This chapter discusses the Department of Commerce’s implementation of comprehensive and partial embargoes and other special controls maintained by the U.S. Government pursuant to the Export Administration Regulations (EAR), either unilaterally or to implement United Nations Security Council (UNSC) Resolutions. Specifically, the U.S. Government maintains comprehensive economic embargoes on Cuba , Iran , Sudan , Syria , and certain designated terrorist persons or groups. The U.S. Government also maintains certain special export control programs, including programs relating to Rwanda and Iraq , consistent with international obligations. Finally, the U.S. Government maintains certain special controls on persons or entities engaged in the proliferation of weapons of mass destruction.
On May 26, 2006 , the Department of Commerce published in the Federal Register an amendment to the EAR (71 FR 30283) clarifying the application of License Exception Baggage (BAG) for Cuba .
On August 31, 2006 , the Department published in the Federal Register an amendment to the EAR implementing the U.S. Government’s decision to rescind Iraq ’s designation as a state sponsor of terrorism (71 FR 51714). As a result of the changes described in this rule, Iraq is no longer subject to AT controls.
On June 5, 2006, the Department published in the Federal Register a General Order (General Order No. 3) imposing license requirements on the export and reexport of all items subject to the EAR and destined to Mayrow General Trading, a United Arab Emirates (UAE) company, and nine affiliated companies (71 FR 32272). The Department published the General Order on the basis of information giving the U.S. Government reason to believe that Mayrow and its affiliated companies had acquired electronic components and devices capable of being used to construct improvised explosive devices (IEDs) to be used against U.S. and Coalition Forces in Iraq and Afghanistan . On September 6, 2006, the Department published in the Federal Register an amendment to General Order No. 3, imposing license requirements on seven additional entities affiliated with or conducting business with Mayrow (71 FR 52426).
On May 26, 2006 , the Department of Commerce published in the Federal Register an amendment to the EAR (71 FR 30283) clarifying the application of License Exception Baggage (BAG) for Cuba . The amendment clarified that wearing apparel, articles of personal adornment worn by a traveler, and personal safety and medical commodities for use by a traveler are not included in the 44-pound limit on personal baggage taken to Cuba .
The Department requires a license for export or reexport to Cuba of virtually all commodities, technology, and software subject to the EAR, with a few narrow exceptions including:
The Department authorizes the use of License Exception Agricultural Commodities (AGR) for U.S. exports and certain reexports of agricultural commodities to Cuba . Section 906(a)(1) of the Trade Sanctions Reform and Export Enhancement Act of 2000 (Title IX of Pub. L. 106-387), as amended (TSRA), requires the expedited review of proposed exports of agricultural commodities to Cuba . Under License Exception AGR, an exporter must submit prior notification of a proposed transaction to the Department of Commerce. The exporter may proceed with the shipment when the Department confirms that no reviewing agency has raised an objection (generally within 12 business days), provided the transaction meets all of the other requirements of the license exception. This expedited review includes the screening of the ultimate recipient of the commodities to ensure that it is not involved in promoting international terrorism. Exports of medicines and medical devices to Cuba are not eligible for License Exception AGR and continue to be subject to the license application and review requirements of Section 6004 of the Cuban Democracy Act of 1992.
The Department of the Treasury’s Office of Foreign Assets Control (OFAC) administers the U.S. Government’s comprehensive trade and investment embargo against Iran . No person may export or reexport items subject to both the EAR and OFAC’s Iranian Transactions Regulations without prior OFAC authorization.
The U.S. Government has a general policy of denial for all items controlled for chemical, biological, missile, and nuclear proliferation reasons; military-related items controlled for national security or regional stability reasons (ECCNs ending in the number 18); and all other items controlled for national security or foreign policy reasons for all end-users in Iran. 8 Pursuant to Executive Order 12959 of May 6, 1995, and Executive Order 13059 of August 19, 1997, the Department of the Treasury maintains comprehensive trade restrictions on exports and reexports of Commerce Control List (CCL) items to Iran and is responsible for licensing: (1) exports from the United States to Iran; (2) exports and reexports by U.S. persons to Iran, including agricultural and medical items classified as EAR99 (items not on the CCL but subject to the EAR) under the provisions of TSRA; and (3) reexports of CCL items by any person to Iran. The Department of Commerce has licensing responsibility for reexports of EAR99 items to Iran by non-U.S. persons for instances where there is a proliferation or terrorism concern, and for the deemed export of technology subject to the EAR to Iranian nationals in the United States . To reinforce controls administered by the Department of the Treasury, it is also a violation of the EAR to export or reexport to Iran any item that is subject to the Treasury Department’s regulations, and also subject to the EAR, without Treasury’s authorization.
On May 22, 2003 , the United Nations Security Council (UNSC) issued Resolution 1483 lifting the comprehensive UNSC trade sanctions on Iraq while retaining restrictions on the sale or supply to Iraq of arms and related materiel. Resolution 1483 also reiterated certain provisions of related UNSC Resolutions 707 of August 15, 1991 , and 687 of April 3, 1991 . In particular, those provisions require that Iraq eliminate its nuclear weapons program and restrict its nuclear activities to the use of isotopes for medical, industrial, or agricultural purposes. Such provisions further mandate the elimination of Iraq 's chemical and biological weapons programs, as well as programs for ballistic missiles with ranges greater than 150 km.
On July 30, 2004 , the Department of Commerce published a rule defining the new licensing policy and requirements for Iraq. On August 31, 2006, the Department of Commerce published rules making further revisions to the licensing policy and requirements for Iraq .
At the time of publication of the July 2004 rule, Iraq was on the list of designated terrorist-supporting countries. Iraq was formally removed from that list on October 7, 2004 . On August 31, 2006 , the Department published in the Federal Register an amendment to the EAR implementing the U.S. Government’s decision to rescind Iraq ’s designation as a state sponsor of terrorism (71 FR 51714). As a result of the changes described in this rule, Iraq is no longer subject to AT controls.
The August 2006 amendment changed the reason for control for eight items from AT to regional stability (RS). The Department will continue to require a license for the export or reexport to Iraq, or transfer within Iraq, of items controlled under the following eight entries for RS reasons: export control classification number (ECCN) 0B999 (specific processing equipment such as hot cells and glove boxes suitable for use with radioactive materials), ECCN 0D999 (specific software for neutronic calculations, radiation transport calculations, and hydrodynamic calculations/modeling), ECCN 1B999 (specific processing equipment such as electrolytic cells for fluorine production and particle accelerators), ECCN 1C992 (commercial charges containing energetic materials, n.e.s.), ECCN 1C995 (certain mixtures and testing kits), ECCN 1C997 (ammonium nitrate), ECCN 1C999 (specific materials, n.e.s.), and ECCN 6A992 (optical sensors not controlled under ECCN 6A002). License applications to export or reexport to Iraq , or transfer within Iraq , such items are reviewed on a case-by-case basis to determine if they would contribute to the building of Iraqi civil infrastructure. Applications determined not to contribute to the building of Iraqi infrastructure will be subject to a general policy of denial. See also Chapter 3 of this report for a broader discussion of RS controls.
In administering the controls related to UNSC Resolution 1483, the Department of Commerce requires a license for the export or reexport to Iraq , or transfer within Iraq , of:
The Department reviews license applications for these items under a general policy of denial.
In addition, the Department requires a license for the export, reexport, or transfer of items subject to the EAR if the exporter knows, has reason to know, or is informed by the Department that the item will be, or is intended to be, used in Iraq for a “military end-use” or a “military end-user,” as defined in Section 746.3 of the EAR. As defined specifically for Iraq , a military end-user is any person or entity whose actions or functions are intended to support “military end-uses” and who is not recognized as a legitimate military organization by the U.S. Government. “Military end-use” is the incorporation of an item into a military item described on the U.S. Munitions List (USML)(22 CFR part 121, International Traffic in Arms Regulations), or the Wassenaar Arrangement Munitions List (WAML); or use, development, or deployment of military items described on the USML or the WAML. The Department reviews license applications destined to such end-users under a policy of denial.
On June 5, 2006, the Department published in the Federal Register a General Order (General Order No. 3) imposing license requirements on the export and reexport of all items subject to the EAR and destined to Mayrow General Trading, a United Arab Emirates (UAE) company, and nine affiliated companies (71 FR 32272). The Department published the General Order on the basis of information giving the U.S. Government reason to believe that Mayrow and its affiliated companies had acquired electronic components and devices capable of being used to construct improvised explosive devices (IEDs) to be used against U.S. and Coalition Forces in Iraq and Afghanistan . On September 6, 2006, the U.S. Department published in the Federal Register an amendment to General Order No. 3, imposing license requirements on seven additional entities affiliated with or conducting business with Mayrow (71 FR 52426).
Pursuant to Section 744.20 of the EAR, the Department prohibits the export and reexport of items requiring a license to entities determined to have transferred equipment and/or technology controlled under the multilateral export control lists (the Missile Technology Control Regime, the Australia Group, the Chemical Weapons Convention, the Nuclear Suppliers’ Group and the Wassenaar Arrangement) or otherwise having the potential to make a material contribution to the development of weapons of mass destruction (WMD) or cruise or ballistic missile systems to inappropriate end-users. The latter category of items includes (a) items of the same kind as those on multilateral lists but falling below the control list parameters, when it is determined that such items have the potential of making a material contribution to WMD or cruise or ballistic missile systems, (b) other items with the potential of making such a material contribution, when added through case-by-case decisions, and (c) items on the U.S. national control lists for WMD or missile reasons that are not on the multilateral lists.
Pursuant to Executive Orders 13067 (November 3, 1997) and 13412 ( October 13, 2006 ), the Department of the Treasury maintains trade restrictions on exports and reexports to Sudan . The export and reexport of items controlled on the CCL to Sudan requires a license from both the Department of Commerce and the Department of the Treasury. License applications may be submitted to both agencies concurrently. The Department of Commerce applies a general policy of denial for the export and reexport of all items controlled for chemical, biological, missile, and nuclear proliferation reasons, military-related items controlled for national security or regional stability reasons (CCL entries ending in the number 18), and certain items controlled for national security or foreign policy reasons, such as aircraft, cryptologic items, and explosive device detectors, for all end-users in Sudan. Other items controlled to Sudan for national security or foreign policy reasons are subject to a general policy of denial for military end-users or end-uses and are reviewed on a case-by-case basis for non-military end-users or end-uses.
The Department of the Treasury is solely responsible for licensing the export of agricultural and medical items not listed on the CCL to Sudan under the provisions of the Trade Sanctions Reform and Export Enhancement Act (TSRA). The Department of the Treasury’s Office of Foreign Assets Control (OFAC) also continues to require a license for the export of EAR99 items to Sudan .
On May 11, 2004, the President issued Executive Order 13338 to implement Sections 5(a)(1) and 5(a)(2)(A) of the Syrian Accountability and Lebanese Sovereignty Restoration Act (SAA). In compliance with the President’s action, the Department revised its license requirements and licensing policy for Syria to restrict all exports or reexports to Syria of items subject to the EAR, as specified in General Order No. 2 to Supplement No. 1 to Part 736 of the EAR, which was published in the Federal Register on May 14, 2004 (69 FR 26766).
The Department of Commerce requires a license for export or reexport to Syria of all commodities, technology, and software subject to the EAR, except:
The Department generally denies license applications for exports or reexports to Syria . However, the Department considers applications for the following on a case-by-case basis:
The Department of Commerce requires a license for the export from the United States or by U.S. persons of all items subject to the EAR to Specially Designated Global Terrorists (SDGTs), Specially Designated Terrorists (SDTs), and Foreign Terrorist Organizations (FTOs). The Department also requires a license for the reexport by non-U.S. persons of items on the CCL to such SDGTs, SDTs, or FTOs and a general policy of denial applies to all applications. SDGTs, SDTs, and FTOs are identified on a list of designated persons maintained by the Department of the Treasury in Appendix A to 31 CFR Chapter V.
On May 17, 1994 , the United Nations Security Council (UNSC) imposed an arms embargo on Rwanda . In 1995, the UNSC suspended the application of the embargo on the Government of Rwanda (GOR) and on September 1, 1996 , the UNSC terminated the embargo in regard to the GOR. However, the United Nations continues to prohibit the sale or supply of such arms and arms-related materiel to non-governmental forces in Rwanda . On July 30, 2003 , the Department of State implemented a partial lifting of the U.S. arms embargo for items subject to the International Traffic in Arms Regulations (ITAR) and destined for the Government of Rwanda. Arms and related materiel subject to Department of Commerce licensing jurisdiction remain under embargo to all end-users in Rwanda.
The U.S. Government continues to require a license for foreign policy purposes for the export or reexport by a U.S. person to any non-government end-user in Rwanda of all ITAR-controlled arms and arms-related materiel of all types, regardless of origin, including weapons and ammunition, military vehicles and equipment, paramilitary police equipment, and spare parts for these items. The embargo applies to all end-users for arms and arms-related material controlled in the EAR. The U.S. Government has a general policy of denial for export or reexport of ITAR-controlled items to non-government end-users and EAR-controlled items to all end-users in Rwanda . The U.S. Government also requires a license for the use of any U.S. aircraft or vessel to supply or transport any such items to Rwanda . The Department reviews proposed exports or reexports to the Government of Rwanda on a case-by-case basis.
The UNSC also maintains embargoes on the export of certain arms and related materiel to several other countries, geographic regions or entities within certain countries. Such countries include the Democratic Republic of Congo, Ivory Coast (known formally as Côte d'Ivoire ), Liberia , Sierra Leone , and Somalia . The Department expects to implement these arms embargoes for purposes of the EAR through a regulation to be published in the Federal Register.
The United States imposed an embargo four decades ago because Cuban Government actions posed a serious threat to the stability of the Western Hemisphere , and the Cuban Government expropriated property of U.S. citizens without compensation. In March 1982, as a result of Cuba ’s support for insurgent groups that engaged in terrorism, the Secretary of State designated it as a state sponsor of terrorism under Section 6(j) of the Act. The purpose of the controls is to restrict exports that would allow Cuba to act as a destabilizing force and/or to support terrorism. The controls demonstrate the United States ’ resolve to maintain stability in the region and to actively work against the threat of terrorism and those who support it. At the same time, U.S. support for the export of food, “gift packs,” and other humanitarian items, such as medicines and medical devices, ensures that the Cuban population is not deprived of basic human needs.
The purpose of the controls is to restrict exports of items that would be useful in enhancing Iran ’s military terrorist-supporting capabilities and to address other U.S. foreign policy concerns, including nonproliferation, human rights, and regional stability. In the Department of State’s Country Reports on Terrorism 2005, dated April 2006, Iran is identified as the most active state sponsor of terrorism. Iran maintains a high-profile role in encouraging anti-Israel activity, and continues to be unwilling to bring to justice detained al-Qa’ida figures. The U.S. Government also has grave concerns regarding Iran ’s nuclear activities and lack of cooperation with the International Atomic Energy Agency (IAEA). U.S. export controls remain in place due to both our terrorism concerns and Iran ’s nuclear activities. By restricting the export of items with military use, the controls demonstrate the resolve of the United States not to provide any direct or indirect military support for Iran and to support other U.S. foreign policy objectives. The United States ’ support for exports and reexports of food items, medical supplies, and medical equipment ensures that the Iranian population receives what it needs for humanitarian purposes.
The purpose of the controls is to restrict exports to insurgents within Iraq and other inappropriate military end-users in Iraq , including the former Iraqi leadership, thereby limiting their ability to enhance or expand their activities.
The purpose of the controls is to demonstrate the United States ’ concern over the diversion of goods for use against U.S. and Coalition Forces, and to demonstrate the United States ’ resolve to act against entities diverting goods for any type of proliferation or munitions-related end-use.
The purpose of the controls is to restrict exports to individuals and entities engaged in proliferation-related activities. The individuals and entities designated under these controls have diverted items that may be used in weapons of mass destructions programs in violation of U.S. export control laws. These controls demonstrate the United States ’ opposition to such transfers as well as its resolve to actively work against such diversions.
Although the Government of Sudan has cooperated in U.S. counterterrorism efforts in the war on terror, the United States continues to have concerns about Sudanese actions regarding the Lord’s Resistance Army.
On January 9, 2005 , a Comprehensive Peace Agreement was signed between the Government of Sudan and the Sudan People’s Liberation Movement/Army (SPLM/A). The Agreement provided for a new constitution and new arrangements for power sharing, wealth sharing, and security, on the national level. On July 9, 2005 , the government of National Unity, which includes participants from both the Government of Sudan and the SPLM/A, was installed and on July 6, a new constitution was ratified. However, the humanitarian crisis in Darfur remains an important focus of U.S. policy efforts. Although a peace accord was signed between the Government of Sudan and one major rebel group, the Sudan Liberation Army (SLA) on May 4, 2006 , attacks on non-combatants in Darfur have increased while access and security for humanitarian aid workers has declined.
The U.S. embargo and export controls remain in place against Sudan to restrict access to items that could make a significant contribution to Sudan ’s military capability and ability to support international terrorism. The United States will not normalize relations with Sudan until the situation in Darfur is satisfactorily addressed.
The Syrian Government continues to provide political and material support to a number of Palestinian groups that have committed terrorist acts, but contends that the groups’ offices in Syria only undertake political and informational activities. Syria also provides political and material support to Hizballah in Lebanon, including allowing Iran to re-supply that terrorist group through Syrian territory. The U.S. Government also continues to view with grave concern the unmonitored movement of anti-Coalition insurgents across the Syria-Iraq border. Additionally, the U.S. Government continues to have concerns about Syria ’s interference in Lebanon and its provision of a safe haven for terrorist organizations as well as its nuclear, missile, and chemical/biological programs.
U.S. export controls reflect U.S. opposition to these activities. The controls also promote other U.S. foreign policy interests, including human rights and regional stability.
The purpose of controls on designated terrorist persons and groups is to restrict exports of items that would be useful in enhancing the capability of SDGTs, SDTs, and FTOs to undertake terrorist acts and to further the general policy of the United States to prevent supporters of terrorism and terrorist elements from acquiring technology that might enhance terrorist capabilities. The controls enable the Department of Commerce to use its licensing and enforcement resources to support U.S. counterterrorism efforts by monitoring and investigating unlicensed exports, reexports, and diversions of items subject to the EAR to parties designated as terrorists by the U.S. Government.
The controls on arms-related items to Rwanda remain in place to prevent any U.S. contribution to potential conflict within the country and to conform to United Nations-mandated sanctions.
1. Probability of Achieving Intended Foreign Policy Purpose. The Secretary has determined that these controls are likely to achieve the intended foreign policy purpose, in light of other factors, including foreign availability from other countries. He has further determined that the foreign policy purpose cannot be achieved through negotiations or other alternative means. The restrictions have denied these persons and nations certain trade relations with the United States and other nations. The controls put pressure on these persons to modify their actions. In addition, the applicable controls may serve to reduce the potential for conflict.
The United States maintains an embargo against Cuba to express U.S. opposition to the continued repressive policies of the Castro government. The United States has modified the embargo on numerous occasions to aid the Cuban people in bringing about a peaceful transition to democracy and a free market economy and to expand humanitarian assistance to the Cuban people.
The controls on Iran restrict its access to specified U.S.-origin items that could be used to threaten U.S. interests in the region. The United States has sought, and will continue to seek, the cooperation of other countries in cutting off the flow of military and military-related equipment to Iran as well as in finding an appropriate resolution to Iran ’s nuclear activities.
The United States’ adherence to the United Nations restrictions on exports, reexports, and transfers to certain Iraqi persons demonstrates U.S. opposition to the WMD activities of the former Iraqi regime and to the destabilizing influence of the insurgents currently operating in Iraq. In parallel with its obligations as a member of the United Nations, the United States will continue to seek the cooperation of other countries in cutting off the flow of military goods, arms, and related materiel to inappropriate end-users in Iraq .
The Secretary has determined that the imposition of these foreign policy controls is likely to achieve the intended purpose to curtail the availability of components and devices that could be used in terrorist attacks or against U.S. and Coalition Forces.
The United States maintains controls on designated persons and entities in order to restrict the access that these individuals and entities have to U.S.-origin items that could be diverted and used for the purpose of destabilization. The U.S. will continue to work with its allies and multilateral regime partners to prevent diversions of this type.
The United States maintains controls on Sudan to affirm the U.S. commitment to restrict Sudan ’s ability to obtain and use U.S.-origin items in support of military activities. The controls also indicate the United States ’ opposition to terrorism and support of United Nations activities in Sudan and efforts to end the humanitarian crisis in Darfur .
The United States maintains controls in response to Syria ’s lack of concrete steps to end support for the terrorist groups that maintain a presence in Syria and Syria ’s continued interference in Lebanon , including Syrian support of Hizballah, and in order to restrict Syria ’s ability to obtain and use U.S.-origin items in these activities.
Controls on exports and reexports to SDGTs, SDTs, and FTOs are intended to prevent acts of terrorism and to affirm U.S. opposition to international terrorism by limiting the ability of designated terrorist organizations and individuals to obtain and use U.S.-origin items in terrorist operations.
The embargo on exports of arms-related items to Rwanda is maintained consistent with UNSC action. Based on the multilateral nature of these controls, the probability is substantial that the desired effect will result.
2. Compatibility with Foreign Policy Objectives. The Secretary has determined that these controls are compatible with U.S. foreign policy objectives; and that the extension of these controls will not have any significant adverse foreign policy consequences. The controls complement U.S. foreign policy and other aspects of U.S. relations with these persons and countries. They encourage these persons and governments to modify their actions with the goal of improving conditions in their region. These controls are consistent with U.S. foreign policy goals of promoting peace and stability, and preventing weapons proliferation and human rights abuses.
3. Reaction of Other Countries. The Secretary has determined that any adverse reaction to these controls is not likely to render the controls ineffective, nor will any adverse reaction by other countries be counter-productive to U.S. foreign policy interests. Notwithstanding the fact that most countries have not imposed embargoes as comprehensive as those of the United States , and that some countries have challenged certain U.S. controls as unwarranted extraterritorial regulations, the overriding foreign policy objective of maintaining these controls outweighs negative foreign reactions. Opposition to U.S. foreign policy-based controls by many of our major trading partners, including some close allies, continues to be a point of contention. This reaction has led some foreign firms to design out U.S. components or to cite the lack of their own national sanctions as a marketing tool to secure business contracts that might have gone to U.S. companies. In some instances, foreign governments have instructed foreign firms to ignore U.S. reexport controls.
Although most countries recognize the right of the United States to determine its own foreign policy and security concerns and share U.S. concerns regarding the Cuban regime, many countries, particularly Canada, Mexico, and the members of the European Union, opposed the Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996 (Helms-Burton) and continue to oppose unilateral U.S. controls on Cuba. Many nations, however, have joined the United States in promoting political freedom, as a result of the Cuban Government’s March 2003 sentencing of 75 pro-democracy advocates to up to 28 years in prison.
Other countries share U.S. concerns regarding Iran ’s support of terrorism, human rights abuses, and attempts to acquire WMD. Ongoing disclosures have also highlighted Iran ’s efforts to develop its nuclear weapon capabilities. The member states of the G-8, the European Union, the members of the Nuclear Suppliers Group, and other multilateral bodies have joined the United States in expressing their concern over Iran ’s nuclear activities and have called on Iran to cooperate more fully with the International Atomic Energy Agency (IAEA). France , the United Kingdom , and Germany have taken the lead in negotiating with Iran over the nuclear issue. The United States supports the efforts of those countries. In general, however, U.S. controls on commercial goods to Iran are more stringent than most other countries’ controls.
The United States continues to impose an arms embargo on military end-users and end-uses that are not affiliated with the Coalition Forces or the Iraqi Government in Iraq in parallel with its obligations as a member of the United Nations. Many other member states also comply with these obligations and impose an arms embargo on Iraq . Other nations also share U.S. concerns about insurgent activities in Iraq .
Although other countries share U.S. concerns about diversions by entities within third countries, no countries maintain controls similar to those implemented by the United States .
Although other countries share U.S. concerns regarding the diversion of goods for use in proliferation-related programs, few countries maintain controls similar to those implemented by the United States .
The United States imposed an embargo in response to credible evidence that Sudan assists international terrorist groups, destabilizes neighboring governments, and violates human rights. Although the United States has been pleased with Sudan ’s cooperation in the war on terrorism, any regularization of relations is contingent on its acceptance of an effective peacekeeping force in Darfur , as mandated by United Nations Security Council Resolution 1706. The United States continues to consult with key allies and urges them to take all possible measures to convince Sudan not to support terrorism. The United States is also in consultation with other countries regarding the humanitarian crisis in Darfur .
The United States maintains controls in response to Syria ’s lack of concrete steps to end support for the terrorist groups that maintain a presence in Syria and Syria ’s continued interference in Lebanon , including Syrian support of Hizballah. Although many other countries concur that Syria ’s regional activities are destabilizing, few countries maintain controls similar to those implemented by the United States .
Many countries support U.S. efforts to fight terrorism through blocking designated terrorist groups and individuals from acquiring commodities that could assist these groups in committing future acts of violence. Although some countries are considering restrictive legislation, very few maintain export controls similar to those implemented by the United States .
The arms embargo on Rwanda is consistent with UN objectives. The U.S. Government has received no significant objections to these UNSC-mandated controls.
4. Economic Impact on United States Industry. The Secretary has determined that any adverse effect of these controls on the economy of the United States , including on the competitive position of the United States in the international economy, does not exceed the benefit to U.S. foreign policy objectives.
The U.S. Government requires a license for the export and reexport of all U.S.-origin commodities, technology, and software subject to the EAR to Cuba . In recent years, the number of license applications that the Department of Commerce has approved to Cuba increased significantly, before decreasing somewhat in 2003. The increase in approved export license applications to Cuba can be attributed to changes made during the late 1990s in U.S. export policies, including the resumption of direct flights, exports of medicines and medical supplies and equipment, exports of food and certain agricultural commodities, and the expansion of agricultural commodities eligible for export authorization under the procedures specified in License Exception AGR to the Cuban Government.
In Fiscal Year 2006, the Department of Commerce approved 269 license applications valued at over $888 million for Cuba . There has been a decline in the number of license applications in Fiscal Year 2006 in comparison with Fiscal Years 2004 and 2005. In Fiscal Year 2006, the Department authorized 183 notifications valued at $1.96 billion under License Exception AGR. The Department of Commerce and reviewing agencies had no objections to these notifications. Normally, only about 10% of the value of items licensed is actually exported.
Number of Applications / Notifications
Total Value in U.S. Dollars
* Includes both license applications and notifications under License Exception AGR.
The majority of export licenses approved for Cuba in Fiscal Year 2006 (204 of the 269 cases) were for EAR99 items, including medicines and medical supplies, instruments, equipment, and gift parcels. Licenses for aircraft and ocean vessels on temporary sojourn accounted for 44 cases.
The U.S. embargo on Cuba is unilateral. According to the CIA’s World Factbook 2006, Cuba imported an estimated $6.91 billion in commodities in 2005 (the most recent year for which statistics are available), up from $5.3 billion the year before. Leading Cuban imports include petroleum, foodstuffs, machinery, and chemicals. Cuba ’s leading suppliers were Spain , Venezuela , the United States , China , Canada , Italy , and Mexico .
The U.S. Government maintains a policy of denial for license applications for exports of items on the CCL to Iran, consistent with the provisions of the Iran-Iraq Arms Non-Proliferation Act of 1992, contained in the National Defense Authorization Act of Fiscal Year 1993 (NDAA), and the U.S. trade and investment embargo of 1995. Statistical data on past exports to Iran provide indications of the economic impact of sanctions, as mandated for this report. Prior to the 1993 NDAA and the imposition of the embargo, U.S. exports to Iran rose sharply in the early 1990s in response to Iran ’s removal of certain import restrictions. From 1991 through 1994, U.S. exports to Iran totaled close to $2.2 billion, making the United States the sixth-largest exporter to Iran during this period. Such exports, however, amounted to only five percent of Iran ’s total imports and less than one percent of overall U.S. exports. As a result of the denial policy mandated by Fiscal Year 1993 NDAA and the 1995 U.S. trade and investment embargo, U.S. exports to Iran fell dramatically. Beginning in 2001, as the result of the implementation of TSRA, exports and reexports of food, agricultural equipment, medicine, medical supplies and medical equipment could be authorized. According to the U.S. Census Bureau statistics, in 2005 (the most recent year for which statistics are available), total U.S. exports to Iran were valued at $95.8 million. The top U.S. commodities exported to Iran were tobacco, medicines, pulpwood and wood pulp, and vegetable seeds.
Since 1997, the Department of the Treasury has had primary jurisdiction for the export and reexport of items subject to the EAR to Iran, and the Department of Commerce has jurisdiction for “deemed exports” (transfers of controlled U.S. technology to Iranian nationals legally working in the United States). In Fiscal Year 2005, the Department of Commerce approved 31 deemed export licenses for Iranian nationals. Table 2 shows the impact of the 1993 NDAA and the trade embargo on U.S. trade with Iran :
Number of Applications
Total Value in U.S. Dollars
The U.S. trade and investment embargo transformed the composition of U.S. trade with Iran . As Table 3 demonstrates, the agricultural, aerospace, and oil industries have been among those most directly affected by the embargo. From 1991 through 1994, U.S. exports of aircraft engine parts to Iran totaled nearly $9.4 million, averaging $2.3 million per year and peaking at more than $7.5 million in 1994. By 1996, aerospace exports declined to virtually zero.
Prior to the embargo, the United States competed with Iran’s major trading partners in exports of industrial machinery, motor vehicles and auto parts, power generating machinery, measuring and controlling devices, computers, plastics and resins, and industrial organic chemicals. In 2005, Iran imported an estimated $42.5 billion worth of industrial raw materials and intermediate goods, capital goods, foodstuffs and other consumer goods, technical services, and military supplies from its leading trade partners: Germany , France , Italy , China , the UAE, South Korea , and Russia .
|S.I.C. Number||Description of Goods||Total Value|
|3511||Turbines and turbine generator sets||$322.5 million|
|3531||Construction machinery and parts||$307.8 million|
|3533||Oil and gas field equipment||$250.1 million|
|2044||Milled rice and by-products||$166.3 million|
|2873||Nitrogenous fertilizers||$124.2 million|
|3714||Motor vehicle parts and accessories||$50.8 million|
|2821||Plastics materials and resins||$45.4 million|
|3743||Railroad equipment and parts||$42.7 million|
|3569||General industrial machinery and equipment||$41.8 million|
The U.S. embargo on Iran has had a damaging impact on U.S. industry, because of the reaction of foreign firms to U.S. reexport requirements. U.S. exporters report that their products are often designed out of foreign manufactured goods to ensure that foreign exports do not fall within the scope of U.S. controls. This “designing out” damages U.S. exports, both for sales to embargoed countries and non-embargoed countries.
Although the security situation and the presence of insurgents in Iraq , among other issues, continue to be of concern to the United States , the United States also fully supports Iraq ’s reconstruction and economic revival. Current licensing policy and requirements reflect Iraq ’s complexity and challenges.
From May 2003 through May 2004, U.S. exports to Iraq were valued at $432.2 million, which represents an increase of $398.7 million from the same time period in calendar years 2002 and 2003. In 2005, according to the most recent U.S. Census Bureau statistics available, U.S. exports to Iraq were worth $1.37 billion. In addition to foodstuffs, other strong categories of U.S. exports to Iraq included telecommunications equipment; aircraft parts; armored fighting vehicles; trucks, buses, and special purpose vehicles; and other industrial machines.
Commerce’s July 30, 2004 , rule on U.S. export control policy and regulations for Iraq was designed to address two significant foreign policy goals. In particular, the rule advances the goal of ensuring that exports and reexports of controlled items destined to civil infrastructure rebuilding are processed in a timely manner. At the same time, in furtherance of applicable UNSC Resolutions and U.S. foreign policy interests, the rule revised section 746.3 of the EAR (15 CFR parts 730-799) and retains substantial restrictions on exports to Iraq destined for inappropriate end-users or end-uses.
Since licensing jurisdiction for Iraq was returned to the Department of Commerce, the majority of license applications received have been for equipment in support of or for use in reconstruction of Iraq and training activities for its police and military. The Department expects that the number and diversity of applications will increase as more U.S. companies begin work in Iraq .
The Secretary has determined that the effect of these foreign policy controls on U.S. industry will be minimal because the volume of U.S. export and reexport transactions involving Mayrow General Trading and related entities is limited within the context of the overall level of shipments of the specific items. The Department did not process any license applications for Mayrow General Trading or any of the related entities in 2006.
The impact on U.S. industry of these controls are minimal as they target one entity at this time, Tula Design Bureau. In 2006, the Department did not receive any license applications involving Tula Design Bureau.
U.S. unilateral export sanctions on Sudan have had a minor impact on U.S. industry. Before the U.S. embargo went into effect on November 4, 1997 , most of the small number of items that Sudan imported from the United States did not require an export license and, thus, were not affected by export controls. According to Census Bureau statistics, in 2005, U.S. exports to Sudan were valued at $108.1 million, and primarily consisted of agricultural exports. The CIA estimates that Sudan ’s total imports from all sources were valued at $5.0 billion in 2005. Leading suppliers to Sudan were China , Saudi Arabia , the UAE, Egypt , Japan , and India . Leading imports were foodstuffs, manufactured goods, refinery and transport equipment, medicines and chemicals, textiles, and wheat.
After sanctions were imposed in 1997, the Treasury Department assumed licensing responsibility for the export and reexport of items subject to the EAR to Sudan . However, the Department of Commerce’s regulations remained in place. Therefore, exporters were required to obtain authorization to export items controlled on the CCL to Sudan from both Treasury and Commerce. Starting in November 2004, the two agencies began to process applications simultaneously to minimize shipping delays, especially for non-governmental humanitarian organizations. Previously, applicants were instructed to obtain authorization from Treasury before submitting an application to Commerce. The Department of Commerce has licensing jurisdiction for the “deemed export” of technology to Sudanese nationals. The Department of the Treasury is solely responsible for licensing the export of agricultural commodities, medical items not listed on the CCL to Sudan under the provisions of TSRA, and other items not listed on the Commerce Control List.
In support of humanitarian efforts, the Department of Commerce approved 42 license applications for Sudan in Fiscal Year 2006 valued at $27 million. During the same time, 21 applications were returned without action, with instructions for the exporter to contact the Department of the Treasury. No applications were denied during Fiscal Year 2006.
Number of Applications / Notifications
Total Value in U.S. Dollars
In 2005, U.S. exports to Syria were valued at $155 million, and were primarily corn and soybeans. The CIA estimates that Syria 's total imports from all sources were almost $6 billion in 2005. Leading suppliers to Syria by market share were Turkey at 10.1 percent, Saudi Arabia at
9 percent, and China , Egypt , Italy and the UAE, all under 5 percent. Leading Syrian imports were machinery and transport equipment, electric power machinery, food and livestock, metal and metal products, chemicals and chemical products, plastics, yarn, and paper.
|Fiscal Year||Number of Applications / Notifications||Total Value in U.S. Dollars|
The SAA, as implemented by the President, prohibited the export of virtually all products of the United States with the exception of food and certain medicine. The Department of Commerce published General Order No. 2 on May 14, 2004 , implementing the SAA for purposes of the EAR. In implementing the SAA, the President exercised his national security waiver authority for certain transactions. The President provided waivers for six categories of items: (1) items for the use of the U.S. Government; (2) certain medicines and medical devices; (3) parts and components intended to ensure the safety of fight for civil passenger aircraft; (4) aircraft used by the Syrian Government for its official use; (5) telecommunications equipment and associated parts and components; and (6) items for the use of the United Nations in Syria. The U.S. Government reviews applications for the export or reexport of items eligible under waivers on a case-by-case basis.
In Fiscal Year 2006, the Department of Commerce approved 168 license applications, valued at $257.4 million. The top categories of approved licenses were EAR99 medical items and telecommunications equipment. (EAR99 covers any export or reexport of any item not specified on the Commerce Control List, unless excluded in the EAR, or subject to the jurisdiction of another agency.) The Department has also returned without action 70 license applications, valued at $446.8 million, and rejected 17 license applications, valued at $22.7 million. The Department did not revoke any previously valid licenses. Many potential license applicants chose not to apply because no available exceptions for their commodity existed.
The Department of Commerce did not review any license applications for SDGTs, SDTs, or FTOs in Fiscal Year 2006. As a result, the economic impact of these controls is presumably minimal. The Department of the Treasury maintains restrictions on activities of U.S. persons involving designated terrorist entities, which the Department of Commerce’s controls augment.
The arms embargo on Rwanda has had little impact on U.S. industry. Total Rwanda imports were estimated to be valued at $243 million in 2005. Leading imports for Rwanda in 2004 were foodstuffs, machinery, steel, petroleum, cement, and construction material. Leading sources of Rwandan imports were Kenya (23.8 percent), Uganda (6.2 percent), Germany (5.3 percent), and Belgium (5.4 percent). In 2005, U.S. exports to Rwanda were valued at $10.5 million, and primarily were comprised of agricultural exports, telecommunications equipment, and computers. The Department of Commerce did not receive any license applications for arms-related items to Rwanda in 2006.
5. Effective Enforcement of Controls
The Secretary has determined the United States has the ability to effectively enforce these controls. Controls on exports to embargoed and sanctioned countries and persons, including those discussed in this chapter, raise a number of challenges. These include the need to concentrate limited resources on priority areas, developing new strategies to limit reexport violations, strengthening the cooperative relationship with other law enforcement agencies in the United States and overseas, and maintaining a consistent outreach effort to help limit U.S. business vulnerability. Overall, the embargoes are generally understood and supported by the U.S. public. Voluntary cooperation from most U.S. exporters is common.
There have been a number of enforcement actions regarding non-compliance with these export controls. For example, on May 18, 2006 , following three days of trial, a federal jury in Brooklyn , New York found Ernest Koh, doing business as Chong Tek, guilty of obtaining U.S. aircraft parts which can be used in C-130 military transport planes and P-3 naval aircraft, and diverting those parts to Malaysia for transshipment to Iran , in violation of the 1995 embargo. In addition, the jury found that Koh had laundered millions of dollars from his bank accounts in Singapore through accounts in the U.S. to promote the ongoing illegal scheme. Sentencing was scheduled for September 2006, but has been postponed.
On June 9, 2005 , GasTech Engineering Corporation and Parviz Khosrowyar, President and CEO of GasTech, were indicted for violations related to a $12 million contract with the National Iranian Gas Company. GasTech attempted to evade U.S. sanctions against Iran by subcontracting a large portion of the contract to a Calgary , Canada firm. A five-count superseding indictment was returned by the grand jury in the Northern District of Oklahoma charging Khosrowyar and GasTech with conspiracy, 18 U.S.C. 371, and three counts of IEEPA, 50 U.S.C. 1701-1706, for violations of the Iranian transactions Regulations. On
January 11, 2006 , GasTech pled guilty to conspiracy to violate the Iranian Transaction Regulations. On March 10, 2006 , GasTech Engineering Corporation was sentenced to five years probation, a $50,000 criminal asset forfeiture penalty, a $33,000 regulatory penalty to be paid to the Department of Treasury’s Office of Foreign Assets Control (OFAC), and a $5,000 criminal fine. Parviz Khosrowyar remains a fugitive.
On August 11, 2004, Khalid Mahmood, doing business as Sharp Line Trading, of Dubai, UAE, and Mohammad Ali Sherbaf, a principal officer of Sepahan Lifter Company of Iran, were indicted for alleged export violations in Sherbaf/Sepahan’s proposed purchase of forklift radiators from a U.S. supplier in violation of the U.S. embargo. On January 19, 2006 , Mahmood was sentenced to 17 months in prison for these violations. On December 7, 2005 , Robert Quinn of Clark Material Handling Corporation was found guilty by a federal jury of one count of conspiring to violate the U.S. trade embargo against Iran and five counts of illegal exports to Iran , and on February 23, 2006 , Quinn was sentenced to 39 months in prison and a $6,000 fine. The transaction was allegedly structured through Mahmood/Sharp Line to conceal the ultimate destination of the goods. On May 4, 2006 , David Tatum, who was also involved in the export, pled guilty to one count of making a false statement to the U.S. government. His sentence is currently pending.
On August 9, 2005 , Naji Antoine Abi Khalil pled guilty to criminal charges for attempting to export BIS and State Department controlled night vision units to Greece , knowing they would be shipped to the foreign terrorist organization Hezbollah in Beirut , Lebanon . On February 2, 2006, Khalil was sentenced to two sixty-month prison terms and a fifty-seven month prison term, all to be served concurrently; plus a $100,000 criminal fine. In June 2004, Khalil was indicted for allegedly providing material support to a foreign terrorist organization, and has been in federal custody since his arrest. An associate of Khalil, Tomer Grinberg of Tober Group Inc., a Brooklyn , New York freight forwarder, was also arrested and indicted for his role in allegedly conspiring to export the same Commerce and State night vision units to Greece knowing they would be shipped to Lebanon , and pled guilty on July 28, 2005 . On April 12, 2006 , Grinberg was sentenced to six months in prison. BIS’s Office of Export Enforcement conducted this investigation in cooperation with other members of the North Texas Joint Terrorism Task Force.
On April 13, 2005 , Infocom Corporation and its principals, Bayan, Ghassan, Basman, Hazim, and Ihasan Elashi were convicted of dealing in the funds of a Specially Designated Terrorist, a high-ranking member of Hamas. This was the second of two trials for Infocom and the Elashis. The first trial, completed in July 2004, resulted in convictions for conspiring to export computers and computer equipment to Libya and Syria . One of the Infocom principals was also convicted in 2002 for violating a BIS Temporary Denial Order (TDO) and was sentenced to 48 months imprisonment. Sentencing in the current cases is pending. On January 24, 2006 , Hazim Elashi was sentenced to 60 months in prison and two years parole in the Northern Judicial District of Texas. Hazim has also been ordered by the court to be deported from the United States at the end of his prison term. On January 25, 2006 , Ihsan Elashi was sentenced to 72 months in prison and two years probation in the Northern Judicial District of Texas. He will begin to serve this sentence at the conclusion of his earlier 48 month prison sentence. Sentencing for the other defendants in the current case is pending. BIS’s Office of Export Enforcement conducted this investigation in cooperation with other members of the North Texas Joint Terrorism Task Force.
On September 12, 2006, BIS ordered the Ghashim Group d.b.a. KZ Results and Mazen Ghashim to each pay a civil penalty of $1,098,000 and to have their export privileges denied for twenty years to settle charges of conspiracy, acting to knowingly export computers from the United States to Syria directly and through the United Arab Emirates without the required Commerce Department licenses, and of knowingly attempting to export computers from the United States to Syria through the United Arab Emirates without the required Commerce Department licenses. BIS further charged that the parties filed misleading information on Shippers Export Declarations stating that no license was required for the shipments, and that the ultimate destination for the shipments was the United Arab Emirates , not Syria . Payment of $1,067,000 of each party's civil penalty has been suspended for five years, and will thereafter be waived, provided that the parties have not violated the Order or the Regulations during that time. On November 1, 2006 , with respect to the attempted exports, Mazen Ghashim pled guilty to two counts of violating IEEPA and agreed to forfeit the computers that were seized by OEE at the time of the attempted exports. He is scheduled to be sentenced in February 2007. In the context of the administrative settlements, BIS also ordered related party MNC Group International (MNC) to pay a civil penalty of $22,000, of which $17,000 was suspended, and named MNC as a related person in the denial order imposed against Mazen Ghashim.
In an October 23, 2006 , Federal Register notice (71 FR 62065), the Department of Commerce solicited comments from industry on the effectiveness of U.S. foreign policy-based export controls. In addition, comments were solicited from the public via the BIS website. Comments from the Department’s six Technical Advisory Committees and the President’s Export Council Subcommittee on Export Administration are solicited on an ongoing basis and are not specific to this report. The comment period closed on November 22, 2006 , and three comments were received. A detailed review of all public comments received can be found in Appendix I.
The U.S. Government has made reasonable efforts to achieve the purposes of the U.S. embargoes and sanctions through negotiations with other countries, through international fora, and through the United Nations, as outlined in the specific country descriptions that follow.
The Administration has worked diligently with other nations, especially countries in Europe and Latin America , to resolve disputes that arise as result of the U.S. embargo. Differences remain between the United States and other countries concerning the best method to encourage democracy and human rights. However, many nations share with the United States the ultimate goal of a free, peaceful, democratic, and market-oriented Cuba .
The United States has an ongoing dialogue with its allies and partners on Iran ’s activities. The United States continues to work with other states to curb Iran ’s proliferation activities, especially in light of the continuing disclosures about Iran ’s nuclear program. In addition, the IAEA is working to verify and monitor Iran ’s nuclear program. The U.S. Government supports these efforts and has provided personnel and materials to the IAEA to facilitate the IAEA’s actions.
Prior to Operation Iraqi Freedom and the lifting of the embargo on Iraq, the United States maintained an ongoing dialogue with other United Nations member states, as well as separately, with its allies and partners. Since the lifting of the embargo, the United States has continued discussions with many other countries on both a bilateral and multilateral basis.
The United States consults regularly with the Government of the UAE regarding improvement of the Emiratis’ federal export control system. Additionally, the United States has consulted with other countries, including but not limited to those in which entities designated under General Order No. 3 are located.
The United States consulted with the Government of Russia prior to the imposition of sanctions on the Russian entity. Additionally, the United States consults on a regular basis with other countries on proliferation and trafficking-related issues.
The United States continues to consult with other countries regarding the internal conflict in Sudan and the humanitarian needs of the population. Many of these consultations have occurred within the United Nations as well as the Intergovernmental Authority on Development (IGAD), which is the entity that sponsored the peace talks between the Government of Sudan, and the Sudan Peoples’ Liberation Movement/Army (SPLM/A).
The United States is in constant communication with other countries regarding the Syrian Government's policies of concern. Additionally, the United States has communicated its concerns to the Government of Syria directly and forcefully through the U.S. Embassy in Syria and the Syrian Ambassador in Washington .
The United States cooperates with allies and partners and shares information on the activities of designated terrorist entities. It is expected that strong international support for the U.S. fight against terrorism will further facilitate dialogue on foreign export control expansion.
Most countries support international efforts to stabilize Rwanda and to prevent further ethnic conflict and regional instability, including through compliance with the United Nations arms embargo.
The U.S. Government imposes embargoes and sanctions in an effort to make a strong statement against a particular country’s policies or a person’s actions. Restrictions on exports can supplement other actions that the U.S. Government takes to change the behavior of the target countries and persons, including such actions as severing diplomatic relations, banning imports into the United States , seeking UN denunciations, and curtailing or discouraging bilateral educational, scientific, or cultural exchanges. The U.S. Government has had some success using these alternative means to reach the intended foreign policy objectives. Nonetheless, these trade sanctions remain a critical part of the U.S. Government’s foreign policy. U.S. Government embargoes and sanctions complement diplomatic measures and continue to be used to influence the behavior of these countries.
The foreign availability of items controlled under Section 6(a) has been considered by the Department of Commerce. In general, numerous foreign sources of commodities and technology similar to those subject to these controls are known, especially for items controlled by the U.S. Government. Although the embargoes and comprehensive sanctions described in this chapter are widely followed and many have significant multilateral support, the U.S. Government’s continued use of embargoes and sanctions serve foreign policy interests that override the impact of foreign availability.