United States: "Implementation Day" Arrives, Triggering Relaxation Of US Sanctions Against Iran

Last Updated: January 22 2016
Article by Margaret M. Gatti and Louis Rothberg

The impact of Implementation Day will vary depending on whether you are a US Person,  a US-owned or controlled Foreign Entity, or a  Foreign Person with no US nexus—what's your status? 

On January 16, the United States relaxed sanctions against Iran, marking "Implementation Day" in connection with the Joint Comprehensive Plan of Action (JCPOA) entered into by the United States, European Union, United Kingdom, France, China, Russia, Germany, and Iran, for which Iran has presumably met key nuclear-related measures required by the agreement.

This relaxation of sanctions against Iran results in (1) very few changes for US individuals and US companies (US Persons); (2) somewhat greater changes for foreign companies that are owned or controlled by US Persons (US-owned or controlled Foreign Entities); and (3) rather significant changes for foreign companies that have no US Person ownership (Foreign Persons) that are involved in Iranian transactions with no US nexus (such as any US-origin content).

The sanctions relaxation that occurred on January 16 emanates almost exclusively from the US Government's (USG's) revision of nuclear-related secondary Iran sanctions and the USG's relatively minor modifications to its primary Iran sanctions.

Before summarizing the implications of the Iran sanction relaxation that occurred on Implementation Day, it is important to clarify the following: 

Primary Iran sanctions are those US sanctions that apply to

(1) the Iran-related activities of US Persons;

(2) the Iran-related activities of US-owned or controlled Foreign  Entities; and

(3) the direct and indirect export, re-export, or transfer to Iran of US-regulated goods and technology by US Persons, US-owned or controlled Foreign Entities, and Foreign Persons.

These sanction measures were imposed principally for antiterrorism or other non-nuclear reasons. With only limited exceptions, the primary Iran sanctions remain largely in place despite Implementation Day.

Nuclear-related secondary Iran sanctions target transactions by Foreign Persons to the extent that such transactions have no US nexus (such as any US-origin content) and are not otherwise subject to US "primary" Iran sanctions.

These sanction measures were imposed principally for nuclear-related reasons and were intended to deter Foreign Persons from engaging in activities involving certain specified sectors of the Iranian economy, including energy, petrochemical, automotive, financial, banking, mining, shipbuilding, and shipping. On Implementation Day, the US relaxed secondary sanctions related to these sectors of the Iranian economy and removed certain Iranian parties from the Office of Foreign Asset Control's (OFAC's) Specially Designated Nationals (SDN) List. By relaxing the secondary Iran sanctions in this manner, the USG effectively removed US-imposed restraints on dealings by Foreign Persons with the formerly targeted Iranian business sectors.  

*                  *                  *

So what does US Iran sanctions relaxation post-Implementation Day (1.16.2016) really mean for each of the constituents delineated below? 

US Individuals and US Companies (US Persons)

For US Persons, very few changes were made to the status quo. The sanction changes implemented on January 16 applicable to US Persons constitute relatively minor modifications to the USG's primary Iran sanctions. These sanctions already encompass several "general licenses" that authorize US Persons' exports of medicine, medical devices, and agricultural products to Iran. These longstanding general licenses remain available. However, in accordance with the terms of the JCPOA, the United States committed to license three additional categories of activities that would otherwise be prohibited under the USG's primary Iran sanctions.

These additional categories of activities are licensed by means of the following:

General License H—Issued and effective on Implementation Day.

As issued, General License H authorizes US Persons to engage, to the extent necessary, in the following activities in connection with transactions involving Iran that US-owned or controlled Foreign Entities are otherwise authorized to conduct pursuant to General License H: 

(1) activities related to the establishment or alteration of operating policies and procedures of a US entity or a US-owned or controlled Foreign Entity so that the US-owned or controlled Foreign Entity can engage in activities newly authorized by General License H;  and

(2) activities to make available to US-owned or controlled Foreign Entities automated and globally integrated computer, accounting, email, telecommunications, or other business support system, platform, database, application, or server necessary to store, collect, transmit, generate, or otherwise process documents or information. Separate authorization of these activities in General License H was necessary because such activities would otherwise be prohibited as "facilitation" under the Iran Transaction Sanction Regulations (ITSR) in section 31 C.F.R. part 560. 208.

Please note, however, that General License H does not authorize US Persons' involvement in any ongoing Iran-related operations or decision making of a foreign-owned or controlled foreign entity. US Persons cannot be involved in the Iran-related day-to-day operations of a US-owned or controlled Foreign Entity, including through the acts of approving, financing, facilitating, or guaranteeing any Iran-related transaction.

A new as-yet-untitled general license, which shall be effective upon publication in the Federal Register.

This general license will authorize US Persons to import Iranian-origin carpets and foodstuffs (including pistachios and caviar) into the United States.  

A Statement of Licensing Policy—Issued and effective on Implementation Day.

This Licensing Policy Statement provides for a favorable case-by-case review of specific license applications submitted to OFAC by individuals and entities who request OFAC authorization to export, re-export, sell, lease, or transfer commercial passenger aircraft (as well as related parts and services) to Iran.

Aside from these minor modifications, the USG's primary Iran sanctions remain largely unchanged after Implementation Day and, as a consequence, US Persons continue to be broadly prohibited from engaging in transactions or dealings in or with Iran or its government. In addition, the government of Iran and Iranian financial institutions remain persons whose property and interests in property are blocked; US Persons continue to be broadly prohibited from engaging in transactions or dealings with the government of Iran and Iranian financial institutions, with the exception of transactions that are exempt from regulation or authorized by OFAC.

Non-US entities that are owned or controlled by US Persons (US-owned or controlled Foreign Entities)

Somewhat greater changes than those that affect US Persons resulted for US-owned or controlled Foreign Entities in the wake of Implementation Day.

These changes occurred exclusively through the issuance of General License H, which was issued and became effective on Implementation Day. General License H authorizes US-owned or controlled Foreign Entities to engage in transactions, directly or indirectly, with the government of Iran (or any person subject to the jurisdiction of the government of Iran) that otherwise would be prohibited by the US primary Iran sanctions under 31 C.F.R. § 560.215. This authorization is significantly constrained by several key exceptions that exclude from the ambit of General License H certain specified transactions, including but not limited to the following: 

  • Direct and indirect re-exports to Iran of any goods, technology, or services originally exported from the United States without separate authorization from OFAC
  • Transactions involving a person included in OFAC's SDN List or any person identified on the List of Foreign Sanctions Evaders pursuant to Executive Order 13608
  • Transfer of funds to, from, or through the US financial system, whether denominated in US dollars or any other currency

To insure that an intended transaction is authorized under General License H, it is essential for US-owned or controlled Foreign Entities to closely review the provisions of General License H and its significant exceptions. If an intended transaction does not fall entirely within the scope of General License H, it is not a permissible transaction and would constitute a violation of 31 C.F.R. § 560.215 in the US primary Iran sanctions.

Foreign Persons that have no US Person ownership that are involved in Iranian transactions with no US nexus  

Rather significant changes have been implemented following Implementation Day for Foreign Persons that are devoid of US Person ownership and that are engaged in Iranian transactions with no US nexus.

On Implementation Day, the United States lifted its nuclear-related secondary sanctions against Iran. These sanctions were directed toward Foreign Persons that engaged in certain conduct that occurred entirely outside of US jurisdiction but involved industry sectors in Iran for which the United States sought to curtail development and growth. These industry sectors included energy, petrochemical, automotive, financial, banking, mining, shipbuilding, and shipping. By lifting the secondary sanctions against Iran, the USG effectively removed US-imposed restraints on dealings by Foreign Persons with formerly targeted Iranian business sectors. That said, it is important for such Foreign Persons to consider the possible implications of the US primary Iran sanctions as well as the remaining US secondary Iran sanctions before undertaking activities involving Iranian industry sectors that were formerly targeted.

Primary Iran sanctions and secondary Iran sanctions may be implicated as follows:

  • Foreign Persons continue to be prohibited from knowingly engaging in conduct that seeks to evade US restrictions on transactions or dealings with Iran or that causes the export of goods or services from the United States to Iran.
  • Foreign Persons continue to be prohibited from exporting, re-exporting, or transferring to Iran any goods, technology, or services originally exported from the United States and/or subject to US export jurisdiction.    
  • Secondary sanctions continue to apply to Foreign Persons for conducting transactions with Iranian or Iran-related individuals and entities that remain or are placed in the future on the SDN List, notwithstanding the lifting of secondary sanctions.
  • The authorizations under General License H that are available to US Persons and US-owned or controlled Foreign Entities are not available in the case of a Foreign Person's dealings with Iran and, accordingly, no US Person may approve, guarantee, or facilitate a transaction by a Foreign Person that is prohibited for such US Person.

Summary and Conclusions

Much of the above discussion is based on the Guidance and FAQs that OFAC has published on its website. However, it should be noted that OFAC has prefaced its FAQ section with a disclaimer that states the following:

"This document is explanatory only and does not have the force of law. Please see particularly the legally binding provisions. . .governing the sanctions. This document does not supplement or modify the statutory authorities, Executive orders, or regulations." 

Please keep this disclaimer in mind and note that the analysis in this LawFlash may be subject to future revision as necessary and appropriate. We will be releasing future LawFlashes as events unfold to provide greater analysis and bring the discrete topics discussed in this LawFlash into increasingly sharper focus. Please stay tuned.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

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