What happens when a rebel group on the OFAC SDN list lays down its arms, renounces terrorism and joins a government friendly to the United States? If you said they would be removed from the list, you would be wrong. If you said it would result in the U.S. requiring U.S. companies to obtain licenses to deal with the government, you might be right.

In 2003 the Communist Party of Nepal, generally referred to simply as the Maoists, was added to the SDN list. Last week the Maoist rebels reached a peace accord with the government of Nepal pursuant to which they would lock up their weapons and then join an interim coalition government. The United States, skeptical that the Maoists will keep their promise to end violence, has refused to remove the Maoists from the SDN list.

If the Maoists remain on the list, the effect of their joining the government may mean that certain transactions with the government of Nepal may, in effect, be transactions benefiting the SDN-listed Maoists and might, accordingly, require a license. As a result, NGOs in Nepal may now need to obtain OFAC licenses to continue operations in Nepal after implementation of the peace accords. Exports from the U.S. to the government of Nepal or to companies owned by it may be subject to the same restrictions.

A “highly-placed” source told the Kathmandu Post that the U.S. Embassy had requested that OFAC grant licenses to permit NGOs to continue to operate in Nepal when the Maoists join the coalition government on December 1. That source indicated that the grant of the licenses was almost certain.

A similar situation was posed when Hamas, also on the SDN list, became the majority party of the Palestinian Legislative Council of the Palestinian Authority after the January 2006 elections. As a result, members of Hamas hold high-level positions of authority in the government, including the post of Prime Minister. Accordingly, OFAC determined that transactions with the Palestinian Authority would require OFAC licenses and issued a series of six general licenses to permit certain transactions with the Palestinian Authority. These general licenses include a general license permitting U.S. citizens to act as employees of the U.N. in the West Bank and Gaza and another general license permitting in-kind donations of medicine, medical services and medical devices.

Whether or not the Maoist participation in the Nepal government will be analogous to the Hamas situation with the Palestinian Authority is difficult to determine at this time since the final details of the accord between the Maoists and Nepal are unknown. Accordingly, any exporter dealing with the government of Nepal or its state-owned enterprises should exercise caution until the situation becomes clear — both as to the level of the Maoist’s participation in the coalition government and as to OFAC’s response to such participation.

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Copyright © 2006 Clif Burns. All Rights Reserved.
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