By S. Nina Gellert
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CAVEAT EMBARGO!
By S. Nina Gellert |
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Beware of U.S. trade restrictions--even if your vessel or cargo is not currently destined for U.S. ports. Shipowners, cargo interests, brokers and agents may (sometimes inadvertently) find themselves in violation of a U.S. trade restriction, even where the voyage or transaction has only a passing relationship to a country blacklisted by the United States. Offending vessels and cargoes may be detained or barred altogether from entering U.S. ports. Monetary sanctions and criminal penalties may be imposed against the players in the transaction. Discussed below are some of the U.S. trade restrictions of which the maritime industry should be aware. (The actual statutes and regulations should be consulted to determine the law applicable to the precise circumstances.)
Scope of Trade Restrictions
The U.S. Treasury Department's Office of Foreign Assets Control ("OFAC") administers eight federal statutes containing trade restrictions. Currently, U.S. restrictions prohibit certain transactions with Angola (UNITA), Burma (Myanmar), Cuba, Iran, Iraq, Libya, North Korea, Sudan, Syria, as well as thousands of specially designated nationals ("SDNs"), terrorists ("SDTs"), and narcotics traffickers ("SDNTs"), lists of which are regularly updated and printed in the Federal Register. If your company or vessel appears on a OFAC list, OFAC will entertain an appeal to remove it. The United States also maintains arms embargoes and broad restrictions against the movement of articles of defense against numerous countries.
It should be noted that many of the trade restrictions specifically exclude from sanctionable conduct the importing and exporting of certain humanitarian and informational materials. Trade restrictions may also be avoided by specific licenses issued by the governmental body administering the regulations, although these licenses can be very difficult to obtain.
The restrictions are enforceable broadly against "persons subject to the jurisdiction of the United States", including 1) individuals and companies physically located within the United States, 2) U.S. citizens and permanent resident aliens anywhere in the world, 3) U.S. corporations, including subsidiaries and branches in foreign countries, even if organized under foreign laws, and 4) entities owned or controlled by any of the above. This means that shipowners, P&I Clubs, brokerage houses and other maritime entities organized under the laws of a foreign country but having a subsidiary or branch office in the United States must comply with U.S. trade restrictions.
Penalties for violating OFAC's trade restrictions range up to 10 years in prison, $1 million in corporate fines and $250,000 in individual fines, or higher in the case of willful violations. Government officials are also authorized to seize the vessel and/or cargo involved in violating these restrictions.
Blocked Vessels
Hundreds of specially designated vessels are included in the SDN lists as having ties to targeted governments or individuals. OFAC has warned:
Banks are now instructed to reject any funds transfer referencing a blocked vessel and must notify OFAC . . . that funds have been returned to remitter due to the possible involvement of an SDN vessel in the underlying transaction. . . . SDN vessels must themselves be physically blocked should they enter U.S. jurisdiction. Freight forwarders and shippers may not charter, book cargo on, or otherwise deal with SDN vessels.
Blocked Banks
Maritime personnel should verify that no bank listed by OFAC as controlled by a targeted government will be used by contracting parties to transmit or receive funds. As transactions with SDN banks are severely restricted, a bank within the jurisdiction of OFAC that receives a request to transfer funds to a blocked bank must freeze those funds. In a typical sales transaction, if the buyer's funds are blocked and original bills of lading are not released, vessel and cargo interests risk incurring substantial delay costs, pressure to discharge without original instruments, etc.
Three Examples: Restrictions Against Cuba, North Korea and Iran
Cuba
The principal maritime restriction against Cuba provides that a vessel calling at a Cuban port for the purpose of conducting cargo operations must wait 180 days after departing the Cuban port before calling at a U.S. port for the purpose of loading or unloading cargo. Similarly, vessels carrying goods or passengers to or from Cuba, or carrying goods in which Cuba or a Cuban national has an interest, may not enter U.S. ports. These prohibitions apply to vessels entering U.S. ports for the sole purpose of taking on bunkers and supplies, as well as to vessels discharging or loading cargo at offshore points or on lighters. More broadly, the purchase, transport and importation into the United States of Cuban merchandise or services, or of merchandise that has been located in or transshipped through Cuba, is prohibited. It is also illegal to export goods or services to Cuba or to broker Cuban trade contracts.
North KoreaThe U.S. Departments of Commerce and Transportation have issued regulations broadly prohibiting (1) taking a U.S.-flag vessel to North Korea, (2) carrying cargo on a U.S.-flag vessel to North Korea, and (3) loading or discharging cargo from a U.S.-flag vessel which the owner/operator knows or has reason to believe is destined for North Korea. OFAC administers North Korean restrictions that generally prohibit the exporting of U.S. goods, technology and services to North Korea, and the importing of goods and services of North Korean origin. It is also illegal to broker North Korean trade contracts.
IranOFAC's restrictions against Iran generally prohibit the importing of goods and services of Iranian origin with the exception of certain news publications and petroleum products refined from Iranian crude oil in a third country. These prohibitions apply to goods imported into the United States for transshipment to third countries and to goods which have been transshipped through third countries without undergoing substantial transformation prior to entry into the United States.
Conclusion
In light of the expansive view OFAC and other governmental agencies take toward trade restrictions, maritime personnel must be very careful to avoid both violation, and appearance of violation, of these restrictions. If a transaction appears to involve a targeted country or blocked bank or vessel, OFAC may be inclined to conduct a broad investigation of the transaction and the entities involved.
