We have recently been called upon by a number of individuals and small businesses to provide counseling and advice on how to comply with regulations administered by theUnited States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) in relation to the export of food, medicine, and medical devices to Iran. We commonly refer to these as TSRA exports, named after the Trade Sanctions Reform and Export Enhancement Act of 2000 (“TSRA”) which called for the licensing of such exports to Iran and other countries despite sanctions prohibitions targeting those jurisdictions. The problem we are continually seeing, and one which we have grappled with in the past, is that there are numerous individuals and small businesses who think they are legally exporting to Iran under TSRA, but who are inadvertently serving as brokers to Iranian entities.

The following is an example of such a scenario: Person X, a U.S. person as defined in 31 CFR 560.314, receives a call from a friend in Iran working at Company Y who inquires into the export of wheat to Iran. Per the general license authorization contained at 31 CFR 560.530, Person X informs the inquiring party that the export of wheat to Iran is authorized and does not require any additional licensing from OFAC. Happy to hear this, Company Y, places a purchase order with Person X to arrange for the export of wheat from the U.S. to Iran. Person X sources a supplier and arranges the payment, shipping, and insurance for that purchase, but does not produce the wheat themselves or actually take physical possession and stock the wheat. Person X is paid a commission by Company Y in Iran. This is not a permissible TSRA export under the general license at 31 C.F.R. 560.530. This is an export of a service (i.e., brokering) to Iran, which is prohibited by 31 CFR 560.204.

The issue that we have encountered in previous OFAC matters is that parties engaged in business relationships such as these do not qualify for use of the general license related to exporting such commodities because they are not a manufacturer or distributor of the commodities. In cases such as these where we have filed voluntary self-disclosures on behalf of those clients engaged in such export of brokering services related to TSRA commodities, OFAC has issued cautionary letters. Also, it is our sense that OFAC would not be open to licensing the export of such services to an Iranian entity, although there is a specific licensing policy in place for brokering the sales of agricultural commodities on behalf of non-U.S. and non-Iranian persons to Iran. Finally, it should be noted that those brokering on behalf of U.S. persons for authorized sales of food, medicine, and medical devices to Iran are permitted to do so.