December 24, 2011

OFAC Significantly Eases Existing Restrictions on Transactions With South Sudan

December 9, 2011
Fulbright Alert - International Trade


On December 8, 2011, the U.S. Department of Treasury, Office of Foreign Assets Control (“OFAC”) issued a final rule[1] that amended the Sudanese Sanctions Regulations (“SSR”) by creating two new general licenses that significantly ease remaining restrictions on transactions with the newly independent Republic of South Sudan (“South Sudan”), including with its oil and gas industry.[2] The new general licenses (31 C.F.R. §§ 538.536 and 538.537), which are effective immediately, now authorize the following:

  • All activities and transactions relating to the petroleum and petrochemical industries in South Sudan and related financial transactions (31 C.F.R. § 538.536)
  • The transshipment of goods, technology and services through Sudan to or from South Sudan and related financial transactions (31 C.F.R. § 538.537)

The collective impact of the new general licenses is significant in that transactions by U.S. persons with South Sudan that had remained prohibited even after South Sudan became independent on July 9, 2011[3] are now authorized including:

    • Export of goods, services and technology to South Sudan’s petroleum or petrochemical industries.[4]
    • Transshipment of goods, technology, and services to or from South Sudan through Sudan
    • Oilfield services
    • Exploration, development, production and field auditing services
    • Activities related to oil and gas pipelines
    • Investment
    • Transport of petroleum from South Sudan through Sudan (except for refining in Sudan)
    • Payments to the Government of Sudan (or entities it owns or controls) of pipeline, port and other fees
    • All financial transactions ordinarily incident to the above activities including, but not limited to, financial transactions with a depository institution owned or controlled by the Government of Sudan or located in Sudan provided that such transactions must first transit through a depository institution not owned or controlled

The new general licenses do not authorize the export of goods, services or technology that are not used in connection with South Sudan’s petroleum or petrochemical industries or the transport of petroleum from South Sudan for refining in Sudan. In addition, all other activities and transactions that are prohibited by the SSR, including those relating to the petroleum and petrochemical industries in Sudan, continue to be prohibited.

Conclusion

These two new general licenses create significant business and investment opportunities for U.S. companies seeking to engage in activities related to South Sudan’s petroleum and petrochemical industries. However, companies considering engaging in transactions with South Sudan should continue to conduct thorough due diligence to determine whether any particular transaction may implicate the remaining restrictions in the SSR. Interested companies should also be aware of the continuing instability in South Sudan given its ongoing dispute with Sudan over certain of South Sudan’s oil resources.

Members of Fulbright’s International Trade Practice group will continue to monitor developments in Sudan and South Sudan closely and will provide additional updates as appropriate.

Read Fulbright's Alert online.

This article was prepared by Stephen M. McNabb (smcnabb@fulbright.com or 202 662 4528), Marsha Z. Gerber (mgerber@fulbright.com or 713 651 5296), Stefan H. Reisinger(sreisinger@fulbright.com or 202 662 4698) and Fatema Merchant (fmerchant@fulbright.com or 202 662 4626) from Fulbright's International Trade Practice Group. Stephen M. McNabb is a partner in Fulbright’s Washington D.C. office and is Head of Fulbright’s International Trade Practice Group. Marsha Z. Gerber is a partner in Fulbright’s Houston, Texas office and is a member of the International Trade Practice Group. Stefan H. Reisinger and Fatema Merchant are attorneys in the International Trade Practice Group.

Fulbright’s International Trade Practice Group
Fulbright’s International Trade Practice Group is comprised of experienced attorneys in several of Fulbright’s offices throughout the world. Attorneys in the group assist clients in matters concerning international trade laws and regulations; including economic sanctions regulations, export/import control regulations, anti-boycott regulations, and anti-corruption laws.

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[1] http://www.treasury.gov/resource-center/sanctions/Programs/Documents/fr76_76617.pdf
[2] Additionally, OFAC amended an existing general license broadening its authorization related to the importation of certain Sudanese-origin services and adding authorization for activities related to Sudanese persons’ travel to the United States (see 31 C.F.R. 538.509). OFAC also made technical changes to the SSR, including changes to reflect the establishment of the independent state of South Sudan and the separation of the Government of the South Sudan from the Government of Sudan.
[3] Despite OFAC’s announcement that the SSR would not apply to the newly independent South Sudan, significant restrictions still remained prohibiting U.S. persons from activities that: dealt in property or property interests of the Government of Sudan; benefitted Sudan or the Government of Sudan, related to the petroleum or petrochemical industry in Sudan, and engaging in exporting and importing activities from South Sudan that transit through Sudan. These restrictions were discussed more fully in a previous Fulbright Alert, found here.
[4] So long as other U.S. export requirements are met including those imposed by the Export Administration Regulations.

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Notice: We are providing the Fulbright Alert as a commentary on current legal issues, and it should not be considered legal advice, which depends on the facts of each situation. Receipt of the Fulbright Alert does not establish an attorney-client relationship. The listed attorneys and/or other attorneys may provide services in connection with a particular matter.

2 comments:

luan said...

Well in that case, these had made both benificial to Sudan and the US. I hope that everything will goes well and economy rate will increase.
Thanks for sharing.

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