In the final weeks of December, President Obama amended sanctions to both the Iran and Russia programs. These changes further relaxed sanctions on Iran while they tightened sanctions on Russia (see our client advisory). Yet, just three days from the inauguration of President-elect Donald Trump, exporters are no doubt wondering what the new president will do with regard to these changes and other sanctions relief that has come to pass under the Obama administration.
In anticipation of possible changes by the Trump administration to the Iran Transactions and Sanctions Regulations (ITSR), the Office of Foreign Assets Control (OFAC) released a guidance to help exporters currently exporting to Iran understand what happens if there is a policy reversal prohibiting such exports. The guidance makes it clear that:
- Exporters cannot be retroactively liable for exporting items that were authorized during the Obama administration
- If changes to the ITSR are made, exporters will be afforded a 180 wind-down period so that they can stop operations and collect payment for goods and services provided to Iranian buyers before the changes.
President-elect Trump has made clear his disapproval of the Iran nuclear deal (also known as the Joint Comprehensive Plan of Action (JCPOA)), and indeed, it is no doubt that the guidance is meant to allay exporter concerns. The wind-down period is particularly significant since receiving payment for goods and services rendered once changes are made to a sanctions regime is always an issue. Although the wind-down period is not binding on the new President, it is hopeful that the pragmatic business-friendly new President will honor the process. However, it is important for exporters to understand that the guidance could be revoked.
Other changes to the ITSR made last December include a change to the definition of “Iranian-origin goods,” which effectively allows goods exported to Iran under a general or specific license to be serviced or repaired outside of Iran such that the service or repair would not be considered an export. The change also allows goods to transit through Iran so long as they are not destined for Iran, including goods that are temporarily offloaded. Other changes include an expansion of general licenses for medical devices and agricultural products. The definition of medical devices now comports with the definition found in the Food, Drug, and Cosmetic Act (FDCA), and the general license for the export of medical devices now includes software used in medical devices. Shrimp may also now be exported to Iran.
Also unclear is what action President-elect Trump may take with regard to sanctions currently in effect against Russia. In December, President Obama strengthened these sanctions, adding more entities to the Specially Designated Nationals (SDN) and Sectoral Sanctions Identifications (SSI) list maintained by OFAC and the Entity List maintained by the Bureau for Industry and Security (BIS). New “cyber sanctions” were introduced against a number of entities and individuals identified in hacking.
In short, like the Iran sanctions, the Russian sanctions are the product of Executive Orders. As new presidents have carte blanche authority to revoke, amend, and issue new Executive Orders, it is important for exporters to watch for changes and understand how those changes will be implemented.
And, as an aside, if you have questions about importing and how President-elect Trump’s import tax may affect you, see my recent article in the Hill.