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Most significant, immediately effective is Section 4 of the
Order, which prohibits non-U.S. companies that are owned or
controlled by a U.S. Person from engaging in transactions with
Iran, as if that non-U.S. company was itself directly subject to
U.S. jurisdiction. Should that foreign-owned entity engage in a
prohibited transaction with Iran, the U.S. parent company, not the
foreign-owned entity, is subject to penalty. The new Order provides
that U.S. Persons can divest or terminate their Iranian business by
February 6, 2013, but OFAC has indicated that the effective date
for enforcement of the new Order remains its date of issuance. OFAC
also has indicated, however, that it will be receptive to reviewing
applications for a specific license to permit a U.S.-controlled
entity to in effect "wind-down" its Iranian transactions
by foreign subsidiaries of U.S. companies by the February 6, 2013
deadline.
The Act already had defined the term "entity" to mean
a partnership, association, trust, joint venture, corporation or
other organization. The Act also clarified that the term "own
or control" means, with respect to an entity (1) to hold more
than 50 percent of the equity interest by vote or value in the
entity; (2) to hold a majority of seats on the board of directors
of the entity; or (3) to otherwise control the actions, policies,
or personnel decisions of the entity. One clarification in the new
Order provides guidance with respect to the term "subject to
the jurisdiction of the Government of Iran." As used in
Section 218 of the Act and in Section 4 of the Order, that term
applies to a "person ordinarily resident in Iran" or
"in Iran," meaning Iranian nationals outside Iran are not
included unless that person ordinarily is resident in Iran. Another
direction given is that a non-U.S. subsidiary will be treated as a
U.S. person for purposes of license application and issuance and
that either it or its U.S. parent can apply for an OFAC
license.
What is most clear from the new Order is that any U.S. company
that has offshore subsidiaries that conduct business with Iran
should immediately analyze their activities. They should either
determine they are in compliance with the requirements of the new
Order or take action to come into compliance, through termination
of their foreign subsidiary's Iranian transactions or
divestiture of that foreign subsidiary where required (applying for
a specific license as needed to complete any such termination or
divestiture).
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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