Implementation Day under the Joint Comprehensive Plan of Action (JCPOA) was on January 16, 2016. It marked the official verification by the International Atomic Energy Agency that Iran implemented its nuclear-related obligations under its agreements with the United States, the European Union and other parties to the agreement.
Pursuant to the agreement, the United States lifted the following secondary sanctions:
- Financial and banking-related sanctions;
- Sanctions on the provision of underwriting services, insurance or reinsurance in connection with activities that are consistent with the terms of the JCPOA;
- Sanctions on Iran’s energy and petrochemical sectors;
- Sanctions on transactions with Iran’s shipping and shipbuilding sectors;
- Sanctions on Iran’s trade in gold and other precious metals;
- Sanctions on trade with Iran in graphite; raw or semi-finished metals, such as aluminum and steel; coal; and software for integrating industrial processes in connection with activities that are consistent with the JCPOA;
- Sanctions on the sale, supply or transfer of goods and services used in connection with Iran’s automotive sector; and
- Sanctions on associated services for each of the categories above.
Removal of Individuals and Entities from Sanctions Lists
In addition, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) removed over 400 individuals and entities from OFAC’s Specially Designated Nationals List and Blocked Persons List (SDN List), Foreign Sanctions Evaders List and/or the Non-SDN Iran Sanctions Act List.
As of January 16, 2016, non-U.S. persons will no longer be subject to sanctions for conducting transactions with any of the more than 400 individuals and entities identified in certain Annex to the JCPOA provided that the transaction does not involve persons who remain on the SDN List after January 16, 2016. (Secondary sanctions still remain for those persons who remain on or are added to the SDN List on sanctions related to categories and sectors identified above.)
Pursuant to terms of the JCPOA, the United States has committed to license three categories of activity that otherwise would be prohibited under the Iranian Transactions and Sanctions Regulations (ITSR). OFAC has therefore issued the following on January 16, 2016:
- A Statement of Licensing Policy allowing case-by case licensing of individuals and entities seeking to export, reexport, sell, lease or transfer to Iran commercial passenger aircraft, and related parts and services, for exclusively commercial passenger aircraft, and provision of associated services, including warranty, maintenance and repair services, for all of the foregoing, provided that licensed items and services are used exclusively for commercial passenger aviation;
- A General License authorizing U.S.-owned or controlled foreign entities to engage in certain activities involving Iran; and
- A General License, which is effective upon publication in the Federal Register, authorizing the importation into the United States of Iranian-origin carpets and foodstuffs, including pistachios and caviar.
It is essential to note that the lifting of secondary sanctions does not apply to U.S. sanctions that may apply under legal provisions other than those specifically cited within certain Annex to the JCPOA. For example, a transaction involving Iran that would be sanctionable under an authority that is not lifted pursuant to the JCPOA (e.g., a U.S. sanctions authority relating to Yemen or Syria) remains sanctionable under that other authority after Implementation Day. It is also important to note that for purposes of U.S. primary sanctions, the term “U.S. person” means “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.” While a U.S. branch of a foreign financial institution would be considered a U.S. person for purposes of the ITSR, the foreign financial institution located outside of the United States would not.
Implementing Regulations for Certain Products
As noted above, OFAC will publish in the Federal Register certain regulatory changes to implement certain U.S. commitments under the JCPOA. Specifically, the importation into the United States and dealings in certain foodstuffs and carpets are subject to a new General License. The qualifying foodstuffs are those “foodstuffs intended for human consumption that are classified under chapters 2-23 of the Harmonized Tariff Schedule of the United States (HTSUS).” The carpets that qualify are “carpets and other textile floor coverings and carpets used as wall hangings that are classified under chapter 57 or heading 9706.00 0060. …” Any person intending to import under this General License may want to confirm with Customs and Border Protection (CBP) the classification of the intended importation. (Customs-binding ruling procedures are available.) Goods under seizure or detention by CBP pursuant to customs regulations or other provisions of law are not covered by the General License until any applicable penalties, charges, duties or other conditions are satisfied. Goods subject to forfeiture proceedings are not covered by the General License. The General License does not authorize debits or credits to Iranian accounts as defined in the ITSR.
The authorized import transactions permit U.S. persons wherever located to engage in transactions or dealings in or related to the product categories described above, provided that the transaction or dealing does not involve or relate to goods, technology or services for exportation, reexportation, sale or supply, directly or indirectly, to Iran, the Government of Iran, an Iranian financial institution or any other person whose property and interests in property are blocked, other than services described in that provision of the ITSR that permits transactions ordinarily incident to a license transaction. Certain transfers of funds involving Iran that are ordinarily incident to an authorized or licensed transaction are permitted. The text of the scope of the authorized transactions will be published in the Federal Register and will be included in 31 CFR 560.534. Please refer to section 31 CFR 560.534 for a full description.
Letters of credit and brokering services pertaining to the products authorized for importation into the United States are subject to specific regulatory provisions covered in 31 CFR 560.535. The letters of credit may not be “advised, negotiated, paid or confirmed by the Government of Iran, an Iranian financial institution or any other person whose property and interests in property are blocked.”
United States depository institutions are authorized to issue, advise, negotiate or confirm letters of credit to pay for transactions in or related to Iranian goods (certain foodstuffs and carpets) located in a third country, other than purchases from the Government of Iran, an Iranian financial institution or any other person whose property and interests in property are blocked, provided that such letters of credit are not issued, advised, negotiated, paid or confirmed by the Government of Iran, an Iranian financial institution or any other person whose property and interests in property are blocked.
Brokering is also authorized for the class of goods described above, provided that the goods are not for exportation, reexportation, sale or supply, directly or indirectly, to Iran, the Government of Iran, an Iranian financial institution or any other person whose property and interests in property are blocked. For information relating to the Government of Iran, please see sections 31 CFR 560.304 and 560.313. For the definition of Iranian financial institution, please refer to 31 CFR 560.324.
A new General License H will be published in the Federal Register authorizing certain transactions relating to foreign entities owned or controlled by a U.S. person. Any foreign entity that is owned or controlled by a U.S. person may want to study the provisions of the General License H prior to engaging in an Iran-related transaction. It may also be worthwhile to address any questions or concerns with OFAC.
Please refer to the webpage on the OFAC website for the full details pertaining to these actions that implement the JCPOA.
Although these Implementation Day changes to OFAC’s nuclear-related sanctions have lifted many prohibitions relating to Iran (so-called “secondary sanctions”), primary U.S. sanctions remain in place. The U.S. domestic trade embargo on Iran remains in place. Implementation Day modifications do not alter these primary sanctions unless specifically noted in the amended and new regulations. OFAC has stated that “U.S. persons, including U.S. companies, continue to be broadly prohibited from engaging in transactions or dealings with Iran or its government.” OFAC has also noted that the Government of Iran and Iranian financial institutions remain persons “whose property and interests in property are blocked.” In addition, non-U.S. persons continue to be prohibited from knowingly engaging in conduct that seeks to evade U.S. restrictions on transactions or dealings with Iran or that causes the export of goods or services from the United States to Iran.