4 Adapting to UN Maritime Sanctions: Shipping Industry
Implications
The Security Council’s sanctions tactics in the maritime sector have generated
substantial discourse among industry participants. Commercial shipping is heavily
regulated by international conventions, domestic laws, and customary practice, so
industry actors are relatively used to oversight from national and supranational
bodies, including the International Maritime Organization which is an organ of the
United Nations itself. But unlike other sources of commercial regulation, Security
Council sanctions can appear rapidly and unexpectedly in response to security crises.
These may immediately impose burdens on shipping interests, with regulators
perhaps unaware of their sweeping impact.
The challenge of compliance with sanctions blacklists is well-known outside of
the shipping industry. Such regulatory tactics have been employed heavily in the
banking sector to combat terrorism and money laundering enterprises. These regulations have spawned robust sanctions compliance initiatives by financial institutions, such as transnational banking entities. For some shipping industry participants,
blacklist compliance may be a less familiar process. Compliance requires more than
simply consulting the lists promulgated by the Security Council to insulate business
relationships from designated entities and vessels. As the Resolutions themselves
indicate, sanctioned entities may attempt to disguise their identity by renaming and
re-registering the designated company or vessel. This places an enhanced duty on
shipping actors to engage in thorough ‘know your customer’ inquiries.
These blacklists of sanctioned entities are not designed to be exhaustive, as some
Resolutions prohibit transactions involving any vessels reasonably believed to be
linked to sanctioned regimes or activities. This includes not only vessels listed by the
Resolutions, but also those owned, controlled, and even ‘chartered’ by the sanctioned government. Due to the complex and sometimes confidential nature of
chartering and sub-chartering, this adds an additional ill-defined layer of scrutiny
for shipowners and shipbrokers. This may also be particularly challenging for
bunker service providers, who are explicitly banned from providing fuel services
to sanctioned vessels. Compliance with blacklists is further complicated by the very
nature of transport processes in which intermediaries regularly arrange transportation on behalf of undisclosed principals. This extends compliance obligations across
the transport chain to intermediaries such as freight forwarders, brokers, and other
logistics providers organizing cargo movements for customers.
Explicit cargo import and export prohibitions raise a different set of challenges.
These may impact a variety of commercial actors, including shippers and consignees
contracting for the sale of goods, carriers moving cargo in the liner trade, shipowners
and charterers under time and voyage charters, bunker service providers, and the
various types of transport intermediaries facilitating such transactions. For any of
these entities, there may be a burden not only to ascertain the true identity of the
parties to their transactions, but also to ensure the authenticity of cargo declarations
contained in legal documents, such as bills of lading, commercial invoices, and
9 The Impact of UN Sanctions on Commercial Shipping Activities
169
Implications
The Security Council’s sanctions tactics in the maritime sector have generated
substantial discourse among industry participants. Commercial shipping is heavily
regulated by international conventions, domestic laws, and customary practice, so
industry actors are relatively used to oversight from national and supranational
bodies, including the International Maritime Organization which is an organ of the
United Nations itself. But unlike other sources of commercial regulation, Security
Council sanctions can appear rapidly and unexpectedly in response to security crises.
These may immediately impose burdens on shipping interests, with regulators
perhaps unaware of their sweeping impact.
The challenge of compliance with sanctions blacklists is well-known outside of
the shipping industry. Such regulatory tactics have been employed heavily in the
banking sector to combat terrorism and money laundering enterprises. These regulations have spawned robust sanctions compliance initiatives by financial institutions, such as transnational banking entities. For some shipping industry participants,
blacklist compliance may be a less familiar process. Compliance requires more than
simply consulting the lists promulgated by the Security Council to insulate business
relationships from designated entities and vessels. As the Resolutions themselves
indicate, sanctioned entities may attempt to disguise their identity by renaming and
re-registering the designated company or vessel. This places an enhanced duty on
shipping actors to engage in thorough ‘know your customer’ inquiries.
These blacklists of sanctioned entities are not designed to be exhaustive, as some
Resolutions prohibit transactions involving any vessels reasonably believed to be
linked to sanctioned regimes or activities. This includes not only vessels listed by the
Resolutions, but also those owned, controlled, and even ‘chartered’ by the sanctioned government. Due to the complex and sometimes confidential nature of
chartering and sub-chartering, this adds an additional ill-defined layer of scrutiny
for shipowners and shipbrokers. This may also be particularly challenging for
bunker service providers, who are explicitly banned from providing fuel services
to sanctioned vessels. Compliance with blacklists is further complicated by the very
nature of transport processes in which intermediaries regularly arrange transportation on behalf of undisclosed principals. This extends compliance obligations across
the transport chain to intermediaries such as freight forwarders, brokers, and other
logistics providers organizing cargo movements for customers.
Explicit cargo import and export prohibitions raise a different set of challenges.
These may impact a variety of commercial actors, including shippers and consignees
contracting for the sale of goods, carriers moving cargo in the liner trade, shipowners
and charterers under time and voyage charters, bunker service providers, and the
various types of transport intermediaries facilitating such transactions. For any of
these entities, there may be a burden not only to ascertain the true identity of the
parties to their transactions, but also to ensure the authenticity of cargo declarations
contained in legal documents, such as bills of lading, commercial invoices, and
9 The Impact of UN Sanctions on Commercial Shipping Activities
169