To OFAC and Beyond: Export Compliance, Sanctions and How to Protect Your Business

Here at the West Virginia Export Promotion Program, we get a lot of questions about where exporters can sell their product, if they need a license and how they can know that a customer is safe. While selling internationally is usually a fairly straightforward process, our answer to these questions is often the same — “it depends.”

It depends on who is buying the product, where the product is going and what it will be used for. In most situations, the answers to these questions come easily. However, there are restricted countries, restricted people and dual use items to consider. To complicate matters, there are multiple federal agencies involved in the regulation of exports. This blog will help clear up some of the confusion.

OFAC and Sanctioned Countries

The Office of Foreign Asset Control (OFAC) is an agency of the U.S. Department of the Treasury that administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals. Its primary goal is to prevent funds from flowing to individuals, entities and organizations engaged in activities deemed harmful to U.S. interests. Exporters must be aware of the countries where they can and cannot do business.  

Some of the countries subject to OFAC sanctions or restrictions include:

1. Iran
2. North Korea
3. Syria
4. Cuba
5. Venezuela
6. Russia (specifically targeted individuals and entities)
7. Sudan
8. Libya
9. Somalia
10. Yemen

It’s important to note that this list isn’t exhaustive. There may be additional countries or entities subject to sanctions. Additionally, the specific restrictions and sanctions imposed on each country can vary depending on the nature of the threat.

Iran, North Korea, Syria and Cuba are embargoed sanctioned countries where all transactions are prohibited. Venezuela, Russia, Sudan, Libya, Somalia and Yemen are subject to targeted sanctions and prohibit the export of certain items. In Venezuela, for example, many of the sanctions focus on the gold, oil and gas sectors and target Venezuela’s state-owned enterprises and other entities associated with the Maduro government. However, there are humanitarian exemptions and companies selling to non-governmental organizations and other aid entities need to do thorough due diligence to confirm they meet this exemption, especially when selling products and services tied to those key industry sectors.

Protecting Your Business – Best Practices for Export Compliance 

With any of the countries listed above, it is important to search OFAC’s official sanctions at least quarterly in order to receive the most up-to-date information as the sanctions can change. If you are shipping to a country above, it’s imperative to refer to the sanctions before finalizing the shipment, and to consult an attorney specializing in international transactions or reach out to a West Virginia Export Promotion International Trade Manager for assistance.

When speaking of export compliance, it’s also a best practice to refer to the Consolidated Screening List before every export shipment, as new information can be added at any time. In the case of export services, consider checking this prior to delivery of the service. It’s rare, but possible, that even a long standing customer may suddenly be included. What is the Consolidated Screening List? The Consolidated Screening List (CSL) is maintained by the U.S. government and consolidates multiple export screening lists of individuals and entities that are subject to export restrictions. It combines lists from the Department of Commerce, the Department of State, and the Department of the Treasury. By consolidating these lists into one searchable website, the CSL streamlines the screening process for exporters to ensure export compliance.

Assistance for Export Compliance

So, when you have a potential export sale it is important to do your research before engaging.  Always check the CSL before finalizing any export and in the case of the OFAC sanctioned countries, review those sanctions to confirm you can be compliant. The great news is that there are tools available to help guide you when you are dealing with customers in nations where you may be facing restrictions. The U.S. Commercial Service offers an International Company Profile service for a small fee which provides a detailed background check on the customer.  This typically includes checking the CSL. This work is performed by the U.S. Commercial Service trade specialists in the country and can also include financial information on the customer. This report is a great initial step in your due diligence to ensure you are protecting yourself as the exporter.

Additionally, consider an EXIM Bank credit insurance policy. EXIM Credit Insurance guarantees payment up to 95 percent of the value of the shipment in the event of nonpayment by the foreign buyer. Like any insurance policy, there is an underwriting process. During the underwriting process, a background check is performed on your customer. If any red flags appear, they are unlikely to be approved. This can give you the chance to take a closer look at the sale and decide if it is in your best interest to move forward with that particular customer.

Finally, there are export compliance firms nationwide that assist exporters with developing an export compliance program and train your team on export compliance. Any member of your team that touches an international transaction should be educated on export compliance. This type of training may also be covered under our Governor’s Guaranteed Workforce Program, so reach out to the West Virginia Department of Economic Development to learn more.

Export Compliance is Your Responsibility

Always remember to do your due diligence when exporting and don’t dismiss any potential red flags in favor of completing a sale. For example, a customer based in one country requesting shipment to a completely different country is something you should investigate, especially if the destination country happens to be on the OFAC sanctions list. If an export does not feel right, consider sharing this information with your local U.S. Commercial Service representatives and a State of West Virginia International Trade Manager. Let us provide you with guidance to make sure the transaction is safe and successful.

Need a refresher on what to do when you think you have an export violation? Check out our blog on Voluntary Disclosures.