The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has issued four new Frequently Asked Questions (FAQs) related to Executive Order (E.O.) 13902, “Imposing Sanctions With Respect to Additional Sectors of Iran.” The FAQs address the manufacture of medicines, medical equipment and sanitation products in Iran, the scope of sectors targeted in Iran, the definition of “goods or services used in connection with” those sectors, and how the terms “knowingly” and “significant” will be interpreted. OFAC expects regulations to be promulgated consistent with these FAQs.
In January 2020, President Trump issued E.O. 13902, which, among other things, authorizes the Secretary of Treasury in consultation with the Secretary of State to block all property and interests in property of all persons:
- Operating in the construction, mining, manufacturing or textile sectors of the Iranian economy (“Sectors”); and
- Knowingly engaged in a significant transaction for the sale, supply or transfer to or from Iran of significant goods or services in connection with the Sectors.
The E.O. also authorizes the Secretary of Treasury to impose sanctions on foreign financial institutions (FFI) determined to have “knowingly” conducted or facilitated any “significant” financial transaction for the sale, supply, or transfer to or from Iran of significant “goods or services used in connection with” the Sectors covered by the E.O.
In sum, the four OFAC FAQs numbered 831, 832, 833, and 834 clarify the scope of potential sanctions under the E.O. as follows:
- 831: OFAC will not target Iranian manufacturers of medicines, medical devices, or products used for sanitation, hygiene, medical care, medical safety, and manufacturing safety, including soap, hand sanitizer, ventilators, respirators, personal hygiene products, diapers, infant and childcare items, personal protective equipment, and manufacturing safety systems, solely for use in Iran;
- 832: OFAC defines the terms “construction sector of the Iranian economy,” “mining sector of the Iranian economy,” “manufacturing sector of the Iranian economy,” and “textiles sector of the Iranian economy;”
- 833: OFAC defines the scope of “goods and services used in connection with” as to each of the Sectors; and
- 834: OFAC interprets the term “knowingly” as it is defined in the Iranian Financial Sanctions Regulations at 31 C.F.R. § 561.314, and “significant” through a “totality of the circumstances” analysis of certain enumerated broad factors.
While OFAC’s guidance does indicate that the sanctions will not target certain activity related to health and safety of persons in Iran, the scope of the potential sanctions remains very broad.