OFAC expands reach of previous sanctions

The Trump Administration issued a new executive order on August 6, 2018, in order to reimpose the first tranche of the Iran sanctions lifted by the former Joint Comprehensive Plan of Action (“JCPOA”). In doing so, the executive order consolidates relevant sanctions authorities and broadens the scope of the previous restrictions.

Companies will now have to comply with a renewed set of secondary sanctions, and prepare for the second and final tranche of reimposed sanctions which will be announced on November 4, 2018.

Interestingly, OFAC has adopted a new broad “material support” prohibition against companies and individuals who provide material support for, or goods and services in support of, persons subject to the Iran sanctions. Such a prohibition will apply to direct or indirect transactions that may ultimately benefit a prohibited entity or person. As a result, companies will have to take greater efforts to confirm that their products or services do not end up in the hands of a prohibited entity or person.

Even though the European Union has not followed suit in reimposing the Iran sanctions, many European companies have announced plans to discontinue business in Iran. In response to the August 6, 2018 action, the European Union announced a new blocking statute that is intended to punish companies and individuals that comply with the new, US sanctions regime against Iran. The EU’s blocking statute is expected to have little impact on EU company decisions to discontinue business in Iran.

As of August 7, 2018, the following sanctions were reinstated:

– The purchase or acquisition of U.S. dollar banknotes by the Iran government.

– Iran’s trade in gold or precious metals.

– The direct or indirect sale, supply, or transfer to or from Iran of graphite, raw, or semi-finished metals such as aluminum and steel, coal, and software for integrating industrial processes.

– Significant transactions related to the purchase or sale of Iranian rials, or the maintenance of significant funds or accounts outside Iran denominated in the Iran rial.

– Purchase, subscription to, or facilitation of the issuance of Iran sovereign debt.

– Iran’s automotive sector.

In addition, the wind-down period terminated for transactions related to: Iran commercial passenger aircraft pursuant to General License I; Iran-origin foodstuffs and carpets; and letters of credit and brokering services.

The next wind-down period ends on November 4, 2018, and previous sanctions will be re-imposed against Iran’s port operators and shipping and ship-building sectors; petroleum-related transactions; financial transactions and specialized messaging services with the Central Bank of Iran; underwriting and insurance services; and Iran’s energy sector. In addition, all activities under General License H will no longer be authorized.

The new executive order also broadens the scope of sanctions in effect prior to the JCPOA dated January 16, 2016. OFAC details this action in Frequently Asked Question 601 (here). These new actions include:

Specially Designated Nationals (SDNs): The executive order provides new authority to designate SDNs to include any person that on or after November 5, 2018 provides material support or goods or services in support of persons designated for: (1) providing support, or goods or services in support of the purchase or acquisition of U.S. bank notes or precious metals by the Iran government; (2) providing support, or goods or services in support of the National Iranian Oil Company (NIOC), the Nafitran Intertrade Oil Company (NIOC), or the Central Bank of Iran; or (3) being part of the Iranian energy sector, shipping, or shipbuilding sectors, being a port operator in Iran, or providing significant support of persons designated as SDNs.

Financial Institutions: The new executive order provides authority to prohibit or restrict correspondent and payable-through accounts of foreign financial institutions that knowingly conduct or facilitate significant transactions with persons designated under the new authorities outlined above.

Petroleum Transactions: The new executive order expands the menu of sanctions available to be imposed on persons who knowingly engage in significant transactions related to Iranian petroleum products and petrochemicals, including: (1) Visa restrictions on controlling officers and shareholders; (2) secondary sanctions on principal executive officers of a SDN; and (3) prohibitions on investing in or purchasing debt and equity instruments from a sanctioned person.

Foreign Subsidiaries of US Companies: The new executive order expands restrictions on foreign subsidiaries of U.S. owned or controlled companies by prohibiting transactions with persons blocked for any of the following activities: (1) providing material support for, or goods and services in support of, persons designated pursuant to Iran sanctions; and (2) being part of the Iranian energy sector, shipping or shipbuilding sectors, being a port operators in Iran or providing significant support of SDNs.

Source » jdsupra

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