On October 18, 2015, the day on which the Joint Comprehensive Plan of Action (“JCPOA”) became effective (“Adoption Day”), the U.S. Department of State (“State Department”) issued contingent waivers of certain extraterritorial sanctions targeting non-U.S. persons that engage in certain transactions with Iran, pursuant to the terms of the JCPOA. Importantly, these waivers are not currently in effect and will take effect only when Iran has fulfilled its nuclear commitments under the JCPOA (i.e., “Implementation Day”). Furthermore, these waivers do not apply to non-U.S. persons that are owned or controlled by U.S. persons (e.g., foreign subsidiaries of U.S. companies). Although the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is expected to issue a General License that will permit non-U.S. persons that are owned or controlled by U.S. persons to engage in activities “consistent with the JCPOA,” the terms of this General License are not yet available.
Below we provide a brief description of the contingent waivers, as well as corresponding FAQs issued by OFAC.
A. State Department Waivers
Pursuant to the JCPOA, the contingent waivers issued by the State Department will waive most extraterritorial sanctions that target non-U.S. persons not owned or controlled by U.S. persons who engage in certain activities with Iran. The relief particularly affects the following industries that are subject to U.S. extraterritorial sanctions: energy; shipping, shipbuilding, and ports; industrial; finance/banking; insurance; gold and other precious metals; certain software and metals; and automotive.
Specifically, on Implementation Day, the contingent waivers will waive sanctions on non-U.S. persons not owned or controlled by U.S. persons that engage in the following non-exhaustive list of activities specified in the JCPOA:
- financial and banking transactions with specified Iranian banks and financial institutions, including the Central Bank of Iran
- transactions in Iranian Rial
- provisions of U.S. banknotes to the Government of Iran
- transfers of Iranian revenues abroad
- purchase of, subscription to or facilitation of the issuance of Iranian sovereign debt, including governmental bonds
- financial messaging services to the Central Bank of Iran and certain Iranian financial institutions
- underwriting services, insurance or reinsurance
- transactions related to Iran’s export of crude oil
- investment in, and support for, Iran’s oil, gas and petrochemical sectors
- purchase, acquisition, sale, transportation or marketing of petroleum, petrochemical products and natural gas from Iran
- export, sale or provision of refined petroleum products and petrochemical products to Iran
- transactions with Iran’s energy sector
- transactions with Iran’s shipping/shipbuilding sectors and port operators
- trade in gold and other precious metals
- trade with Iran in graphite; raw or semifinished metals, such as aluminum and steel; coal; and software for integrating industrial processes
- sale, supply or transfer of goods and services used in connection with Iran’s automotive sector.
Importantly, these contingent waivers will not permit non-U.S. persons to engage in transactions with “Specially Designated Nationals” (SDNs). However, pursuant to the JCPOA, OFAC is expected to remove a large number of Iranian entities (listed in Attachment 3 to Annex II of the JCPOA) from the SDN List on Implementation Day.
B. OFAC FAQs
Additionally, on October 18, OFAC issued corresponding FAQs clarifying that the above contingent waivers do not take effect until “Implementation Day,” when “the IAEA verifies that Iran has implemented [its] commitments under the JCPOA.” OFAC reiterated that the current sanctions regime remains in place and warned that both U.S. persons and non-U.S. persons should not execute agreements prior to Implementation Day that obligate them to participate in transactions that are currently prohibited, even if these obligations are merely executory and not effective and binding until Implementation Day. Specifically, OFAC states that “entering into contracts involving Iran or its government before Implementation Day may be sanctionable,” including contracts “that are contingent on the implementation of sanctions relief under the JCPOA.” Additionally, OFAC emphasized that, “unless authorized by OFAC, U.S. persons are prohibited from entering into contracts— contingent or otherwise—involving Iran or its government, including with individuals and entities on the SDN List.”
OFAC also stated that it “intends to publish on its website prior to Implementation Day detailed guidance and information on the implementation of U.S. commitments with respect to sanctions under the JCPOA.” This guidance will presumably include information on the General License that OFAC is expected to provide that will permit non-U.S. persons owned or controlled by U.S. persons to engage in certain activities “consistent with the JCPOA.”