The ever-shifting sands of U.S. sanctions and export controls can make it challenging to know the current restrictions that exist with respect to a given country. With each new administration comes newly imposed restrictions and newly lifted restrictions. This problem was particularly exacerbated by the 180-degree pivot taken between the Obama and Trump Administrations. Meanwhile, the Biden Administration has stayed the course on some Trump Administration policy measures, while changing direction on others. This article aims to provide a simple overview of the current state- of- affairs with respect to some of the major theatres in U.S. sanctions and export controls policy, including with respect to Iran, Cuba, China, Russia, and Venezuela.
Iran
Iran is subject to a long-standing comprehensive embargo.
As such, U.S. persons are generally prohibited from engaging in any
transactions with Iran without authorization from OFAC and/or
BIS. Furthermore, Iran is the target of many "secondary
sanctions" that penalize non-U.S. persons for engaging in
transactions with Iran. These secondary sanctions target a
broad array of industries including Iran's energy, shipping,
and automotive sectors, among others.
Under the Obama Administration, the U.S. and Iran agreed to the Joint Comprehensive Plan of Action ("JCPOA") wherein Iran committed to cease certain nuclear activities in exchange for the U.S. lifting certain secondary sanctions. Meanwhile, the E.U., China, and Russia also agreed to lift most sanctions on Iran. However, on May 8, 2018, President Trump announced that the U.S. would withdraw from the JCPOA and reimpose secondary sanctions that the U.S. had previously lifted under the agreement. As such, non-U.S. companies would be sanctionable by the U.S. if they engaged in any proscribed transactions involving Iran. Furthermore, in October 2019, the Trump Administration expanded secondary sanctions on Iran's metals, energy, and defense sectors, and imposed sanctions on various individuals and entities in China, Russia, Turkey, and other countries for engaging in certain transactions with Iran.
In a reversal of the previous administration's posture, the Biden Administration has expressed its desire to rejoin the JCPOA and has formally offered to reengage in negotiations with Iran. Nonetheless, the Biden Administration has also stated that sanctions will not be lifted unless Iran ceases its enrichment of uranium, which Iran resumed after the U.S. withdrew from the JCPOA.
Cuba
Like Iran, Cuba is subject to a comprehensive embargo,
where almost all transactions by U.S. persons involving Cuba
require a license from OFAC or BIS. Beginning in 2014, the
Obama Administration initiated a policy shift away from sanctions
and toward engagement and the normalization of relations with
Cuba. Throughout the Obama Administration, restrictions on
travel were gradually rescinded to the point that U.S. persons
could rather easily travel to Cuba including on cruise lines that
offered travel between the U.S. and Cuba. However, the Trump
Administration reversed most of these changes by reinstating and
expanding restrictions on travel to Cuba. Some key changes
under the Trump Administration included prohibiting
people-to-people education travel and terminating cruise ship
travel.
Finally, in May of 2019, the Trump Administration allowed Title III of the Helms-Burton Act to become effective, thus allowing businesses that benefit from property that was confiscated by the Cuban Government to be sued by former owners of the subject property. As a result, both U.S. and non-U.S. companies conducting business in Cuba face significant liability if they use any property that was confiscated by the Cuban Government. At least 40 lawsuits have been filed against companies operating in Cuba under Title III of the Helms-Burton Act, including lawsuits against several major cruise lines and foreign banks, among others.
China
Unlike Iran or Cuba, China is not subject to a
comprehensive embargo. However, China has been a particular
area of concern for OFAC and BIS, and the risks from doing business
in China have increased as a result. In May 2019, BIS added
Huawei and many of its affiliates to the BIS Entity List, thus
prohibiting most transactions with Huawei. In addition, in June of
2020, BIS expanded restrictions on exports for military end-uses or
end users, which had only applied to Russia and Venezuela, to also
apply to China. These restrictions were also expanded to
apply to a much broader range of goods, including common software
products. The definition of "military end user"
under the military end user/end use rules is quite expansive and
includes the national armed services, national guard, national
police, government intelligence, and reconnaissance organizations,
as well as any end user whose activities are intended to support
military end uses.
Furthermore, beginning in June 2020, BIS began implementing measures to remove differential treatment of Hong Kong under the EAR. In December 2020, BIS removed Hong Kong as a separate destination under the EAR. In conjunction with BIS's measures, it is now prohibited to export U.S.-origin defense articles to Hong Kong without a license from DDTC.
For its part, OFAC has also implemented new restrictions on China including a ban on investing in Chinese entities that are deemed by OFAC to be connected to the Chinese military. OFAC has published a list of these entities, which include prominent publicly traded companies, such as China Telecom and China Mobile, among others. Furthermore, as a result of the enactment of the Hong Kong Autonomy Act ("HKAA") on July 14, 2020, OFAC is authorized to sanction foreign persons involved in undermining the autonomy of Hong Kong, and foreign financial institutions that engage in certain transactions with such persons.
Russia
Since 2014, Russia has been the target of an expansive
list-based sanctions program, in addition to export restrictions
mostly aimed at Russia's energy and defense sectors.
Sanctions and export controls on Russia have only increased over
the past 7 years, including under the Trump Administration.
Over the past year, additional individuals and entities have
been added to OFAC's list of Specially Designated Nationals
("SDNs") and Sectoral Sanctions Identifications
("SSIs"). Furthermore, in February 2020, BIS
expanded export restrictions on Russia by removing Russia from
Country Groups A:2 and A:4 to D:2 and D:4. As a result,
certain license exceptions will no longer be available for exports
to Russia. Meanwhile, as noted previously, the expanded
military end use/military end user restrictions implemented in
April of 2020 also apply to Russia. Given recent
developments, such as the arrest of opposition figure Alexei
Navalny and high-profile hacks on the U.S. government and private
companies, we anticipate continued expansion of U.S. sanctions and
export controls on Russia.
Venezuela
Starting with the Obama Administration, Venezuela has been
the target of continually expanding sanctions. The Obama
Administration imposed list-based sanctions against numerous
individuals for human rights abuses, corruption, and antidemocratic
actions. Thereafter, the Trump Administration significantly
expanded sanctions on Venezuela in response to authoritarian
actions taken by Venezuela's President, Nicolás
Maduro.
Under the Trump Administration, a succession of Executive Orders were issued expanding sanctions on Venezuela. Beginning in August 2017, the Trump Administration imposed restrictions on providing credit to the Venezuelan government, including state owned entities like PdVSA. These restrictions were later expanded to prohibit transactions related to purchasing Venezuelan debt. In January 2019, PdVSA, Venezuela's state-owned oil and gas entity, was designated as an SDN. As a result, U.S. persons are generally prohibited from engaging in transactions with PdVSA, or entities owned or controlled by PdVSA. Finally, in August 2019, President Trump issued E.O. 13884, blocking (freezing) the property and interests of the Maduro government in the United States and within the control of U.S. persons.
Conclusion and Outlook
As the Biden Administration has only recently taken the
reigns from the Trump Administration, we anticipate further changes
of U.S. sanctions and export controls policies. We expect
that the Biden Administration will stay the course with China and
Russia, thus resulting in further restrictions. For Cuba, we
would anticipate a less aggressive posture from the Biden
Administration and potentially a reversal of Trump era
policies. Meanwhile, although the Biden Administration has
expressed a desire to reverse the Trump Administration's
policies with respect to Iran, whether this occurs will likely
depend on whether Iran ceases uranium enrichment. Given that
the U.S. has already reneged on its promises once, Iran may not
have much appetite to reengage with the U.S.
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