Overview
This section prohibits federal agencies and their contractors from acquiring supplies or services from sources restricted by the Department of the Treasury’s Office of Foreign Assets Control (OFAC). It aligns federal procurement with U.S. foreign policy and national security sanctions imposed via statutes, Executive orders, and federal regulations.
Key Rules
- Broad Applicability: Prohibitions apply to executive agencies, prime contractors, and all tiers of subcontractors.
- Standard of Compliance: Acquisitions are prohibited if the transaction would be illegal for any person subject to U.S. jurisdiction under 31 CFR Chapter V.
- Geographic Restrictions: Most transactions involving Cuba, Iran, and Sudan are prohibited, along with most imports from Burma or North Korea.
- Entity-Specific Restrictions: Acquisitions are prohibited from individuals and entities identified on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List).
- Authorization Exception: Transactions otherwise prohibited by these rules may only proceed if specifically authorized by OFAC.
Practical Implications
- Contractors must implement robust supply chain due diligence and "Know Your Vendor" protocols to screen all subcontractors and suppliers against the SDN List.
- Failure to comply with these restrictions can result in severe legal penalties, contract termination for default, and potential suspension or debarment from future government contracting.