Prohibited Country Sanctions and Embargoes: Make Sure You Know the Difference When Drafting Contract Language and Evaluating Export Markets

by Baker Donelson
Contact

Casually, the words ‘embargo’ and ‘sanction’ are often used interchangeably. But when it comes to drafting a contract or assessing the viability of an export opportunity, failing to use the correct word can have serious consequences. Generally, both terms describe government measures that prohibit individuals and entities under the jurisdiction of one country (not necessarily just its citizens and companies) from engaging in trade or transacting with those of another. Historically, an embargo connotes a complete ban on all commercial activity between two nations, while sanctions are more limited in scope and prohibit trade in certain types of goods or transactions with particular individuals and entities. In fact, sanctions are described by some as a ‘partial embargo.’ The current measures governing commercial relations between the United States and Cuba are a classic example of what is considered an embargo. But even this characterization can be misleading. Strictly speaking, the measures imposed against Cuba are not a total embargo as certain transactions involving journalistic pursuits, certain foodstuffs, humanitarian assistance, and religious travel are allowed despite the ‘embargo.’ Thus an embargo to one person may not be an embargo to all. Another example is Iran. There is an embargo on US goods going to Iran unless you export medical and dental “devices” or foodstuff.  However, consider N. Korea where most people would say we also have an embargo. US entities are permitted to make financial investments in North Korea. Who knew that? Of course it isn’t true for Iran or Cuba. Each country has its own specific unique set of sanctions.

When drafting sanction and embargo clauses in contracts or considering where to do business, keep these points in mind:

If you (or your company) are a U.S. person, the U.S. sanction or embargo restrictions apply everywhere in the world: whether you are in the United States, in the country being sanctioned, or anywhere else. So avoid language that ties a party’s sanctions obligations to a physical location.

Just because a country is sanctioned (or even embargoed) it does not mean that all commercial opportunities in that country or with that country’s nationals are off limits. Each sanctions regime is different (compare the fairly limited sanctions currently imposed on certain Russian and Ukrainian individuals and entities with the broader sanctions that are imposed on most transactions with the Iranian government, Iranians, and Iranian entities), so in certain cases a particular deal can go forward because it falls outside the scope of applicable restrictions. Of course, a detailed review of current regulations is necessary to determine whether this is true in a particular case, but make sure to leave room for lawful activity in sanctioned countries by avoiding blanket statements that prohibit parties from involving themselves in any transaction that involves a sanctioned country. (I have seen really high priced lawyer make this mistake.

Due to the political nature of sanctions and the fact that they are used by the US government as diplomatic tools to influence the behaviors of other nations they are constantly changing in response to the ever-evolving geopolitical landscape. So avoid including lists of specifics countries in your contracts because if sanctions against a particular country are lifted while the contract is still in force such outdated language could potentially complicate a party’s plans to enter an attractive new market.

In most cases, due to the all-encompassing nature of the concept of an embargo discussed above, it is preferable to describe measures as sanctions in a contract in order to allow for the intricacies of each individual sanctions regime and avoid a reading that would prohibit all (including legal) activity in or with a sanctioned country.

An appreciation for the business activities that remain permissible in or with sanctioned countries along with sufficiently permissive contract language and a comprehensive export compliance program that requires your employees to perform the necessary due diligence on each individual transaction will ensure your company remains compliant but doesn’t miss out on perfectly legal and potentially lucrative opportunities in the process! [I know the sentence is really long. You may need to read it twice. Sorry.]

Have a great day,

Doreen

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Baker Donelson | Attorney Advertising

Written by:

Baker Donelson
Contact
more
less

Baker Donelson on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.