Two key things have happened with respect to Sudan:

  1. Congress passed and the President signed on October 13, 2006 the Darfur Peace and Accountability Act of 2006 (H.R. 3127, pub. Law no. 109-344) and

  2. The President issued Executive Order 13412 of October 13, 2006, blocking property and prohibiting transactions with the Government of Sudan in order to implement certain provisions of the Act.

However, since Executive Order 13067 and OFAC regulations, the Sudanese Sanctions Regulations (31 CFR part 538) already blocked property and prohibited transactions with Sudan since November 4, 1997, the question is what has changed for U.S. persons and foreign persons interested in trade with Sudan.

The answer is that Executive Order has actually eased sanctions against an area in Southern Sudan provided they do not involve property or interests in property of the Government of Sudan. The new Executive Order lifts the export and import, and other sanctions contained in section 2 of the old Executive Order 13067 with respect to:

  • Southern Sudan

  • Southern Kordofan/Nuba Mountains State

  • Blue Nile State

  • Abyei

  • Darfur

  • "marginalized areas in and around Khartoum"

PROVIDED that the transactions do not involve property or interests in property of the Government of Sudan. The Executive Order also states that the Government of Sudan does not include the regional government of Southern Sudan. The Executive Order is, however, quite explicit that any transaction involving the petroleum industry in Sudan is considered a transaction with the Government of Sudan and therefore prohibited. On November 17, 2006, OFAC issued interpretive guidance with respect to Executive Order 13067. The key points of this guidance are summarized below.

Petroleum Related Transactions:

All transactions by U.S. persons relating to Sudan’s petroleum or petrochemical industries, including, but not limited to, oilfield services and oil or gas pipelines, are prohibited.

Transshipments within Sudan:

Transshipments of goods through non-exempt areas (i.e. the areas not specifically listed above) would still require authorization from OFAC. Thus, for example, you could not ship products destined for Darfur through Khartoum or Port Sudan without OFAC authorization. However, you could ship such items directly to Darfar or through another exempt area to Darfur without OFAC authorization.

Financial Transactions:

Financial transactions that involve depositary institutions located in non-exempt areas of Sudan remain prohibited. Additionally, a financial transaction with a branch of a bank in an exempt area, where the bank was headquartered in a non-exempt area (such as Khartoum), is prohibited. Finally, because financial transactions in which the Government of Sudan has a property interest in the transaction remain prohibited, transactions with banks in which the Government of Sudan has an ownership interest are prohibited.

Agricultural Commodities, Medicine, and Medical Devices:

These items continue to require a license from OFAC pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), even to the now exempt areas of Sudan.

In sum, these regulatory changes mean that U.S. Persons may now undertake activities in the exempt areas of Sudan without a license from OFAC and certain goods may now be exported to these exempt areas, provided in both instances the Government of Sudan does not have a property interest in the transaction and the transaction does not involve Sudan’s petroleum or petrochemical industry. As a practical matter, however, the restrictions on transshipments within Sudan and financial transactions may make transactions in this area difficult.

Finally, it is important to note that with respect to exports, these regulatory changes do not impact the need to comply with the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR). Thus, prior to any export to an exempt area of Sudan, you will need to determine if a license is required from the U.S. Department of Commerce for the export. Exports of defense articles and services require a license under the ITAR and Sudan is currently a proscribed country.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.