Update: On January 16, 2020, OFAC announced a 90-day wind-down period for persons engaged in transactions that could be sanctioned under Executive Order 13902 with respect to the construction, mining, manufacturing, and textiles sectors of the Iranian economy. Parties should wind down any sanctionable dealings in those sectors before April 9, 2020. Consistent with previous wind-down periods, OFAC noted that parties entering into new business during this period may be sanctioned.
On January 10, 2020, President Trump issued Executive Order 13902 (E.O. 13902) expanding secondary sanctions against the construction, mining, manufacturing, and textiles sectors of Iran and providing authority for future sanctions on additional sectors of the Iranian economy. E.O. 13902 authorizes imposition of sanctions on persons facilitating significant transactions in connection with the targeted sectors in Iran (including financial institutions processing such transactions), as well as authorizing the designation of Iranian and other entities operating in those sectors. Like all “secondary” sanctions, E.O. 13902 threatens imposition of penalties on non-U.S. persons acting entirely outside U.S. jurisdiction. Together with the concurrently-announced designation of Iran’s largest steel and iron manufacturers, E.O. 13902 marks an escalation of the “maximum pressure campaign” against Iran. These expanded sanctions are immediately effective although it is possible that a wind-down window may be provided in future guidance in keeping with previous expansions of U.S. sanctions on Iran.
E.O. 13902 provides the following potential grounds for the imposition of blocking sanctions:
- to operate in the construction, mining, manufacturing, or textiles sectors of the Iranian economy, or any other sector of the Iranian economy designated in the future under O. 13902 by the Secretary of Treasury and Secretary of State;
- to have knowingly engaged, on or after the date of O. 13902, in a significant transaction for the sale, supply, or transfer to or from Iran of significant goods or services used in connection with a targeted sector of the Iranian economy;
- to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked pursuant to O. 13902; or
- to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to O. 13902.
In addition, foreign financial institutions may have their access to U.S. correspondent accounts or payable-through accounts blocked or strictly limited for knowingly conducting or facilitating transactions:
- for the sale, supply, or transfer to or from Iran of significant goods or services used in connection with a targeted sector of the Iranian economy; or
- for or on behalf of any person whose property and interests in property are blocked pursuant to O. 13902.
As is typical, E.O. 13902 exempts activities involving the provision (including sales) of agricultural commodities, food, medicine, or medical devices to Iran. Activities of the United Nations are also exempt.
Although there is as of yet no additional guidance related to E.O. 13902, we anticipate that “significant” will be interpreted along the lines of existing OFAC secondary sanctions guidance.