Jun

23

OFAC Designation Footnote Exempts Similarly Named U.S. Company


Posted by at 9:53 pm on June 23, 2011
Category: Iran Sanctions

The Office of Foreign Assets Control (“OFAC”) today announced a new round of sanctions against various Iranian entities including the national airline Iran Air and its domestic air carrier Iran Air Tours. The press release announcing the sanctions highlighted Iran Air’s involvement in transporting missiles and parts and components used in developing ballistic missiles. The sanctions also targeted Tidewater Middle East Co. (“Tidewater”), which is the company that manages seven of Iran’s ports. The press release highlighted a number of Iranian vessels that were found to be carrying arms and materiel that had been loaded at ports managed by Tidewater. But the most interesting part of the designation was a footnote:

*There is no relationship between today’s target, Tidewater Middle East Co., and Tidewater (US), an international shipping company headquartered in the United States, listed on the New York Stock Exchange as TDW.

In the past, OFAC has usually declined to provide any statements about people or companies that are not on the SDN list, even though it gives an avenue to parties on the SDN list to argue that they should not be on the list. In short, an innocent party, like someone named Daniel Garcia, who is denied a loan because there is another Daniel Garcia on the list, has less rights with respect to the SDN list than a terrorist who is actually nam mmed on the list. OFAC’s reasoning has been that it doesn’t won’t to say who is not on the list because that person might someday be on the list and the previous negative certification would then be misleading. So what gives with Tidewater, Inc., the Tidewater that is not the Tidewater now on the SDN list? Is this the beginning of a reversal of OFAC’s unwillingness to provide negative certifications, or does Tidewater have extra special clout at OFAC? I am aware of only one other instance where OFAC specifically called out companies with similar names to make clear that they are not on the list. Should all the Daniel Garcias that aren’t the Daniel Garcia on the SDN list give OFAC a call?

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Copyright © 2011 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)


2 Comments:


Clif – The piece of yesterday’s designations that OFAC does not go out of its way to explain is that the Berman Amendment to IEEPA exempts travel-related transactions from the President’s and OFAC’s authority to impose sanctions. Since IEEPA is the only statutory basis for the WMD blocking program, it appears that U.S. persons may still be able to travel on the two airlines. However, whether banks will want to spend the time to determine whether a payment is for exempt travel-related transactions or, perhaps, for non-exempt air freight is questionable. So the freedom to travel policy of IEEPA (50 U.S.C. 1702(b)(4)) may go by the boards for U.S.-originating payments.

Comment by Ex-OFAC on June 24th, 2011 @ 6:38 am

The Office of Antiboycott Compliance generally takes a dim view of similar name inquiries, i.e., it has in the past posited an irrebutable presumption that if a similar name inquiry comes from a national of or entity doing business in or with a boycotting country, that any such similar name inquiry is a prohibitted boycott related inquiry as to whether the person or entity is related to a blacklisted person. (See e.g., Stair Cargo). OFAC’s long blacklists, which were promulgated after OAC took this position back in the 80s and 90s, might provide some cover for similar name inquiries as long as the inquiry does not specifically mention the Arab League boycott.

Of course, recent Supreme Court cases (Sorrell v. IMS Health) suggest that the commercial speech exception upon which the 8th Circuit relied in the Baldridge case in order to uphold the information furnishing prohibitions in the Antiboycott Regulations has been narrowed to exclude any content-based prohibition on communication of information that is not an integral part of prohibited conduct. Thus, the information furnishing provisions of the Antiboycott Regulations, even if they were authorized by IEEPA, can no longer stand up to First Amendment strict scrutiny.

Comment by Mike Deal on June 24th, 2011 @ 2:29 pm