1) JANUARY 2016 n NO. 1
Maritime
January 16th Marked Changes in U.S. Sanctions on Iran
Action Item: January 16, 2016, marked Implementation Day
under the Joint Comprehensive Plan of Action (“JCPOA”), an
agreement between Iran and the EU3+3 nations (the United
Kingdom, France, Germany, Russia, China, and the United
States) to ease international trade sanctions in exchange for
constraints on Iran’s nuclear capabilities. As of January 16, the
United States lifted a number of nuclear-related sanctions on
Iran, particularly the so-called “secondary sanctions” related
to non-U.S. persons. With limited exceptions, U.S. persons and
companies continue to be broadly prohibited from engaging
in transactions with Iran, but a limited exception has been
implemented to permit foreign subsidiaries of U.S. entities to
do business with Iran in some circumstances.
New Development
January 16, 2016, was Implementation Day under the JCPOA.
On this day, the International Atomic Energy Agency verified
that Iran implemented all primary nuclear-related requirements
under the JCPOA. As a result of this verification, the United
States, along with the European Union and United Nations,
lifted a host of nuclear-related sanctions on Iran. The U.S.
Department of the Treasury’s Office of Foreign Assets Control
(“OFAC”) released several documents on January 16 to assist
in understanding the effect of the changes, including Guidance
Relating to the Lifting of Certain Sanctions Pursuant to the Joint
Comprehensive Plan of Action on Implementation Day and
Frequently Asked Questions Relating to the Lifting of Certain
U.S. Sanctions Under the Joint Comprehensive Plan of Action
on Implementation Day, among others. The OFAC guidance
documents are available here.
Background
The JCPOA was reached on July 14, 2015, between the EU3+3
and Iran to ensure Iran’s nuclear program will be exclusively
peaceful. The JCPOA was formally adopted in October 2015 and
participants began implementing their JCPOA requirements. On
January 16, 2016, the U.S. Secretary of State confirmed that the
International Atomic Energy Agency verified that Iran had met
all of its key commitments under the JCPOA. As a result of this
verification, January 16, 2016, is known as Implementation Day
and participants in the JCPOA, including the United States, took
steps to implement their sanctions commitments.
Certain U.S. Secondary Sanctions Lifted
As a result of Implementation Day, the United States lifted
nuclear-related secondary sanctions on a number of Iran’s
business sectors and related services. As a general matter, the
sanctions lifted are secondary sanctions that address nonU.S. persons, including broad sanctions on Iran’s shipping,
shipbuilding, ports, energy, and financial services sector.
© 2016, Blank Rome LLP. All rights reserved. Please contact Blank Rome for permission to reprint. Notice: The purpose of this update is to identify select developments that may be of interest
to readers. The information contained herein is abridged and summarized from various sources, the accuracy and completeness of which cannot be assured. This update should not be
construed as legal advice or opinion, and is not a substitute for the advice of counsel.
2) Maritime n Page 2
However, the core provisions of the U.S. embargo on Iran remain
in place. U.S. persons continue to be broadly prohibited from
engaging in transactions or dealings directly or indirectly with
Iran or its government. In addition, non-U.S. persons continue
to be prohibited from knowingly engaging in conduct to evade
U.S. restrictions on transactions or dealings with Iran or that
causes the export of goods or services from the United States
to Iran. U.S. persons remain required to block the property of
the Government of Iran, and U.S. export control requirements
continue to prohibit exports or re-exports of goods and
technology under U.S. jurisdiction directly or indirectly to Iran
(with limited exceptions, such as agricultural commodities,
medicine, and medical supplies).
Sanctions Related to Iran’s Shipping and Shipbuilding Sectors
and Port Operators: Secondary sanctions that apply to non-U.S.
persons related to shipping and shipbuilding and port operators
were lifted. It is no longer sanctionable for non-U.S. persons
to engage in transactions with Iran’s shipping and shipbuilding
sectors and port operators, including the Islamic Republic of Iran
Shipping Lines (“IRISL”), South Shipping Line, the National Iranian
Tanker Company, and the port operators of Bandar Abbas, if not
on the list of Specially Designated Nationals. These activities also
encompass activities such as providing support services such as
bunkering, inspection, and classification.
Financial and Banking-Related Sanctions: Secondary sanctions
that apply to non-U.S. persons engaging in certain financial and
banking activities related to Iran were lifted. Specifically, it is no
longer sanctionable for a non-U.S. person to conduct financial
and banking transactions with certain individuals and entities,
including the Central Bank of Iran, the National Iranian Oil
Company, the Naftiran Intertrade Company, the National Iranian
Tanker Company, other specified Iranian financial institutions
and individuals and entities identified as the Government of Iran,
and a broad range of individuals and entities that were removed
from OFAC’s List of Specially Designated Nationals (“SDN
List”) on Implementation Day. It is also no longer sanctionable
for non-U.S. persons to engage in transactions involving the
Iranian rial or maintaining funds or accounts outside of Iran
denominated in the Iranian rial. It is no longer sanctionable for
non-U.S. persons to provide U.S. bank notes to the Government
of Iran or to purchase, subscribe to, or facilitate the issuance of
Iranian sovereign debt. Finally, it is no longer sanctionable for
a non-U.S. person to provide specialized financial messaging
services to the Central Bank of Iran and certain Iranian financial
institutions. Recent press reports have noted Iranian banks are
taking steps to reestablish SWIFT connections with non-Iranian
financial institutions, but western banks are moving cautiously
on reestablishing correspondent banking ties in light of the
remaining U.S. sanctions.
Sanctions Related to Insurance: Secondary sanctions that
apply to non-U.S. persons who provide underwriting services,
insurance, or re-insurance in connection with activities
consistent with the JCPOA were lifted, including underwriting
services, insurance, and re-insurance in connection with
activities in the energy, shipping, and shipbuilding sectors of
Iran, for the National Iranian Oil Company or the National Iranian
Tanker Company, or for vessels that transport crude oil, natural
gas, liquefied natural gas, petroleum, or petrochemical products
to or from Iran. In the global shipping sector, this creates an
opportunity for marine insurers and P&I Clubs to move back
into Iran trade, but pooling and reinsurance arrangements that
indirectly involve U.S. persons in such trade remain a source of
significant compliance concern.
Sanctions Related to Iran’s Energy and Petrochemical Sectors:
Secondary sanctions that apply to non-U.S. persons who engage
in certain Iranian energy sector activities also were lifted. It is
no longer sanctionable for non-U.S. persons to invest in Iran’s
oil, gas, and petrochemical sectors or purchase, acquire, sell,
transport, or market petroleum, petrochemical products, and
natural gas from Iran. Nor is it sanctionable for non-U.S. persons
to export, sell, or provide refined petroleum and petrochemical
products to Iran. Finally, it is no longer sanctionable for nonU.S. persons to conduct transactions with Iran’s energy sector,
including the National Iranian Oil Company, National Iranian
Tanker Company, and Naftiran Intertrade Company.
Sanctions Related to Gold and Precious Metals: Secondary
sanctions that apply to non-U.S. persons trading in gold and
other precious metals were lifted. Such activities include
supplying, exporting, or transferring gold and other precious
metals to or from Iran, along with facilitating related financial
transactions or providing relating services, insurance, or
transportation.
Sanctions Related to Software and Metals: Secondary sanctions
that apply to non-U.S. persons trading with Iran in graphite, raw,
or semi-finished metals, such as aluminum and steel, coal, and
software for integrating industrial processes in connection with
activities consistent with the JCPOA, were lifted.
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Sanctions Related to the Automotive Sector: Secondary sanctions
that apply to non-U.S. persons selling, transferring, or supplying
goods and services in connection with Iran’s automotive sector
were lifted.
Limited Relief for U.S. Persons and Entities
Pursuant to the JCPOA, the United States agreed to license
three categories of activity that would otherwise be prohibited,
including (1) export or re-export to Iran of commercial passenger
aircraft and related parts and services; (2) activities by non-U.S.
persons that are owned or controlled by a U.S. person; and (3)
importation of Iranian origin carpets and certain foodstuffs.
However, no transactions may involve individuals or entities on
the SDN List.
With regard to activities by non-U.S. persons that are owned
or controlled by a U.S. person, OFAC issued General License
H, which authorizes U.S.-owned or controlled foreign entities
to engage in certain transactions involving Iran that would
otherwise be prohibited by the Iranian Transactions and
Sanctions Regulations (“ITSR”). General License H does not,
however, permit U.S.-owned or controlled foreign entities to
engage in activities involving:
irect or indirect exportation or re-exportation of goods,
  
d
technology, or services from the United States;
ransfer of funds to, from, or through the U.S. financial
  
t
system;
ny individual or entity on the SDN List or Foreign Sanctions
  
a
Evaders List (“FSE List”);
ctivity prohibited by, or requiring a license under, U.S.
  
a
Export Administration Regulations;
ny military, paramilitary, intelligence, or law enforcement
  
a
entity of the Government of Iran, or any officials, agents, or
affiliates thereof; and
ertain sanctionable activity relating to proliferation of
  
c
weapons of mass destruction, international terrorism, Syria,
Yemen, and Iran’s human rights abuses against its citizens.
As a result, a number of U.S. companies are examining
the possibility of permitting foreign subsidiaries to resume
dealings with Iran. However, such operations would have to be
undertaken without any review, approval, or other facilitation
by the U.S. parent, or any U.S.-citizen or resident employees,
officers, or board members. Such constraints give rise to
significant challenges with regard to governance and compliance.
With regard to export to Iran of commercial passenger aircraft
and related parts and services, OFAC issued a Statement
of Licensing Policy establishing a licensing regime for the
authorization of export, re-export, sale, lease, or transfer to Iran
of commercial passenger aircraft for exclusively civil aviation
use, along with spare parts, components, and services for such
aircraft.
Finally, with regard to importation of Iranian origin carpets and
foodstuffs, OFAC issued an amendment to the ITSR authorizing
the importation of Iranian origin carpets and foodstuffs,
including pistachios and caviar.
Conclusion and Recommendations
The JCPOA Implementation Day brought significant changes to
the United States’ Iran sanctions with regard to non-U.S. persons.
However, with limited exceptions, the sanctions applicable to
U.S. persons remains largely unchanged.
Given the complexity of the recent changes to the Iran sanctions
landscape and the remaining U.S. restrictions, we recommend
that any new operations involving Iran be reviewed carefully with
counsel to ensure that any compliance risks are minimized.
For additional information, please contact:
Matthew J. Thomas
202.772.5971 | MThomas@BlankRome.com
Jonathan K. Waldron
202.772.5964 | Waldron@BlankRome.com
Dana S. Merkel
202.772.5973 | DMerkel@BlankRome.com