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Case No. UKRAINE-EO13661-2015-317467-1
Kalashnikov Designs Ltd
7 Clarence Parade
Cheltenham
GL50 3NY
United Kingdom
Attn: [ ]
Dear [ ]
This responds to your request dated March 2, 2015, as supplemented on June 17, 2015, July 8, 2015, and May 6, 2019 (collectively, the “Application”), to the Office of Foreign Assets Control (OFAC), seeking guidance on U.S. person involvement in a merchandising agreement with Kalashnikov Concern, an entity designated under the Ukraine-Related Sanctions Regulations, 31 C.F.R. Part 589 (the “Regulations”). According to the Application, you are a U.S. citizen and minority shareholder in Kalashnikov Designs Ltd (“Kalashnikov Designs”), a company incorporated in the United Kingdom. You further state that Kalashnikov Designs would like to produce and sell shirts, jeans, watches, leather goods, etc. under Kalashnikov Concern’s trademark, including AK-47, AK-74, and AKM....
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1) BACKGROUND
This guidance letter contains notable conclusions regarding the relationship between the basic blocking prohibition and (i) U.S. person involvement in sanctions-implicating transactions of offshore entities, and (ii) the ability of U.S. persons to hold equity in non-sanctioned third country companies that do business substantially (if not exclusively) with blocked persons. Note that the entity at issue here (Kalashnikov Designs Limited) was a small entity incorporated on 5-9-12 and dissolved on 11-19-19 (see native PDF), and Kalashnikov Concern was designated as an SDN on July 16, 2014.
The applicant is a U.S. person (by citizenship) that, from March 2, 2015 through May 6, 2019, "held a 25 percent ownership interest in" a non-U.S. person entity that appeared to be created for the predominant (if not sole) purpose of selling goods "[p]ursuant to a merchandising agreement" with an SDN to which...