On February 27, 2020, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued a new Counter Terrorism and Iran-related General License No. 8 (“GL 8”) together with new frequently asked questions (“FAQs”) about the general license and the Swiss Humanitarian Trade Arrangement (“SHTA”). New GL 8 authorizes US Persons and non-US entities owned or controlled by US Persons to engage in Iran-related humanitarian transactions even if the CBI is directly or indirectly involved.
Although the US Government has continued to expand US sanctions targeting Iran since its withdrawal from the Joint Comprehensive Plan of Action in 2018, OFAC has maintained exceptions and authorizations for humanitarian transactions with Iran. Specifically, under the Iranian Transactions and Sanctions Regulations (“ITSR”), US Persons and non-US entities owned or controlled by US Persons (together “ITSR Parties”) are authorized by general license (also known as “Ag/Med Licenses”) to participate in the sale, export, or reexport of certain categories of agricultural commodities, medicines, and medical devices to Iran. OFAC can also authorize humanitarian transactions with Iran under specific licenses to the extent an item or service being exported/reexported to Iran is not covered by the Ag/Med Licenses. Importantly, however, these authorizations generally do not apply if the transaction involves any parties designated in connection with Iran’s support for international terrorism or WMD proliferation (i.e., designated to the Specially Designated Nationals and Blocked Persons List (“SDN List”) with the tags [SDGT] and/or [NPWMD]).
In September 2019, OFAC designated the CBI under terrorism-related sanctions authorities, which created significant confusion for US and non-US parties, including financial institutions, given the CBI’s role in processing payments related to humanitarian-related transactions. Our blog post on the designation of the CBI is available here.
To clarify the US Government’s position vis-à-vis humanitarian transactions potentially involving the CBI, GL 8 authorizes the involvement of the CBI in humanitarian transactions and activities that were otherwise permitted under the ITSR prior to the CBI’s September 2019 designation. In other words, if an ITSR Party is authorized under one of the Ag/Med Licenses to export/reexport agricultural commodities, medicines, or medical devices (as those terms are defined in the ITSR), or the transaction is covered by an OFAC specific license, then GL 8 authorizes the direct or indirect involvement of the CBI in such transactions.
GL 8 does not authorize:
- transactions that involve persons designated to the SDN List in connection with Iran’s support for international terrorism or WMD proliferation other than the CBI;
- the export/reexport of certain items not covered by Ag/Med Licenses directly to the CBI; or
- any other transactions involving the CBI that are not explicitly authorized in GL 8.
In FAQ 823, OFAC confirmed that non-ITSR parties that engage in dealings with the CBI that would be authorized for ITSR Parties under GL 8 in the context of Iran-related humanitarian transactions will not be exposed to the risk of US secondary sanctions, provided no other prohibited SDNs are involved. For example, non-ITSR parties that engage in humanitarian transactions involving the CBI will not be exposed to secondary sanctions risks simply because of the CBI’s involvement. As part of the US Government’s commitment to ensuring that humanitarian items can be exported to Iran, GL 8 took effect on the same day as the SHTA. As discussed in our previous blog post here, the SHTA constitutes a new payment mechanism developed in coordination with the Swiss and US Governments to enable Swiss companies to be paid for humanitarian goods delivered to Iran. Several of the FAQs that OFAC published on January 27 discuss the SHTA’s implementation and mechanism.