Reluctant signature

Trump signs off on Russia sanctions, but shippers need to think about restricted party lists tied to China

By: Chris Gillis
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Photo: ID1974 / Shutterstock.com
   President Donald Trump on Wednesday signed into law sweeping sanctions legislation on Russia, North Korea, and Iran that could have direct and indirect impacts on importers and exporters.
   The sanctions bill includes penalties tied not only Russian individuals and entities tied to the Putin regime, but those involved with Iran and North Korea weapons development programs.
   In the case of Russia, the legislation punishes the Russian government for allegedly tampering with the recent U.S. presidential election, while Iran and North Korea received additional sanctions for ballistic missile tests carried out by those two countries.
   The legislation, Countering America's Adversaries Through Sanctions Act (H.R. 3364), passed both the Senate and House with overwhelming majorities, effectively rendering it veto-proof by the time it reached the president’s desk.
   President Trump said the sanctions offer “tough measures to punish and deter bad behavior by the rogue regimes in Tehran and Pyongyang,” as well as demonstrate that the U.S. government will “not tolerate interference in our democratic process, and that we will side with our allies and friends against Russian subversion and destabilization.”
However, he called the bill “seriously flawed,” since Congress effectively took away the White House’s direct authority to negotiate changes to the Russian sanctions.
   Section 216 of the legislation, for example, grants Congress the ability to change the Russian sanctions and prescribes a review period that precludes the president from taking certain actions.
   “By limiting the executive’s flexibility, this bill makes it harder for the United States to strike good deals for the American people, and will drive China, Russia, and North Korea much closer together,” Trump warned.
   Despite signing the sanctions legislation, Trump said he remains determined to improve relations between the United States and Russia.
   "We hope there will be cooperation between our two countries on major global issues so that these sanctions will no longer be necessary," he said.
   Meanwhile, Susan Kohn Ross, attorney with the law firm Mitchell Silberberg & Knupp LLP, wrote in a note to clients Wednesday that they shippers should be wary of the indirect impacts of the sanctions, especially as it relates to China.
   "Those already seeking to do business with Russia or Iran will not find anything unusual in these new sanctions," she wrote. "The existing sanctions regimes regarding those two countries change only to the extent of those on whom the sanctions may be imposed. The potentially big change comes with regard to North Korea. It is commonly understood that much of the economic support which North Korea receives internationally comes from relationships fostered with the government of China, driven, in large measure, by their common border. Bearing in mind the extensive amount of trade going on between U.S. and Chinese companies, in the face of this new law, American companies would be wise to undertake much more due diligence in their dealings with their Chinese buyers and sellers than has been the case in the past.
   "What this new law means for international traders is that, in a relatively short period of time, new lists of blocked parties may be issued, and, of course, those lists are already frequently updated," Ross wrote. "Some of the reports in the new law are demanded within 90 days of enactment and others at 180 days and others even later.
   Ross urged importers and exporters to double down on due diligence when it comes to vetting trading partners.

The key is clearly understanding both who owns the party with whom you are dealing, but also who are that party’s customers/suppliers and whether any of those persons are blocked or any blocked person holds an ownership interest in the vendor (direct or indirect) with whom you are dealing.

   "The latest round of sanctions now demands that American companies seek many more details from their Chinese buyers and sellers," Ross wrote. "The key is clearly understanding both who owns the party with whom you are dealing, but also who are that party’s customers/suppliers and whether any of those persons are blocked or any blocked person holds an ownership interest in the vendor (direct or indirect) with whom you are dealing. To make the needed determination, OFAC (the Treasury Department's Office of Foreign Assets Control) draws a distinction between entities which are 'owned' by a blocked party, and those which are only 'controlled' by a blocked party. Either way, OFAC’s guidance makes clear that if you are dealing, even remotely, with blocked parties, appropriate due diligence is mandated."