Statutory Provisions Requiring U.S. Sanctions Against Iraq Suspended - U.N. And Other U.S. Sanctions Continue In Force.

OFAC Issues Four General Licenses

On May 7, 2003, President Bush suspended certain statutory provisions requiring economic sanctions against Iraq under the Iraq Sanctions Act of 1990 and Section 620A of the Foreign Assistance Act of 1961. This action was made possible by the enactment on April 16, 2003 of the Emergency Wartime Supplemental Appropriations Act, 2003, Pub. L. No. 108-11 (the 2003 Act), which authorized the President to suspend the application of these provisions with prior notification and subsequent reporting to Congress.

Despite press reports that U.S. sanctions against Iraq have been lifted, exporters should be aware that U.S. sanctions imposed under other statutory provisions continue in force and sanctions imposed by the United Nations under Security Council Resolutions 660 and 661 (1990), as well as subsequent resolutions including 986 (1995) which established the oil-for-food program, also remain in force. On May 9, 2003, the United States circulated a proposed resolution to lift most U.N. sanctions. The Security Council will be considering this proposal in the coming weeks.

The President's May 7, 2003 Determination (No. 2003-23) is nevertheless an important step in paving the way for resumption of normal trade with Iraq and approval of export licenses for dual-use products. In this regard, the Office of Foreign Assets Control (OFAC) issued four general licenses on May 7, 2003 authorizing transactions in connection with certain humanitarian and reconstruction activities.

Other U.S. and U.N. Sanctions

Since 1990, there have been several layers of sanctions restricting exports of dual-use items to Iraq. The original executive orders imposing sanctions on Iraq in 1990 (Executive Orders 12722 (August 2, 1990) and 12724 (August 9, 1990)) were issued under the authority of the International Emergency Economic Powers Act. Shortly afterwards, the U.N. Security Council adopted Resolution 660 (August 6, 1990), which the U.S. implemented under the United Nations Participation Act. These and other statutes provided the initial authority for the Iraqi Sanctions Regulations at 31 C.F.R. Part 575. Subsequently, the Iraq Sanctions Act of 1990 was enacted in November 1990. This statute required the President to continue to impose economic sanctions against Iraq. In effect, Congress mandated what had previously been an Executive determination.

Separate from these sanctions, the International Traffic in Arms Regulations issued under the authority of the Arms Export Control Act restrict exports of defense articles to Iraq. These regulations implement U.N. sanctions on arms exports as well.

Suspension of Iraq Sanctions Act

Under the 2003 Act, Congress granted authority to the President to suspend the application of the Iraq Sanctions Act of 1990 and Section 620A of the Foreign Assistance Act of 1961, which provides for the designation of countries that support international terrorism. The 2003 Act permits the President to waive the requirements of the Iran-Iraq Arms Non-Proliferation Act of 1992 with respect to humanitarian assistance and supplies. Other provisions of that law remain in effect prohibiting exports of items intended to contribute to Iraq's efforts to acquire chemical, biological, nuclear or destabilizing numbers and types of advanced conventional weapons.

The President may authorize exports to Iraq of "nonlethal military equipment" controlled under the International Traffic in Arms Regulations after determining that the export is in the national interest and providing Congress with notification five days prior to export. This Presidential authorization requirement is waived with respect to exports of nonlethal military equipment designated by the Secretary of State for use by a reconstituted or interim Iraqi military or police force.

The President has delegated the reporting responsibilities under the 2003 Act to the Secretary of Commerce, or until such time as the principal licensing responsibility for the export of items on the Commerce Control List has reverted to the Department of Commerce, to the Secretary of the Treasury. (OFAC currently licenses transactions subject to the U.S. sanctions on Iraq.) Licensing responsibility for defense articles will remain with the State Department.

OFAC Issues Four General Licenses

Because the authority for sanctions under other statutes and regulations remains in force, there is still a general prohibition on economic activity with Iraq. As a consequence, Iraqi property remains blocked (to the extent such property has not been confiscated under Executive Order 12390 (March 20, 2003). Specific licenses are required for imports, exports and other transactions not covered by general licenses or other specific authorizations.

To support humanitarian and reconstruction efforts, OFAC has issued four general licenses. These general licenses add four new sections to the Iraqi Sanctions Regulations summarized as follows:

U.S. persons are authorized to transfer funds to any person in Iraq for non-commercial humanitarian purposes such as family remittances up to $500 per month. U.S. financial institutions are authorized to engage in transactions ordinarily incident to these transfers. 31 C.F.R. s. 575.529.

U.S. government agencies and their contractors (or subcontractors) and grantees are authorized to engage in transactions within the scope of their official duties under the relevant U.S. government contracts or grants. Exports and reexports of goods and technology controlled by the Commerce Department under the Export Administration Regulations must be separately authorized under the Iraqi Sanctions Regulations. If the contracting or granting U.S. government agency has determined that the relevant contract or grant is not in support of U.S. government humanitarian assistance or reconstruction efforts, or not in support of allied forces deployed in military, contingency, humanitarian or peacekeeping operations in Iraq, the export or reexport must be approved by the U.N. 661 Committee to the extent and in the manner required under U.N. Security Council resolutions. U.S. citizens who wish to travel to Iraq under this authorization may be required to apply to the State Department to have their passports validated for travel to Iraq. 31 C.F.R. s. 575.530.

Transactions necessary to provide privately financed humanitarian support or to plan or prepare for the provision of humanitarian support to the Iraqi people in Iraq are authorized. This is subject to restrictions, including separate licensing for exports and reexports and approval by the U.N. 661 Committee. 31 C.F.R. s. 575.531.

Exports or reexports to Iraq are authorized provided the export or reexport of goods or technology controlled by the Commerce Department under the Export Administration Regulations is separately authorized pursuant to the Iraqi Sanctions Regulations and any exports or reexports to Iraq must be submitted to the U.N. 661 Committee to the extent and in the manner required under U.N. Security Council resolutions. 31 C.F.R. s. 575.532.

For commercial (non-humanitarian) activities in Iraq, General License 2 and 4 are of most significance. General License 2, however, is limited to work under U.S. government contracts or grants. This would benefit Bechtel, Halliburton and other companies that have been awarded contracts or subcontracts for reconstruction work. General License 4 opens the door to the possibility of issuing export/reexport licenses for other types of transactions but such licenses are still subject to U.N. authorization.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

Mr Christopher Wall

Pillsbury Winthrop LLP 

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