April 21, 2020

U.S. Sanctions Compliance During COVID-19: Pandemic-Related Guidance from the Office of Foreign Assets Control

The Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”) released brief policy guidance on April 20, 2020, addressing the COVID-19 pandemic’s impact on the capability of the global business community to comply with an array of U.S. economic sanctions. Striking a tone of partnership, OFAC encourages regulated parties facing deadlines imposed by its regulations “to contact OFAC as soon as practicable” if they anticipate delays in the filing of blocking and reject reports, responses to administrative subpoenas, and reports required by general or specific licenses as potentially needing relief from deadlines. Unlike other federal agencies that have broadly extended filing deadlines, OFAC appears poised to grant extensions on a case-by-case basis. The conversations encouraged by this guidance may forestall a flurry of voluntary self-disclosures filed by companies failing to meet OFAC-imposed deadlines for reasons related to the pandemic.

In the same communication, OFAC recognizes that “technical and resources challenges for organizations” may require temporary changes, including shifting sanctions-compliance resources to other, pandemic-related concerns. Invoking its prior guidance on the elements of an effective sanctions compliance program and acknowledging its longstanding direction that companies adopt a tailored, “risk-based approach,” the agency sought to address the concerns of under-resourced companies that may inadvertently violate complex sanctions prohibitions. OFAC seems to recognize that “social distancing,” travel restrictions, and other pandemic-related business disruptions will present companies with hard choices between the safety of their employees and strict compliance with sanctions prohibitions. Should your business decide to redirect resources from sanctions compliance, we recommend speaking with counsel while maintaining a written record of (a) the challenges facing the business as a result of COVID-19, and (b) the specific reasons underpinning resource reallocation decisions that may impact sanctions compliance.

The April 20 guidance followed OFAC’s publication of a fact sheet on April 16, 2020, that gathered into one place, with helpful commentary and links, the existing exemptions and authorizations that facilitate the provision of COVID-19-related medicine, medical devices, agricultural exports, and humanitarian assistance by U.S. persons to Cuba, Iran, North Korea, Syria, the Crimea region of Ukraine, and Venezuela. This fact sheet should prove a helpful resource to companies in the medical/life sciences, agriculture, and other affected sectors, including those that have changed their businesses to address new overseas markets or to manufacture or distribute new products in high demand as a result of COVID-19.

As a cautionary note, the April 20 guidance and April 16 fact sheet on authorized exports to sanctioned countries should be read in tandem with new prohibitions imposed on April 7, 2020, by the Federal Emergency Management Agency (“FEMA”) on the export from the United States to any foreign country of certain personal protective equipment (“PPE”) designated by the Department of Health and Human Services as “scarce or threatened materials.” This includes N-95 and other identified filtering facepiece regulators; elastomeric, air-purifying respirators; and certain PPE surgical masks and gloves. Customs and Border Protection is empowered to detain export shipments of this equipment so that FEMA may determine whether it should be returned for domestic availability, subject to various exemptions authorizing the export of this equipment notwithstanding the FEMA restrictions (e.g., for exports to Canada and Mexico, to U.S. government agencies abroad, and various others). The prohibitions will remain in place until at least August 10, 2020.

If you would like additional information about the issues addressed in this client alert, please contact Rich Matheny, Jacob Osborn or the Goodwin lawyer with whom you typically consult.