Putting aside the politics surrounding the Iran Nuclear Deal, the exchange of prisoners and other hot button political issues surrounding Implementation Day and the change in US-Iran relations, the new Iran sanctions create a new set of challenges for trade compliance officers. Talk about a headache — all you have to do is look at the new guidance, Frequently Asked Questions, and related documentation (Here).

The media has helped to raise expectations about major changes in the Iran sanctions program by making broad claims of sanctions relief. Business leaders and managers are reading these popular sanctions reports and then asking legal and compliance officials if they can now conduct business with Iran.

Unfortunately, the media descriptions are inaccurate. In general, United States businesses are still prohibited from dealing directly, or indirectly, with Iran businesses. Broad prohibitions against Iran because of Iran’s promotion of terrorism around the world remain in place. The basic US trade embargo against Iran remains in full force and effect.

Contrary to many media reports, US companies cannot start to engage in direct oil deals, financial transactions, and a host of other business transactions. One big exception, however, is the aviation industry that is authorized as of Saturday, January 16, 2016, to sell Iran jets, parts and services and other aviation industry products and services.

On Implementation Day, the United States lifted the nuclear-related “secondary sanctions” that were generally imposed through the years in response to Iran’s development of nuclear weapons. The “secondary sanctions” were directed toward non-U.S. persons for conduct that occurred entirely outside of the U.S. The relaxation of the secondary restrictions, however does not change the prohibition against foreign entities that facilitate or seek to assist US companies to circumvent the embargo by exporting US goods or services to Iran.

The thrust of OFAC’s major changes to the Iran sanctions program is the removal of “secondary” sanctions against foreign companies that engage in business with Iran business and the Iran government. Through the years, the US government has expanded sanctions against Iran to the maximum legal limit – imposing sanctions on foreign businesses that are subject to US jurisdiction. The limit of such sanctions depends on compliance with the Due Process Clause of the US Constitution.

The remaining OFAC sanctions appear to put US companies and persons at a disadvantage in comparison to foreign companies that are now authorized to conduct business with Iran businesses. To address this issue, OFAC adopted an interesting definition and a new General License H. All of these changes outlined below do not alter the basic obligation of US and foreign persons not to deal with Specially Designated Nationals and other prohibited persons.

The definition of a non-U.S. person means “any individual or entity excluding 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.”

However, the definition of a non-U.S. person includes “an entity that is owned or controlled by a United States person and established or maintained outside the United States (a “U.S.-owned or – controlled foreign entity) is eligible to participate in transactions or activities subject to the sanctions lifting” as authorized by OFAC to engage in such transactions or activities, including pursuant to General License H.

A foreign subsidiary of a U.S. company may engage in direct business with Iran businesses. General License H authorizes US foreign subsidiaries to rely on common US company infrastructure to support its foreign subsidiary, including “(1) activities related to the establishment or alteration of operating policies and procedures of a United States entity or a U.S.-owned or controlled foreign entity [for authorized transactions];” and (2) activities to make available to those foreign entities that the U.S. person owns or controls any automated and globally integrated computer, accounting, email, telecommunications, or other business support system, platform, database, application, or server necessary to store, collect, transmit, generate, or otherwise process documents or information [for authorized transactions].”

All of these means a new compliance world for US companies – a foreign subsidiary can engage in otherwise prohibited transactions when most of the activity relating to the business occurs outside the United States and is generally supported by a US company’s infrastructure as defined in General License H. Drawing lines here between permissible and impermissible activity is going to be challenging for companies, and in particular lawyers and compliance officers responsible for trade compliance.