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December 16, 2019: State Department Iran Advisory

The U.S. Department of State is issuing this advisory to alert persons globally to the U.S. sanctions risks for parties involved in transfers or exports to Iran of graphite electrodes and needle coke, which are essential materials for Iran’s steel industry.  The U.S. Government is taking strong action to deny the Government of Iran revenue derived from Iran’s steel sector, since such funds may be used to advance the Iranian regime’s malign behavior, including its proliferation programs, campaigns of regional aggression, and support for terrorist groups.

Transfers or exports to Iran of graphite electrodes or needle coke create significant sanctions risk for entities and individuals, including but not limited to producers and exporters of graphite electrodes and needle coke, port operators, shippers, shipping companies, and vessel operators and owners.  Sanctions risks may be present even if the intended end-user is not in Iran’s steel sector.

Several U.S. government sanctions authorities may apply to such transfers or exports, and those who engage in such transfers are at risk regardless of their nationality or location.  The consequences of being designated related to such transfers or exports are substantial, including potential blocking sanctions.  Businesses should be aware of the risks created from transferring or exporting needle coke and graphite electrodes to Iran and implement effective due diligence policies, procedures, and internal controls to ensure compliance with applicable legal requirements.

I. Background on Graphite Electrodes and Needle Coke

Graphite electrodes are mainly used in electric steelmaking, due to their high levels of electrical conductivity and ability to withstand high temperatures.  Electric steelmaking uses electric arc furnaces to create steel by melting down other recycled steel products.  Graphite electrodes are the main heating element during this process.  After this process is complete, the molten steel is poured into ladles and casted into new steel products.

Needle coke is needle-shaped carbon material characterized by low electrical resistance and strong shock resistance, and is the main input used to create graphite electrodes.  Needle coke can be derived from petroleum or coal, both of which can be used to produce the graphite electrodes needed for electric steelmaking through a multi-step baking process.

II. Authorities and Sanctions

Executive Order 13871 (Imposing Sanctions with Respect to the Iron, Steel, Aluminum, and Copper Sectors of Iran):  E.O. 13871 authorizes the blocking of property of any person determined by the Secretary of the Treasury, in consultation with the Secretary of State, to have knowingly engaged in a significant transaction for the sale, supply, or transfer to Iran of significant goods or services used in connection with the iron, steel, aluminum, or copper sectors of Iran.  Such goods or services could include exports of graphite electrodes or needle coke.

The Iran Freedom and Counter-Proliferation Act of 2012 (IFCA):  IFCA Section 1245(a)(1) requires the Secretary of State to impose 5 or more of the sanctions described in section 6(a) of the Iran Sanctions Act of 1996 with respect to a person (individual or entity) if the Secretary of State determines that the person knowingly sells, supplies, or transfers graphite, directly or indirectly, to or from Iran if the graphite (1) is to be used in connection with the energy, shipping, or shipbuilding sectors of Iran or any sector of the economy of Iran determined to be controlled directly or indirectly by Iran’s Revolutionary Guard Corps (IRGC); or (2) is sold, supplied, or transferred to or from an Iranian person included on the list of specially designated nationals and blocked persons maintained by the Office of Foreign Assets Control of the Department of the Treasury.  Of note, the sanctions menu described in section 6(a) of the Iran Sanctions Act of 1996 includes blocking sanctions.

Additional Iran-Related Authorities:  Industry should exercise enhanced due diligence prior to conducting any transfer or export of graphite electrodes or needle coke to Iran, regardless of whether Iran’s steel industry is involved in the transaction.  Industry should understand that the particulars of a transfer or export of graphite electrodes or needle coke to Iran such as the shipping line used or intended end-user could also cause such activities to be covered by other Iran sanctions-related authorities.

The U.S. Government administers and enforces comprehensive trade restrictions with respect to Iran, as set forth in the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR), issued under the authority of the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06, among other authorities.  The ITSR prohibits most direct and indirect transactions with Iran by U.S. persons or within the United States, unless authorized by the Department of the Treasury or exempted by statute.  Further, absent an applicable exemption from the Department of Treasury, foreign persons, including foreign financial institutions, are prohibited from processing transactions to or through the United States in violation of these prohibitions, including transactions through U.S. correspondent accounts for or on behalf of Iranian financial institutions, other persons located in Iran, or where the benefit of those services is otherwise received in Iran.

In addition, non-U.S. persons — including foreign financial institutions — may be subject to U.S. sanctions for certain transactions for or support to Iran-related persons on OFAC’s SDN List, unless an exception applies.

For more information, please refer to the Department of Treasury Office of Foreign Asset Control:  https://www.treasury.gov/resource-center/sanctions/Pages/default.aspx

Mr. Watchlist wonders why this is coming out of State, not Treasury…

Link:

State Department Fact Sheet

Categories: Guidance Iranian Sanctions State Department Updates

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