On October 31, 2019, the US State Department strengthened US secondary sanctions targeting Iran under the Iran Freedom and Counter-Proliferation Act of 2012 (“IFCA”) (codified at 22 U.S.C. § 8801 et seq.), which dates back to 2013. These new IFCA sanctions target the construction sector in Iran and make sanctionable the export to Iran of certain strategic metals.
Under IFCA sections 1245-1246, sanctions may be imposed on persons who knowingly engage in the sale, supply or transfer, directly or indirectly, to or from Iran of certain materials. IFCA Section 1245(a)(1)(C)(i) requires the President to impose five or more of the menu-based sanctions described in section 6(a) of the Iran Sanctions Act of 1996 (“ISA”) against any person where a determination is made that such person has engaged in the sale, supply, or transfer to or from Iran of raw and semi-finished metals, graphite, coal, and software for integrating industrial processes:
- if they are to be used in connection with any sector of the economy of Iran determined to be controlled directly or indirectly by the Islamic Revolutionary Guard Corps (“IRGC”), or
- if they are determined to be used in connection with Iran’s nuclear, military, or ballistic missile programs.
Both conditions require specific determinations. The first condition requires identification of the relevant sector. The second condition requires a determination that the qualifying metals are determined to be used in the named programs. The potential ISA sanctions include, among others, SDN designation, a prohibition for the US Government to issue specific export licenses under the Export Administration Act, and a prohibition on US-dollar transactions and payments through US banks.
On October 31, the US Secretary of State made two determinations:
- the construction sector of Iran is controlled directly or indirectly by the IRGC, and
- four strategic materials (“Strategic Metals”) are being used in connection with the nuclear, military, or ballistic missile programs of Iran. According to the State Department fact sheet, the four Strategic Metals are stainless steel 304L tubes; MN40 manganese brazing foil; MN70 manganese brazing foil; and stainless steel CrNi60WTi ESR + VAR (chromium, nickel, 60 percent tungsten, titanium, electro-slag remelting, vacuum arc remelting).
This is the first time the State Department has made such determinations under IFCA.
The first IFCA determination makes sanctionable the sale, supply or transfer, directly or indirectly, to or from Iran of any raw and semi-finished metals, graphite, coal, and software for integrating industrial processes if such metals are used in connection with the construction sector. Such metals have been previously been described in an FAQ published by the US Treasury Department’s Office of Foreign Assets Control. The second IFCA determination makes sanctionable the sale, supply or transfer, directly or indirectly, of any Strategic Materials to or from Iran, regardless of the end-user or end-use.
These IFCA sanctions and the accompanying statements from the State Department indicate that the metals sector remains a focus of US sanctions efforts targeting Iran, building on Executive Order 13871 from May 2019 that authorized the imposition of sanctions on parties operating in the iron, steel, aluminum, and copper sectors of Iran. These sanctions are in addition to US secondary sanctions targeting other sectors of the Iranian economy, in the energy, shipping, shipbuilding, automotive sectors.