In an Executive Order issued on January 10, 2020, the Trump administration announced the imposition of new sanctions relating to the construction, mining, manufacturing, and textile sectors of the Iranian economy and left open the possibility of targeting other sectors, “as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State.”1 Since U.S. persons are already prohibited from engaging in nearly all transactions involving Iran, the EO appears to be directed primarily at non-U.S. persons engaged in transactions with Iran that otherwise have no nexus to the United States (i.e., secondary sanctions). As a result, non-U.S. persons who directly or indirectly conduct business with anyone determined to be operating in these sectors could be placed on the Specially Designated Nationals (SDN) list administered by the U.S. Office of Foreign Assets Control (OFAC), in which case their property would be blocked and they would be unable to conduct business in the United States or with U.S. persons.
In particular, the EO authorizes the Secretary of the Treasury to block the property of any person determined:
to operate in the construction, mining, manufacturing, or textiles sectors of the Iranian economy;
to have knowingly engaged in a significant transaction for the sale, supply, or transfer of goods or services used in connection with the specified sectors;
to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to any person whose property and interests in property are blocked pursuant to the EO (i.e., anyone identified on the SDN list); or
to be owned or controlled by, or to have acted on behalf of any person identified on the SDN list pursuant to the EO.
The EO also targets foreign financial institutions that knowingly conduct or facilitate significant financial transactions for or in connection with the Iranian construction, mining, manufacturing, and textile sectors. Foreign financial institutions determined to be so engaged could be prohibited from opening and/or operating correspondent or payable-through accounts in the United States.
As is often the case with executive orders and regulations relating to economic sanctions, many of the terms are not specifically defined. For example, which industries are included within the “manufacturing” sector is unclear and could broadly be construed to include virtually any entity making any kind of good in Iran. While clarifications are often provided within Frequently Asked Questions on the OFAC website, FAQs have not yet been published with regard to this EO.
Designation of Foreign Metals Traders
In a related action on the same day, OFAC announced that a number of non-U.S. entities were being added to the SDN list pursuant to a separate Executive Order (EO 13871) for engaging in significant transactions within the Iranian metals sectors (e.g., iron, steel, aluminum, and copper).2 In addition to a number of Iranian metals producers, OFAC cited Pamchel Trading Company Beijing Co. Ltd. and Anchor Power Limited, located in China and the Seychelles respectively, for selling multiple consignments of materials for use by Iranian metals manufacturers. OFAC also designated a vessel, the Liberian-flagged bulk carrier Hong Xun and its Chinese owner and manager, Hongyuan Marine Co. Ltd., for transporting to China steel slabs manufactured by an Iranian steel company.
These actions are instructive in that they shed at least some light on what OFAC considers to be a “significant transaction” and “material” support for a sanctioned sector of the Iranian economy. In particular, the OFAC press release confirms that the transportation of steel slabs by the Hong Xun was deemed to be “a signiﬁcant transaction for the purchase, acquisition, sale, transport, or marketing of iron, iron products … from Iran” that resulted in the vessel and its owner being designated as SDNs.
As the sheer volume of sanctions and designations relating to Iran continue to increase, it is apparent that the Trump administration’s “maximum pressure” campaign against Iran’s economy shows no signs of abating. Sanctions violations can result in a variety of penalties including civil monetary penalties, criminal prosecution, restrictions from U.S. markets, and/or being placed on the SDN list. U.S. and non-U.S. persons operating within the industrial sectors identified herein should review their transactions for problematic links to Iran. They should also remain vigilant to avoid deceptive practices by Iran and its surrogates, which could result in a violation of U.S. sanctions.