As noted in our previous article on 4 May, US President Donald Trump threatened last January to withdraw from the Joint Comprehensive Plan of Action (JCPOA) if he did not think its flaws could be fixed.

This article was originally published on Commercial Risk Online here: http://www.commercialriskonline.com/jcpoa-new-us-position-now-clearsort/

A previous article on this topic was published on Commercial Risk Online here: http://www.commercialriskonline.com/iran-sanctions-still-uncertain-will-happen-heres-happen/

While the JCPOA does not contemplate withdrawal of a party, we suggested that, to President Trump, ‘withdrawal’ might mean reinstatement of all US sanctions that were in force prior to the negotiations that led to the JCPOA. This proved to be the case, as on 8 May 2017, President Trump issued a memorandum directing: “the Secretary of State and the Secretary of the Treasury [to] immediately begin taking steps to reimpose all US sanctions lifted or waived in connection with the JCPOA”.

The reimposition of sanctions is to be implemented in two stages. There will be a 90-day wind-down period for a first group of sanctions, and a 180-day wind-down period for a second group. It is not yet clear whether any conditions apply to wind-down activities, but additional guidance in this regard is expected.

Sanctions to be reimposed after the 90-day wind-down period

Sanctions to be reimposed after the 90-day wind-down period, which ends on 6 August 2018, relate to:

  • The purchase or acquisition of US dollar banknotes by the Government of Iran
  • 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 the territory of Iran denominated in the Iranian rial
  • The purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt
  • Iran’s automotive sector.

In addition, at the end of the 90-day wind-down period, the US will revoke: authorisations to import Iranian-origin carpets and foodstuffs into the US; authorisations under specific licences to export or re-export to Iran certain aircraft and related parts and services to Iran; and authorisations related to contingent contracts concerning such exports or re-exports.

Sanctions to be reimposed after the 180-day wind-down period

Sanctions to be reimposed after the 180-day wind-down period, which ends on 4 November 2018, relate to:

  • Iran’s port operators, and shipping and shipbuilding sectors, including on the Islamic Republic of Iran Shipping Lines, South Shipping Line Iran, or their affiliates
  • Petroleum-related transactions with, among others, the National Iranian Oil Company, Naftiran Intertrade Company, and National Iranian Tanker Company, including the purchase of petroleum, petroleum products, or petrochemical products from Iran
  • Transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions under Section 1245 of the National Defense Authorization Act for Fiscal Year 2012 (financial institutions in countries that make significant reductions in their purchases of Iranian crude during and after the wind-down period will be eligible for exemptions from these sanctions)
  • The provision of certain specialised financial messaging services to the Central Bank of Iran and Iranian financial institutions
  • The provision of underwriting services, insurance, or reinsurance
  • Iran’s energy sector.

As the end of the 180-day wind-down period, the US will also revoke authorisations under General Licence H for US-owned foreign subsidiaries to engage in Iran-related business. Although General Licence H will not be revoked until 4 November, when “administratively feasible” the Office of Foreign Assets Control (OFAC) will replace it with a “more narrowly-scoped authorisation” to engage in transactions that are ordinarily incident and necessary to wind down Iran-related activities.

Specially Designated National (SDN) listings

Sometime between now and 5 November 2018, OFAC will re-designate as SDNs entities within the broad definition of “Government of Iran” and “Iranian financial institution”. On inception of the JCPOA, some 400 such entities were removed from the SDN list and placed on a newly-created ‘13599 list’.

Conclusions

The process of reimposing sanctions on Iran will be a bumpy one. These sanctions were originally imposed in layers across a period of years through a series of Congressional acts and Presidential executive orders. Each sanction has distinct contours and complexities.

Having so many disparate sanctions come back into play in a compressed time period presents a hefty new challenge to international businesses that wish to steer clear of harm’s way. Further US guidance on how these provisions and the related wind-down periods will apply should at least help.