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EX/IM ITEMS FROM TODAY’S FEDERAL REGISTER
82 FR 28215-28216: Global Magnitsky Human Rights Accountability Act Report
* AGENCY: Department of State.
* ACTION: Notice.
* SUMMARY: This notice contains the text of the report, submitted by the President, that is required by the Global Magnitsky Human Rights Accountability Act.
* FOR FURTHER INFORMATION CONTACT: Benjamin A. Kraut, Email: Krautb@state.gov, Phone: (202) 647-9452.
* SUPPLEMENTARY INFORMATION: On April 21, 2017, the President approved the following report under the Global Magnitsky Human Rights Accountability Act (Pub. L. 114-328, Subtitle F). The text follows:
The Global Magnitsky Human Rights Accountability Act (Pub. L. 114-328, Subtitle F) (the “Act”), enacted on December 23, 2016, authorizes the President to impose financial sanctions and visa restrictions on foreign persons in response to certain human rights violations and acts of corruption. …
Although no financial sanctions were imposed under the Act during the 120 days since its enactment, the United States is actively seeking to identify persons to whom this Act may apply and collecting the necessary evidence to impose sanctions.
In addition, the Department of the Treasury has issued a number of sanctions designations related to human rights abuses and corruption under existing sanctions programs. Sanctions programs that feature one or both of these designation criteria include programs related to Belarus, Burundi, the Central African Republic, the Democratic Republic of Congo, Iran, Libya, North Korea, Russia, Somalia, South Sudan, Syria, Ukraine, Venezuela, and Zimbabwe, as well as the Sergei Magnitsky Rule of Law Accountability Act of 2012 (the “Magnitsky Act”).
Examples of Treasury Department designations issued in recent years consistent with the human rights- and corruption-related designation criteria of these programs are provided below. This is not an exhaustive list; rather, it illustrates designations that align with the Act’s focus on human rights and corruption. …
Patricia M. Haslach, Acting Assistant Secretary of State, Bureau of Economic and Business Affairs, Department of State.
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| | OTHER GOVERNMENT SOURCES
|2. Ex/Im Items Scheduled for Publication in Future Federal Register Editions |
[No items of interest noted today.]
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|3. Commerce/BIS: (No new postings.) |
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4 . DHS/CBP Announces Deployment Support + Statements Cutover Plan
(Source: CSMS #17-000360, 20 June 2017.)
On 8 July 2017, CBP will deploy in ACE collections and statements, reconciliation, drawback, duty deferral and liquidation. The following message covers deployment support options for trade users, as well as an updated cutover plan for statements.
In support of the July 8th ACE deployment, the following options will be available for support. More information on the deployment can be found at CBP.gov/ACE under “What’s New with ACE.”
(1) Trade Update Call: From 10-14 July the Trade Update Call will be conducted DAILY from 2:00-3:00pm Eastern Time. This call will provide updates on the deployment and answer questions from members of the trade.
– Line 1: 1-877-336-1828, PC 6124214
– Line 2 (If line 1 is full): 1-877-873-8017, PC 6215791
(2) Client Representatives: Trade members experiencing EDI issues during business hours should contact their assigned client representative. If you are unsure which client representative is assigned to your company please email – email@example.com (3) ACE Help Desk: For technical issues related to ACE please contact the ACE Help Desk – ACE.Support@cbp.dhs.gov or 1-866-530-4172 (4) Additional Support options may be found here.
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5 . DHS/CBP Deploys ACE Production HTS Query
(Source: CSMS #17-000363, 20 Jun 2017.)
The Harmonized Tariff Schedule (HTS) Query functionality was deployed to the ACE Production environment, this morning, Tuesday, June 20, 2017.
Supporting documentation can be found in the ACE CATAIR. The Harmonized Tariff Schedule chapter is
located under the Draft Chapters for Future Capabilities tab and can be accessed here.
Technical inquiries can be directed to Mr. Blake Hefley via email at firstname.lastname@example.org.
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| | 6 . DHS/CBP Gathers Feedback on USVI Trade Automation Process
U.S. Customs and Border Protection (CBP) held an event Friday at the Cyril E. King Airport to gather local feedback to incorporate the U.S. Virgin Islands into the Automated Commercial Environment (ACE), to expedite the importation process.
With the title On the Path to Automation, Getting there together!, the USVI trade community and CBP had an open dialogue regarding the challenges of using a manual paper-laden process, its impacts to commerce, and the initial steps taken by CBP to modernize this process through the introduction of electronic filing or automation.
In 2016, the CBP San Juan Field Office started the process of gathering information on the longstanding system in which all custom entries are made by importers in person, on paper to the CBP entry branch in Charlotte Amalie.
“Stakeholder input has been key to our ACE success. This input has been a critical component in defining the business requirements that have made up our ACE deployments, and will continue to be critical as we enter the next phase of ACE,” indicated Brenda Smith, Executive Assistant Commissioner (EAC) for Trade. “We look forward to the ongoing dialogue, including today’s discussion, to determine how we can integrate the needs of USVI processing into ACE.”
With a manual cargo clearance process, each CBP employee must retain and apply import laws and regulations based on a manual review upon receipt of clearance documents.
“We need to make the trade entry process in the USVI more customer friendly,” stated Edward Ryan, Assistant Director of Field Operations for Trade in Puerto Rico and the USVI.
Customs regulations require the advance electronic transmission of cargo information prior to arrival into the United States by sea or air.
The first step in utilizing ACE for trade automation will be to test the carrier manifest component of ACE. This will involve the cooperation of select vessel carriers to send their advanced manifests through ACE for CBP VI review. Thereafter, this submission requirement will be implemented for all vessel carriers. This will bring vessel carriers in line with the Customs regulations.
CBP requirements in the USVI are unique because it operates under the Danish Public Law 64; a law that remains in effect since 1914, when Denmark sold the islands to the U.S.
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7 . State/DDTC: (No new postings.)
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|9. DW: “EU Agrees to Joint Sanctions on Cyberattacks” |
The EU has agreed to use a “cyber diplomacy toolbox” against hackers targeting member states. The move comes amid concern hackers may seek to influence German elections in September.
The European Union agreed Monday that a cyberattack on any member state would be met by a joint response, including sanctions on state and non-state hackers.
EU foreign ministers meeting in Luxembourg said in a statement that the bloc would use a “cyber diplomacy toolbox” to respond to malicious cyberactivities targeting computer systems.
“A joint EU response to malicious cyberactivities would be proportionate to the scope, scale, duration, intensity, complexity, sophistication and impact of the cyberactivity,” foreign ministers said in a statement.
So-called restrictive measures typically target individuals, groups, companies or governments with travel bans, asset freezes and restrictions on doing business.
With German elections coming up in September, there is rising concern within the EU that individuals or groups could carry out malicious cyberattacks to influence the elections, possibly backed by a foreign government such as Russia.
The German government last month warned political parties to take extra defense against the hacking of their computer systems after alleged Russian-backed cyberattacks to influence the US and French elections through the release of hacked emails.
Suspected Russian-backed hackers broke into the email accounts of German lawmakers in 2015, and subsequently targeted political parties including Angela Merkel’s Christian Democratic Union. …
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* Authors: Carlton Greene, Esq., email@example.com; Cari N. Stinebower, Esq., firstname.lastname@example.org; and Alan W. H. Gourley, Esq., email@example.com. All of Crowell & Moring LLP.
New U.S. sanctions were announced last week on Cuba, Russia, and Iran, though none of the new restrictions has an immediate effect.
After weeks of internal deliberations, President Trump on June 16 partially fulfilled a campaign pledge by announcing a limited re-implementation of sanctions on Cuba. The new Cuba measures will only take effect after the relevant agencies implement new regulations, a revision process that will begin within the next 30 days, but may take several months.
Separately, on June 15, the U.S. Senate overwhelmingly passed new sanctions on both Iran and Russia; that legislation must still be voted on by the U.S. House of Representatives, but appears likely to pass with strong bipartisan support in the next several weeks.
Cuba: Presidential Memorandum Announcing New Restrictions
During his campaign, President Trump committed to “overturn” President Obama’s relaxations of sanctions on Cuba. On June 16, he released a National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba. Importantly, the memorandum does not make any immediate changes to U.S. law; instead, it announces the contours of new U.S. policy, then directs the U.S. Department of Commerce and the U.S. Department of the Treasury to “initiate a process to adjust current regulations” within the next 30 days. The Treasury’s Office of Foreign Assets Control has already indicated, in a set of Frequently Asked Questions, that it expects its revisions to the Cuban Assets Control Regulations (CACR) to be issued “in the coming months.”
The memorandum announces the following changes to U.S. sanctions on Cuba:
– Prohibitions on Transacting with the Cuban Military: The memorandum announces a policy to “end economic practices that disproportionately benefit the Cuban government or its military, intelligence, or security agencies or personnel at the expense of the Cuban people.” To implement this policy, the memorandum directs the Secretary of State to publish a list of entities that are “under the control of, or act on behalf of, the Cuban military, intelligence, or security services” (the Cuban Military List), which will include the Grupo de Administración Empresarial (the Armed Forces Business Enterprises Group, or GAESA, and entities it owns or controls). U.S. Persons will generally be prohibited from transacting with persons on the Cuban Military List. However, the memorandum includes several exceptions including, among other things, transactions that: (a) support visas for permissible travel; (b) support sales of agricultural commodities, medicines, and medical devices; (c) support the expansion of direct telecommunications and internet access for the Cuban people; and (d) support programs to build democracy in Cuba. Importantly, OFAC clarified that it will not prohibit “Cuba-related commercial engagement” including direct transactions with the Cuban military, provided those engagements were in place prior to the issuance of OFAC’s new regulations.
– Removing Authorization for Individual “People-to-People” Travel: The memorandum directs the relevant agencies to limit the scope of educational travel to trips taken “under the auspices of an organization” subject to U.S. jurisdiction and on which the traveler is accompanied “by a representative of the sponsoring organization.” In practice, this policy change will remove the previous authorization for individual’s to design their own “people-to-people” exchanges. The memorandum does not otherwise direct the removal of the 12 current general licenses that authorize travel, but it does direct the Secretary of the Treasury to “regularly audit travel to Cuba to ensure that travelers are complying with relevant statutes and regulations,” a break from the more lenient enforcement posture under the Obama administration.
– Expansion of the “Prohibited Officials of the Government of Cuba”: The memorandum directs OFAC to expand its definition of the term “Prohibited Officials of the Government of Cuba”. Currently, the term applies only to members of the Council of Ministers and flag officers of the Revolutionary Armed Forces. The memorandum expands the term to apply to a number of senior Government officials including: (a) Ministers and Vice Ministers; (b) members of the National Assembly of People’s Power; (c) members of any provincial assembly; (d) Director Generals and sub-Director Generals of all Cuban ministries; (e) all employees of the Ministry of the Interior and Ministry of Defense; (f) all editors and deputy editors of Cuban state-run media organizations (including newspapers, televisions, and radio); and (g) all members and employees of the Cuban Supreme Court.
Although some observers expected a complete reversal of the Obama-era relaxations, the memorandum leaves in place large portions of President Obama’s post-2014 relaxations. For example, based on the contents of the memorandum and the limited guidance issued to date by OFAC (OFAC FAQs) and the Bureau of Industry and Security (BIS FAQs), the following are unlikely to change: (a) existing specific licenses; (b) most existing BIS license exceptions, including exports in support of the Cuban People; (c) authorized travelers will remain permitted to bring back Cuban-origin cigars and rum; (d) Cuba will not be (re)added to the list of State Sponsors of Terrorism; (e) the United States will maintain diplomatic relations with Cuba; (f) commercial travel services (e.g., cruises and flights) will remain authorized; (g) remittances will not be limited; and (h) the repeal of the “wet foot, dry foot” policy will remain in place.
Russia: Senate Legislation Imposes New Primary, Secondary, and Sectoral Sanctions
On June 15, the U.S. Senate passed legislation which, if enacted into law, would dramatically expand sanctions on Russia. Specifically, a bipartisan group of Senators reached a compromise earlier in the week to combine several pending Russia-related measures and attach them as an amendment to S.722 – The Countering Iran’s Destabilizing Activities Act of 2017 (the Iran-related aspects are discussed further below).
The legislation would impose an extensive series of new restrictions on Russia. The following represent a few of the key highlights:
– New “Blocking” Sanctions: The legislation provides the president with new authorities to impose sanctions on entities undertaking a variety of activities. Specifically, the president “shall” impose blocking sanctions on any person determined to be: (1) knowingly engaging in significant activities undermining cybersecurity on behalf of the Russian Government; (2) a non-U.S. person who violates, attempts to violate, or facilitates or structures transactions to evade, existing Russia-related sanctions; (3) a non-U.S. person responsible for, complicit in, or otherwise directing the commission of serious human rights abuses in Russia; or (4) a non-U.S. person who provides significant support that materially contributes to the ability of the Government of Syria to acquire chemical, biological, or nuclear weapons, ballistic missiles, or other similar items (e.g., those on the U.S. Munitions List).
– New “Sectoral” Sanctions (Sec. 223): The legislation provides new discretionary authority to impose sectoral sanctions on persons if the Secretary of the Treasury determines that the person is a “state-owned” entity operating in Russia’s (a) railway, (b) shipping, (c) metals, or (d) mining sectors. The legislation does not designate any new entities; it simply enables potential future designations.
– Expansion of Existing Sectoral Sanctions: The legislation modifies the existing sectoral sanctions in three ways: (1) it lowers the permitted maturity period for credit extended to entities designated pursuant to Directive 1 to 14 days (from 30 days); (2) it lowers the permitted maturity period for Directive 2 entities to 30 days (from 90 days); and (3) it expands Directive 4 to target activities involving exploration and production for oil from deepwater, arctic offshore, or shale locations involving Russian energy firms and entities designated pursuant to Directive 4 anywhere in the world (as opposed to just in Russia).
– New “Secondary” Sanctions on Persons transacting with Russia’s Defense Sector, Energy Pipelines, or Privatization of State-Owned Enterprises: The legislation substantially expands the U.S.’ “secondary” sanctions targeting Russia. Currently, the United States has a limited set of secondary sanctions authorities that apply to Russia (pursuant to the Ukraine Freedom Support Act), that have never yet been utilized. The legislation expands these authorities as follows
(1) New Authorities: The legislation directs that the president “shall” impose five or more sanctions (see below) on non-U.S. persons determined to have engaged after the date of the legislation: (1) in significant transactions with a person who is part of, or acts on behalf of, the defense or intelligence sectors of the Government of Russia; or (2) makes an investment of $10,000,000 that directly and significantly contributes to the ability of Russia to privatize state-owned assets in a manner that “unjustly benefits” Russian officials. Additionally, the president “may” impose five or more sanctions on non-U.S. persons determined to have made: (3) an investment of more than, or goods, services, or technology worth more than, $1,000,000 (or $5,000,000 in a 12-month period) that contributes to Russia’s ability to construct energy export pipelines.
(2) Potential Penalties: The legislation provides a “menu” of secondary sanctions penalties from which the president can choose. These parallel those utilized in the Iran context and include: (1) denial of Export-Import bank assistance; (2) denial of export licenses; (3) denial of loans from U.S. financial institutions; (4) a prohibition on financial institutions serving as a primary dealer in U.S. Government debt instruments and/or serving as a repository of U.S. government funds; (5) denial of U.S. government contracts; (6) denial of access to U.S. foreign exchange; (7) denial of access to U.S. correspondent or payable through accounts; (8) potential asset blocking; (9) prohibition on U.S. persons investing in the non-U.S. person; (10) denial of visas to corporate officers; and (11) similar restrictions imposed on principal executive officers.
– Codification of Existing Sanctions: The legislation codifies all of the existing Executive Orders on Russia (both those related to Ukraine and to Cyber activities). While the legislation provides the president with a termination authority, in practice this codification substantially reduces the president’s flexibility to relax the existing sanctions (by way of comparison, Congress’s “codification” of existing Cuba-related sanctions in the mid-1990s is the primary reason that President Obama was unable to fully repeal the Cuba embargo in 2014-2016 as he desired). Importantly, the legislation also codifies all existing designations, making it harder to remove persons from either the list of Specially Designated Nationals (SDN) or the Sectoral Sanctions Identification (SSI) list.
– Restrictions on the President: The legislation restricts the president’s ability to unwind existing sanctions, including removing existing designations. Prior to doing so, the president is now required to provide at least 30 days’ notice to Congress. Congress is then provided with procedures to issue either a ‘Joint Resolution of Approval’ or a ‘Joint Resolution of Disapproval’ of the proposed action.
Iran: Senate Legislation Imposes New Non-Nuclear Sanctions
The legislation also includes a number of new sanctions on Iran. To ensure the United States complies with its commitments under the Joint Comprehensive Plan of Action (JCPOA), which suspended or waived aspects of the U.S. sanctions targeting Iran’s nuclear program, these new restrictions are targeted at non-nuclear behavior (e.g., support for terrorism, ballistic missile programs, human rights abuses, etc.). The new measures include:
– New Blocking Sanctions Authorities: The legislation provides that the president “shall” impose new blocking sanctions on persons determined to be: (a) knowingly engaging in activity that materially contributes to the Government of Iran’s ballistic missile program; and (b) knowingly engaged in any activity that materially contributes to the sale, supply, or transfer to or from Iran of major conventional arms systems. Additionally, the legislation indicates that the president “may” impose new blocking sanctions on persons (c) determined to be responsible for extrajudicial killings or other gross violations of human rights committed against individuals in Iran who sought to expose illegal activity or to defend human rights and freedoms.
– Designation of the IRGC as a Terrorist Group: The legislation designates the Islamic Revolutionary Guard Corps as a terrorist organization pursuant to the Global Terrorism Sanctions Regulations (SDGT). The IRGC had already been designated by the U.S. pursuant to the U.S. Weapons of Mass Destruction program. Its subsidiary, the Quds Force, has already been designated as an SDGT.
– Development of a Regional Strategy for Countering Iran: In addition to authorizing a series of new reports – including on the coordination of U.S. measures with Europe and on the detention of U.S. citizens in Iran – the legislation requires the development of a “regional strategy” for deterring conventional and asymmetric Iranian activities in the region, including the IRGC’s regional efforts, Iran’s support for Syrian President Bashar al-Assad, Iranian’s interference with commercial shipping, and other measures.
The legislation passed the Senate 98-2 and now needs to be taken up by the U.S. House of Representatives. Debate has not currently been scheduled, but given previous efforts by the House to impose restrictions on both Iran and Russia, the legislation is widely expected to be approved with a large bipartisan majority. Secretary Tillerson and other members of the Trump administration have indicated they oppose aspects of the legislation – in particular the elements that limit the administration’s discretion to unwind existing restrictions – but if it passes by large majorities in both houses of Congress, it is not yet known whether President Trump will veto the legislation and open the possibility of being overturned.
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| | 11. C. Tinaves: “Turning Back the Clock on Cuba…Kind of”
* Author: Chalinee Tinaves, Esq., Commonwealth Trading Partners, firstname.lastname@example.org.
On Friday, 16 June, President Trump announced changes to the U.S. policy towards Cuba. His new Cuba policies seek to enhance compliance with U.S. law, hold the Cuban regime accountable for human rights abuses, further U.S. national security and foreign policy interests and those of the Cuban people, and lay the groundwork for empowering the Cuban people to develop greater economic and political liberty. Although much of the Obama Administration’s policies remain intact (such as the sending of remittances to Cuba, the expansion of telecommunications and internet access for Cuban people, support for the sale of agricultural commodities, medicine, and medical devices, and the end of the “Wet Foot, Dry Foot” immigration policy), President Trump’s policies are likely to impact two key areas:
(1) trade/business as it seeks to end economic practices that benefit Cuban military, intelligence, or security agencies or personnel; and
(2) travel-related transactions as it seeks to enforce the ban on U.S. tourism to Cuba.
To curtail economic practices benefiting the Cuban military, intelligence, or security services or personnel (such as the Grupo de Administración Empresarial S.A. (GAESA) and its affiliates, subsidiaries, and successors), the State Department has been tasked with publishing a list of entities with which direct financial transactions disproportionately benefit these military-linked enterprises at the expense of the Cuban people or private businesses. This might be difficult to implement as GAESA is reported to control 40-60% of the Cuban economy, including hotels, restaurants, stores, and supermarkets.
Regarding travel-related transactions, the Obama Administration authorized travel-related transactions for 12 categories of identified activities. Outright travel for tourism purposes was prohibited. Individuals seeking to travel to Cuba could travel for educational purposes pursuant to the general license for people-to-people travel. Under this license, each traveler was required to maintain a full schedule of educational exchange activities resulting in meaningful interactions between the traveler and Cuban people and retain records demonstrating such. Those traveling under the auspices of an organization sponsoring exchanges to promote people-to-people contact were able to rely on the sponsoring entity for recordkeeping purposes. However, in practice, it’s not clear how effective enforcement of this general license was. Under President Trump’s new policies, individual “people-to-people” travel will be prohibited but group “people-to-people” travel may continue. Individuals may travel to Cuba as part of programs that take place “under the auspices of an organization that is subject to U.S. jurisdiction that sponsors such exchanges to promote people-to-people contact.” Representatives of the group must accompany each group to make sure that travelers maintain a full-time schedule.
The departments of Treasury and Commerce are now on a 30-day clock to begin the process of issuing new regulations addressing these policy changes. The regulatory amendments are expected to be issued “in the coming months.” In the interim, the announced policy changes will not take effect until those departments have finalized their new regulations.
To provide greater detail on President Trump’s Cuba announcement, OFAC released responses to Frequently Asked Questions.
Regarding the commercial aspects, businesses currently engaged in the Cuban market that may undertake direct transactions with these parties are also authorized as long as the commercial engagements are in place prior to the issuance of the forthcoming regulations. Further, new regulations will not affect existing contracts and licenses. Once the State Department publishes its list of prohibited entities with which direct transactions generally will not be permitted, U.S. companies should be sure check the list to determine if transacting with their Cuban counterpart is permitted.
For those lucky individuals traveling under an individual people-to-people trip that began booking their travel arrangements (flights, hotels, rental cars, etc.) prior to June 16, all future travel-related transactions are authorized regardless of whether the trip occurs before or after OFAC’s new regulations are issued as long as the travel-related transactions were consistent with the Obama-era regulations. Travel arrangement transactions that may include direct transactions with entities related to the Cuban military, intelligence, or security services (GAESA essentially) will also be permitted if they’re made prior to the forthcoming regulations. Once the new regulations enter into effect, travel-related transactions with parties identified by the State Department generally will not be permitted.
While you may not see changes when you purchase airline tickets or book a cruise, know that new policies are coming and travel-related transactions with prohibited entities identified generally will not be permitted. Individuals making travel arrangements after 16 June do so at their own risk. Since there is no specific timeline as to when OFAC’s new regulations will be announced, it is entirely possible for the rules to change while the travelers are in Cuba.
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| | 12. J.A. Lee, R. Kirk & C. Krass: “A Blockbuster Week in U.S. Sanctions”
* Authors: Judith A. Lee, Esq., email@example.com, 202-887-3591; Ronald Kirk, Esq., firstname.lastname@example.org, 214-698-3295; and Caroline Krass, Esq., email@example.com, 202-887-3784. All of Gibson, Dunn & Crutcher LLP.
In the aftermath of the 2016 U.S. presidential election, many of you asked us how U.S. sanctions would change under the Trump Administration. Pointing to President Trump’s extensive criticism of former President Barack Obama’s foreign policy, we predicted significant developments with the Iran and Cuba sanctions programs, and noted that Congress might make its own attempts to force the President’s hand with respect to sanctions on the Russian Federation. These predictions have borne out. In the space of one week, the U.S. Senate voted by an overwhelming majority to expand and codify Obama-era sanctions imposed on Iran and President Trump pulled back on certain aspects of the Cuba sanctions program. Most significantly, the Senate also attached to the Iran bill a significant amendment which would codify and expand U.S. sanctions against the Russian Federation on several fronts, and which would limit the ability of the Trump Administration to weaken both the current sanctions and the new sanctions the amendment would impose.
These changes will be jolting for many companies who have sought to take advantage of the relaxation of sanctions against Cuba and Iran or who have struggled to steer clear of violating the complex Russia sectoral and other sanctions to date. However, they are just the latest manifestation of an ongoing struggle between the executive and legislative branches to shape U.S. foreign policy through the crafting of sanctions over the last several decades.
The Senate’s 98-2 vote in favor of the Countering Iran’s Destabilizing Activities Act of 2017 (S. 722 or “CIDA”) presented a rare moment of bipartisan unity in a bruising political season. [FN/1] CIDA introduced widely popular measures to sanction Iran for its ballistic missile testing. On June 12, Senate Majority Leader Mitch McConnell (R-KY), Senate Banking Committee Chairman Mike Crapo (R-ID), Ranking Member Sherrod Brown (D-OH), Senate Foreign Relations Committee Chairman Bob Corker (R-TN) and Ranking Member Ben Cardin (D-MD) introduced the Countering Russian Influence in Europe and Eurasia Act of 2017 (“CRIEEA”), as Senate Amendment 232 to S. 722. CRIEEA is the latest of several efforts by the 115th Congress to impose sanctions on Russia in response to its ongoing actions in the Ukraine and Syria as well as Russian government interference in the U.S. election. [FN/2] CRIEEA would tighten and expand existing regulations by instituting new sectoral and secondary sanctions. Notably, the proposed legislation would make it significantly more difficult for the Trump Administration to roll back sanctions absent Congressional approval.
By joining the Iran and Russia bills, the Senate assured that President Trump would have to veto more aggressive measures against Iran-which he supports-in order to rid his administration of the new Russian sanctions-which he has criticized. [FN/3] President Trump has reportedly stated since taking office that he does not intend to lift existing Russian sanctions, but his administration also has proposed such relief as a possible incentive to secure Russia’s cooperation in the fight against terrorism. Secretary of State Rex Tillerson had urged the Senate to give the administration “flexibility” to determine appropriate use of sanctions. The Trump Administration has also dismissed reports regarding Russia’s alleged interference in the 2016 election. S. 722 awaits approval from the House of Representatives, where key leadership appears more reticent to go against the wishes of the Trump Administration by imposing additional sanctions. Questions remain as to how the House may alter the substance of the bill, whether President Trump will sign it, and how his administration will implement the measures if passed.
Days after the Senate vote on CIDA, President Trump announced that his administration would unravel many of former President Obama’s rapprochement initiatives with Cuba. Although President Trump’s policy shift was met with cheers from the anti-Castro block in Florida, the reversal caused confusion and concern among many U.S. companies that had already begun to invest in Cuba pursuant to the relaxed sanctions. Notably, although President Trump announced that he was “canceling” the “last administration’s completely one-sided deal with Cuba,” the changes announced by the White House and the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) fell far short of a complete reversal. [FN/4]
The proposed changes to the Iran, Russia and Cuba sanctions programs are discussed in more detail below.
Although President Trump and various members of Congress have criticized the Joint Comprehensive Plan of Action (“JCPOA”), a deal to ease certain sanctions on Iran in exchange for limitations on the country’s nuclear program, the deal remains in place. For more information regarding the current state of play with regard to the JCPOA, please see our recent client alert, Iran Sanctions Update – Status Quo So Far, Uncertainty Remains.
Leaving the nuclear sanctions untouched, CIDA takes issue with Iran’s recent ballistic missile testing and requires the President to impose sanctions against any U.S. and foreign person who “knowingly engages in any activity that materially contributes” to Iran’s ballistic missile program or efforts to develop, deploy, or maintain systems capable of delivering weapons of mass destruction. [FN/5] Sanctioned persons would be subject to asset “blocking,” meaning that U.S. persons would be required to freeze the assets of sanctioned persons in their possession or control. [FN/6] Sanctioned persons would also be prohibited from entering the United States.
CIDA’s other measures address the following:
Iranian Revolutionary Guard Corps
CIDA targets the Iranian Revolutionary Guard Corps (“IRGC”) and its special forces unit, the Quds Force (“IRGC-QF”). [FN/7] The IRGC currently is listed as a Specially Designated National (“SDN”) by virtue of its involvement in weapons proliferation activity and human rights abuses in Iran and Syria. The IRGC-QF was sanctioned due to its actions in support of terrorist and insurgent groups, including the provision of terrorist operatives throughout the Middle East and South Asia. [FN/8] CIDA would require the President to impose sanctions against the IRGC, the IRGC-QF, and their officials, agents, and affiliates under Executive Order 13224, which targets persons or entities involved in terrorism, but stops short of requiring the designation of such persons or entities as Foreign Terrorist Organizations.
The practical impact of this requirement would be to potentially increase the number of entities associated with the IRGC identified on the sanctions list. Counterintuitively, this could help enable companies to better capitalize on pre-existing sanctions relief. The challenge faced by many companies considering now-legal Iranian transactions is that even though they seek to avoid doing business with the IRGC, the opacity of the Iranian economic system can make it difficult to determine if a given counterparty is affiliated with the IRGC. If OFAC is charged with constructing a more complete list of where in the Iranian economy the IRGC and its affiliates reside, it is possible that companies will have an easier time navigating the Iranian system and finding “clean” counterparties.
Human Rights Abuses
CIDA would also authorize the President to sanction persons responsible for “extrajudicial killings, torture, or other gross violations of internationally recognized human rights” committed against individuals in Iran who seek to expose illegal activity conducted by the government of Iran or to “obtain, exercise, defend or promote” internationally recognized human rights and freedoms. [FN/9] Notably, because the Secretary of State would be required to identify such individuals, the bill leaves the executive branch with significant discretion over how this measure would be enforced.
CIDA would require the President to impose sanctions on any person who “knowingly engages in any activity that materially contributes to the supply, sale, or transfer directly or indirectly to or from Iran, or for the use in or benefit of Iran” of certain enumerated conventional weapons, as well as any person who knowingly provides “technical training, financial resources or services, advice, other services or assistance” related to the supply, sale, or transfer of those weapons. [FN/10] As with human rights abuses, the discretion over the threshold finding that persons are “knowingly” engaging in such activities is left to the discretion of the President.
Codification of Previous Designations
CIDA codifies the SDN listing of persons pursuant to Executive Order 13382 (Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters) and Executive Order 13224. [FN/11] Such persons may only be removed from the SDN List if the President “determines and reports to the appropriate congressional committees that it is vital to the national security interests of the United States to waive such sanctions.” [FN/12]
Questions remain regarding the appropriate separation of powers between the executive and legislative branches when “locking in” these designations. Although the codification of such designations has become a favored Congressional tool, some critics believe it is an overextension of legislative power. Moreover, the President retains the ability to license otherwise prohibited transactions with entities and individuals who may remain listed. As such, if this bill becomes law and the President is unable to remove certain individuals from the SDN List, he would nonetheless still be able to promulgate licenses to exempt transactions with certain specified SDNs. Congress would be hard pressed to limit this aspect of the President’s discretionary authority.
The newly proposed Russian sanctions present a dramatic expansion of existing regulations, building on what has become one of OFAC’s most complex sanctions regimes. The existing U.S. sanctions program against Russia was developed in concert with the European Union and other allies and implemented, for the most part, by Executive Orders. CRIEEA would codify existing Obama-era Executive Orders, impose additional cybersecurity-related sanctions, authorize the imposition of sanctions against additional sectors of the Russian economy such as shipping and mining, and require Congressional review of any Presidential decision to terminate or relax existing Russia sanctions.
Expansion of Sectoral Sanctions
Notably, the existing “sectoral sanctions” imposed on certain Russian industries differ depending on the sector of the Russian economy in which a specific entity operates. [FN/13] In September 2014, through a complicated and unprecedented process of Executive Orders and Presidential Directives, the United States instituted sanctions targeting Russia’s finance, energy and defense sectors, measures that impact some of the largest companies in Russia. [FN/14] The policy goal behind the sectoral sanctions was to increase political pressure on President Vladimir Putin by hindering the ability of major Russian firms to continue providing Russia with hard currency and other resources-but to do so in a manner that would limit collateral consequences for the U.S. and our European allies, as well as the global economy. [FN/15] As such, whereas the traditional tool of U.S. sanctions was to “blacklist” targets resulting in a near-complete ban on their undertaking U.S.-related transactions, these so-called “sectoral sanctions” are much more limited and surgical.
CRIEEA would extend the sectoral sanctions set forth in Executive Order 13662 to state-owned entities operating in the railway, shipping, or metals and mining sector in Russia. [FN/16] Originally, Executive Order 13662 authorized sanctions on any person determined by the Secretary of the Treasury to operate in Russia’s financial services, energy, metals and mining, engineering, and “defense and related materiel” sectors. These targeted sectoral sanctions were implemented through a series of “Directives” targeting specific entities in the aforementioned sectors. [FN/17]
CRIEEA would further tighten certain financial restrictions pertaining to subject sectors by directing OFAC to modify Directive 1 to reduce the maximum maturity on new debt that U.S. persons can finance, transact in or otherwise deal with in relation to sanctioned entities from 30 to 14 days. [FN/18] CRIEEA would modify Directive 2 by reducing the longest maturity period of new debt that U.S. persons are allowed to finance, transact in or otherwise deal in with regard to the sanctioned entities from 90 to 30 days. [FN/19]
Critically, CRIEEA also would expand the prohibitions in Directive 4 from deep water, Arctic offshore or shale projects within Russian territory to any project worldwide. [FN/20] Directive 4 would be modified to prohibit the provision, exportation, or reexportation by U.S. persons of goods, services (except for financial services), or technology in support of exploration or production for deep water, Arctic offshore, or shale projects “(1) that have the potential to produce oil; (2) in which a Russian energy firm is involved; and (3) that involve any person determined to be subject to the directive or property or interests in property of such a person.” [FN/21] Given the breadth of global activities in which the Russian energy firms already subject to the Directive are involved (including in projects throughout Asia and the Middle East) this expansion could indirectly impact close U.S. allies and partners involved with projects using the same firms. While consequences could be serious, note that the provision stops short of imposing “secondary sanctions” on non-U.S. entities for their dealings with these Russian entities-the bill saves such for other activities (see below).
Expansion of Secondary Sanctions
The United States’ willingness to impose secondary sanctions on foreign persons and companies is a historical point of contention between the U.S. and its allies, as such measures reach non-U.S. persons with no ostensible connection to U.S. jurisdiction. These measures threaten to cut off non-U.S. persons who conduct business in violation of certain regulations from access to the U.S. goods, services, technology, business opportunities, and capital, and to significant international finance opportunities, such as international financial institution projects or transactions in which the U.S. has a say. Even when these secondary sanctions are focused on what U.S. persons can become involved with, their collateral impact can be huge, as many non-U.S. banks and financial institutions opt to “de-risk” their offerings to steer well clear of U.S. sanctions.
CRIEEA would mandate secondary sanctions for non-U.S. persons who engage in certain efforts to undermine cybersecurity, engage in certain transactions with Russian intelligence or defense sectors, provide investment in or support to Russian energy export pipelines, or invest or otherwise facilitate the privatization of Russia’s state-owned assets. [FN/22] Of particular note to companies supporting international energy pipeline development is the proposed Section 235 authority to impose secondary sanctions on companies who either invest or provide technology, information, goods and services above certain threshold value levels to support Russian energy export pipelines. [FN/23]
Section 235 of CRIEEA specifies 12 options for the President to consider when applying sanctions to targeted foreign persons, a menu that draws heavily from options developed in prior legislation, specifically the Iran Sanctions Act of 1996, as amended, and the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010.
As enumerated in Section 235, the 12 possible secondary sanctions include:
(1) Denial of Export-Import Bank Assistance for Exports to Sanctioned Persons
. The President may direct the Export-Import Bank to withhold approval of any guarantee, insurance, extension of credit, or participation in the extension of credit in connection with the export of any goods or technology to the sanctioned person.
(2) Export Licensing Sanctions
. The President may order the U.S. Government not to issue any specific license nor grant any other specific permission or authority to export goods or technology under relevant authorities.
(3) Prohibition on Loans from U.S. Financial Institutions
. The President may prohibit any U.S. financial institution from making loans or providing credits to a sanctioned person totalling more than U.S. $10 million in any 12 month period.
(4) Opposition to Loans from International Financial Institutions
. The President may direct the U.S. executive director of an international financial institution to “use the voice and vote of the United States” to oppose any loan to benefit a sanctioned person.
(5) Prohibitions for Sanctioned Financial Institutions
. For sanctioned financial institutions, possible sanctions may include prohibitions on (A) designation as a primary dealer or (B) service as a repository of government funds.
(6) Procurement Sanction
. The U.S. Government may not procure or enter into any contract for the procurement of any goods or services from sanctioned persons.
(7) Foreign Exchange
. The President may prohibit transactions in foreign exchanges subject to the jurisdiction of the United States and involving interests of a sanctioned person.
(8) Banking Transactions
. The President may prohibit transfers of credit or payments between financial institutions or by, through or to any financial institution to the extent subject to the jurisdiction of the United States and involving interests of a sanctioned person.
(9) Property Transactions
. The President may prohibit any person from (A) acquiring, holding, withholding, transporting, importing or exporting property subject to the jurisdiction of the United States and with respect to which the sanctioned person has interest, (B) dealing with or exercising any right, power or privilege with respect to such property, or (C) conducting any transaction involving such property.
(10) Ban on Investment in Equity or Debt
. The President may prohibit any U.S. person from investing in or purchasing significant amounts of equity or debt instruments of a sanctioned person.
(11) Exclusion of Corporate Officers
. The President may direct the Secretary of State to deny a visa to, and the Secretary of Homeland Security to exclude from the United States, any alien determined to be a corporate officer or principal of, or a shareholder with a controlling interest in, a sanctioned person.
(12) Sanctions on Principal Executive Officers
. The President may impose on the principal executive officer or officers of a sanctioned person, or on persons performing similar functions and with similar authorities as such officer or officers, any of the sanctions specified above.
In addition to the secondary sanctions applicable to foreign persons, CRIEEA would further revise existing Russia sanctions legislation to impose penalties on foreign persons found to be evading sanctions. [FN/24] The foreign sanctions evaders provision could present significant risks for non-U.S. persons involved in Russia-related investments and transactions. Notably, CRIEEA would block the property of “foreign sanctions evaders,” similar to provisions in the Iran and Syria sanctions program. This would include any foreign person whom the President determines knowingly “materially violates, attempts to violate, conspires to violate, or causes a violation” of any Russia sanctions; or “facilitates significant deceptive or structured transactions for or on behalf of-(A) any person subject to sanctions imposed by the United States with respect to the Russian Federation; or (B) any child, spouse, parent, or sibling of an individual described in subparagraph (A).” [FN/25]
CRIEEA would also direct the President to impose sanctions on persons determined to have knowingly engaged in “significant activities undermining cybersecurity against any person, including a democratic institution, or government” on behalf of the Russian government, as well as any person or entity that is owned or controlled by, or that acts on behalf of such persons. [FN/26] “Significant activities undermining cybersecurity” include significant efforts to “deny access to or degrade, disrupt or destroy an information and communications technology system or network” or to “exfiltrate, degrade, corrupt, destroy, or release information from such a system or network” without authorization for the purpose of (i) conducting influence operations; or (ii) causing a significant misappropriation of funds, economic resources, trade secrets, personal information, or financial information for commercial or competitive advantage or private financial gain; as well as significant destructive malware attacks and significant denial of service activities. [FN/27]
In this context we note that the Council of the European Union (the “E.U.”) has today announced that for the first time it will be prepared to impose sanctions against “state and non-state actors” as a part of a broader policy response to malicious cyber activity. [FN/28] The imposition of sanctions is one element within what the E.U. is describing as its “cyber diplomacy toolbox”. [FN/29] The Council has published Conclusions on a Framework for a Joint E.U. Diplomatic Response to Malicious Cyber Activities which clarifies the policy objectives behind this development: “The EU affirms that measures within the Common Foreign and Security Policy, including, if necessary, restrictive measures, adopted under the relevant provisions of the Treaties, are suitable for a Framework for a joint EU diplomatic response to malicious cyber activities and should encourage cooperation, facilitate mitigation of immediate and long-term threats, and influence the behavior of potential aggressors in a long term“. [FN/30] Pending BREXIT this extension of the E.U.’s sanctions regime would be implemented by the United Kingdom alongside the other Member States.
Other Mandatory Sanctions
The Act would mandate certain sanctions on foreign persons whom the President determines “knowingly” make a “significant investment” in a “special Russian crude oil project,” which includes deepwater, Arctic offshore or shale. Namely, the Act would modify Section 4(b)(1) of the Ukraine Freedom Support Act of 2014, 22 U.S.C. 8923(b)(1) (“UFSA”), by striking ”on and after the date that is 45 days after the date of the enactment of this Act, the President may impose” (emphasis added) and inserting “on and after the date that is 30 days after the date of the enactment of the Countering Russian Influence in Europe and Eurasia Act of 2017, the President shall impose, unless the President determines that it is not in the national interest of the United States to do so” (emphasis added). [FN/31] The Act would similarly mandate sanctions with respect to foreign financial institutions by replacing “may impose” with “shall impose” and otherwise updating the UFSA. [FN/32] Once more, the actual impact of this change would be to change the President’s political calculations regarding whether he would impose such sanctions-the President would retain the discretion to make (or not to make) the initial findings that would lead to these otherwise “mandatory” sanctions.
Notably, the existing sectoral sanctions against Russia are further complemented by certain behavior-based and region-specific initiatives. The 2012 Sergei Magnitsky Rule of Law Accountability Act of 2012 punishes Russian officials thought to be responsible for the death of lawyer Sergei Magnitsky by prohibiting their entrance to the United States and their use of its banking system. CRIEEA would mandate penalties on those persons found to have engaged in significant corruption or to have contributed to human rights abuses in territories occupied or controlled by the Russian Federation. [FN/33] Targeting corruption has been a goal of many sanctions proponents in Congress- the challenge, and the concern prior administrations have had with such a strategy, is how to define significant corruption. This legislation advances that objective, but does not break new ground in that regard.
On June 16, 2017, President Trump announced that his administration would reimpose some of the sanctions on Cuba that were relaxed under President Obama. In late 2014, the Obama Administration began a diplomatic process that gradually thawed tensions with the Communist state and eased commercial and travel restrictions between the two countries. While President Obama did not end the embargo on Cuba, which was established by Congress and consequently can only be ended by statutory amendment, the U.S. eased travel restrictions and the two countries reopened embassies in each other’s capitals for the first time since 1961. Since then, the U.S. and Cuba have signed multiple bilateral agreements to collaborate on issues ranging from human and drug trafficking to maritime security and migration, and President Obama ended the “wet foot, dry foot” immigration policy that provided visas to Cubans who had reached U.S. shores. Although President Trump had hinted at a more wholesale rejection of the Obama Administration’s Cuba policies, the changes announced by the White House and OFAC were relatively modest in scope. [FN/34]
According to a fact sheet issued by the White House, the new Cuba policy aims to keep the Grupo de Administración Empresarial, a conglomerate run by the Cuban military, from benefiting from the opening in U.S.-Cuba relations. [FN/35] The new policy purports to enhance existing travel restrictions to “better enforce the statutory ban” on U.S. tourism to Cuba, including limiting travel for non-academic educational purposes to group travel and prohibiting individual travel permitted by the Obama Administration. [FN/36] Senior White House officials also indicated that the current Administration will not close the newly re-opened U.S. Embassy in Havana or reinstate the “wet foot, dry foot” policy. [FN/37] The Trump Administration indicated that the policy changes will not take effect until the Departments of the Treasury and Commerce issue new regulations, and directed those Departments to begin the process of issuing new regulations within 30 days. [FN/38]
OFAC notes in a series of new Frequently Asked Questions that the announced policy changes will not change the authorizations for sending remittances to Cuba. However, the announced changes also include an exception allowing transactions incident to the sending, processing, and receipt of authorized remittances to the extent they would otherwise be restricted by the new policy limiting transactions with certain identified Cuban military, intelligence, or security services. [FN/39]
The U.S. State Department will be publishing a list of entities with which direct transactions generally will not be permitted, along with further guidance. [FN/40]
While the Russia, Iran and Cuba sanctions regimes are all based on different legal authorities and speak to diverse political and national security interests, the focus on these three areas reflects the continuing use of sanctions as a tool to address U.S. competing foreign policy concerns. Sanctions have become a primary foreign policy battleground, both with respect to how U.S. foreign policy is received and regarding clashes between the branches as Congress and the President maneuver to see which side will be able to push certain foreign policy interests forward. The result is a very fluid environment and one in which banks, corporations and individuals with cross-border exposure (or potential exposure) almost anywhere in the world need to remain vigilant to changing policies, enforcement priorities, and risks.
[FN/1] Only two Republican Senators-Mike Lee of Utah and Rand Paul of Kentucky-voted against the bill.
[FN/2] See, e.g., the Countering Russian Hostilities Act of 2017 (S. 94) (introduced on January 11, 2017).
[FN/3] 115th Congress (2017-2018), Amendment 232 to S. 722, available here. [FN/4] Adam Fisher, “Trump ‘canceling’ Obama’s Cuba policy but leaves much in place,” ABC News, (June 17, 2017), available here.
[FN/5] S. 722, Section 4.
[FN/6] Id. The restrictions would apply not only to sanctioned persons but to their successors, parent company, subsidiaries and affiliates.
[FN/7] Id., Section 5.
[FN/8] Id., Section 5 (1).
[FN/9] S. 722, Section 6.
[FN/10] Id., Section 7.
[FN/11] Id., Section 8.
[FN/12] Section 12.
[FN/13] OFAC, Frequently Asked Question and Answers (“FAQ”) Nos. 370-474, available here.
[FN/15] Blacklisting some of these actors could have had substantial collateral consequences for U.S. and European interests, as well as for the global economy.
[FN/16] Section 223(a).
[FN/17] On July 16, 2014, OFAC exercised the authority granted by Executive Order No. 13662 and issued Directives that placed limited sanctions on four entities in the Russian financial services and energy sectors, as identified on a newly published SSI List. The SSI List has been amended over time. Entities owned a total of 50 percent or more by one or more sanctioned parties are similarly blocked (the “50 Percent Rule”). OFAC has confirmed that this 50 Percent Rule applies to persons identified on the SSI as well as the SDN Lists.
[FN/18] Section 223(b).
[FN/19] Section 223(c).
[FN/20] Directive 4 currently prohibits “the provision, exportation, or reexportation, directly or indirectly, of goods, services (except for financial services), or technology in support of exploration or production for deepwater, Arctic offshore, or shale projects that have the potential to produce oil in the Russian Federation, or in maritime area claimed by the Russian Federation and extending from its territory, and that involve any person determined to be subject to this Directive, its property, or its interests in property.”
[FN/21] Section 223(d).
[FN/22] Section 224(a)(2) (cybersecurity), Section 231((b) (transactions with Russia’s defense or intelligence sectors), Section 232(a) (Russian pipelines), Section 233(a) (investment in or facilitation of privatization of Russian state-owned assets).
[FN/23] We further note that the current text of Section 235 could be construed to support the imposition of secondary sanctions against any Russian energy pipelines, not just energy export pipelines. See Section 235(c).
[FN/24] Sections 228 (a) (setting forth proposed changes to the Support for the Sovereignty, Integrity, Democracy and Economic Stability of Ukraine Act of 2014, 22 U.S.C. 8901 et. seq.)
[FN/26] Section 224 (a)(1)(A)-(B).
[FN/27] Section 224 (c).
[FN/28] Press Release, Council of the European Union, “Cyber attacks: EU ready to respond with a range of measures, including sanctions”, available here.
[FN/30] Council of the European Union, Conclusions on a Framework for a Joint EU Diplomatic Response to Malicious Cyber Activities (Cyber Diplomacy Toolbox”), available here.
[FN/31] The amended Section 4(b)(1) would read: “Except as provided in subsection (d), on and after the date that is 30 days after the date of the enactment of the Countering Russian Influence in Europe and Eurasia Act of 2017, the President shall impose, unless the President determines that it is not in the national interest of the United States to do so, 3 or more of the sanctions described in subsection (c) with respect to a foreign person if the President determines that the foreign person knowingly makes a significant investment in a special Russian crude oil project.”
[FN/32] Section 226. The amended language would read: “The President shall impose, unless the President determines that it is not in the national interest to do so, the sanction described in subsection (c) with respect to a foreign financial institution that the President determines knowingly engages, on or after the date of the enactment of this Act, in significant transactions involving activities described in subparagraph (A)(ii) or (B) of section 8923(a)(2) of this title or paragraph (1) or (3) of section 8923(b) of this title for persons with respect to which sanctions are imposed under section 8923 of this title. […] The President may impose the sanction described in subsection (c) with respect to a foreign financial institution if the President determines that the foreign financial institution has, on or after the date that is 30 days after the date of the enactment of the [CRIEEA], knowingly facilitated a significant financial transaction on behalf of any Russian person included on the [SDN List]…”
[FN/33] Sections 227 (corruption), 228 (foreign sanctions evaders and serious human rights abusers).
[FN/34] Fisher, supra n. 4; see Fact Sheet on Cuba Policy, Whitehouse.gov (June 16, 2017) (“White House Fact Sheet on Cuba Policy”), available here and OFAC, Frequently Asked Questions on President Trump’s Cuba Announcement (June 16, 2017) (“OFAC Cuba FAQs”), available here.
[FN/35] White House Fact Sheet on Cuba Policy.
[FN/37] Fisher, supra n. 4.
[FN/39] OFAC Cuba FAQs, No. 8.
[FN/40] OFAC Cuba FAQs, No. 11.
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| | 13. M. Volkov: “Five Telltale Signs of a Weak Corporate Culture”
(Source: Volkov Law Group Blog. Reprinted by permission.)
* Author: Michael Volkov, Esq., Volkov Law Group, firstname.lastname@example.org, 240-505-1992.
We all know it when we see it – a company with a weak corporate culture of ethics and compliance. Many companies claim they have an ethical culture but few really do.
With increasing emphasis and understanding of the tangible benefits of an ethical culture, companies are striving to achieve such a goal. Unfortunately, there is no single solution to companies that want to establish a culture of ethics. Each company has a distinct culture and therefore a unique path to achieving an ethical culture.
In assessing a company’s state of culture, there are several signs of a weak culture of ethics and compliance. Here are five:
The Single CEO Video Statement
– Some companies maintain a fig leaf of culture of ethics by citing its tone at the top. Exhibit 1 for its claim is a canned video statement, recorded and replayed to demonstrate a company’s commitment to ethical principles. I have no objection to such a video, but there is much more that is required for a company to establish its tone at the top. Recorded messages have to be reinforced with actions and conduct taken by the CEO and senior management to publicize and demonstrate their commitment to an ethical culture.
The “Vanilla” Code of Ethics and Business Conduct
– A company’s code of conduct has to reflect the company’s principles, its standing in its industry, and its objective to integrate ethical business decision-making into its operations. A cut-and-paste code of conduct reflects a company’s failure to realize the unique opportunity to design and implement a code of conduct that advances its objective of ethics. The message must be clear, succinct and designed to reinforce selected ethical values. It cannot be a mere statement of laws and behaviors that a company is committed to with little relevance or explanation in the context of its business.
The Chief Compliance Officer’s Position and Role
– A CCO’s position in the corporate organization is an important – if not critical – indicator of a company’s commitment to a culture of ethics. If a CCO is part of the legal department, has little visibility into the business and has little access to the C-Suite, you can bet that the company has no real desire to build a culture of ethics. On the other hand, if you observe a CCO who is empowered, independent, and with a senior management role in business decisions, that is a strong indicator of a desire to build an ethical culture. The CCO is likely to have an office in the C-Suite with direct access to the CEO and the audit/compliance committee. A CCO who has this stature in the company can play a defining role in building, measuring and monitoring a culture of ethics.
CCO Focus on “Easy” Metrics and Accomplishments
– A CCO who focuses on some of the basic aspects of a compliance program is an important indicator of a lack of priorities and lost opportunities. For example, a CCO who defines compliance “success” by achieving close to 100 percent annual compliance certifications from employees is giving themselves a self-defined pat on the back. By aiming low, the CCO can almost guarantee success in his or her own mind. The danger of such an attitude is that the CCO informs and educates the CEO, senior management and the board of this criterion is doing everyone a disservice. If a CCO devotes extraordinary time and attention to “measuring” such certification percentages and reporting to the board on such issues, the CCO needs to reexamine his or her priorities. In a company dedicated to a culture of ethics, a CCO is devoted to promoting a culture of ethics, monitoring the company’s culture and reporting on its culture to the CEO and the board.
Reporting, Investigations and Discipline
– A company that fails to understand the importance of maintaining an effective system of organizational justice is bound to miss the importance of such a system to an ethical culture. If a company does not encourage employee reporting of misconduct, ensure prompt responses to such concerns, or maintain consistent discipline of executives, managers and employees, a company will not have a culture of ethics. An effective system for employee reporting of concerns and misconduct is a fundamental foundation for a culture of ethics. It is a basic requirement that has to exist for a culture of ethics to flourish and for company leadership to maintain credibility in the organization.
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|EDITOR’S NOTES |
* Charles W. Chesnutt (Charles Waddell Chesnutt, 20 Jun 1858 – 15 Nov 1932, was an American author, essayist, political activist and lawyer, best known for his novels and short stories exploring complex issues of racial and social identity in the post-Civil War South.)
– “There’s time enough, but none to spare.”
* Anna Letitia Barbauld (née Aikin, 20 Jun 1743 – 9 Mar 1825; was a prominent English poet, essayist, literary critic, editor, and children’s author.)
– “The dead of midnight is the noon of thought.”
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| | 15 . Are Your Copies of Regulations Up to Date? (Source: Editor)
The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register. Changes to applicable regulations are listed below.
– Last Amendment: 15 Jan 2016: 81 FR 2657-2723: Machineguns, Destructive Devices and Certain Other Firearms; Background Checks for Responsible Persons of a Trust or Legal Entity With Respect To Making or Transferring a Firearm
– Last Amendment: 27 Jan 2017: 82 FR 8589-8590: Delay of Effective Date for Importations of Certain Vehicles and Engines Subject to Federal Antipollution Emission Standards [New effective date: 21 March 2017.]; and 82 FR 8590: Delay of Effective Date for Toxic Substance Control Act Chemical Substance Import Certification Process Revisions [New effective date: 21 March 2017.] – Last Amendment: 14 Jun 2017: 82 FR 27108-27110: Wassenaar Arrangement 2015 Plenary Agreements Implementation, Removal of Foreign National Review Requirements, and Information Security Updates; Corrections
– Last Amendment: 16 Jun 2017: 82 FR 27613-27614: Removal of Burmese Sanctions Regulations
– Last Amendment: 19 Apr 2017: 82 FR 18383-18393: Foreign Trade Regulations: Clarification on Filing Requirements – HTS codes that are not valid for AES are available here
– The latest edition (19 Apr 2017) of Bartlett’s Annotated FTR (“BAFTR”), by James E. Bartlett III, is available for downloading in Word format. The BAFTR contains all FTR amendments, FTR Letters and Notices, a large Index, and footnotes containing case annotations, practice tips, and Census/AES guidance. Subscribers receive revised copies every time the FTR is amended. The BAFTR is available by annual subscription from the Full Circle Compliance website. BITAR subscribers are entitled to a 25% discount on subscriptions to the BAFTR.
– HTS codes for AES are available here . – HTS codes that are not valid for AES are available here
– Latest Amendment: 11 Jan 2017: 82 FR 3168-3170: 2017 Civil Monetary Penalties Inflationary Adjustment – The only available fully updated copy (latest edition 10 Jun 2017) of the ITAR with all amendments is contained in Bartlett’s Annotated ITAR (“BITAR”), by James E. Bartlett III. The BITAR contains all ITAR amendments to date, plus a large Index, over 800 footnotes containing amendment histories, case annotations, practice tips, DDTC guidance, and explanations of errors in the official ITAR text. Subscribers receive updated copies of the BITAR in Word by email, usually revised within 24 hours after every ITAR amendment. The BITAR is available by annual subscription from the Full Circle Compliance website . BAFTR subscribers receive a 25% discount on subscriptions to the BITAR, please contact us
to receive your discount code.
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| | 16 . Weekly Highlights of the Daily Bugle Top Stories (Source: Editors) Review last week’s top Ex/Im stories in “Weekly Highlights of the Daily Bugle Top Stories” published here .
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|* The Ex/Im Daily Update is a publication of FCC Advisory B.V., edited by James E. Bartlett III and Alexander Bosch, and emailed every business day to approximately 8,000 subscribers to inform readers of changes to defense and high-tech trade laws and regulations. We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOJ/ATF, DoD/DSS, DoD/DTSA, State/DDTC, Treasury/OFAC, White House, and similar websites of Australia, Canada, U.K., and other countries and international organizations. Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items. |
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