The Office of Foreign Assets Controls has published an interim final rule concerning Iraqi Sanctions Regulations: Authorization of Certain New Transactions, 68 Fed. Reg. 38188 (2003 in which it amends the trade embargo on Iraq. The new rule removes the export license requirement for exports to Iraq of articles that are not on the Commerce Control List (CCL), i.e., those designated as EAR99 under the Export Administration Regulations. Exports of most CCL items remain subject to OFAC licensing requirements, while reexports of such items are subject to licensing by the Bureau of Industry and Security (BIS).

     Specifically, the rule provides that, with specified exceptions, "all transactions that are otherwise prohibited by subpart B" of 31 C.F.R. Part 575 "are authorized". 31 C.F.R. Subpart B governed the Iraqi trade embargo, and prohibited exports of virtually all goods from the U.S. to Iraq, imports of Iraqi merchandise into the U.S., and financial transactions with Iraq. By authorizing these otherwise-prohibited transactions, OFAC has lifted the trade embargo, so that exports to, imports from, and financial transactions with Iraq are now largely permitted, with specified exceptions.

     OFAC continues to require a license for exports and certain reexports to Iraq of items that are "controlled" by BIS under the EARs. "Controlled" is defined as "subject to a license requirement under" the EARs. The rule specifically references 15 C.F.R. § 746.3, which provides that CCL items "containing a CB Column 1, CB Column 2, CB Column 3, NP Column 1, NP Column 2, NS Column 1, NS Column 2, MT Column 1, RS Column 1, RS Column 2, CC Column 1, CC Column 2, CC Column 3 in the Country Chart Column of the License Requirements section of an ECCN, or classified under ECCNs 1C980, 1C981, 1C982, 1C983, 1C984, 1C997, 5A980, 0A980, 0A983, 0A985, and 0E982" are controlled to Iraq. For practical purposes, therefore, CCL-covered items are controlled to Iraq and would require an OFAC license except for items controlled for AT (antiterrorism) purposes; these are not identified in section 746.3 and therefore are not considered controlled under the new rule.

     OFAC also requires a license for third-country reexports of such items to Iraq that are "subject to U.S. jurisdiction", defined to include: (a) Any individual, wherever located, who is a citizen or resident of the United States; (b) Any person within the United States as defined in 31 C.F.R. § 500.330; (c) Any corporation organized under the laws of the United States or of any state, territory, possession, or district of the United States; and (d) Any corporation, partnership, or association, wherever organized or doing business, that is owned or controlled by persons specified in preceding paragraphs (a) or (c). 31 C.F.R. § 500.329. Thus, foreign subsidiaries that are owned or controlled by U.S. companies are covered by the OFAC reexport restrictions.

     Reexports of such controlled items that are not "subject to U.S. jurisdiction" (i.e., performed by foreign companies that are not "owned or controlled" by a U.S. person) are not decontrolled, but rather are subject to BIS jurisdiction under 15 C.F.R. § 746.3.

     In addition to the relaxation of export licensing requirements, the new rule authorizes most imports from, and financial transactions with, Iraq. Again there are exceptions. Previously-blocked property and property interests remain blocked, meaning that funds in blocked accounts cannot be transferred. No transactions are permitted with previously-designated "specially designated nationals" or persons on the Defense Department's 55-person "watch" list.

     OFAC has solicited public comment on the new rule; comments are due by August 26, 2003.

     A copy of the notice is available through the GPO Online Access's website, http://a257.g.akamaitech.net/7/257/2422/14mar20010800/edocket.access.gpo.gov/2003/pdf/03-16216.pdf

     

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