On April 16, 2020, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) released a 10-page document entitled “Fact Sheet: Provision of Humanitarian Assistance and Trade to Combat COVID-19.” This document provides a detailed overview of U.S. sanctions laws as they apply to the provision of COVID-19-related humanitarian assistance to high-risk countries such as Cuba, Iran, North Korea, Syria, Venezuela and the Crimea region.
While potentially serving as a useful reference to existing OFAC programs and guidance, it is important to note that the latest fact sheet does not make any substantive changes to existing sanctions regulations and related Executive Orders. Moreover, as evidenced by the length and complexity of OFAC’s latest fact sheet, interpretation and application of the OFAC rules governing shipments of food, medicine, certain medical devices and other humanitarian assistance to high-risk countries remains highly nuanced, fact-specific and widely variable depending on the countries and persons involved and the nature of each transaction.
Nevertheless, certain key steps are common to compliance with the various OFAC sanctions programs. First and foremost, companies wishing to export, re-export, donate or otherwise transfer humanitarian assistance to high-risk countries and regions such as Cuba, Iran, North Korea, Syria, Venezuela and the Crimea region should first screen the transaction to determine whether any of the parties involved (e.g., banks, end users, consignees, freight forwarders and other parties to a transaction) are identified on any U.S. government denied party lists or otherwise subject to OFAC sanctions.
This step is critical for all transactions – even those that may not appear to involve U.S.-origin goods, services, U.S. dollars or another “U.S. nexus” – because of the wide scope and extent of OFAC’s primary and secondary sanctions authority. Even if a transaction lacks any apparent U.S. nexus, the involvement of a Specially Designated National (SDN) or other sanctioned individual, company or entity could result in a bank or other third party (such as a freight forwarder) freezing, blocking or rejecting the transaction and related payments and, potentially, the application of U.S. sanctions against the parties involved in the transaction. Accordingly, any matches or potential matches to SDNs or other denied parties should be carefully analyzed and all red flags resolved before proceeding. Even then, it is a best practice to pre-clear authorized transactions that involve high-risk countries with your bank and other third-party service providers to avoid delays, rejections, or cancellations.
Second, companies should not presume that OFAC sanctions are the only export requirements that apply. For example, as OFAC itself repeatedly emphasizes in the latest guidance, some transactions that may fall within the scope of an OFAC general license or humanitarian exception may still require analysis and licenses or other approvals under overlapping regulations such as the Export Administration Regulations (EAR) enforced by the Department of Commerce’s Bureau of Industry and Security (BIS). In addition, individuals and companies providing humanitarian assistance should be mindful of procedural requirements that may apply, such as Electronic Export Information filing requirements under the U.S. Foreign Trade Regulations (FTR).
Finally, companies seeking to provide humanitarian assistance should pay careful attention to and strictly follow the record-keeping and other detailed procedural requirements of the OFAC sanctions, EAR, FTR, and related licenses and approvals. In general, these requirements mandate retention of screening, due diligence, transaction, shipment and payment records for a minimum of five years. Further, procedural requirements such as specific contract terms and conditions may apply depending on the destination of humanitarian assistance and the parties and countries involved.
