Yesterday, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued advisory guidance concerning the activities of the Islamic Republic of Iran’s Shipping Lines (IRISL). For those of you who haven’t been keeping up with OFAC administered sanctions programs over the last five or six years, IRISL, its entities, and its vessels, have been one of the main focal points of targeting under Executive Order 13382 and the Non-Proliferation of Weapons of Mass Destruction sanctions program. It has been alleged by OFAC that IRISL provides assistance and support to Iran’s highly contested nuclear program and therefore is subject to economic sanctions for providing such support.

OFAC’s recent advisory opinion states that IRISL has recently been operating vessels despite their flags having been revoked and that as more jurisdictions refuse to flag IRISL vessels, it is increasingly likely that persons will encounter IRISL vessels that are not properly flagged. In response, OFAC has advised those in the maritime sector to be care of such tactics and for state port control and canal authorities to thoroughly scrutinize the certificates of registry of IRISL vessels, to ensure that such documentation is not expired or fraudulent and to take action if they are found to be lacking. Furthermore, OFAC warned that if maritime authorities and other persons in the maritime industry assisting IRISL or its blocked affiliates to re-flag their vessels could themselves be designated pursuant to Executive Order (“E.O.”) 13382, as those involved in the proliferation of weapons of mass destruction.

I like OFAC, I really do, but to say that those engaged in the reflagging of IRISL vessels could be designated under Executive Order 13382 strikes me, a through and through OFAC apologist, as wrong. Now I understand that according to OFAC, E.O. 13382 blocks not only the proliferators themselves but their support networks. However, the language of E.O. 13382 provides the a sense of the spirit of the law when it states, “any person determined by the Secretary of the Treasury, in consultation with the Secretary of State, the Attorney General, and other relevant agencies, to have provided, or attempted to provide, financial, material,
technological or other support for, or goods or services in support of, any activity or transaction described in paragraph (a)(ii) of this section, or any person whose property and interests in property are blocked pursuant to this order..” Paragraph (a)(ii) states that, “any foreign person determined by the Secretary of State, in consultation with the Secretary of the Treasury, the Attorney General, and other relevant agencies, to have engaged, or attempted to engage, in activities or transactions that have materially contributed to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction or their means of delivery (including missiles capable of delivering such weapons), including any efforts to manufacture, acquire, possess, develop, transport, transfer or use such items, by any person or foreign country of proliferation concern…” In short, it seems that when read together these two paragraphs imply that the parties to be designated under the executive order are to be those involved in an array of proliferation activities and those parties supporting those proliferators in their proliferation activity. OFAC is clearly using more of a plain language interpretation here and stating that anyone who gives support to one of these designated parties could they themselves be designated.

I think it would make more sense logically to designate those parties assisting the re-flagging of IRISL vessels under Executive Order 13608, commonly referred to as the Foreign Sanctions Evaders sanctions. Indeed, Section 1(a)(i)(b) of E.O. 13608 directly states that the Secretary of the Treasury may designate those involved in facilitating deceptive transactions to evade sanctions, “…to the extent such conduct relates to property and interests in property of any person subject to United States sanctions concerning Iran or Syria, Executive Order 13382 of June 28, 2005, any Executive Order subsequent to Executive Order 13382 of June 28, 2005, that relates to the national emergency declared in Executive Order 12938 of November 14, 1994, or any Executive Order relating to the national emergency declared in Executive Order 13224 of September 23, 2001…” Clearly the authority is there for them to use that program. Why they prefer that the activities delineated above serve as a basis for designation under E.O. 13382 as opposed to E.O. 13608 is unclear to me, but honestly they could make an argument for designation under either executive order.

At the end of the day, the law is the law, and OFAC enforces that law so it would be wise to follow their advisory guidance. I point all of this out only to say that if one of these maritime sector entities or officals is designated under E.O. 13382 for re-flagging an IRISL vessel, I think an argument for reconsideration could be made that the re-flagging was not for the purpose of supporting proliferation activities but for some other, perhaps more legitimate reason. It would be hard to imagine that IRISL’s entire reason for being revolves around Iran’s nuclear program. Indeed, IRISL has been around since 1967, when it was formerly known as Aria Shipping and arguably has a broader range of activities to carry out other than just carrying around material related to uranium enrichment and the development of weapons of mass destruction.

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@ferrari-legal.com.