FROM THE OFFICE OF PUBLIC AFFAIRS

July 26, 1999
LS-29

Treasury Deputy Secretary Stuart E. Eizenstat Statement on Sanctions

Today, the Treasury Department is taking key steps, after close consultation with the Departments of State and Agriculture, to implement the policy announced by the President on April 28 to authorize, with appropriate safeguards, commercial sales of food, medicine and medical equipment under existing unilateral sanctions regimes. This policy affirmed the President's earlier statement that ". . . food and other human necessities should not be used as a tool of foreign policy except under extraordinary circumstances."

Treasury's Office of Foreign Assets Control ("OFAC") is therefore issuing regulations amending the current sanctions regimes for Iran, Libya and Sudan to provide for the issuance of licenses -- on a case-by-case basis and with appropriate safeguards -- permitting commercial sales of food, medicine and medical equipment to approved buyers in those countries. Today's changes will not affect the sanctions regimes for North Korea, Cuba, Iraq and Serbia, since there are already other provisions for licensing sales of these items to those countries. For example, in the case of Iraq, where the sanctions are multilateral, sales of humanitarian items are licensed under the U.N.'s oil-for-food program. In the case of Serbia, licenses are already available for commercial sales of these items for civilian end-use under appropriate safeguards to prevent diversion to military, paramilitary or political use.

Sanctions on food, medicine and medical equipment do not generally advance our policy goals and may have adverse consequences in the humanitarian realm. In addition, sanctions can have a detrimental effect on our own agricultural sector. The changes we are announcing today are designed to address both these problems by establishing an expedited licensing regime for the sale of food, medicine and medical equipment to Iran, Libya and Sudan. While there will be conditions on the licenses that we will be issuing, the conditions have been kept to a minimum. 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.

Here are the main provisions of the new licensing 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, so long as the latter items are not listed on the Commerce Control List maintained by the Department of Commerce.
  • It will allow sales only to approved buyers. This means private individuals acting for their own account, nongovernmental entities, and government procurement bodies identified by OFAC 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 requests 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 specific license after a case-by-case contract review.
  • Brokering by U.S. persons will be permitted for the bulk agricultural commodities listed in the regulations. Where the underlying sale is by a U.S. person 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. person 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. persons 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 authorize, 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).

Let me also repeat here what I said in announcing this policy on April 28: there will be no U.S. Government funding or financing in support of these sales.

Based on our consultations with all the interested farm and associated groups, we believe that we have developed a balanced, efficient and competitive process to permit our agricultural commodities and products to be sold to the countries in question. We believe the same is true for medicine and medical equipment. Finally, we welcome constructive suggestions for improvements as we implement this policy.



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