Transcript Slide 1

Overview of Iranian
Trade Sanctions
London - October 2010 - Presented by Kirk M. Lyons
© 2010 | Lyons & Flood LLP, 65 West 36th Street, 7th Floor, New York, NY 10018
Purpose and history of Iranian sanctions
2. Global sources of sanctions
3. Focus on U.S. sanctions
4. Scope of the sanctions
5.
Prohibited transactions and activities
6. Permitted transactions and activities
7.
Potential penalties for violation
8. Waivers and other provisions
9. Responses to sanctions
10. A look forward
11. Useful resources
12. Q & A
1.
Agenda
October 2010
2
1970s: Islamic Revolution and hostage crisis
Purpose and history of Iranian sanctions
October 2010
3
1980s: Iran-Iraq War and
reduction of oil production
2000s: Nuclear development
Purpose and history of Iranian sanctions (cont.)
October 2010
4
United States
• Executive Orders
• Acts of Congress
• Department of
Commerce
• Bureau of Industry
and Security
• Department of the
Treasury
• Office of Foreign
Assets Control
United
Nations
Security
Council
European
Union
• Regulation
423/2007
• Council Decision
of 4/23/07
• Regulation
668/2010
• Council Decision
of 7/26/10
• Resolution 1737
(12/23/06)
• Resolution 1747
(3/24/07)
• Resolution 1803
(3/3/08)
• Resolution 1929
(6/9/10)
Global sources of sanctions
October 2010
5
Other
National
Laws
•
•
•
•
•
•
•
•
•
Australia
United Kingdom
Canada
France
Japan
Switzerland
Norway
Pakistan
etc.
United States
• Executive Orders
• Acts of Congress
• Department of
Commerce
• Bureau of Industry
and Security
• Department of the
Treasury
• Office of Foreign
Assets Control
United
Nations
Security
Council
European
Union
• Regulation
423/2007
• Council Decision
of 4/23/07
• Regulation
668/2010
• Council Decision
of 7/26/10
• Resolution 1737
(12/23/06)
• Resolution 1747
(3/24/07)
• Resolution 1803
(3/3/08)
• Resolution 1929
(6/9/10)
Focus on U.S. sanctions
October 2010
6
Other
National
Laws
•
•
•
•
•
•
•
•
•
Australia
United Kingdom
Canada
France
Japan
Switzerland
Norway
Pakistan
etc.
Executive Orders
• 12170 (11/14/79)
• 12205 (4/7/80)
• 12211 (4/17/80)
• 12276 through
12284 (1/23/81)
• 12294 (2/26/81)
• 12957 (3/17/95)
• 12959 (5/9/95)
• 13059 (8/19/97)
• 13553 (9/29/10)
Focus on U.S. sanctions (cont.)
October 2010
7
Executive Orders
• 12170 (11/14/79)
• 12205 (4/7/80)
• 12211 (4/17/80)
• 12276 through
12284 (1/23/81)
• 12294 (2/26/81)
• 12957 (3/17/95)
• 12959 (5/9/95)
• 13059 (8/19/97)
• 13553 (9/29/10)
Focus on U.S. sanctions (cont.)
October 2010
8
Acts of Congress
Executive Orders
• 12170 (11/14/79)
• 12205 (4/7/80)
• 12211 (4/17/80)
• 12276 through
12284 (1/23/81)
• 12294 (2/26/81)
• 12957 (3/17/95)
• 12959 (5/9/95)
• 13059 (8/19/97)
• 13553 (9/29/10)
• Iran Sanctions
Act of 1996 (P.L.
104-172, 50
U.S.C. 1701 note)
• Comprehensive
Iran Sanctions,
Accountability,
and Divestment
Act of 2010 (P.L.
111-195)
Focus on U.S. sanctions (cont.)
October 2010
9
• Iran Sanctions
Act of 1996 (P.L.
104-172, 50
U.S.C. 1701 note)
• Comprehensive
Iran Sanctions,
Accountability,
and Divestment
Act of 2010 (P.L.
111-195)
Focus on U.S. sanctions (cont.)
October 2010
10
Dept. of the Treasury
Acts of Congress
Executive Orders
• 12170 (11/14/79)
• 12205 (4/7/80)
• 12211 (4/17/80)
• 12276 through
12284 (1/23/81)
• 12294 (2/26/81)
• 12957 (3/17/95)
• 12959 (5/9/95)
• 13059 (8/19/97)
• 13553 (9/29/10)
• Iranian Assets
Control
Regulations, 31
C.F.R. Part 535
• Iranian
Transactions
Regulations, 31
C.F.R. Part 560
• Iranian Financial
Sanctions
Regulations, 31
C.F.R. Part 561
• Iran Sanctions
Act of 1996 (P.L.
104-172, 50
U.S.C. 1701 note)
• Comprehensive
Iran Sanctions,
Accountability,
and Divestment
Act of 2010 (P.L.
111-195)
And many more…
Focus on U.S. sanctions (cont.)
October 2010
11
Dept. of the Treasury
Acts of Congress
Executive Orders
• 12170 (11/14/79)
• 12205 (4/7/80)
• 12211 (4/17/80)
• 12276 through
12284 (1/23/81)
• 12294 (2/26/81)
• 12957 (3/17/95)
• 12959 (5/9/95)
• 13059 (8/19/97)
• 13553 (9/29/10)
• Iranian Assets
Control
Regulations, 31
C.F.R. Part 535
• Iranian
Transactions
Regulations, 31
C.F.R. Part 560
• Iranian Financial
Sanctions
Regulations, 31
C.F.R. Part 561
Iran Sanctions Act of 1996 (as amended by CISADA):

Applies to “any person the President determines has carried out the
[sanctionable] activities”
◦ Not limited to just U.S. persons or companies – extraterritorial in reach
◦ Extends to successors, parents, subsidiaries and affiliates – the key is common
ownership and/or control
All other sanctions including Executive Orders, Department of
Treasury regulations, and other provisions of CISADA:

Apply to U.S. persons or companies wherever they are located or do
business, including any foreign branches or subsidiaries

Apply to any persons or companies present in the U.S., including U.S.based branches or subsidiaries of foreign companies

Apply to persons or companies whose property is present in the U.S. to the
extent of such property, including electronic funds transfers and letters of
credit
Scope of the sanctions
October 2010
12
Under the Iran Sanctions Act of 1996 (as amended
by CISADA), it is prohibited to “knowingly”:

Make an investment, in excess of $5 million per instance or $20
million annually, that “directly and significantly contributes to the
enhancement of Iran's ability to develop petroleum resources”
which includes exploration, extraction, refining, and transportation
of petroleum, refined petroleum products, oil or LNG, natural gas
resources, oil or LNG tankers, and products used to construct or
maintain pipelines used to transport oil or LNG

Sell, lease, or provide to Iran “goods, services, technology,
information or support,” with a fair market value in excess of $1
million per instance or $5 million annually, that could directly and
significantly facilitate the maintenance or expansion of Iran's
domestic production of refined petroleum products, including any
direct and significant assistance with respect to the construction,
modernization, or repair of petroleum refineries"
Prohibited transactions and activities
October 2010
13
Under the Iran Sanctions Act of 1996 (as amended
by CISADA), it is prohibited to "knowingly":

Sell or provide to Iran refined petroleum products (defined as
diesel, gasoline, jet fuel, and aviation gasoline) with a fair market
value of $1 million per instance or $5 million annually

Sell, lease, or provide to Iran “goods, services, technology,
information or support,” with a fair market value in excess of $1
million per instance or $5 million annually, that could directly and
significantly contribute to the enhancement of Iran’s ability to
import refined petroleum products” including:
◦ “underwriting or entering into a contract to provide insurance or
reinsurance for the sale, lease, or provision of such goods,
services, technology, information or support”
◦ “financing or brokering such sale, lease, or provision”
◦ “providing ships or shipping services to deliver refined petroleum
products to Iran”
Prohibited transactions and activities (cont.)
October 2010
14
Additionally, U.S. persons or companies cannot
knowingly:

Import any goods from Iran

Export any goods, services, or technology of U.S. origin to Iran
◦ Includes transshipments where undertaken with knowledge or
reason to know that the re-exportation is intended for Iran

Purchase, sell, transport, swap, broker, approve, finance,
facilitate, or guarantee such transactions – even between foreign
parties

Invest in property owned or controlled by the Government of
Iran

Contract to provide supervision and management responsibility
for the development of petroleum resources located in Iran, or
finance or guarantee such contracts
Prohibited transactions and activities (cont.)
October 2010
15
U.S. financial institutions (including insurance companies
and branches or agencies of foreign banks) may not:

Open or maintain correspondent accounts or payable-through accounts on behalf of
foreign financial institutions which “knowingly”:
◦ Facilitate the efforts of the Government of Iran “to acquire or develop weapons of
mass destruction or delivery systems for weapons of mass destruction,” “to
provide support for organizations designated as foreign terrorist organizations ...
or support for acts of international terrorism”
◦ “[F]acilitate the activities of a person subject to financial sanctions” pursuant to
United Nations Security Council resolutions
◦ Engage in money laundering to carry out the above
◦ Facilitate efforts by Iranian financial institutions to carry out the above
◦ Facilitate significant transactions or provide significant financial services for
Iran’s Revolutionary Guard Corps or any of its agents or affiliates whose property
is blocked, or financial institutions whose property is blocked in connection with
Iran's support for international terrorism or proliferation of weapons of mass
destruction or delivery systems for weapons of mass destruction
Prohibited transactions and activities (cont.)
October 2010
16

There are limited exceptions to the ban on imports to the U.S. from
Iran including:
◦ Accompanied baggage for personal travel, and information and
informational materials (defined as: publications, films, posters,
phonographs, microfilms, microfiche, tapes, compact disks, CD ROMs,
artworks, and wire feeds)

Similarly, permitted exports to Iran from the U.S. include:
◦ Agricultural products, medicine, medical devices, informational materials,
humanitarian assistance, goods to support non-governmental organizations,
hardware and software needed to access the internet, and parts and
technologies necessary to assure the safety of civilian aviation

Foreign persons or companies may import goods from Iran to countries
other than the U.S.

Foreign persons or companies may export goods, services, technology,
information or support to Iran from other countries besides the U.S., so
long as such exports do not involve refined petroleum products or
enhance Iran's petroleum refining capacity or Iran's ability to import
refined petroleum products in excess of the threshold amounts
Permitted transactions and activities
October 2010
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Violation of the Iran Sanctions Act of 1996 (as amended by
CISADA) requires imposition of at least three of the below:










Denial of assistance or credit by the Export-Import Bank of the United
States
Revocation of export licenses
Prohibitions on loans or credits from U.S. financial institutions
Prohibition for financial institution's designation as primary dealer in U.S.
debt instruments
Prohibition for financial institution's service as agent of U.S. or as
repository for U.S. funds
Denial of U.S. government procurement opportunities
Prohibitions on making foreign exchange transactions in the U.S.
Prohibitions on bank transfers in the U.S.
Prohibitions on property transactions in the U.S.
Restrictions on imports
The sanctions will also be published which could lead to reputational damage.
Potential penalties for violation
October 2010
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Violation of Executive Orders:

Criminal fines of up to $1 million and a prison term of up to
20 years
Violation of Iranian Transactions Regulations:

Civil fines of up to $11,000 per violation, criminal fines of up
to $50,000, and a prison term of up to 10 years
Violation of Iranian Financial Sanctions Regulations:

Civil fines of the greater of $250,000 or double the amount at
issue (i.e., the amount of the offending transaction or the
balance of the offending account), criminal fines of up to $1
million, and a prison term of up to 20 years
Additional criminal fines and prison terms for making
false statements or concealment of sanctions violations
Potential penalties for violation (cont.)
October 2010
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A determination to impose sanctions is not reviewable in
any court and cannot be appealed
 However, waivers can be obtained from the President
where such activities which are found to be “necessary to
the national interest”
 Alternatively, the Secretary of State is permitted to issue
advisory opinions as to whether a proposed activity
would result in sanctions
 After receiving credible information indicating that a
person is engaged in sanctionable conduct, the President
is required to initiate an investigation, which must be
completed within 180 days

Waivers and other provisions
October 2010
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INTERTANKO: Sanctions Clause
Any trade in which the vessel is employed under this Charterparty
which could expose the vessel, its Owners, Managers, crew or insurers
to a risk of sanctions imposed by a supranational governmental
organisation or the United States, { insert other countries } shall be
deemed unlawful and Owners shall be entitled, at their absolute
discretion, to refuse to carry out that trade. In the event that such risk
arises in relation to a voyage the vessel is performing, the Owners shall
be entitled to refuse further performance and the Charterers shall be
obliged to provide alternative voyage orders.
Source: INTERTANKO
Published: March 2010
Responses to sanctions
October 2010
21
BIMCO: Sanctions Clause for Time Charter Parties
(a) The Owners shall not be obliged to comply with any orders for the employment of the Vessel in any
carriage, trade or on a voyage which, in the reasonable judgement of the Owners, will expose the
Vessel, Owners, managers, crew, the Vessel's insurers, or their re-insurers, to any sanction or
prohibition imposed by any State, Supranational or International Governmental Organisation.
(b) If the Vessel is already performing an employment to which such sanction or prohibition is
subsequently applied, the Owners shall have the right to refuse to proceed with the employment and
the Charterers shall be obliged to issue alternative voyage orders within 48 hours of receipt of Owners'
notification of their refusal to proceed. If the Charterers do not issue such alternative voyage orders the
Owners may discharge any cargo already loaded at any safe port (including the port of loading). The
Vessel to remain on hire pending completion of Charterers' alternative voyage orders or delivery of
cargo by the Owners and Charterers to remain responsible for all additional costs and expenses
incurred in connection with such orders/delivery of cargo. If in compliance with this Sub-clause (b)
anything is done or not done, such shall not be deemed a deviation.
(c) The Charterers shall indemnify the Owners against any and all claims whatsoever brought by the
owners of the cargo and/or the holders of Bills of Lading and/or sub-charterers against the Owners by
reason of the Owners' compliance with such alternative voyage orders or delivery of the cargo in
accordance with Sub-clause (b).
(d) The Charterers shall procure that this Clause shall be incorporated into all sub-charters and Bills of
Lading issued pursuant to this Charter Party.
Date: 09.07.10
Responses to sanctions (cont.)
October 2010
22
Lloyd’s: Sanction Limitation and Exclusion Clause
No (re)insurer shall be deemed to provide cover and no (re)insurer shall
be liable to pay any claim or provide any benefit hereunder to the extent
that the provision of such cover, payment of such claim or provision of
such benefit would expose that (re)insurer to any sanction, prohibition
or restriction under United Nations resolutions or the trade or economic
sanctions, laws or regulations of the European Union, United Kingdom
or United States of America.
JC2010/014
11 August 2010
Responses to sanctions (cont.)
October 2010
23

The Iran Sanctions Act of 1996 (as amended by CISADA) will cease
to be effective on December 31, 2016, but can be terminated earlier
if the President certifies to Congress that the Government of Iran
has ceased providing support for acts of international terrorism and
has ceased the pursuit, acquisition, and development of nuclear,
biological, and chemical weapons and ballistic missiles and ballistic
missile launch technology

More specific regulation of financial institutions is expected to be
issued by OFAC

OFAC will continue to add Iranian persons and entities to its list of
Specially Designated Nationals and Blocked Persons

Further regulations issued by the EU Council and other national
governments are expected

Next year the focus in the U.S. will shift to countries which permit
evasion of sanctions and provide safe harbor for violators, such as
Russia, China, the United Arab Emirates, Malaysia, and Singapore
A look forward
October 2010
24
U.S. Treasury – Sanctions Program Summary for Iran
http://www.ustreas.gov/offices/enforcement/ofac/programs/iran/iran.shtml
OFAC - List of Specially Designated Nationals and Blocked
Persons
http://www.ustreas.gov/offices/enforcement/ofac/sdn/
Iran Watch – Sanctions Tally
http://www.iranwatch.org/ourpubs/bulletin/unscmatrix.html
Regulatory DataCorp Inc.
http://www.rdc.com
Useful resources
October 2010
25
Questions and Answers
October 2010
26