Last year, I posted an article about a U.S. company that was engaged in prohibited brokerage services on behalf of a third country entity for the sale of agricultural commodities to Iran. The agricultural commodities in question are those which are generally authorized by the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) for export to Iran. Ultimately, after the company filed a voluntary self-disclosure, OFAC issued a cautionary letter.

For those of you who didn’t read the article, it should be understood that if you seek to engage in brokerage services on behalf of a third country entity for the sale of agricultural commodities to Iran that you need a license from OFAC to provide such services. This has become a big issue as of late, because many parties who don’t qualify as manufacturers or distributors have been receiving instructions from parties outside of the U.S. to source agricultural commodities and arrange for their sale and shipment to Iran. Unfortunately, that is considered brokering and requires license authorization from OFAC.

A short time after filing the voluntary self-disclosure, the U.S. company referred to above, also filed a license application seeking authorization to provide brokerage services related to the sale of bulk agricultural commodities as described in Appendix B of 31 C.F.R. Part 560 to a third country company for the sale of such commodities to an Iranian importer. In addition, the payment for the transactions was to be made from a non-U.S., non-Iranian financial institution outside of both the U.S. and Iran, and sent to the U.S. broker, with payment for the goods then paid on to the third country exporter. Although it took OFAC ten (10) months to make a decision, the request for authorization was ultimately granted for a two (2) year period.

Part of the reason these transactions were authorized can be found in OFAC’s licensing policy for brokerage services to non-U.S. persons for bulk agricultural commodities. That licensing policy states that, “[s]pecific licenses may be issued on a case-by-case basis to permit United States persons to provide brokerage services on behalf of non-United States, non-Iranian persons for the sale and exportation or reexportation of bulk agricultural commodities to the Government of Iran, entities in Iran or individuals in Iran.” In order to qualify for this policy the agricultural commodities must 1) be of the types listed in Appendix B to 31 part 560; and 2) cannot be sold to Iranian military or law enforcement purchasers. In addition a fully formed license application for this type of services must include all of the following information:

1) The applicant’s full legal name, and the state of incorporation and principal place of business if it is a corporate entity;

(2) The applicant’s mailing and street address, a point of contract, and any relevant telephone and fax numbers and e-mail addresses.

(3) The names and contact information of all parties with an interest in the transaction.

(4) A description of all items to be exported or reexported, including a statement that the item is classified as EAR 99 and any supporting documentation.

Please keep in mind every OFAC case is different and every OFAC license application is made on a case-by-case basis. As such, the decision OFAC made in the case referred to above may not necessarily be reached in every matter presenting similar facts. The important take away here is that OFAC does exercise a positive licensing policy in favor of such activities, and it can take as long as ten (10) months to receive such an authorization. As with everything OFAC related, you can’t rush into it; therefore, if you are considering exporting to Iran, or providing brokerage services to Iran, it makes sense to begin planning out such transactions early on and have a solid understanding of the Iranian Transactions and Sanctions Regulations (ITSR) and any applicable licensing policies OFAC maintains in relation to it.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com.