US lifts trade sanctions on Sudan

On January 13, 2017, President Obama issued an Executive Order that will revoke provisions of prior Executive Orders that authorized the imposition of sanctions on Sudan if, during the next six months, Sudan sustains the positive actions that gave rise to the new Executive Order. In conjunction with the President’s action, the US Department of the Treasury, Office of Foreign Assets Control (“OFAC”)  amended the SSR to add a general license, effective January 17, 2017, authorizing all transactions prohibited by the SSR, as well as by Executive Orders 13067 and 13412. As a result, US persons  generally are able to transact with individuals and entities in Sudan, and the property of the Government of Sudan subject to US jurisdiction is unblocked. The general license only authorizes transactions that are prohibited under the SSR and does not affect other OFAC sanctions programs, including those related to Darfur or South Sudan. Additionally, the six-month review period in the new Executive Order leaves open the possibility that the sanctions could be reinstated in the event that the US government determines, on or before July 12, 2017, that Sudan has not continued to take the positive actions that led to the Executive Order. OFAC has published a fact sheet and updated FAQs providing additional details.

Background

For almost two decades, Sudan has been subject to  comprehensive US sanctions. The Sudan sanctions program began in 1997, when President Clinton issued Executive Order (“E.O.”) 13067,¹ declaring a national emergency with respect to the Government of Sudan’s policies and actions. E.O. 13067 imposed a trade embargo against the entire territory of Sudan and a comprehensive blocking of the Government of Sudan. In 2006, President Bush expanded the scope of the national emergency related to Sudan to specifically include Darfur and issued E.O. 13400,² blocking the property of certain persons involved in the conflict in Sudan’s Darfur region. Later that year, President Bush issued E.O. 13412,³ taking additional steps with respect to the national emergency declared in E.O. 13067.  E.O. 13412 continued the comprehensive blocking of the Government of Sudan imposed by E.O. 13067, but exempted the then-regional Government of South Sudan as well as certain specified areas⁴  from most of the prohibitions under the Sudan sanctions program.⁵

New Executive Order and regulatory amendment

The new Executive Order, “Recognizing Positive Actions by the Government of Sudan and Providing for the Revocation of Certain Sudan-Related Sanctions,” provides a path for the permanent revocation of the sanctions provisions in Executive Orders 13067 and 13412 on July 12, 2017, provided that the Secretary of State publishes in the Federal Register on or before that date a notice stating that the Government of Sudan has sustained the positive actions that gave rise to the Executive Order and provides to the President a report on the Government of Sudan’s progress.

On January 17, 2017, OFAC published an amendment to the SSR, adding a general license at section 538.540 of the SSR that authorizes all transactions prohibited by the SSR and by Executive Orders 13067 and 13412. More specifically, US persons are now authorized, without the need to obtain a specific license from OFAC, to process transactions involving persons in Sudan; to engage in imports and exports that were previously prohibited under the SSR; and to engage in transactions involving property in which the Government of Sudan has an interest.

This regulatory amendment has the following effects:

• All property and interests in property blocked pursuant to the SSR are unblocked;
• All trade between the United States and Sudan that was previously prohibited by the SSR is authorized;
• All transactions by US persons relating to the petroleum or petrochemical industries in Sudan that were previously prohibited by the SSR are authorized, including oilfield services and oil and gas pipelines; and,
• US persons are no longer  prohibited from facilitating transactions between Sudan and third countries, to the extent previously prohibited by the SSR.

Practical implications

Importantly, certain restrictions related to Sudan remain, including the following:

• While the SSR was lifted on January 17, 2017, the President’s authority to reimpose  sanctions remains in place until July 12, 2017. Accordingly, the lifting of the sanctions could all be undone if sufficient progress in Sudan is not made within six months.
• The general license only authorizes transactions prohibited by the SSR and by Executive Orders 13067 and 13412. It does not authorize transactions that are prohibited under any other OFAC sanctions program, including transactions that are prohibited under the Darfur Sanctions Regulations, 31 C.F.R. part 546, the South Sudan Sanctions Regulations, 31 C.F.R. part 558, or Executive Orders 13400 or 13664.⁶ 
• A specific license is not required to export or reexport agricultural commodities, medicines, or medical devices to Sudan beginning January 17, 2017, as such transactions are generally licensed pursuant to 31 C.F.R. § 538.540. However, as the general license implements certain requirements of the Trade Sanctions Reform and Export Enhancement Act of 2000, 22 U.S.C. §§ 7201-7211, as amended, any exports or reexports of agricultural commodities, medicine, or medical devices to the Government of Sudan, to any individual or entity in Sudan, or to any person in a third country purchasing specifically for resale to any of the foregoing, must be shipped within 12 months of the date of the signing of the contract for the relevant export or reexport of such items to Sudan.
• The general license will not obviate the requirement to comply with other applicable provisions of law, including the Export Administration Regulations, 15 C.F.R. parts 730-774, administered by the US Department of Commerce, Bureau of Industry and Security.
• The general license will not affect past, present, or future OFAC enforcement investigations or actions related to any apparent violations of the SSR relating to activities that are authorized by the general license but that occurred prior to the effective date of the general license. 

Accordingly, as important limitations remain in place, companies doing business in Sudan should continue to maintain appropriate compliance policies and procedures, including due diligence and screening to ensure that they do not engage in any transactions with Sudanese individuals or entities that remain blocked pursuant to Executive Order 13400 or any OFAC sanctions authorities other than the SSR, Executive Order 13067, and Executive Order 13412.

We will continue to monitor these developments and issue additional briefings as warranted.