Client Alerts  - International Business May 02, 2024

Security Aid Legislation Expands Sanctions Authorities — and Exposure

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Written By: James Kevin Wholey

Statute of Limitations for Civil Sanctions Violations and Breaches of Export Restrictions Substantially Lengthened

The much-debated supplemental foreign assistance package (H.R.815) enacted last week and signed by President Biden on April 24, 2024, also, in largely unheralded fashion, provides for a substantial expansion of U.S. trade sanctions authorities. It also substantially increases potential exposure by doubling the statute of limitations for civil sanctions violations and breaches of certain specified export restrictions.

While most attention centered on the bill’s emergency security assistance for Ukraine and Israel (and the complex political maneuvering attending its passage) as well as a possible forced sale or ban of the TikTok app, the measure contains a significant number of other provisions, including:

  • Authorizing (but not yet mandating) the confiscation of Russian assets subject to U.S. jurisdiction, with the proceeds to benefit Ukraine.
  • Numerous provisions authorizing new sanctions and enhanced trade restrictions regarding Iran, as well as on those parties (especially China) implicated in supporting evasion of existing sanctions.
  • Authorizing sanctions on entities or individuals providing material support to Hamas.
  • Various provisions aimed at combatting illicit international trafficking in opioids and fentanyl.
  • Directing greater harmonization of the list of individuals designated under U.S. Russia sanctions with those so designated by the U.K. and the EU.
  • Extending the statute of limitations for civil violations of U.S. sanctions and of certain trade regulations from five years to 10 years.

Each of these provisions merits careful review by the parties potentially affected; but it is this last item (the statute of limitations extension) that is likely to have, ultimately, the most far-reaching consequences for most of those currently engaged in international trade and other transactions. Such a substantial lengthening of the statute of limitations (by revising the International Emergency Economic Powers Act (IEEPA), the legal basis for sanctions administered by the U.S. Treasury’s Office of Foreign Assets Control (OFAC); and the Trading With the Enemy Act, which authorizes the U.S. Department of Commerce’s trade restrictions with Cuba) should prompt a serious review and reassessment by such enterprises of their sanctions and export compliance programs and procedures. Among other concerns, internal controls and records retention policies will need to be revised to reflect this extended timeline.

In addition, the extended exposure period is likely to affect capital market activity, complicating and intensifying prudent due diligence on the part of investors, lenders, insurers, and potential venture partners, as well as counterparties. Standard closing documents will now need to take into account this lengthened (and thus heightened) exposure.

Companies involved in international business, or in potential transactions with those that are, would be well advised (with assistance of counsel) to carefully review and, if needed, revise internal compliance programs, diligence standards and strategies, and transaction documents, to reflect this new level of potential exposure.

For more information regarding this legislation, or other trade law matters, please contact James Kevin Wholey at (202) 617-2714, jwholey@phillipslytle.com; any member of the Phillips Lytle International Business Law Team; or the Phillips Lytle attorney with whom you have a relationship.

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