The Iranian Transactions and Sanctions Regulations (“ITSR”) administered by the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) generally prohibit the export and reexport of U.S.-origin goods and services to Iran without a specific license. However, certain transactions are exempt from this broad-sweeping provision, notably the general license set forth in 31 C.F.R. § 560.530. This provision generally authorizes the sale, export and reexport of U.S.-origin agricultural commodities (including food products), medicine, and medical devices to Iran (subject to a few caveats of course), and was implemented to carry out the mandates of the Trade Sanctions Reform and Export Enhancement Act of 2000, otherwise known as “TSRA.”

In a similar provision, 31 C.F.R. § 560.533 generally authorizes the brokering of sales, exports and reexports of U.S.-origin agricultural commodities, medicine, and medical devices between U.S. and Iranian parties, whereby U.S. persons broker on behalf of a U.S. manufacturer or distributor. Within the context of the ITSR, a U.S. person refers to any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States. The transaction must in all respects meet the requirements of the general authorizations set forth in 31 C.F.R. § 560.530, including payment terms consistent with 31 C.F.R. § 560.532. Assuming the transaction complies with those provisions, a U.S. broker is free to assist with the sale, export and reexport of qualified agricultural commodities, medicine, and medical devices to Iran.

Although the above provisions are fairly well known within the exporting and sanctions compliance community, there are also situations that arise where a U.S. person may want to broker on behalf of a non-U.S. company. For example, a U.S. broker may have an established customer in Canada that manufactures medical apparel, and wants to help establish a relationship with an importer in Iran. Although the medical items are included on the OFAC’s list of basic medical supplies – which was recently expanded – the fact that a U.S. person is brokering on behalf of a non-U.S. company requires the issuance of a specific license before the transaction can proceed. The requirement of obtaining a license when brokering on behalf of a non-U.S. company is sometimes overlooked, and can lead to violations of the ITSR even though the products being sold and exported fall within the terms of the general license under 31 C.F.R. § 560.530.

Pursuant to 31 C.F.R. § 560.533(b), a U.S. person must submit an application for a specific license if they intend to broker on behalf of a non-U.S. company. Further, as noted in § 560.533(b), OFAC will consider applications to broker on behalf of non-U.S., non-Iranian companies.  As such, the language of the provision indicates that OFAC may deny an application if brokering is on behalf of an Iranian entity.

Speaking from experience in practice, OFAC has previously issued licenses to U.S. persons seeking to broker on behalf of non-U.S., non-Iranian entities. Although the licensing process may impose a three to four month setback until a license is issued, it is nonetheless a requirement that U.S. brokers need to be mindful of when assisting a non-U.S. company with the sale and export of agricultural commodities and food products, medicine, and medical devices to Iran.

The author of this blog post is Margaret Ververis, an OFAC attorney specializing in sanctions compliance and criminal defense matters. If you have any questions, please contact her at 202-440-2581 or ververis@ferrariassociatespc.com.