On Thursday, April 16 and Monday, April 20, 2020, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) made announcements to address the global COVID-19 crisis, recognizing both that providing COVID-related humanitarian assistance abroad requires consideration of applicable sanctions and that companies’ sanctions compliance resources may be stretched thin during the pandemic. The announcements include a Fact Sheet consolidating preexisting guidance from OFAC pertaining to humanitarian trade and a subsequent Notice encouraging prompt communication with OFAC in the event that COVID-19 pandemic-related challenges will impact the ability of any person to meet deadlines associated with OFAC-related regulatory requirements.
Humanitarian Relief Authorizations
In a statement made during a virtual panel presentation on April 17, the Director of OFAC, Andrea Gacki, stated that OFAC is making it a priority to ensure that sanctions “do not impede humanitarian relief efforts related to the COVID-19 crisis.” To that end, on April 16, OFAC issued guidance consolidating the longstanding exceptions under its most restrictive sanctions programs that allow U.S. persons to provide humanitarian support in countries where their activities are otherwise prohibited or seriously restricted. The ten-page Fact Sheet on the Provision of Humanitarian Assistance and Trade to Combat COVID-19 catalogs the available exemptions, exceptions, and authorizations relating to humanitarian assistance and trade under (1) the comprehensive embargos on Cuba, Iran, North Korea, Syria, and the Crimea region of Ukraine, and (2) the Venezuela sanctions program, under which the government of Venezuela is blocked, certain conduct is prohibited, and numerous Venezuelan individuals and entities are included on the Specially Designated Nationals (“SDN”) List.
The Fact Sheet does not create any new exemptions, exceptions, or authorizations. The existing humanitarian relief-related allowances are found in certain Executive Orders as well as various of OFAC’s general licenses, specific licensing policies, extensive FAQs, and other published advisories and guidance, to which the Fact Sheet helpfully provides direct hyperlinks. The existing allowances are intended to permit humanitarian goods and services to reach the general public of each sanctioned country. Depending on the country, the provision of food, agricultural commodities, medicine, medical devices, clothing, or other goods or services may be authorized, subject to applicable conditions specific to each authorization.
The Fact Sheet also provides a brief summary of the purpose of each sanction program — broadly speaking, deterring or limiting oppressive or harmful activities of the government or regime in power or curbing illicit activities. Some activities that would otherwise be prohibited may be allowed when they involve the provision of humanitarian assistance to ordinary citizens. For example, certain transactions in Venezuela are authorized despite having a nexus to the blocked government of Venezuela, as are limited transactions in North Korea that involve the government of North Korea, such as certain payments of fees, taxes, or duties or purchases of permits that may be necessary to deliver humanitarian goods or services to citizens.
The Fact Sheet makes clear that OFAC will prioritize license applications, compliance questions, and other requests relating to humanitarian support transactions that are not otherwise authorized or exempt from sanctions, and OFAC will review specific license requests on a case-by-case basis. Ms. Gacki reportedly stated that licenses to provide humanitarian items to Iran — which is among the countries hit hardest by COVID-19 — are being treated with particular urgency. Anecdotally, we have been advised that OFAC is currently receiving a large number of new requests (of all types) in its online application system.
Authorizations from other U.S. government agencies may still be required for transactions allowed by OFAC, including export licenses from the Department of Commerce’s Bureau of Industry and Security (“BIS”) or, for the export of “scarce or threatened” Personal Protective Equipment (“PPE”), specific approval from the Department of Homeland Security’s Federal Emergency Management Agency (“FEMA”). We recently discussed FEMA’s temporary rule restricting the export of certain types of PPE here and here. Thus, while existing general licenses already permit the export of certain PPE to Iran, for example, specific FEMA approval may be required for those exports through at least August 10, 2020.
Compliance with Regulatory Deadlines and Allocation of Compliance Resources
On Monday, April 20, OFAC issued a Notice encouraging any person affected by COVID-19, including financial institutions and other businesses, to communicate with OFAC “as soon as practicable” if the person “believes it may experience delays in its ability to meet deadlines associated with regulatory requirements administered by OFAC.” OFAC recognizes that deadlines for reports on blocked or rejected transactions, responses to administrative subpoenas, reports required by general or specific licenses, and other required reports or submissions all may be impacted by COVID-19. OFAC also encourages any person submitting a self-disclosure to do so electronically through the following email address instead of physical mail: OFACdisclosures@treasury.gov.
Consistent with OFAC’s enforcement guidelines and its Framework for OFAC Compliance Commitments, which we previously discussed here, the Notice encourages companies to employ a “risk-based” approach to sanctions compliance during the current crisis. Therefore, if a company experiences “technical and resource challenges caused by the COVID-19 pandemic” and chooses to temporarily reallocate sanctions compliance resources to other functions, OFAC will consider this as a factor, which will be evaluated on a case-by-case basis, when considering any apparent violation that occurs during this period.