On April 18, 2024, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) and the UK’s Foreign, Commonwealth & Development Office (“FCDO”) announced a coordinated sanctions package targeting Iran. In the US, OFAC added 16 individuals and 10 entities to the Specially Designated Nationals and Blocked Persons List (“SDN List”) and the US Commerce Department’s Bureau of Industry and Security (“BIS”) also expanded the scope of Foreign Direct Product (“FDP”) rules for foreign-produced items destined for Russia, Belarus, Crimea, and Iran under the US Export Administration Regulations (“EAR”). In the UK, the FCDO initially designated 7 individuals and 6 entities and later designated a further 2 individuals and 4 entities.
US Developments
SDN Designations
The 26 new SDN designations—issued pursuant to Executive Orders 13882, 13871, and 13224 and listed here—target Iran’s unmanned aerial vehicle, steel, and automobile industries according to OFAC’s press release. The new SDNs are located in Iran, the United Kingdom, Turkey, Germany, Hong Kong, and the United Arab Emirates.
US Persons are generally prohibited from dealing, directly or indirectly, with SDNs, entities that are owned 50% or more by one or more SDNs, and their property or property interests. Non-US persons can be held liable for “causing” violations by US Persons involving transactions with SDNs and can also be subject to secondary sanctions risks for providing “material support” to SDNs. Secondary sanctions risks include the risk of being separately designated as an SDN.
EAR Rule Changes
For background, BIS’ April 18, 2024 rule changes (published here) build upon BIS’ February 24, 2023 action. BIS has stated that both actions were taken in response to Iran’s involvement in supplying unmanned aerial vehicles in support of Russia’s invasion of Ukraine. As part of that February 2023 action, BIS imposed a new Iran FDP rule for items in certain categories of the Commerce Control List and for certain other items identified by Harmonized Tariff System codes in Supplement No. 7 to EAR Part 746, later expanded on May 19, 2023 and January 23, 2024. Our blog posts on the February 2023 rule and subsequent expansions are respectively linked here, here, and here. BIS also expanded the destination scope of the Russia/Belarus FDP rule—originally implemented on March 2, 2022—to include Crimea on May 19, 2023. Our blog posts on the Russia/Belarus/Crimea FDP rule are linked here and here. Like the scope of the Iran FDP rule, the scope of the Russia/Belarus/Crimea FDP rule includes all items listed in Supplement No. 7 to EAR Part 746.
With the April 18, 2024 expansion, the items in Supplement No. 7 to EAR Part 746 will now include the entirety of the “Common High Priority List“, which includes approximately 50 high priority items BIS found to be sought by Russia to procure for its weapons programs. The Common High Priority List items include integrated circuits, radio frequency transceiver modules, items essential for the manufacturing and testing of electronic components, and computer numerically controlled machine tools. By extending the Iran and Russia/Belarus/Crimea FDP rules to the entirety of the Common High Priority List, BIS expands jurisdiction over foreign-produced items destined to Iran and Russia/Belarus/Crimea.
UK Developments
New Sanctions against Iran
The 13 new designations, issued by the FCDO on April 18, 2024 pursuant to the Iran (Sanctions) Regulations 2023, target individuals and entities involved in Iranian military or defense and which the UK Government considers to have enabled Iran to conduct destabilizing regional activity. On April 26, 2024, the FCDO designated 2 individuals and 4 entities that are considered to be closely involved with Iran’s drone production. Further to existing trade measures prohibiting the export of specific components and services to Iran, the UK Government has announced that it plans to expand such measures to include new bans on the export of components used in drone and missile production to Iran.
