May 09, 2018
On May 8, 2018, President Trump announced that the United States will withdraw from the Joint Comprehensive Plan of Action (“JCPOA”)—i.e., the July 2015 international agreement concerning Iran’s nuclear program among Iran, China, France, Russia, the United Kingdom, the United States, Germany, and the European Union—and issued a National Security Presidential Memorandum (“NSPM”) directing the Secretary of State and the Secretary of the Treasury to prepare to re-impose Iran-related economic sanctions that the United States had lifted in January 2016 when it implemented the JCPOA. Consistent with the NSPM, the Department of State and the Department of the Treasury will re-impose a subset of these sanctions after August 6, 2018 (following a 90-day transition period), and they will re-impose the remaining sanctions after November 4, 2018 (following a 180-day transition period). In each case, the transition period is intended to allow persons that had entered into transactions in reliance on the U.S. relaxation of sanctions under the JCPOA to wind down those transactions.
The sanctions relief the United States provided pursuant to the JCPOA in January 2016 affected both U.S. and non-U.S. persons. However, even after January 2016, U.S. persons remained prohibited from engaging in most dealings with the Government of Iran or persons in Iran. As a result, when sanctions are re-imposed after the wind-down periods, the most significant impact will be on non-U.S. persons. (U.S. persons will be affected by the revocation of authorizations related to, for example, the exportation of commercial aircraft and related parts and services and the importation of Iranian-origin carpets and foodstuffs.) The most sweeping changes include:
- Non-U.S. Entities Owned or Controlled by U.S. Entities. Prior to January 2016, U.S. sanctions on Iran restricted not only the activities of U.S. persons, but also the activities of foreign subsidiaries of U.S. persons. The United States lifted the restrictions on foreign subsidiaries in January 2016 through an authorization known as “General License H.” General License H allowed U.S.-owned or -controlled foreign entities to engage in most activities involving Iran, provided there was no link to specifically-sanctioned individuals, entities, or activities, no export or reexport of U.S.-origin goods, and no territorial nexus to the United States. On November 5, 2018, after the 180-day wind-down prohibited, the pre-General License H prohibitions will resume. Thus, foreign entities owned or controlled by U.S. persons will be subject to the same restrictions on dealings with Iran as their U.S. parents (similar to U.S. sanctions targeting Cuba, but unlike other comprehensive U.S. sanctions regimes).
- All Non-U.S. Persons and Entities. Most of the sanctions that were lifted when the United States implemented the JCPOA were “secondary sanctions,” which expose non-U.S. persons and entities (regardless of whether they are owned or controlled by U.S. persons) to the threat of U.S. sanctions based on specified conduct involving Iran, even when that conduct has no nexus to the United States. Such secondary sanctions include, for example, loss of access to the U.S. financial system and disqualification from bidding on U.S. government contracts.
After August 6, 2018, following the 90-day wind-down period, non-U.S. persons will again face secondary sanctions risks if they are involved in any of the following:
- The purchase or acquisition of U.S. dollar banknotes by the Government of Iran;
- Iranian trade in gold or precious metals;
- The direct or indirect sale, supply, or transfer to or from Iran of graphite, raw or semi-finished metals such as aluminum and steel, coal, and software for integrating industrial processes;
- Significant transactions related to the purchase or sale of Iranian rials, or the maintenance of significant funds outside the territory of Iran denominated in the Iranian rial;
- The purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt; and
- Dealings involving the Iranian automotive sector
After November 4, 2018, following the 180-day wind-down period, non-U.S. persons will again face secondary sanctions risks related to the following:
- Dealings involving Iran’s port operators and shipping and shipbuilding sectors, including the Islamic Republic of Iran Shipping Lines, South Shipping Line Iran, or their affiliates;
- The purchase of petroleum, petroleum products, or petrochemical products from Iran, and other petroleum-related transactions with, among others, the National Iranian Oil Company, Naftiran Intertrade Company, and National Iranian Tanker Company;
- Transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions;
- The provision of specialized financial messaging services to the Central Bank of Iran and other designated Iranian financial institutions;
- The provision of underwriting services, insurance, or reinsurance relating to Iran;
- Dealings involving Iran’s energy sector; and
- Dealings with the more than 400 individuals and entities who were removed from the Specially Designated Nationals and Blocked Persons List or other U.S. sanctions lists pursuant to the JCPOA, but whose designations now will be reinstated.
This Alert is not intended to provide legal advice. If you have questions regarding its content, please contact Ted Posner (firstname.lastname@example.org; 202.682.7064) or Timothy Welch(email@example.com; 202.682.7132).