Guidance for Regional and Global Commodity Trading, Supplier, and Brokering Companies
Regional and global commodity trading, supplier, and brokering companies may wish to consider implementing the following due diligence practices as appropriate in assessing and mitigating sanctions risks.
Monitoring AIS transmissions of chartered clients, especially in the case of vessels in areas determined to be at high-risk for sanctions evasion via ship-to-ship transfers.
Identifying the vessels which, in the past two years, have a pattern of AIS disablement or manipulation inconsistent with SOLAS and potentially terminating business relationships with clients that continue to use those vessels.
Adopting contractual language with chartered clients that incorporate an “AIS switch-off” clause, allowing for contract termination if the chartered clients demonstrates a pattern of multiple instances of AIS disablement or manipulation that is inconsistent with SOLAS.
Incorporating contractual language that prohibits transfers of cargo to vessels that are not broadcasting AIS for reasons inconsistent with SOLAS.
Adopting a contractual provision that incorporates a mechanism to monitor whether commodity transactions occur as outlined under the original contract and any addenda to the contract.
Ensuring that, in transactions involving ship-to-ship transfers, transacting parties should endeavor to note all involved vessels’ IMO numbers and conduct reviews of vessel logs and cargo certificate of origin to establish a relevant chain of custody for the commodity in question.
Sensitizing clients to potential sanctions risk related to activities involving Iranian, North Korean, or Syrian ports.
Providing regular case studies and updates regarding illicit activity in industry-wide circulars, particularly in relation to shipping oil and petroleum products. This should include the specific North Korea-related UN Security Council resolutions provisions regarding ship-to-ship transfers (UNSCR 2375, OP 11), as well as UNSCR 2397 (OP 13), which expresses concern that North Korea-associated vessels intentionally disregard requirements to operate AIS to evade UNSCR sanctions monitoring.
Recognizing that purchases of crude and refined petroleum, petrochemicals, and metals at rates significantly below market prices may be red flags indicating illicit behavior.
Requesting and reviewing complete and accurate shipping documentation, including bills of lading identifying the origin of cargo where individuals and entities are processing transactions pertaining to shipments potentially involving products to or from Iran, North Korea, or Syria. Such shipping documentation should reflect the details of the underlying voyage, including the vessel(s), cargo, origin, destination, and parties to the transaction. Any indication of manipulated shipping documentation is a red flag for potential illicit activity and should be investigated fully prior to continuing with the transaction.
Ensuring employees who reveal illegal or sanctionable behavior are protected from retaliation, and ensuring there is a confidential mechanism to report suspected or actual violations of law or sanctionable conduct.
Communicating with international partners, as shipping business arrangements may involve parties subject to the laws of different jurisdictions. Explaining relevant restrictions under U.S. and UN sanctions regimes to parties involved in a transaction can facilitate more effective compliance with them. The United States encourages all parties involved in the shipping industry to share this advisory with those in your supply chain.
Incorporating data into due diligence practices from several organizations that provide commercial shipping data, such as ship location, ship registry information, and ship flagging information, along with available information from the U.S. Department of the Treasury, the UN, and the U.S. Coast Guard.
Requiring contractual language that describes AIS disablement and manipulation inconsistent with SOLAS and sanctionable conduct as of the contract date as potential grounds for termination of the contract and removal and denial of services. Additionally, parties could incorporate contractual language that prohibits transfers of cargo to clients that are not broadcasting AIS consistent with SOLAS or have an AIS history that indicates manipulation inconsistent with SOLAS.