Implications of President Trump’s Withdrawal of the U.S. from the Iran Nuclear Deal and the Re-imposition of U.S. Sanctions on Iran
On May 8, 2018, President Trump announced the United States’ withdrawal from the Joint Comprehensive Plan of Action (“JCPOA”), pursuant to which the U.S. had provided relief from certain direct sanctions and more secondary sanctions which had been imposed on Iran. At such time, the President also issued a National Security Presidential Memorandum (“NPSM”) directing the Secretaries of State and Treasury to “begin reinstating,” following winding down periods, of all sanctions which the Obama Administration had waived or lifted in connection with the JCPOA.
In connection with the NPSM, the Departments of State and Treasury began the termination of existing waivers and the winding down of certain others. The Treasury Department’s Office of Foreign Assets Control (“OFAC”) announced that it expects that “all U.S. nuclear-related sanctions that had been lifted under the JPOA will be re-imposed and in full effect.”
The U.S. Government will re-impose sanctions on August 6, 2018 covering:
In addition, OFAC will revoke the authorizations permitting imports of carpets and foodstuffs of Iranian origin, as well as the permissions related to activities related to sale of aircraft (including parts and services) to Iran.
Additionally, the NPSM directs that the U.S. Government will re-impose sanctions on November 4, 2018 in the following areas:
A U.S. company doing business, directly or through non-U.S. subsidiaries, in or with Iran or Iranian persons in any of the above-listed areas must wind down its activities by the date on which the NPSM directs the sanctions to be re-imposed.
A critical provision of the NSPM is the directive which requires that OFAC revoke General License H, which authorized U.S.-owned and controlled foreign subsidiaries and affiliates to engage in a range of activities (including direct sales and investment) in Iran. OFAC will allow activities existing prior to the NSPM to continue, subject to their being wound down by November 4, 2018. OFAC will re-list on its “Blocked Persons” list those who came off the SDN list as a result of the JCPOA. Such re-listed persons will be once again subject to U.S. sanctions, as will those U.S. persons who continue to do business with them.
The impact of the withdrawal from the JCPOA on U.S. persons will be limited because, the JCPOA did not lift the sanctions prohibiting U.S. persons from directly conducting business in or with Iran, other than carpets or foodstuffs. The NSPM will eliminate these limited business opportunities for U.S. persons to directly conduct business in Iran. The impact on non-U.S. entities which are owned or controlled by U.S. entities will be significant. As part of the JCPOA, General License H had authorized such entities with the ability to engage in the activities which were prohibited for U.S. persons. General License H will be revoked, and OFAC will instruct those doing business under this General License will have to wind down these previously permitted activities.
As a result, U.S. businesses will now have to assess whether their business activities performed through non-U.S. affiliates will expose them and their affiliates to secondary sanctions if they continue to perform business activities which may be subject to the above listed sanctions or whether they will engage with persons who will be “re-listed” as SDNs by OFAC. Non-U.S. persons who continue to do business in Iran following the wind down periods will need to ensure that such activities no longer involve U.S. persons or other areas which might trigger U.S. jurisdictional activities. In the meantime, U.S. companies engaging in activities permitted by the JCPOA should begin the wind down activities mandated by the NSPM.
It should be noted that the U.S.’s withdrawal from the JCPOA has not terminated the agreement. The other parties to the deal with Iran—the EU, China, France, Germany, Russia and the UK—have not repudiated the agreement nor have they re-invoked their sanctions regimes. This friction between the U.S. and its allies or trading partners could potentially lead to the U.S. imposing secondary sanctions on EU or Chinese companies could present companies with a complex compliance matrix to navigate. 2.
If you have any questions regarding the JCPOA or any other US Trade Sanctions, please contact Eric Breitman.