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Not So Fast: OFAC Revokes General Licenses For IRISL Vessels

The United States Department of the Treasury Office of Foreign Assets Control (OFAC) revoked two of the general licenses they had previously issued authorizing the judicial sale of a number of vessels owned by the Islamic Republic of Iran Shipping Lines (IRISL).

The effective date of the first revocation, made in regards to General License No. 1 under the Weapons of Mass Destruction Proliferation Sanctions Regulations, was March 18, 2011. Effective that date, those transactions related to the arrest, detention, and judicial sale of the MV Sabalan, MV Sahand, and MV Tuchal, three vessels on OFAC’s List of Specially Designated Nationals (SDN List), were no longer authorized.

The effective date of the second revocation, made in regards to General License No. 3 under the Weapons of Mass Destruction Proliferation Sanctions Regulations, is March 28, 2011. Effective that date, those transactions related to the arrest, detention, and judicial sale of the MV First Ocean and MV Second Ocean, two vessels on OFAC’s SDN List, were no longer authorized.

Any transactions related to these formerly authorized activities are still eligible for specific licensure. In other words, to engage in such activities a properly drafted OFAC specific license application will have to be produced and submitted to OFAC. Decisions on these license application can take a fair amount of time, particularly if the facts underlying the transactions are complicated. For general insight and tips on how to properly draft an OFAC license, The Iranian Transactions Regulations Practice Guide. The information there is useful not only for drafting OFAC specific licenses under the Iranian Transactions Regulations but also for other OFAC sanctions programs as well.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.

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OFAC General License for Libyan Diplomatic Missions

There is good news for diplomatic missions of the Government of Libya to the United States or the United Nations: The United States Department of the Treasury Office of Foreign Assets Control (OFAC) has issued a general license which will allow such parties to engage in certain transactions for goods and services are now allowed.

The authorization found in this new general license only pertains to those goods or services related to conducting official business of the missions, or for personal use of the employees of the missions. This does not include the purchase of goods or services for resale. Transactions for real property are also not authorized under this general license. Finally, payment for these goods and services must come from a U.S. financial institution which holds an OFAC specific license to process such transactions.

The same requirements do not apply for those parties who are merely employees of the diplomatic mission. Those individuals do not need to make payment for goods and services through a U.S. financial institution license by OFAC.

Here’s the problem: What do these diplomatic missions do during the interim period where U.S. financial institutions are waiting on a response for their license request? There was no mention by OFAC that expedited processing would be implemented for those U.S. financial institutions seeking specific licenses to carry out such transactions. Also, what if no U.S. financial institutions want to bother with it? Perhaps they don’t want to hassle with the expense, time, or stigma that will be associated with facilitating transactions pursuant to this general license. Such an attitude would certainly leave diplomatic missions from the Government of Libya in a tough situation; one in which they have authorization to purchase, but no bank to service the purchases. In sum, until a U.S. financial institution decides to service these transactions and obtains a specific license to conduct these transactions the Government of Libya’s diplomatic missions to the U.S. or the U.N. will be all dressed up with nowhere to go.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.

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Yet Another OFAC General License Issued For IRISL Vessels

The United States Department of the Treasury Office of Foreign Assets Control (OFAC) issued a third general license today related to the the arrest, detention, and judicial sale of vessels belonging to the Islamic Republic of Iran Shipping Lines (IRISL). This general license relates to two vessels, the MV First Ocean and the MV Second Ocean, which were both designated as OFAC SDNs (Specially Designated Nationals) last summer pursuant to the Weapons of Mass Destruction Proliferators Sanctions Regulations (WMD Program).

The general license authorizes all transactions related to the arrest, detention, and judicial sale of the MV First Ocean and MV Second Ocean. Included within the scope of these authorized transactions are bidding on the purchase of the vessels; paying deposits; providing financing, insurance, or funding in connection with the purchase; and, in furtherance of the arrest, detention, and judicial sale of the vessels, providing vessel management services; providing port agency services; purchasing of bunkers; repairing or modifying the vessels for commercial use; providing crewing; and hiring surveyors to inspect the vessels. This general license expires at 11:59 p.m. eastern standard time, February 15, 2012.

Despite this laundry list of authorized transactions, this general license does not authorize any provision of services, or any transfer of funds or other property, directly or indirectly, that would otherwise be prohibited by 31 C.F.R. Chapter V, including to any entity or individual whose property and interests in property are blocked pursuant to any Executive order, statute, or 31 C.F.R. Chapter V.

In the event that one of these vessels is sold pursuant to judicial sale, the purchaser may provide OFAC with evidence demonstrating that the basis for the blocking is no longer applicable. This evidence is required to expedite the removal of the vessels from the OFAC SDN List. Such evidence should consist of (1) documentation demonstrating completion of the vessel sale, such as a bill of sale or other evidence provided by a sheriff or court; (2) documentation demonstrating the source of funds for the vessel purchase, such as evidence of any financing associated with purchasing the vessel and the parties associated with such financing; (3) corporate and other documentation to substantiate the identity of the buyer; and, if applicable, (4) information or documentation regarding plans to lease the vessel to any party other than the buyer.

A few months ago I wrote a blog posting where I speculated as to whether or not OFAC would continue to issue these general licenses in a piecemeal fashion or just issue one comprehensive general license for all IRISL vessels. The answer is becoming clear: OFAC is providing general licenses for IRISL vessels in a piecemeal fashion. What is less clear is what action IRISL will take in attempting to regain hold of these vessels if and when they are sold. That will remain to be seen, however, for the time being the vessels can be purchased without (for the most part) the fear of incurring consequences from OFAC.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.

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Three (3) Keys to Drafting an OFAC Specific License Application

When one hears the term OFAC specific license application they imagine a form or a questionnaire type document. This is false. An OFAC specific license application is actually a formal written document akin to a written letter which lays out a transaction which would normally be prohibited, but for which the applicant seeks authorization from the Office of Foreign Assets Control (OFAC) to engage in.

Not all specific license applications are the same. However, there are some general rules to follow. Follow these three keys for drafting a successful OFAC specific license application:

1. State the purpose of the license: What are you requesting the license for? Under which OFAC sanctions program is it being requested? Will it harm the integrity of the sanctions program it is being authorized under?

Be clear in what you are trying to achieve by applying for the specific license. Make sure you communicate not only the purpose of the license application but also any relevant legal arguments as to why it should be granted. In addition, make sure that OFAC knows that authorization in your case will not harm the sanctions program or U.S. foreign policy objectives. Include arguments that establish the policy considerations of authorizing your transaction.

2. Identify the names and contact information of all parties involved. Are there banks involved? What about shippers? Are there any parties that you know will benefit from the transaction outside of those directly contemplated in a contract?

This rule seems like a no-brainer, however, sometimes applicants for an OFAC license do not think deeply enough about the issue and fail to include all the parties that could be involved. Remember, a license authorization will only cover those transactions stated in the original license application. If something is incidental to those transactions you maybe ok, however, if you forget something like the involvement of a bank or a shipper, then that license application will not cover any transactions with that party.

3. Provide documentation. When dealing with OFAC do not assume your word is gold. Make sure to include documentation to show that the transactions you propose are legitimate and are being carried out by legitimate parties. Registration documents, product descriptions, even brochures or literature about different parties or organizations involved in the transactions can be included to inform OFAC of the legitimacy of the transaction.

You are not entitled to an OFAC license. The United States Department of the Treasury can deny anyone they like of an OFAC specific license. Therefore, from the beginning put you should provide the right information and ample documentation to support it. If you can not or do not want to hire an OFAC attorney to assist you in procuring your license then the best option is to follow these keys to draft a successful OFAC license application.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.

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