Prospects for US-Iran talks on the JCPOA
On February 18, US Secretary of State Antony Blinken met with his European counterparts to discuss re-joining the Iran Nuclear Deal. Diplomatic efforts have been complicated by the fact that both the US and Iran are urging the other side to take the first step. Iran says that if sanctions are not lifted by next week, it will limit UN inspections of its nuclear facilities, adding to reports that Iran is producing uranium enriched up to 20 percent. Blinken stressed that the US would only re-enter the agreement if Iran came into full compliance of its obligations but would also be open to talks with Iran hosted by the EU. Source: Institute for Peace & Diplomacy Bulletin 11 - 2/20/2021
What this means for you?
President Trump had pulled the U.S. out of the Joint Comprehensive Plan of Action (JCPOA) with Iran arguably because it was a bad deal for the U.S. Now, the Biden administration appears as if it will attempt to rekindle our relations with Iran and rejoin the deal. If all the Biden administration does is rejoin the JCPOA without any changes then the following guidance may apply…
1. Your foreign subsidiary will continue to be prohibited from the exportation, re-exportation, sale, or supply, directly or indirectly, from the United States of any goods, technology, or services if the items are destined for Iran or the Government of Iran at the time they leave the United States unless the goods are exempt from regulation or authorized by license.
2. Your distributor located in a third country may not directly or indirectly export or reexport items previously exported from the U.S. if they know the item is specifically for shipment to Iran unless the U.S. good was substantially transformed into a foreign-made product outside of the U.S.; or that good is incorporated into a foreign-made product outside the U.S. and the value of the part is less than 10% of the total value of the foreign-made product exported from that third country. However, the exportation or re-exportation of U.S.-origin goods that are designated as EAR99 from a third country to Iran without knowledge or reason to know at the time of export from the United States that the goods are intended specifically for Iran is not prohibited.
To summarize, below is a short list of what you MAY or MAY NOT do:
Provided that your foreign subsidiary is an entity established or maintained outside the United States and is “owned or controlled” by a U.S. person when the U.S. 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.
Pursuant to General license “H” (general license H was the prevailing license in 2017 when the JPCOA was still in effect), provided that the transaction does not involve any person or entity on a Denied Parties List and is otherwise consistent with the regulations -
• Your foreign subsidiary MAY engage in transactions with the Government of Iran or any person subject to the jurisdiction of the Government of Iran as long as the activity is within the scope of the General License H.
• Your U.S.-based operations MAY NOT directly or indirectly export or re-export goods, technology, or services from the U.S. without separate authorization from the U.S. government. This includes the supply of items to your foreign subsidiary knowingly for re-export to Iran.
• Your U.S.-based operations MAY NOT export or re-export goods to Iran, Syria, or Yemen any goods for prohibited end uses such as nuclear proliferation, weapons of mass destruction, items related to terrorism or items relating to Iran’s commission of human rights abuses against its citizens.
• Your U.S.-based operations MAY NOT be involved in the Iran-related day-to-day operations of your foreign subsidiary, including the approving, financing, facilitating, or guaranteeing any Iran-related transaction by the foreign entity.
• Your foreign subsidiary MAY utilize your ERP system – Your U.S.-based operations MAY “make available” any automated and globally integrated computer, accounting, email, telecommunications, or other business support system, platform, database, application, or server necessary to store, collect, transmit, generate, or otherwise process documents or information related to transactions by foreign entities they own or control.
• If your ERP system requires the intervention of an individual located in the United States to complete a request initiated by your foreign subsidiary such as a U.S. person performing data entry or internal processing for the creation of a customer record – your ERP system at that point would not be considered “automated” thus PROBHIBITING the interaction of the U.S. based individual with the exception of routine maintenance carried out by the U.S. based person.
State-level Sanctions Against Iran
A small sticky point… In a little-known aspect of Iran's international isolation, 31 U.S. states have enacted measures punishing companies operating in certain sectors of its economy, directing public pension funds with billions of dollars in assets to divest from the firms and sometimes barring them from public contracts.
In more than half those states, the restrictions expire only if Iran is no longer designated to be supporting terrorism or if all U.S. federal sanctions against Iran are lifted - unlikely outcomes even in the case of a final nuclear accord.
CA, CT, FL, IL, IN, MD, MI, MS, NJ, NY, NC, PA, RI, and SC all forbid their public entities from entering into contracts that do business with the energy or military sectors of Iran, beyond a divestment policy and not in conflict with federal law.
As a note, it is possible that a state or local sanctions law could be written so as not to conflict with a federal law. Where Congress has not enacted or authorized sanctions against a particular country, state or local sanctions directed at that jurisdiction may be challenged on dormant foreign affairs or Foreign Commerce Clause grounds. You should exercise diligence in areas where you engage in business with State Governments.
A little about us: Maple Creek employs a forensic, hands-on, comprehensive approach to international trade development ultimately providing you the opportunity to anticipate legal issues before they become an issue. Global trade compliance is strategic, we help our clients assess areas of vulnerability, remove avoidable costs, minimize risk and foster international trade development.