Treasury significantly eases Sudan sanctions, paves the road for new business opportunities in Sudan

January 16, 2017

Export Controls & Economic Sanctions Alert

Author(s): Alexandra Lopez-Casero, Kendal H. Tyre

Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a sweeping new general license that effectively eases most restrictions on doing business in Sudan. This significant change to the Sudanese Sanctions Regulations (SSR) opens new business opportunities for U.S. companies in Sudan.

On Friday, the White House explained that Sudan’s positive actions over the past six months, including a marked reduction in offensive military activity and the cooperation with the United States on addressing regional conflicts and the threat of terrorism, warranted this change in U.S. sanctions policy with the goal “to see these efforts sustained and enhanced by the Government of Sudan.”

Until now, OFAC had maintained a comprehensive embargo against Sudan that essentially prohibited all business activities involving Sudan with some narrow exceptions. The new general license (added at Section 538.540 of the SSR) authorizes all transactions that were previously prohibited by the SSR. For example, U.S. persons are now allowed to engage in transactions involving the Sudanese petroleum and petrochemical industries, including oilfield services and oil and gas pipelines, as well as in transactions involving property in which the Government of Sudan has an interest.

Moreover, products that are not export controlled (EAR99 products) may now be exported to Sudan without an export license. This includes most consumer products, but also basic electronics, many components and other commercial and industrial products that are not listed on the Commerce Control List. Exports of agricultural commodities, medicine and basic medical devices also no longer require a specific license from OFAC.

U.S. companies and their subsidiaries may still not ship U.S.-origin products (or foreign-made products at or above 10% U.S. content) that are listed on the Commerce Control List or that are subject to the International Traffic in Arms Regulations. Exporters should ensure that they know the export control classifications of their products and that they carefully screen potential customers, distributors, resellers, foreign financial institutions and other intermediaries and business partners against the U.S. prohibited persons lists issued by OFAC and the U.S. Departments of Commerce and State. A fairly large number of Sudanese entities and individuals remain blacklisted. Depending on the product, exporters should also insist on written confirmations from Sudanese customers to confirm the specific end use and ensure that their products are not used for proliferation activities or other prohibited end uses. The new general license does not authorize transactions prohibited under the Darfur or South Sudan sanctions programs. Exporters should also recognize that the Trump Administration can undo this regulatory change without congressional action as swiftly as it was issued today.

In sum, this is a significant change and opportunity for U.S. exporters who are interested in exploring business activities in Sudan, a country that until now was essentially blacklisted by OFAC, as long as they follow sound export compliance practices.

Sudan’s economic activity was projected to remain subdued in the coming years. After the 2011 secession of South Sudan, that resulted in the loss of approximately three-quarters of Sudan’s oil revenues, some stability was restored. However, the U.S. sanctions helped preclude a substantial economic recovery. The one bright spot in the otherwise troubled economy was the slow, but steady, growth of the Sudanese gold trade.  Although this increase in revenue from gold does not fully offset the loss of the country’s oil sector, it does, along with a current easing of U.S. sanctions, signal the potential for new business development and opportunities.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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