By: Mark Jensen and Melinda Lewis
June brought a dark milestone in the Syrian civil war as the death toll exceeded 100,000 since the conflict began nearly two years ago. Amid international and domestic pressure to take action against the Syrian government for the continuing escalation of violence against its people, the United States has issued revised sanctions against Syria and announced its intention to provide arms to the Syrian rebels.
Even prior to the current civil war, Syria was the target of U.S. sanctions, including the 2004 Syria Accountability Act (SAA), which prohibits export to Syria of all U.S. products other than food and medicine; measures in 2006 under the U.S. Patriot Act, Section 311 that prohibited correspondent accounts with the Commercial Bank of Syria; and a series of Presidential Executive Orders that, among other things, designate certain Syrian persons as Specially Designated Nationals (SDNs).
On June 12, 2013, the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC) published two revisions of the sanctions designed to ease private support of the Syrian people. Previously under Executive Order 13582 (2011), U.S. persons were prohibited from investing in Syria, exporting or supplying any service to Syria, or participating in any transaction involving Syrian petroleum. These revisions will have the effect of authorizing certain services in support of nongovernmental organizations’ activities. These notices intend to offer economic and humanitarian relief to the Syrian rebels.
Licensing Policy on Telecommunications, Agriculture, and Petroleum
OFAC’s Licensing Policy on Telecommunications, Agriculture, and Petroleum (available here) permits U.S. persons to obtain OFAC licenses to engage in transactions involving the telecommunications and agriculture sectors and involving Syrian-origin petroleum and petroleum products for the benefit of the National Coalition of Syrian Revolutionary and Opposition Forces or its supporters . The purpose of the policy change is to enable private persons to better and more securely access the Internet, to strengthen the agricultural sector in Syria, which OFAC refers to as a “food insecure” country, and to support the Syrian opposition.
Persons seeking to take advantage of this new policy should take note of the limitations to obtaining OFAC licenses under the policy. First, no licenses will be granted for transactions with any person subject to sanctions pursuant to Executive Order 13608 or any person whose property (or property interest) is blocked pursuant to Executive Orders 13338, 13399, 13460, 13572, 13573, 13582, and 13606, or any other person who is a “Specially Designated Person” (SDN) under U.S. sanctions regulations. Additionally, licenses will not be granted for transactions, either directly or indirectly, with the Syrian government or related entities. For these reasons, a U.S. person seeking such license should conduct appropriate due diligence on prospective business partners, as it is not always clear who might constitute a government’s controlled entity or instrumentality.
Transactions related to petroleum have an additional requirement: the transactions must be “for the benefit of the National Coalition of Syrian Revolutionary and Opposition Forces or its supporters.” Given potential uncertainty surrounding the makeup of this group and its supporters arising from the reported involvement of Al Qaeda operatives in the region, transactions might be banned by the SDN List or other prohibitions. Another administrative hurdle could arise related to the “benefit” requirement in authorizing these transactions. A June 20, 2013 Reuters article (available here), noted that there is constant trading between the rebels and the regime. The cross-pollenating nature of trade might complicate any determination on who receives the “benefit” of the petroleum transactions.
NGO Services for the Preservation of Cultural Heritage Sites
General License 11, published September 27, 2011, authorized nongovernmental organizations (NGOs) to export or re-export services to Syria that would otherwise be prohibited by Section 2 of Executive Order 13582, so long as the services supported not-for-profit activities. The permitted activities include humanitarian projects (e.g., drought relief, assistance to refugees, and food and medicine distribution); democracy building (e.g., rule of law, citizen participation, and government accountability); education; and non-commercial development projects directly benefiting the Syrian people (e.g., sustainable agriculture and clean water assistance). New General License 11A, published in the Federal Register on June 25, 2013, expands the permitted services to include the preservation and protection of cultural heritage sites in Syria (e.g., museums, historical buildings, and archaeological sites). Although no guidance was published on defining a cultural heritage site, examples of such sites would likely include six Syrian sites recently placed on the List of World Heritage in Danger by United Nations Educational, Scientific and Cultural Organization (UNESCO).
General License 11A (like its predecessor) does not require prior authorization from OFAC to provide permitted services. However, entities seeking to operate in Syria should be aware of the additional OFAC reporting requirements for services protecting cultural heritage sites. The General License requires that those engaged in providing services for cultural heritage sites and those facilitating the transactions (including persons processing the transfers of funds) file quarterly reports with OFAC. The reports must contain “complete information on all activities and transactions undertaken,” and information on the U.S. entities that processed any transfers of funds with respect to the cultural heritage sites (parties involved, value of transactions, services provided, and the dates of the transactions). The reports must be filed no later than 30 days following the end of the calendar quarter.
This quarterly report was not a requirement for any other not-for-profit activity under General License 11, nor is it a requirement for any service under the new General License other than services involving preservation of cultural heritage sites. The potential administrative burden of such reports should be considered by any person contemplating such operations.
NGOs should be aware of other restrictions beyond those in the General License, including those imposed by other U.S. government authorities and the international community. For example, U.S. NGOs may provide certain humanitarian services to Syria under the OFAC General Licenses, but the export of certain medicines and other goods might be prohibited by other U.S. government authorities. Specifically, only food and medicines not on the Commerce Control List (CCL) may be exported or reexported to Syria without a Bureau of Industry and Security (BIS) license. Importantly, many vaccines and immunotoxins are currently listed on the CCL and therefore require a license to be exported to Syria. NGOs should take note that the BIS may consider licensing the export of certain items on a case-by-case basis, but there is no guarantee of a favorable licensing decision. In addition to U.S. limitations, the United Nations (U.N.) and other countries (e.g., the United Kingdom) impose sanctions against Syria, which may result in controls that supplement the EAR. As a consequence, NGOs will need to be aware of the applicable U.S. and international laws before considering operations in Syria.
These latest developments are only a part of U.S. policy favoring increased effort to aid Syrian rebels. After evidence emerged earlier this June that chemical weapons are being used against the rebels, President Obama announced that “a red line had been crossed,” and that the United States would provide weapons to the rebels. But since then, there has been considerable political debate on what, if any, weapons or other lethal support should be provided.
Since changes in sanctions policy may be less controversial than policy regarding lethal support, further changes in the Syria sanctions may be expected. One possibility is that OFAC may authorize the export of additional categories of services or goods to Syria. Another intriguing possibility is that OFAC may attempt to place certain geographical boundaries on the Syrian sanctions. The precedent for such an action is the Sudan program, in which southern Sudan was exempted from certain OFAC prohibitions under the Sudanese Sanctions Regulations even before the referendum established South Sudan as a separate country. Depending on political developments in Syria, OFAC may be prepared to take similar steps in that country. We will continue to monitor the situation and provide relevant updates.