Domestic businesses that want to expand their operations by sourcing or selling their products overseas can take advantage of globalization to reduce costs and increase markets. While the United States maintains trade agreements with most countries, business owners don’t have unlimited options. The federal government maintains a list of countries in which it forbids U.S. companies to conduct business, and it prohibits specific items from being traded.
The Treasury Department’s Office of Foreign Asset Control enforces government sanctions against targeted countries, regimes, organizations and firms. These sanctions are designed to accomplish the government’s foreign policy and national security goals. The OFAC also has the power to stop specific transactions or freeze assets that fall under U.S. jurisdiction. Fines for noncompliance are substantial -- civil penalties can be $250,000 or twice the value of the underlying transaction for each violation, and criminal penalties include potential fines of $20 million and imprisonment for up to 30 years for willful violations.
At the time of publication, Burma, Cuba, Iran, Sudan and Syria had comprehensive sanctions placed against them by the government. That prohibits companies from trading with companies based in those countries without first submitting a written request for a specific license that grants an exception. Other countries have noncomprehensive sanctions, meaning that while there are no broad prohibitions on economic agreements, trade with specifically named individuals and entities is prohibited. These include the Western Balkans, Belarus, Cote d'Ivoire, Democratic Republic of the Congo, Iraq, Liberia, Persons Undermining the Sovereignty of Lebanon or Its Democratic Processes and Institutions, Libya, North Korea, Somalia and Zimbabwe.
The OFAC maintains a list of different sanction programs on its website, which is useful for businesses to determine what’s prohibited. It also provides a hotline that businesses can call to determine whether their intended market is affected by sanctions. The list of prohibited countries and entities is updated frequently, and businesses are responsible for complying with the updated restrictions.
The Bureau of Industry and Security, a division of the Commerce Department, handles export controls for specific products. This affects companies that produce products and services with additional restrictions. Businesses selling electronic components or finished products, chemicals, telecommunications or avionics equipment, and information security materials are among the firms that need a specific Export Control Classification Number for everything they intend to export. Based on the ECCN and the restrictions associated with it, a business might have additional countries where it’s prohibited from selling its wares.