On May 8, 2019, President Trump issued a new Executive Order expanding secondary sanctions against the iron, steel, aluminum, and copper sectors of Iran. The Executive Order provides authority to impose sanctions on foreign persons who operate in the covered metals sectors or who facilitate significant transactions in connection with those sectors. Unlike direct sanctions (which have long prohibited unlicensed dealings with Iran with a connection to U.S. jurisdiction), secondary sanctions threaten the imposition of sanctions against non-U.S. persons acting entirely outside U.S. jurisdiction. Although the order is immediately effective, firms are permitted 90 days to wind down existing transactions pursuant to an accompanying OFAC FAQ.
The Executive Order provides the following potential grounds for the imposition of blocking sanctions:
(i) to be operating in the iron, steel, aluminum, or copper sector of Iran, or to be a person that owns, controls, or operates an entity that is part of the iron, steel, aluminum, or copper sector of Iran;
(ii) to have knowingly engaged in a significant transaction for the sale, supply, or transfer to Iran of significant goods or services used in connection with the targeted sectors;
(iii) to have knowingly engaged, on or after the date of this order, in a significant transaction for the purchase, acquisition, sale, transport, or marketing of iron, iron products, aluminum, aluminum products, steel, steel products, copper, or copper products from Iran;
(iv) to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of any person who has been blocked under this Executive Order; or
(v) to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person who has been designated for blocking under this Executive Order.
In addition, foreign financial institutions may have their access to U.S. correspondent accounts blocked or strictly limited for knowingly conducting or facilitating any of the following transactions:
(i) for the sale, supply, or transfer to Iran of significant goods or services used in connection with the iron, steel, aluminum, or copper sectors of Iran;
(ii) for the purchase, acquisition, sale, transport, or marketing of iron, iron products, aluminum, aluminum products, steel, steel products, copper, or copper products from Iran; or
(iii) for or on behalf of any person any person who has been designated for blocking under the Executive Order.
Accompanying guidance also states that “significant” will be interpreted in line with existing OFAC secondary sanctions guidance, using a highly discretionary and multivariate “totality of the circumstances” test.