There have been a slew of matters that have come up recently involving U.S. persons participating in the export of medicine and medical devices exported to Iran pursuant to specific license authorization under the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA). Those familiar with economic sanctions programs administered by the United States Department of the Treasury Office of Foreign Assets Control (OFAC) are probably wonder what the problem with that is.The problem in there cases is that a number of individuals are engaged in such activities inside Iran. What has made matters even more concerning is that these individuals are operating companies who are not only importing the products from U.S. sources, but also distributing them in Iran.

You may ask: but isn’t there a general license for brokers of TSRA products? Yes, 31 C.F.R. 560.533 contains a general license authorizing U.S. persons to provide brokerage services on behalf of U.S. persons for the sale and exportation or reexportation to Iran of agricultural commodities, medicine, and medical devices on behalf of U.S. persons where the sale and exportation or reexportation is authorized by a one-year license issued pursuant to section 560.530 of the Iranian Transactions Regulations (ITR). Section 560.530(b) also authorizes the making of arrangements, cargo inspections, obtaining insurance, and arrangement of financing (consistent with section 560.532 of the ITR) for such authorized exports or reexports, as well as the entry into executory contracts (including pro forma invoicing) for the exportation or reexportation of agricultural commodities, medicine, and medical devices to the Government of Iran, entities in Iran, or persons, provided that performance of an executory contract is expressly made contingent upon the prior issuance of a license under paragraph (a) of section 560.530. The provisions of section 560.530 and 560.533, do not however, authorize the creation or management of an entity in, and organized under the laws of Iran.

The reason for this is because in order to operate a company in Iran you will necessarily need to employ Iranian-origin services such as labor, rental property, etc. Engagement of such services will cause a U.S. person to run afoul of the prohibition of trade transactions for Iranian-origin goods or services found at 31 C.F.R. 560.206. As such, operating inside of Iran as a broker of TSRA exports would be virtually impossible unless the U.S. person acting pursuant to such license would merely work out of his residence, employ no staff, and have receive all payments for his services in a non-Iranian bank account outside of Iran. Since this set of circumstances sounds quite untenable from a business perspective, those seeking to serve as brokers under the general license at 560.533 should make sure to keep their operations outside of Iran.

This aside, the larger lesson to be learned here is that OFAC is putting its foot down when it comes to U.S. citizens and permanent legal residents operating companies in Iran. Even when the business activities are authorized or favorable to U.S. foreign policy objectives the prohibition in 560.206 makes it impossible to maintain and operate a business in Iran as a U.S. person.

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.