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Friday, 05 June 20
U.S. SANCTIONS COMPLIANCE GUIDANCE RELEASED FOR THE GLOBAL MARITIME, ENERGY AND METALS SECTORS - AKIN GUMP
 Key Points
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On May 14, 2020, OFAC, the Department of State and the U.S. Coast Guard jointly released guidance for persons involved in the maritime industry regarding common deceptive shipping practices used to subvert U.S. and United Nations sanctions programs targeting Iran, North Korea and Syria.
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The guidance highlights certain deceptive practices employed in maritime activity that could signal sanctions evasion.
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The guidance also contains specific measures that the maritime industry and energy and metals sectors can take to tailor their sanctions compliance programs to avoid sanctions violations or otherwise supporting illicit shipping activities.
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This Guidance is part of a sustained focus on the international shipping industry, including the U.S. Government’s latest enforcement actions in the shipping sector on June 2, 2020.
The Guidance
On May 14, 2020, the Department of the Treasury’s Office of Foreign Assets Control (OFAC), the Department of State and the U.S. Coast Guard jointly released guidance (the “Guidance”) regarding common deceptive shipping practices in order to aid persons involved in the maritime industry, and energy and metals sectors, in tailoring their due diligence and sanctions compliance policies and procedures. The Guidance is particularly targeted towards ship owners, managers, operators, brokers, ship chandlers, flag registries, port operators, shipping companies, freight forwarders, classification service providers, commodity traders, insurance companies and financial institutions. The shipping industry continues to present particularly challenging issues associated with U.S. sanctions compliance, including the involvement of numerous parties in particular voyages all with different, yet overlapping risks.
The Guidance continues a further and concerted effort by OFAC to focus in particular on the shipping industry and builds on prior advisories that it has issued directed at the shipping industry, including one issued on September 4, 2019, entitled “Sanctions Risks Related to Shipping Petroleum and Petroleum Products from Iran” that also identified specific deceptive shipping practices and risk mitigation measures for the industry. As the U.S. Government’s latest enforcement actions on June 2, 2020 demonstrate, OFAC sanctions enforcement attention is squarely focused on the international shipping industry.
The Guidance also provides important insights for companies operating in the maritime sector regarding the criteria that OFAC applies when evaluating an effective sanctions compliance program for such companies.
Below we summarize key points from the Guidance that are relevant for the shipping sector, including a summary of deceptive practices highlighted in the Guidance, a summary of general practices for effective identification of potential sanctions evasion and summaries of guidance for certain actors in the maritime industry and country-specific guidance.
Deceptive Shipping Practices
The Guidance provides a summary of common tactics utilized to facilitate sanctionable or illicit maritime trade linked to Iran, North Korea and Syria, including:
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Disabling or manipulating the Automatic Identification System (AIS) on vessels to conceal a vessel’s port of call or other information regarding its voyage.
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Physically altering vessel identification to obscure the identities of sanctioned vessels or vessels engaging in sanctionable activities.
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Falsifying cargo and vessel documents, particularly with respect to shipments involving petrochemicals, petroleum, petroleum products, metals (steel, iron) or sand to disguise their origin.
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Ship-to-Ship (STS) Transfers used to conceal origin/destination of products.
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Voyage irregularities to disguise the ultimate destination or origin of cargo, including indirect routing, unscheduled detours or transit or transshipment of cargo through third countries.
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False flags and flag hopping (i.e., repeatedly registering vessels with new flag states).
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Use of complex ownership or management to disguise the ultimate beneficial owner of cargo or commodities in order to avoid sanctions or other enforcement actions.
General Practices for Effective Identification of Sanctions Evasion
The Guidance also highlights, and provides details regarding, the following practices for effective identification of potential sanctions evasion:
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Institutionalizing a sanctions compliance program, including through the implementation of written standardized operational compliance policies, procedures, standards of conduct and safeguards.
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Establishing AIS best practices and contractual requirements that make disabling/manipulating AIS for illegitimate reasons grounds for termination of contracts or investigations.
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Monitoring ships throughout the entire transaction lifecycle, including through supplementing AIS with Long Range Identification and Tracking (LRIT) and receiving periodic LRIT signals on a frequency informed by the entity’s risk assessment.
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Conducting “Know Your Customer” due diligence on customers and counterparties, which could include “maintaining the names, passport ID numbers, address(es), phone number(s), email address(es), and copies of photo identification of each customer’s beneficial owner(s).”
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Exercising supply chain due diligence, including, as appropriate, conducting due diligence to ensure that recipients and counterparties to a transaction are not sending or receiving commodities that may trigger sanctions, such as Iranian petroleum or North Korea-origin coal, and implementing controls that allow for verification-of-origin and recipient checks for ships that conduct STS transfers.
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Incorporating the above “best practices” into contracts.
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Sharing information about sanctions evasion techniques and threats amongst industry groups.
Annex A: Actor-specific Guidance
In Annex A, the Guidance provides bulleted lists of guidance and information for particular actors within the maritime industry, including: maritime insurance companies, flag registry managers, port state control authorities, shipping industry associations, regional and global commodity trading, supplier, and brokering companies, financial institutions, ship owners, operators, and charterers, classification societies, vessel captains and crewing companies.
Below we summarize the guidance with respect to ship owners, operators and charterers, vessel captains and crewing companies.
Ship Owners, Operators, and Charterers:
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Identify vessels that, in the past two years, have a pattern of AIS manipulation not consistent with the International Convention for the Safety of Life at Sea and terminating business relationships with clients that continue to use those vessels.
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Keep and analyze records, including, where possible, photographs, of delivery and recipient vessels and/or recipients located at ports when possible, to enhance end-use verification.
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Protect employees who reveal illegal or sanctionable behavior from retaliation.
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Incorporate data into due diligence practices from organizations that provide commercial shipping data.
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Communicate to counterparts as necessary and appropriate (e.g., ship owners, managers, charterers, operators) an expectation that they have adequate and appropriate compliance policies.
Vessel Captains:
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Ensure deck officers are aware of the International Maritime Organization’s (IMO) AIS regulations, including the requirement to consistently broadcast AIS transmissions.
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Communicate to ship owners and charterers that vessels are monitored for AIS disablement and that any occurrences of AIS disablement will be investigated.
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Understand vessels’ AIS history to determine whether they may have been involved in illicit activities.
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Before engaging in ship-to-ship transfers, verify the other vessel’s name, IMO number and flag, and ensure there is a legitimate business purpose for the transfer.
Crewing Companies:
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Ensure crewmembers are aware of IMO guidance in relation to illicit shipping and the reasons why certain practices are unsafe.
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Communicate to clients that crews are monitored for AIS disablement and that any occurrences of AIS disablement will be investigated.
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Understand vessels’ AIS history to determine whether it may have been involved in illicit activities.
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Ensure that crewmembers who reveal illegal or sanctionable activity are protected from retaliation and providing a confidential mechanism for reporting sanctionable conduct.
Annex B: Country Guidance
In Annex B, the Guidance summarizes relevant provisions of U.S. and U.N. sanctions programs concerning North Korea, Iran and Syria and actions prohibited under said programs relevant to the maritime industry. It also highlights a few points with respect to recent deceptive practices to facilitate illicit shipping to North Korea, Syria, and Iran which are summarized below.
North Korea:
North Korea reportedly exported 3.7 million metric tons of coal between January and August 2019, in violation of U.N. sanctions. Further, while under United Nations Security Council Resolution 2397, North Korea is limited to importing a maximum of 500,000 barrels of petroleum per year, from January to October 2019. North Korea ports received 221 tanker deliveries, which, if fully laden, would result in approximately 3.89 million barrels of imports. According to the Guidance, these illicit exports and imports are primarily effectuated via ship-to-ship transfers in Chinese territorial seas. Image 1 below depicts the most common areas in which such ship-to-ship transfers take place.
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Common Locations of Ship-to-Ship Transfers subverting North Korean Sanctions1 |
North Korea is also reportedly acquiring vessels destined for scrapping and non-ocean-going barges that do not transmit AIS signals to engage in illicit import/export operations.
Syria:
The Guidance notes that “the supply chain and petroleum-related shipments [to Syria] create significant sanctions risk for those in the maritime industry.” As an example, it highlights the September 2019 OFAC action against Maritime Assistance LLC for facilitating the sale and delivery of jet fuel to Russian military forces operating in Syria. It also highlights the OFAC action in the November 2018 scheme in which Iranian and Russian entities engaged in a payment offsetting arrangement in which the sale and shipment of Iranian oil to Syria provided funding to Iran and proxy groups such as Hizballah, the Islamic Resistance Movement (HAMAS) and the Islamic Revolutionary Guard Corps-Quds Force (IRGC-QF).
Iran:
The Guidance did not provide specific guidance with respect to deceptive shipping practices used to subvert Iran-related sanctions—rather, it noted that the IRGC-QF continues to try to evade U.S. sanctions “by obfuscating the origin, destination, and recipient of oil shipments,” stating that “the use of such deceptive tactics is unique neither to Iran nor to Iran’s petroleum industry.”
Companies in the shipping industry or whose businesses intersect the shipping sector should assess their sanctions risk in light of this latest U.S. government guidance and make necessary modifications or enhancements to their compliance programs to mitigate this risk.
Source: Akin Gump, Strauss Hauer & Feld LLP
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Tuesday, 13 February 24
WHAT IS THE OUTLOOK FOR THE NATURAL GAS SPOT PRICE IN 2024 AND 2025? EIA
We expect the U.S. benchmark Henry Hub natural gas spot price to average higher in 2024 and 2025 than in 2023, but to remain lower than $3.00 per m ...
Monday, 12 February 24
US THERMAL COAL EXPORTS HIT 5-YEAR HIGHS AND TOP $5 BLN IN 2023 - REUTERS
United States exporters of thermal coal earned more than $5 billion in 2023 as they shipped out more than 32.5 million metric tons of the high-poll ...
Tuesday, 06 February 24
NEW E-FUELS PROJECT TO MAKE INTERNATIONAL SHIPPING CLIMATE-NEUTRAL - RINA
Transport and trade on the ocean blue must be made much greener. This is the goal of the new €17 million European GAMMA project, where compani ...
Tuesday, 06 February 24
INDIA SEES ANNUAL COAL OUTPUT UP 10.9% IN 2024/25 - REUTERS
India expects domestic coal output to increase by 10.9% to 1.13 billion metric tons in the fiscal year ending March 2025, a senior government offic ...
Tuesday, 06 February 24
INDIA'S COAL PRODUCTION INCREASES BY 10.3% TO 99.73 MILLION TONNE IN JANUARY - PTI
The country’s coal output rose 10.3 per cent to 99.73 Million Tonne (MT) in January, over the same month in the previous fiscal.
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Showing 36 to 40 news of total 6871 |
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- VISA Power Limited - India
- PowerSource Philippines DevCo
- Chettinad Cement Corporation Ltd - India
- Indika Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- McConnell Dowell - Australia
- PTC India Limited - India
- Billiton Holdings Pty Ltd - Australia
- International Coal Ventures Pvt Ltd - India
- Antam Resourcindo - Indonesia
- GMR Energy Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Videocon Industries ltd - India
- Electricity Generating Authority of Thailand
- Binh Thuan Hamico - Vietnam
- Semirara Mining Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- White Energy Company Limited
- Offshore Bulk Terminal Pte Ltd, Singapore
- New Zealand Coal & Carbon
- SMC Global Power, Philippines
- Sindya Power Generating Company Private Ltd
- Manunggal Multi Energi - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Vedanta Resources Plc - India
- Neyveli Lignite Corporation Ltd, - India
- Tamil Nadu electricity Board
- Romanian Commodities Exchange
- Sarangani Energy Corporation, Philippines
- Australian Coal Association
- Straits Asia Resources Limited - Singapore
- Thai Mozambique Logistica
- Cement Manufacturers Association - India
- Kapuas Tunggal Persada - Indonesia
- Aditya Birla Group - India
- Heidelberg Cement - Germany
- Central Java Power - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Australian Commodity Traders Exchange
- SN Aboitiz Power Inc, Philippines
- Essar Steel Hazira Ltd - India
- Metalloyd Limited - United Kingdom
- Coastal Gujarat Power Limited - India
- Mjunction Services Limited - India
- Ceylon Electricity Board - Sri Lanka
- Holcim Trading Pte Ltd - Singapore
- Wilmar Investment Holdings
- Africa Commodities Group - South Africa
- Bharathi Cement Corporation - India
- Bhatia International Limited - India
- Borneo Indobara - Indonesia
- Baramulti Group, Indonesia
- Sree Jayajothi Cements Limited - India
- Ministry of Finance - Indonesia
- Gujarat Sidhee Cement - India
- Global Coal Blending Company Limited - Australia
- Larsen & Toubro Limited - India
- Kaltim Prima Coal - Indonesia
- India Bulls Power Limited - India
- Ministry of Mines - Canada
- Globalindo Alam Lestari - Indonesia
- Anglo American - United Kingdom
- Port Waratah Coal Services - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Mintek Dendrill Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Interocean Group of Companies - India
- Banpu Public Company Limited - Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- London Commodity Brokers - England
- MS Steel International - UAE
- Grasim Industreis Ltd - India
- Planning Commission, India
- Minerals Council of Australia
- Power Finance Corporation Ltd., India
- The University of Queensland
- Orica Mining Services - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- PNOC Exploration Corporation - Philippines
- Mercator Lines Limited - India
- Price Waterhouse Coopers - Russia
- Kepco SPC Power Corporation, Philippines
- Deloitte Consulting - India
- Ambuja Cements Ltd - India
- Central Electricity Authority - India
- Kideco Jaya Agung - Indonesia
- SMG Consultants - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Rio Tinto Coal - Australia
- IEA Clean Coal Centre - UK
- CNBM International Corporation - China
- Marubeni Corporation - India
- PetroVietnam Power Coal Import and Supply Company
- Maheswari Brothers Coal Limited - India
- Wood Mackenzie - Singapore
- Madhucon Powers Ltd - India
- Siam City Cement - Thailand
- Indian Oil Corporation Limited
- Thiess Contractors Indonesia
- Orica Australia Pty. Ltd.
- Meenaskhi Energy Private Limited - India
- Jindal Steel & Power Ltd - India
- Bhoruka Overseas - Indonesia
- Gujarat Electricity Regulatory Commission - India
- OPG Power Generation Pvt Ltd - India
- Posco Energy - South Korea
- Xindia Steels Limited - India
- Lanco Infratech Ltd - India
- Indogreen Group - Indonesia
- Tata Chemicals Ltd - India
- Bayan Resources Tbk. - Indonesia
- Malabar Cements Ltd - India
- Indonesian Coal Mining Association
- Jaiprakash Power Ventures ltd
- Timah Investasi Mineral - Indoneisa
- Intertek Mineral Services - Indonesia
- Global Business Power Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Petron Corporation, Philippines
- Siam City Cement PLC, Thailand
- Alfred C Toepfer International GmbH - Germany
- Bahari Cakrawala Sebuku - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Makarim & Taira - Indonesia
- Mercuria Energy - Indonesia
- Economic Council, Georgia
- Electricity Authority, New Zealand
- Toyota Tsusho Corporation, Japan
- Leighton Contractors Pty Ltd - Australia
- Formosa Plastics Group - Taiwan
- Global Green Power PLC Corporation, Philippines
- Agrawal Coal Company - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Energy Link Ltd, New Zealand
- Petrochimia International Co. Ltd.- Taiwan
- Standard Chartered Bank - UAE
- Edison Trading Spa - Italy
- AsiaOL BioFuels Corp., Philippines
- Aboitiz Power Corporation - Philippines
- ASAPP Information Group - India
- Eastern Coal Council - USA
- Savvy Resources Ltd - HongKong
- Riau Bara Harum - Indonesia
- Singapore Mercantile Exchange
- Ministry of Transport, Egypt
- Jorong Barutama Greston.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Altura Mining Limited, Indonesia
- San Jose City I Power Corp, Philippines
- Goldman Sachs - Singapore
- Therma Luzon, Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Sical Logistics Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Latin American Coal - Colombia
- Indian Energy Exchange, India
- Sinarmas Energy and Mining - Indonesia
- Bukit Makmur.PT - Indonesia
- IHS Mccloskey Coal Group - USA
- Sakthi Sugars Limited - India
- TeaM Sual Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Bhushan Steel Limited - India
- European Bulk Services B.V. - Netherlands
- Salva Resources Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Merrill Lynch Commodities Europe
- Bulk Trading Sa - Switzerland
- Coalindo Energy - Indonesia
- Sojitz Corporation - Japan
- Kartika Selabumi Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Carbofer General Trading SA - India
- Attock Cement Pakistan Limited
- Medco Energi Mining Internasional
- Bukit Asam (Persero) Tbk - Indonesia
- The Treasury - Australian Government
- Directorate Of Revenue Intelligence - India
- Samtan Co., Ltd - South Korea
- Star Paper Mills Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Energy Development Corp, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Vizag Seaport Private Limited - India
- Uttam Galva Steels Limited - India
- CIMB Investment Bank - Malaysia
- Rashtriya Ispat Nigam Limited - India
- GAC Shipping (India) Pvt Ltd
- Trasteel International SA, Italy
- Coal and Oil Company - UAE
- GVK Power & Infra Limited - India
- ICICI Bank Limited - India
- Kumho Petrochemical, South Korea
- Parry Sugars Refinery, India
- Kobexindo Tractors - Indoneisa
- Independent Power Producers Association of India
- Dalmia Cement Bharat India
- LBH Netherlands Bv - Netherlands
- Bangladesh Power Developement Board
- Georgia Ports Authority, United States
- Meralco Power Generation, Philippines
- Barasentosa Lestari - Indonesia
- Eastern Energy - Thailand
- Indo Tambangraya Megah - Indonesia
- Commonwealth Bank - Australia
- Renaissance Capital - South Africa
- The State Trading Corporation of India Ltd
- Parliament of New Zealand
- Karaikal Port Pvt Ltd - India
- Chamber of Mines of South Africa
- South Luzon Thermal Energy Corporation
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