A key provision of the amended regulations is the interpretative guidance relating to what constitutes a “significant transaction or transactions.”
In furtherance of Executive Order 13871 of May 8, 2019, the United States Department of Treasury Office of Foreign Assets Control (OFAC) published in the Federal Register on August 7, 2019, comprehensive amendments to 31 CFR Parts 561 and 562. Under the title “Iranian Financial Sanctions Regulations and Iranian Human Rights Abuses Sanctions Regulations,” these amendments are effective immediately. (See Federal Register Vol. 84 No. 152, pages 38545 through 38551.)
The amendments impose specific sanctions with respect to the iron, steel, aluminum and copper sectors of Iran. These sanctions are, in addition to sanctions in place, aimed at “deny[ing] Iran all paths to both a nuclear weapon and intercontinental ballistic missiles, and to counter the totality of Iran’s malign influence in the Middle East.”
To achieve the goals of the United States in carrying out the above policy, Executive Order 13871 sought to deny the Iranian government revenue “including revenue derived from the export of products from Iran’s iron, steel, aluminum and copper sectors.”
In accordance with the terms of the Executive Order discussed above, the sanctions in question block, with certain exceptions, all property and interests in property of persons identified by OFAC that are in the U.S., that come within the U.S. or that come with the possession or control of “U.S. persons” and:
- Operate in the iron, steel, aluminum or copper sector of Iran or are a person that owns, controls or operates an entity that is part of the iron, steel, aluminum or copper sector of Iran;
- On or after May 8, 2019, knowingly engaged in a significant transaction for the sale, supply or transfer of significant goods or service used in connection with the sectors described above;
- On or after May 8, 2019, knowingly engaged in a significant transaction for the purchase, acquisition, sale, transport or marketing of the above identified products;
- Materially assisted, sponsored or provided financial, material or technological support for, or goods or services in support of, any person whose property and interest in property are blocked; or
- Are owned or controlled by, or to acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked.
The action taken by OFAC imposes further sanctions and limitations upon foreign financial institutions (FFIs) that, after May 8, 2019, knowingly conducted transactions proscribed by Executive Order 13871. Please refer to the Federal Register notice of August 7, 2019, for full details of the scope of the prohibitions applicable to both U.S. persons and so-called FFIs. A new Section 561.205 has been added to the sanction regulation to implement the correspondent account or payable-through account sanctions as described in Executive Order 13871.
OFAC has added new Sections 561.331 through 561.337 to provide definitions of key terms such as aluminum, aluminum products, aluminum sector of Iran, copper, copper products, copper sector of Iran, iron, iron products, iron sector of Iran, steel, steel products and steel sector of Iran. OFAC is also making conforming edits to Section 561.301 relating to the effective date of applicable prohibitions, Section 561.404 relating to determinations of significance and to closing a correspondent or payable-through account and Section 561.802 relating to the delegation of authority by the secretary of the Treasury.
OFAC has redesignated the existing 561.205 as 561.220 and has added a new 561.205 to implement the correspondent account or payable-through account sanctions described in Section 2 of Executive Order 13871.
A key provision of the amended regulations is the interpretative guidance relating to what constitutes a “significant transaction or transactions.” Details are available in the new Section 562.407, which can be found on page 38550 of the Federal Register, Vol. 84 No. 152.