On January 16, 2016 (Implementation Day), the International Atomic Energy Agency certified that Iran had implemented measures to curb its nuclear program. As a result, the United States and the European Union (EU) lifted a number of sanctions as envisioned by the Joint Comprehensive Plan of Action (JCPOA). While the EU lifted most of its sanctions, the U.S. provided for modest relief in the form of lifting "secondary" sanctions directed toward non-U.S. persons and de-listing certain Iranian persons and companies. We outline below some of the more consequential changes to assist in navigating the complex sanctions regime, which is subject to change and development.
In What Kind of Transactions May non-U.S. Persons Now Engage?
Non-U.S. persons and companies may now more freely conduct dealings with Iran's financial and banking, energy and petrochemicals, shipping, gold and precious metals, software, and automotive sectors. Importantly, they may now:
- Engage in financial transactions with the Government of Iran and certain Iranian financial institutions;
- Provide underwriting services, insurance or re-insurance in the energy, shipping and shipbuilding sectors;
- Import or transport Iranian oil, gas or petrochemicals, and invest in the Iranian oil and gas sector;
- Trade in graphite and raw or semi-finished metals such as aluminum, steel, and coal with Iran;
- Engage in transactions in Iran's automotive sector;
- Engage in transactions with nearly 400 individuals and entities that have been removed from the Specially-Designated Nationals (SDN List) and other OFAC-administered lists of sanctioned persons, including the Central Bank of Iran, the National Iranian Oil Company and the National Iranian Tanker Company.
May US owned-or controlled foreign entities engage in transactions with Iran and Iranian persons?
Pursuant to a General License issued by the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC) on Implementation Day, U.S.-owned or- controlled foreign entities may now also engage in transactions with the Iranian Government or Iranian entities that would otherwise be prohibited, provided they do not:
- Involve U.S. persons employed by the U.S.-owned or –controlled foreign entity to engage in day-to-day operations in Iran;
- Export or re-export goods, technology, or services from the United States (without separate authorization from OFAC);
- Engage in any activity involving any item subject to the Export Administration Regulations (EAR) that is prohibited by or requires a license under the EAR, or involves a person whose export privileged have been denied, unless authorized by the U.S. Department of Commerce;
- Transfer funds to, from, or through the U.S. financial system;
- Engage in a transaction with a listed person;
- Engage in a transaction with any military, paramilitary, intelligence, or law enforcement entity of the Iranian Government; or
- Otherwise violate any regulations relating to Iran's proliferation of weapons of mass destruction, international terrorism, Syria, Yemen, or Iran's commission of human rights abuses against its citizens.
While a U.S. parent may not facilitate any transaction of a foreign affiliate with Iran, it may nonetheless: (i) Engage in activities related to the establishment or alteration of corporate policies and procedures to allow U.S.-owned or controlled foreign entities to engage in authorized transactions involving Iran, and (ii) Make available to their subsidiaries any automated and globally integrated business systems related to transactions with Iran.
What are the remaining restrictions on U.S. persons and what type of transactions are permitted?
It is important to note most U.S. Iran-related sanctions remain in place as to U.S. persons. With limited exceptions, U.S. persons continue to be broadly prohibited from engaging in transactions involving Iran or its government. Importantly, U.S. persons (and U.S. owned-or controlled foreign entities) cannot engage in transactions with Iranian financial institutions that remain on the SDN list, such as Mehr Bank, or entities that are related to the Government of Iran, such as the Islamic Revolutionary Guard Corps (IRGC). However, they may: (i) Subject to prior authorization, export to Iran commercial passenger aircrafts, spare parts and components, and associated services for commercial passenger aviation; and (ii) Import into the United States Iranian-origin carpets and foodstuffs, including pistachios and caviar.
The chart below provides a brief overview of transactions in which U.S. persons and U.S.-owned-or -controlled foreign entities may engage:
Summary of U.S. Iran-related Sanctions
|Activity||U.S. Persons||U.S. Foreign Subsidiaries|
|Engage in financial transactions with the government of Iran or Iranian financial institutions||No||Yes, under certain conditions|
|Provide underwriting services, insurance, or re-insurance in the energy, shipping, and shipbuilding sectors||No||Yes, under certain conditions|
|Import or transport Iranian oil, gas, or petrochemicals; invest in the Iranian oil and gas sector||No||Yes, under certain conditions|
|Conduct transactions with Iran's shipping and shipbuilding sectors and port operators||No||Yes, under certain conditions|
|Trade in gold or other precious metals||No||Yes, under certain conditions|
|Trade with Iran in graphite and raw or semi-finished metals, such as aluminum, steel, and coal||No||Yes, under certain conditions|
|Provide software for integrating industrial processes to Iran||No||Yes, under certain conditions|
|Engage in transactions in Iran's automotive sector||No||Yes, under certain conditions|
|Engage in dealings with listed persons||No||No|
|Export spare parts for commercial passenger aircrafts||Yes, subject to prior authorization||Yes|
|Import Iranian carpets||Yes||Yes|
Circumstances Remain Fluid and Companies Should Proceed with Caution
The United States can discretionarily re-impose sanctions, in whole or in part, under the JCPOA's "snapback" provisions. Although the current risk of sanctions' snapback is remote, circumstances may change based on political developments, including the replacement of the current Administration next year or passage of legislation that would supersede the JCPOA.
As such, all companies should continue to exercise caution and undertake customary due diligence, even if their Iran-related dealings are no longer subject to US secondary sanctions prohibitions. Companies must vigilantly ensure that they are not facilitating transactions that remain prohibited, such as transactions with Iranian persons/entities on the SDN List, and meet US government expectations that all companies will adopt and follow appropriate procedures to identify, escalate, interdict, and report transactions that violate US sanctions programs.
* * * * * * * * * *
For more information on doing business with Iran, please contact Venable's International Trade Group. We are available to assist U.S. and non-U.S. companies in evaluating the viability of business opportunities and potential risks under the new sanctions regimes, including those involving Iran.