On August 6, 2018, the Treasury Department’s Office of Foreign Assets Control (OFAC) released a new Executive Order to implement the previously announced re-imposition of U.S. sanctions for Iran. There were no major surprises, with the Executive Order paralleling the guidance released on May 8, 2018 when the President announced his decision to cease the United States’ participation in the Joint Comprehensive Plan of Action (JCPOA) and to begin re-imposing the U.S. nuclear-related sanctions that had been lifted, following a wind-down period.
Effective August 7, 2018, the Executive Order re-imposed sanctions for items that had been subject to a 90-day wind-down period following May 8. This includes secondary sanctions applying to purchase or acquisition of U.S. dollar banknotes by the Government of Iran; certain trade in gold or precious metals; certain trade in graphite, raw or semi-finished metals such as aluminum, steel, coal and software for integrating industrial processes; certain transactions relating to Iranian rials; certain transactions relating to issuance of Iranian sovereign debt; and sanctions relating to Iran’s automotive sector.
The U.S. government will re-impose the remaining previously lifted sanctions effective November 5, 2018 under the Executive Order and also re-designate at least some parties removed from sanctions lists under the JCPOA. Please see our earlier post on the Global Trade & Sanctions Law blog for more information on the full scope of the withdrawal.
OFAC issued new FAQ guidance along with the new Executive Order and also updated FAQs issued on May 8, 2018 that may be particularly helpful to companies during the wind-down period.
- FAQs 2.3 and 2.4 confirm that secondary sanctions would not apply where companies receive payments relating to Iran after a wind-down period where goods or services were fully provided and delivered during the relevant wind-down period, and payment is made pursuant to an agreement reached before 8 May 2018 that was consistent with U.S. policy at the time entered.
- FAQ 2.6 clarifies that companies generally are permitted to enter into new agreements after May 8, 2018 where they are incident to the wind down of existing contracts, and are made within the relevant wind-down period. Payments during and in some cases after the applicable wind-down period may be processed pursuant to such new agreements incident to existing contracts.
OFAC indicates that further guidance will issue on or before November 4, 2018. The Executive Order and FAQs from August 6, 2018, can be found here.
U.S. withdrawal from the JCPOA and re-imposition of secondary sanctions for Iran remain controversial, and the reaction of countries around the world (and U.S. enforcement) will bear watching. The European Union, for example, has added countermeasures designed to protect EU members continuing to engage with Iran. We will offer a separate blog post to examine the EU initiative and its potential impact.