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New OFAC Guidance Offers Clarity on Operations Involving Iran

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On December 15, 2016, the Office of Foreign Assets Control (OFAC) provided updated guidance on what companies can expect in the event of the “snapback” of sanctions under the Joint Comprehensive Plan of Action (JCPOA).  Previously, OFAC Frequently Asked Questions (FAQs) had only offered the possibility of working with companies in the event of snapback.  The guidance offers assurances of a 180-day wind down period.  OFAC issued this clarification in response to many questions it received, but it is not intended to signal an expectation that the sanctions will snapback.

In addition, OFAC issued a new General License J-1 to replace General License J addressing the temporary sojourn of U.S.-origin aircraft in Iran.  The updated general license authorizes the temporary sojourn of U.S.-origin aircraft as part of a code sharing arrangement with an Iranian air carrier.  Our prior blog post on the issuance of General License J is available here.

Sanctions Snapback

OFAC issued new FAQs stating what companies can expect in the event sanctions are re-imposed as a result of an Iranian violation of the JCPOA following the JCPOA dispute resolution process.

  • The U.S. government would provide a 180-day wind down period for non-U.S. and non-Iranian persons who (a) entered into then-permitted agreements prior to snapback; or (b) were acting pursuant to a U.S. specific or general license issued under the JCPOA.
    • This 180-day period is meant only to authorize the winding down of operations undertaken pursuant to a written contract or agreement that was entered into prior to the snapback.
    • This means that OFAC will not permit delivery of new goods/software or provision of new services.
  • Prior contracts will not be grandfathered.  For example, if prior to snapback an entity enters into a written contract to deliver 100 machines and has only delivered 50 at the time a snapback occurs, the remaining 50 may not be delivered even during the wind down period.
  • Non-U.S., non-Iranian persons can receive payment for goods or services fully provided or delivered prior to snapback.
  • Similarly, it would be permitted for such parties to receive repayment for loans or credits extended to an Iranian counterparty prior to snapback.  But additional loans or credit after snapback would be prohibited (unless specifically authorized or not prohibited).
  • Payments (or repayments) would need to be made by non-U.S. banks and not via the U.S. financial system — e.g. dollar transfers — unless the transaction is exempt or authorized by OFAC.

General License J-1

In issuing General License J-1, OFAC slightly liberalized the criteria for temporary sojourn of aircraft in Iran by removing the requirement that an Eligible Aircraft must not carry a flight number issued to an Iranian carrier.  Removing this restriction permits certain code sharing agreements with Iranian airlines.  The aircraft, however, still may not have the logo and livery of an Iranian carrier.  In addition, the aircraft may only remain in Iran for up to 72 hours.