In a rapidly evolving geopolitical landscape marked by rising tensions and global economic challenges, the European Union is accelerating efforts to diversify its trade partnerships. One of the most significant recent developments is the signing of the EU-Mercosur Partnership Agreement (EMPA, or the Agreement) and the Interim Trade Agreement (iTA) on 17 January 2026, after more than 25 years of negotiations between the EU and four Mercosur countries: Argentina, Brazil, Paraguay, and Uruguay. The Agreement is historic both in market size and scope. Together, the EU and Mercosur represent more than 700 million consumers, and upon entry into force, the iTA will eliminate import duties on over 90% of goods traded between both blocs. Yet the path forward is not without obstacles; we discuss key developments that are shaping the Agreement’s trajectory below.

Understanding the Agreement’s structure and how to claim trade benefits

The EMPA encompasses both political cooperation and trade components, thus requiring ratification by all EU member states before it can enter into force. In contrast, the iTA covers only the trade and investment aspects of the EMPA and can therefore be ratified at the EU level alone. This two-track approach enables trade-related commitments to take effect ahead of the EMPA’s full implementation. Only goods originating in the respective territories may benefit from preferential treatment under the iTA. Accordingly, the Agreement includes provisions governing the determination of origin, which assess whether products have been wholly obtained in the territory, produced exclusively from originating materials, or manufactured incorporating non-originating materials that fulfil the product-specific rules of origin.

The iTA establishes a self-certification system based on “statements on origin” rather than formal certificates issued by governmental authorities. The statement must appear on the invoice, delivery note, or other relevant commercial document; it must generally bear the original, handwritten signature of the exporter; and it must be submitted within its validity period. Having a statement alone is not sufficient: importers must be prepared to submit, at any time upon request by customs authorities (even after the import happened), all appropriate documents proving the originating status of the imported products. Any products exported under tariff rate quotas granted by the EU must also be accompanied by an official document issued by the Signatory Mercosur State.

The iTA includes several mechanisms to ensure that businesses can enjoy the benefits of the Agreement and protect themselves from unwarranted impacts. Businesses can request an investigation in the event of a threat of serious injury to their industry due to the increase of bilateral trade (see the bilateral safeguard clause below); they can request advance rulings with regard to tariff classification or origin (and, to a degree, also on valuation); and the Agreement foresees administrative and judicial appeal mechanisms against administrative actions, rulings, and decisions of customs or other authorities affecting the trade between the two blocs.

Sensitivities and the road to provisional application

The Agreement has faced strong opposition from agricultural stakeholders and environmental advocates in the EU. Critics argue that it would expose EU farmers to unfair competition from imports produced under weaker labour, environmental, animal welfare, and pesticide standards, threatening farm livelihoods and EU food security. Concerns were also raised about the Agreement’s unprecedented “rebalancing mechanism”, which allows either party to demand compensation or adjust tariff concessions if the other party introduces new laws on environmental, climate, or health topics. Opponents warn that this provision could undermine EU sovereignty by allowing Mercosur countries to challenge and seek compensation for EU sustainability legislation, including measures on deforestation (EUDR), the Carbon Border Adjustment Mechanism (CBAM), and corporate sustainability due diligence (CSDDD).

On 21 January 2026, these concerns prompted the European Parliament to adopt a motion to request the Court of Justice of the European Union to assess the compatibility of the Agreement with the EU Treaties. The Parliament has indicated that it “will be able to vote to grant consent (or not) to the Agreement” only after the Court delivers its opinion. As this is expected to take up to two years, this creates a significant procedural hurdle for the Agreement’s conclusion. Despite the request for an opinion on the legality, the European Commission may still proceed with the provisional application of the Agreement; however, doing so would go against standard practice and enter politically sensitive territory.

Bilateral safeguard clause

On 10 February 2026, the European Parliament furthermore approved a new regulation establishing enhanced safeguard clauses to protect the EU agricultural sector from potential market disruptions resulting from trade liberalisation under the Agreement. The Safeguard Regulation allows the EU to temporarily suspend tariff preferences on agricultural imports from Mercosur countries if a surge in imports threatens to harm EU producers.

The safeguard mechanism introduces stricter thresholds than originally proposed by the Commission. An investigation into protective measures will be triggered when imports of sensitive agricultural products –including poultry, beef, eggs, dairy, garlic, citrus, honey, sugar, and biodiesel – increase by 5% on a three-year average (reduced from the Commission’s proposed 10% per year) and when import prices fall 5% below the relevant domestic price. Investigations may also be initiated at the request of a member state or industry representatives in cases of threatened serious injury. The Commission is required to report to Parliament at least every six months on the impact of sensitive product imports. Once formally adopted by the Council, the Regulation will enter into force alongside the iTA.

Looking ahead

The EMPA represents a landmark achievement in international trade diplomacy, particularly given the scale and economic significance of the markets involved. However, its path to implementation remains uncertain amid ongoing internal divisions within the EU. The recent referral for review by the Court of Justice constitutes an important setback for the European Commission, adding complexity to an already fraught ratification process. As the Agreement navigates these remaining procedural and political hurdles, companies operating across both trade blocs would be well-advised to monitor developments closely and assess potential implications for their cross-border operations. Looking ahead, the EU-Mercosur experience also signals a shift in how the EU approaches trade agreements going forward: frustrated by lengthy ratification timelines, the European Commission has proposed a “possible accelerated procedure” that would shorten the process from conclusion of negotiations to entry into force from 23 months to just 13 months, with trade deals with Indonesia and India identified as potential test cases.

What businesses trading between the EU and Mercosur should consider next

Our International Trade team has capabilities across Europe and Latin America, and we are well positioned to assist you in understanding and leveraging the mechanisms and advantages provided by the Agreement.

While the Agreement is pending ratification, businesses should use this period to prepare. This includes:

  • Supply chain planning and impact assessment: Analyse your supply chains to identify products that may benefit from preferential tariff treatment and those that may require adjustments to meet origin requirements, and assess the potential duty benefits.
  • Origin review: Assess whether your products qualify as “originating” under the Agreement’s rules and review your evidentiary documentation for origin determination purposes, including statements on origin, supplier declarations, and supporting records.
  • Tariff classification analysis: Review the tariff classification of goods that could benefit from potential duty savings under the Agreement and seek advance rulings where appropriate.
  • Compliance gap analysis: Identify gaps in your current documentation and record-keeping practices against the iTA’s requirements.
  • Regulatory monitoring: Keep on top of developments in the ratification process, the Court of Justice proceedings, and any changes to related EU legislation (e.g., EUDR, safeguard regulations).
  • Regulatory compliance: Comply with standalone EU regulations (e.g., EUDR, CBAM, CSDDD) that will remain in effect regardless of the Agreement’s status, ensuring your products meet all necessary standards for market access.

Once the iTA enters into force, businesses should ensure ongoing compliance and maximise the Agreement’s benefits:

  • Authorised Economic Operator (AEO) applications: Consider applying for AEO status to benefit from reduced documentation, fewer inspections, faster release times, and other trade facilitation advantages.
  • Customs broker management: Ensure that customs brokers are appropriately instructed to process preferential duty claims and ensure compliance with origin evidencing requirements.
  • Safeguards: Protect your interests in safeguard investigations, whether you are an EU producer seeking protection or an exporter affected by potential safeguard measures.
  • Customs disputes and appeals: File administrative and judicial appeals against customs decisions affecting your trade.

Should the Court of Justice of the EU issue an adverse opinion or the ratification process otherwise fail, businesses will need to reassess their strategies. In the absence of the Agreement, standard customs rules – including non-preferential origin requirements, most-favoured-nation (MFN) tariff rates, and existing regulatory and market access limitations – would continue to apply. Ensuring compliance with these requirements remains essential to avoid disruptions and hurdles in accessing the EU and Mercosur markets.

  • Non-preferential origin compliance: Assess compliance with non-preferential origin rules and documentation requirements that apply in the absence of a preferential trade agreement.
  • MFN tariff assessment: Analyse the impact of continued MFN tariff rates on your products.

Our cross-jurisdictional teams in Europe and Latin America work seamlessly to provide coordinated advice tailored to your business needs. Please do not hesitate to contact us to discuss how we can support you.

I was recently quoted in TradeWinds on the growing number of tankers going dark as the EU considers expanding restrictions on maritime services connected to Russia’s oil trade.

https://www.tradewindsnews.com/tankers/dozens-more-tankers-going-dark-as-eu-eyes-russian-maritime-services-ban/2-1-1941406

It now looks increasingly certain that the EU, and likely the UK, will move to a comprehensive maritime services ban on the carriage of Russian crude oil to third countries. This would represent a significant shift in policy, going further than the previous price-cap regime by banning Western companies from providing shipping, insurance and other maritime support services tied to Russian crude oil exports.

Rather than gradually lowering the oil price cap, EU leaders appear to have concluded that controlling Russia’s oil revenues through comprehensive restrictions on maritime services is necessary to squeeze state profits. These steps would build on measures taken by the UK and U.S. last year to target the four largest producers of Russian oil.

If introduced, the impact of these measures remains to be seen. A key risk associated with a full services ban is that it could lead to further proliferation of the parallel fleet, which has already become a source of considerable international concern.

As the EU and other jurisdictions look to change their approach, maritime stakeholders should reassess both compliance processes and contractual risk allocation.

As a follow-up to our previous client alerts on the EU’s Russian gas phase-out (available here), we have prepared an infographic summarising how the EU sanctions framework (Regulation 833/2014) interacts with the RePowerEU phase-out Regulation (Regulation 2026/261), including the key contract cut-off and phase-out dates for both LNG and pipeline gas.

Download the infographic.

Key announcements:

  • On January 8, 2026, the Federal Communications Commission (FCC) announced its first enforcement action based on a failure to comply with Team Telecom Letter of Agreement (LOA) commitments.
  • After violating the terms of a Team Telecom LOA by failing to screen foreign person employees and allowing foreign person employees to access U.S. communications infrastructure and customer information without seeking prior approval from DOJ, a satellite and earth-station operator (Operator) signed a settlement with the FCC, agreeing to (a) pay $175,000 to the U.S. Treasury Department; and (b) implement a robust compliance plan.

Background:

The Committee for the Assessment of Foreign Participation in the U.S. Telecommunications Services Sector (Team Telecom) is comprised of members of the Departments of Justice (DOJ), Defense, and Homeland Security and is responsible for reviewing FCC applications and licenses for national-security and law-enforcement risks. Team Telecom may advise that an application or license should be (i) granted, as it would not raise national security-or law enforcement risks; (ii) granted, subject to conditions to mitigate any national-security or law-enforcement risk; or (iii) denied. One method of mitigation is the use of an LOA. An LOA imposes binding commitments that mitigate national-security and law-enforcement risks arising from a provider’s FCC-licensed satellite or earth-station operations.

FCC enforcement action:

Under its LOA from 2022, the Operator committed to implement strict controls on foreign-employee access to U.S. communications infrastructure and customer information, including an obligation to notify DOJ before granting such access to any foreign employee. However, due to inadequate screening procedures, the Operator failed to submit at least 186 foreign employees for DOJ vetting. The FCC led the investigation following a DOJ referral which found that prior access had been granted without notification to DOJ.

The Operator signed a settlement with the FCC, agreeing to (a) pay $175,000 to the U.S. Treasury Department; and (b) implement a robust compliance plan to ensure there is no further unauthorized foreign-employee access. The enforcement action indicates the FCC’s intent to enforce Team Telecom mitigation agreements and compliance. Assistant Attorney General John Eisenberg issued the following statement: “The promises that companies make to Team Telecom are binding and enforceable commitments . . .” and “[the] enforcement action sends a clear message that compliance is not optional.” Moreover, “The Justice Department, as Chair of Team Telecom, remains committed to working with the FCC to . . . hold companies that violate the terms of their licenses to account.”

Key announcements:

  • On December 29, 2025, the U.S. Department of Agriculture announced an Advanced Notice of Proposed Rulemaking (ANPRM) relating to the Agricultural Foreign Investment Disclosure Act of 1978 (AFIDA), specifically to address the increased national security attention to foreign ownership and substantial control of agricultural land.
  • AFIDA requires certain foreign persons to report interests in U.S. agricultural land to the U.S. Department of Agriculture (USDA), using reported information to brief Congress and inform national security agencies, including CFIUS, about potential risks tied to foreign ownership or control of land near sensitive facilities. These rules were last substantively updated in 2006, and the USDA seeks to modernize AFIDA reporting, improve data completeness and verification, and align processes with national security and technology needs.
  • In conjunction with the announcement, the USDA invites public comments on the ANPRM, which will be considered in the development of any future regulatory changes.

AFIDA foreign investment reporting requirements:

AFIDA regulations require reporting from any foreign person that held, holds, acquires, or transfers any interest in U.S. agricultural land, generally within 90 days of acquisition or of becoming a foreign person. USDA relies on these filings to (i) produce periodic reports to Congress, and agencies, including CFIUS and the Department of Defense and (ii) use AFIDA-sourced data to identify and review transactions that may implicate national security, such as parcels near sensitive military installations.

A “foreign person” includes foreign governments; entities organized under foreign law or having a principal place of business outside the United States; non‑U.S. citizens or nationals; and domestic entities in which a foreign person holds “significant interest or substantial control.” Reportable “agricultural land” includes U.S. land used for farming, ranching, timber, or forestry, subject to limited small‑parcel/low‑revenue exceptions.

 “Any interest” generally encompasses all interests in agricultural land acquired, held, or transferred by a foreign person, but excludes security interests, leases under 10 years, specified future interests, certain rights‑of‑way and easements unrelated to agricultural production, mineral-only rights, and other specified interests.

Filers submit their report, via Form FSA–153, with required information, including legal name and address; citizenship (for individuals); nature and type of land interest; organizational details for non‑individuals (e.g., country of incorporation and principal place of business); legal description and acreage; intended agricultural use; method of acquisition and relationship to the prior owner; and the acquisition or transfer date. Historically, these forms were filed in the local Farm Service Agency county office, however, USDA is transitioning to an electronic filing portal, as mandated by the Consolidated Appropriations Act.

Filers that are not individuals or foreign governments must report foreign persons holding a “significant interest or substantial control” in the filer. This term captures, among other thresholds, 10 percent or more interests by a single foreign person, coordinated 10 percent or more interests held by foreign persons acting in concert through a domestic entity, and 50 percent or more aggregate interests held by foreign persons in a domestic entity even if not acting in concert. USDA may request additional information from individuals named in a filing.

USDA’s proposed rulemaking:

USDA cites three principal catalysts for updating AFIDA: (1) steadily increasing foreign holdings of U.S. agricultural land, (2) statutory direction to implement streamlined, electronic reporting and record retention, and (3) the 2024 GAO report identifying gaps in USDA’s collection, verification, timeliness, and sharing of AFIDA data critical to CFIUS reviews. GAO recommended, among other actions, strengthening data verification and monitoring and ensuring completeness of country‑of‑origin information.

USDA seeks input on: the scope of “foreign person,” “any interest,” and “agricultural land,” including whether to differentiate requirements for persons from foreign adversary countries; expanding or refining the data elements filers must provide, including verifiable geospatial property information; and approaches for capturing and verifying information on multi‑tiered and complex indirect ownership, including ultimate ownership, in a timely, accurate manner. USDA invites comments from stakeholders, including farmers, industry, CFIUS and national security agencies, and state and local governments. Comments must be received by USDA by January 28, 2026.

In today’s global trade landscape, trade defence instruments (TDI), such as anti-dumping and countervailing (anti-subsidy) duties, are more vital than ever. TDI are measures used to protect EU industry from imports originating from non‑EU countries that distort competition by suppressing EU producers’ prices, typically through dumping or because of state subsidies. The European Commission, specifically its Directorate‑General for Trade, is competent to initiate and conduct investigations that may lead to the imposition of such duties, in addition to regular customs duties, on the relevant goods. The annual TDI conference on 11 December brought together trade practitioners from across the spectrum, including lawyers representing exporters and EU industries, senior European Commission officials, industry associations, members of the EU courts, WTO experts, and academics. Against increasingly complex global trade dynamics, the discussions offered a clear preview of how the EU’s trade defence toolbox is evolving to adapt to the rapidly changing geopolitical context. We’ve translated the insights from the TDI conference into six practical expectations for 2026.

One: Convergence between TDI and economic security. Economic security and trade policy are now tightly coupled. The rebranding of “DG Trade and Economic Security” is more than cosmetic; it frames the Commission’s ongoing review of whether the TDI toolkit is effective and sufficient to address new risk patterns, including persistent global overcapacity and supply-chain vulnerabilities. We expect that the first half of 2026 will be marked by policy work to recalibrate instruments and guidance, tighten enforcement with customs and market surveillance, and align TDI with broader economic security initiatives.

Two: TDI remains central, despite a growing toolbox. Even as new EU instruments emerge, classic anti-dumping, anti-subsidy, and safeguard tools will remain central to addressing overcapacity and market distortions. The new instruments will supplement TDI. In 2026, stakeholders should anticipate sustained recourse to investigations in sectors where global imbalances persist, along with sharper attention to injury analyses and the selection of measures that deter circumvention.

Three: Resourcing, speed, and due process. The EU Commission is trying to cope with resource constraints, and understaffing is difficult to remedy in the short term. When considering reducing investigation lead times, the authorities will face the challenge of balancing any reduction against the rights of defence. Nonetheless, in 2026, we expect that the EU Commission will work on incremental process efficiencies, which could include changes to simplify questionnaires.

Four: Enforcement priorities. From an enforcement perspective, two observations stand out. First, authorities are increasing scrutiny of e‑commerce warehouses to ensure the effective application of trade defence measures, particularly for consumer goods. Second, the focus is turning to structures such as splitting product components across multiple consignments without economic justification to evade measures. Conduct of this kind is likely to be treated as abuse of law and a breach of customs legislation, drawing both trade‑defence and customs‑enforcement consequences in 2026.

Five: Registration and retroactivity. The EU Commission’s move to automatically register imports in TDI cases has had a chilling effect on trade flows, often triggering a sudden drop in imports. At the TDI conference, participants noted that the predictability of the retroactive application period could preserve the intended deterrent effect of such decisions. We believe the Commission’s automated registration practice will remain in place in 2026. However, if investigation lead times are shortened, the authorities may seek to levy duties retroactively as of the initiation of an investigation, creating an immediate chilling effect on imports.

Six: Particular market situation. Imports originating from countries affected by regional overcapacity may depress domestic prices to such a degree that the Commission finds that a particular market situation exists and adjusts its duty‑calculation methodology, typically resulting in higher duties. We believe imports from countries experiencing excess inflows due to regional overcapacity in certain sectors will come under increasing scrutiny to determine whether a particular market situation exists.

On 17 December 2025, the European Commission published an amendment proposal (COM 2025/0419) to the Carbon Border Adjustment Mechanism (CBAM) Regulation (Regulation (EU) 2023/956), which proposes to expand CBAM to certain downstream goods and strengthen anti-circumvention provisions. The proposal also refines operational rules, including for electricity imports, exemptions, and market-stability safeguards. On the same day, the Commission published several implementing acts addressing issues such as default values, the price of CBAM certificates, methodologies for calculating embedded emissions, and verification principles. It also published a proposal to establish a so‑called “Temporary Decarbonisation Fund”.

This alert focuses on the key amendments included in the Commission’s proposal to amend the CBAM Regulation.

Extension of CBAM to downstream goods

The Commission proposes to extend CBAM beyond the current list of basic materials in Annex I (e.g., aluminium, cement, fertilisers, iron, and steel) to approximately 180 downstream products, with particular focus on steel‑ and aluminium‑intensive goods (see the full list of goods included in the proposal here). These include machinery, hardware and fabrications, vehicle components, domestic appliances, construction equipment, and certain scrap metal. The stated objective, reflected in the Commission’s press release and FAQs, is to address the risk that downstream producers facing higher input costs due to CBAM and the Emissions Trading System (ETS) will relocate to jurisdictions with less stringent environmental rules. This extension to new products is foreseen in Article 30(3) of the CBAM Regulation, which allows the Commission to identify products further down the value chain for potential inclusion.

As stated in the Commission’s FAQs, only emissions embedded in the input materials (precursors) used to make the downstream goods will be subject to CBAM, while emissions from downstream processing or assembly will not be taken into account. To illustrate how it would work in practice, the Commission gives the following example: car doors manufactured in a non-EU country would attract CBAM obligations (e.g., declaring emissions, surrendering CBAM certificates) for the emissions embedded in the steel plates used in their construction, but not for the fabrication of those plates into parts or their assembly. To operationalise this approach, the proposal introduces Article 7(2a) and an Annex VIII into the CBAM Regulation, listing precursors that must be taken into account for embedded emissions calculations. In addition, recognising the complexity of calculating embedded emissions in multi‑component goods, the amendment proposal allows for declaring the embedded emissions in downstream products according to default values.

To preserve market stability, a new Article 27a empowers the Commission, by delegated acts, to exempt the goods listed in Annex I from CBAM’s scope where their inclusion would risk causing severe harm to the Union internal market due to serious and unforeseen circumstances. In parallel, Article 2(11) would allow the Commission to adopt delegated acts under an urgency procedure to add non-EU countries or territories to the list of exempted countries in Annex III.

Reinforced anti‑circumvention framework

Building on the Steel and Metal Action Plan of 19 March 2025, the proposal strengthens CBAM’s anti‑circumvention tools. A new concept of “abusive practices” is introduced in Article 3(35), capturing conduct that seeks to gain a benefit by unduly avoiding, in whole or in part, CBAM financial liability.

Under proposed Article 6(6a), the Commission could require additional supporting documentation for CBAM declarations relating to the identification, combination, and origin of goods. Article 6(7) would allow the Commission to determine categories of products at high risk of abusive practices and to inform competent and customs authorities to intensify controls. In cases of indirect representation, the EORI number(s) of the importer(s) on whose behalf the CBAM declaration is made would need to be provided in the application to become an authorised CBAM declarant, enabling further transparency for the enforcement authorities. Article 7(5) would reinforce record‑keeping requirements, obliging authorised CBAM declarants to maintain records necessary to substantiate embedded emissions calculations.

The proposed amendment also introduces Article 27(2)(c), which brings the artificial adjustment of supply chains to secure lower default values for goods within the definition of a circumvention practice.

Other amendments

For electricity, the proposal introduces some changes to the method for calculating the emissions factor for imported electricity as of January 2026 and allows the Commission to integrate a third-party country into the EU electricity market, thereby exempting its imported electricity from CBAM and subjecting it to the ETS, pursuant to proposed Article 2(7a).

The proposal inserts Article 17(5a), allowing competent authorities to require a financial guarantee from an authorised CBAM declarant that cannot demonstrate adequate financial capacity to fulfil its CBAM financial obligations. The amount of the guarantee may correspond, for example, to the declarant’s estimated annual quantity of imports of CBAM goods.

Practical implications

If adopted as proposed, CBAM would extend to a materially broader set of downstream, steel‑ and aluminium‑intensive products, while limiting the chargeable emissions to those embedded in the specified precursors. Companies importing multi‑component goods should anticipate increased data‑collection demands, the need to substantiate precursor content and origin, and potential reliance on default values where calculation complexity warrants. Electricity importers should prepare for revised default factors from January 2026 and monitor developments relating to market integration‑based exemptions. Across sectors, the reinforced anti‑circumvention rules signal a stricter documentation and control environment, especially for high‑risk product categories and supply chains involving indirect representation.

Next steps

The Commission’s amendment proposal is presented to the European Parliament and the Council of the EU, composed of Member State representatives, for debate and a vote on its adoption.

The latest U.S. sanctions designations on China’s independent “teapot”’ refineries signal a more targeted and commercially impactful approach to constraining Iran’s oil exports. This article explores how these measures work and their effectiveness.

Key takeaways

  • The U.S. is sanctioning China’s independent “teapot” refineries to increase pressure on Iran’s oil exports.
  • SDN designations have immediate commercial consequences, cutting affected companies off from the U.S. financial system and discouraging banks, insurers and traders from dealing with them.
  • Restructuring or renaming does not remove risk unless it is clear that the new entity is genuinely separate from the sanctioned one.

During this Trump term, the United States has adopted a more nuanced approach to the “maximum pressure” campaign to squeeze Iran’s oil export revenues.  As China is the largest buyer of Iranian oil, that trade route was always under scrutiny by the U.S. authorities.  However, the designation of independent “teapot” refineries is a novel approach that started earlier this year.

Why Hebei Xinhai Chemical stands out

Hebei Xinhai Chemical was targeted in the third round of teapot designations and sent a particularly strong message because, unlike the other teapots that are domestic-facing, Xinhai is a relatively big teapot with full-on crude import quotas.  It is “independent”, but at the same time more connected with the international market.  While the less connected intra-China teapots can absorb or tame the impact of the sanctions, international transactions are where these designations “bite” because being placed on OFAC’s SDN List blocks a company’s access to the U.S. financial system, including the use of U.S. dollars.

How sanctions effectiveness is felt in practice

The “effectiveness” of the sanctions is measured by how much the sanctions are complied with and how much the targeted behavior changes.  Companies’ risk appetites fluctuate based on the exposure they have to the U.S. financial system.  If a non-U.S. company has a lot of U.S. counterparts that it deals with, or has contracts denominated in U.S. dollars, that company will not want to take the risk of an OFAC designation through secondary sanctions.  Even without having a U.S. counterparty, an SDN listing makes the life of a company extremely difficult, where parties including banks and insurers alike – especially in the Western world – will not want to deal with an SDN.

The pattern of U.S. designations targeting different participants of the Iranian oil supply chain, whether it be the vessels carrying these products, the ports receiving them, or the refineries processing them, has certainly been effective in terms of increasing the risk averseness of the parties that may be looking to ship in this trade route.  On the receiving end, it is understood some of the sanctioned teapots are renaming and reorganizing themselves, presumably because these sanctions do bite.

Do restructurings reduce sanctions risk?

As a result of the restructuring activities, if a new entity is formed and it does not have sanctioned ownership, the default position is the new entity would not be considered sanctioned (though it may be targeted in a future action).  However, if the new entity is seen effectively as a “spin-off” of the previously sanctioned entity, then that may be sufficient to deter parties from dealing with it depending on the commercial risk appetite.

A similar issue arises when a previously sanctioned complex expands.  An expanded complex may continue to run into practical difficulties and face risk averseness if it is not clear from the outside that the expanded parts are entirely distinct from the sanctioned parts, in terms of ownership and property interest.

In short, formal corporate restructuring does not necessarily mitigate commercial sanctions risk unless the independence and ownership of the “new” entity can be demonstrated with clarity.

Key takeaways:

  • EU and UK sanctions now increasingly target the full maritime logistics chain, including third country actors
  • Shadow-fleet measures have intensified scrutiny on vessels and operators
  • Compliance has become central to commercial decision-making
Continue Reading How sanctions transformed the shipping industry in 2025

The European Parliament and Council have reached a provisional political agreement to permanently end all imports of Russian natural gas into the EU on an accelerated timetable. The deal brings forward key deadlines for LNG and pipeline gas, tightens limits on contract amendments, enhances anti-circumvention and origin-tracking rules, and strengthens enforcement with significant penalties. Member States will also be required to submit national diversification plans by March 2026. For a concise breakdown of the measures, timelines, and compliance implications, please read our full client alert here.