Countering America's Adversaries Through Sanctions Act
The implications of the new sanctions are very complex and fact-specific. Wikborg Rein's lawyers have particular expertise within international sanctions and assist companies with navigating and assessing implications of export restrictions to their specific operations. In this brief article, we summarize the H.R. 3364 and some of its key provisions.
The H.R. 3364 consist of three acts and includes provisions that specifically targets the shipping, oil, energy, arms and defense sectors, as well as financial institutions. Norwegian oil companies, manufacturers and oilfield service firms with US nexus should be particularly aware of the 33 percent threshold that prohibits supply to certain oil projects in which sanctioned Russian companies are involved, anywhere in the world. With respect to the “secondary sanctions”, the restrictive measures for example related to "special Russian crude oil projects" may prohibit Norwegian entities from knowingly making significant investments in such projects, as well as restricting financial institutions from engaging in transactions involving such activity.
While some provisions in H.R. 3364 will take effect within a prescribed period of time (e.g. the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) shall modify Directives 1 and 2 under US Sectoral Sanctions no later than 60 days after the bill's enactment, and the modifications will take effect 60 days thereafter, Directive 4 shall be modified within 90 days after the enactment and take effect 90 days thereafter), others do not state a prescribed time for implementation and will require additional actions by the President (e.g. designation of targeted/blocked parties).
The H.R. 3364 consists of three acts and some of the key provisions are summarized below.
Countering Iran's Destabilizing Activities Act of 2017
- The Iran-related measures further target Iran’s ballistic missile program, its support for terrorism and human rights abuses, while seeking to preserve the Iran nuclear deal.
- The bill directs the President to impose blocking sanctions on any person that knowingly contributes to: (1) Iran’s ballistic missile program or weapons of mass destruction programs, 2) the sale or transfer to Iran of military equipment or provide related technical training, financial resources, advice or other services to Iran, and (3) the Islamic Revolutionary Guard Corps and its foreign officials, agents or affiliates.
- The President may impose sanctions against persons responsible for human rights violations in Iran.
- President may temporarily waive the imposition or continuation of sanctions under specified circumstances.
Countering Russian Influence in Europe and Eurasia Act of 2017
- The Russia-related measures provides sanctions for activities concerning: (1) cyber security, (2) crude oil projects, (3) financial institutions, (4) corruption, (5) human rights abuses, (6) evasion of sanctions, (7) transactions with Russian defense or intelligence sectors, (8) export pipelines, (9) privatization of state-owned assets by government officials, and (10) arms transfers to Syria. The President may waive certain cyber- and Ukraine-related sanctions.
- The bill consolidates sanctions on Russia’s energy and financial sectors currently imposed by executive order.
- The President must submit for congressional review proposal to ease, terminate or waive the sanctions against Russia.
- Modifications to the scope of the OFAC sectoral sanctions:
- Directive 1 with respect to the Russian financial services sector: will prohibit dealings by US persons in new debt of longer than 14 days maturity (down from 30 days) of Russian financial institutions designated pursuant this directive, their property, or interests in property.
- Directive 2 with respect to the Russian energy sector: will prohibit dealings by US persons in new debt of longer than 60 days maturity (down from 90 days) of Russian energy companies designated pursuant to this directive, their property, or interests in property
- Directive 4 will be expanded to prohibit the provision by US persons of goods, non-financial services or technology in support of exploration or production for “new” deepwater, Arctic offshore, or shale projects that have the potential to produce oil (no longer limited to the Russian territory, meaning that it applies anywhere in the world) and in which an entity subject to Directive 4 has a 33 % or greater ownership interest.
- The bill imposes new/additional secondary sanctions, meaning that they apply to non-US persons as well as (some of the sanctions) apply to US persons. For example:
- Sanctions with respect to any person that knowingly engages in activities that undermine cybersecurity against any person, including a democratic institution, or government on behalf of the Russian government.
- Sanctions on non-US persons that knowingly export or transfer to Syria significant financial, material, or technological support that contributes materially to the Syrian government’s ability to acquire certain weapons and defense articles.
- Sanctions on non-US persons involved in serious human rights abuses in any territory forcibly occupied or otherwise controlled by the Russian government.
- The President, "in coordination with allies of the United States", may impose sanctions targeting persons that; (i) knowingly makes an investment that directly and significantly contributes to the enhancement of the ability of Russia to construct energy export pipelines, or (ii) sells, leases, or provide to Russia goods, services, technology, information or support that could directly and significantly facilitate the maintenance or expansion of the construction, modernization, or repair of energy export pipelines, and where any of which has a fair market value of $1,000,000 or more, or that, during a 12-month period, has an aggregate fair market value of $5,000,000 or more.
Korean Interdiction and Modernization of Sanctions Act
- The North-Korea related measures provides sanctions against: (1) North Korean cargo and shipping, (2) goods produced in whole or part by North Korean convict or forced labor, and (3) foreign persons that employ North Korean forced laborers.
- The bill increases the President's authority to impose sanctions on persons that engage in activities in violation of certain UN Security Council resolutions regarding North Korea, as well as to designate parties to the SDN List that engage in certain activities (such as selling or transferring significant amounts of crude oil, petroleum products or natural gas resources to the Government of North Korea).
- Prohibits U.S. financial institutions from establishing or maintaining correspondent accounts used by foreign financial institutions to provide indirect financial services to North Korea.
- Shipping related sanctions, including prohibitions on foreign vessels over 300 gross tons to enter or operate in navigable waters of the United States if, for example, the vessel is owned or operated by or on behalf of a country identified by the President as non-compliant with the applicable UN Security Council resolutions.