Embargo

What it means

An embargo is a ban on trade with a particular country or in particular goods, such as weapons, technology or raw materials. It is imposed by the EU, the UN or an individual state as a foreign policy tool, for example against a country that breaches international law.

Embargoes are usually part of wider sanctions, which may also freeze the assets of specific people and companies, ban providing them with funds or services, or restrict transport and financial services. Sanctions lists change and expand frequently.

Breaching an embargo is a criminal offence in Slovakia and can also lead to corporate criminal liability. The company also risks losing licences, heavy fines and the loss of banking relationships, as banks enforce sanctions strictly.

How it works in practice

Companies trading internationally should carry out sanctions screening of business partners, their owners and the end users of goods. Checking the direct customer is not enough, as goods may reach an embargoed country through intermediaries.

For dual-use goods, which can have both civilian and military uses, an export licence is required even outside an embargo. The classification of the goods should be checked and, if in doubt, the competent ministry consulted before shipping.

As part of AML and KYC checks, banks screen payments against sanctions lists and hold suspicious ones. The company should have documentation on the origin of the goods, the end user and the purpose of the deal ready to explain a payment.

What to watch out for

Circumventing sanctions through third countries is a common risk. An unusual rise in orders from countries neighbouring an embargoed state, an unclear route for the goods or payments from other countries are red flags that need checking.

Sanctions can change overnight, and contracts concluded before they were imposed may become impossible to perform. Contracts with foreign partners should therefore include a sanctions clause allowing termination without penalty if performance would breach an embargo.