I hate knocking the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) for the guidance they publish on their website because quite frankly any guidance we can get from them on the complicated, and sometimes vague, laws they administer is much needed. That said, I shook my head a little bit this week when I reviewed the new Frequently Asked Questions (“FAQs”) OFAC published on July 1, 2013 concerning implementation of the Iran Freedom and Counter Proliferation Act (IFCPA). These new FAQs deal with sanctions that will impact shipping transactions and Iran’s automobile sector. The shipping FAQ I was fine with; it was FAQ 316 dealing with export to Iran of “auto-kits” that made me scratch my head a little bit.

FAQ 316 states, in relevant part, “The E.O. does not make sanctionable the export of finished vehicles to Iran if no further assembly or manufacturing is required. As such, exporting fully assembled and finished vehicles to Iran for sale by a non-sanctioned Iranian dealer or distribution network would not be sanctionable.” Seems pretty innocuous right? Well, not necessarily. There are a few words missing here which, although it may seem obvious to seasoned OFAC practitioners, are needed to inform the general public that what the FAQ is referring to is non-U.S. origin vehicles. A plain reading of the FAQ with out any, or limited, understanding of U.S. economic sanctions and/or OFAC regulations could reasonably lead one to believe that U.S. origin cars could be sold to Iran, which is obviously far from the truth. However, to figure that out, you need start with a general understanding of secondary sanctions and the sanctions authority arising from IFCPA.

This wasn’t the first time an FAQ could have caused confusion. A similar type of situation arose in the FAQs issued shortly after the issuance of the new Iranian Transactions and Sanctions Regulations (ITSR). FAQ 243, states in relevant part, “The personal remittances general license does not permit a U.S. person to deal directly with money service businesses (MSBs) or hawalas, wherever located.” When this FAQ was first published, myself and other practitioners, took it to mean that there could be no coordination of funds transfers of personal remittances through MSBs, including those in Iran. This would be highly problematic as one of the only ways to have a personal remittance sent from Iran to the United States is to have it sent through a “saraaf” which is a money exchanger that would properly fall under the definition of an MSB. However, based on several conversations I had with OFAC compliance personnel and with attorneys at their Chief Counsel’s office, this was not what was meant by the FAQ. Rather, the FAQ anticipates the dealings being carried out by a U.S. depository institution and to that end such activity would be authorized.

The last thing I would want is for OFAC to issue less guidance; certainly the guidance they issue is much appreciated and generally can be very helpful. However, what you read in the FAQs should not be taken as the end all, be all of an analysis as to whether certain activity is permissible. Often times, even OFAC practitioners need to interact with OFAC to determine what is actually meant by the FAQs. As such, if you are non-practitioner seeking to decipher whether or not a certain activity is permissible, it would greatly behoove you to sit down with an experienced OFAC attorney to make a determination as to whether or not the FAQ can appropriately be applied to the fact pattern. In most cases, additional correspondence will be needed with OFAC to make a determination as to the applicability of a particular FAQ and as to whether your proposed activity is authorized or licensable.

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.