Risky for Business: Trade Sanctions
by Peter Quinter, guest columnist
It has been a year since President Obama issued Executive Order 13660, entitled “Blocking Property of Certain Persons Contributing to the Situation in Ukraine,” and opened an economic front in the international dispute with Russia over its actions in Ukraine.
Since then, there have been more Executive Orders aimed at turning up the pressure on Russia to quit the Ukraine by shutting down its international commerce. The US has been joined by the European Union and other countries – including Canada, Australia and Japan – in pursuing “diplomacy by other means” that fall short of a shooting war.
I leave it to the geopoliticians to determine the long-term effectiveness of these sanctions. (Although I might share my observation that international trade, more than anything else, leads to knowledge and understanding between peoples, cultures, and countries. To cut trade ties can lead, in the extreme case, to a North Korea.
As a customs and international trade attorney, I can tell you that US business people and companies who were conducting legitimate transactions with Russian trading partners abruptly found themselves on the wrong side of the law, potentially subject to criminal and civil investigations, fines, and prosecution.
Complicating matters is the fact that it is not enough for a US business to check the name of its Russian counterparty against those of the sanctioned 50 entities and 57 individuals on the blacklist maintained by the US Treasury’s Office of Foreign Assets Control (OFAC). (You can find the list of all US sanctions programs administered by OFAC here.)
OFAC has made it clear that “US persons may not procure goods, services, or technology from, or engage in transactions with, a blocked person directly or indirectly (including through a third party intermediary).” According to data compiled by Dow Jones Risk & Compliance, the 107 parties named in the Russian sanctions hold ownership stakes in or potentially exercise control over thousands of companies around the globe. These thousands of companies are not on any US government-maintained list, by the way. It is the responsibility of the US importer or exporter to do the research into the counterparty’s ties.
It does seem ironic that, even as the US piles sanctions on Russia, it is lifting its half-century-old embargo on Cuba. On January 16, OFAC revised its regulations regarding Cuba and the Commerce Department’s Bureau of Industry and Security (BIS) revised its Export Administration Regulations (EAR) to begin implementing the policy changes announced by President Obama a month earlier. Among changes that reduce restrictions on travel, dealings with Cuban nationals in third countries, and financial transactions, are new trade authorizations, most notably for telecommunications products and services.
The US government has also recently elected to swap the trade sanctions stick for the carrot of new authorizations for trade with Sudan and Iran. But beware, these strategies can be reversed – and quickly – in the current geopolitical environment
If you have questions about trade sanctions or compliance with other restrictions on imports or exports, please post your comments below or contact me directly at email@example.com or (954) 270-1864.
Copyright ©2015 GrayRobinson
*Peter Quinter will be speaking on Advanced Seafood Safety and Compliance with Federal Regulators at the Seafood Expo North America in Boston, March 15-17.