Administration Issues Regulations For Relaxed Sanctions

July 27,1999

The Clinton Administration has issued regulations that ease commercial sales of food, medicine and medical equipment to approved buyers in Iran, Libya and Sudan. Sanctions on those items, says Treasure Deputy Secretary Stuart Eizenstat, "do not generally advance our policy goals and may have adverse consequences..."

Changes announced Monday establish an expedited licensing regime for food and medicine sales to the three countries. "While there will be conditions on the licenses that we will be issuing, the conditions have been kept to a minimum," said Eisenstat. "In developing these regulations, we have consulted with farmers, agricultural and exporter groups, and we believe that this program meets their needs while also protecting the foreign policy interests of the United States.

Agriculture Secretary Dan Glickman said the announcement "is a significant change in U.S. unilateral economic sanctions policy (with) important implications for American agriculture." The new policy implies that food and medicine should not be used as a tool of foreign policy and that sanctions policy should not impose "undue burdens on our farmers and ranchers," he said.

There are nine main provisions to the new policy:

--It will apply to sales of agricultural commodities and products that are intended for ultimate consumption as food by humans or animals as well as medicine and medical equipment as long as the latter items are not listed on the commerce control list maintained by the Commerce Department.

--It will allow sales only to approved buyers. That means private individuals acting for their own account, nongovernmental entities and government procurement bodies identified by Treasury's Office of Foreign Assets Control as not being affiliated with the "coercive organs of the state."

--All sales will require specific OFAC licenses under one of two procedures. The first is an expedited procedure designed for sales of specified bulk agricultural commodities. The second is a two-step procedure for all other food items, medicine and medical equipment.

--The first procedure applies only to sales of bulk agricultural commodities listed in the regulations. A single OFAC license, in effect over a specified period of time, will authorize the licensee to respond to request for bids, to enter into binding contracts and to perform under the contracts. Applicants will not have to identify the purchasers or other sales terms, such as price, in advance, but the contracts they enter into pursuant to the licenses will have to meet certain conditions.

--The second procedure applies to sales of all other food items, medicine and medical equipment. The first step in this procedure is an authorization by general license to enter into executory contracts that make performance contingent upon final OFAC approval, that disclose all parties with an interest in the sale, and that set forth all terms of the sale and meet certain other conditions. The second step is for the prospective sellers to apply to OFAC for a specific license authorizing performance under the contracts. OFAC will issue a specified license after a case-by-case contract review.

--Brokering by U.S. individuals will be permitted for the bulk agricultural commodities listed in the regulations. Where the underlying sale is by a U.S. individual and must be specifically licensed, brokering is permitted by general license. Where the underlying sale is a third country sale and is not subject to OFAC licensing requirements, a U.S. individual must apply for a specific license to broker the sale.

--The regulations limit payment and financing terms, under a general license, to cash in advance, sales on open account with certain limitations, or financing by third country banks that are neither U.S. individuals nor Iranian, Libyan or Sudanese government entities.

--The general license for payment and financing will permit U.S. banks to advise or confirm letters of credit issued by third country banks. Applications from U.S. banks for specific licenses to participate in financing arrangements other than those generally licensed will be considered on a case-by-case basis, where those financing arrangements would not undermine overall compliance with sanctions.

--The regulations authorized, by general license and with some limitations, transactions ordinarily incident to licensed sales (such as transportation, insurance and, in the case of Libya, travel transactions).