There have recently been a number of sources reporting that there is no longer a de minimus rule contained in the Iranian Transactions and Sanctions Regulations (ITSR). For those of you unfamiliar with the concept of the de minimus rule in the context of Iran sanctions, it is the basic idea that an article created by a non-U.S. person which contains less than ten (10) percent of U.S. origin content falls under an exception to the prohibition on export and reexport of U.S. origin goods to Iran. Prior to the issuance of the ITSR, the de minimis rule was found in a few places including 31 CFR 560.205(b)(2), 31 CFR 560.420, and 31 CFR 560.511.

When the ITSR was issued Section 560.511 was removed and such removal was noted in the summary of the Federal Register notice. This may have lead to some of the confusion that is now becoming commonplace; namely that there is no longer a de minimis rule in the ITSR. A deeper look into the regulations, however, shows that the de minimis rule still exists. Despite the removal of 560.511, the language of 31 CFR 560.205(b)(2) remains the same. That section states that, “The prohibitions…of this section shall not apply to those goods…subject to export license application requirements if such goods…have been…incorporated into a foreign-made product outside the United States if the aggregate value of such goods and technology described in paragraph (a)(2) of this section constitutes less than 10 percent of the total value of the foreign-made product to be exported from a third country.” Furthermore, the language of 31 CFR 560.420 also remains unchanged.

Based on these regulations, it appears that the de minimis rule is still alive and well in the ITSR. I was even initially caught up in the removal of this rule, as an early version of an article I wrote a few months ago had a footnote citing to a source that the rule had been removed. That footnote was later removed when I requested the correction. As of today, I have yet to see where the support for the removal of the de minimis rule stems from. If anyone has the answer to that, I would be grateful if you provide it in the comments section.

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.