International Trade & Compliance Alert
The Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”) issued an extensive Fact Sheet on April 16, 2020 regarding the provision of humanitarian assistance and trade to combat COVID-19 in compliance with U.S. sanctions.
OFAC economic sanctions generally forbid the supply of most goods and services to embargoed locations, such as Iran, and to a variety of sanctioned entities and individuals. The Fact Sheet describes several exemptions, exceptions, and authorizations that, in specified circumstances, cover the supply of certain goods and services that are useful for COVID-19 relief. These include, in particular, medicine and medical devices, such as certain personal protective equipment (“PPE”), to certain sanctioned countries. OFAC observes that certain items that would be useful for COVID-19 assistance would require a specific OFAC license and that OFAC is “prioritizing and expediting review of these license requests.”
The Fact Sheet notes that U.S. persons who want to export PPE from the United States must review all relevant U.S. regulations and guidance, including the temporary Federal Emergency Management Agency (“FEMA”) rule issued on April 10, 2020, effective from April 7, 2020 to August 10, 2020, which prohibits the export from the United States of five types of PPE without explicit FEMA approval. FEMA issued the temporary rule under the Defense Production Act of 1950, as amended, recently issued Executive Orders (“E.O.s”), and the Presidential Memorandum on Allocating Certain Scarce or Threatened Health and Medical Resources to Domestic Use, dated April 3, 2020. The PPE subject to the rule are:
The Fact Sheet describes the treatment of certain types of Iranian manufacturers under E.O. 13902 in light of the COVID-19 epidemic. As discussed in our prior client alert, E.O. 13902, issued on January 10, 2020, targets persons operating in Iran’s construction, mining, manufacturing, and textiles sectors, authorizing the imposition of “secondary” sanctions on non-Iranian, non-U.S. companies that engage in certain significant transactions relating to any designated sector or materially assist or provide support to persons blocked under the order. The Fact Sheet provides that for purposes of E.O. 13902, persons in Iran that are manufacturing medicines, medical devices, or products used for sanitation, hygiene, medical care, medical safety, and manufacturing safety, including, among other things, soap, hand sanitizer, ventilators, respirators, and PPE, for use in Iran and not for export from Iran, will not be considered to be operating in the manufacturing sector of Iran.
The Fact Sheet also highlights the Swiss Humanitarian Trade Arrangement (the “SHTA”), an operational channel formally established in February 2020 by the Swiss government in coordination with the U.S. government intended “to facilitate the flow of humanitarian goods to the Iranian people while safeguarding against the Iranian regime’s diversion of humanitarian trade for malign purposes.” Financial institutions that want to participate in the SHTA must commit to conducting enhanced due diligence to ensure that humanitarian goods reach the Iranian people and are not misused by the Iranian regime. The SHTA is the first channel established under a humanitarian framework announced in October 2019 by the U.S. Treasury and State Departments designed to “ensure unprecedented transparency into humanitarian trade with Iran.” The humanitarian framework sets forth detailed documentation that may be required with respect to transactions conducted pursuant to the mechanism.By collecting relevant information in one document, the Fact Sheet should be a useful resource for persons seeking to supply agricultural products, medicine, medical devices, or other humanitarian assistance to sanctioned countries, during or after the COVID-19 pandemic. As always, persons seeking to engage in such activities will need to review carefully and ensure they comply with the terms of available exemptions, exceptions, and/or OFAC general licenses.