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US Government Provides Exceptions for Transactions Related to Personal Communications

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On 18 February 2015, the US Government issued final rules relaxing certain export and reexport restrictions imposed under US sanctions targeting Sudan.  Specifically, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) amended the Sudanese Sanctions Regulations, 31 C.F.R. Part 538 (“SUSR”), to include a new general license authorizing the export or reexport to Sudan of certain software, hardware, and services incident to personal communications.  In coordination with OFAC, the US Commerce Department’s Bureau of Industry and Security (“BIS”) amended the Export Administration Regulations, 15 C.F.R. Parts 730-774 (“EAR”), to expand an existing license exception to apply to the export or reexport of consumer communications devices to Sudan and to adopt a more favorable specific licensing policy for the export or reexport to Sudan of certain related items that are not eligible for the license exception.  Frequently Asked Questions about these changes were published by both OFAC and BIS.

Action from both OFAC and BIS was necessary because the two agencies have overlapping licensing jurisdiction for exports and reexports involving Sudan.  This is in addition to OFAC’s licensing jurisdiction over the Sudan-related activities of US Persons.

Amendments to the SUSR

The general license in SUSR § 538.533, which heretofore permitted  the export of no-cost software and services related to enhancement  of personal communications over the Internet, has been significantly expanded to permit the exportation and reexportation of services, software, and hardware as further described below.  This new general license (“the General License”) in many ways is similar to General License D-1 to the Iranian Transactions and Sanctions Regulations, 31 C.F.R. Part 560.  Pursuant to the General License, and subject to certain restrictions, US Persons are now authorized to engage in the following activities, even if fee-based:

  • The exportation or reexportation to Sudan of services incident to the exchange of personal communications over the Internet (e.g., “instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, and blogging”);

  • The exportation, reexportation, or provision to Sudan of certain software that is necessary to enable such services;

  • The exportation, reexportation, or provision to Sudan of certain software, hardware, and related services that are specified in Appendix B to the SUSR (including hand carries of hardware by persons travelling to Sudan directly or indirectly from the United States);

  • The exportation or reexportation to Sudan of consumer-grade (but not commercial-grade) Internet connectivity services and the provision, sale, or leasing of capacity on telecommunications transmission facilities incident to personal communications; and

  • Importation by persons entering into the United States from Sudan of hardware or software that were exported to Sudan pursuant to the General License (including hand carries of hardware by persons travelling to the United States directly or indirectly from Sudan).

The Government of Sudan is not an eligible end-user under the General License for the transactions described above.  However, US Persons are authorized to engage in the exportation, reexportation, or provision to the Government of Sudan of certain services and software related to personal communications so long as these services and software are “widely available to the public at no cost to the user.”

In addition, non-US Persons are authorized to export, reexport, or otherwise provide:

  • Software subject to the EAR that is necessary to enable services incident to the exchange of personal communications over the Internet; and

  • Hardware and software subject to the EAR that is specified in Appendix B to the SUSR.

Importantly, the General License does not authorize the following:

  • Transactions involving Specially Designated Nationals;

  • Transactions with the Government of Sudan (except as noted above for the exportation, reexportation, or provision by US Persons of services and software “widely available to the public at no cost to the user”);

  • Web-hosting services for commercial endeavors and domain name registration services; and

  • Transactions involving items subject to the EAR where the export or reexport will be to prohibited end-users or for prohibited end-uses identified in the EAR.

Services, software, or hardware incident to personal communications but not eligible for the General License may not be exported without a specific authorization from OFAC, but OFAC will review applications for such authorizations on a case-by-case basis.

Amendments to the EAR

In coordination with OFAC’s amendments to the SUSR, BIS made parallel amendments to the EAR that affect the licensing requirements and policies related to the export or reexport to Sudan of items subject to the EAR, in particular the following:

  • BIS amended License Exception Consumer Communications Devices, which is found at EAR § 740.19 (“License Exception CCD”) and was previously only available for Cuba, to make this license exception available for the export or reexport to Sudan of 18 specific types of “consumer” commodities and software.  There is a significant overlap between the items eligible for License Exception CCD and those eligible for the OFAC General License and listed on Appendix B to the SUSR.  License Exception CCD is not available for the export or reexport to the Government of Sudan, except for certain categories of “consumer” software distributed free of charge.  Moreover, this license exception does not affect the licensing requirements that apply to the export or reexport of items subject to the EAR to prohibited end-users or for prohibited end-uses.

  • BIS also adopted a new licensing policy and will review license applications for the export or reexport to Sudan of telecommunications equipment and associated computers, software, and technology for civil end-use that do not qualify for License Exception CCD on a case-by-case basis.

Coordinated Approach

As noted above, the coordinated action taken by both OFAC and BIS was necessary because these agencies share jurisdiction for certain exports and reexports involving Sudan.  Companies engaging in the export or reexport of items that would appear to be eligible for OFAC’s General License or BIS’s License Exception CCD should confirm whether their activities are subject to OFAC and/or BIS jurisdiction.  To the extent that both OFAC and BIS jurisdiction apply, companies should be diligent in ensuring that they comply with all of the conditions for use of both the General License and License Exception CCD.

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Author

Ms. Contini focuses her practice on export controls, trade sanctions, and anti-boycott laws. This includes advising US and multinational companies on trade compliance programs, risk assessments, licensing, review of proposed transactions and enforcement matters. Ms. Contini works regularly with companies across a wide range of industries, including the pharmaceutical/medical device, oil and gas, and nuclear sectors.

Author

Joseph Schoorl is an associate in the Washington, DC office. Prior to joining the Firm, he worked as a clerk in the spring of 2012 and as a summer associate in 2011 at Baker McKenzie. In addition, he interned with the Department of Commerce’s Office of Chief Counsel for Industry and Security. He advises US and non-US companies on licensing, enforcement actions, internal investigations and compliance audits, mergers and acquisitions and other cross-border transactions, and on the design, implementation, and administration of compliance programs. Mr. Schoorl's practice focuses on international trade. He advises clients on compliance with US export controls, trade and economic sanctions, and anti-boycott controls.

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