U.S. and Non-U.S. Parties Beware (Again): Latest U.S. Sanctions on Iran go into Effect 1 July 2013

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The Iran Freedom and Counter-Proliferation Act of 2012 (IFCA) and Executive Order (EO) 13645 become effective on 1 July 2013. IFCA was signed into law on 2 January 2013, as a part of the National Defense Authorization Act (NDAA) for Fiscal Year 2013 and authorizes broad sanctions aimed at Iran’s energy, shipping, and shipbuilding sectors, the sale and supply of precious and certain other metals, graphite, coal, and industrial software, and targets providing insurance and other financial services to sanctioned Iranian parties.  EO 13645 was signed on 3 June 2013 and implements and expands upon IFCA, significantly targeting Iran’s automotive sector.  IFCA marks the fourth U.S. Iran sanctions statute to go into effect since 2010, while EO 13645 is the sixth Iran-focused EO since 2012.

This latest round of U.S. sanctions again applies extraterritorially, reaching non-U.S. parties (including trading companies) that do business with Iranian-owned entities.  They are, in effect, “secondary sanctions.”  In general, IFCA presents sanctions liability exposure for “any person” (including entities) knowingly providing support or selling, supplying, or transferring to or from Iran significant goods or services to Iran’s energy, shipping, and shipbuilding sectors or port operations.  Similarly, IFCA sanctions can be imposed against “any person” that sells, supplies, or transfers, directly or indirectly, to or from Iran precious metals, graphite, aluminum, steel, and coal (all if used in certain ways), and software used for integrating industrial processes.  Financial institutions facilitating final transactions and insurance underwriting, relating to such activities, are likewise sanctionable.  IFCA also poses sanctions risk for “any person” knowingly providing support to any Iranian party on the Specially Designated National (SDN) List maintained by the Department of the Treasury, Office of Foreign Assets Control (OFAC).

Certain exceptions apply to IFCA, most notably for the sale of agricultural commodities, food, medicine, medical devices, and providing humanitarian assistance to the Iranian people.

EO 13645 presents additional significant sanctions risks for foreign parties.  The EO expands the reach of U.S. sanctions to the Iranian automotive industry so that sanctions can be imposed against “any person” that sells, supplies, or transfers significant goods or services to Iran’s automotive sector, including goods used to manufacture or assemble trucks, cars, motorcycles and other vehicles in Iran.  In addition, financial institutions that conduct or facilitate any significant transactions related to the purchase or sale of Iranian Rials or maintaining significant accounts denominated in Iranian Rials, are subject to sanction.

To assist U.S. and foreign parties understand and comply with this latest round of U.S. sanctions against certain Iranian sectors, OFAC has added Frequently Asked Questions (FAQs) as guidance, http://1.usa.gov/128MxDA.

For assistance with understanding and complying with IFCA, EO 13645, other Iran sanctions laws, regulations, and Executive Orders, and other economic sanctions regimes, as well as representation before BIS and OFAC in investigations, civil penalty, and voluntary self-disclosures, please contact Jon P. Yormick, Attorney and Counsellor at Law, [email protected]  or by calling +1.866.967.6425 (Toll free in Canada & U.S.), +1.216.928.3474, or Skype at jon.yormick.

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