On December 23, 2016, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued a final rule amending the licensing provisions of section 560.530 of the Iranian Transactions and Sanctions Regulations, 31 C.F.R. Part 560 (“ITSR”) and making certain other amendments to the ITSR (the “Final Rule”). Section 560.530 sets forth the favorable Ag/Med licensing regime for the export/reexport of agricultural commodities, medicine, and medical devices to Iran (i.e., “Ag/Med” licenses).
Specifically, the Final Rule (1) expands the scope of medical devices and agricultural commodities generally authorized for export or reexport to Iran and, to improve patient safety, also provides new or expanded authorizations for (2) training; (3) replacement parts; (4) software and services related to the operation, maintenance, and repair of medical devices; and (5) imports into the United States of agricultural commodities, medicine, and medical devices previously exported under Ag/Med licenses that are broken or connected to product recalls, adverse events, or other safety concerns. In addition, the Final Rule (6) revises the definition of the terms “goods of Iranian origin” and “Iranian-origin goods” at ITSR section 560.306 to clarify that the definition does not include certain specified categories of goods.
The key regulatory changes implemented pursuant to the Final Rule are described below. OFAC has also published certain new and updated Frequently Asked Questions related to the below-described changes.
- Additional Medical Devices and Agricultural Commodities Generally Authorized for Export/Reexport
The general license in ITSR section 560.530(a)(3) (the “Ag/Med General License for Medicine and Medical Devices”) previously authorized exports/reexports of certain medical devices specified on OFAC’s “List of Medical Supplies” published on the OFAC website. The Final Rule expands this general license to generally authorize the export/reexport to Iran of all items meeting the ITSR definition of the term “medical device,” except for those that are explicitly excluded. Such specifically excluded medical devices are identified in a new “List of Medical Devices Requiring Specific Authorization” maintained on OFAC’s website (which has replaced the “List of Medical Supplies”). The export/reexport of these excluded medical devices to Iran requires specific authorization from OFAC.
OFAC has also removed shrimp and shrimp eggs from the list of excluded agricultural commodities not covered by the general license in ITSR section 560.530(a)(2) (i.e., the “Ag/Med General License for Agricultural Commodities”). The export/reexport to Iran of shrimp and shrimp eggs previously required specific OFAC authorization.
- Provision of Training Necessary and Ordinarily Incident to Safe and Effective Use
OFAC has added new provisions to the Ag/Med General Licenses for Agricultural Commodities, Medicine, and Medical Devices generally authorizing the provision of training “necessary and ordinarily incident” to the safe and effective use of agricultural commodities, medicine, and medical devices exported/reexported pursuant to an Ag/Med general license.
OFAC’s new FAQ 484 provides additional guidance on the types of training considered by OFAC to be “necessary and ordinarily incident” to the safe and effective use of medicine and medical devices. According to the FAQ, “OFAC considers training activities including the dissemination of product information on the intended use of a device; comparisons of other devices and options; and the manufacturer’s instructions for use, labeling, warning, contraindications, storage, and maintenance of the medicine or device to be necessary and ordinarily incident to the safe and effective use of medicines and medical devices.” Other examples noted in the FAQ include “training health care professionals to use medical devices safely in order to achieve the desired patient outcome, training on procedures for cleaning and inspecting devices regularly to ensure they are functioning correctly, ongoing training and periodic testing to ensure users stay competent, and training on procedures for adverse events or device failure.”
- Supply of Medical Device Replacement Parts
OFAC has expanded the scope of the existing general authorization for replacement parts. This general license previously authorized the export/reexport of replacement parts only on a one-for-one basis of exchange. The amended general license does not require a one-for-one basis of exchange but rather authorizes the export/reexport of replacement parts for storage within Iran for future use provided that:
(i) the replacement parts are classified as EAR99 or, in the case of replacement parts that are not subject to the EAR, would be EAR99 if they were located in the United States;
(ii) the replacement parts are intended to replace a broken or nonoperational component of a medical device previously exported/reexported to Iran pursuant to an Ag/Med license or the exportation/reexportation of the replacement part is ordinarily incident and necessary to the proper preventative maintenance of such a medical device;
(iii) the number of replacement parts that are exported or reexported to and stored in Iran does not exceed the number of corresponding parts in use in relevant medical devices in Iran; and
(iv) the parts being replaced are promptly provided to a non-Iranian entity located outside of Iran selected by the supplier of the replacement parts
- Provision of Software and Services related to the Operation, Maintenance, and Repair of Medical Devices
OFAC has added a new general license to authorize the export/reexport to Iran of software and services related to the operation, maintenance, and repair of medical devices previously exported/reexported to Iran pursuant to an Ag/Med license, subject to certain conditions. A key condition is that the software must be designated EAR99, or in the case of software not subject to the EAR, would be designated EAR99 if located in the United States. Specifically, this general license authorizes the export/reexport to Iran of:
a. software necessary for the installation and operation of medical devices or replacement parts authorized for export/reexport under an Ag/Med license, and the conduct of related transactions;
b. software updates for those devices, and the conduct of related transactions; and
c. repair services for medical devices authorized for export/reexport to Iran by OFAC, including inspection, testing, calibration, and diagnostic services to ensure patient safety or effective operation of such medical devices, provided such services do not substantively alter the functional capabilities of the medical device as originally exported/reexported.
- Imports into the United States of Broken or Defective items
OFAC has adding a new general license to authorize the importation into the United States of certain U.S.-origin agricultural commodities, medicine, and medical devices. Specifically, the new general license authorizes the import into the United States of items, which were previously exported/reexported to Iran under Ag/Med licenses, that are broken, defective, or nonoperational or connected to product recalls, adverse events, or other safety concerns.
- Amendment to Definition of “Goods of Iranian Origin” and “Iranian-Origin Goods”
Finally, OFAC has amended the definition in ITSR section 560.306 of the terms “goods of Iranian origin” and “Iranian-origin goods” to clarify that this definition does not include the following categories of goods, provided that such goods were not grown, produced, manufactured, extracted, or processed in Iran:
- Goods exported/reexported to Iran under an OFAC general or specific license (such as an Ag/Med license or General License D-1 for certain services, software, and hardware incident to personal communications ) that have subsequently been reexported from and are located outside of Iran; and
- Goods transported on a vessel or aircraft, as well as the underlying vessel or aircraft itself, that passed though Iranian territorial waters or stopped at a port or place in Iran en route to a destination outside of Iran that have not otherwise come into contact with Iran.