As we reported in January 2016, the Office of Foreign Assets Control (OFAC) published General License H in conjunction with the implementation of the Joint Comprehensive Plan of Action (JCPOA). At that time, the European Union removed many of the sanctions that had prevented European-based companies from engaging in trade with Iran. The United States suspended its “secondary” sanctions that had targeted European and other non-U.S. companies that had engaged in Iran-related transactions. In contrast, the United States maintained nearly all of its “primary” sanctions preventing U.S.-based companies from engaging in trade with Iran, and those sanctions normally extend to foreign subsidiaries of U.S. parents.
General License H was designed to level the playing field – it authorized foreign subsidiaries of U.S. parents to engage in many Iran-related transactions, provided that those foreign subsidiaries excluded U.S. persons and the U.S. financial system from those transactions.
On June 27, OFAC revoked General License H pursuant to the United States’ withdrawal from the JCPOA. As a result, U.S. secondary sanctions will “snap back” into effect. OFAC presumably concluded that, just as non-U.S. companies will be subject to sanctions if they engage in many types of Iran-related transactions after a wind-down period, non-U.S. subsidiaries of U.S. parents no longer required General License H.
OFAC has added § 560.537 to the Iranian Transactions and Sanctions Regulations (ITSR) to authorize through 11:59 p.m. Eastern Standard Time on Nov. 4, 2018, all transactions and activities that are ordinarily incident and necessary to the wind-down of transactions relating to foreign entities owned or controlled by a United States person that were previously authorized under General License H.
An archival version of General License H remains posted on OFAC’s website to aid persons in determining which activities were not sanctionable or prohibited while the authorization was in effect and how best to wind down such activity.
U.S.-based companies that had modified policies and procedures to enable their non-U.S. subsidiaries to take advantage of General License H should consult § 560.537, and the guidance published by OFAC.
For your convenience, we reproduce ITSR § 560.537 below.
§ 560.537 Winding down of transactions relating to foreign entities owned or controlled by a U.S. person.
(a) Except as provided in paragraph (c) of this section, all transactions and activities that are ordinarily incident and necessary to the wind down of the following activities are authorized through 11:59 p.m. eastern standard time on November 4, 2018: an entity owned or controlled by a United States person and established or maintained outside the United States (a “U.S.- owned or -controlled foreign entity”) engaging in transactions, directly or indirectly, with the Government of Iran or any person subject to the jurisdiction of the Government of Iran that would otherwise be prohibited by § 560.215.
(b) All transactions and activities that are ordinarily incident and necessary to the wind down of the following activities are authorized through 11:59 p.m. eastern standard time on November 4, 2018: A United States person engaging in the following:
(1) Activities related to the establishment or alteration of operating policies and procedures of a United States entity or a U.S.-owned or -controlled foreign entity, to the extent necessary to allow a U.S.-owned or -controlled foreign entity to engage in transactions authorized in paragraph (a) of this section; and
(2) Activities to make available to those foreign entities that the U.S. person owns or controls any automated and globally integrated computer, accounting, email, telecommunications, or other business support system, platform, database, application, or server necessary to store, collect, transmit, generate, or otherwise process documents or information related to transactions authorized in paragraph (a) of this section.
Note 1 to paragraph (b): See § 560.208 for prohibitions on facilitation by United States persons, which remain in effect, with the exception of activities authorized in paragraph (b) of this section.
(c) Paragraph (a) of this section does not authorize transactions involving:
(1) The exportation, reexportation, sale, or supply, directly or indirectly, from the United States of any goods, technology, or services prohibited by § 560.204 or the reexportation from a third country of any goods, technology, or services prohibited by § 560.205;
(2) Any transfer of funds to, from, or through a United States depository institution or a United States-registered broker or dealer in securities;
(3) Any person on OFAC’s list of Specially Designated Nationals and Blocked Persons (SDN List), or any activity that would be prohibited by any part of 31 CFR chapter V other than part 560 if engaged in by a United States person or in the United States;
(4) Any person identified on the List of Foreign Sanctions Evaders pursuant to Executive Order 13608;
(5) Any activity involving any item (including information) subject to the Export Administration Regulations, 15 CFR parts 730 through 774 (EAR), that is prohibited by, or otherwise requires a license under, part 744 of the EAR; or participation in any transaction involving a person whose export privileges have been denied pursuant to part 764 or 766 of the EAR, without authorization from the Department of Commerce;
(6) Any military, paramilitary, intelligence, or law enforcement entity of the Government of Iran, or any official, agent, or affiliate thereof;
(7) Any activity that is sanctionable under Executive Order 12938 or 13382 (relating to Iran’s proliferation of weapons of mass destruction and their means of delivery, including ballistic missiles); Executive Order 13224 (relating to international terrorism); Executive Order 13572 or 13582 (relating to Syria); Executive Order 13611 (relating to Yemen); or Executive Order 13553 or 13606, or section 2 or 3 of Executive Order 13628 (relating to Iran’s commission of human rights abuses against its citizens); or
(8) Any nuclear activity involving Iran that is subject to the procurement channel established pursuant to paragraph 16 of the United Nations Security Council Resolution 2231 (2015) and Section 6 of Annex IV to the Joint Comprehensive Plan of Action of July 14, 2015 and that has not been approved through that procurement channel process.
(d)(1) For purposes of paragraph (b)(2) of this section, the term “automated” refers to a computer, accounting, email, telecommunications, or other business support system, platform, database, application, or server that operates passively and without human intervention to facilitate the flow of data between and among the United States person and its owned or controlled foreign entities.
(2) For purposes of paragraph (b)(2) of this section, the term “globally integrated” refers to a computer, accounting, email, telecommunications, or other business support system, platform, database, application, or server that is available to, and in general use by, the United States person’s global organization, including the United States person and its owned or controlled foreign entities.
(3) Paragraph (b)(2) of this section does not authorize the use of any automated computer, accounting, email, telecommunications, or other business support system, platform, database, application, or server in connection with any transfer of funds to, from, or through a United States depository institution or a United States-registered broker or dealer in securities.
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