On January 16, 2016, also known as Implementation Day, the United States government lifted certain nuclear-related secondary sanctions it had in place against Iran. Although Implementation Day resulted in some changes to U.S. sanctions law, many sanctions prohibiting U.S. persons from dealing with Iran are still in place. This article begins by giving an overview of the Nuclear Deal and Implementation day and then moves to outline the removal of the secondary sanctions concerning non-U.S. persons, and finally closes by discussing the impact of Implementation Day on U.S. persons.
On July 14, 2015, the P5+1 (China, France, Germany, Russia, the United Kingdom, and the United States), the European Union (EU), and Iran reached a Joint Comprehensive Plan of Action (JCPOA) to ensure that Iran’s nuclear program will be exclusively peaceful.
On January 16, 2016, Implementation Day, upon confirmation that Iran met obligations under JCPOA, the U.S. lifted nuclear-related sanctions against Iran. It is important for U.S. persons (meaning any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States) that the secondary nuclear-related sanctions are generally aimed at non-U.S. persons for specified conduct that occurs entirely outside of the United States. As a result, many of the changes in the regulations that took place on Implementation Day DO NOT impact U.S. persons directly.
The primary U.S. sanctions (i.e. the domestic trade embargo) against Iran and the main body of sanctions law as outlined by the Iranian Transactions and Sanctions Regulations, 31 C.F.R. Part 560 (ITSR) remains in place. Therefore, even after Implementation Day and the lifting of the nuclear sanctions, with limited exceptions, U.S. persons (as defined above) – including U.S. companies – continue to be broadly prohibited from engaging in transactions or dealings with Iran or its government. Therefore, it remains impetrative that U.S. persons ensure that a particular transaction and/or conduct at issue are permitted under the current regulations before engaging in any conduct, commercial or other, vis-à-vis Iran.
On Implementation Day, the U.S. lifted certain sanctions that restricted the financial and banking activities non-U.S. persons could engage in relating to Iran. In particular, beginning on Implementation Day, the following activities by non-U.S. persons are no longer sanctionable: activities, including financial and banking transactions, with the Government of Iran (GOI), the Central Bank of Iran (CBI), Iranian financial institutions, and other Iranian persons including the provision of loans, transfers, accounts (including the opening and maintenance of correspondent and payable-through accounts at non-U.S. financial institutions), investments, securities, guarantees, foreign exchange (including Iranian rial-related transactions), letters of credit and commodity futures or options, the provision of specialized financial messaging services and facilitation of direct or indirect access thereto, the purchase or acquisition by the GOI of U.S. bank notes, and the purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt as well as providing specialized financial messaging services to the CBI and Iranian financial institutions.
Beginning on Implementation Day, non-U.S. persons are authorized to provide underwriting services, insurance, or re-insurance in connection with activities consistent with the JCPOA, including activities with individuals and entities set forth in the regulations, including underwriting services, insurance, or re-insurance in connection with activities in the energy, shipping, and shipbuilding sectors of Iran, for National Iranian Oil Company (NIOC) or National Iranian Tanker Company (NITC), or for vessels that transport crude oil, natural gas, liquefied natural gas, petroleum, and petrochemical products to or from Iran.
Beginning on Implementation Day such sanctions, including sanctions on associated services, do not apply to non-U.S. persons who: (i) are part of the energy sector of Iran; (ii) purchase, acquire, sell, transport, or market petroleum, petroleum products (including refined petroleum products), petrochemical products, or natural gas (including liquefied natural gas) to or from Iran; (iii) provide to Iran support, investment (including through joint ventures), goods, services (including financial services), and technology that can be used in connection with Iran’s energy sector, the development of its petroleum resources, and its domestic production of refined petroleum products and petrochemical products; or (iv) engage in activities with Iran’s energy sector, including NIOC, NITC, and Naftiran Intertrade Company (NICO).
On Implementation Day such sanctions, including sanctions on associated services, do not apply to non-U.S. persons who are part of the shipping or shipbuilding sectors of Iran or who: own, operate, control, or insure a vessel used to transport crude oil, petroleum products (including refined petroleum products), petrochemical products, or natural gas (including liquefied natural gas) to or from Iran; operate a port in Iran, engage in activities with, or provide financial services and other goods and services used in connection with, the shipping and shipbuilding sectors of Iran or a port operator in Iran, including port services, such as bunkering and inspection, classification, and financing, and the sale, leasing, and provision of vessels to Iran.
Beginning on Implementation Day such sanctions, including sanctions on associated services, do not apply to non-U.S. persons who sell, supply, export, or transfer, directly or indirectly, to or from Iran, gold and other precious metals, or conduct or facilitate a financial transaction or provide services for the foregoing, including any security, insurance, and transportation.
Beginning on Implementation Day such sanctions, including sanctions on associated services, do not apply to non-U.S. persons who sell, supply, or transfer, directly or indirectly, graphite, raw or semi-finished metals such as aluminum and steel, coal, and software for integrating industrial processes, to or from Iran in connection with activities consistent with the JCPOA, including trade with certain individuals and entities, and the sale, supply, or transfer of such materials to the energy, petrochemical, shipping, and shipbuilding sectors of Iran, and Iranian ports, or conduct or facilitate a financial transaction or provide services for the foregoing, including insurance and reinsurance.
Beginning on Implementation Day such sanctions, including sanctions on associated services, do not apply to non-U.S. persons who conduct or facilitate financial or other transactions for the sale, supply, or transfer to Iran of goods and services used in connection with the automotive sector of Iran.
On Implementation Day, OFAC issued a statement of licensing policy which establishes a favorable licensing policy regime through which U.S. persons and non-U.S. persons may request specific authorization from OFAC to engage in transactions for the (i) export, reexport, sale, lease or transfer to Iran of commercial passenger aircraft for exclusively civil aviation end use, (ii) export, reexport, sale, lease or transfer to Iran of spare parts and components for commercial passenger aircraft; and (iii) provision of associated services, including warranty, maintenance, and repair services and safety-related inspections, for all the foregoing, provided that licensed items and services are used exclusively for commercial passenger aviation. Please not that any export, reexport, or transfer of U.S. export-controlled items must be consistent with other U.S. legal requirements.
On Implementation Day, OFAC issued General License H (GLH) authorizing U.S.-owned or controlled foreign entities to engage in certain transactions involving Iran that would otherwise be prohibited. More specifically, the general license allows U.S.-owned or controlled foreign entities to engage in the same type of transactions that non-U.S. entities are now permitted to engage in as a result of the lifting the secondary nuclear-related sanctions as noted in Part II of this article and outlined above.
An entity established or maintained outside the United States is “owned or controlled” by a U.S. person if the U.S. person: (1) holds a 50 percent or greater equity interest by vote or value in the entity; (2) holds a majority of seats on the board of directors of the entity; or (3) otherwise controls the actions, policies, or personnel decisions of the entity.
GLH does not authorize U.S.-owned or -controlled foreign entities to engage in any transactions involving: (1) the direct or indirect exportation or reexportation of goods, technology, or services from the United States (without separate authorization from OFAC); (2) any transfer of funds to, from, or through the U.S. financial system; (3) any individual or entity on the SDN List or any activity that would be prohibited by non-Iran sanctions administered by OFAC if engaged in by a U.S. person or in the United States; (4) any individual or entity identified on the FSE List; (5) unless authorized by the U.S. Department of Commerce, activity prohibited by, or requiring a license under, part 744 of the U.S. Export Administration Regulations (EAR) or a person whose export privileges have been denied pursuant to part 764 or 766 of the EAR; (6) any military, paramilitary, intelligence, or law enforcement entity of the Government of Iran, or any officials, agents, or affiliates thereof; (7) any activity that is sanctionable under E.O. 12938 or 13382 (relating to Iran’s proliferation of weapons of mass destruction and their means of delivery, including ballistic missiles); E.O. 13224 (relating to international terrorism); E.O. 13572 or 13582 (relating to Syria); E.O. 13611 (relating to Yemen); or E.O. 13553 or 13606, or section 2 or 3 of E.O. 13628 (relating to Iran’s commission of human rights abuses against its citizens); and (8) any nuclear activity involving Iran that is subject to the procurement channel established pursuant to paragraph 16 of UNSCR 2231 (2015) and section 6 of Annex IV of the Joint Comprehensive Plan of Action of July 14, 2015 and that has not been approved through the procurement channel process.
In addition, GLH authorizes U.S. persons to engage in certain activities otherwise prohibited by the ITSR, namely, activities related to the establishment or alteration of corporate policies and procedures to the extent necessary to allow U.S.-owned or -controlled foreign entities to engage in transactions involving Iran that are authorized under GLH, and making available to foreign entities they own or control certain automated and globally integrated business support systems.
Please be advised, however, that with the exception of activities authorized in GLH, the prohibition on facilitation by United States persons under the current U.S. sanctions law (ITSR) will remain in effect.
OFAC has issued a regulatory amendment to the ITSR, effective upon publication in the Federal Register, to authorize the importation into the United States of Iranian-origin carpets and foodstuffs, including pistachios and caviar.
Carpets and foodstuffs authorized for importation pursuant to the general license are still subject to all other laws and regulations applicable to goods imported into the United States, including generally applicable laws and regulations administered by other departments and agencies, such as the Departments of Agriculture or Commerce, the Food and Drug Administration, or Customs and Border Protection.
In addition, under an accompanying provision, U.S. depository institutions are authorized to process letters of credit for payments for Iranian-origin carpets and foodstuffs, and U.S. persons are authorized to act as brokers for the purchase or sale of Iranian-origin carpets and foodstuffs authorized to be imported into the United States under the general license.
With the exception of the three categories of activities described above, the sanctions lifted on Implementation Day do not apply to U.S. persons and entities. Therefore U.S. persons and U.S. companies continue to be broadly prohibited from engaging in transactions or dealings with Iran and the Government of Iran unless such activities are exempt from regulation or authorized by OFAC.
Please be advised that this article is intended to provide general information regarding the current U.S. sanctions law and is not intended to serve as a substitute for legal advice. For more specific information regarding the current sanctions regulations and your case, please speak to an experienced attorney.
Please feel free to contact our firm with any questions at 310-780-6360 or by email via our website www.yazdanyarlaw.com.