On June 27, 2018, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) revoked two general licenses issued under the Joint Comprehensive Plan of Action (“JCPOA”), amended the Iranian Transactions and Sanctions Regulations (“ITSR”), and updated relevant sections of the related Frequently Asked Questions Regarding the Re-Imposition of Sanctions Pursuant to the May 8, 2018 NSPM Relating to the JCPOA (the “FAQ”). This announcement follows the president’s May 8 decision that the U.S. would withdraw from the JCPOA (the Iranian Nuclear Deal), and is part of the re-imposition of U.S. sanctions against Iran, as discussed in our previous briefing.
Revocation of General Licenses H and I
OFAC has now formally revoked General License H and General License I.
General License H authorized foreign entities owned or controlled by U.S. persons to conduct business with Iran. In conjunction with this revocation announcement, OFAC also updated relevant sections of its FAQ. The updated FAQ states that OFAC has issued a wind-down general license, to be published at 31 CFR § 560.537, that allows for the wind down of activities involving Iran authorized pursuant to General License H. All activities conducted pursuant to the now-revoked General License H must wind down by November 4, 2018, 11:59 p.m. EDT. Under the wind-down license, U.S. persons will be permitted to engage in 1) activities relating to the establishment or alteration of operation policies and procedures of the U.S. entity or U.S.-owned or -controlled foreign entity to the extent necessary to allow the U.S.-owned or -controlled foreign entity to wind down, and 2) activities to make available to those U.S.-owned or -controlled foreign entities any automated and globally integrated system, platform, database, application, or server necessary to store, collect, transmit, generate, or otherwise process documents or information related to the wind down.
General License I authorized U.S. persons to enter into, and to engage in all transactions ordinarily incident to the negotiation of and entry into, contracts for activities eligible for authorizing under the Statement of Licensing Policy for Activities Related to the Export or Re-Export to Iran of Commercial Passenger Aircraft and Related Parts and Services. The updated FAQ advises that OFAC has issued a wind-down general license that allows for the wind down of activities involving Iran that were previously authorized under General License I, which will appear at 31 CFR § 560.536. All activities conducted pursuant to the now-revoked General License I must wind down by August 6, 2018, 11:59 p.m. EDT. No further transactions will be authorized after that date. Under the wind-down license for activities conducted under General License I, U.S. persons will be permitted to assist in the wind down by engaging in any transaction that is ordinarily incident to the negotiation of contingent contracts for activities that were, at the time of the negotiation, eligible for authorization under the Statement of Licensing Policy.
OFAC announced that it will keep archival versions of these general licenses available on its website to assist companies in assessing which of their activities were previously permitted but now must be wound down.
Revocation of Licenses Allowing Importation of Iranian-Origin Carpets and Foodstuffs
OFAC also amended the ITSR to revoke the licenses allowing for the importation of Iranian-origin carpets and foodstuffs, including pistachios and caviar, from Iran or a third country. The revoked licenses also relate to the use of certain letters of credit and brokering services relating to the importation of Iranian-origin food and carpets. A wind-down license has replaced the prior licenses. U.S. persons will only be authorized to engage in all transactions and activities that are ordinarily incident and necessary to the wind down of transactions that were previously authorized under the relevant ITSR provisions. After 11:59 p.m. EDT on August 6, 2018, no further transactions will be permitted.
U.S. businesses and their foreign subsidiaries should carefully review their activities that currently, or potentially, involve Iran, and continue the appropriate wind down of these activities. Specifically, any U.S. businesses that made use of General License H to allow their foreign subsidiaries to transact with Iran will need to complete the wind down of activities by November 4, 2018. And any U.S. businesses that made use of General License I will need to complete the wind down of activities by August 6, 2018. Any activities relating to foodstuffs or carpets must also be wound down by August 6, 2018 (only 39 days from today).
As the current administration continues to re-implement U.S. sanctions against Iran, it is important for U.S. businesses with subsidiaries or operations outside of the U.S. to continue to monitor any changes to the sanctions. As these most recent announcements demonstrate, the wind-down period for previously authorized activities can be short, requiring companies to react to changes immediately in order to be in compliance by the time the wind-down period ends. The full extent of the sanctions that the U.S. plans to re-impose against Iran is yet unknown, so businesses should prepare for the possibility that new restrictions may be added.