Iran: U.S. withdrawal from JCPOA. How will this affect the U.S. sanctions regime over Iran? 10 questions and answers

What does Trump’s decision to withdraw US from the Joint Comprehensive Plan Of Action (JCPOA) entail?

On May 8 2018 US President Donald Trump announced his decision to cease the United States’ participation in the Iran nuclear deal (i.e. not to give further execution to the JCPOA) and to begin re-imposing the U.S. nuclear-related sanctions that were lifted after January 16th 2016 (s.c. Implementation Day).

 
Therefore, US sanctions that were lifted after the Implementation Day will snap back into place but this will happen only after two wind-down periods of 90 and 180 days during which activities involving Iran and are consistent with the US sanctions relief provided for under the JCPOA will still be allowed.

 
More precisely the decision to cease the United States’ participation in the Iran nuclear deal has established:

1. a 90-day wind-down period ending on August 6, 2018;
2. a 180-day wind-down period ending on November 4, 2018.

Which sanctions will be re-imposed after the 90 day wind-down period ending on August 6, 2018?

After the 90 day wind down period ends on August 6, 2018 the following activities and sectors will be subject to sanctions again:

1. the purchase or acquisition of US-dollar banknotes by the Government of Iran;
2. Iran’s trade in gold or precious metals;
3. 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;
4. 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 rials;
5. the purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt;
6. Iran’s automotive sector.

Persons engaging in the activities listed above undertaken pursuant to the US sanctions relief provided for in the JCPOA should take the necessary steps to wind down those activities by August 6 2018, to avoid exposure to sanctions or an enforcement action under US-law.

Which sanctions will be re-imposed after the 180 day wind-down period ending on November 4, 2018?

After the 180 day wind down period ends on November 4, 2018 the following sectors, operators and activities will be subject to sanctions again:

1. Iran’s port operators, and shipping and shipbuilding sectors, including on the Islamic Republic of Iran Shipping Lines (IRISL), South Shipping Line Iran, or their affiliates;
2. petroleum-related transactions with, among others, the National Iranian Oil Company (NIOC), Naftiran Intertrade Company (NICO), and National Iranian Tanker Company (NITC), including the purchase of petroleum, petroleum products, or petrochemical products from Iran;
3. transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions under Section 1245 of the National Defense Authorization Act for Fiscal Year 2012 (NDAA);
4. the provision of specialized financial messaging services to the Central Bank of Iran and Iranian financial institutions described in Section 104(c)(2)(E)(ii) of the Comprehensive Iran Sanctions and Divestment Act of 2010 (CISADA);
5. the provision of underwriting services, insurance, or reinsurance;
6. Iran’s energy sector.

Persons engaging in the activities listed above undertaken pursuant to the U.S. sanctions relief provided for in the JCPOA should take the steps necessary to wind down those activities by November 4, 2018, to avoid exposure to sanctions or an enforcement action under U.S. law.

Can new activities involving Iran be engaged after May 8, 2018 if such activities will not extend beyond the end of the relevant wind-down period?

Yes, provided that activities that may be subject to U.S. sanctions again are terminated before the August 6, 2018 or November 4, 2018 (as the case may be).

Will the persons that were placed on the List of Persons Identified as Blocked Solely Pursuant to Executive Order 13599 (E.O. 13599 List) on JCPOA Implementation Day (January 16, 2016) be put back on the SDN List?

Yes, but no earlier than November 4, 2018. This is to allow for the orderly wind down by non-U.S., non-Iranian persons of activities that had been undertaken prior to May 8, 2018, consistent with the U.S. sanctions relief provided for under the JCPOA.

 
No later than November 5, 2018, OFAC expects to move persons identified as meeting the definition of the terms “Government of Iran” or “Iranian financial institution” from the List of Persons Blocked Solely Pursuant to E.O. 13599 (the “E.O. 13599 List”) to the SDN List.

As of May 8, 2018, may business relations entered into with persons removed from the SDN List and/or other OFAC sanctions lists on Implementation Day be subject to U.S. sanctions again?

No. However, no later than November 5, 2018, OFAC will re-impose, as appropriate, the sanctions that applied to persons removed from the SDN List and/or other lists maintained by OFAC on January 16, 2016.

 
Depending on the authority or authorities pursuant to which these actions to re-list are taken, there may be secondary sanctions exposure for parties that engage in certain activities with these persons after their re-listing.

Can payments for goods and services subject to U.S. sanctions after the wind-down periods be received after August 6, 2018 and November 4, 2018?

Yes. As long as the payment is due for goods or services fully provided or delivered to an Iranian counterparty prior to August 6, 2018, or November 4, 2018, as applicable, and pursuant to a written contract entered into prior to May 8, 2018.

 
In this case the U.S. government would allow the non-U.S., non-Iranian person to receive payment also after the wind-down period.

What will happen to U.S.-owned or -controlled European companies that have engage in activities involving on the basis of a General License H (GL H) by OFAC?

As soon as it is administratively feasible OFAC intends to revoke GL H, which authorized U.S.-owned or -controlled foreign entities to engage in certain activities involving Iran.

 
OFAC also expects to issue a revised authorization for the wind down of activities involving Iran authorized pursuant to GL H. The wind-down of those activities authorized pursuant to GL H must be completed by November 4, 2018.

 
Notice of the revocation of GL H and the issuance of the wind-down authorization will be published in the Federal Register.

Will specific licenses issued by OFAC under Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services (JCPOA SLP) be revoked?

Yes. To the extent they have not yet expired, OFAC expects to revoke the specific licenses issued pursuant to the JCPOA SLP and issue authorizations to provide for a wind-down period that will end on August 6, 2018.

Will General Licenses I (GL I) be still valid?

As soon as is administratively feasible, OFAC intends to revoke GL I, which authorized U.S. persons to enter into, and to engage in transactions that are ordinarily incident to the negotiation of and entry into contingent contracts for activities eligible for authorization under the JCPOA SLP.

 
OFAC also expects to issue a revised authorization for the wind down of activities involving Iran authorized pursuant to GL I. The wind-down of those activities authorized pursuant to GL H must be completed by August 6, 2018.

 
Notice of the revocation of GL I and the issuance of the wind-down authorization will be published in the Federal Register.