FAR 52.225-13 is the federal contract clause that bars a contractor from buying anything for the contract that OFAC's sanctions rules prohibit. Its last paragraph tells the contractor to put the same clause into its subcontracts. If you supply a prime contractor on a federal job, there is a good chance it is in your subcontract, whether or not you read it.
This guide explains what the clause says, what it leaves out, and a setup a small subcontractor can run without a compliance department.
What does FAR 52.225-13 say?
The clause is titled "Restrictions on Certain Foreign Purchases." The current version is dated February 2021. It has three paragraphs. The full text is short enough to read in a minute.
Paragraph (a) is the rule. Except as authorized by OFAC, "the Contractor shall not acquire, for use in the performance of this contract, any supplies or services" if any proclamation, executive order or statute administered by OFAC, or OFAC's regulations at 31 CFR Chapter V, "would prohibit such a transaction by a person subject to the jurisdiction of the United States."
In plain words: if a US person could not legally buy it under OFAC's rules, you cannot buy it for the contract.
Paragraph (b) gives examples and points to the lists. It says most transactions involving certain countries are prohibited, and that the people and entities subject to sanctions are on OFAC's List of Specially Designated Nationals and Blocked Persons, the SDN list.
Paragraph (c) is the flowdown: "The Contractor shall insert this clause, including this paragraph (c), in all subcontracts."
Who does it reach?
FAR subpart 25.7 sets the policy: "agencies and their contractors and subcontractors must not acquire any supplies or services" that OFAC's rules would prohibit. FAR 25.1103(a) tells contracting officers to put the clause in solicitations and contracts "unless an exception applies."
For commercial products and services, the clause is listed in FAR 52.212-5, the list of statutory clauses a contracting officer marks as applying. Look for item "52.225-13" in that list in your prime contract, or in the flowdown terms your prime sends you.
Paragraph (c) passes the clause from each tier to the next. A small machine shop making custom parts for a tier-two subcontractor on a Defense Department contract is bound by it as much as the prime is.
The exception for commercial subcontracts
FAR 44.402(b) says that, notwithstanding any other clause in the prime contract, "only those clauses identified in the clause at 52.244-6 are required to be in subcontracts for commercial products or commercial services." FAR 52.244-6 lists the clauses that must flow down to commercial subcontracts. 52.225-13 is not one of them.
So if you sell the prime an off-the-shelf product or a commercial service, the clause is not required in your subcontract. Some primes add it anyway, or put a general sanctions term in their purchase order. Check your own subcontract or PO terms to see what you signed.
As a US company, you are bound by OFAC's rules anyway. The clause makes that a contract term. A breach can become a contract problem with your prime as well as a sanctions problem.
What does it not say?
The clause sets an outcome, not a method. It does not:
- say how to check suppliers
- say how often to check
- name which lists beyond the SDN list
- ask you to report checks to anyone
That leaves the method to you. Primes fill the gap with their own supplier terms and questionnaires, and some ask subcontractors to confirm they screen their own supply chain.
What do primes usually ask for?
Supplier questionnaires vary. These questions come up often:
- Do you screen your suppliers against OFAC's lists? How often?
- Do you also check the Consolidated Screening List, which includes the BIS Entity List?
- Are you, or any of your owners, on an exclusion list such as the one on SAM.gov?
- Can you provide records of your screening if asked?
The last question is where small subcontractors get stuck. "Yes, we check" is easy to write. A dated record for each supplier is what shows it.
A proportionate setup for a small subcontractor
It follows the same steps as our guide on whether small businesses need OFAC screening.
1. List the suppliers you buy from for the contract
Start with the vendors in your accounting system that supply materials, parts, software or services you use on the federal work. Foreign suppliers and distributors of foreign parts come first.
2. Screen each supplier and its owners
Search each supplier in OFAC's Sanctions List Search. If you export or handle controlled items, check the Consolidated Screening List too. For foreign suppliers, ask who owns them and screen the owners. OFAC treats a company owned 50% or more by blocked persons as blocked, even if its name is on no list. Our guide to how to check if a company is sanctioned walks through each step.
3. Screen before you buy, then again when the lists change
Check a new supplier before the first purchase order. Recheck existing suppliers when OFAC updates its lists, or on a fixed schedule you can explain to your prime. A supplier that was clear when you onboarded it can be designated later.
4. Keep a dated record
For each supplier, record the date, the name searched, the lists checked, the result and who reviewed any possible match. OFAC's recordkeeping rule, 31 CFR 501.601, requires records of transactions subject to its regulations to be kept for at least 10 years. Keep them where a contracts manager or auditor can find them.
5. Write it down in one page
A one-page procedure covers who screens, when, against which lists, what happens on a hit and where the records live. Send it when a prime asks how you screen.
Our step-by-step guide to screening QuickBooks vendors against the OFAC list shows the manual process. Sanctions Verified, opening to QuickBooks Online and Xero users, screens every vendor against OFAC, the US export lists and six more official sources, rechecks them when the lists change, and attaches a dated certificate to each vendor record. You can check one supplier now with the free check.
What if a supplier matches?
Stop the purchase. Do not pay an open invoice. Compare the details in the list entry with what you know about the supplier, following OFAC's FAQ 5. If the match looks real, tell your prime under your contract's notice terms, and get legal advice before you release any payment or property. If you block property, OFAC requires a report within 10 business days. The steps are in our guide to OFAC's sanctions lists.
