International Trade Law News

Published by Jacobson Burton Kelley PLLC

By Doug Jacobson, Jacobson Burton PLLC

Here are answers to some of the frequently asked questions we have been receiving from US and non-US companies following the July 14, 2015 announcement of the Joint Comprehensive Plan of Action (JCPOA) between the P5+1 countries and Iran on Iran's nuclear program.

What would you advise companies now wanting to trade with Iran? 

Answer: The key piece of advice I have been providing to clients following the July 14, 2015 JCPOA announcement is to have realistic expectations, to understand the limited scope of the US sanctions relief contained in the JCPOA, the major hurdles in the way of its implementation, and to avoid media reports that contain general information only. We should not expect to see any US sanctions relief for several months, and most likely not until mid 2016. Sales and marketing staff should work very closely with their in-house and outside compliance resources to determine what is permissible and what is not. In the meantime, and for the next few months, the activity with Iran that was prohibited on July 13, 2015, the day before the announcement, remains prohibited today and until further notice from the Treasury Department's Office of Foreign Assets Control (OFAC). 

What misconceptions are out there that need to be corrected regarding sanctions on Iran? 

Answer: For most US-based companies, even if the JCPOA is approved by Congress and after several months is implemented in full, there will be little impact on US companies. The US agreed to lift only selected sanctions on Iran, such as secondary (extraterritorial) nuclear sanctions that restrict the activities of non-US persons with Iran. This means there will be relief only from sanctions on transactions outside the United States, not involving US persons or products sourced from the US. The US primary sanctions that prohibit most US goods from being exported to Iran and generally prohibit US persons from engaging in transactions with Iran will remain in effect until modified by the US Congress. In other words, once this agreement is implemented, which will not be until early 2016, US policy will be very similar to what it was in 2010, which is before the US secondary sanctions on Iran were first imposed. 

What mistakes do companies need to avoid in connection with potential business with Iran? 

Answer: Companies must avoid relying on rumors and unofficial information. They must make decisions based on specific guidance provided by the US Office of Foreign Assets Control, the Bureau of Industry and Security and other US regulatory agencies. Just because a competitor may be undertaking an activity in Iran or involving Iranian entities does not mean that it is compliant with US laws or the laws of other countries. The broad sanctions imposed on Iran by the EU and many other countries will also remain unchanged for the next several months and some countries, such as Canada, have indicated that they may choose to maintain the existing sanctions. 

On what sectors of the Iranian economy will the sanctions be lifted first and what sectors will take longer? 

Answer: For US based companies, the only significant changes to the current primary sanctions on Iran, once implemented in 2016, will be to allow for the sale and lease of commercial passenger aircraft and related parts to Iran for civilian end-use, upon receipt of a license from OFAC. In addition, OFAC will license non-US entities that are owned or controlled by a US person, such as a non-US subsidiary of a US company, to engage in activities with Iran that are consistent with the JCPOA. It is not yet clear whether OFAC will issue a general license authorizing such transactions or if each company will need to obtain its own specific license. In addition, the US will again allow the importation into the US of Iranian-origin carpets and food, which were permitted from 2000 through 2010. The US secondary (extraterritorial) sanctions relief will affect the activities of non-US companies in many other sectors in Iran, including energy, metals, automotive and shipping, insurance and banking. 

Will the JCPOA impact the current US policy on exports of permitted medical and agricultural products to Iran?

Answer: No. As noted, there will be limited changes on the US primary sanctions on Iran. OFAC's licensing policy for food, medicine, medical devices and agricultural commodities will not change under the JCPOA. As a result, the exports of these items still require a general or specific license to be exported to Iran. It is possible, although not certain, that payments for authorized items through European or Asian banks may be easier as a result of the JCPOA but direct Iran-US banking transactions will remain prohibited. In addition, there are many ports in Iran that will remain off limits due to the port operators being on the SDN List. The sanctions relief in the JCPOA is not expected to change the current policy since those sanctions were imposed for non-nuclear reasons.

Labels: OFAC, Sanctions; Iran