May 7, 2015: OFAC updates Ukraine-related sanctions FAQ

On May 7th, OFAC updated 2 FAQs related to Ukraine-related sanctions (395 and 419) and added a new question (453). Here they are:

FAQ 395:

395. Do Directives 1, 2, and 3 prohibit U.S. persons from dealing in or processing transactions under a letter of credit that was issued on or after the sanctions effective date and that carries a term of longer than 30 days maturity (for Directives 1 and 3) or 90 days maturity (for Directive 2) when the beneficiary or the issuing bank of that letter of credit is one of the entities identified as subject to the Directives?

U.S. persons may deal in (including act as the advising or confirming bank or as the applicant (i.e., the purchaser of the underlying goods or services)) or process transactions under a letter of credit in which an entity subject to Directive 1, 2, or 3 is the beneficiary (i.e., the exporter or seller of the underlying goods or services) because the subject letter of credit does not represent an extension of credit to the SSI entity. U.S. persons may deal in (including act as the advising or confirming bank or as the applicant or beneficiary) or process transactions under a letter of credit where the issuing bank is an SSI entity provided that the terms of all payment obligations under the letter of credit conform with the debt prohibitions under the applicable Directives. For example, a U.S. bank acting as the negotiating bank for a letter of credit issued by an SSI entity subject to Directive 1 should ensure that it receives reimbursement from the SSI entity within the allowable 30-day debt limit.

U.S. persons may not deal in (including act as the advising or confirming bank or as the beneficiary) or process transactions under a letter of credit if all of the following three conditions are met: (1) the letter of credit was issued on or after the sanctions effective date, (2) the letter of credit carries a term of longer than 30 days maturity (for persons subject to Directives 1 and 3) or 90 days maturity (for persons subject to Directive 2), and (3) an SSI entity is the applicant of the letter of credit. This would constitute prohibited activity because the subject letter of credit would represent an extension of credit to the SSI entity. [5-7-2015]

FAQ 419:

419. How should U.S. persons account for the 30- and 90-day debt prohibitions under Directives 1, 2, and 3 as they relate to payment terms for the following types of transactions: (1) the sale of goods to an SSI entity, (2) the provision of services to and subscription arrangements involving SSI entities, and (3) progress payments for long-term projects?

U.S. persons may engage in commercial transactions with SSI entities provided that any such transactions do not represent a direct or indirect dealing in prohibited debt or equity. Because offering payment terms of longer than 30 or 90 days to an SSI entity generally constitutes a prohibited dealing in debt of the SSI entity, U.S. persons should ensure that payment terms conform with the applicable debt prohibitions. For sales of goods to an SSI entity, U.S. persons may extend payment terms of up to 30 or 90 days from the point at which title or ownership of the goods transfers to the SSI entity. For the provision of services to, subscription arrangements involving, and progress payments for long-term projects involving SSI entities, U.S. persons may extend payment terms of up to 30 or 90 days from the point at which a final invoice (or each final invoice) is issued. Payments made under these types of payment terms should utilize a value date of not later than 30 or 90 days from either the point at which title or ownership has transferred (for payments relating to sales of goods) or the date of each final invoice (for payments relating to services, subscription arrangements, and progress payments). In the event that a U.S. person believes that it may not receive payment in full by the end of the 30- or 90-day period, the U.S. person should contact OFAC to determine whether a license or other authorization is required. [5-7-2015]

FAQ 453:

453. Pursuant to General License 6 under the Ukraine-Related Sanctions Program, are U.S. financial institutions authorized to process noncommercial, personal remittances to or from Crimea (or to or from individuals ordinarily resident in Crimea) when there is no individual who is a U.S. person as either the remitter or beneficiary in the transaction?

Yes. U.S. depository institutions, U.S.-registered brokers or dealers in securities, and U.S.-registered money transmitters are authorized to process noncommercial, personal remittances pursuant to General License 6 regardless of whether the originator or beneficiary is an individual who is a U.S. person. For example, General License 6 authorizes a U.S. depository institution to act as the intermediary financial institution and sole U.S. party in a payment representing a personal remittance originated by a non-U.S. person located outside of the United States for the benefit of an individual located in or ordinarily resident in Crimea. [5-7-2015]

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