By Mario Mancuso and Anthony Rapa

Law360 (April 14, 2020, 5:38 PM EDT) --

Mario Mancuso

Anthony Rapa

The onset of COVID-19 has triggered a humanitarian crisis around the world, prompting policy discussions across several disciplines, including economic sanctions.

While there have been policy proposals regarding implementation of sanctions relief to facilitate humanitarian support to sanctioned countries impacted by the crisis, long-standing U.S. sanctions policy in fact already permits a broad range of humanitarian support.

This article provides an overview of the humanitarian relief activities that are authorized under the most sweeping sanctions programs currently in force — specifically, those targeting Iran, Syria, Cuba, Venezuela, North Korea and the Crimea region of Ukraine.

For ease of explanation, this overview synthesizes sanctions regulations administered by the U.S. Department of the Treasury, Office of Foreign Assets Control and the export administration regulations, or EAR, administered by the U.S. Department of Commerce, Bureau of Industry and Security.

Any person seeking to engage in activity under the authorizations described below should also keep apprised of any export restrictions that the U.S. might impose with respect to certain medical supplies in the coming weeks, as the Federal Emergency Management Agency recently has done with certain personal protective equipment.

Iran

Iran has been particularly hit hard by COVID-19, prompting calls for the easing of sanctions in response to the crisis. However, as U.S. authorities have made clear, U.S. sanctions already permit certain dealings in support of the Iranian people, including with respect to humanitarian relief and the supply of medical items. OFAC has delineated such permissible activities in a recently issued set of frequently asked questions.[1]

Specifically, as set out in the FAQ, U.S. persons (and entities owned or controlled by U.S. persons) are permitted to engage in the following humanitarian-related activity related to Iran:

Sales of Medicine, Medical devices and Agricultural Commodities.

Pursuant to an OFAC general license, U.S. persons are authorized to sell to Iran many types of medicine, medical devices, and agricultural commodities. There are restrictions on transactions involving specially designated nationals, and military, law enforcement and intelligence entities. Certain items are ineligible under the general license. Additionally, only certain payment terms are permissible. For sales of medicine, medical devices and agricultural commodities that are not eligible under the general license, specific licensing is available.

Donations

Donations of articles intended to relieve human suffering, including medicine, food, and clothing, are exempt from the Iran sanctions regulations. There are restrictions on dealings with the government of Iran and persons who are specially designated nationals. Notably, this exemption applies only to articles, and not to funds. Funds are discussed below, with respect to nongovernmental organizations, or NGOs.

NGO Activities

Pursuant to an OFAC general license, U.S. person NGOs are permitted to engage in humanitarian projects to meet basic human needs in Iran, including the donation of health-related services. Additionally, NGOs can transfer up to $500,000 per year to Iran in support of such activities. NGOs engaging in activity under the general license must submit quarterly reports to OFAC.

Central Bank of Iran

An OFAC general license authorizes transactions involving the Central Bank of Iran with respect to sales of medicine, medical devices and agricultural commodities as described above, but otherwise dealings with the CBI are not permitted.

It is important to note that the U.S. maintains a broad range of secondary sanctions against Iran that restrict non-U.S. persons from dealing with Iran. Generally, under these secondary sanctions, there are exceptions for humanitarian trade, subject to certain restrictions (including restrictions directed at the CBI).

Notably, in October 2019 the Trump administration issued guidance[2] regarding the establishment of a secure payment channel for non-U.S. financial institutions supporting sales of medicine, medical devices and agricultural commodities to Iran.

Syria

Sales or Donations of Medicine and Food

U.S. sanctions do not restrict the supply of medicine and food to Syria. Notably, the export of medical devices requires a license under the EAR if the device is (a) located in the U.S., (b) is of U.S. origin, (c) is of non-U.S. origin, but comprises more than 10% U.S. content, or (d) in certain cases, is the direct product of U.S. technology.

NGO Activities

The same range of activities that are permissible for NGOs in the Iran context are permissible for Syria. NGOs are subject to a quarterly reporting requirement.

Cuba

Donations 

Under the Cuba embargo, persons subject to U.S. jurisdiction — U.S. persons and non-U.S. entities owned or controlled by U.S. persons — are authorized to donate to Cuba items for basic human needs that are subject to the EAR, including most medicine, medical devices and food.

Favorable Licensing Policy for Sales of Medicine and Medical devices 

Exports of medicine and medical devices subject to the EAR that are not donations — i.e., exports of items for sale — are subject to a licensing requirement. These exports, unlike most other exports to Cuba, are subject to a favorable licensing policy, meaning a specific license is reasonably likely to be granted.

Exports of Agricultural Commodities

There is a general authorization for exports to Cuba of agricultural commodities subject to the EAR.

Humanitarian Projects 

An OFAC general license authorizes transactions related to certain humanitarian projects in or related to Cuba, including medical and health-related projects. This includes certain remittances in support of such projects.

Venezuela

Transactions With Entirely Private/Nonsanctioned Entities 

Unlike the other sanctions regimes described in this article, U.S. sanctions against Venezuela do not restrict broad categories of trade, but rather restrict dealings with the government of Venezela, entities owned 50% or greater by the government of Venezuela, SDNs, and entities owned 50% or greater by SDNs.

If U.S. persons do not engage in dealings with such parties, or with certain sanctioned sectors such as the oil, gold and defense sectors, then generally speaking OFAC sanctions will not restrict a transaction with or involving Venezuela.

Exports of Medicine, Medical Devices and Agricultural Commodities

To the extent a transaction involves a restricted party described above, there is a general license authorizing most exports of medicine, medical devices, and agricultural commodities. Notably, the general license does not authorize transactions or dealings with Banco de Desarrollo Economico y Social de Venezuela or Banco Bandes Uruguay S.A.

North Korea

Donations 

Donations to North Korea of items for basic human needs subject to the EAR are permissible, including donations of most medicine, medical devices and food.

Favorable Licensing Policy for Sales of Medicine and Medical Devices

Exports of medicine, medical devices and agricultural commodities subject to the EAR that are not donations — i.e., exports of items for sale — are subject to a licensing requirement. Similar to Cuba, these exports, unlike most other exports to North Korea, are subject to a favorable licensing policy, meaning a specific license is reasonably likely to be granted (with the exception of certain items determined to be luxury goods).

Humanitarian Projects

An OFAC general license authorizes NGOs to engage in activities "to support humanitarian projects to meet basic human needs in North Korea." This includes the distribution of food and medicine intended to be used to relieve human suffering.

Additionally, NGOs are authorized to export food and medicine to North Korea, provided that such exports are from a country other than the U.S. and that the items are not subject to the EAR.

Crimea Region of Ukraine

Donations

Donations to Crimea of items for basic human needs subject to the EAR are permissible, including donations of most medicine, medical devices and food.

Sales of Medicine and Food

An OFAC general license authorizes supplying most medicine and food to Crimea, other than to military and law enforcement purchasers. EAR restrictions do not apply to such activity.

Sales of Agricultural Commodities and Medical Devices

The OFAC general license described above authorizes the supply to Crimea of most agricultural commodities and medical devices. However, to the extent such items are subject to the EAR, a Bureau of Industry and Security licensing requirement applies.

Best Practices

Companies, nonprofits and other parties looking to engage in humanitarian-related and medical-related transactions in the sanctions context should be mindful that, at a high level, there are various general authorizations permitting such activity, but that all of these authorizations are subject to complex conditions, limitations and, in certain cases, reporting requirements.

Exporters of items subject to the EAR should review both OFAC sanctions regulations and the EAR before proceeding, as potential dual licensing requirements could apply. Furthermore, notwithstanding the authorizations described herein, it will be important to keep apprised of developments regarding potential U.S. restrictions on exports of medical supplies, such as recent Federal Emergency Management Agency restrictions on PPE exports.

Within this paradigm, it is also important to keep in mind that even where a general license does not apply, specific licensing is available. Notably, humanitarian-related transactions tend to be one of the few types of activities eligible for case-by-case or even, in some cases, favorable consideration in the specific licensing context.

Specific licenses can be particularly helpful where they build upon a general authorization already in place, such as by increasing a generally authorized threshold for funds transfers or by permitting different payment terms than those authorized under a general license.

Conclusion

Although the various general licenses and licensing policies described above are complex, significant opportunity to engage in humanitarian-related transactions still exists under the sanctions programs noted herein.

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Mario Mancuso and Anthony Rapa are partners at Kirkland & Ellis LLP.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#COVID19.

[2] https://www.treasury.gov/resource-center/sanctions/Programs/Documents/iran_humanitarian_20191025.pdf.

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