Irwin

In the wake of President Bush’s re-election, the war on terrorism and the reconstruction of Iraq and Afghanistan continues unabated. Contractors working in Iraq and Afghanistan face tough challenges, including an increasingly perilous security environment, coupled with much public scrutiny worldwide. But on top of that, working in the region often involves dealing with a difficult overlay of U.S. sanctions, laws and regulations.

Few people are aware of the complexity and broad scope of such sanctions and many do not appreciate the fine efforts by many companies to adhere to these rules in a most challenging environment. Economic sanctions remain at the forefront of the war on terrorism, as shown by the implementation of sanctions against Syria last year, lifting of sanctions against Libya for apparent "good behavior" and possible heightened sanctions against Iran. And, as a technical matter, Iraq also remained sanctioned for some time after the initial U.S. military action.

Greater Reliance

Sanctions represent an increasingly important element of U.S. foreign policy. But they are not just an academic proposition and tool of statecraft, they are a complex reality of reconstruction work. Contractors unwittingly can get caught in the middle as they try to meet the special, dangerous and pressing needs of reconstruction and still meet the letter of U.S. law.

Fortunately, contractors are taking steps to comply with the rules and U.S. regulators likewise are acting responsibly in addressing the needs of the reconstruction.

Iraq is a good example. Because Iraq remained sanctioned well into the initial military campaign, it was subject to a number of export control restrictions. Many contractors initially needed licenses for relatively rudimentary equipment and supplies despite the immediacy of the reconstruction efforts. Fortunately, Iraq no longer is sanctioned and the export control environment, while not necessarily "easy," is more permissive than a year ago. The Bureau of Industry and Security at the Commerce Dept. now has a process by which contractors can apply for a "Special Iraq Reconstruction License."

Terrorist Lists

Apart from export controls, the U.S. government, through the Office of Foreign Assets Control at the Dept. of the Treasury, still has in place strict sanctions regarding working with Specially Designated Nationals.

SDNs are thousands of persons and entities throughout the world who have been designated as terrorists or supporters of terrorists (or narcotics traffickers). Any substantive contact with them is a possible violation of U.S. law, potentially subjecting the violator to criminal penalties, not to mention bad publicity.

Because many people and firms want to get in on the reconstruction action, reconstruction contractors in particular need to have mechanisms to screen potential partners against the SDN list.

These laws apply independently to all U.S. persons anywhere in the world and there are separate clauses in federal contracts that specifically apply these requirements to the reconstruction.

The screening is not easy because of the way the list is published. It often is possible for contractors to have "false matches" that require further research. But compliance makes sense from many views because contractors surely don’t want the added threat of working with SDNs.

Logistics and sourcing channels are made far more complicated as a result of sanctions against Iran and Syria. Contractors in Iraq, in particular, have to contend with many thousands of miles of border adjacent to sanctioned territory. They had to develop strategies to ensure that work gets done quickly and well, but doesn’t violate U.S. law.

Under such conditions, one easily could imagine that compliance with U.S. sanctions rules would go by the wayside. But that doesn’t appear to be the case. And with all of the criticism and scrutiny surrounding reconstruction efforts, this is one piece of good news that deserves mention.

Andrew D. Irwin is a government contracts and export control lawyer
with Steptoe & Johnson LLP in Washington, D.C.
He can be reached at www.steptoe.com or (202) 429-3000.