In May we wrote about President Trump's decision to withdraw from JCPOA. At that time businesses were given a period of 90 - 180 days to wind down their operations or business with Iran. That wind down period ended on November 4, 2018.
According to U.S. Department of Treasury's Office of Foreign Assets Control (OFAC) the United States will fully enforce the reinstated sanctions on Iran. The OFAC has issued a FAQ related to the re-imposition of sanctions. These sanctions may be imposed on provided goods and services and the "extension of additional loans or credits to an Iranian counterpart" unless there is an exemption, OFAC has authorized them, or said activities are not sanctionable. Significantly, exceptions and authorizations do not apply to transactions with persons on the SDN List ( specially designated persons and blocked persons list).
Broadly speaking OFAC provides guidance on the criteria and steps U.S. persons, U.S. owned, or - controlled foreign entities and non U.S. persons, or non Iranian persons can take to receive payments after the wind down period for goods or services, loans or credit provided before the end of said period. We have outlined the conditions in the following order: receipt of payments by non U.S.persons, non Iranian persons; receipt of payments involving U.S. persons, U.S. owned, or - controlled foreign entities; transactions involving individuals in the SDN List; documents needed; humanitarian and consumer goods.
Non U.S. Persons, non - Iranian Persons
Goods and Services
To receive payments one must have have fully provided or delivered goods or services before the end of the wind down period. That is either before August 6, or November 4, 2018, as applicable. Services or goods are fully provided or serviced based on industry standards. Goods and service, generally, are fully delivered or provided when a party has performed all the actions and satisfied all the conditions necessary to receive payments.
Additionally, there must be a written contract or agreement entered into before May 8th, 2018. This is not enough, however, the activities involved must have complied with U.S. sanctions at the time of delivery or when services were rendered. Hence, timing, compliance and a written contract are important. If these conditions are fulfilled , the U.S. government would allow the non U.S. person, non Iranian person to receive payments.
Loans and credit extended
The U.S. government will allow payment if the following conditions are fulfilled:
Timing : The loans and credit should have been extended prior to the end of the wind down period.
Contract: The extension must have been in a written contract or agreement entered before May 8th, 2018.
Compliance: these activities are conform to U.S. sanctions in effect at the time the loan or the credit was extended.
Consistent with U.S. sanctions the activities set forth above should not be with persons in the SDN list at the time of transaction. Significantly, payment cannot involve U.S. persons or U.S. financial systems, unless the transaction is exempt from regulations or OFAC has authorized it.
Unsure what to do?
One can seek the OFAC's assistance or that of the State Department's before receiving payments and ensure that the one meets the criteria provided.
U.S persons, U.S. owned - or controlled foreign entities
Unlike, non U.S. persons, non Iranian persons, U.S. persons may receive payments only during the "validity period", namely, through 11:59 p.m. eastern time on November 4, 2018. Payments after the wind down period require specific authorization from OFAC. The requests will be assessed on a case by case basis.
Request for specific license should include sufficient details including:
1. whether the transaction was conform U.S. sanctions at the time of the transaction
2. the existence of a written contract or agreement entered into before May 8, ' 18. Absence of such a contract can be grounds for denial of the request.
3. an explanation of the reasons for not receiving payments before the end of the applicable wind down period.
4. Identity of all the parties involved must be disclosed.
5. Efforts undertaken to obtain payments must be accounted for along with documentation showing such efforts having taken place, including invoices, shipping documents and contracts.
Payments for activities that involve persons on the SDN list during the wind down period are subject to sanctions and the U.S. government will fully enforce them.
U.S persons need authorization to any payments related to persons on the SDN list; requests will be evaluated on a case by case basis.
Non U.S. persons and foreign financial institutions could be subject to U.S. sanctions for knowingly engaging in "certain significant transactions" involving Iranian persons on the SDN List.
Humanitarian and consumer goods
These transactions are generally permitted and not sanctionable unless they involve persons on the SDN list or other institutions and organizations with terrorist ties or IRSG.
*Dear reader, while it is our pleasure to raise awareness on issues important to our clients, it is also our responsibility to inform you that the information provided is for educational purposes only. It is not, and it should not be construed, legal advice. Should you have specific questions you may always contact us at 734-591-7200 or other qualified counsel.