US sanctions are tools meant to alter or change the domestic or foreign policy of a foreign government, so US foreign policy plays a major role in crafting US sanctions on countries or regions, as well as with entities, persons, or sectors in a specific country.
The main laws governing financial relations with Iran are the ITSR (the Iranian Transaction Sanctions Regulations) and CISADA (the Comprehensive Iran Sanctions, Accountability and Divestment Act). There are numerous executive orders on the subject as well. If you want to know more about Iran sanction laws and programs, speak with a knowledgeable OFAC lawyer who could answer your questions.
Laws Concerning Trade with Iran
Iran sanction laws prohibit US persons and entities from importing, exporting, and providing or receiving services to or from Iran. There are various exceptions that permit US persons and entities to engage in legal trade with Iran, and these exemptions are called general licenses. General licenses are authorizations with strict requirements on trade with a sanctioned country like Iran.
Additionally, simply negotiating or engaging in any form of business with a counterpart in Iran may be impermissible, so it is best to speak with an OFAC attorney before engaging in conversation or negotiation with an Iranian person or entity for business activity.
Exceptions to Trade Laws
Regarding trade with Iran, there are exceptions for those who have families who are Iranian nationals. These include transactions related to the remittance of personal funds, sales of property acquired in Iran prior to being a US person, the transfer of funds in relation to an inheritance from an Iranian person, or the transfer of remains of family members.
What Goods Can Legally be Traded with Iran?
At the moment after the reposition of the nuclear-related sanctions, legal trade with Iran is limited to medical goods, medical devices, pharmaceutical products, food-related products, agricultural goods, the provision of services for human rights, and some cultural activities.
If a person’s trade or prospective business activity with Iran is prohibited, specific license applications are available. A sanctions attorney can help draft and submit to OFAC a specific license application that would provide legal authorization to engage in a set of proposed transactions that are outlined in the license application. Receiving authorization from OFAC may take months and it is very important to be incredibly specific in the license applications. That is why it is important to consult with an experienced OFAC lawyer that has extensive knowledge of Iran sanction laws.
Changes to the ITSR
The most recent changes to the ITSR stem from the President deciding in 2018 to withdraw from the JCPOA as outlined in the National Security Presidential Memorandum. These were codified into three different regulations. The first one is Section 560.534, which regards the winding down of transactions related to importation into the United States as well as dealings in foodstuffs and carpets.
All transactions ordinarily incident and necessary to the wind-down of the following activities would be authorized until August 6, 2018 at 11:59 PM Eastern Time, and that regards the importation of Iranian-origin goods such as foodstuffs intended for human consumption as well as carpets and textiles of Iranian origin. Section 560.535 also authorizes the wind-down of transactions through August 6, 2018 at 11:59 Eastern Time. This section disregards credit and brokering services related to certain foodstuffs and carpets. US institutions issuing ledgers of credit in favor of a beneficiary in Iran, which includes the government of Iran or an Iranian financial institution, are permitted within the context of winding down the activities.
It is also permitted for US financial institutions to issue, advise, negotiate, or confirm those ledgers of credit to pay for transactions related to Iranian-origin goods from the Iranian government, an Iranian financial firm, or any blocked person, provided that the goods are not for exportation or supply directly or indirectly to the government of Iran nor an Iranian financial institution or any blocked person.
General License H Policies
US companies who have foreign subsidiaries relying on General License H to conduct business in Iran need to change their General License H policies to ensure that only wind-down activities occur from now until November 6, 2018. While accepting new customers is prohibited, it will be important for compliance personnel to consult with foreign subsidiaries regarding what qualifies as permissible wind-down activity and to monitor the ongoing activity to ensure it qualifies. US persons should be careful to avoid operational approval of transactions.
Recent News Regarding Iran Sanctions
In recent news regarding the JCPOA, the US has rejected a request from several European countries for broad exemptions to do business with Iran. The Secretary of State, Mike Pompeo, and the Treasury Secretary, Steven Mnuchin, wrote in a letter that the administration would not agree to wide-ranging protections for European firms seeking to do business in Iran. Rather, they would grant only limited exceptions based on national security or humanitarian grounds.
In the letter, the European Minister said that they expected their close ally, the United States, to not enforce sanctions against EU companies doing business in Iran. More specifically, the Minister asked that the US refrain from punishing firms in certain commercial sectors, including energy, automobile manufacturing, aviation, infrastructure, and pharmaceuticals. Without some protections from the US regime sanctions, most major European companies will have little choice but to pull out of Iran and their business in Iran. The JCPOA wind-down process has begun and its first wave of sanctions will be coming in August. The next is expected to hit in November. In order to learn more about current Iran sanction laws and how they could affect your business, speak with an intelligent OFAC lawyer that could answer your questions.