E9-21553. Sudanese Sanctions Regulations

AGENCY:

Office of Foreign Assets Control, Treasury.

ACTION:

Final rule.

SUMMARY:

The Department of the Treasury's Office of Foreign Assets Control (“OFAC”) is amending the Sudanese Sanctions Regulations by issuing a general license that authorizes the exportation and reexportation of agricultural commodities, medicine, and medical devices to the Specified Areas of Sudan, as well as the conduct of related transactions. The Specified Areas of Sudan are defined as Southern Sudan, Southern Kordofan/Nuba Mountains State, Blue Nile State, Abyei, Darfur, and marginalized areas in and around Khartoum. OFAC also is making conforming changes to the Sudanese Sanctions Regulations to reflect this authorization.

DATES:

Effective Date: September 9, 2009.

FOR FURTHER INFORMATION CONTACT:

Assistant Director for Compliance, Outreach and Implementation, tel.: [phone], Assistant Director for Licensing, tel.: [phone], Assistant Director for Policy, tel.: [phone], Office of Foreign Assets Control, or Chief Counsel (Foreign Assets Control), tel.: [phone], Office of the General Counsel, Department of the Treasury (not toll free numbers).

SUPPLEMENTARY INFORMATION:

Electronic and Facsimile Availability

This document and additional information concerning OFAC are available from OFAC's Web site (http://www.treas.gov/​ofac) or via facsimile through a 24-hour fax-on-demand service, tel.: [phone].

Background

The Sudanese Sanctions Regulations, 31 CFR part 538 (the “SSR”), were promulgated to implement Executive Order 13067 of November 3, 1997 (62 FR 59989, November 5, 1997) (“E.O. 13067”), in which the President declared a national emergency with respect to the policies and actions of the Government of Sudan.

To deal with that emergency, E.O. 13067 imposed comprehensive trade sanctions with respect to Sudan and blocked all property and interests in property of the Government of Sudan in the United States or within the possession or control of United States persons.

Subsequently, on October 13, 2006, the President signed the Darfur Peace and Accountability Act of 2006 (Pub. L. 109-344, 120 Stat. 1869) (“DPAA”) and issued Executive Order 13412 of October 13, 2006 (71 FR 61369, October 17, 2006) (“E.O. 13412”). The DPAA and E.O. 13412, inter alia, exempt the Specified Areas of Sudan from certain prohibitions set forth in E.O. 13067, and define the term Specified Areas of Sudan to include Southern Sudan, Southern Kordofan/Nuba Mountains State, Blue Nile State, Abyei, Darfur, and marginalized areas in and around Khartoum. While E.O. 13412 exempted the Specified Areas of Sudan from certain prohibitions in E.O. 13067, it continued the country-wide blocking of the Government of Sudan's property and interests in property and imposed a new country-wide prohibition on transactions relating to Sudan's petroleum or petrochemical industries. E.O. 13412 also removed the regional Government of Southern Sudan from the definition of the term Government of Sudan set forth in E.O. 13067. OFAC issued amendments to the SSR implementing E.O. 13412 on October 31, 2007 (72 FR 61513, October 31, 2007).

OFAC today is further amending the SSR to resolve a tension between E.O. 13412 and the DPAA on the one hand, and the Trade Sanctions Reform and Export Enhancement Act of 2000 (22 U.S.C. 7201-7211) (“TSRA”) on the other. Pursuant to E.O. 13412 and the DPAA, most trade and related activities—other than trade with the Government of Sudan or relating to Sudan's petroleum or petrochemical industries—are allowed with the Specified Areas of Sudan. These Specified Areas, however, remained subject to regulations promulgated pursuant to section 906(a)(1) of TSRA, which provides that the export of agricultural commodities, medicine, and medical devices to the government of a country that has been determined by the Secretary of State, under section 6(j) of the Export Administration Act of 1979, 50 U.S.C. App. 2405(j) (the “EAA”), to have repeatedly provided support for acts of international terrorism, or to any entity in such a country, shall be made pursuant to one-year licenses issued by the United States government.

Because Sudan has been determined by the Secretary of State to be a country that has repeatedly provided support for acts of international terrorism pursuant to section 6(j) of the EAA, the entire country remained subject to TSRA's licensing requirements under the SSR. The overlap of TSRA with E.O. 13412 and the DPAA—as previously implemented in the SSR—resulted in the requirement that OFAC authorize the export of agricultural and medical items to the Specified Areas of Sudan, even though no OFAC authorization was required to export most other items to those areas.

Therefore, in view of the underlying policy objectives and findings concerning the Specified Areas of Sudan that resulted in the elimination of most of the previous economic sanctions against these areas within Sudan, including export sanctions analogous to those covered by TSRA, OFAC has determined that specific licenses for TSRA-related transactions with respect to the Specified Areas of Sudan should no longer be required. Instead, OFAC is authorizing such transactions through a general license, set forth at SSR § 538.523(a)(2), provided that such transactions do not involve any property or interests in property of the Government of Sudan or relate to the petroleum or petrochemical industries in Sudan. In accordance with the requirements set forth in section 906(a)(1) of TSRA, this general license covers exports shipped within the twelve-month period beginning on the date of the signing of the export contract. In addition, each year by the anniversary of its effective date on September 9, 2009, OFAC will determine whether to revoke the general license. Unless revoked, the general license will remain in effect. However, specific licenses for TSRA-related transactions with respect to the Government of Sudan, to any individual or entity in an area of Sudan other than the Specified Areas of Sudan, or to persons in third countries purchasing specifically for resale to the foregoing are still required.

Existing prohibitions and safeguards satisfy TSRA's requirement that procedures be in place to deny the general license for exports to entities within Sudan promoting international terrorism. For instance, the requirement that no U.S. person engage in any transaction with anyone on OFAC's List of Specially Designated Nationals and Blocked Persons, including persons designated under the terrorism programs administered by OFAC, provides a mechanism for denying TSRA-related exports to certain entities within the Specified Areas of Sudan. In addition, if it deems necessary, OFAC may amend, modify, or revoke the new general license pursuant to § 501.803 of the Reporting, Procedures and Penalties Regulations, 31 CFR part 501 (the “RPPR”), which set forth standard reporting and recordkeeping requirements and license application and other procedures governing transactions regulated pursuant to other parts of 31 CFR chapter V. Section 538.502 of the SSR similarly provides OFAC with the authority to exclude any person, property, or transaction from the operation of the general license or to restrict the applicability of the general license with respect to any persons, property, or transactions. Finally, the requirement that all U.S. persons maintain records of any transaction subject to OFAC-administered sanctions for a period of not less than five years pursuant to RPPR § 501.601, and OFAC's authority to obtain these records pursuant to RPPR § 501.602, allow OFAC to monitor activities under the general license in order to determine whether it should exercise these authorities.

Those transactions now authorized by the general license set forth at § 538.523(a)(2) of the SSR include the sale, exportation, and reexportation of agricultural commodities, medicine, and medical devices, the financing of and payment for such sales, and the brokering of TSRA sales. However, the transshipment or transit of TSRA-related exports through areas of Sudan other than the Specified Areas of Sudan, and any related financial transactions that are routed through depository institutions located in an area of Sudan other than the Specified Areas, remain prohibited under §§ 538.417 and 538.418 of the SSR.

Public Participation

Because the amendment of 31 CFR part 538 involves a foreign affairs function, the provisions of Executive Order 12866 and the Administrative Procedure Act (5 U.S.C. 553), requiring notice of proposed rulemaking, opportunity for public participation, and delay in effective date, are inapplicable. Because no notice of proposed rulemaking is required for this rule, the Regulatory Flexibility Act (5 U.S.C. 601-612) does not apply.

Paperwork Reduction Act

The collections of information related to 31 CFR part 538 are contained in 31 CFR part 501 (the “Reporting, Procedures and Penalties Regulations”). Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3507), those collections of information have been approved by the Office of Management and Budget under control number 1505-0164. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number.

List of Subjects in 31 CFR Part 538

• Administrative practice and procedure
• Banks
• Banking
• Blocking of assets
• Exports
• Foreign trade
• Humanitarian aid
• Imports
• Penalties
• Reporting and recordkeeping requirements
• Specially designated nationals
• Sudan
• Terrorism
• Transportation

For the reasons set forth in the preamble, the Department of the Treasury's Office of Foreign Assets Control amends 31 CFR part 538 as follows:

PART 538—SUDANESE SANCTIONS REGULATIONS

1. Revise the authority citation for part 538 to read as follows:

Authority: 3 U.S.C. 301; 18 U.S.C. 2339B, 2332d; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; Public Law 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); 22 U.S.C. 7201-7211; Public Law 109-344, 120 Stat. 1869; Public Law 110-96, 121 Stat. 1011; E.O. 13067, 62 FR 59989, 3 CFR, 1997 Comp., p. 230; E.O. 13412, 71 FR 61369, 3 CFR, 2006 Comp., p. 244.

Subpart B—Prohibitions

2. Revise the note to § 538.212(g)(2) to read as follows:

§ 538.212

Exempt transactions.

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(g) * * *

(2) * * *

Note to § 538.212(g)(2):

See § 538.523(a)(2) for a general license authorizing the exportation and reexportation of agricultural commodities, medicine, and medical devices to the Specified Areas of Sudan, and the conduct of related transactions.

Subpart D—Interpretations

3. Amend § 538.405 by revising paragraph (d) to read as follows:

§ 538.405

Transactions incidental to a licensed transaction authorized.

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(d) Financing of licensed sales for exportation or reexportation of agricultural commodities or products, medicine, or medical equipment to the Government of Sudan, to any individual or entity in an area of Sudan other than the Specified Areas of Sudan, or to persons in third countries purchasing specifically for resale to the foregoing. See § 538.525.

Subpart E—Licenses, Authorizations, and Statements of Licensing Policy

4. Amend § 538.523 by redesignating paragraph (a), paragraph (b), and the introductory text to paragraph (c) to read as follows:

§ 538.523

Commercial sales, exportation, and reexportation of agricultural commodities, medicine, and medical devices.

(a)(1) One-year specific license requirement. The exportation or reexportation of agricultural commodities (including bulk agricultural commodities listed in appendix A to this part 538), medicine, or medical devices to the Government of Sudan, to any individual or entity in an area of Sudan other than the Specified Areas of Sudan, or to persons in third countries purchasing specifically for resale to the foregoing, shall only be made pursuant to a one-year specific license issued by the U.S. Department of the Treasury, Office of Foreign Assets Control, for contracts entered into during the one-year period of the license and shipped within the 12-month period beginning on the date of the signing of the contract. No specific license will be granted for the exportation or reexportation of agricultural commodities, medicine, or medical equipment to any entity or individual in Sudan promoting international terrorism, to any narcotics trafficking entity designated pursuant to Executive Order 12978 of October 21, 1995 (60 FR 54579, October 24, 1995) or the Foreign Narcotics Kingpin Designation Act (21 U.S.C. 1901-1908), or to any foreign organization, group, or persons subject to any restriction for its involvement in weapons of mass destruction or missile proliferation. Executory contracts entered into pursuant to paragraph (b)(2) of this section prior to the issuance of the one-year specific license described in this paragraph shall be deemed to have been signed on the date of issuance of that one-year specific license (and, therefore, the exporter is authorized to make shipments under that contract within the 12-month period beginning on the date of issuance of the one-year specific license).

(2) General license for the Specified Areas of Sudan. The exportation or reexportation of agricultural commodities (including bulk agricultural commodities listed in appendix A to this part 538), medicine, and medical devices to the Specified Areas of Sudan and the conduct of related transactions, including, but not limited to, the making of shipping and cargo inspection arrangements, the obtaining of insurance, the arrangement of financing and payment, the entry into executory contracts, and the provision of brokerage services for such sales and exports or reexports, are hereby authorized, provided that such activities or transactions do not involve any property or interests in property of the Government of Sudan and do not relate to the petroleum or petrochemical industries in Sudan, and also provided that all such exports or reexports are shipped within the 12-month period beginning on the date of the signing of the contract for export or reexport.

Note 1 to § 538.523(a)(2):

Consistent with section 906(a)(1) of the Trade Sanctions Reform and Export Enhancement Act of 2000 (22 U.S.C. 7205), each year by the anniversary of its effective date of September 9, 2009, the Office of Foreign Assets Control will determine whether to revoke this general license. Unless revoked, the general license will remain in effect.

Note 2 to § 538.523(a)(2):

See §§ 538.417 and 538.418 for additional requirements with respect to transshipments through, and financial transactions in, Sudan.

(b) General license for arrangement of exportation or reexportation of covered products. (1) With respect to sales pursuant to § 538.523(a)(1), the making of shipping arrangements, cargo inspection, obtaining of insurance, and arrangement of financing (consistent with § 538.525) for the exportation or reexportation of agricultural commodities, medicine, or medical devices to the Government of Sudan, to any individual or entity in an area of Sudan other than the Specified Areas of Sudan, or to persons in third countries purchasing specifically for resale to the foregoing, are authorized.

(2) If desired, entry into executory contracts (including executory pro forma invoices, agreements in principle, or executory offers capable of acceptance such as bids in response to public tenders) for the exportation or reexportation of agricultural commodities, medicine, and medical devices to the Government of Sudan, to any individual or entity in an area of Sudan other than the Specified Areas of Sudan, or to persons in third countries purchasing specifically for resale to the foregoing, is authorized, provided that performance of an executory contract is expressly made contingent upon the prior issuance of the one-year specific license described in paragraph (a)(1) of this section.

(c) Instructions for obtaining one-year specific licenses. In order to obtain the one-year specific license described in paragraph (a)(1) of this section, the exporter must provide to the Office of Foreign Assets Control:

* * * * *

5. Amend § 538.525 by revising paragraphs (a) introductory text and (b) to read as follows:

§ 538.525

Payment for and financing of commercial sales of agricultural commodities, medicine, and medical equipment.

(a) General license for payment terms. The following payment terms for sales, pursuant to § 538.523(a)(1), of agricultural commodities and products, medicine, and medical equipment to the Government of Sudan, to any individual or entity in an area of Sudan other than the Specified Areas, or to persons in third countries purchasing specifically for resale to the foregoing are authorized:

* * * * *

(b) Specific licenses for alternate payment terms. Specific licenses may be issued on a case-by-case basis for payment terms and trade financing not authorized by the general license in paragraph (a) of this section for sales pursuant to § 538.523(a)(1). See § 501.801(b) of this chapter for specific licensing procedures.

* * * * *

6. Amend § 538.526 by revising paragraph (a), the introductory text of paragraph (b), and paragraph (b)(2) to read as follows:

§ 538.526

Brokering sales of agricultural commodities, medicine, and medical devices.

(a) General license for brokering sales by U.S. persons. United States persons are authorized to provide brokerage services on behalf of U.S. persons for the sale and exportation or reexportation by United States persons of agricultural commodities, medicine, and medical devices to the Government of Sudan, to any individual or entity in an area of Sudan other than the Specified Areas of Sudan, or to persons in third countries purchasing specifically for resale to the foregoing, provided that the sale and exportation or reexportation is authorized by a one-year specific license issued pursuant to § 538.523(a)(1).

(b) Specific licensing for brokering sales by non-U.S. persons of bulk agricultural commodities. Specific licenses may be issued on a case-by-case basis to permit United States persons to provide brokerage services on behalf of non-United States, non-Sudanese persons for the sale and exportation or reexportation of bulk agricultural commodities to the Government of Sudan, to any individual or entity in an area of Sudan other than the Specified Areas of Sudan, or to persons in third countries purchasing specifically for resale to the foregoing. Specific licenses issued pursuant to this section will authorize the brokering only of sales that:

* * * * *

(2) Are to purchasers permitted pursuant to § 538.523(a)(1); and

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Dated: September 1, 2009.

Adam J. Szubin,

Director, Office of Foreign Assets Control.