On October 22, 2012, the Office of Foreign Assets Control (“OFAC”) reissued in its entirety and renamed the Iranian Transactions and Sanctions Regulations (“ITSR”) at 31 C.F.R. Part 560, previously titled the Iranian Transactions Regulations. The newly reissued regulations do not incorporate the changes implemented as a result of the Iran Threat Reduction and Syria Human Rights Act which was signed into law in August, and so do not provide any additional guidance regarding the scope or application of those changes regarding foreign parties owned or controlled by a U.S. person.

However, the regulations, as reissued, do contain some important new provisions, including a completely new general license for the sale of medicines and medical devices to Iran.

As part of its reissuance of the ITSR, OFAC has added a new General License to authorize the exportation or reexportation of certain medical supplies to Iran. Previously, the export of such items required a license under the Trade Sanctions Reform Act (“TSRA”). See 31 C.F.R. § 560.530. Items that previously required a specific TSRA license, but which can now be exported under the General License, include “basic medical supplies,” defined as items identified on the “List of Basic Medical Supplies” on OFAC’s website, as well as EAR99 medicines and medical devices, defined respectively as “drugs” and “devices” in section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 321).

In addition to the new General License, the ITSR also include changes (identified by OFAC as “clarifications”) to requirements for the financing of sales made pursuant to the TSRA and the new General License. The ITSR now indicate that financing of all TSRA sales is excepted from the authorization for transactions ordinarily incident to a licensed transaction. The sections of the ITSR that authorize the conduct of related transactions, including payment terms and financing for the TSRA sales, now govern instead.

The ITSR, Section 560.532(a), provide a General License authorizing specific payment options for sales under the new General License at Section 560.530(a). These options include:

  • Cash in advance;
  • Sales on open account, provided that the account receivable may not be transferred by the person extending the credit;
  • Financing by third-country financial institutions that are not United States persons, Iranian financial institution, or the Government of Iran, although such financing may be confirmed or advised by U.S. financial institutions; or
  • Letters of credit issued by an Iranian financial institution whose property and interests in property are blocked solely pursuant to this part. Letters of credit under this General License must be initially advised, confirmed or otherwise dealt in by a third-country financial institution that is not a United States person, an Iranian financial institution, or the Government of Iran before it is advised, confirmed or dealt in by a U.S. financial institution.

While other payment options may be authorized, they will require the issuance of a specific license from OFAC.