Federal Republic of Yugoslavia (Serbia and Montenegro) Kosovo Sanctions Regulations

Federal RegisterOct 13, 1998

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DEPARTMENT OF TRANSPORTATION

DEPARTMENT OF THE TREASURY

Office of Foreign Assets Control

31 CFR Part 586

Federal Republic of Yugoslavia (Serbia and Montenegro) Kosovo

Sanctions Regulations

AGENCY: Office of Foreign Assets Control, Treasury.

ACTION: Final rule.

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SUMMARY: The Office of Foreign Assets Control of the U.S. Department of

the Treasury is issuing the Federal Republic of Yugoslavia (Serbia and

Montenegro) Kosovo Sanctions Regulations to implement Executive Order

13088 of June 9, 1998, ``Blocking Property of the Governments of the

Federal Republic of Yugoslavia (Serbia and Montenegro), the Republic of

Serbia, and the Republic of Montenegro, and Prohibiting New Investment

in the Republic of Serbia in Response to the Situation in Kosovo.''

EFFECTIVE DATE: October 13, 1998.

FOR FURTHER INFORMATION CONTACT: Steven I. Pinter, Chief of Licensing,

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 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

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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 ``Research Mall'' of the

FedWorld bulletin board. By modem, dial 703/321-3339, and select self-

expanding file ``T11FR00.EXE'' 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.treas.gov/ofac, 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 (within the United States) a touch-

tone telephone.

Background

On June 9, 1998, the President issued Executive Order 13088 (the

``Order''), effective at 12:01 a.m. EDT on June 10, 1998, declaring a

national emergency to deal with the threat posed to the national

security and foreign policy of the United States by the actions and

policies of the Governments of the Federal Republic of Yugoslavia

(Serbia and Montenegro) and the Republic of Serbia with respect to

Kosovo, invoking the authority, inter alia, of the International

Emergency Economic Powers Act (50 U.S.C. 1701-1706). The Order

authorizes the Secretary of the Treasury, in consultation with the

Secretary of State, to take such actions,

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including the promulgation of rules and regulations, as may be

necessary to carry out the purposes of the Order. In implementation of

the Order, the Treasury Department is issuing the Federal Republic of

Yugoslavia (Serbia and Montenegro) Kosovo Sanctions Regulations, 31 CFR

part 586 (the ``Regulations'').

Section 586.201 of the Regulations implements sections 1 and 2 of

the Order, blocking all property and interests in property of the

Governments of the Federal Republic of Yugoslavia (Serbia and

Montenegro), the Republic of Serbia, and the Republic of Montenegro

that are in the United States, that hereafter come within the United

States, or that are or hereafter come within the possession or control

of United States persons, including their overseas branches. In keeping

with the Order, this section also specifies that the blocking of

property and property interests includes the prohibition of financial

transactions with, including trade financing for, the Governments of

the Federal Republic of Yugoslavia (Serbia and Montenegro), the

Republic of Serbia, and the Republic of Montenegro by United States

persons. Section 586.201 also encompasses the exemption contained in

section 2 of the Order, which excludes from blocking financial

transactions, including trade financing, by United States persons

within the territory of the Federal Republic of Yugoslavia (Serbia and

Montenegro) if (a) conducted exclusively through the domestic banking

system within the Federal Republic of Yugoslavia (Serbia and

Montenegro) in local currency (dinars), or (b) conducted using bank

notes or barter. This exemption is further described in Sec. 586.408

and expanded by the general license contained in Sec. 586.513.

Section 7 of the Order provides that special consideration shall be

given to the circumstances of the Government of the Republic of

Montenegro and persons located in and organized under the laws of that

Republic in the implementation of the Order. On June 18, 1998, OFAC

issued General License No. 1, authorizing all transactions by U.S.

persons involving property or interests in property of the Government

of the Republic of Montenegro, except as provided pursuant to the

Federal Republic of Yugoslavia (Serbia and Montenegro) and Bosnian

Serb-Controlled Areas of the Republic of Bosnia and Herzegovina

Sanctions Regulations, 31 CFR part 585. This general license is

implemented in Sec. 586.516 of the Regulations.

Section 586.204 of the Regulations implements section 3 of the

Order and prohibits all new investment in the territory of the Republic

of Serbia by U.S. persons, and the approval or other facilitation by

U.S. persons of other persons' new investment in the territory of the

Republic of Serbia. The term ``new investment,'' defined in section

5(c) of the Order and Sec. 586.312 of the Regulations, means (i) the

acquisition of debt or equity interests in, (ii) a commitment or

contribution of funds or other assets to, or (iii) a loan or other

extension of credit to, a public or private undertaking, entity, or

project, other than donations of funds for purely humanitarian purposes

to charitable organizations.

Section 586.205 of the Regulations implements section 4 of the

Order and prohibits any transaction by a U.S. person that evades or

avoids, or that has the purpose of evading or avoiding, or attempts to

violate, any of the prohibitions set forth in the Order.

Transactions otherwise prohibited under this part but found to be

consistent with U.S. policy may be authorized by a general license

contained in subpart E or by a specific license issued pursuant to the

procedures described in subpart D of part 501 of 31 CFR chapter V.

Penalties for violations of the Regulations are described in subpart G

of the Regulations.

Since the Regulations involve a foreign affairs function, the

provisions of Executive Order 12866 and the Administrative Procedure

Act (5 U.S.C. 553) (the ``APA'') 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

As authorized in the APA, the Regulations are being issued without

prior notice and public comment procedure. Collections of information

related to the Regulations are contained in 31 CFR part 501 (the

``Reporting and Procedures Regulations''). Pursuant to the Paperwork

Reduction Act of 1995 (44 U.S.C. 3507), those collections of

information have been approved by OMB under control number 1505-0164.

An adjustment to the approved burden hours to reflect the additional

burden imposed in administering the Regulations has been filed with

OMB. 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.

List of Subjects in 31 CFR Part 586

Administrative practice and procedure, Banks, banking, Blocking of

assets, Federal Republic of Yugoslavia (Serbia & Montenegro),

Investments, Kosovo, Montenegro, Penalties, New investment, Reporting

and recordkeeping requirements, Serbia.

For the reasons set forth in the preamble, 31 CFR part 586 is added

to read as follows:

PART 586--FEDERAL REPUBLIC OF YUGOSLAVIA (SERBIA & MONTENEGRO)

KOSOVO SANCTIONS REGULATIONS

Subpart A--Relation of This Part to Other Laws and Regulations

Sec.

586.101 Relation of this part to other laws and regulations.

Subpart B--Prohibitions

586.201 Prohibited transactions involving blocked property.

586.202 Effect of transfers violating the provisions of this part.

586.203 Holding of funds in interest-bearing accounts; investment

and reinvestment.

586.204 Prohibited new investment within Serbia.

586.205 Evasions; attempts; conspiracies.

586.206 Exempt transactions.

Subpart C--General Definitions

586.301 Blocked account; blocked property.

586.302 Effective date.

586.303 Entity.

586.304 Federal Republic of Yugoslavia (Serbia & Montenegro); FRY

(S&M).

586.305 General license.

586.306 Government of the Federal Republic of Yugoslavia (Serbia and

Montenegro).

586.307 Government of the Republic of Montenegro.

586.308 Government of the Republic of Serbia.

586.309 Information and informational materials.

586.310 Interest.

586.311 License.

586.312 New investment.

586.313 Person.

586.314 Property; property interest.

586.315 Specific license.

586.316 Transfer.

586.317 U.S. financial institution.

586.318 United States.

586.319 United States person; U.S. person.

Subpart D--Interpretations

586.401 Reference to amended sections.

586.402 Effect of amendment.

586.403 Termination and acquisition of an interest in blocked

property.

586.404 Setoffs prohibited.

586.405 Transactions incidental to a licensed transaction.

586.406 Provision of services.

586.407 Offshore transactions.

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586.408 Exempt financial transactions within the territory of the

FRY (S&M); prohibition on establishment of new offices in Serbia.

586.409 Approval or other facilitation of other persons' investment

in the territory of the Republic of Serbia.

586.410 Transfer of funds to the benefit of certain persons in the

territory of the FRY (S&M).

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

586.501 General and specific licensing procedures.

586.502 Effect of license or authorization.

586.503 Exclusion from licenses and authorizations.

586.504 Payments and transfers to blocked accounts in U.S. financial

institutions.

586.505 Payment of obligations to U.S. persons authorized.

586.506 Investment and reinvestment of certain funds.

586.507 Completion of certain transactions related to bankers

acceptances authorized.

586.508 Entries in certain accounts for normal service charges

authorized.

586.509 Provision of certain legal services authorized.

586.510 Transactions related to telecommunications authorized.

586.511 Transactions related to mail authorized.

586.512 Transactions related to patents, trademarks and copyrights

authorized.

586.513 Certain transactions with respect to trade with blocked

persons authorized.

586.514 Divestiture of U.S. person's equity investment in the

territory of the Republic of Serbia.

586.515 Payments for services rendered by the Government of the FRY

(S&M) to aircraft authorized; aircraft and maritime safety.

586.516 Transactions with respect to property in which the

Government of Montenegro has an interest authorized.

Subpart F--Reports

586.601 Records and reports.

Subpart G--Penalties

586.701 Penalties.

586.702 Prepenalty notice.

586.703 Response to prepenalty notice; informal settlement.

586.704 Penalty imposition or withdrawal.

586.705 Administrative collection; referral to United States

Department of Justice.

Subpart H--Procedures

586.801 Procedures.

586.802 Delegation by the Secretary of the Treasury.

Subpart I--Paperwork Reduction Act

586.901 Paperwork Reduction Act notice.

Authority: 3 U.S.C. 301; 31 U.S.C. 321(b); 50 U.S.C. 1601-1641,

1701-1706; E.O. 13088, 63 FR 32109 (June 12, 1998).

Subpart A--Relation of This Part to Other Laws and Regulations

Sec. 586.101 Relation of this part to other laws and regulations.

(a) This part is separate from, and independent of, the other parts

of this chapter with the exception of part 501 of this chapter, the

recordkeeping and reporting requirements and license application and

other procedures of which apply to this part. Actions pursuant to part

501 of this chapter with respect to the prohibitions of this part are

considered actions pursuant to this part. Differing foreign policy and

national security contexts may result in differing interpretations of

similar language among the parts of this chapter. No license or

authorization contained in or issued pursuant to those other parts

authorizes any transaction prohibited by this part. No license or

authorization contained in or issued pursuant to any other provision of

law or regulation authorizes any transaction prohibited by this part.

(b) No license or authorization contained in or issued pursuant to

this part relieves the involved parties from complying with any other

applicable laws or regulations.

Subpart B--Prohibitions

Sec. 586.201 Prohibited transactions involving blocked property.

(a) Except as authorized by regulations, orders, directives,

rulings, instructions, licenses, or otherwise, no property or interests

in property of the Governments of the FRY (S&M), the Republic of

Serbia, and the Republic of Montenegro, that are in the United States,

that hereafter come within the United States, or that are or hereafter

come within the possession or control of U.S. persons, including their

overseas branches, may be transferred, paid, exported, withdrawn or

otherwise dealt in.

(b) The blocking of property and property interests in paragraph

(a) of this section includes the prohibition of financial transactions

with, including trade financing for, the Governments of the FRY (S&M),

the Republic of Serbia, and the Republic of Montenegro by United States

persons.

including trade financing, by United States persons within the

territory of the FRY (S&M) if conducted exclusively through the

domestic banking system within the FRY (S&M) in local currency

(dinars), or conducted using bank notes or barter.

Note to paragraph (c) of Sec. 586.201: See Secs. 586.408 and

586.513.

(d) Unless otherwise authorized by this part or by a specific

license expressly referring to this section, the transfer (including

the transfer on the books of any issuer or agent thereof), disposition,

transportation, importation, exportation, or withdrawal of, or the

endorsement or guaranty of signatures on, or otherwise dealing in any

security (or evidence thereof) registered or inscribed in the name of

the Governments of the FRY (S&M), the Republic of Serbia, and the

Republic of Montenegro, and held within the possession or control of a

U.S. person is prohibited, irrespective of the fact that at any time

(either prior to, on, or subsequent to the effective date) the

registered or inscribed owner thereof may have, or appears to have,

assigned, transferred, or otherwise disposed of any such security.

(e) When a transaction results in the blocking of funds at a

financial institution pursuant to this section and a party to the

transaction believes the funds have been blocked due to mistaken

identity, that party may seek to have such funds unblocked pursuant to

the administrative procedures set forth in Sec. 501.806 of this

chapter.

Note to Sec. 586.201: On June 18, 1998, the Office of Foreign

Assets Control issued General License No. 1, now contained in

Sec. 586.516, authorizing all transactions by U.S. persons involving

property or interests in property of the Government of the Republic

of Montenegro, except with respect to property that continues to be

blocked pursuant to the Federal Republic of Yugoslavia (Serbia and

Montenegro) and Bosnian Serb-Controlled Areas of the Republic of

Bosnia and Herzegovina Sanctions Regulations, 31 CFR part 585 (see

Sec. 585.525). In addition, as set forth in Sec. 586.502 (d), any

transaction authorized with respect to the Government of the FRY

(S&M) pursuant to this part is also authorized with respect to the

Governments of the Republic of Serbia and the Republic of

Montenegro, unless otherwise specified.

Sec. 586.202 Effect of transfers violating the provisions of this

part.

(a) Any transfer after the effective date which is in violation of

any provision of this part or of any regulation, order, directive,

ruling, instruction, license, or other authorization issued pursuant to

this part and involves any property or interest in property blocked

pursuant to Sec. 586.201 is null and void and shall not be the basis

for the assertion or recognition of any interest in or right, remedy,

power or privilege with respect to such property or property interests.

(b) No transfer before the effective date shall be the basis for

the assertion or recognition of any right, remedy,

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power, or privilege with respect to, or interest in, any property or

interest in property blocked pursuant to Sec. 586.201, unless the

person with whom such property is held or maintained, prior to such

date, had written notice of the transfer or by any written evidence had

recognized such transfer.

authorization issued by or pursuant to the direction or authorization

of the Director of the Office of Foreign Assets Control before, during,

or after a transfer shall validate such transfer or render it

enforceable to the same extent that it would be valid or enforceable

but for the provisions of the International Emergency Economic Powers

Act, this part, and any regulation, order, directive, ruling,

instruction, or license issued pursuant to this part.

(d) Transfers of property which otherwise would be null and void or

unenforceable by virtue of the provisions of this section shall not be

deemed to be null and void or unenforceable as to any person with whom

such property was held or maintained (and as to such person only) in

cases in which such person is able to establish to the satisfaction of

the Director of the Office of Foreign Assets Control each of the

following:

(1) Such transfer did not represent a willful violation of the

provisions of this part by the person with whom such property was held

or maintained;

(2) The person with whom such property was held or maintained did

not have reasonable cause to know or suspect, in view of all the facts

and circumstances known or available to such person, that such transfer

required a license or authorization by or pursuant to this part and was

not so licensed or authorized, or if a license or authorization did

purport to cover the transfer, that such license or authorization had

been obtained by misrepresentation of a third party or the withholding

of material facts or was otherwise fraudulently obtained; and

(3) The person with whom such property was held or maintained filed

with the Office of Foreign Assets Control a report setting forth in

full the circumstances relating to such transfer promptly upon

discovery that:

(i) Such transfer was in violation of the provisions of this part

or any regulation, ruling, instruction, license, or other direction or

authorization issued pursuant to this part; or

(ii) Such transfer was not licensed or authorized by the Director

of the Office of Foreign Assets Control; or

(iii) If a license did purport to cover the transfer, such license

had been obtained by misrepresentation of a third party or the

withholding of material facts or was otherwise fraudulently obtained.

Note to paragraph (d) of Sec. 586.202: The filing of a report in

accordance with the provisions of paragraph (d)(3) of this section

shall not be deemed evidence that the terms of paragraphs (d)(1) and

(2) of this section have been satisfied.

(e) Unless licensed or authorized pursuant to this part, any

attachment, judgment, decree, lien, execution, garnishment, or other

judicial process is null and void with respect to any property or

interest in property blocked pursuant to Sec. 586.201.

Sec. 586.203 Holding of funds in interest-bearing accounts; investment

and reinvestment.

(a) Except as provided in paragraph (c) or (d) of this section, or

as otherwise directed by the Office of Foreign Assets Control, any U.S.

person holding funds, such as currency, bank deposits, or liquidated

financial obligations, subject to Sec. 586.201 shall hold or place such

funds in a blocked interest-bearing account located in the United

States.

(b)(1) For purposes of this section, the term blocked interest-

bearing account means a blocked account:

(i) In a federally-insured U.S. bank, thrift institution, or credit

union, provided the funds are earning interest at rates which are

commercially reasonable; or

(ii) With a broker or dealer registered with the Securities and

Exchange Commission under the Securities Exchange Act of 1934, provided

the funds are invested in a money market fund or in U.S. Treasury

bills.

(2) For purposes of this section, a rate is commercially reasonable

if it is the rate currently offered to other depositors on deposits or

instruments of comparable size and maturity.

(3) Funds held or placed in a blocked account pursuant to this

paragraph (b) may not be invested in instruments the maturity of which

exceeds 180 days. If interest is credited to a separate blocked account

or sub-account, the name of the account party on each account must be

the same.

180 days at the time the funds become subject to Sec. 586.201 may

continue to be held until maturity in the original instrument, provided

any interest, earnings, or other proceeds derived therefrom are paid

into a blocked interest-bearing account in accordance with paragraph

(b) or (d) of this section.

(d) Blocked funds held in accounts or instruments outside the

United States at the time the funds become subject to Sec. 586.201 may

continue to be held in the same type of accounts or instruments,

provided the funds earn interest at rates which are commercially

reasonable.

(e) This section does not create an affirmative obligation for the

holder of blocked tangible property, such as chattels or real estate,

or of other blocked property, such as debt or equity securities, to

sell or liquidate such property at the time the property becomes

subject to Sec. 586.201. However, the Office of Foreign Assets Control

may issue licenses permitting or directing such sales in appropriate

cases.

(f) Funds subject to this section may not be held, invested, or

reinvested in a manner which provides immediate financial or economic

benefit or access to persons whose property or interests in property

are blocked pursuant to Sec. 586.201, nor may their holder cooperate in

or facilitate the pledging or other attempted use as collateral of

blocked funds or other assets.

Sec. 586.204 Prohibited new investment within Serbia.

Except as otherwise provided in regulations, orders, directives, or

licenses that may hereafter be issued pursuant to this order, all new

investment in the territory of the Republic of Serbia by United States

persons, and the approval or other facilitation by United States

persons of other persons' new investment in the territory of the

Republic of Serbia, are prohibited.

Sec. 586.205 Evasions; attempts; conspiracies.

Any transaction by any United States person or within the United

States that evades or avoids, or has the purpose of evading or

avoiding, or attempts to violate, any of the prohibitions set forth in

this part is prohibited. Any conspiracy formed for the purpose of

engaging in a transaction prohibited by this part is prohibited.

Sec. 586.206 Exempt transactions.

(a) Personal communications. The prohibitions contained in this

part do not apply to any postal, telegraphic, telephonic, or other

personal communication, which does not involve the transfer of anything

of value.

(b) Information and informational materials. (1) The importation

from any country and the exportation to any country of information or

informational materials as defined in Sec. 586.309, whether commercial

or otherwise, regardless of format or medium of transmission, are

exempt from the prohibitions and regulations of this part.

(2) This section does not authorize transactions related to

information and

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informational materials not fully created and in existence at the date

of the transactions, or to the substantive or artistic alteration or

enhancement of informational materials, or to the provision of

marketing and business consulting services. Such prohibited

transactions include, but are not limited to, payment of advances for

information and informational materials not yet created and completed

(with the exception of prepaid subscriptions for widely circulated

magazines and other periodical publications), provision of services to

market, produce or co-produce, create or assist in the creation of

information and informational materials, and payment of royalties to

persons whose property or interests in property are blocked pursuant to

Sec. 586.201 with respect to income received for enhancements or

alterations made by U.S. persons to information or informational

materials imported from persons whose property and property interests

are blocked pursuant to Sec. 586.201.

(3) This section does not exempt or authorize transactions incident

to the exportation of software subject to the Export Administration

Regulations, 15 CFR parts 730-774, or to the exportation of goods,

technology or software, or to the sale or leasing of telecommunications

transmission facilities (such as satellite links or dedicated lines)

for use in the transmission of any data. The exportation of such items

or services and the sale or leasing of such facilities to a person

whose property and interests in property are blocked pursuant to

Sec. 586.201 is prohibited.

transactions ordinarily incident to travel to or from any country,

including exportation or importation of accompanied baggage for

personal use, maintenance within any country including payment of

living expenses and acquisition of goods or services for personal use,

and arrangement or facilitation of such travel including non-scheduled

air, sea, or land voyages.

(d) Journalistic activity. The prohibitions contained in this part

do not apply to transactions in the FRY (S&M) for journalistic activity

by persons regularly employed in such capacity by a news-gathering

organization.

(e) Humanitarian donations. The prohibitions of this part do not

apply to donations by U.S. persons of articles, such as food, clothing,

and medicine, intended to be used to relieve human suffering.

Subpart C--General Definitions

Sec. 586.301 Blocked account; blocked property.

The terms blocked account and blocked property shall mean any

account or property subject to the prohibition in Sec. 586.201 held in

the name of a person whose property is blocked pursuant to Sec. 586.201

or in which such person has an interest, and with respect to which

payments, transfers, exportations, withdrawals, or other dealings may

not be made or effected except pursuant to an authorization or license

from the Office of Foreign Assets Control.

Sec. 586.302 Effective date.

The term effective date refers to the effective date of the

applicable prohibitions and directives contained in this part which is

12:01 a.m. EDT, June 10, 1998.

Sec. 586.303 Entity.

The term entity means a partnership, association, trust, joint

venture, corporation, or other organization.

Sec. 586.304 Federal Republic of Yugoslavia (Serbia & Montenegro); FRY

(S&M).

The term Federal Republic of Yugoslavia (Serbia & Montenegro) or

FRY (S&M) means the territory of the Republics of Serbia and

Montenegro.

Sec. 586.305 General license.

The term general license means any license or authorization the

terms of which are set forth in this part.

Sec. 586.306 Government of the Federal Republic of Yugoslavia (Serbia

and Montenegro).

The term Government of the Federal Republic of Yugoslavia (Serbia

and Montenegro) means the government of the FRY (S&M), its agencies,

instrumentalities, and controlled entities, including all financial

institutions and state-owned and socially-owned entities organized or

located in the FRY (S&M) as of June 9, 1998, any successors to such

entities, and their respective subsidiaries and branches, wherever

located, and any persons acting or purporting to act for or on behalf

of any of the foregoing.

Note to Sec. 586.306: Please refer to the appendices at the end

of this chapter for listings of persons determined to fall within

this definition who have been designated pursuant to this part.

Section 501.807 of this chapter sets forth the procedures to be

followed by persons seeking administrative reconsideration of their

designations, or who wish to assert that the circumstances resulting

in designation are no longer applicable.

Sec. 586.307 Government of the Republic of Montenegro.

The term Government of the Republic of Montenegro means the

government of the Republic of Montenegro, including any subdivisions

thereof or local governments therein, its agencies, instrumentalities

and controlled entities, including all financial institutions and

state-owned and socially-owned entities organized or located in the

Republic of Montenegro as of June 9, 1998, any successors to such

entities, and their respective subsidiaries and branches, wherever

located, and any persons acting or purporting to act for or on behalf

of any of the foregoing.

Note to Sec. 586.307: Section 586.516 authorizes all

transactions by U.S. persons involving property or interests in

property of the Government of the Republic of Montenegro, unless

such property remains blocked pursuant to the Federal Republic of

Yugoslavia (Serbia and Montenegro) and Bosnian Serb-Controlled Areas

of the Republic of Bosnia and Herzegovina Sanctions Regulations, 31

CFR part 585 (see Sec. 585.525).

Sec. 586.308 Government of the Republic of Serbia.

The term Government of the Republic of Serbia means the government

of the Republic of Serbia, including any subdivisions thereof or local

governments therein, its agencies, instrumentalities, and controlled

entities, including all financial institutions and state-owned and

socially-owned entities organized or located in the Republic of Serbia

as of June 9, 1998, any successors to such entities, and their

respective subsidiaries and branches, wherever located, and any persons

acting or purporting to act for or on behalf of any of the foregoing.

Note to Sec. 586.308: Please refer to the appendices at the end

of this chapter for listings of persons determined to fall within

this definition who have been designated pursuant to this part.

Section 501.807 of this chapter sets forth the procedures to be

followed by persons seeking administrative reconsideration of their

designations, or who wish to assert that the circumstances resulting

in designation are no longer applicable.

Sec. 586.309 Information and informational materials.

(a)(1) For purposes of this part, the term information and

informational materials means publications, films, posters, phonograph

records, photographs, microfilms, microfiche, tapes, compact disks, CD

ROMs, artworks, and news wire feeds, and other information and

informational materials.

[[Page 54580]]

(2) To be considered informational materials, artworks must be

classified under chapter heading 9701, 9702, or 9703 of the Harmonized

Tariff Schedule of the United States.

(b) The term information and informational materials with respect

to U.S. exports does not include items:

(1) That were, as of April 30, 1994, or that thereafter become,

controlled for export pursuant to section 5 of the Export

Administration Act of 1979, 50 U.S.C. App. 2401-2420 (the ``EAA''), or

section 6 of the EAA to the extent that such controls promote

nonproliferation or antiterrorism policies of the United States.

(2) With respect to which acts are prohibited by 18 U.S.C. chapter

37.

Sec. 586.310 Interest.

Except as otherwise provided in this part, the term interest when

used with respect to property (e.g., an interest in property) means an

interest of any nature whatsoever, direct or indirect.

Sec. 586.311 License.

Except as otherwise specified, the term license means any license

or authorization contained in or issued pursuant to this part.

Sec. 586.312 New investment.

The term new investment means the acquisition of debt or equity

interests in, a commitment or contribution of funds or other assets to,

or a loan or other extension of credit to, a public or private

undertaking, entity, or project, including the Government of the

Republic of Serbia, other than donations of funds to charitable

organizations for purely humanitarian purposes.

Sec. 586.313 Person.

The term person means an individual or entity.

Sec. 586.314 Property; property interest.

The terms property and property interest include, but are not

limited to, money, checks, drafts, bullion, bank deposits, savings

accounts, debts, indebtedness, obligations, notes, guarantees,

debentures, stocks, bonds, coupons, any other financial instruments,

bankers acceptances, mortgages, pledges, liens or other rights in the

nature of security, warehouse receipts, bills of lading, trust

receipts, bills of sale, any other evidences of title, ownership or

indebtedness, letters of credit and any documents relating to any

rights or obligations thereunder, powers of attorney, goods, wares,

merchandise, chattels, stocks on hand, ships, goods on ships, real

estate mortgages, deeds of trust, vendors' sales agreements, land

contracts, leaseholds, ground rents, real estate and any other interest

therein, options, negotiable instruments, trade acceptances, royalties,

book accounts, accounts payable, judgments, patents, trademarks or

copyrights, insurance policies, safe deposit boxes and their contents,

annuities, pooling agreements, services of any nature whatsoever,

contracts of any nature whatsoever, and any other property, real,

personal, or mixed, tangible or intangible, or interest or interests

therein, present, future or contingent.

Sec. 586.315 Specific license.

The term specific license means any license or authorization not

set forth in this part but issued pursuant to this part.

Sec. 586.316 Transfer.

The term transfer means any actual or purported act or transaction,

whether or not evidenced by writing, and whether or not done or

performed within the United States, the purpose, intent, or effect of

which is to create, surrender, release, convey, transfer, or alter,

directly or indirectly, any right, remedy, power, privilege, or

interest with respect to any property and, without limitation upon the

foregoing, shall include the making, execution, or delivery of any

assignment, power, conveyance, check, declaration, deed, deed of trust,

power of attorney, power of appointment, bill of sale, mortgage,

receipt, agreement, contract, certificate, gift, sale, affidavit, or

statement; the making of any payment; the setting off of any obligation

or credit; the appointment of any agent, trustee, or fiduciary; the

creation or transfer of any lien; the issuance, docketing, filing, or

levy of or under any judgment, decree, attachment, injunction,

execution, or other judicial or administrative process or order, or the

service of any garnishment; the acquisition of any interest of any

nature whatsoever by reason of a judgment or decree of any foreign

country; the fulfillment of any condition; the exercise of any power of

appointment, power of attorney, or other power; or the acquisition,

disposition, transportation, importation, exportation, or withdrawal of

any security.

Sec. 586.317 U.S. financial institution.

The term U.S. financial institution means any U.S. entity

(including foreign branches) that is engaged in the business of

accepting deposits, making, granting, transferring, holding, or

brokering loans or credits, or purchasing or selling foreign exchange,

securities, commodity futures or options, or procuring purchasers and

sellers thereof, as principal or agent; including, but not limited to,

depository institutions, banks, savings banks, trust companies,

securities brokers and dealers, commodity futures and options brokers

and dealers, forward contract and foreign exchange merchants,

securities and commodities exchanges, clearing corporations, investment

companies, employee benefit plans, and U.S. holding companies, U.S.

affiliates, or U.S. subsidiaries of any of the foregoing. This term

includes those branches, offices and agencies of foreign financial

institutions which are located in the United States, but not such

institutions' foreign branches, offices, or agencies.

Sec. 586.318 United States.

The term United States means the United States, its territories and

possessions, and all areas under the jurisdiction or authority thereof.

Sec. 586.319 United States person; U.S. person.

The term United States person or U.S. person means any U.S.

citizen, permanent resident alien, entity organized under the laws of

the United States (including foreign branches), or any person in the

United States.

Subpart D--Interpretations

Sec. 586.401 Reference to amended sections.

Except as otherwise specified, reference to any section of this

part or to any regulation, ruling, order, instruction, direction, or

license issued pursuant to this part refers to the same as currently

amended.

Sec. 586.402 Effect of amendment.

Any amendment, modification, or revocation of any section of this

part or of any order, regulation, ruling, instruction, or license

issued by or under the direction of the Director of the Office of

Foreign Assets Control does not, unless otherwise specifically

provided, affect any act done or omitted to be done, or any civil or

criminal suit or proceeding commenced or pending prior to such

amendment, modification, or revocation. All penalties, forfeitures, and

liabilities under any such order, regulation, ruling, instruction, or

license continue and may be enforced as if such amendment,

modification, or revocation had not been made.

Sec. 586.403 Termination and acquisition of an interest in blocked

property.

(a) Whenever a transaction licensed or authorized by or pursuant to

this part results in the transfer of property (including any property

interest) away

[[Page 54581]]

from a person whose property or interests in property are blocked

pursuant to Sec. 586.201, such property shall no longer be deemed to be

property blocked pursuant to Sec. 586.201, unless there exists in the

property another interest that is blocked pursuant to Sec. 586.201 or

any other part of this chapter, the transfer of which has not been

effected pursuant to license or other authorization.

(b) Unless otherwise specifically provided in a license or

authorization issued pursuant to this part, if property (including any

property interest) is transferred or attempted to be transferred to a

person whose property or interests in property are blocked pursuant to

Sec. 586.201, such property shall be deemed to be property in which

that person has an interest and therefore blocked.

Sec. 586.404 Setoffs prohibited.

A setoff against blocked property (including a blocked account),

whether by a U.S. bank or other U.S. person, is a prohibited transfer

under Sec. 586.201 if effected after the effective date.

Sec. 586.405 Transactions incidental to a licensed transaction.

Any transaction ordinarily incident to a licensed transaction and

necessary to give effect thereto is also authorized, except an

unlicensed transaction by a person whose property or interests in

property are blocked pursuant to Sec. 586.201, or involving an

unlicensed debit to a blocked account or transfer of blocked property

not explicitly authorized within the terms of the license.

Sec. 586.406 Provision of services.

(a) Except as provided in Sec. 586.201(c) or as otherwise

authorized, the prohibitions contained in Sec. 586.201 apply to

services performed by U.S. persons, wherever located:

(1) On behalf of, or for the benefit of, a person whose property or

interests in property are blocked pursuant to Sec. 586.201; or

(2) With respect to property interests of a person whose property

or interests in property are blocked pursuant to Sec. 586.201.

(b) Example: U.S. persons may not, without specific authorization

from the Office of Foreign Assets Control, represent an individual or

entity with respect to contract negotiations, contract performance,

commercial arbitration, or other business dealings with persons whose

property or interests in property are blocked pursuant to Sec. 586.201.

See Sec. 586.509 on licensing policy with regard to the provision of

certain legal services.

Sec. 586.407 Offshore transactions.

(a) The prohibitions contained in Sec. 586.201 apply to

transactions by any U.S. person in a location outside the United States

with respect to property in which the U.S. person knows, or has reason

to know, that a person whose property and interests in property are

blocked pursuant to Sec. 586.201 has or has had an interest since the

effective date.

(b) Prohibited transactions include, but are not limited to,

importation into or exportation from locations outside the United

States of, or purchasing, selling, financing, swapping, insuring,

transporting, lifting, storing, incorporating, transforming, brokering,

or otherwise dealing in, within such locations, goods, technology or

services in which the U.S. person knows, or has reason to know, that a

person whose property and interests in property are blocked pursuant to

Sec. 586.201 has or has had an interest since the effective date.

or abroad, purchase, sell, finance, insure, transport, act as a broker

for the sale or transport of, or otherwise deal in, furniture, shoes or

other goods manufactured by a state or socially-owned entity organized

or located in the FRY (S&M).

(2) A U.S. person may not, within the United States or abroad,

conduct transactions of any nature whatsoever with an entity that the

U.S. person knows or has reason to know is a state or socially-owned

entity within the territory of the FRY (S&M), or which benefits or

supports the business of such an entity, unless the entity is licensed

by the Office of Foreign Assets Control to conduct such transactions

with U.S. persons or the transaction is generally licensed in, or

exempted from the prohibitions of, this part.

Note to Sec. 586.407: See Sec. 586.513 with regard to the

authorization of certain trade-related transactions.

Sec. 586.408 Exempt financial transactions within the territory of the

FRY (S&M); prohibition on establishment of new offices in Serbia.

(a) Section 586.201(c) exempts financial transactions, including

trade financing, from the prohibitions contained in Sec. 586.201 by

U.S. persons physically located within the territory of the FRY (S&M),

where those transactions are conducted exclusively through the domestic

banking system within the FRY (S&M) in local currency (dinars), or

using bank notes or barter. A U.S. entity must have a permanent

establishment, such as a branch or representative office, within the

territory of the FRY (S&M) to be considered physically located there

for purposes of this paragraph (a).

(b) The prohibition on new investment within Serbia contained in

Sec. 586.204, as defined in Sec. 586.312, precludes the establishment

after the effective date of a new representative or branch office or

joint venture or other entity within the territory of the Republic of

Serbia, because such activity would necessarily involve a commitment or

contribution of funds or other assets to a public or private

undertaking, entity, or project within Serbia. See Sec. 586.513

concerning the authorization of certain trade-related transactions

conducted using bank notes or barter by U.S. persons located outside of

the territory of the FRY (S&M).

Note to Sec. 586.408: All transactions with respect to property

in which the Government of the Republic of Montenegro has an

interest are authorized pursuant to Sec. 586.516. Therefore, all

financial transactions by U.S. persons within the territory of the

Republic of Montenegro are authorized, unless the transaction

involves property in which another interest exists that is blocked

pursuant to Sec. 586.201 or any other part of this chapter. See

Sec. 586.403.

Sec. 586.409 Approval or other facilitation of other persons'

investment in the territory of the Republic of Serbia.

(a) The prohibition contained in Sec. 586.204 against approval or

other facilitation by U.S. persons of other persons' investment in the

territory of the Republic of Serbia bars any action by a U.S. person

that assists or supports other persons' activity that would constitute

prohibited new investment under that section if engaged in by a U.S.

person. Such approval or other facilitation with respect to persons

whose property or interests in property are blocked pursuant to

Sec. 586.201 also constitutes a violation of that section. See the

definition of the term new investment in Sec. 586.312.

(b) Examples: (1) A U.S. person is prohibited from brokering,

financing, guaranteeing, or approving the purchase by any other person,

including a foreign affiliate, of shares, including an equity interest,

in a publicly or privately held undertaking, entity or project located

in the territory of the Republic of Serbia, except as provided in

Sec. 586.514.

(2) The sale to a non-U.S. person of a U.S. person's equity or

income interest in an entity in the territory of the Republic of Serbia

constitutes facilitation of that other person's investment in Serbia,

and would otherwise be prohibited but for the authorization contained

in Sec. 586.514.

(3) A U.S. national or permanent resident alien employed by a

foreign person may not participate in any

[[Page 54582]]

decision-making role in an activity by the foreign person that includes

investment in the territory of the Republic of Serbia.

Sec. 586.410 Transfer of funds to the benefit of certain persons in

the territory of the FRY (S&M).

Section 586.201 does not prohibit U.S. financial institutions that

are not blocked, including their foreign branches, from transferring

funds to accounts in financial institutions for the benefit of

individuals, non-governmental organizations and other persons located

in the territory of the FRY (S&M) whose property and interests in

property are not blocked pursuant to that section, provided that such

transactions do not result in the transfer of funds to or for the

benefit of persons whose property or interests in property are blocked

pursuant to Sec. 586.201.

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

Policy

Sec. 586.501 General and specific licensing procedures.

For provisions relating to licensing procedures, see subpart C of

part 501 of this chapter. Licensing actions pursuant to part 501 of

this chapter with respect to the prohibitions of this part are

considered actions pursuant to this part.

Sec. 586.502 Effect of license or authorization.

(a) No license or other authorization contained in this part, or

otherwise issued by or under the direction of the Director of the

Office of Foreign Assets Control pursuant to this part, authorizes or

validates any transaction effected prior to the issuance of the

license, unless specifically so provided in such license or

authorization.

(b) No regulation, ruling, instruction, or license authorizes any

transaction prohibited under this part unless the regulation, ruling,

instruction, or license is issued by the Office of Foreign Assets

Control and specifically refers to this part. No regulation, ruling,

instruction, or license referring to this part authorizes any

transaction prohibited by any provision of this chapter unless the

regulation, ruling, instruction or license specifically refers to such

provision.

transaction otherwise prohibited under this part has the effect of

removing a prohibition or prohibitions contained in this part from the

transaction, but only to the extent specifically stated by its terms.

Unless the regulation, ruling, instruction, or license otherwise

specifies, such an authorization does not create any right, duty,

obligation, claim, or interest in, or with respect to, any property

which would not otherwise exist under ordinary principles of law.

Note to paragraph (c) of Sec. 586.502: The general license in

Sec. 586.516 authorizing transactions with respect to property in

which the Government of the Republic of Montenegro has an interest

removes such property and interests in property from the phrase

``property and interests in property blocked pursuant to

Sec. 586.201'' for purposes of this part.

(d) Any general license or statement of licensing policy contained

in this part authorizing transactions with respect to the Government of

the FRY (S&M) shall, unless otherwise stated, also authorize analogous

transactions with respect to the Governments or territories of the

Republic of Serbia and the Republic of Montenegro.

Sec. 586.503 Exclusion from licenses and authorizations.

The Director of the Office of Foreign Assets Control reserves the

right to exclude any person, property, or transaction from the

operation of any license, or from the privileges therein conferred, or

to restrict the applicability thereof with respect to particular

persons, property, transactions, or classes thereof. Such action is

binding upon all persons receiving actual or constructive notice of

such exclusion or restriction.

Sec. 586.504 Payments and transfers to blocked accounts in U.S.

financial institutions.

Any payment of funds or transfer of credit in which any person

whose property and interests in property are blocked pursuant to

Sec. 586.201 has any interest, that comes within the possession or

control of a U.S. financial institution, must be blocked in an account

on the books of that financial institution. A transfer of funds or

credit by a U.S. financial institution between blocked accounts in its

branches or offices is authorized, provided that no transfer is made

from an account within the United States to an account held outside the

United States, and further provided that a transfer from a blocked

account may only be made to another blocked account held in the same

name.

Note to Sec. 586.504: Please refer to Sec. 501.603 of this

chapter for mandatory reporting requirements regarding financial

transfers. See also Sec. 586.203 concerning the obligation to hold

blocked funds in interest-bearing accounts.

Sec. 586.505 Payment of obligations to U.S. persons authorized.

(a) The transfer of funds after the effective date by, through, or

to any U.S. financial institution or other U.S. person not blocked

pursuant to this chapter solely for the purpose of payment of

obligations to U.S. persons of persons whose property or interests in

property are blocked pursuant to Sec. 586.201 is authorized, provided

that the obligation arose prior to the effective date or is otherwise

authorized pursuant to statute or the provisions of this part, and the

payment requires no debit to a blocked account. Property is not blocked

by virtue of being transferred or received pursuant to this section.

(b) A person receiving payment under this section may distribute

all or part of that payment to any person, provided that any such

payment to a person whose property or interests in property are blocked

pursuant to Sec. 586.201 must be to a blocked account in a U.S.

financial institution.

Note to Sec. 586.505: Please refer to Sec. 501.603 of this

chapter for mandatory reporting requirements regarding financial

transfers. See also Sec. 586.203 concerning the obligation to hold

blocked funds in interest-bearing accounts.

Sec. 586.506 Investment and reinvestment of certain funds.

U.S. financial institutions are authorized to invest and reinvest

assets blocked pursuant to Sec. 586.201, subject to the following

conditions:

(a) The assets representing such investments and reinvestments are

credited to a blocked account or subaccount which is held in the same

name at the same U.S. financial institution, or within the possession

or control of a U.S. person, but in no case may funds be transferred

outside the United States for this purpose; and

(b) The proceeds of such investments and reinvestments are not

credited to a blocked account or subaccount under any name or

designation which differs from the name or designation of the specific

blocked account or subaccount in which such funds or securities were

held; and

through pledging or other use) to any person whose property or

interests in property are blocked pursuant to Sec. 586.201.

Sec. 586.507 Completion of certain transactions related to bankers

acceptances authorized.

Persons other than those whose property or interests in property

are blocked pursuant to Sec. 586.201 are authorized to buy, sell, and

satisfy obligations with respect to bankers acceptances, and to pay

under deferred payment undertakings, involving a property interest

blocked pursuant to Sec. 586.201, as long as the bankers

[[Page 54583]]

acceptances were created or the deferred payment undertakings were

incurred prior to the effective date.

Sec. 586.508 Entries in certain accounts for normal service charges

authorized.

(a) U.S. financial institutions are hereby authorized to debit any

blocked account with such U.S. financial institution in payment or

reimbursement for normal service charges owed to such U.S. financial

institution by the owner of such blocked account.

(b) As used in this section, the term normal service charge shall

include charges in payment or reimbursement for interest due; cable,

telegraph, or telephone charges; postage costs; custody fees; small

adjustment charges to correct bookkeeping errors; and, but not by way

of limitation, minimum balance charges, notary and protest fees, and

charges for reference books, photocopies, credit reports, transcripts

of statements, registered mail, insurance, stationery and supplies, and

other similar items.

Sec. 586.509 Provision of certain legal services authorized.

(a) The provision to or on behalf of a person whose property or

interests in property are blocked pursuant to Sec. 586.201 of the legal

services set forth in paragraph (b) of this section is authorized,

provided that all receipt of payment therefor must be specifically

licensed.

(b) Specific licenses may be issued, on a case-by-case basis,

authorizing receipt, from unblocked sources, of payment of professional

fees and reimbursement of incurred expenses for the following legal

services by U.S. persons to a person whose property or interests in

property are blocked pursuant to Sec. 586.201:

(1) Provision of legal advice and counseling on the requirements of

and compliance with the laws of any jurisdiction within the United

States, provided that such advice and counseling is not provided to

facilitate transactions that would violate any of the prohibitions

contained in this part;

(2) Representation of a person whose property or interests in

property are blocked pursuant to Sec. 586.201 when named as a defendant

in or otherwise made a party to domestic U.S. legal, arbitration, or

administrative proceedings;

(3) Initiation of domestic U.S. legal, arbitration, or

administrative proceedings in defense of property interests subject to

U.S. jurisdiction of a person whose property or interests in property

are blocked pursuant to Sec. 586.201;

(4) Representation of a person whose property and interests in

property are blocked pursuant to Sec. 586.201 before any federal or

state agency with respect to the imposition, administration, or

enforcement of U.S. sanctions against such person; and

(5) Provision of legal services in any other context in which

prevailing U.S. law requires access to legal counsel at public expense.

property or interests in property are blocked pursuant to Sec. 586.201,

not otherwise authorized in or exempted by this part, requires the

issuance of a specific license.

(d) Entry into a settlement agreement affecting property or

interests in property of a person whose property or interests in

property are blocked pursuant to Sec. 586.201 or the enforcement of any

lien, judgment, arbitral award, decree, or other order through

execution, garnishment or other judicial process purporting to transfer

or otherwise alter or affect a property interest of such person is

prohibited unless specifically licensed in accordance with

Sec. 586.202(e).

Sec. 586.510 Transactions related to telecommunications authorized.

All transactions with respect to the receipt and transmission of

telecommunications involving the FRY (S&M) are authorized. This section

does not authorize the provision to any person whose property or

interests in property are blocked pursuant to Sec. 586.201 of

telecommunications equipment or technology, nor the sale or leasing of

telecommunications transmission facilities (such as satellite links or

dedicated lines).

Sec. 586.511 Transactions related to mail authorized.

All transactions by U.S. persons, including payment and transfers

to common carriers, incident to the receipt or transmission of mail

between the United States and the FRY (S&M) are authorized, provided

that mail is limited to personal communications not involving a

transfer of anything of value.

Sec. 586.512 Certain transactions related to patents, trademarks and

copyrights authorized.

(a) All of the following transactions in connection with patent,

trademark, copyright or other intellectual property protection in the

United States or the FRY (S&M) are authorized:

(1) The filing and prosecution of any application to obtain a

patent, trademark, copyright or other form of intellectual property

protection;

(2) The receipt of a patent, trademark, copyright or other form of

intellectual property protection;

(3) The renewal or maintenance of a patent, trademark, copyright or

other form of intellectual property protection; and

(4) The filing and prosecution of opposition or infringement

proceedings with respect to a patent, trademark, copyright or other

form of intellectual property protection, or the entrance of a defense

to any such proceedings.

(b) This section authorizes the payment of fees currently due to

the United States Government, or of the reasonable and customary fees

and charges currently due to attorneys or representatives within the

United States, in connection with the transactions authorized in

paragraph (a) of this section. Payment effected pursuant to the terms

of this paragraph (b) may not be made from a blocked account.

the Government of the FRY (S&M), or of the reasonable and customary

fees and charges currently due to attorneys or representatives within

the territory of the FRY (S&M), in connection with the transactions

authorized in paragraph (a) of this section.

(d) Nothing in this section affects obligations under any other

provision of law.

Sec. 586.513 Certain transactions with respect to trade with blocked

persons authorized.

(a) U.S. persons may trade in goods in which a person whose

property and interests in property are blocked pursuant to Sec. 586.201

has an interest, provided that the payment for the goods is made in

bank notes and coins of any currency or by barter. Any open account

credit terms may not exceed 30 days. Transactions relating to services

incident to this trade in goods, including payment for shipping and

insurance to non-blocked entities, are authorized.

(b) Example: A U.S. company located outside of Serbia may ship

goods to Serbia in exchange for bank notes and coins or under a barter

arrangement in exchange for Serbian goods, exchanged directly with the

U.S. company or assigned to a third company in satisfaction of an

obligation owed that party by the U.S. company. Except as provided in

Sec. 586.408 or otherwise specifically authorized, however, the U.S.

company may not establish or use an account at a financial institution

[[Page 54584]]

within the territory of the Republic of Serbia in connection with any

trade transaction described in this section.

Sec. 586.514 Divestiture of U.S. person's equity investment in the

territory of the Republic of Serbia.

Notwithstanding the prohibition in Sec. 586.204 against the

facilitation by a U.S. person of other persons' new investment in the

territory of the Republic of Serbia, all transactions related to the

divestiture or transfer to a non-U.S. person, other than a person whose

property or property interests are blocked pursuant to Sec. 586.201 or

this chapter, of a U.S. person's investment in the Republic of Serbia

are authorized.

Sec. 586.515 Payments for services rendered by the Government of the

FRY (S&M) to aircraft authorized; aircraft and maritime safety.

(a) Payments to the Government of the FRY (S&M) of charges for

services rendered by that Government in connection with the overflight

of the territory of the FRY (S&M) or emergency landing in the FRY (S&M)

by aircraft are authorized.

(b) Specific licenses may be issued on a case-by-case basis for the

exportation and reexportation of goods, services, and technology to

insure the safety of civil aviation and safe operation of U.S.-origin

commercial passenger aircraft, and to ensure the safety of ocean-going

maritime traffic in international waters.

Sec. 586.516 Transactions with respect to property in which the

Government of the Republic of Montenegro has an interest authorized.

All transactions by U.S. persons involving property or interests in

property in which the Government of the Republic of Montenegro has an

interest are authorized, except with respect to property blocked

pursuant to the Federal Republic of Yugoslavia (Serbia and Montenegro)

and Bosnian Serb-Controlled Areas of the Republic of Bosnia and

Herzegovina Sanctions Regulations, 31 CFR part 585 (see Sec. 585.525).

Property and interests in property of the Government of Montenegro

shall not be considered ``property and interests in property blocked

pursuant to Sec. 586.201'' for purposes of this part. This

authorization does not apply, however, to property in which the

Government of Montenegro has an interest but in which there also exists

an interest of another person whose property or interests in property

are blocked pursuant to Sec. 586.201 or any other part of this chapter.

Subpart F--Reports

Sec. 586.601 Records and reports.

For provisions relating to records and reports, see subpart C of

part 501 of this chapter.

Subpart G--Penalties

Sec. 586.701 Penalties.

(a) Attention is directed to section 206 of the International

Emergency Economic Powers Act (50 U.S.C. 1705) (the ``Act''), which is

applicable to violations of the provisions of any license, ruling,

regulation, order, direction or instruction issued by or pursuant to

the direction or authorization of the Secretary of the Treasury

pursuant to this part or otherwise under the Act. Section 206 of the

Act, as adjusted by the Federal Civil Penalties Inflation Adjustment

Act of 1990 (Pub. L. 101-410, as amended, 28 U.S.C. 2461 note),

provides that:

(1) A civil penalty not to exceed $11,000 per violation may be

imposed on any person who violates any license, order, or regulation

issued under the Act;

(2) Whoever willfully violates any license, order, or regulation

issued under the Act shall, upon conviction, be fined not more than

$50,000, or, if a natural person, may be imprisoned for not more than

10 years, or both; and any officer, director, or agent of any

corporation who knowingly participates in such violation may be

punished by a like fine, imprisonment, or both.

(b) The criminal penalties provided in the Act are subject to

increase pursuant to 18 U.S.C. 3571.

that whoever, in any matter within the jurisdiction of any department

or agency of the United States, knowingly and willfully falsifies,

conceals or covers up by any trick, scheme, or device a material fact,

or makes any false, fictitious or fraudulent statement or

representation or makes or uses any false writing or document knowing

the same to contain any false, fictitious or fraudulent statement or

entry, shall be fined under title 18, United States Code, or imprisoned

not more than five years, or both.

(d) Violations of this part may also be subject to relevant

provisions of other applicable laws.

Sec. 586.702 Prepenalty notice.

(a) When required. If the Director of the Office of Foreign Assets

Control has reasonable cause to believe that there has occurred a

violation of any provision of this part or a violation of the

provisions of any license, ruling, regulation, order, direction or

instruction issued by or pursuant to the direction or authorization of

the Secretary of the Treasury pursuant to this part or otherwise under

the International Emergency Economic Powers Act, and the Director

determines that further proceedings are warranted, he shall issue to

the person concerned a notice of his intent to impose a monetary

penalty. The prepenalty notice shall be issued whether or not another

agency has taken any action with respect to this matter.

(b) Contents--(1) Facts of violation. The prepenalty notice shall

describe the violation, specify the laws and regulations allegedly

violated, and state the amount of the proposed monetary penalty.

(2) Right to respond. The prepenalty notice also shall inform the

respondent of respondent's right to make a written presentation within

30 days of mailing of the notice as to why a monetary penalty should

not be imposed, or, if imposed, why it should be in a lesser amount

than proposed.

Sec. 586.703 Response to prepenalty notice; informal settlement.

(a) Deadline for response. The respondent shall have 30 days from

the date of mailing of the prepenalty notice to make a written response

to the Director of the Office of Foreign Assets Control.

(b) Form and contents of response. The written response need not be

in any particular form, but shall contain information sufficient to

indicate that it is in response to the prepenalty notice. It should

contain responses to the allegations in the prepenalty notice and set

forth the reasons why the respondent believes the penalty should not be

imposed or, if imposed, why it should be in a lesser amount than

proposed.

written response to a prepenalty notice pursuant to this section, the

respondent or respondent's representative may contact the Office of

Foreign Assets Control as advised in the prepenalty notice to propose

the settlement of allegations contained in the prepenalty notice and

related matters. In the event of settlement at the prepenalty stage,

the claim proposed in the prepenalty notice will be withdrawn, the

respondent is not required to take a written position on allegations

contained in the prepenalty notice, and the Office of Foreign Assets

Control will make no final determination as to whether a violation

occurred. The amount accepted in settlement of allegations in a

prepenalty

[[Page 54585]]

notice may vary from the civil penalty that might finally be imposed in

the event of a formal determination of violation. In the event no

settlement is reached, the 30-day period specified in paragraph (a) of

this section for written response to the prepenalty notice remains in

effect unless additional time is granted by the Office of Foreign

Assets Control.

Sec. 586.704 Penalty imposition or withdrawal.

(a) No violation. If, after considering any response to the

prepenalty notice and any relevant facts, the Director of the Office of

Foreign Assets Control determines that there was no violation by the

respondent named in the prepenalty notice, the Director promptly shall

notify the respondent in writing of that determination and that no

monetary penalty will be imposed.

(b) Violation. If, after considering any response to the prepenalty

notice, the Director of the Office of Foreign Assets Control determines

that there was a violation by the respondent named in the prepenalty

notice, the Director promptly shall issue a written notice of the

imposition of the monetary penalty to the respondent.

(1) The penalty notice shall inform the respondent that payment of

the assessed penalty must be made within 30 days of the mailing of the

penalty notice.

(2) The penalty notice shall inform the respondent of the

requirement to furnish the respondent's taxpayer identification number

pursuant to 31 U.S.C. 7701 and that such number will be used for

purposes of collection and reporting on any delinquent penalty amount

in the event of a failure to pay the penalty imposed.

Sec. 586.705 Administrative collection; referral to United States

Department of Justice.

In the event that the respondent does not pay the penalty imposed

pursuant to this part or make payment arrangements acceptable to the

Director of the Office of Foreign Assets Control within 30 days of the

mailing of the written notice of the imposition of the penalty, the

matter may be referred for administrative collection measures by the

Department of the Treasury or to the United States Department of

Justice for appropriate action to recover the penalty in a civil suit

in a Federal district court.

Subpart H--Procedures

Sec. 586.801 Procedures.

For license application procedures and procedures relating to

amendments, modifications, or revocations of licenses; administrative

decisions; rulemaking; and requests for documents pursuant to the

Freedom of Information and Privacy Acts (5 U.S.C. 552 and 552a), see

subpart D of part 501 of this chapter.

Sec. 586.802 Delegation by the Secretary of the Treasury.

Any action which the Secretary of the Treasury is authorized to

take pursuant to Executive Order 13088 (63 FR 32109, June 12, 1998),

and any further Executive orders relating to the national emergency

declared in Executive Order 13088, may be taken by the Director of the

Office of Foreign Assets Control, or by any other person to whom the

Secretary of the Treasury has delegated authority so to act.

Subpart I--Paperwork Reduction Act

Sec. 586.901 Paperwork Reduction Act notice.

For approval by OMB under the Paperwork Reduction Act of 1995 (44

U.S.C. 3507) of information collections relating to recordkeeping and

reporting requirements, to licensing procedures (including those

pursuant to statements of licensing policy), and to other procedures,

see Sec. 501.901 of this chapter. An agency may not conduct or sponsor,

and a person is not required to respond to, a collection of information

unless it displays a valid control number assigned by OMB.

Dated: September 18, 1998.

R. Richard Newcomb,

Director, Office of Foreign Assets Control.

Approved: September 29, 1998.

Elisabeth A. Bresee,

Assistant Secretary (Enforcement), Department of the Treasury.

[FR Doc. 98-27339 Filed 10-7-98; 4:34 pm]

BILLING CODE 4810-25-F

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.