It’s only been a few weeks since the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) published their Guidance Relating to the Lifting of Certain Sanctions Pursuant to the Joint Comprehensive Plan of Action on Implementation Day, Frequently Asked Questions Relating to the Lifting of Certain U.S. Sanctions Under the Joint Comprehensive Plan of Action (JCPOA) on Implementation Day, and General License H: Authorizing Certain Transactions relating to Foreign Entities Owned or Controlled by a United States Person. While these are not all of the documents they have released concerning easing of sanctions targeting Iran arising from the United States’ commitments under the Joint Comprehensive Plan of Action (“JCPOA”)–the deal reached between Iran and the P5+1 designed to curb Iran’s nuclear program–it does represent those documents and authorities which have lead to a number of questions, one of which is the subject of this post.

We have been getting questions, over and over again, as to why U.S. persons employed at U.S. owned or controlled foreign entities may now make initial business determinations to engage in Iran-related activities authorized under General License H, so long as they are not otherwise involved in the transactions, while those working at purely foreign entities cannot. Let’s consider this for a moment. Generally speaking, OFAC’s General License H allows U.S. owned or controlled foreign entities to engage in transactions with Iran that would otherwise be prohibited by 31 C.F.R. § 560.215. Further, subsection (b)(1) of that authorization would allow a U.S. person to establish or alter policies and procedures to the extent necessary to allow for the U.S. owned or controlled foreign entity to engage in those authorized Iran-related transactions. Were General License H to not provide the authorization at (b)(1), the U.S. persons seeking to approve Iran-related business would be prohibited to do so, as it would constitute facilitation prohibited by 31 C.F.R. § 560.208.

Here comes the paradox. OFAC General License H only extends to U.S. persons working at U.S. owned or controlled foreign entities. It does not extend to U.S. persons working at completely foreign entities. In other words, what a U.S. person can do in relation to Iran-related trade at one foreign entity, it may not be able to do at another depending on the ownership or control of the foreign entities in question. What’s the policy rationale behind that? It’s not entirely clear, but it certainly seems to be a paradox that is confounding a lot of U.S persons working overseas, and the foreign entities they are employed by.

We’ve written time and time again that compliance can be complicated, sanctions are complicated, and sanctions compliance is extremely complicated. The paradox I highlighted above, is illustrative of some of the fact patterns arising in a post-JCPOA environement that can produce counter-intuitive results. As such, and in particular given the recent hysteria surrounding Iran-related sanctions relief, caution is a must, and patience in a virtue. Please contact your OFAC compliance lawyer before proceeding on any transaction falling under the ambit of OFAC General License H.

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