International Trade Law News
May 12, 2004
BIS Issues General Order Implementing Sanctions on Syria
Today the Bureau of Industry and Security (BIS) issued an advance copy of the final rule containing the Syria General Order (General Order No. 2 to Supplement No. 1 of Part 736 of the Export Administration Regulations (EAR)). The final rule and General Order will be published in the Federal Register on Friday, May 14th and will become effective on that date.
Effective May 14, 2004, a license must be obtained from BIS prior to the export or reexport to Syria of all items subject to the EAR, except food and medicines that are classified as EAR99. A license is also required for the "deemed export" and "deemed reexport" of any technology or source code on the Commerce Control List (CCL) to a Syrian foreign national. "Deemed exports" and "deemed reexports" involving technology or source code subject to the EAR but not listed on the CCL do not require a license to Syrian foreign nationals.
The General Order imposes strict limitations on the use of license exceptions in connection with exports to Syria.
The General Order specifies that BIS "may" issue specific licenses on a case-by-case basis to export certain products to Syria, including:
--Items in support of activities, diplomatic or otherwise, of the United States Government;
--Medicines on the CCL and medical devices (as discussed below medicines classified as EAR99 may be exported to Syria without a license);
--Parts and components intended to ensure the safety of civil aviation and the safe operation of commercial passenger aircraft (subject to a $2 million limit per each two-year license issued);
--Aircraft chartered by the Syrian Government for the transport of Syrian Government officials on official Syrian Government business;
--Telecommunications equipment and associated computers, software and technology;
--Items in support of United Nations operations in Syria.
The General Order makes clear that the following are not subject to this General Order and thus will not require a license to be exported to Syria:
--Informational materials in the form of books and other media;
--Publicly available software and technology; and
--Technology exported in the form of a patent application or an amendment.
In addition to permitting the export of food and medicine classified as EAR99 to Syria without a license, the General Order provides that "BIS may also consider" license applications for the export and reexport of medicine (on the CCL) and medical devices on a case by case basis.
With respect to medicine and medical devices, it will be necessary to obtain an export license from BIS to ship any medicine listed on the CCL and all medical devices directly from the U.S. to Syria. It will also be necessary to obtain a license to reexport any U.S. origin medicine on the CCL and medical devices from a third country to Syria. An analysis of all foreign-produced products should be undertaken before those products are exported to Syria to ensure that the value of the U.S.-origin parts and components contained in the finished product conforms to the de minimis requirements of the EAR.
Unfortunately, because the Syria Accountability Act (SAA) did not conform to the language of the Trade Sanctions Reform Act, the General Order only permits the unlicensed export of food, but does not permit "agricultural commodities" to be exported to Syria. One of the problems with this is that the term "food" is not defined in the EAR or in the General Order. BIS will have to issue guidance in the future to eliminate confusion over what products fall within the scope of the term "food" used in the SAA and in the General Order.
While not specifically noted in the General Order, BIS is likely to examine very closely the end-users stated in license applications. Over the past few years, BIS has had a policy of denying license applications to Syria when the products were destined for the Syrian military, police, intelligence services or similar types of end-users.
While not specified in the General Order, applications to obtain an export license must be subitted to BIS on Form 748P or via SNAP, BIS' electronic licensing system.
May 11, 2004
United States Imposes Sanctions on Syria
Today President Bush issued an Executive Order implementing sanctions on Syria pursuant to the Syria Accountability and Lebanese Sovereignty Restoration Act of 2003 (SAA) (Public Law 108-175, 117 STAT. 2486).
The following sanctions were imposed by the United States on Syria in accordance with section five of the SAA and are effective at 12:01 eastern daylight time on May 12, 2004:
1. Prohibition on the export or reexport to Syria of most U.S. origin products. This includes a ban on the sale and donation of all U.S. origin products to Syria, except for food, medicine and medical devices. In addition, pursuant to the waiver provision of the SAA the President will permit certain other discrete categories of exports to Syria, such as those to support activities of the United States Government and United Nations agencies, to facilitate travel by United States persons, for certain humanitarian purposes, to help maintain aviation safety, and to promote the exchange of information. “Medicines on the Commerce Control List and medical devices” were among the humanitarian items that will still be permitted to be exported to Syria. However, the President did not provide a waiver to permit the export of “agricultural commodities”, a term defined by section 902(1) of the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) (Public Law 106-387) as much broader than the “food” exception set forth in today's Executive Order. In addition, a waiver was granted permitting the export of telecommunications equipment and certain software and technology to Syria.
The prohibition on exports and reexports to Syria will primarily be implemented by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS). All products that will be still permitted to be exported to Syria, including food, medicine and medical devices, will require a specific license to be issued by BIS prior to export. BIS will issue a General Order (General Order No. 2) implementing the export ban and specifying the procedures for obtaining a specific license to export the permitted products to Syria. The General Order will be published in the Federal Register by the end of this week. However, until the General Order is issued U.S. companies and their overseas affiliates should refrain from entering into any transactions with Syria and should not ship any U.S. origin products to Syria from the United States or via third countries.
2. A ban on the export to Syria of any items that appear on the United States Munitions List (arms and defense weapons, ammunition, etc.) or the Commerce Control List (CCL) (dual-use items such as chemicals, nuclear technology, propulsion equipment, lasers, etc.). These prohibitions will be implemented by the State Department’s Directorate of Defense Trade Controls (for USML items) and the Commerce Department’s Bureau of Industry and Security (for items on the CCL).
3. A prohibition on commercial air services between the United States and Syria by Syria-owned and controlled aircraft. The flight ban will be implemented by the U.S. Department of Transportation.
In addition to the sanctions provided for under the SAA, the Executive Order also imposed the following additional sanctions that were not required by the SAA:
4. The Treasury Department will issue regulations pursuant to the USA PATRIOT Act requiring U.S. financial institutions to sever correspondent accounts with the Commercial Bank of Syria (CBS) based on money laundering concerns. CBS is the single, government-owned bank specializing in servicing foreign trade and commercial banking, including foreign exchange transactions. CBS maintains correspondent accounts with banks in countries all over the world, including the United States. In accordance with this requirement, today the Treasury Department has sent to the Federal Register a notice of proposed rulemaking that would prohibit any U.S. bank, broker-dealer, futures commission merchant, introducing broker or mutual fund from opening or maintaining a correspondent account for or on behalf of CBS.
5. The Treasury Department's Office of Foreign Assets Control (OFAC) will designate certain Syrian individuals and entities contributing to terrorist-related activities. OFAC will subject designees to sanctions that will block their property and property interests and prohibit U.S. persons from engaging in financial transactions with them.
The White House indicated that the President will consider additional sanctions against Syria if it does not take “serious and concrete steps to cease its support for terrorist groups, terminate its weapons of mass destruction programs, withdraw its troops from Lebanon, and cooperate fully with the international community in promoting the stabilization and reconstruction of Iraq.”
Please continue to monitor Trade Law News for further information regarding the sanctions on Syria.
May 10, 2004
U.S. Appears Poised to Impose Sanctions on Syria
It appears likely that tomorrow, May 11, 2004, the U.S. will finally impose sanctions on Syria pursuant to the Syria Accountability and Lebanese Sovereignty Restoration Act of 2003. As previously reported, The Syria Accountability Act was signed into law by President Bush on December 12, 2003 (P.L. 108-175 117 STAT. 2486).
While the Bureau of Industry and Security (BIS) has already begun to implement unofficially the provision of the Syria Accountability Act that prohibits the export to Syria of any item on the United States Munitions List or Commerce Control List, Congress has been pressing the Administration to impose the additional sanctions on Syria as required by section 5(a)(2) of the Act. That provision requires the President to impose at least two out of the following six sanctions: (A) the prohibition of the export of products of the United States (other than food and medicine) to Syria; (B) Prohibiting United States businesses from investing or operating in Syria; (C) Restricting Syrian diplomats in Washington, D.C., and at the United Nations in New York City, to travel only within a 25-mile radius of Washington, D.C., or the United Nations headquarters building; (D) Prohibiting aircraft owned or controlled by Syria to take off from, land in, or overfly the United States; (E) Reducing United States diplomatic contacts with Syria; (F) Blocking transactions in any property in which the Government of Syria has any interest, by any person, or with respect to any property, subject to the jurisdiction of the United States. Naturally, hard liners in Congress have been pressing for the total ban on exports to and investment in Syria.
While the details of the sanctions will not be known until the announcement is made, it appears likely that the U.S. may impose a total ban on the export of U.S.-origin products to Syria. Unfortunately, due to an error in the legislative drafting process section 5(a)(2)(A) of the Syrian Accountability Act only exempts U.S. origin "food and medicine" from the scope of any export restrictions that may be imposed by the President. As a result of this oversight, the Syrian Accountability Act fails to conform to Section 902 of the Trade Sanctions Reform and Enhancement Act of 2000, commonly known as "TSRA")(P.L. 106-387). TSRA specifies that "agricultural commodities, medicines and medical devices" must be excluded from the scope of any unilateral sanctions imposed by the United States.
Since the Syria Accountability Act was enacted into law in December 2003, various agricultural and medical device interests have been working behind the scenes in an effort to ensure that the decision makers at the White House and at the Departments of Commerce, State and Treasury will exclude "agricultural commodities, medicines and medical devices" from the sanctions imposed by the U.S. on Syria.
Agricultural products and medical devices are excluded from the sanctions currently imposed by the U.S. on Cuba, Iran and Sudan and it would be contrary to existing law if such humanitarian products were not excluded from any sanctions imposed on Syria.
