Despite the implementation of the Joint Comprehensive Plan of Action (“JCPOA”) – the nuclear accord between the United States, other major world powers, and Iran – U.S. persons remain broadly prohibited from engaging in most transactions with Iran or Iranian parties. Nonetheless, the JCPOA did herald certain new license authorizations that permit U.S. persons to engage in specific trade-related activities with Iran. It will be important for U.S. persons – defined to include U.S. citizens, permanent resident aliens, entities organized under the laws of the United States (as well as their foreign branches), and persons physically located within the United States – seeking to engage in trade-related activities with Iran – to ensure their compliance with U.S. sanctions regulations, including by consulting legal counsel as necessary.
For nearly three decades, the United States has imposed a comprehensive trade and investment embargo with Iran with only limited and narrowly construed exceptions. This trade embargo is codified at 31 C.F.R. Part 560, where it is otherwise known as the Iranian Transactions and Sanctions Regulations (“ITSR”). The ITSR imposes broad prohibitions on the import into the U.S. of Iranian-origin goods and services; the export and re-export to Iran of U.S.-origin goods, technology, and services; U.S. person facilitation of transactions by a foreign person with Iran if such transactions would be prohibited if engaged in by a U.S. person; and all trade-related dealings or transactions by U.S. persons with Iran or Iranian parties. The purpose of these sanctions prohibitions is to restrict U.S. economic activity with Iran.
However, the ITSR does contain certain exemptions and license authorizations and exceptions. These include license authorizations for the export and sale of certain agricultural commodities, medicines, and medical supplies to Iran, as well as for the provision to Iran of certain hardware, software, and services incident to personal communications (such as smartphones and tablets). A full list of such exemptions, license authorizations and exceptions can be found at 31 C.F.R. § 560.210; Subpart E of 31 C.F.R. Part 560; and on the U.S. Department of the Treasury’s Iran Sanctions webpage.
While the JCPOA did not terminate the broad prohibitions of the ITSR, it did authorize certain additional trade-related activities with Iran. Pursuant to the JCPOA, the Office of Foreign Assets Control (OFAC) issued a general license authorization (codified at 31 C.F.R. § 560.534) for the importation into the United States of Iranian-origin carpets and certain foodstuffs. This means that U.S. persons can now engage in the importation of Iranian-origin carpets and certain foodstuffs into the United States without first obtaining specific license authorization from OFAC – provided that U.S. parties comply in full with the terms of 31 C.F.R. § 560.534 and other applicable U.S. law.
Further, OFAC issued a Statement of Licensing Policy (“SLP”) for U.S. and non-U.S. persons to request specific license authorizations to engage in transactions for the sale of commercial passenger aircraft and related parts and services to Iran under certain restrictive conditions. OFAC’s issuance of a SLP is intended to signals that U.S. persons are entitled to submit specific license applications and OFAC will review such applications with a presumption in the applicant’s favor. Nonetheless, U.S. persons are required to receive specific license authorization before engaging in any transactions that would be covered under the terms of the SLP.
Finally, OFAC issued General License H, authorizing U.S.-owned or –controlled foreign entities – as defined at 31 C.F.R. § 560.215(b) – to engage in transactions, directly or indirectly, with Iran or Iranian parties that would otherwise be prohibited under 31 C.F.R. § 560.215, which addresses prohibitions on foreign entities owned or controlled by U.S. persons. Some have interpreted this provision as authorizing U.S. persons to engage in certain activities with Iran that had otherwise previously been prohibited. With one limited exception, this is not the case. General License H is intended to permit foreign entities that meet the definition of U.S.-owned or –controlled to engage in trade-related dealings with Iran. However, U.S. persons at those entities are not permitted to engage in or otherwise facilitate transactions with Iran or Iranian persons, as U.S. persons remain prohibited from such transactions under the ITSR.
The JCPOA opened certain limited avenues for trade with Iran or Iranian persons, but the broad prohibitions of the ITSR remain in place. U.S. persons considering engaging in trade-related activities with Iran should consult legal counsel prior to undertaking any proposed dealings and strive to deepen their understanding of legal implications in this context. Violations of the ITSR can be met with serious civil and criminal penalties, and U.S. authorities have imposed such penalties on violating parties in the past.
* The contents of this communication are not and should not be regarded as constituting legal advice. As noted above, U.S. and other persons should discuss any proposed activities involving Iran with legal counsel to ensure compliance with U.S. law.
Tyler Cullis is the Legal Fellow and Policy Associate at NIAC. He provides legislative and advocacy outreach, research and writing, and legal analysis. A law graduate of the Boston University School of Law, he specialized in the U.S. sanctions on Iran and the Iran nuclear issue. Tyler tweets at @TylerCullis.