Overview
Effective February 18, 2015, the Department of Treasury’s Office of Foreign Assets Control (OFAC) expanded the scope of a general license contained in the Sudanese Sanctions Regulations (SSR), 31 C.F.R. Part 538, pertaining to certain software, hardware and services incident to personal communications. The Bureau of Industry and Security (BIS) concurrently amended the Export Administration Regulations (EAR) to authorize the export of consumer communications devices to Sudan under License Exception Consumer Communications Devices (CCD), Part 740.19, and revised the licensing policy of denial to one of case-by-case licensing for export to Sudan of telecommunications equipment and associated computers, software, and technology for civil end use. BIS also removed a license requirement for reexport to Sudan of certain telecommunications software. Both OFAC and BIS have issued Frequently Asked Questions (FAQs) regarding these changes.
The bottom line is that companies can now export to Sudan certain fee-based software and services, as well as hardware incident to the exchange of personal communications over the Internet, such as instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, and blogging. Hardware would include certain mobile phones. This is not unlike the situation that now exists for Iran under General License D-1 issued under the Iranian Transactions & Sanctions Regulations. However, companies must be careful to examine the regulatory requirements, scope of authorizations, and continued restrictions applicable under both the SSR and the EAR for Sudan before engaging in any specific transaction since unlike Iran, an authorization available from OFAC under the SSR does not satisfy licensing requirements under the EAR.
Background
The SSR restrict most trade between “US persons” and Sudan. “US persons” are defined to include US citizens, permanent resident aliens, entities organized under the laws of the United States (including foreign branches), and persons located in the United States. The term does not include foreign-incorporated subsidiaries of US companies.
OFAC amended the SSR in March 2010 to authorize the export and reexport to Sudan of certain services and software incident to personal internet-based communications, provided that these covered services and software were publicly available for free. OFAC had simultaneously issued a similar authorization for Iran, and an authorization limited to services incident to personal internet-based communications for Cuba. These measures were consistent with broader US government policy in favor of fostering the free flow of information and freedom of expression in these countries. See our previous advisory on this.
In May 2013, OFAC expanded this authorization for Iran by issuing General License D under the Iranian Transactions and Sanctions Regulations (ITSR), 31 C.F.R. Part 560, which authorized export to Iran of certain fee-based (as opposed to free) services and software incident to exchange of personal communications, and export of certain personal communications-related hardware. See our previous advisory on this. OFAC later expanded this authorization by issuing General License D-1 under the ITSR in February 2014, as summarized in our previous advisory.
Similar to General License D-1 for Iran, OFAC has now broadened its authorization for Sudan by amending the general license, set forth in 31 C.F.R. 538.533, pertaining to certain software, hardware, and services incident to personal communications.
Changes to the SSR
Previously, section 538.533 of the SSR authorized the exportation from the United States, or by US persons wherever located, to Sudan of certain services and software incident to personal communications over the Internet (such as instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, and blogging). Such services and software qualified for the authorization only if they were “publicly available at no cost to the user,” and, for software, (i) designated as EAR99, (ii) not subject to the EAR, or (iii) classified as mass market software under ECCN 5D992. (By “publicly available,” OFAC was not referring to “publicly available” software that is not subject to the EAR, but rather software that is “widely available to the public.” OFAC has clarified this in the new general license.) It should be noted that OFAC did not explicitly authorize the export of technology to Sudan, which would include source code.
OFAC has expanded the scope of the general license contained in Part 538.533 of the SSR in several ways. The general license now:
- Authorizes the export and reexport from the United States or by a US person wherever located, to Sudan of certain fee-based services incident to the exchange of personal communications (such as instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, and blogging), and software necessary to enable such services. The software must be classified as either EAR99 or controlled under ECCN 5D992.c, or if not subject to the EAR, of a type that would be classified as such if it were subject to the EAR.
- Authorizes the export and reexport to Sudan of certain additional personal communications hardware, software, and related services. Appendix B to Part 538 provides a list of hardware and software that fall within the scope of this general license, including certain types of mobile phones and smartphones, SIM cards, modems, routers, satellite phones, laptops, tablets, and anti-virus software. For services and software, this is in addition to the authorization discussed immediately above. Export and reexport of hardware subject to the EAR is authorized if it is listed in Appendix B, whereas export and reexport of hardware not subject to the EAR is authorized if it is of a type described in Appendix B, provided that it would be designated EAR99 or ECCN specified in Appendix B if subject to the EAR.
- Many items listed in the Appendix must be “consumer” items in order to be eligible. Appendix B defines consumer as “generally available to the public by being sold, without restriction, from stock at retail selling points” by over-the-counter, mail order, electronic, and telephone transactions. Furthermore, the items must be “[d]esigned for installation by the user without further substantial support by the supplier.”
- The OFAC FAQs provide that export and reexport of accessories for authorized hardware, such as headsets, cases, chargers, docks, cables, batteries, keyboards, mice, and computer “peripherals” such as consumer disk drives and other data storage devices, are authorized.
- However, the FAQs further provide that the general license does not authorize the export or reexport of parts and components for authorized items.
- Authorizes the import by an individual into the United States of hardware and software previously exported or reexported to Sudan pursuant to the general license. For example, an individual can carry a smartphone that falls within the scope of the general license while traveling to and from Sudan.
- Creates a limited exception to the prohibition on exporting items intended for the Government of Sudan (GOS) by authorizing the export and reexport to the GOS of certain no-cost services and software incident to personal communication that are “widely available to the public.” This is a narrow authorization that does not permit export or reexport of any other service, software or hardware to the GOS.
- Authorizes the export and reexport to Sudan of consumer-grade Internet connectivity services, as well as the provision, sale, or leasing of capacity on telecommunications transmission facilities incident to personal communications. Export and reexport to Sudan of commercial-grade (as opposed to consumer-grade) Internet connectivity services or telecommunication transmission facilities remains restricted.
The final rule does not authorize US companies to employ agents in Sudan to facilitate sales, create or fund a physical sales presence on the ground in Sudan, or utilize Sudanese commercial marketing services in furtherance of exports authorized under the amended general license.
See our previous advisory regarding OFAC’s FAQs regarding ITSR General License D-1, which OFAC has applied to the SSR general license.
Changes to the EAR
EAR restrictions on exports and reexports to Sudan are significant in two respects: (1) BIS maintains a licensing regime under the EAR that is distinct from the SSR and operates independently of the SSR, so US persons acting under the newly expanded general license under the SSR need to ensure that their exports are lawful under the EAR; and (2) EAR controls apply to all persons worldwide that export and reexport items “subject to” the EAR, a term that includes all US-origin items and foreign-made items that incorporate more than a de minimis level of US content.
Concurrent with OFAC’s expansion of the SSR general license, BIS amended the EAR to revise License Exception CCD by adding Sudan as an eligible destination. License Exception CCD, set forth in Part 740.19 of the EAR, authorizes the export and reexport of certain listed commodities and software, including consumer devices such as computers, mobile phones, televisions, radios, printers, modems, and digital cameras that are widely available for retail purchase, as well as certain telecommunications- and information security-related software.
Many items eligible for export and reexport under License Exception CCD are designated as EAR99 or classified as ECCN 5A992. Export and reexport to Sudan of EAR99 items, and reexport to Sudan of many ECCN 5A992 items do not require a license from BIS, unless involving end-use and end-user concerns restrictions set forth in Part 744. The revision of License Exception CCD by adding Sudan as an eligible destination does not change this. But a license was generally required to export ECCN 5A992 items to Sudan. License Exception CCD now relaxes that license requirement for listed 5A992 items. Restrictions on the availability of all license exceptions, set forth in Part 740.2, general prohibitions under the EAR set forth in Part 735, and end-use and end-user concerns, set forth in Part 744, are all applicable to exports or reexports to Sudan under License Exception CCD.
Many consumer communication devices, related software, and telecommunication infrastructure on the Commerce Control List (CCL) that are not eligible under License Exception CCD may require a license for export and reexport to Sudan for “anti-terrorism” reasons. See Part 742.10 of the EAR. BIS maintains a general policy of denial on applications for export and reexport to Sudan of many of these items on the CCL. However, with regard to telecommunications equipment and computers, software and technology associated with telecommunications equipment on CCL intended for civil end use, including items useful for the development of civil telecommunications network infrastructure, the new rule modifies that policy to one of case-by-case review.
Prior to BIS’s issuance of the new rule, Cuba was the only eligible destination under License Exception CCD. The final rule makes further changes to License Exception CCD that are specific to Sudan only, and do not apply to exports to Cuba:
- Global Positioning System receivers or similar satellite receivers controlled under ECCN 7A994 are eligible for exports or reexports under this license exception, but only for Sudan.
- The Government of Sudan, unlike the Cuban Government, can be an eligible end-user under the license exception for certain consumer software that is distributed free of charge. Note, however, that the Government of Sudan and entities it owns, operates or controls remain an ineligible end-user for all other eligible items under the license exception. A license is required for export or reexport of such items to the Government of Sudan, and BIS will review such applications on a case-by-case basis.
BIS also authorized the reexport to Sudan without a license of certain telecommunications software controlled under ECCN 5D992.b or 5D992.c (which includes mass market software such as mobile apps). Previously, commodities controlled under ECCN 5A992 were eligible for reexport to Sudan without a license from BIS, but not related software. BIS has now authorized reexport of the related software to Sudan without a license from BIS.
Even though not all eligible items under the license exception use the term “consumer” in their name or description, the BIS FAQs suggest that all items need to meet the definition of “consumer” in order to be eligible under License Exception CCD. (The BIS definition of “consumer” is identical to the OFAC definition of the term in Appendix B, described above.) As a result, before relying on License Exception CCD, companies need to ensure that the item is a “consumer” item as that term is defined in the license exception. If there is uncertainty as to whether or not an item is a “consumer” item, companies can either seek an advisory opinion from BIS, or apply for a license and request BIS to determine whether the item is eligible under License Exception CCD.
Finally, it should be noted that while most items that qualify for export and reexport to Sudan under the revised License Exception CCD also qualify under OFAC’s general license, the lists do not overlap completely. For example, digital cameras and memory cards classified under ECCN 5A992 are eligible for authorization under License Exception CCD, but do not fall within the scope of the SSR general license. Companies should therefore review both the SSR and the EAR to ensure compliance with the applicable requirements.
Conclusion
The OFAC and BIS rules mark a continuing effort by the US Government to promote freedom of expression in Sudan through export and sanctions policy. This is consistent with US policy towards Iran and Cuba, and to an extent, Syria. Exporters seeking to make use of the new liberalizations should take care to ensure that exports are compliant with both the SSR and the EAR, as applicable. One cannot assume that an authorization under one regime means that the export or reexport is permissible under the other regime.
