On September 17, 2021, the President signed Executive Order (“E.O.”) 14046, imposing sanctions on certain persons with respect to the humanitarian and human rights crisis in Ethiopia.

According to a Fact Sheet issued by the White House, the conflict in Ethiopia “has sparked one of the worst humanitarian and human rights crises in the world, with over 5 million people requiring humanitarian assistance and nearly one million living in famine-like conditions.”

The U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and the Department of State also issued related press releases.

On the same day, OFAC issued three related general licenses (“GLs”) and six frequently asked questions (“FAQs”). The GLs and FAQs are explained in further detail below.

The Scope of E.O. 14046

E.O. 14046 authorizes the imposition of sanctions on any foreign person determined by the Secretary of the Treasury, in consultation with the Secretary of State, inter alia:

  • to have engaged in, or attempted to engage in, certain corruption and/or serious human rights abuse in northern Ethiopia;
  • to be a military or security force that operates or has operated in northern Ethiopia on or after November 1, 2020;
  • to be an entity that has engaged in, or whose members have engaged in, activities that have contributed to the crisis in northern Ethiopia;
  • to be a political subdivision, agency, or instrumentality of the Government of Ethiopia, the Government of Eritrea, or certain other political groups;
  • to be a spouse or adult child of any sanctioned person;
  • to be or have been a leader, official, senior executive officer, or member of the board of directors of certain entities, where the person has engaged or attempted to engage in, any activity contributing to the crisis in northern Ethiopia;
  • to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any sanctioned person; or
  • to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any sanctioned person.

With respect to individuals and entities designated pursuant to E.O. 14046, the executive order authorizes OFAC to select from a “menu” of blocking and non-blocking sanctions measures, including the following:

  • block all property and interests in property of the sanctioned person that are in the U.S., that hereafter come within the U.S., or that are or hereafter come within the possession or control of any U.S. person, and provide that such property and interests in property may not be transferred, paid, exported, withdrawn, or otherwise dealt in;
  • prohibit any U.S. person from investing in or purchasing significant amounts of equity or debt instruments of the sanctioned person;
  • prohibit any U.S. financial institution from making loans or providing credit to the sanctioned person;
  • prohibit any transactions in foreign exchange that are subject to the jurisdiction of the U.S. and in which the sanctioned person has any interest; or
  • impose on the leader, official, senior executive officer, or director of the sanctioned person, or on persons performing similar functions and with similar authorities as such persons, any of the sanctions described above.

General Licenses

GL 1 authorizes all transactions and activities that are for the conduct of the official business of the following entities, by employees, grantees, or contractors: (i) the United Nations, (ii) the International Centre for Settlement of Investment Disputes and the Multilateral Investment Guarantee Agency; (iii) the African Development Bank Group, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank Group; (iv) the International Committee of the Red Cross and the International Federation of Red Cross and Red Crescent Societies; and (v) the African Union.

GL 2 authorizes all transactions and activities that are ordinarily incident and necessary to the activities by nongovernmental organizations, including: (i) the processing and transfer of funds; (ii) the payment of taxes, fees, and import duties; and (iii) the purchase or receipt of permits, licenses, or public utility services.

GL 3 authorizes all transactions and activities that are ordinarily incident and necessary to the exportation or reexportation of agricultural commodities, medicine, medical devices, replacement parts and components for medical devices, or software updates for medical devices to Ethiopia or Eritrea, or to persons in other countries purchasing specifically for resale to Ethiopia or Eritrea.

Frequently Asked Questions

FAQ 922 explains that E.O. 14046 provides for the imposition of menu-based sanctions on foreign persons determined by the Secretary of the Treasury, in consultation with the Secretary of State, to meet certain criteria under the order, including foreign persons determined to be responsible for or complicit in actions or policies that expand or extend the ongoing crisis in northern Ethiopia or obstruct a ceasefire or peace process.

FAQ 923 clarifies that, unless an entity is itself a sanctioned person and listed separately on OFAC’s Specially Designated Nationals and Blocked Persons List (“SDN List”), it is not blocked pursuant to E.O. 14046. Thus, OFAC’s 50 Percent Rule does not apply to persons blocked solely pursuant to E.O. 14046.

FAQ 924 similarly clarifies that, if a person is listed on OFAC’s Non-SDN Menu-Based Sanctions List (“NS-MBS List”) as subject to only one or more of the sanctions described in E.O. 14046, these non-blocking sanctions do not apply to an entity owned in whole or in part, individually or in the aggregate, directly or indirectly, by such sanctioned person, unless OFAC separately lists the entity on the NS-MBS List as subject to sanctions.

FAQ 925 clarifies the particular organizations that are included within the definition of the United Nations’ “Programmes, Funds, and Other Entities and Bodies, as well as its Specialized Agencies and Related Organizations,” as used in GL 1.

FAQ 926 clarifies that GL 2 authorizes certain transactions and activities involving nongovernmental organizations’ (“NGOs”) activities in Ethiopia or Eritrea, including: (i) activities to support humanitarian projects and to meet basic human needs; (ii) activities to support democracy building; (iii) activities to support education; (iv) activities to support non-commercial development projects directly benefiting the people of Ethiopia or Eritrea; and (v) activities to support environmental and natural resource protection.

FAQ 927 explains that non-U.S. persons, including NGOs and foreign financial institutions, generally do not risk exposure to U.S. sanctions for engaging in, or facilitating transactions or payments for, activities that would be exempt or authorized for U.S. persons pursuant to GL 1, GL 2, and/or GL 3.

We will continue to monitor developments in this area, and encourage you to subscribe to be kept informed of latest developments. Please contact the authors or your usual Herbert Smith Freehills contacts for more information.

Jonathan Cross
Jonathan Cross
Counsel, New York
+1 917 542 7824
Christopher Boyd
Christopher Boyd
Associate, New York
+1 917 542 7821
Brittany Crosby-Banyai
Brittany Crosby-Banyai
Associate, New York
+1 917 542 7837
Alex Hokenson
Alex Hokenson
Associate, New York
+1 917 542 7836