OFAC Requirements for Importers and Exporters

Each industry has specific requirements for complying with economic transactions and trade sanctions in accordance with the sanctions programs administered by the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC). OFAC violations may lead to blocked property, fines, and civil and criminal penalties.

For those involved in the importing and exporting of products, goods, and services, OFAC sanctions and regulatory compliance are very real and important aspects of conducting international business.

Staying abreast of new and evolving sanctions programs can be difficult without legal counsel to ensure compliance with recordkeeping, reporting, licensing, and other OFAC requirements of properly conducting business within the parameters of economic sanctions and trade embargoes.

The Foreign Assets Control Regulations applicable to Exporters and Importers are extensive. Strict adherence to record keeping and reporting rules, refraining from engaging in prohibited transactions, avoiding OFAC violations, and complying with general licenses or obtaining special licenses to engage in otherwise prohibited transactions are only some of the OFAC-related challenges facing U.S. importers and exporters. Understanding the requirements and prohibitions is key to maintaining compliance with OFAC regulations.

Foreign Assets Control Regulations for Exporters and Importers

The Treasury Department provides a resource (pdf) for understanding OFAC sanctions as they apply to exporting and importing industries. OFAC violations can be quite costly for importers and exporters:

• Importers may have payments for goods blocked and never receive the goods because of “nonpayment.” Additionally, the importer may be subject to thousands of dollars in fines for violating Executive Orders or Acts of Congress.
• Exporters may have property blocked and may be fined in accordance with the Trading with the Enemy Act or International Emergency Economic Powers Act for sending goods to a Specially Designated National (SDN) or to a blocked country.
• Exported items may be blocked and an exporter may be required to pay a significant fine if documents show the products are intended for re-exportation to a blocked country.
• A company that charters a shipping vessel may be subject to civil or criminal penalties if the vessel and/or vessel owner are listed as SDNs.
• An importer is considered to be in violation of OFAC sanctions if the imported products were shipped from a non-blocked country using a vessel owned by a blocked government or entity on the SDN list.

The above mentioned situations can lead to heavy fines, blocked payments, seized or blocked shipments, and criminal penalties — including incarceration.

Trade Restrictions

Exporters and importers must be aware of trade restrictions against targeted countries, regimes, individuals, front organizations, and persons known as Specially Designated Nationals and identified on the SDN list.

Exportation, re-exportation, and importation is subject to trade restrictions when the activities involve the following countries or SDNs engaged in activities including terrorism, international drug trafficking, the proliferation of weapons of mass destruction, or the rough diamond trade.  A sampling of the prohibitions contained in each such sanctions program follows:

• Burma/Myanmar— No dealings with those persons appearing on the SDN List.
• Cuba – No exports of goods or services to Cuba, except licensed exports of food, medicine, medical devices, and agricultural commodities or OFAC-licensed telecommunications transactions; no imports of goods or services from Cuba; no dealing in goods of Cuban origin or brokering of Cuban trade contracts; Certain exemptions involving non-governmental organizations, gifts, and informational materials apply.
• Iran — No exports or re-exports of goods, services, or technology to Iran, except agricultural commodities, medicine & medical devices licensed by OFAC; no imports of goods or services from Iran except specified personal products and household goods; no dealing in goods of Iranian origin; No U.S. person may facilitate Iran-related transactions by third-country firms; informational materials and donated humanitarian goods are exempted from trade restrictions.
• Iraq — Exports controlled by the Department of Commerce under the Export Administration Regulations must be authorized by the Bureau of Industry and Security (BIS).
• Liberia – No import of rough diamonds, unless controlled by the Kimberly Process Certification Scheme (KPCS); no import of Liberian timber or round logs.
• North Korea – Nearly all imports and exports require OFAC notification and approval, except certain exemptions contained in the IEEPA statute.
• Sudan — Exports of goods, services, and technology are prohibited, with exceptions for agricultural commodities, medicine and medical devices licensed by OFAC; no goods or services may be imported from Sudan; brokering of Sudanese trade contracts is prohibited; import/export prohibition exemptions exist for informational materials.
• Syria — No receipt of unlicensed donations from the Syrian government; no financial transactions with the Syrian government if there is reasonable cause to believe there is a risk of furthering terrorist activity in or against the United States; no exports, re-exports, or donations of American-origin goods to Syria except food, medicine, and informational materials; exportation of medical equipment to Syria requires a license from the Bureau of Industry and Security (BIS).
• Zimbabwe — Transactions involving persons named in or pursuant to Executive Order 13288 are prohibited.
• Diamond Trade – No import of rough diamonds unless controlled by the KPCS.
• Narcotics – Nearly all dealings with Specially Designated Narcotics Traffickers and drug kingpins are prohibited.
• Terrorism — Nearly all dealings in support of Specially Designated Terrorists (SDT), Specially Designated Global Terrorists (SDGT), or Foreign Terrorist Organizations (FTO) are prohibited.
• Weapons of Mass Destruction (WMD)—No import of goods, technology, or services produced or provided by foreign persons designated by the Secretary of State as proliferators of weapons of mass destruction.

Importers and exporters are required to exercise due diligence in searching the SDN list and ensuring that dealings and transactions with foreign countries are not in violation of OFAC sanctions programs. OFAC violations can result in seized, blocked, or forfeited assets; blocked accounts and funds; civil penalties; and the possibility of criminal charges and imprisonment.