Worldwide: They're Back…Renewed U.S. Sanctions Imperil Canadian Business With Iran

Introduction

On August 7, 2018, the United States ("U.S.") began re-imposing "secondary" sanctions targeting non-U.S. persons engaged in commercial activities with Iran. Canadian and other companies that violate these sanctions face potential prosecution in the United States or exclusion from the U.S. market. In this post, we describe the sanctions that have come back into force, the response from Canada and other countries, and how Canadian businesses can determine if they are at risk.

The U.S. Announcement

On May 8, 2018, the United States announced its unilateral withdrawal from the Joint Comprehensive Plan of Action ("JCPOA"), the nuclear agreement between Iran and the United States, China, Russia, France, Germany, the United Kingdom and the European Union ("EU"). Under the JCPOA, the United States had lifted its secondary sanctions on Iran; that is, those addressing the activities of non-U.S. entities and individuals. (Most U.S. prohibitions on engagement with Iran by U.S. businesses and individuals remained in place despite the JCPOA.)

As part of the U.S. withdrawal, the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC") has implemented 90-day and 180-day wind-down periods for activities involving Iran. At the end of the wind-down periods, applicable U.S. secondary sanctions come back into force. The first of those wind-down periods ended on August 6, 2018. The second will end on November 4, 2018.

Secondary Sanctions

Under an Executive Order issued by President Trump on August 6, 2018 and entitled Reimposing Certain Sanctions With Respect to Iran, as of 12:01 a.m. on August 7, 2018, the United States has re-imposed sanctions on the following activities by non-U.S. persons and on services related to these activities; these sanctions apply even if there is no nexus between the sanctioned activities and the United States:

  • the purchase or acquisition of U.S. bank notes 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 a derivative, swap, future, forward, or other similar contact whose value is based on the exchange rate of the Iranian rial;
  • the maintenance of significant funds or accounts outside the territory of Iran denominated in Iranian rials;
  • the purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt; and
  • the sale, supply, or transfer of significant goods or services used in connection with the Iranian automotive sector.

Following the 180 day wind-down period ending on November 4, 2018, the United States will re-impose sanctions on transactions with certain Iranian entities or activities in connection with Iran and related services as described below:

  • Iran's port operators, and shipping and shipbuilding sectors, including the Islamic Republic of Iran Shipping Lines ("IRISL"), South Shipping Line Iran, or their affiliates;
  • petroleum-related transactions with, among others, the National Iranian Oil Company ("NIOC"), Naftiran Intertrade Company ("NICO"), and National Iranian Tanker Company ("NITC"), 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;
  • the provision of specialized financial messaging services to the Central Bank of Iran and Iranian financial institutions;
  • the provision of underwriting services, insurance, or reinsurance; and
  • the sale, supply, or transfer of significant goods or services used in connection with the Iranian energy sector.

Additionally, the U.S. will re-impose sanctions that applied to persons removed from the List of Specially Designated Nationals and Blocked Persons and other lists maintained by OFAC or other government departments.

The legal consequences for a non-U.S. company that violates these prohibitions can be severe and may include:

  • seizure of its property in the United States;
  • freezing of its assets by the U.S. government or U.S. financial institutions;
  • inability to receive U.S. regulatory approvals;
  • prohibition on maintaining correspondent or payable-through accounts in the United States;
  • civil penalties; and
  • criminal prosecution.

As recently as January 2017, the Toronto-Dominion Bank paid more than US$500,000 to OFAC to settle civil claims after self-disclosing that it had violated the United States' Iran and Cuba sanctions regimes through services it provided to its Canadian customers.

Worldwide Response

On June 6, 2018 the EU updated the blocking legislation (amending the Annex to Council Regulation No 2271/96) to cover a number of U.S. laws that give effect to the Iran sanctions. The amendment, which is effective as of August 7, makes it illegal for EU entities to comply with the U.S. secondary sanctions.

Nevertheless, many EU-based companies look set to cease their Iran-linked activities, including French oil giant Total, Dutch shipping company Maersk, and German industrial heavyweight Seimens.

China has stated that it will maintain normal trade ties with Iran and will continue to import Iranian oil. Chinese companies recently met to review their operations in Iran and strategize ways to continue operating there.

Canada's Response

To date, Canada's position on Iran has been mixed. Canada has continued to publically support the JCPOA, most recently following the latest G7 meeting: Canada reaffirms support for Joint Comprehensive Plan of Action. At the same time, the Government supported a Conservative opposition motion (June 12, 2018) that, among other things, condemned the Iranian regime for its ongoing sponsorship of terrorism and called on the government to abandon current plans to restore diplomatic relations.

Canada has its own blocking legislations, the Foreign Extraterritorial Measures Act, which in principle it could use in response to the re-imposition of U.S. sanctions. However, Canada has not given any indication that it intends to do so, nor is there any indication that it will, for a variety of legal and political reasons.

In addition, Canada continues to maintain various restrictions on dealings with Iran, largely involving trade in military or nuclear-related goods or with specific persons and entities linked to the Iranian government. Global Affairs Canada maintains an overview of these Canadian sanctions related to Iran.

What Should Canadian Businesses Do?

Whether or not it has U.S. affiliates or operations, any Canadian company that does business in Iran or with Iranian entities, or is considering doing so, should seek legal advice regarding its exposure to U.S. secondary sanctions. Companies should also assess potential commercial risk from disruption to their supply chains and other business relationships as a result of the re-imposition of U.S. sanctions.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions