US Crude Oil Exports Flow Again

The Bureau of Industry and Security (BIS) followed suit on December 22, 2015 when it posted the following licensing policy guidance for crude oil exports on its website:

Effective immediately, pursuant to section 101 of Division O of the Consolidated Appropriations Act, 2016, signed on December 18, 2015, a Department of Commerce license is no longer required to export crude oil. Crude oil is now classified as EAR99. Most exports of crude oil may now be made as NLR (no license required). Exporters should be aware that exports to embargoed or sanctioned countries or persons, including those listed in parts 744 and 746 of the EAR and persons subject to a denial of export privileges, continue to require authorization.

BIS will shortly be taking steps to amend the Export Administration Regulations to reflect this change. Companies holding current licenses for crude oil exports should be aware of section 750.7(i) of the EAR terminating license conditions upon the termination of the requirement for the export license.

In short, whether the crude oil is of US or foreign-origin, because crude oil is now classified as EAR99 it can be exported from the United States to most countries without a US export license. The only restrictions are exports to the embargoed countries/region (Iran, Cuba, North Korea, North Sudan, Syria, and the Crimea region) and to prohibited/restricted end-users and end-uses.

Further, according to section 750.7(i) of the EAR, companies that already have an export license to export crude oil with license conditions are no longer bound by these conditions. However, this change does not relieve an exporter or reexporter of its responsibility for any export violations that might have occurred prior to December 18, 2015.

The new law makes it very difficult to reimpose the crude oil export ban. The President can only reimpose export licensing requirements or other restrictions on the export of crude oil from the US for a period of 1 year or less. The law includes affirmative actions a President and his Administration would have to take to reinstate the export ban, including:

1. declare a national emergency and issue a notice of the declaration in the Federal Register;
2. identify specific countries, persons or organizations to which the ban applies and explain the national security reasons for the action; or
3. the Secretary of Commerce, in consultation with the Secretary of Energy, finds and reports to the President that
   1. the export of crude oil has caused sustained material oil supply shortages or sustained oil prices significantly above world market levels that are directly attributable to the export of crude oil produced in the US; and
   2. those supply shortages or price increases have caused or are likely to cause sustained material adverse employment effects in the United States.

Arent Fox has significant experience in helping companies navigate and comply with US sanctions laws and export controls as well as interfacing with the OFAC and the BIS on a company’s behalf.