[Federal Register Volume 61, Number 239 (Wednesday, December 11, 1996)]
[Rules and Regulations]
[Pages 65312-65315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31647]



[[Page 65311]]

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Part VI





Department of the Treasury





_______________________________________________________________________



Office of Foreign Assets Control



_______________________________________________________________________



31 CFR Part 575



Iraqi Sanctions Regulations; Licensing of Performance on Certain 
Contracts With the Government of Iraq; Final Rule

  Federal Register / Vol. 61, No. 239 / Wednesday, December 11, 1996 / 
Rules and Regulations  

[[Page 65312]]



DEPARTMENT OF THE TREASURY

Office of Foreign Assets Control

31 CFR Part 575


Iraqi Sanctions Regulations; Licensing of Performance on Certain 
Contracts With the Government of Iraq

AGENCY: Office of Foreign Assets Control, Treasury.

ACTION: Final rule; amendment.

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SUMMARY: This final rule amends the Iraqi Sanctions Regulations to 
provide a statement of licensing policy regarding specific licensing of 
U.S. persons seeking to purchase Iraqi-origin petroleum and petroleum 
products from Iraq. Statements of licensing policy are also provided 
regarding sales of essential parts and equipment for the Kirkuk-
Yumurtalik pipeline system, and sales of humanitarian goods to Iraq, 
pursuant to United Nations approval. A general license is being added 
to authorize dealings in Iraqi-origin petroleum and petroleum products 
that have been exported from Iraq with United Nations and U.S. 
Government approval. The rule also adds definitions and makes technical 
amendments.

EFFECTIVE DATE: December 10, 1996.

FOR FURTHER INFORMATION CONTACT: Steven I. Pinter, Chief, Licensing 
Division, tel.: 202/622-2480, or William B. Hoffman, Chief Counsel, 
tel.: 202/622-2410, Office of Foreign Assets Control, Department of the 
Treasury, Washington, DC 20220.

SUPPLEMENTARY INFORMATION:

Electronic and Facsimile Availability

    This document is available as an electronic file on The Federal 
Bulletin Board the day of publication in the Federal Register. By 
modem, dial 202/512-1387 and type ``/GO FAC,'' or call 202/512-1530 for 
disk or paper copies. This file is available for downloading without 
charge in WordPerfect 5.1, ASCII, and Adobe AcrobatTM readable 
(*.PDF) formats. For Internet access, the address for use with the 
World Wide Web (Home Page), Telnet, or FTP protocol is: 
fedbbs.access.gpo.gov. The document is also accessible for downloading 
in ASCII format without charge from Treasury's Electronic Library 
(``TEL'') in the ``Business, Trade and Labor Mall'' of the FedWorld 
bulletin board. By modem, dial 703/321-3339, and select the appropriate 
self-expanding file in TEL. For Internet access, use one of the 
following protocols: Telnet = fedworld.gov (192.239.93.3); World Wide 
Web (Home Page) = http://www.fedworld.gov; FTP = ftp.fedworld.gov 
(192.239.92.205). Additional information concerning the programs of the 
Office of Foreign Assets Control is available for downloading from the 
Office's Internet Home Page: http://www.ustreas.gov/treasury/services/
fac/fac.html, or in fax form through the Office's 24-hour fax-on-demand 
service: call 202/622-0077 using a fax machine, fax modem, or touch-
tone telephone.

Background

    On April 14, 1995, the United Nations Security Council (the 
``UNSC'') adopted Resolution 986, which creates a framework, subject to 
agreement of the Government of Iraq, that would permit the Government 
of Iraq to sell $2 billion worth of petroleum and petroleum products 
over a 6-month period, with all proceeds placed in a United Nations 
(``UN'') escrow account for designated uses. On May 20, 1996, a 
Memorandum of Understanding Between the Secretariat of the United 
Nations and the Government of Iraq on the Implementation of Security 
Council Resolution 986 (1995) (the ``Memorandum of Understanding'') was 
signed by representatives of the Government of Iraq and the UN. The 
Memorandum of Understanding contains agreements preparatory to 
implementation of Resolution 986. On August 12, 1996, Procedures to be 
Employed by the Security Council Committee Established by Resolution 
661 (1990) Concerning the Situation Between Iraq and Kuwait in the 
Discharge of its Responsibility as Required by Paragraph 12 of Security 
Council Resolution 986 (1995) (the ``Guidelines'') further elaborated 
the procedures necessary to implement Resolution 986. A portion of the 
proceeds in the escrow account will be available for Iraq's purchase of 
medicine, health supplies, foodstuffs, and materials and supplies for 
essential civilian needs, to be specified in a list prepared by Iraq 
and submitted to and approved by the UN Secretary-General. At the UN 
level, this program will be administered by the UNSC Committee 
established pursuant to UNSC Resolution 661 (the ``661 Committee''), 
which has established guidelines concerning procedures for permitted 
Iraqi purchases and sales. Within the United States, the Treasury 
Department's Office of Foreign Assets Control (``OFAC''), in 
consultation with the Department of State, will implement UNSC 
Resolution 986. No direct financial transactions with the Government of 
Iraq are permitted.
    New Secs. 575.327 and 575.328 define the terms ``Memorandum of 
Understanding'' and ``Guidelines,'' and a technical amendment is made 
to Sec. 575.325 (61 FR 36628, July 12, 1996).
    New Sec. 575.523 provides a statement of licensing policy for U.S. 
persons seeking to purchase petroleum and petroleum products from the 
Government of Iraq or Iraq's State Oil Marketing Organization 
(``SOMO'') pursuant to UNSC Resolution 986, other relevant Security 
Council resolutions, the Memorandum of Understanding, and other 
guidance issued by the 661 Committee. Issuance of a specific license 
authorizes the licensee to deal directly with the 661 Committee or its 
designee (the ``overseers'') appointed by the UN Secretary-General 
pursuant to UNSC Resolution 986, other relevant Security Council 
resolutions, the Memorandum of Understanding, and other guidance issued 
by the 661 Committee. The list of ``national oil purchasers'' will be 
supplied to the 661 Committee. Licensees whose contracts are approved 
by the overseers are authorized to perform those contracts in 
accordance with their terms.
    New Secs. 575.524 and 575.525 provide statements of licensing 
policy for the exportation to Iraq of pipeline parts and equipment 
necessary for the safe operation of the Iraqi portion of the Kirkuk-
Yumurtalik pipeline system, and the sale of humanitarian aid to Iraq.
    New Sec. 575.526 adds a general license for dealing in, and 
importation into the United States of, Iraqi-origin petroleum and 
petroleum products, the purchase and exportation of which have been 
authorized in accordance with UNSC Resolution 986, other relevant 
Security Council resolutions, the Memorandum of Understanding, and 
other guidance issued by the 661 Committee.
    Finally, Sec. 575.522 (61 FR 36628, July 12, 1996) is amended to 
clarify that the authorization for executory contracts by U.S. persons 
includes contracts with third parties incidental to permissible 
executory contracts with the Government of Iraq.
    Because the Regulations involve a foreign affairs function, 
Executive Order 12886 and the provisions of the Administrative 
Procedure Act (5 U.S.C. 553), requiring notice of proposed rulemaking, 
opportunity for public participation, and delay in effective date, are 
inapplicable. Because no notice of proposed rulemaking is required for 
this rule, the Regulatory Flexibility Act (5 U.S.C. 601-612), does not 
apply.

Paperwork Reduction Act

    The Regulations are being issued without prior notice and public 
procedure pursuant to the

[[Page 65313]]

Administrative Procedure Act (5 U.S.C. 553). Pursuant to the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3507), the collections of information 
contained in the Regulations have been submitted to and approved by the 
Office of Management and Budget (``OMB''), pending public comment, and 
have been assigned control number 1505-0130. An agency may not conduct 
or sponsor, and a person is not required to respond to, a collection of 
information unless the collection of information displays a valid 
control number.
    The collections of information in this final rule are contained in 
Secs. 575.523, 575.524, and 575.525. This information is required by 
the Office of Foreign Assets Control for licensing and administrative 
purposes and for ensuring compliance with the Regulations. The likely 
respondents and recordkeepers are business organizations.
    No assurances of confidentiality are given to persons who furnish 
information to OFAC unless specifically indicated in advance. It is the 
policy of OFAC to protect the confidentiality of information in 
appropriate cases pursuant to the exemptions from disclosure provided 
under the Freedom of Information Act (5 U.S.C. 552) and the Privacy Act 
(5 U.S.C. 552a).
    Estimated total annual reporting and/or recordkeeping burden: 100 
hours.
    The estimated annual burden per respondent/recordkeeper varies from 
30 minutes to 1 1/2 hours, depending on individual circumstances, with 
an estimated average of 1 hour.
    Estimated number of respondents and/or recordkeepers: 100.
    Estimated annual frequency of responses: 1.
    Comments are invited on: (a) whether these collections of 
information are necessary for the proper performance of the functions 
of the agency, including whether the information has practical utility; 
(b) the accuracy of the agency's estimate of the burden of the 
collections of information; (c) ways to enhance the quality, utility, 
and clarity of the information to be collected; and (d) ways to 
minimize the burden of the collection of information on respondents, 
including through the use of automated collection techniques or other 
forms of information technology.
    Comments concerning the above information, the accuracy of 
estimated average annual burden, and suggestions for reducing this 
burden should be directed to the Office of Management and Budget, 
Paperwork Reduction Project, control number 1505-0130, Washington, DC 
20503, with a copy to the Office of Foreign Assets Control, U.S. 
Department of the Treasury, 1500 Pennsylvania Ave., NW--Annex, 
Washington, DC 20220. Any such comments should be submitted not later 
than 60 days from publication. Comments on aspects of the Regulations 
other than those involving collections of information should not be 
sent to OMB.

List of Subjects in 31 CFR Part 575:

    Administrative practice and procedure, Banks, banking, Blocking of 
assets, Exports, Foreign trade, Humanitarian aid, Imports, Iraq, Oil 
imports, Penalties, Petroleum, Petroleum products, Reporting and 
recordkeeping requirements, Specially designated nationals, Travel 
restrictions.
    For the reasons set forth in the preamble, 31 CFR part 575 is 
amended as follows:

PART 575--IRAQI SANCTIONS REGULATIONS

    1. The authority citation for part 575 is revised to read as 
follows:
    Authority: 50 U.S.C. 1701-1706; 50 U.S.C. 1601-1651; 22 U.S.C. 
287c; Pub. L. 101-513, 104 Stat. 2047-55 (50 U.S.C. 1701 note); Pub. 
L. 104-132, 110 Stat. 1214, 1254 (18 U.S.C. 2332d); Pub. L. 101-410, 
104 Stat. 890 (28 U.S.C. 2461 note); 3 U.S.C. 301; E.O. 12722, 55 FR 
31803, 3 CFR, 1990 Comp., p. 294; E.O. 12724, 55 FR 33089, 3 CFR, 
1992 Comp., p. 317; E.O. 12817, 57 FR 48433, 3 CFR, 1992 Comp., p. 
317.

Subpart C--General Definitions

    2. Section 575.325 is revised to read as follows:


Sec. 575.325  986 Escrow Account; United Nations Iraq Account.

    The term 986 Escrow Account or United Nations Iraq Account means 
the escrow account established by the Secretary-General of the United 
Nations pursuant to paragraph 7 of UNSC Resolution 986.
    3. Section 575.327 is added to subpart C to read as follows:


Sec. 575.327  Memorandum of Understanding.

    The term Memorandum of Understanding means the Memorandum of 
Understanding Between the Secretariat of the United Nations and the 
Government of Iraq on the Implementation of Security Council Resolution 
986 (1995).
    4. Section 575.328 is added to subpart C to read as follows:


Sec. 575.328  Guidelines.

    The term Guidelines means the Procedures to be Employed by the 
Security Council Committee Established by Resolution 661 (1990) 
Concerning the Situation Between Iraq and Kuwait in the Discharge of 
its Responsibility as Required by Paragraph 12 of Security Council 
Resolution 986 (1995).

Subpart E--Licenses, Authorizations, and Statements of Licensing 
Policy

    5. Section 575.522 is amended by removing paragraph (a)(2), 
redesignating paragraphs (a)(3) and (a)(4) as (a)(2) and (a)(3) 
respectively; redesignating paragraphs (b), (c), (d) and (e) as (c), 
(d), (e), and (f) respectively amending new paragraph (c) by revising 
``paragraph (a)'' to read ``paragraphs (a) and (b)''; ; and adding a 
new paragraph (b) to read as follows:


Sec. 575.522  Executory contracts with the Government of Iraq for trade 
in petroleum, pipeline parts and equipment, and humanitarian goods 
authorized.

*****
    (b) United States persons are authorized to enter into executory 
contracts for the trading, importation, exportation, or other dealings 
in or related to Iraqi-origin petroleum and petroleum products outside 
Iraq, the performance of which is contingent upon the prior 
authorization of the Office of Foreign Assets Control in or pursuant to 
this part.
*****
    6. Section 575.523 is added to subpart E to read as follows:


Sec. 575.523  Certain transactions in Iraqi petroleum and petroleum 
products.

    (a) Specific licenses may be issued on a case-by-case basis to 
permit United States persons to purchase Iraqi-origin petroleum or 
petroleum products from the Government of Iraq in accordance with the 
provisions of UNSC Resolution 986, other relevant Security Council 
resolutions, the Memorandum of Understanding, and other guidance issued 
by the 661 Committee. Licensees will be included on the U.S. oil 
purchaser list to be provided to the 661 Committee, authorizing such 
U.S. persons to seek approval from the 661 Committee or its designee 
for the purchase of Iraqi-origin petroleum or petroleum products. 
Licensees are authorized to perform a contract approved by the 661 
Committee or its designee in accordance with its terms.
    (b) Applications for specific licenses pursuant to this section 
shall provide the following information:
    (1) The applicant's full legal name;
    (2) The applicant's mailing and street addresses;
    (3) The name of the individual(s) responsible for the license 
application and related commercial transactions and the individual's 
telephone and facsimile numbers;

[[Page 65314]]

    (4) If the applicant is a business entity, the state or 
jurisdiction of incorporation and principal place of business;
    (5) Written certification that the applicant has entered into an 
executory contract for the purchase of Iraqi-origin petroleum or 
petroleum products with the Government of Iraq, that the contract 
accords with normal arms-length commercial practice, and that the 
applicant is familiar with this part, particularly Secs. 575.601 and 
575.602, and will make the executory contract and other documents 
related to the purchase of Iraqi-origin petroleum or petroleum products 
available to the Office of Foreign Assets Control in accordance with 
the requirements of this part; and
    (6) Written certification that the applicant understands that 
issuance of a license pursuant to this section does not authorize a 
licensee to provide goods, services, or compensation of any kind to the 
Government of Iraq other than that specifically provided in contracts 
entered into by the applicant and the Government of Iraq and submitted 
to and approved by the 661 Committee or its designee.
    (c) Applications for specific licenses pursuant to this section 
shall be submitted to the Licensing Division, Office of Foreign Assets 
Control, U.S. Treasury Department, 1500 Pennsylvania Avenue, NW--Annex, 
Washington, DC 20220.
    (d) Contracts may be performed only as specifically authorized 
pursuant to this section unless additional authorization is granted or 
obtained pursuant to this part for any amendment or modification.
    (e) This section does not authorize any transfer of funds or other 
financial or economic resources to or for the benefit of the Government 
of Iraq or a person in Iraq except transfers to the 986 Escrow Account.
    (f) Attention is drawn to Sec. 575.418 regarding authorization for 
transactions ordinarily incident to a licensed transaction.
    7. Section 575.524 is added to subpart E to read as follows:


Sec. 575.524  Exportation of pipeline parts and equipment.

    (a) Specific licenses may be issued to U.S. persons on a case-by-
case basis to permit the sale and exportation to Iraq of pipeline parts 
and equipment essential for the safe operation of the Kirkuk-Yumurtalik 
pipeline system in Iraq, in accordance with the provisions of UNSC 
Resolution 986, other applicable Security Council resolutions, the 
Memorandum of Understanding, and applicable guidance issued by the 661 
Committee.
    (b) Applications for specific licenses pursuant to this section 
shall be made in advance of the proposed sale and exportation, and 
provide the following information:
    (1) Identification of the applicant, including:
    (i) Applicant's full legal name;
    (ii) Applicant's mailing and street addresses;
    (iii) The name of the individual(s) responsible for the application 
and related commercial transactions and the individual's telephone and 
facsimile numbers; and
    (iv) If the applicant is a business entity, the state or 
jurisdiction of incorporation and principal place of business;
    (2) The name and address of all parties involved in the 
transactions and their role, including financial institutions and any 
Iraqi broker, purchasing agent, or other participant in the purchase of 
the pipeline parts or equipment;
    (3) The nature, quantity, value and intended use of the pipeline 
parts and equipment;
    (4) The intended point(s) of entry into Iraq, proposed dates of 
entry and delivery, and the final destination in Iraq of the pipeline 
parts and equipment;
    (5) A copy of the concluded contract with the Government of Iraq 
and other relevant documentation, all of which must comply with the 
provisions of UNSC Resolution 986, other applicable Security Council 
resolutions, the Memorandum of Understanding, and applicable guidance 
issued by the 661 Committee; and
    (6) A statement that the applicant is familiar with the 
requirements of the above-referenced documents, particularly Memorandum 
of Understanding paragraph 24 and Guidelines paragraphs 35 and 45, and 
will conform the letter of credit and related financing documents to 
their terms.
    (c) Applications for specific licenses pursuant to this section 
shall be submitted to the Licensing Division, Office of Foreign Assets 
Control, U.S. Treasury Department, 1500 Pennsylvania Avenue, NW--Annex, 
Washington, DC 20220.
    (d) Attention is drawn to Sec. 575.418 regarding authorization for 
transactions ordinarily incident to a transaction licensed by OFAC. 
Transactions of a U.S. person that are incidental to a third-country 
national's activities pursuant to UNSC Resolution 986 require specific 
OFAC licensing. Licensing requirements for the reexportation of goods 
subject to U.S. jurisdiction are addressed in Sec. 575.205.
    (e) Contracts may be performed only pursuant to the terms submitted 
to OFAC when specifically authorized pursuant to this section unless 
additional authorization is granted or obtained pursuant to this part 
for any amendment or modification of such contracts.
    (f) Payment for goods exported pursuant to this section may be 
obtained only from the 986 Escrow Account, and must conform to the 
requirements of UNSC Resolution 986, other applicable Security Council 
resolutions, the Memorandum of Understanding, and applicable guidance 
issued by the 661 Committee.
    (g) Attention is drawn to Sec. 575.101 regarding compliance with 
other applicable laws and regulations. No license or authorization 
contained in or issued pursuant to this part shall be deemed to 
authorize the exportation, reexportation or retransfer of goods, 
technology, or services that are subject to unmet export license 
application requirements of another agency of the United States 
Government.
    8. Section 575.525 is added to subpart E to read as follows:


Sec. 575.525  Exportation of humanitarian aid.

    (a) Specific licenses may be issued to U.S. persons on a case-by-
case basis to permit the sale and exportation to Iraq of medicine, 
health supplies, foodstuffs, and materials and supplies for essential 
civilian needs of the Iraqi population (``Humanitarian Aid''), in 
accordance with the provisions of UNSC Resolution 986, other applicable 
Security Council resolutions, the Memorandum of Understanding, and 
applicable guidance issued by the 661 Committee.
    (b) Applications for specific licenses pursuant to this section 
shall be made in advance of the proposed sale and exportation, and 
provide the following information:
    (1) Identification of the applicant, including:
    (i) Applicant's full legal name;
    (ii) Applicant's mailing and street addresses;
    (iii) The name of the individual(s) responsible for the application 
and related commercial transactions and the individual's telephone and 
facsimile numbers; and
    (iv) If the applicant is a business entity, the state or 
jurisdiction of incorporation and principal place of business.
    (2) The name and address of all parties involved in the 
transactions and their role, including financial

[[Page 65315]]

institutions and any Iraqi broker, purchasing agent, or other 
participant in the purchase of the Humanitarian Aid;
    (3) The nature, quantity, value and the intended use of the 
Humanitarian Aid;
    (4) The intended point(s) of entry into Iraq, proposed dates of 
entry and delivery, and the final destination in Iraq of the 
Humanitarian Aid;
    (5) A copy of the concluded contract with the Government of Iraq or 
the United Nations Inter-Agency Humanitarian Programme and other 
relevant documentation, all of which must comply with the provisions of 
UNSC Resolution 986, other applicable Security Council resolutions, the 
Memorandum of Understanding, and applicable guidance issued by the 661 
Committee; and
    (6) A statement that the applicant is familiar with the 
requirements of UNSC Resolution 986, other applicable Security Council 
resolutions, the Memorandum of Understanding, and applicable guidance 
issued by the 661 Committee, particularly Memorandum of Understanding 
paragraph 24 and Guidelines paragraphs 35 and 45, and will conform the 
letter of credit and related financing documents to their terms.
    (c) Applications for specific licenses pursuant to this section 
shall be submitted to the Licensing Division, Office of Foreign Assets 
Control, U.S. Treasury Department, 1500 Pennsylvania Avenue, NW--Annex, 
Washington, DC 20220.
    (d) Attention is drawn to Sec. 575.418 regarding authorization for 
transactions ordinarily incident to a transaction licensed by OFAC. 
Transactions of a U.S. person that are incidental to a third-country 
national's activities pursuant to UNSC Resolution 986 require specific 
OFAC licensing. Licensing requirements for the reexportation of goods 
subject to U.S. jurisdiction are addressed in Sec. 575.205.
    (e) Contracts may be performed only pursuant to the terms submitted 
to OFAC when specifically authorized pursuant to this section unless 
additional authorization is granted or obtained pursuant to this part 
for any amendment or modification of such contracts.
    (f) Payment for goods exported pursuant to this section may be 
obtained only from the 986 Escrow Account and must conform to the 
requirements of UNSC Resolution 986, other applicable Security Council 
resolutions, the Memorandum of Understanding, and applicable guidance 
issued by the 661 Committee.
    (g) Attention is drawn to Sec. 575.101 regarding compliance with 
other applicable laws and regulations. No license or authorization 
contained in or issued pursuant to this part shall be deemed to 
authorize the exportation, reexportation or retransfer of goods, 
technology, or services that are subject to unmet export license 
application requirements of another agency of the United States 
Government.
    9. Section 575.526 is added to subpart E to read as follows:


Sec. 575.526  Dealings in and importation of certain Iraqi-origin 
petroleum and petroleum products authorized.

    (a) United States persons are authorized to deal in, and to import 
into the United States, Iraqi-origin petroleum and petroleum products, 
the purchase and exportation from Iraq of which have been authorized by 
the 661 Committee or its designee and, if otherwise required pursuant 
to this part, by the Office of Foreign Assets Control.
    (b) This section does not authorize any transfer of funds or other 
financial or economic resources to or for the benefit of the Government 
of Iraq or a person in Iraq except transfers to the 986 Escrow Account.
    (c) Attention is drawn to Sec. 575.418 regarding authorization for 
transactions ordinarily incident to a licensed transaction.
    10. Section 575.901 is amended by adding a sentence to the end 
thereof to read as follows:


Sec. 575.901  Paperwork Reduction Act Notice.

    * * * The information collection requirements in Secs. 575.523, 
575.524, and 575.525 have been approved by the Office of Management and 
Budget and assigned control number 1505-0130.

    Dated: December 9, 1996.
R. Richard Newcomb,
Director, Office of Foreign Assets Control.
    Approved: December 9, 1996.
Elisabeth A. Bresee,
Deputy Assistant Secretary (Law Enforcement).
[FR Doc. 96-31647 Filed 12-10-96; 12:10 pm]
BILLING CODE 4810-25-F