New Laws Reduce Some Red Tape, but Create Some Confusion and Ambiguity
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today issued a major revamp of Iranian Transactions Regulations (31 CFR Part 560), the core body of sanctions laws maintained by the United States on Iran. The regulations, renamed the Iranian Transactions and Sanctions Regulations (ITSR), preserve many of the same regulations but create certain exemptions (known as general licenses). Naturally this creates much confusion, ambiguity and even challenges as to what the laws now permit and what they do not. The law also better reflects certain realities regarding U.S.-based Iranians and their legal needs by providing certain clarifications as to what is and is not permitted.
Reducing the Red Tape
The regulations do not reflect a loosening of the sanctions, but rather a reduction of bureaucratic hassle. In other words, OFAC has effectively authorized by general license certain activities it traditionally authorized by specific license. Examples include certain sales of properties in Iran by U.S. persons. More notably, there is now a general license for certain “basic medical supplies” and medicines. Therefore, a license is no longer needed for these types of exports to Iran provided certain criteria are met (more sophisticated medical supplies, equipment and certain medicines continue to require a license). Also, funds transfers for certain immigration visas are now permissible without the need for a specific license (this is useful for Iranians these days who fret that the value of the Rial will plummet as they sit and wait for their OFAC license).
New Permissions But Different Problems
The general licenses for the sale of property, transfer of funds for immigration visas, the export of basic medical supplies and export of certain medicines do not eliminate the logistical issues. In fact, it may make things more complicated. When you obtain a specific license, you effectively receive a multi-page document tailored for your transactions. This document contains a specific number that can be exceptionally useful when included in wire transfers. Basically, the license number can help reduce the risk of your wire transfer being rejected by your U.S. bank and your bank account being closed. Additionally, the letter is an authoritative confirmation of legality to banks, shippers, cargo inspectors and other entities that the licensee has to deal with.
Now that many of these transactions no loner need a specific license, the responsibility will effectively shift to the entity who is transacting in Iran – the individual selling his or her house, the business exporting the medical supplies, etc. – to show his/her/its bank, shipping companies, vendors that the transaction is permissible. Given that there are many conditions and limitations, plus the fact that not all goods are permitted, this creates more ambiguity and places more work on the businesses.
I have noticed this has become an increasingly interesting exercise – my firm is often retained by clients to help convince clients’ banks that their transactions are authorized and do not need a specific OFAC license. Preparing the right materials to provide vendors and other entities explaining the law and what is actually permissible and not, not to mention documenting the transaction is imperative. Also, one should not forget that there are still many regulations, from which banks and entities one can and cannot deal with in Iran to how funds transfers can be effectuated.
Building on what I explained above, the laws are a bit ambiguous. Do you fit under the general license requirements or not? An example: the general license for the sale of property covers property acquired before the individual became a U.S. citizen or property you inherited from somebody who died in Iran. What if you bought a condominium in Iran while you were living there but happened to have been born in the United States (or held a green card then)? Or, what if your relative died in Canada and left you property in Iran? Not all exports are permitted, not all sales in Iran are authorized. It is absolutely critical that you examine and analyze the law thoroughly and make sure you fall under the exception and if you do not, that you proceed with the filing and ensure compliance.