On May 8, 2018, the Trump administration announced that the United States will withdraw from the Joint Comprehensive Plan of Action (JCPOA) entered into between Iran, China, France, Germany, Russia, the United Kingdom and the United States in 2015 and implemented at the beginning of 2016. The JCPOA, commonly referred to as the Iran nuclear deal, was forged during the Obama administration with the goal of curtailing Iran’s nuclear weapons ambitions. President Trump’s decision has immediate and far-ranging implications on a variety of levels, including impacting U.S. business interests and, in particular, foreign entities owned or controlled by U.S. parties, as well as foreign transactions in U.S.-origin goods or U.S. dollars.
Timelines for reinstatement of U.S. sanctions, predominantly U.S. secondary sanctions, and concomitant deadlines for action by affected parties, generally will range from 90 to 180 days (commonly referred to as a “wind-down period”). Accordingly, following Nov. 4, 2018, all U.S. sanctions that had been lifted under the JCPOA will be reimposed and in full effect. U.S. and non-U.S. parties must immediately assess their activities, both current and anticipated, in order to effectively plan for the reinstatement of U.S. sanctions, and begin concerted steps to withdraw from activities that will soon be prohibited under U.S. law.
U.S. Treasury Department’s Office of Foreign Assets Control must implement detailed regulations regarding many elements of the U.S. withdrawal from the JCPOA, and the associated resumption of sanctions. General and specific licenses issued as a result of the JCPOA will be revoked or amended. Accordingly, close attention to the Trump administration’s next steps with respect to the JCPOA withdrawal and resumption of sanctions is critical to ensuring timely compliance with the evolving legal landscape.
The following is a brief outline of the major implications of the U.S.’s withdrawal from the JCPOA, divided between the 90- and 180-day wind-down periods:
90-Day Wind-Down Period - Sanctions to Be Reimposed Following Aug. 6, 2018:
- Sanctions on the purchase or acquisition of U.S. dollar banknotes by the government of Iran.
- Sanctions on Iran’s trade in gold or precious metals.
- Sanctions on 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.
- Sanctions on significant transactions related to the purchase or sale of Iranian rials, or the maintenance of significant funds or accounts outside the territory of Iran denominated in the Iranian rial.
- Sanctions on the purchase, subscription to or facilitation of the issuance of Iranian sovereign debt.
- Sanctions on Iran’s automotive sector.
In addition, as of Aug. 6, 2018, the U.S. government will revoke the following JCPOA-related authorizations:
- The importation into the United States of Iranian-origin carpets and foodstuffs and certain related financial transactions pursuant to general licenses under the Iranian Transactions and Sanctions Regulations.
- Activities undertaken pursuant to specific licenses issued relative to the export or re-export to Iran of commercial passenger aircraft and related parts and service.
- Activities undertaken pursuant to General License I relating to contingent contracts for activities eligible for authorization under the JCPOA Statement of Licensing Policy.
180-Day Wind-Down Period – Sanctions to Be Reimposed Following Nov. 4, 2018:
- Sanctions on Iran’s port operators, and shipping and shipbuilding sectors, including on the Islamic Republic of Iran Shipping Lines, South Shipping Line Iran or their affiliates.
- Sanctions on petroleum-related transactions with, among others, the National Iranian Oil Co., Naftiran Intertrade Co. and National Iranian Tanker Co., including the purchase of petroleum, petroleum products or petrochemical products from Iran.
- Sanctions on transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions.
- Sanctions on the provision of specialized financial messaging services to the Central Bank of Iran and Iranian financial institutions.
- Sanctions on the provision of underwriting services, insurance or reinsurance.
- Sanctions on Iran’s energy sector.
In addition, as of Nov. 5, 2018, the U.S. government will revoke the authorization for U.S.-owned or -controlled foreign entities to engage in activities previously authorized under General License H.
Finally, no later than Nov. 5, 2018, the U.S. government will reimpose, as appropriate, the sanctions that applied to persons removed from the List of Specially Designated Nationals and Blocked Persons and/or other lists maintained by the U.S. government.
For additional details, you can access a Treasury Department press release and FAQs here.
The effect on a particular company of the U.S. withdrawal from the JCPOA will depend, among other things, on the company’s business operations, its location, and its dealings with Iran or the government of Iran. The U.S. government will expect companies that have engaged in any transactions with Iran as a result of the JCPOA to immediately make efforts to wind down such transactions, certainly within the required time frames noted above. Therefore, companies should ensure that they have the appropriate procedures in place to identify and respond to the effects of the reimposition of sanctions previously lifted under the JCPOA.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.