On November 5, 2018, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) took several actions to finalize the re-imposition of sanctions against Iran in response to President Trump’s May 8, 2018 decision to cease the United States’ participation in the Joint Comprehensive Plan of Action (“JCPOA”). See our previous blog posts here regarding the President’s May 8, 2018 decision to cease the United States’ participation in the JCPOA and here regarding Executive Order (“EO”) 13846, issued on August 6, 2018, which consolidated and reissued several sanctions provisions that had been suspended or revoked while the JCPOA was in effect.
OFAC’s November 5th, 2018 actions included:
- Re-imposing sanctions on activities that were subject to the 180-day wind-down period that ended on November 4, 2018;
- Designating more than 700 individuals, entities, aircraft, and vessels as Specially Designated Nationals (“SDNs”) and adding them to OFAC’s List of Specially Designated Nationals and Blocked Persons List (“SDN List”), including moving parties that were previously identified on the List of Persons Blocked Solely Pursuant to EO 13599 (“EO 13599 List”) back to the SDN List;
- Amending the Iranian Transactions Sanctions Regulations (“ITSR”) to reflect the re-imposition of sanctions pursuant to certain sections of EO 13846 and technical changes that remove references to the EO 13599 List, as well as amending an existing general license in the ITSR to authorize US persons to sell certain personal property in Iran and transfer the proceeds to the United States;
- Announcing significant reduction exceptions (“SREs”) to eight countries (China, India, Italy, Greece, Japan, South Korea, Taiwan, and Turkey) to allow those countries to temporarily continue to purchase Iranian oil; and
- Issuing new and revised Frequently Asked Questions (“FAQs”) relating to the re-imposition of US sanctions suspended or revoked in connection with the JCPOA.
With these steps, all US sanctions suspended or revoked in connection with the JCPOA are re-imposed and in full effect.
Re-imposition of Pre-JCPOA Sanctions
As provided for in EO 13846, sanctions were re-imposed on activities that were subject to the 180-day wind-down period announced on May 8, 2018 that ended on November 4, 2018. These include:
- Sanctions on Iran’s port operators, and shipping and shipbuilding sectors, including on the Islamic Republic of Iran Shipping Lines (“IRISL”), South Shipping Line Iran, or their affiliates;
- Sanctions on petroleum-related transactions with, among others, National Iranian Oil Company (“NIOC”), Naftiran Intertrade Company (“NICO”), and the National Iranian Tanker Company (“NITC”), including the purchase of petroleum, petroleum products, or petrochemical products from Iran;
- Sanctions on transactions by foreign financial institutions (“FFIs”) with the Central Bank of Iran (“CBI”) and designated Iranian financial institutions under section 1245 of the National Defense Authorization Act (“NDAA”) for Fiscal Year 2012;
- Sanctions on the provision of specialized financial messaging services to the CBI and Iranian financial institutions described in subsection 104(c)(2)(E)(ii) of the Comprehensive Iran Sanctions and Divestment Act of 2010 (i.e., sanctions relating to the provision of SWIFT messaging services);
- Sanctions on the provision of underwriting services, insurance, or reinsurance; and
- Sanctions on Iran’s energy sector.
Designation of SDNs and Elimination of EO 13599 List
OFAC has added more than 700 individuals, entities, aircraft, and vessels to the SDN List, including individuals and entities that had been removed from the SDN List in connection with the JCPOA as well as over 300 new targets. In addition, the new designations include, but are not limited to:
When the JCPOA came into effect, persons designated under EO 13599 (i.e., persons meeting the definition of “Government of Iran” or “Iranian financial institution”) were removed from the SDN List and identified on the then-newly created EO 13599 List. On November 5, 2018, OFAC moved all of these persons back to the SDN List, with the identifying“[IRAN]” tag, and eliminated the EO 13599 List. Notably, some of these persons have been designated under additional sanctions authorities and may be subject to secondary sanctions, as reflected in their entries on the SDN List (including but not limited to Bank Sepah, Bank Mellat, Bank Melli, Bank Kargoshaee, Future Bank, Export Development Bank of Iran, Post Bank of Iran, Europaisch-Iranische Handelsbank, Bank of Industry and Mine of Iran and Bank Tejarat).
In addition, the new designations include, but are not limited to:
- Over 200 persons and vessels in Iran’s shipping and energy sectors (including but not limited to Islamic Republic of Iran Shipping Lines and NITC);
- The Atomic Energy Organization of Iran as well as its subsidiaries and associated individuals; and
- Iran Air, the national airline of Iran, and 67 of its aircraft.
US Persons (i.e., entities organized under US law and their non-US branches; parties physically located in the United States; US citizens and permanent resident aliens wherever located or employed) are generally prohibited from engaging in transactions involving any person designated as an SDN. Non-US Persons may risk US secondary sanctions for engaging in significant transactions involving an Iranian person on the SDN List (other than a non-designated Iranian financial institution) or a person designated in connection with Iran’s support for international terrorism or proliferation of weapons of mass destruction. Persons subject to secondary sanctions will have a notation of “Additional Sanctions Information – Subject to Secondary Sanctions” in their SDN List entry in addition to any tags they may have for any other sanctions program(s) they have been designated under (e.g., the “[SDGT]” tag, the “[IRAN-HR]” tag, or the “[NPWMD]” tag).
Amendment of the ITSR
In addition to the above actions, OFAC amended the ITSR, effective November 5, 2018 to, among other things, (i) reflect the re-imposition of sanctions pursuant to certain sections of EO 13846 and (ii) make technical changes to remove references to the EO 13599 List.
In particular, OFAC reinstated the regulatory provisions of the authorities that were previously in sections 5 and 6 of EO 13622 (EO 13622 was revoked when the JCPOA went into effect) and now are in sections 1 and 10 of EO 13846 by revising paragraph (c) of section 560.211 of the ITSR. Sections 1(a)(i) and 1(a)(ii) of EO 13846 authorize OFAC to designate as an SDN any person determined by OFAC to have:
- On or after August 7, 2018, materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, the purchase or acquisition of US bank notes or precious metals by the Government of Iran; or
- On or after November 5, 2018, materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, NIOC, NICO, any entity owned or controlled by, or operating for or on behalf of, respectively, NIOC or NICO, or the CBI.
Section 10 of EO 13846 provides that section 1(a) of the EO 13846 does not apply to gas and pipeline projects meeting certain criteria, namely, the Shah Deniz project and pipeline projects for transport of gas from Azerbaijan to Turkey and Eastern Europe.
Also, to accommodate the elimination of the EO 13599 List, OFAC removed references throughout the ITSR to the EO 13599 List.
Finally, OFAC revised the general license at ITSR section 560.543 to permit certain transactions related to the sale of certain personal property in Iran without prior authorization. Previously, ITSR section 560.543 was limited to the sale of real property. Now, US persons will be permitted to participate in transactions necessary and ordinarily incident to the sale of real property as well as personal property in Iran and transfer of proceeds to the United States, provided that the property was either (1) acquired before the individual became a US person or (2) inherited from persons in Iran. This change complements ITSR section 560.518, which authorizes certain transactions in Iranian-origin household and personal effects.
Issuance of SREs to China, India, Italy, Greece, Japan, South Korea, Taiwan, and Turkey
Several US sanctions authorities related to Iran include an exception for countries that have received a SRE under section 1245(d)(4)(D) of the NDAA. On November 5, 2018, the Secretary of State announced that China, India, Italy, Greece, Japan, South Korea, Taiwan, and Turkey received SREs, which must be renewed every six months, with the primary effect that these countries may continue to temporarily import Iranian-origin oil so long as certain conditions regarding the purchases are met.
In particular, under the NDAA and section 561.203 of the Iranian Financial Sanctions Regulations (“IFSR”), a FFI may be subject to secondary sanctions if it knowingly engages in a significant financial transaction with the CBI, designated financial institutions, NIOC, NICO, or otherwise for the purchase of petroleum or petroleum products from Iran unless the FFI is hosted in a country that has received an SRE. With SREs in place, FFIs in the listed eight countries may continue to facilitate petroleum purchases for them, although strict specific conditions regarding the transaction must be met.
Also, as noted in new FAQ 642, service providers in countries with SREs that might otherwise face secondary sanctions under the Iran Freedom and Counter-Proliferation Act of 2012 for dealing with Iranian port operators and shipping sector may facilitate the importation of petroleum into those countries, provided that Iranian entities that are involved in such transactions are not designated in connection with Iran’s support for international terrorism, or its proliferation of weapons of mass destruction or their means of delivery.
New and Revised FAQs
OFAC has issued new FAQs (FAQs 630 through FAQ 645) related to the end of the 180-day wind-down period and the re-imposition of US sanctions suspended or revoked while the JCPOA was in effect. In addition, OFAC has amended FAQ 256 and FAQ 417, and archived outdated FAQs. The new FAQs address questions regarding the various actions taken on November 5, 2018, including the re-imposition of secondary sanctions, the elimination of the EO 13599 List, the use of humanitarian exemptions, and the use of SREs, among others.