On December 15, 2016, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) updated the Frequently Asked Questions Relating to the Lifting of Certain U.S. Sanctions under the Joint Comprehensive Plan of Action (“JCPOA FAQs”), providing guidance regarding how sanctions would be re-imposed in case of a "snapback" of Iranian sanctions.
The update amended answers to questions M.4 and M.5. OFAC maintained its position that contracts signed prior to snapback will not be "grandfathered," meaning that companies would need to exit from contracts that involve sanctionable activities in the event of snapback, even if the contract had been permissible under the JCPOA. The agency provided a more concrete framework, however, on how it might authorize certain winding-down activities by non-Iran, non-U.S. companies ("third country persons").
The updated JCPOA FAQs states that, in line with past practice, OFAC would allow third country persons a 180-day period to wind down operations involving Iran that were consistent with the JCPOA and undertaken under a written contract entered into prior to snapback. In addition, after snapback, OFAC will allow third country persons to be made whole for debts and obligations owned to them by Iranian parties, including payment for goods or services fully provided or delivered prior to snapback and repayment of loans or credits extended to an Iranian party prior to snapback.
Similarly, U.S. persons and non-U.S. persons owned or controlled by U.S. persons would be provided with a 180-day winding-down period if they were conducting authorized activities involving Iran prior to snapback and the activities become unauthorized following the snapback. Should the previously-relaxed U.S. sanctions against Iran be restored, companies can also seek OFAC's specific case-by-case authorization if the wind-down is unlikely to be achieved in 180 days.
The new guidance emphasizes that, if snapback occurs, no additional goods or services, other than these necessary to wind down operations or businesses in Iran, should be delivered in the 180-day period to Iran or Iranian parties.
The update addresses a key concern for companies who are contemplating business in Iran, especially in light of the sanctions policy uncertainties in relation to the upcoming change of U.S. administration. Companies should, accordingly, implement snapback provisions in their contractual terms with Iranian counterparties.
In addition, OFAC also issued General License J-1. This General License amended a previously-issued general license that authorized the re-exporting of certain civil aircraft to Iran on temporary sojourn and related activities, by allowing the temporary re-export of eligible aircraft that involves code sharing arrangements.