OFAC Clarifies Scope of Expanded Iran Sanctions

The Treasury Department’s Office of Foreign Assets Control on June 5 issued a series of frequently asked questions to clarify a January executive order that expanded U.S. sanctions authority against Iran (see 2001100050). The FAQs clarified that the U.S. will not target Iranian medical manufacturers, defined the sectors of Iran’s economy referenced in the order and specified which goods and services may be targeted. Before this guidance, the agency had done little to define the broad scope of the order, which was causing confusion about the reach of the authorities and the Iranian sectors that would be subject to expanded sanctions (see 2001170034).

OFAC said it will not look to sanction Iranian manufacturers of medicines, medical devices, personal protective equipment and other virus-fighting goods “solely for use in Iran and not for export.” The agency also clarified that the order does not authorize sanctions against exports of agricultural goods, medicine or medical devices to Iran. But the order does authorize sanctions against people or companies operating in Iran’s construction, mining, manufacturing and textiles sectors.

OFAC said it will define Iran’s construction sector as the “production, procurement, devising, framing, or arranging in Iran” of materials to build a range of structures. The definition applies to “engaging in new work, additions, alterations, maintenance, and repairs of residential, commercial, or institutional buildings,” OFAC said. It defines the mining sector as “any act, process, or industry of extracting” stones and other minerals from “the Earth in Iran”; manufacturing sector as “the creation in Iran of goods by manual labor or machinery” for export, excluding certain medical products; and textile sector as “fiber synthesis, dyeing, weaving, knitting, or felting in Iran of textiles.”

Any person or company who “knowingly” deals in “significant transactions” in these sectors risks sanctions exposure, OFAC said. The agency said it will release regulations to define goods and services used in these sectors that may be subject to sanctions, but the FAQs contain a range of possible goods and services likely to be included in the regulations. Examples include building supplies and excavating services in the construction sector, boring equipment and irrigation services in the mining sector, tooling machinery and maintenance services in the manufacturing sector and industrial sewing machines and design services in the textile sector.

For the purpose of enforcing the upcoming regulations, OFAC said it will define the term “knowingly” -- which will determine whether transactions are subject to sanctions -- as having “actual knowledge, or should have known, of the conduct, the circumstance, or the result.” OFAC said it will determine whether the transactions are “significant” by assessing “the totality of the facts and circumstances,” including the transaction’s value, the “nature” of the goods or services, the “level of awareness of management,” the involvement of sanctioned people or entities, the impact of the provision of the goods and whether the transaction involved “deceptive practices.”