United States: President Implements Sanctions Against Syria

On May 11, 2004, President Bush issued Executive Order No. 13338 (the "Order") implementing the Syrian Accountability and Lebanese Sovereignty Restoration Act of 2003, P.L. 108-175 (the "Act"). The new Syrian sanctions block transactions involving property subject to US jurisdiction in which certain Syrian individuals and government entities have an interest, prohibit certain donations to Syria, bar Syrian commercial aircraft from the US, and prohibit exports to Syria of US products (except food and medicine) under a general order published May 14, 2004 by the Department of commerce, Bureau of Industry and Security ("BIS").

Passed with strong congressional support on November 20, 2003, President Bush signed the Act on December 12, 2003. The Act mandated the imposition of additional economic and diplomatic sanctions on Syria in response to Syria’s failure to secure its border with Iraq, its continued support of anti-American terrorists interfering with efforts to restore order in Iraq, and its holding of Baath Party assets used to finance the Iraq insurgency.

Despite signing the Act, the Administration continued diplomatic efforts and sought to avoid the imposition of sanctions which, according to the President’s signing statement, the Act only "purported" to impose. The President interpreted the Act as infringing upon the President’s exercise of a core constitutional power, and stated that the sanctions would be implemented in a manner consistent with the President’s constitutional authority to conduct foreign affairs with due weight given to comity between the legislative and executive branches. These diplomatic efforts have not been successful.

Effective May 12, 2004, all property interests of the following persons that are or come within the US or possession of US persons are blocked and may not be transferred paid, exported, withdrawn or otherwise dealt in:

• Persons directing or contributing to Syria’s provision of safe haven or other support to any person who is named on the List of Blocked Persons and Specially Designated Nationals ("SDN List") administered by the Department of the Treasury, Office of Foreign Assets Control ("OFAC") for terrorism reasons;

• Persons directing or contributing to Syria’s military or security presence in Lebanon;

• Persons directing or contributing to Syria’s pursuit of weapons of mass destruction and medium and long range surface-to-surface missiles;

• Persons directing or contributing to Syria’s efforts to undermine US and international efforts with respect to the stabilization and reconstruction of Iraq; and

• Persons owned or controlled by, or acting or purporting to act for or on behalf of, directly or indirectly, any person whose property or interests in property are blocked pursuant to the Order.

To date, these blocked persons have not been named by OFAC, but will be included on the SDN List when designated. It will be necessary for OFAC to issue new regulations to implement the blocking program.

Effective May 12, 2004, US persons are prohibited from contributing any funds, goods or services by, to or for the benefit of any person blocked under the Order or receiving such contributions from blocked persons. The President determined under section 203(b)(2) of the International Emergency Economic Powers Act that the donation of articles intended to relieve human suffering, such as food, medicine and clothing, would seriously impair his ability to deal with the national emergency with respect to Syria. Accordingly, the exportation or reexportation of such donated articles to Syria is prohibited.

The Order prohibits any air carrier owned or controlled by Syria from taking off or landing in the US, subject to the following exceptions based on a determination of national interest:

• Aircraft of any air carrier owned or controlled by Syria or chartered by the Syrian government for transport of government officials to or from the US on official Syrian government business (to the extent consistent with US Department of Transportation regulations);

• Takeoffs or landings for non-traffic stops of aircraft of any such air carrier that is not engaged in scheduled international air services; and

• Emergency takeoffs and landings. Flights over the US by Syrian air carriers are permitted.

The Act directs the President to impose a mandatory prohibition on exports of items on the Commerce Control List ("CCL") and US Munitions List ("USML") and requires the President to impose two out of five other listed sanctions, including a prohibition on the export or reexport to Syria of "products of the United States (other than food and medicine)" and the above prohibition on Syrian aircraft. Like the aircraft prohibition, the President also issued a partial national security interest waiver for exports authorizing BIS to permit licensing the exportation and reexportation to Syria of certain items.

Published on May 14, 2004 (69 Fed. Reg. 26766), General Order No. 2 to Supplement No. 1 to Part 736 of the Export Administration Regulations, 15 C.F.R. Parts 730-774 ("EAR"), revokes all previously issued export licenses for Syria. All commodities, software and technology subject to the EAR (including those categorized under EAR99) now require a license except for EAR99 food and medicine and "deemed" exports or reexports of EAR99 technology and source code, which may be exported and reexported to Syria without a license. Informational materials and publicly available software are also exempt from the new export license requirement.

Previously issued licenses with conditions requiring written US Government authorization for the reexport, transfer or resale of items already exported or reexported remain in effect. Requests for such authorization will require interagency approval. Items on dock for loading, on lighter, laden aboard an exporting carrier or en route to a port of export on May 14, 2004 remain subject to licensing rules applicable on May 13, 2003. Such items not actually exported or reexported before midnight on May 28, 2004 may be exported or reexported only if authorized pursuant to the general order.

All license applications will be subject to a presumption of denial except for the following items, which will be considered on a case-by-case basis:

• Medicine and medical devices listed on the CCL;

• Parts and components intended to ensure the safety of civil aviation and safe operation of commercial passenger aircraft (subject to a $2 million license ceiling, except in the case of complete overhauls);

• Items in support of activities of the US Government;

• Telecommunications equipment and associated computers, technology and software;

• Items in support of United Nations operations in Syria; and

• Deemed exports and reexports of technology and source code listed on the CCL.

All License Exceptions in EAR Part 740 are inapplicable for Syria except as follows:

• TMP – (EAR § 740.9(a)(2)(viii)) for items for use only by the news media;

• GOV – (EAR § 740.11(b)(2)(i) and (ii)) for items for personal or official use by personnel and agencies of the US Government;

• TSU – (EAR §740.12(a)(b) and (c)) for operation and sales technology and software and software updates;

• BAG – (EAR § 740.14(a) – (d)) for exports of items as personal baggage (except shotguns, shells and encryption items); and

• AVS – (EAR §740.15(a)(4)) for reexports of civil aircraft on temporary sojourn to Syria.

Additional sanctions may be imposed under the Act if Syria does not take steps to cease its support for terrorism, terminate its weapons of mass destruction programs, withdraw its troops from Lebanon, and cooperate fully with the reconstruction of Iraq. These additional sanctions may include:

• Prohibiting US businesses from investing or operating in Syria;

• Restricting travel by Syrian diplomats in the US;

• Reducing diplomatic contacts with Syria;

• Revoking the national interest waiver permitting BIS to issue export licenses for certain products and authorizing the air carrier exceptions; or

• Blocking all Syrian government property in the US or subject to the jurisdiction of the US.

In addition to Executive Order 13338 and BIS General Order No. 2, the Department of the Treasury on May 11, 2004 designated the Commercial Bank of Syria as a financial institution of "primary money laundering concern" under Section 311 of the USA PATRIOT Act. Following rulemaking proceedings, this action will require US financial institutions to sever correspondent banking relationships with the Commercial Bank of Syria.

The Act requires sanctions against Syria to remain in place until the President certifies that Syria has:

• Ceased providing support for international terrorist groups and is prohibiting terrorist groups from maintaining facilities in territory under Syrian control;

• Withdrawn all Syrian military, intelligence and other security personnel from Lebanon;

• Ceased development of certain ballistic missiles, made credible assurances that it is not engaged in the development or acquisition of weapons of mass destruction, and permits UN observers to verify such compliance; and

• Ceased its support for and facilitation of all terrorist activities inside of Iraq.

When issued, OFAC implementing regulations will clarify the scope of the new Syria sanctions, but based on the Order and BIS General Order No. 2, it is clear that the sanctions are more limited than the sanctions on Cuba, Iran or Sudan. The Order does not generally freeze Syrian government assets and does not generally prohibit US companies from exporting services to Syria. US companies may, for example, continue to engage in commercial licensing transactions with Syria.

Even before the Act, Syria had been designated as a terrorist country and was subject to strict export license requirements, including a prohibition on exports of USML items and anti-terrorism controls on dual-use items on the CCL. Consequently, the volume of US exports to Syria has been small totaling only about $260 million per year. This amount will shrink even more because items under previous export licenses now cannot be shipped, even low technology products and software now require licenses, and the use of license exceptions is restricted. It may be possible to obtain licenses for such items as telecommunications equipment and associated computers, technology and software, which will soften the impact of the sanctions, but precisely what items will be eligible for this licensing policy will have to be tested through the license application process.