U.S. Economic Sanctions: Current Landscape, Recent Activity, and New Developments

1. U.S. Economic Sanctions:Current Landscape, Recent Activity, and New Developments

2. Speaker Meredith RathboneAssociate Steptoe & Johnson LLP, Lex Mundi member firm for Washington D.C. mrathbone@steptoe.com

3. Overview of U.S. Economic Sanctions • OFAC (Office of Foreign Assets Control – Treasury Department) administers U.S. sanctions programs • Regulations: 31 C.F.R. Parts 500-598 • Website: http://www.ustreas.gov/offices/enforcement/ofac/ • Sanctioned countries: • Cuba, Iran, Sudan - almost complete prohibition • North Korea, Syria – broad export restrictions (BIS) • Burma (Myanmar) – financial services and new investment restrictions, among others • Also: Balkans, Belarus, Cote d’Ivoire (Ivory Coast), Democratic Republic of the Congo, Iraq, Lebanon, Liberia, Somalia, Zimbabwe • List-based sanctions (SDNs, foreign policy, national security, terrorists, narcotics traffickers)

4. U.S. Economic Sanctions - Prohibitions • Sanctions programs vary significantly. They can prohibit, among other things: • Exports, reexports, and transshipments of U.S.-origin goods, technology, know-how, and services to sanctioned countries or persons • Investment in sanctioned countries or persons • “Dealing in” goods, technology, or services destined for sanctioned countries (regardless of origin) or blocked property (asset freezes) owned/controlled by sanctioned persons • “Facilitating” or “approving” a foreign (non-U.S.) person in its business dealings with sanctioned countries or persons • Evading or avoiding the restrictions in OFAC’s regulations

5. Who Must Abide By U.S. Sanctions? • All persons in the United States are covered, regardless of nationality • U.S. companies, U.S. citizens, and lawful permanent residents are covered, wherever located • Non-U.S. subsidiaries of U.S. companies are prohibited from engaging in any business transactions with Cuba • U.S. companies and persons cannot facilitate or approve any sanctioned country activities of non-U.S. subs • Exports by non-U.S. companies of U.S.-origin products to sanctioned countries can be prohibited • Exports by non-U.S. companies of non-U.S. products that contain greater than de minimis levels of U.S.-origin content can be unlawful

6. Prohibited Facilitation or Approval - Examples • U.S. persons and companies cannot: • Refer sanctioned country business to a non-U.S. subsidiary • Assist a foreign sub in structuring a transaction involving business with OFAC sanctioned country or person • Provide advice, consulting, business, legal or other support for a transaction relating to OFAC sanctioned country or person • Provide financing, guarantee, warranty, transportation, logistical, or indemnity support to a foreign sub for a transaction involving an OFAC sanctioned country or person • Provide management oversight, direction or approval to a foreign sub relating to specific activities in an OFAC sanctioned country

7. Iran Sanctions Act & Related Developments • Iran Sanctions Act (formerly ILSA) in place since 1996 • Targeted persons determined to have (1) invested $20 million or more in a project in Iran that contributed to the development of Iran’s petroleum resources, or (2) sold WMDs or certain conventional weapons to Iran • Focused on the activities of non-U.S. companies • President to choose 2 of 6 possible sanctions • Never enforced • Limited UN sanctions against Iran have been in place since 2006

8. Iran Sanctions Act & Related Developments (Cont.) • Tougher Sanctions Passed: • UN Security Council - Resolution 1929 (June 9, 2010) • United States – Comprehensive Iran Sanctions Accountability and Divestment Act (CISADA) (June 24, 2010) • European Union (July 26, 2010) • Canada (July 26, 2010) • Japan (August 3, 2010)

9. U.S. Sanctions – CISADA (Refined Petroleum) • CISADA expands petroleum-related restrictions of ISA by prohibiting: • Providing refined petroleum products to Iran valued at $1 m or more ($5 m in a 12-month period) • Providing of goods, services or other support to Iran valued at $1 m or more ($5 m in a 12-month period) that could directly and significantly facilitate the maintenance or expansion of Iran’s domestic production of refined petroleum products • Providing goods, services, technology, information or support valued at $1 m or more ($5 m in a 12-month period) that could directly and significantly contribute to Iran’s ability to import refined petroleum products • Insurance/reinsurance/underwriting • Financing/brokering • Shipping services

10. US Sanctions – CISADA (Refined Petroleum) • CISADA makes it more difficult for the President to avoid conducting an investigation or making a determination of sanctionable activity • Requires the President to impose 3 out of an expanded menu of 9 sanctions • New sanctions include: (1) prohibition on transactions in foreign exchange; (2) prohibition on transfers of credit or payments through/to U.S. financial institutions if sanctioned person has an interest; (3) prohibition on dealing in property in which sanctioned person has an interest • Sanctions can be imposed on parent companies and affiliates • Delay and waiver provisions still available, but more difficult to use

11. CISADA – Financial Institutions • Targets non-U.S. financial institutions that: • facilitate Iran’s ability to acquire WMDs or provide support for terrorism • facilitate activities of persons subject to UN sanctions • provide significant facilitation/support of blocked IRGC entities or blocked Iranian financial institutions • Prohibits U.S. financial institutions from dealing with non-U.S. financial institutions that violate sanctions • Regulations to be implemented that will establish certain audit, reporting, due diligence, or certification requirements • Goal: Force foreign financial institutions to choose – us or them

12. CISADA – Other Provisions • U.S. Government contracting restrictions • USG contractors must certify that they do not engage in sanctionable activities • Enhanced import restrictions; codifies export restrictions • Permits divestment from companies that engage in sanctionable activities • Requires DNI to submit reports identifying destinations of diversion concern • Enhanced export licensing requirements for designated countries

13. Other Sanctions Developments • Somalia Sanctions Regulations – Property of persons contributing to conflict in Somalia blocked (April 2010) • North Korea – U.S. to name entities and persons involved in arms trading, counterfeiting, drug trafficking, and other illegal activities – property under U.S. control will be blocked • Cuba: • Cash in advance requirement modified for agricultural products – may now receive payment when products arrive in Cuba, before transfer to Cuban buyers (2010) • Eased restrictions on family visits, remittances, and certain telecommunications-related activities (2009) • Legislation introduced in Congress to lift travel ban and ease financing restrictions for sale of agricultural products

14. Thank you! On behalf of Lex Mundi and Steptoe & Johnson LLP, we would like to thank you for joining. If you have any questions or comments, please feel free to contact Meredith Rathbone at mrathbone@steptoe.com