Worldwide: Export Control Update – January 2016

Last Updated: 18 February 2016
Article by Laurent Ruessmann, Vivien Davies and Jochen Beck

The start of the New Year has brought a substantial easing of the Iran sanctions.  However contrary to the impression given by the press, several important trade restrictions still remain in place.  Businesses are well advised to review carefully the new EU (and US) sanction regimes before heading off for new adventures in Iran.

Besides the substantial revamp of the Iran sanctions, the EU also updated various other sanctions regimes, including against Syria, Libya, and Tunisia in January. 

Our January update provides an overview of the latest changes to the EU sanctions regimes.

1. Iran

Following the agreement in November 2013 on a Joint Plan of Action (JCPOA) concerning Iran's nuclear programme, between Iran and China, France, Germany, Russia, the UK and the US, the EU had suspended some of the restrictive measures in place under the EU Iran embargo.  In the summer of 2015, intensive negotiations between Iran and its counterparts in Vienna led to an agreement on the future of Iran's nuclear program in July 2015.  On 16 January 2016, the International Atomic Energy Agency finally confirmed that Iran had fulfilled its nuclear-related commitments under the JCPOA.  Accordingly, the United Nations, the EU and the US eased sanctions related to Iran's nuclear programme.

Following "Implementation Day", Regulation 267/2012, as amended, however continues to maintain a set of prohibitions and authorisation requirements.  Several Annexes have undergone important changes. 

In addition, Regulation 359/2011 imposing restrictions on Iran for human rights violations during the Arab Spring, and the general EU and national export controls on military and dual-use exports, continue to apply.  As Iran remains subject to an arms embargo, the catch-all clause under Article 4(2) of Regulation 428/2009 (EU Dual-Use Regulation) must be observed in particular upon export.  (According to Article 4(2), the export of non-listed dual-use items to a country subject to a military embargo requires a prior authorisation if the exporter knows or has been informed that the items have a military end-use.) 

In detail the changes to Regulation 267/2012 are as follows:

Prohibitions that continue to apply

In addition to the arms embargo and the prohibition to export equipment for internal repression under Regulation 359/2011, Regulation 267/2012 maintains the following core prohibitions:

  • Proliferation:  prohibition of the sale, supply, transfer or export, purchase import or transport (as well as to provide related brokering, financing and technical assistance) of Missile Technology Control Regime (MTCR) items listed in Annex III for use in Iran or to an Iranian person; and
  • Designated parties:  prohibition of the supply of financial or economic resources to designated parties, and freezing of funds of designated parties.

Restrictions that continue to apply

In addition to the general licensing requirement under the EU Dual-Use Regulation (see in particular Article 3 for exports of listed dual-use items and the catch-all clause in Article 4(1) and (2)) and Regulation 359/2011, Regulation 267/2012 maintains certain licensing requirements after Implementation Day.

The following exports (sales and transfers) and provision of related services (brokering, financing, technical assistance) require prior authorisation from the competent MS authorities:

  • Nuclear Suppliers Group (NSG) items and other items related to proliferation.
  • Certain Enterprise planning software; and
  • Graphite and raw or semi-finished metals.

New Annex structure

When adopting Resolution 2231(2015), the UN oriented itself on the international control regimes and applied different controls to items (good, software and technology) controlled by the NSG on the one hand and the MTCR on the other. 

Therefore, it is no longer sufficient to know that an item is listed in Annex I of the EU Dual-Use Regulation (to which the previous version of Annex I of Regulation 267/2012 referred).  Rather, exporters must also check in which annex of Regulation 267/2012 the items fall.  Should an item be included in both Annex I and III, Annex III (and the relevant controls) prevails.  Annexes IV, IVA, V, VI, VIA, VIB and VII, XI, XII were deleted.

The following table provides an overview of the changed annex system of Regulation 267/2012:

New Annexes

Content

Old Annexes

Annex I

NSG items

Annex I (part thereof)

Annex II

Proliferation related items   (not listed in Annex I or III)

Annexes II and III

Annex III

MTCR items

Annex I (part thereof)

Annex VIIA

Industrial software

Annex VIIA

Annex VIIB

Graphite and Metals

Annex VIIB

Annexes VIII, IX

Designated parties

Annexes VIII, XI

Annex X

MS authorities

Annex X

Annexes XIII, XIV

Designated parties

 

Sanctions that have been lifted

The EU has lifted the following trade restrictions (which had partially already been suspended):

  • Prohibition on the import or transport of crude oil, gas, petroleum products;
  • Prohibitions related to key equipment for the Iranian oil, gas and petrochemical industries;
  • Prohibitions related to key naval equipment and related services;
  • Prohibition on import and export of gold, precious stones and diamonds;
  • Prohibition on the export of coinage and notes to the Iranian Central Bank;
  • Prohibition on making available vessels designed for the transport or storage of oil or petrochemical products; and
  • Authorisation and notification requirements for money transfers and prohibition of insurance services.

A consolidated version of Regulation 267/2012 as amended is available at the Eurlex website.

Practical implications and key questions

The result of Implementation Day is that most economic business transactions are permitted and the UK government, e.g., has confirmed that it will support and assist economic operators that look to exploit opportunities with Iran.

However, EU entrepreneurs planning to do business with Iran will need to carefully observe the scope of the current EU and US sanctions.  In this regard, from a practical viewpoint, international banks will likely have an important role in how fast Western companies can enter Iran.  As international transactions are still predominantly conducted in USD and virtually all large EU banks have US subsidiaries, they will likely take a cautious approach towards transactions with Iran, in particular considering the wider US sanctions and the fact that several EU banks are still "recovering" from US fines.  However, without guaranteed capital flows, it will also be difficult for businesses to enter the Iranian market.  In this context, the National Iranian Oil Company (NIOC) has recently announced that it intends to switch to the Euro as trading currency.

2. Central African Republic

Regulation 2015/2454 and Decision 2015/2459 amended the list of natural persons affected by restrictive measures in view of the situation in the Central African Republic.  The changes concerned the amendment of the entry of Oumar Younous Abdoulay and the addition of two persons to that list: Haroun Gaye and Eugène Barret Ngaikosset.

3. Libya

Regulation 2016/44 repealed and reconsolidated Regulation 204/2011 and its subsequent amendments.  It also amended the list of natural persons and legal entities subject to financial sanctions or travel restrictions with regard to the situation in Libya.   

4. Syria

Regulation 2015/2350 and Decision 2015/2359 deleted the entries of one person (Samir Hamsho) and two entities (Syria Steel SA and Al Buroj Trading) of the list of persons and entities affected by restrictive measures in view of the situation in Syria.

5. Tunisia

Regulation 2016/111 and Decision 2016/119 amended the list of natural and legal persons subject to restrictive measures in view of the situation in Tunisia.  Moreover, Decision 2016/119 extended the application of the sanctions until 31 January 2017.

6. Al Qaida

In order to implement the Decisions adopted by the United Nations Security Council during the months of October and November 2015, Regulation 2015/2245 amended Regulation 881/2002 by adding the entry of Emrah Erdogan, amending that of Abu Bakar Ba'asyir and deleting those of Mohammed Ahmed Shawki Al Islambolly, Mohamed Amine Akli, Chiheb Ben Mohamed Ben Mokhtar Al-Ayari and Nazih Abdul Hamed Nabih Al-Ruqai'i.  Furthermore, Regulation 2016/13 amended the entries of twelve individuals (Nashwan Abd Al-Razzaq Abd Al-Baqi, Mohammad Tahir Hammid, Ata Abdoulaziz Rashid, Farhad Kanabi Ahmad, Ibrahim Mohamed Khalil, Najmuddin Faraj Ahmad, Akram Turki Hishan Al-Mazidih, Ghazy Fezza Hishan Al-Mazidih, Muthanna Harith Al-Dari, Ibrahim Awwad Ibrahim Ali Al-Badri Al-Samarrai, Abu Mohammed Al-Jawlani and Tarkhan Ismailovich Gaziev) and deleted one person from the list (Rafik Mohamad Yousef).

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.

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