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OFAC: Ask me a question…

Today, OFAC added two new Frequently Asked Questions for the Iran-related program:

855. How will transactions related to official activities of international organizations be treated for purposes of secondary sanctions to the extent that the Iranian financial sector or Iranian financial institutions sanctioned under Executive Order (E.O.) 13902 are involved?  

Answer

Pursuant to Section 12 of E.O. 13902, the prohibitions of E.O. 13902 do not apply to transactions for the conduct of the official business of the United Nations (including its specialized agencies, programmes, funds, and related organizations) by employees, grantees, or contractors thereof.  In addition, transactions and activities involving an Iranian financial institution (Iranian FI) blocked under E.O. 13902 are authorized under General License (GL) L to the extent they are authorized, exempt, or otherwise not prohibited by the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR).  Section 560.539 of the ITSR authorizes transactions for the official business of certain international organizations, including the United Nations and its Specialized Agencies, Programmes, Funds, and Related Organizations, including the World Bank Group, the International Monetary Fund, the International Atomic Energy Agency, the International Labor Organization, and the World Health Organization. 

For purposes of secondary sanctions, as described in FAQ 844, non-U.S. persons are not exposed to sanctions for engaging in transactions and activities involving the Iranian financial sector or an Iranian FI blocked pursuant to E.O. 13902 that would be authorized for U.S. persons under GL L.   

In addition, Treasury will generally view the following additional transactions by non-U.S. persons involving Iranian FIs blocked solely pursuant to E.O. 13599 and E.O. 13902 or the Iranian financial sector, as non-sanctionable:

  • The operating expenses or other official business of missions in Iran of international organizations in which Iran is a member or participant, or for the personal use of employees of the missions; and
  • The operating expenses or other official business associated with the Government of Iran’s missions to international organizations in which Iran is a member or participant, or for the personal use of employees of the missions, including the provision of routine goods and services to such missions or their employees by non-U.S. persons.

Please note that the guidance above applies only with respect to transactions or activities involving the Iranian financial sector or Iranian FIs sanctioned solely pursuant to E.O. 13599 and E.O. 13902.  These transactions and activities should not involve persons designated on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List) in connection with Iran’s support for international terrorism or proliferation of weapons of mass destruction (WMD), unless exempt or otherwise permitted. 

856. How will transactions related to Iran’s participation in legal proceedings, including administrative, judicial, arbitral proceedings, and proceedings before international courts and tribunals, be treated for purposes of secondary sanctions to the extent that Iranian financial institutions or the Iranian financial sector sanctioned under Executive Order (E.O.) 13902 are involved?

Answer

Transactions and activities involving Iranian financial institutions blocked under E.O. 13902 remain authorized under General License (GL) L to the extent they are authorized, exempt, or otherwise not prohibited by the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR). This authorization includes certain transactions and activities relating to the initiation and conduct of legal proceedings authorized or otherwise permitted pursuant to section 560.510 or 560.525 of the ITSR, such as transactions or activities related to the defense of individuals in legal proceedings in Iran brought by the Government of Iran, including any arrest, investigation, prosecution, or detention. Such permissible transactions and activities may include reasonable and customary payments for the provision of legal services, bail and/or bond payments, judicial costs and fees, costs for the production of documents and appearances of witnesses, and payment of experts.  

In addition, for purposes of secondary sanctions, as described in FAQ 844, non-U.S. persons are not exposed to sanctions for engaging in transactions and activities involving the Iranian financial sector or an Iranian FI blocked pursuant to E.O. 13902 that would be authorized for U.S. persons under GL L.  

Please note that, unless permitted by GL L and FAQ 844, payments made to Iran involving blocked Iranian persons — including the Government of Iran, including any political subdivision, agency, or instrumentality thereof — in connection with awards, orders, decisions, or settlement of claims may be subject to sanctions. OFAC will assess such transactions on a case-by-case basis.

Please also note that guidance above applies only with respect to transactions or activities involving Iranian FIs sanctioned solely pursuant to E.O. 13599 and E.O. 13902 or the Iranian financial sector.  These transactions and activities should not involve persons designated on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List) in connection with Iran’s support for international terrorism or proliferation of weapons of mass destruction (WMD) unless exempt or otherwise permitted. 

and updated four others:

830. Will OFAC target Iranian manufacturers of medicines, medical devices, or products used for sanitation or hygiene or as personal protective equipment for use in Iran pursuant to Executive Order (E.O.) 13902 for continuing to manufacture these items?  Will OFAC target persons conducting or facilitating transactions for the provision of such items to Iran if the transaction involves a person sanctioned under E.O. 13902? 

Answer

No.  For the purposes of evaluating sanctions pursuant to E.O. 13902, persons in Iran manufacturing medicines, medical devices, or products used for sanitation, hygiene, medical care, medical safety, and manufacturing safety, including soap, hand sanitizer, ventilators, respirators, personal hygiene products, diapers, infant and childcare items, personal protective equipment, and manufacturing safety systems, solely for use in Iran and not for export from Iran, will not be considered to be operating in the manufacturing sector of the Iranian economy. Note that persons conducting or facilitating transactions for the provision, including any sale, of agricultural commodities, food, medicine, or medical devices to Iran will not be subject to sanctions under E.O. 13902.  (See FAQs 844 and 847 for more information.)

E.O. 13902 imposes sanctions with respect to any person determined by the Secretary of the Treasury, in consultation with the Secretary of State, to operate in the construction, mining, manufacturing, and textiles sectors of the Iranian economy, and any additional sectors of the Iranian economy as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State.  On October 8, 2020, the Secretary of the Treasury identified the financial sector of the Iranian economy for additional sanctions under E.O. 13902.  Iranian and non-Iranian persons operating in these sectors could be subject to sanctions pursuant to E.O. 13902.

The United States maintains broad exceptions and authorizations that allow for the commercial sale and export of humanitarian goods, including medicine and medical devices, to Iran or the Government of Iran from the United States or by U.S. persons or U.S.-owned or -controlled foreign entities.  Similar exceptions apply to the export of such humanitarian goods to Iran or the Government of Iran by non-U.S. persons.  However, these authorizations and exceptions do not apply to transactions involving persons on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List) that have been designated in connection with Iran’s support for international terrorism or proliferation of weapons of mass destruction (including certain designated Iranian financial institutions and the Islamic Revolutionary Guard Corps), or in connection with activity that is subject to other sanctions not specific to Iran, unless exempt or otherwise permitted, such as certain transactions or activities involving the Central Bank of Iran, the National Iranian Oil Company (NIOC), or any entity in which NIOC owns a 50 percent or greater interest, that are consistent with GL 8A. For further guidance related to humanitarian trade with Iran and the provision of humanitarian assistance to Iran, please see FAQ 828

831. How will OFAC define the sectors of the Iranian economy specified in Executive Order (E.O.) 13902 of January 10, 2020?

Answer

E.O. 13902 imposes sanctions with respect to any person determined by the Secretary of the Treasury to operate in the construction, mining, manufacturing, and textiles sectors of the Iranian economy, and any additional sectors of the Iranian economy as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State.  On October 8, 2020, the Secretary of the Treasury identified the financial sector of the Iranian economy for additional sanctions under E.O. 13902. Iranian and non-Iranian persons operating in these sectors of the Iranian economy or sectors of the Iranian economy identified in the future could be subject to sanctions.

OFAC expects to promulgate regulations that define the terms construction sector of the Iranian economy, mining sector of the Iranian economy, manufacturing sector of the Iranian economy, textiles sector of the Iranian economy, and financial sector of the Iranian economy consistent with the following:

Construction sector of the Iranian economy: The term construction sector of the Iranian economy means the production, procurement, devising, framing, or arranging in Iran of parts or materials to fabricate, shape, or form buildings or structures, including the on-site development, assembly, or construction of residential, commercial, or institutional buildings in Iran. The term applies to engaging in new work, additions, alterations, maintenance, and repairs of residential, commercial, or institutional buildings. Persons such as for-sale builders, design-build firms, and project construction management firms in Iran may be considered as operating in this sector.

Mining sector of the Iranian economy: The term mining sector of the Iranian economy means any act, process, or industry of extracting, at the surface or underground, ores, coal, precious stones, or any other minerals or geological materials from the Earth in Iran.

Manufacturing sector of the Iranian economy: The term manufacturing sector of the Iranian economy means the creation in Iran of goods by manual labor or machinery that are for export from Iran or for sale within Iran. For the purposes of evaluating sanctions pursuant to E.O. 13902, persons in Iran manufacturing medicines, medical devices, or products used for sanitation, hygiene, medical care, medical safety, and manufacturing safety, including soap, hand sanitizer, ventilators, respirators, personal hygiene products, diapers, infant and childcare items, personal protective equipment, and manufacturing safety systems, solely for use in Iran and not for export from Iran, will not be considered to be operating in the manufacturing sector of the Iranian economy. Note that persons conducting or facilitating transactions for the provision, including any sale, of agricultural commodities, food, medicine, or medical devices to Iran will not be subject to sanctions under E.O. 13902.

Textiles sector of the Iranian economy: The term textiles sector of the Iranian economy means the fiber synthesis, dyeing, weaving, knitting, or felting in Iran of textiles, including apparel, carpets, cloths, fabric, or related goods, that are for export from Iran.

Financial sector of the Iranian economy: The term financial sector of the Iranian economy includes all Iranian financial institutions as defined in Section 561.320 of the Iranian Financial Sanctions Regulations, meaning any entity (including foreign branches), wherever located, organized under the laws of Iran or any jurisdiction within Iran, or owned or controlled by the Government of Iran, or in Iran, or owned or controlled by any of the foregoing, that is engaged in the business of accepting deposits, making, granting, transferring, holding, or brokering loans or credits, or purchasing or selling foreign exchange, securities, commodity futures or options, or procuring purchasers and sellers thereof, as principal or agent.  Iranian financial institutions include but are not limited to depository institutions, banks, savings banks, money service businesses, trust companies, insurance companies, securities brokers and dealers, commodity futures and options brokers and dealers, forward contract and foreign exchange merchants, securities and commodities exchanges, clearing corporations, investment companies, employee benefit plans, dealers in precious metals, stones, or jewels, and holding companies, affiliates, or subsidiaries of any of the foregoing.

Persons who knowingly engage in a significant transaction for the sale, supply, or transfer to or from Iran of significant goods or services used in connection with the above-named sectors of the Iranian economy risk exposure to blocking sanctions pursuant to E.O. 13902. In addition, persons that have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, persons designated pursuant to E.O. 13902 could themselves be designated. Furthermore, foreign financial institutions that have knowingly conducted or facilitated any significant financial transaction for such designated persons risk exposure to U.S. correspondent account or payable-through account sanctions. 

832. What are significant goods or services used in connection with a sector of the Iranian economy specified in Executive Order (E.O.) 13902?

Answer

Persons who have knowingly engaged in a significant transaction for the sale, supply, or transfer to or from Iran of significant goods or services used in connection with the construction, mining, manufacturing, textiles, and financial sectors of the Iranian economy as described in FAQ 831 risk exposure to blocking sanctions pursuant to E.O. 13902. Further, foreign financial institutions that have knowingly conducted or facilitated any significant financial transaction for the sale, supply, or transfer to or from Iran of significant goods or services used in connection with those sectors of the Iranian economy risk exposure to U.S. correspondent account or payable-through account sanctions.

OFAC expects to promulgate regulations defining goods and services used in connection with the construction, mining, manufacturing, textiles, and financial sectors of the Iranian economy consistent with the following (See FAQ 833 for an interpretation of the term “significant.”):

Goods or services used in connection with the construction sector of the Iranian economy:

The term goods used in connection with the construction sector of the Iranian economy means equipment or materials that enable the services described below or the activities described in FAQ 831 with respect to the construction sector of the Iranian economy, including: building supplies, concrete, scaffolding, lifts, hoists, cranes, conveyors, and mechanized equipment for material handling. Goods that ensure the protection of life and prevention of injuries to persons operating in the construction sector of the Iranian economy are excluded from this definition, including personal protective equipment, safety devices, and alarm systems.

The term services used in connection with the construction sector of the Iranian economy include: blasting, demolition, dredging, electrical work, excavating, masonry, plumbing, rigging, welding, for-sale building, design-build consultations, and construction management. Services that ensure the protection of life and prevention of injuries to persons operating in the construction sector of the Iranian economy are excluded from this definition, including cleaning, safety inspections, and services necessary for use of protective goods described above.

Goods or services used in connection with the mining sector of the Iranian economy:

The term goods used in connection with the mining sector of the Iranian economymeans equipment or materials that enable the services described below or the activities described in FAQ 831 with respect to the mining sector of the Iranian economy, including: boring equipment, conveyor belts, directional digging technology, haul trucks, hydraulic excavators, explosives, and power shovels. Goods that ensure the protection of life and prevention of injuries to persons operating in mines in Iran are excluded from this definition, including personal protective equipment, safety devices, ventilation systems, and alarm systems.

The term services used in connection with the mining sector of the Iranian economyincludes: auguring, boring, backfilling, combusting, crushing, exploration, grinding, grading, irrigating, impounding, magnetic separation, mineral processing, geophysical surveying, mapping services, operating mines or quarries, site preparation, and related construction activities. Services that ensure the protection of life and prevention of injuries to persons operating in the mining sector of the Iranian economy are excluded from this definition, including rescue and accident response services, cleaning, safety inspections, and services necessary for use of protective goods described above.

Goods or services used in connection with the manufacturing sector of the Iranian economy:

The term goods used in connection with the manufacturing sector of the Iranian economy means equipment or materials, including raw materials, tooling machinery, and components of finished products, that enable the services described below. Goods that ensure the protection of life and prevention of injuries to persons operating in the manufacturing sector of the Iranian economy are excluded from this definition, including personal protective equipment, safety devices, and alarm systems.

The term services used in connection with the manufacturing sector of the Iranian economy includes: new installment, additions, alteration, maintenance, and repair of manufacturing equipment; procurement or supply of raw materials for the manufacturing sector of the Iranian economy; and distribution services to persons operating in the manufacturing sector of the Iranian economy. Services that ensure the protection of life and prevention of injuries to persons operating in the manufacturing sector of the Iranian economy are excluded from this definition, including cleaning services, safety inspections, and services necessary for use of protective goods described above.

Goods or services used in connection with the textiles sector of the Iranian economy:

The term goods used in connection with the textiles sector of the Iranian economymeans equipment, machines, materials, and items used in the textiles sector of the Iranian economy or that enable the services described below or the activities described in FAQ 831 with respect to the textiles sector of the Iranian economy, including: looms, industrial sewing machines, industrial washers and dryers, and industrial embroidery machinery. Goods that ensure the protection of life and prevention of injuries to persons operating in the textiles sector of the Iranian economy are excluded from this definition, including personal protective equipment, safety devices, and alarm systems.

The term services used in connection with the textiles sector of the Iranian economyincludes: procurement or supply of raw materials for textiles production, and design of textiles products. Services that ensure the protection of life and prevention of injuries to persons operating in the textiles sector of the Iranian economy are excluded from this definition, including cleaning services, safety inspections, and services necessary for use of protective goods described above.

Goods or services used in connection with the financial sector of the Iranian economy:
On or after November 22, 2020, persons who have knowingly engaged in a significant transaction for the sale, supply, or transfer to or from Iran of significant goods or services used in connection with the financial sector of the Iranian economy risk exposure to blocking or other sanctions under E.O. 13902, unless the transaction is for a permitted transaction, such as humanitarian trade or a transaction or activity authorized for U.S. persons or otherwise described in FAQs 844, 847, 855, or 856.

The term goods or services used in connection with the financial sector of the Iranian economy includes new hardware or software, or upgrades to existing hardware or software, and related services, for use by Iranian financial institutions sanctioned pursuant to E.O. 13902 or the Iranian financial sector. It also includes financial services for transactions other than permitted transactions (e.g., humanitarian trade or transactions or activities authorized for U.S. persons or otherwise described in FAQs 844, 847, 855, or 856.  The term does not include goods or services ordinarily incident and necessary to:

  • The wind down of accounts, transactions, operations, contracts, or other agreements involving the Iranian financial sector or an Iranian financial institution sanctioned pursuant to E.O. 13902 that were in effect prior to October 8, 2020.  
  • The maintenance of accounts, transactions, operations, contracts, and other agreements involving the Iranian financial sector or an Iranian financial institution sanctioned pursuant to E.O. 13902 that were in effect prior to October 8, 2020 and: (i) are used in connection with permitted transactions, such as humanitarian trade or transactions or activities authorized for U.S. persons or otherwise described in FAQs 844, 847, 855, or 856 or (ii) are otherwise necessary for the continued processing of such permitted transactions. 

The Department of the Treasury continues to analyze goods and services used in connection with the financial sector of the Iranian economy and may issue additional guidance about the types of goods and services that are considered sanctionable for purposes of E.O. 13902.  We urge caution in any dealings involving the Iranian financial sector or with an Iranian financial institution sanctioned pursuant to E.O. 13902.

847. As a result of the sanctions on the Iranian financial sector and certain Iranian financial institutions (Iranian FIs) pursuant to Executive Order (E.O.) 13902, do non-U.S. persons risk exposure to sanctions for continuing to engage in previously non-sanctionable trade involving the Iranian financial sector or E.O. 13902-sanctioned Iranian FIs, even after the end of the 45-day wind-down period?

Answer

For purposes of E.O. 13902, OFAC would not generally view transactions or activities by non-U.S. persons to be sanctionable if they are consistent with activities that would be permissible if conducted by U.S. persons.  As noted in FAQ 842, General License (GL) L authorizes U.S. persons to engage in transactions and activities involving Iranian FIs blocked pursuant to E.O. 13902 that are authorized, exempt, or otherwise excluded from prohibition under the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR).  In addition, pursuant to Sections 11 and 12 of E.O. 13902, respectively, the prohibitions of E.O. 13902 do not apply:  (i) with respect to any person for conducting or facilitating a transaction for the provision (including any sale) of agricultural commodities, food, medicine, or medical devices to Iran; or (ii) to transactions for the conduct of the official business of the United Nations (including its specialized agencies, programmes, funds, and related organizations) by employees, grantees, or contractors thereof.

For purposes of secondary sanctions, as described in FAQ 844, non-U.S. persons are not exposed to sanctions for engaging in transactions and activities involving the Iranian financial sector or an Iranian FI blocked pursuant to E.O. 13902 that would be authorized for U.S. persons under GL L.  

In addition, OFAC would generally view as non-sanctionable any transactions or activities by foreign financial institutions (FFIs) and other non-U.S. persons that involve the Iranian financial sector or Iranian FIs sanctioned solely pursuant to E.O. 13599 and E.O. 13902, and that fall within the categories set forth below, to the extent such transactions or activities are not already exempt or otherwise excepted from sanctions:

  • The sale, supply, or transfer of goods and services to Iran – as well as intermediate goods used for manufacturing of such goods in Iran – solely for use in Iran and not for export from Iran, to ensure the protection of life, health, and safety, such as: products used for sanitation, hygiene, medical care, medical safety, and manufacturing safety, including soap, hand sanitizer, ventilators, respirators, personal hygiene products, diapers, infant and childcare items, personal protective equipment, manufacturing safety systems, safety devices, alarm systems, and ventilation systems.
  • Arrangement and facilitation of travel into, out of, and within Iran, by air, sea, or land, including travel service providers and air carrier services;
  • The provision of medical or healthcare services to persons in Iran or ordinarily resident in Iran; and
  • The provision of educational services by academic institutions outside Iran to persons in Iran or ordinarily resident in Iran.

Please note that the guidance above applies only with respect to transactions or activities involving the Iranian financial sector or Iranian FIs sanctioned solely pursuant to E.O. 13599 and E.O. 13902. These transactions and activities should not involve persons designated on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List) in connection with Iran’s support for international terrorism or proliferation of weapons of mass destruction (WMD), unless exempt or otherwise permitted.

Links:

OFAC Notice

New FAQs 855, 856

Updated FAQs 830, 831, 832, 847

Categories: Executive Order 13902 Frequently Asked Questions (FAQ) Guidance Iranian Sanctions OFAC Updates

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