Everyone is doing their part during these unprecedented times to help the global community cope with the COVID-19 pandemic. That includes the U.S. Office of the Foreign Assets Control (“OFAC”), in the Department of the Treasury. In the past two weeks OFAC has issued two new guidance documents and several Frequently Asked Questions to point out that its softer, humanitarian side for exporters of medical and agricultural goods, and to suggest that it can be understanding regarding sanctions compliance issues related to the COVID-19 crisis.
The first of these documents, the Fact Sheet on the Provision of Humanitarian Assistance and Trade to Combat COVID-19 issued on April 16, is a 10-page summary of the general licenses, exemptions, guidance, and FAQs related to humanitarian exports to each of the destinations subject to the comprehensive or nearly-comprehensive U.S. embargoes – Iran, Syria, Cuba, North Korea, Venezuela, and the Crimea region of Ukraine. To be sure, there is nothing new in this document: the humanitarian exemptions from the embargoes for the export of medicine, medical devices, and agricultural products have long been a part of U.S. policy.
In fact, calling these exemptions “humanitarian” is somewhat misleading, because U.S. law has long permitted commercial export of medicine, medical devices, and agricultural products to embargoed countries, not merely donations and transactions by non-governmental organizations. For many years I have worked with U.S. companies and their non-U.S. subsidiaries that continued to sell medicine and medical devices to customers in Iran, Syria, and sometimes other embargoed destinations. There was a time when such sales required specific licenses from OFAC, but then the licensing regime was relaxed with the grant of regulatory general licenses. Unfortunately, the policy of allowing sales of medical and agricultural goods to embargoed countries was to some extent thwarted by OFAC’s extensive restrictions on the financial and shipping industries, especially in Iran. These restrictions made legitimate trade in humanitarian goods more risky and sometimes logistically impossible. The sheer volume of OFAC’s guidance that aims to address the chilling effects of sanctions on legitimate trade in humanitarian goods attests to the complexity of this problem and OFAC’s commitment to implementing the softer side of U.S. policy.
The Fact Sheet is an extremely helpful guide from OFAC for all who will export medical and agricultural goods to countries subject to OFAC sanctions. At the time when U.S. states and hospital systems are engaged in price-wars to obtain badly-needed personal protective equipment (“PPE”) and medical supplies, and when the United States is restricting the export of PPE and other COVID-19 related supplies, this OFAC guidance might seem to be irrelevant. However, that is not so. First, the authorizations for export of agricultural foodstuffs have become more important than ever in the context of the severe economic downturn caused by the pandemic, which endangers the food security of hundreds of millions of people in developing countries. These people’s lives may depend on supplies of agricultural products from the highly-productive farms in the United States and Canada.
Second, there will come a day when the COVID-19 pandemic will be mostly behind us in the United States. The hospital systems will no longer be at full capacity, stocks of masks and ventilators will be replenished, and a COVID-19 vaccine or vaccines will be manufactured and distributed. At that time, both our health and economic security will become dependent on the ability of other countries to cope with COVID-19. It is likely that poorer countries, including North Korea, Cuba, Venezuela, Syria, and Iran, will be less successful in protecting their populations from coronavirus and will become reservoirs of infections. Then, being able to export medicine and medical devices to such countries will be necessary both for humanitarian and our national self-interests reasons.
The second of OFAC’s actions to assist the trade community in connection with the COVID-19 pandemic is Statement of April 20, 2020. In this Statement, OFAC encourages persons affected by the pandemic to contact 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.” It also encourages the submission of self-disclosures through the OFACdisclosures@treasury.gov e-mail address in place of physical mail. Finally, OFAC reiterates that it supports a risks-based approach to sanctions compliance, and makes the following statement:
Accordingly, if a business facing technical and resource challenges caused by the COVID-19 pandemic chooses, as part of its risk-based approach to sanctions compliance, to account for such challenges by temporarily reallocating sanctions compliance resources consistent with that approach, OFAC will evaluate this as a factor in determining the appropriate administrative response to an apparent violation that occurs during this period.
The meaning of this, in OFAC’s typical fashion, is ambiguous. The context of the statement is that OFAC intends to be more understanding of delays and difficulties with sanctions compliance. OFAC appears to say it will have some understanding if a business temporarily reallocates its sanctions compliance resources during the pandemic as a part of its risk-based approach to compliance. However, OFAC does not say that it will refrain from taking enforcement actions or view reallocation of resources from sanctions compliance as excusable. Rather, it says that it “will evaluate this as a factor in determining the appropriate administrative response to an apparent violation.” Is OFAC going to let companies off the hook for disregarding the sanctions compliance during the COVID-19 pandemic? I wouldn’t bet on it.