This installment of PARCEL Counsel is being written during the first weeks of March, 2022 when terms such as “sanctioned” or “sanctions” are very much in the news. These news stories relate to Russia, Belarus, Vladimir Putin, other individuals in the Russian government, and the so-called Russian Oligarchs.
The concept of sanctioning a country is not a new one. During the War of 1812, the Treasury Department administered sanctions against Great Britain for the forcible seizure of American sailors. Over the years, various federal agencies have been involved in administering sanctions. At the present time, the Office of Foreign Assets Control (OFAC) within the Treasury Department plays a leading role, although other governmental offices and agencies are also involved.
There are many forms and variations of sanctions; however, this column will focus on those prohibiting transactions with certain designated countries and persons. It is important to note that the US Statutes and Regulations which implement sanctions do not directly regulate such countries or individuals but rather regulate US citizens and companies, including transportation service providers and parcel shippers.
Generally speaking, once a country or individual is determined by the Executive Branch of the United States government to be what is called a “target” of a sanction, “US persons” may not engage in any financial transactions or other dealings with the target country or individual. The term “US persons” includes US citizens, regardless of where they are located, all persons and entities within the US, and all US incorporated entities and their foreign branches. A particular sanctions program may further extend the scope as to who must comply with the sanction.
The consequences for violating a sanction program are substantial — there can be both criminal and civil penalties. The civil penalties are often measured as twice the value of the transaction. In recent years, penalties have been assessed for millions of dollars. Accordingly, it is of upmost importance that a company shipping internationally be fully informed and up to date with respect to sanctions and, in particular, what OFAC calls “Sanctions Lists,” which are posted on its website. There are currently three such lists: (i) Specially Designated Nationals List, (ii) Consolidated Sanctions List and (iii) Additional OFAC Sanctions Lists. As of March 7, 2022, just the first of these lists takes up 1,706 pages!
A critical first step to avoid violating one or more provisions of one or more sanctions programs is to determine if the person or entity with whom you are planning to transact business is subject to sanctions before doing business. The defense of “I did not know that my customer was on a sanctions list” does not work. Given the number of sanctions programs and the fact that they are continually changing, shippers and transportation service providers typically rely on an automated process using computer software or other technologies.
Given the serious nature of the US sanction programs and the consequences for non-compliance, it is critical that an organization establish what is called a Sanctions Compliance Program, or SCP. For those just getting started in international shipping and transactions, a good starting point would be a close review of the Department of Treasury’s “A Framework for OFAC Compliance Commitments” https://home.treasury.gov/system/files/126/framework_ofac_cc.pdf.
All for now!Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found in the “Content Library” on PARCELindustry.com. Your questions are welcome at email@example.com.
This article originally appeared in the March/April, 2022 issue of PARCEL.