January 16, 2016, marked “Implementation Day” for the Joint Comprehensive Plan of Action (JCPOA) reached by the P5+1 (China, France, Germany, Russia, the United Kingdom, and the United States), the European Union, and Iran.
Prior to Implementation Day, the U.S. Iranian Transactions and Sanctions Regulations (ITSR) prohibited foreign entities that are owned or controlled by U.S. persons from supplying goods or services to Iran. 31 C.F.R. § 560.215. A foreign entity is “owned or controlled” by a U.S. person if the U.S. person:
(i) Holds a 50 percent or greater equity interest by vote or value in the entity;
(ii) Holds a majority of seats on the board of directors of the entity; or
(iii) Otherwise controls the actions, policies, or personnel decisions of the entity.
As part of the United States’ implementation of the JCPOA, effective January 16, 2016, OFAC has issued General License H: Authorizing Certain Transactions Relating to Foreign Entities Owned or Controlled by a United States Person. General License H significantly relaxes the prior restrictions on non-U.S. entities that are owned or controlled by a U.S. person. Broadly stated, such entities may now conduct business with Iran or with any person/entity under the jurisdiction of Iran, subject to several qualifications.
Under General License H, the restrictions on non-U.S. entities that are owned or controlled by a U.S. person include the following:
- No direct exportation or reexportation of goods from the U.S.;
- No transactions with an individual or entity listed on the SDN List or the FSE List;
- No transactions involving an item subject to DOC license requirements (without prior authorization from DOC);
- No transactions with military, paramilitary, intelligence or law enforcement entities of the Government of Iran; and
- Generally, no transactions related to weapons, weapons delivery systems or nuclear activity.
General License H also places limitations on the role that a U.S. person can play in transactions involving Iran. A U.S. person may be involved in the initial determination to engage in business with Iran and may establish internal procedures to enable such transactions. However, a U.S. person “may not be involved in the Iran-related day-to-day operations of a U.S.-owned or -controlled foreign entity.” Prohibited conduct includes approving, financing, facilitating or guaranteeing any specific Iran-related transaction.
Separately, the U.S. will be lifting import restrictions on carpets and foodstuffs (including caviar and pistachios) from Iran. This change will go into effect upon publication in the Federal Register.
Compliments of Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP – A member of the EACCNY