US Reimposes Nuclear Sanctions against Iran (IRB No. 575)

by Bryan Cave Leighton Paisner

On May 8, 2018, President Trump announced that the United States is pulling out of the Joint Comprehensive Plan of Action (“JCPOA”).  The announcement will result in the reimposition of the sanctions that were lifted or waived as a result of implementation of the JCPOA on January 16, 2016.  As a result of “wind-down” provisions, the reinstatement of the sanctions will be complete on November 4, 2018, the expiration date for the longest wind-down period. 

Re-Imposition of Nuclear Sanctions

For US entities, not much will change.  Because the JCPOA did not have any impact on the majority of sanctions imposed by the United States against Iran, US entities have continued since JCPOA implementation to be extremely limited in what activities they could undertake with respect to Iran.  Instead, the most significant impacts are on non-US subsidiaries of US parties and on wholly-non-US parties who have engaged in activities involving Iran over the past two years.  Activities of non-US subsidiaries of US entities will need to be brought to an end and the activities of third country parties may create a risk of secondary sanctions.

Secondary sanctions will be back in effect following the relevant wind-down periods discussed below.  Parties removed from the SDN List pursuant to implementation of the JCPOA will be returned to the SDN List.  Parties who engage in dealings with the parties returned to the SDN List or that engage in other activities for which secondary sanctions had been lifted (e.g., dealing with Iran’s automotive and energy sectors) may become subject to secondary sanctions.  

General License H will be revoked; OFAC will need to take specific action to revoke General License H, which revocation is expected to occur in the coming days.  Non-US entities owned or controlled by US persons will again be subject, under section 560.215, to all restrictions of the Iranian Transactions and Sanctions Regulations (“ITSR”) that apply to US persons. 

Commercial passenger aircraft related authorizations will cease to be available.  The Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services (“SLP”) is no longer in effect.  Licenses issued pursuant to this will be revoked after August 6, 2018.  License applications currently pending under this licensing policy will be returned without action.  General License I authorizing the entry into contingent or executory contracts for activities that were eligible for authorization pursuant to the SLP will also be revoked.  Specific licenses, however, based on aviation safety considerations will still be available, on a case-by-case basis, as provided in section 560.528 of the ITSR.

Authorized Wind-Down of Activities

In order to reduce the impact of these changes on US and third country parties, the US government is authorizing the wind-down of ongoing activities that were consistent with the US sanctions post-JCPOA.  Specifically, the US government is implementing a 90-day wind-down period for certain activities that would otherwise trigger secondary sanctions under the US nuclear sanctions against Iran and a 180 day wind-down period for other such activities.  The 90-day wind-down period will expire August 6, 2018; the 180-day wind-down period will expire November 4, 2018.  Separately, a 180-day wind-down period is in effect for activities already underway pursuant to General License H.  All activities must cease by November 4, 2018.  Finally, a 90-day wind-down period is in effect for activities pursuant to General License I and to specific licenses issued pursuant to the SLP.  The wind-down period for these expires August 6, 2018. 

For all of these wind-down periods, the complete details have yet to be published. New FAQs issued by OFAC have indicated that payment may be made for goods after the relevant wind-down date only if delivery of the goods was completed before the expiration of the wind-down period and the payment is made in accordance with the terms of the written agreement. In all cases, however, the US government has indicated that the goal of the wind-down periods is to allow for the orderly wind-down of activities that were previously undertaken consistent with US sanctions against Iran.  Although it appears some allowances may be made for undertakings committed to prior to May 8, 2018, which cannot be completed by non-US parties prior to the end of the wind-down period, there is clearly an emphasis on having parties wrap up all activities within the applicable wind-down period.  

Ag/Med General Licenses Expected to Remain Unchanged

What is not expected to change as part of this re-imposition of the nuclear sanctions are the general licenses that are contained in §§ 560.530 and 560.532 of the ITSR with respect to the export and reexport of agricultural commodities, medicine and medical devices to Iran or the Government of Iran and payments related thereto remain in effect.  US parties and their non-US subsidiaries may continue to engage in activities authorized by these general licenses. However, payment for these exports to Iran will be complicated by the return to the SDN List of many Iranian financial institutions that had been removed from that list after the JCPOA.

Stay Tuned:  More Information Expected from US Government

More details are expected to follow as the US Government takes specific actions to implement yesterday’s withdrawal from the JCPOA and re-imposition of nuclear sanctions against Iran.  In the meantime, the message from the US government is clear:  continue to engage in new business with Iran at your own risk and be very cognizant of the relevant wind-down periods.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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