United Nations Climate Change
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January 16, 2016 was Implementation Day for the Joint Comprehensive Plan of Action ("JCPOA") reached among the P5+1 (the United States, China, France, Germany, Russia, and the United Kingdom), the European Union, and Iran. On Implementation Day, the Secretary of State confirmed that the International Atomic Energy Agency ("IAEA") had verified Iran's completion of specified nuclear-related commitments, and the United States lifted certain nuclear-related "secondary sanctions" pertaining to the activities of non-US persons. These sanctions relate to (i) Iran's financial, banking, energy, petrochemical, shipping, shipbuilding, and automotive sectors; (ii) Iran's port operators; (iii) the provision of insurance, re-insurance, and underwriting services in connection with activities that are consistent with the JCPOA; (iv) Iran's trade in gold and other precious metals; (v) trade with Iran in graphite, raw, or semi-finished metals, such as aluminum and steel, coal, and certain software in connection with activities that are consistent with the JCPOA; and (vi) the provision of associated services for each of the categories above.
In addition, the United States implemented more limited relief pertaining to the primary sanctions applicable to US persons. The United States issued: (i) a Statement of Licensing Policy allowing for the case-by-case licensing of individuals and entities seeking to export, reexport, sell, lease, or transfer to Iran commercial passenger aircraft and related parts and services for exclusively civil, commercial passenger aviation end-use; (ii) a general license, authorizing non-US entities that are US-owned or -controlled to engage in certain activities involving Iran; and (iii) a general license, which is effective upon publication in the Federal Register, authorizing the importation into the United States of Iranian-origin carpets and foodstuffs, including pistachios and caviar. Further, the United States removed over 400 individuals and entities from sanctions lists maintained by the US Department of the Treasury, Office of Foreign Assets Control ("OFAC").1
Nuclear-related secondary sanctions
The United States lifted the nuclear-related secondary sanctions described in sections 4.1-4.7 of Annex II and 17.1-17.2 of Annex V of the JCPOA. These secondary sanctions generally are directed toward non-US persons for specified conduct involving Iran that occurs entirely outside of US jurisdiction and does not involve US persons. As a result of the lifting of these sanctions, non-US persons may now engage in the following activities without running afoul of US sanctions:
The US commitments to lift secondary sanctions do not apply to transactions or activities involving individuals and entities who remain or are placed on OFAC's SDN List after Implementation Day and are without prejudice to any other US sanctions that may apply under legal provisions other than those cited in section 4 of Annex II of the JCPOA.
Primary sanctions relief
The United States has licensed or committed to license three categories of activity that would otherwise be prohibited under the Iranian Transactions and Sanctions Regulations, 31 C.F.R. Part 560 ("ITSR"), provided that the transactions do not involve individuals and entities on the SDN List and are otherwise consistent with the JCPOA and applicable US law.
In particular, OFAC issued a Statement of Licensing Policy that allows for the case-by-case licensing of individuals and entities seeking to export, reexport, sell, lease, or transfer to Iran commercial passenger aircraft, and related parts and services, for exclusively commercial passenger aviation.
In addition, OFAC issued General License H ("GL H"), effective on Implementation Day, authorizing non-US entities that are owned or controlled by a US person ("US-owned or -controlled foreign entities")2 and that are established or maintained outside the United States to engage in certain transactions, directly or indirectly, with the Government of Iran or any person subject to the jurisdiction of the Government of Iran.3 GL H also allows a US person to engage in the following limited activities in support of such authorized transactions by a US-owned or -controlled foreign entity:
As OFAC's FAQs explain, the authorization in GL H is intended to cover the involvement of US person board members, senior management, and employees of either a US parent company or a US-owned or -controlled foreign entity in the establishment or alteration of operating policies and procedures of the US parent company or any of its owned or controlled foreign entities, to the extent necessary to allow any of the US-owned or -controlled foreign entities to engage in transactions with Iran authorized under GL H. This authorization is also intended to cover US persons who may be hired as outside legal counsel or consultants to draft, alter, advise, or consult on such operating policies and procedures. GL H also authorizes US persons, including employees and outside legal counsel and consultants, to provide training, advice, and counseling on the new or revised operating policies and procedures, provided that these services are not provided to facilitate transactions in violation of US law. Importantly, while US persons may be involved in the initial determination to engage in activities with Iran authorized by GL H, as well as the establishment or alteration of the necessary policies and procedures, GL H does not authorize US person involvement in the ongoing Iran-related operations or decision making of its owned or controlled foreign entity engaging in activities with Iran authorized by GL H after these actions are taken. US persons may not be involved in the Iran-related, day-to-day operations of a US-owned or -controlled foreign entity, including by approving, financing, facilitating, or guaranteeing any Iran-related transaction by the foreign entity.
Notwithstanding GL H, the prohibition against facilitation in the ITSR remains in effect for US persons.5 GL H also does not authorize the use of any automated computer, accounting, email, telecommunications, or other business support system, platform, database, application, or server in connection with any transfer of funds to, from, or through a US depository institution or a US-registered broker or dealer in securities. Additionally, GL H does not authorize transactions involving:
OFAC further submitted for publication in the Federal Register a final rule adding a general license under the ITSR, authorizing the importation into the United States of Iranian-origin carpets and foodstuffs, including pistachios and caviar.
Sanctions list removals
The United States removed over 400 individuals and entities from the SDN List, the Foreign Sanctions Evaders List ("FSE List"), and/or the Non-SDN Iran Sanctions Act List ("NS-ISA List"). Beginning on Implementation Day, non-US persons will no longer be subject to sanctions for conducting transactions with any of these individuals and entities (set out in Attachment 3 to Annex II of the JCPOA), provided these transactions do not involve persons on the SDN List after Implementation Day or other conduct that remains prohibited. Secondary sanctions continue to apply to non-US persons for conducting transactions with any of the more than 200 Iranian or Iran-related individuals and entities who remain or are placed on the SDN List, notwithstanding the lifting of certain secondary sanctions.
1 Implementation Day also marked the close of the Joint Plan of Action of November 24, 2013, as extended ("JPOA"), including the provision of sanctions relief pursuant to the JPOA. Effective Implementation Day, all specific licenses that: (1) were issued pursuant to OFAC's Second Amended Statement of Licensing Policy on Activities Related to the Safety of Iran's Civil Aviation Industry, and (2) have an expiration date on or before July 14, 2015, are authorized to remain in effect according to their terms until May 31, 2016.
2 An entity is "owned or controlled" by a US person if the US person: (1) holds a 50 percent or greater equity interest by vote or value in the entity; (2) holds a majority of seats on the board of directors of the entity; or (3) otherwise controls the actions, policies, or personnel decisions of the entity.
3 Such transactions would otherwise be prohibited under 31 C.F.R. § 560.215.
4 The term "automated" refers to passive operation without human intervention to facilitate the flow of data between and among the US person and its owned or controlled foreign entities. The term "globally integrated" refers to general availability and use by the US person's global organization including the US person and its owned or controlled foreign entities.
5 See 31 C.F.R. § 560.208.
6 See 31 C.F.R. § 560.204.
7 See 31 C.F.R. § 561.404 of the IFSR in determining whether transactions, financial transactions, or financial services are significant.
IMO 2020 is almost upon us. Readers are well aware of the impending switch to 0.5 percent fuel mandated by Annex VI of MARPOL which will cause an anticipated drop in HSFO demand, the potential hazards of new untested LSFO blends, the concerns around scrubber operations, the debate over open loop versus closed loop, and the myriad of other risks associated with the impending regulatory change.