Yesterday the Office of Foreign Assets Control (OFAC) formally rescinded General License H, requiring foreign subsidiaries of U.S. companies to wind down remaining business related to Iran by 11:59 pm EST on November 4, 2018. After that date, foreign subsidiaries of U.S. companies and other owned or controlled entities will generally be prohibited from conducting any business related to Iran, including wind down activity. This action was required following the President’s announcement on May 8 that the United States would withdraw from the multilateral Iran nuclear deal (the Joint Comprehensive Plan of Action or JCPOA).
OFAC issued amended FAQs and replaced General License H with a new Section 560.537 to the Iranian Transactions and Sanctions Regulations (ITSR, 31 C.F.R. Part 560) authorizing the following wind down activities related to foreign subsidiaries’ business with Iran:
- Entities owned or controlled by a U.S. company established or maintained outside of the United States may engage in all transactions and activities that are ordinarily incident and necessary to wind down business with Iran;
- U.S. persons may engage in limited activities related to the establishment or alteration of policies and procedures to the extent necessary to allow foreign subsidiaries to wind down business with Iran;
- U.S. persons may also continue to make available automated, global systems (e.g., email, computer systems, etc.) to process documents or data related to wind down activities.
OFAC also amended the ITSR to require the wind down of activities regarding the importation of Iranian foodstuffs and carpets and those related to the commercial aviation sector in Iran that were previously authorized under General License I.
Key point: U.S. companies that have foreign subsidiaries relying on General License H to conduct business in Iran need to change their General License H policies to ensure that only wind down activities occur going forward. While accepting new customers will be prohibited, it will be important for compliance personnel to consult with foreign subsidiaries regarding what qualifies as permissible wind down activity, and monitor ongoing activity to ensure it qualifies. That said, U.S. persons must be careful to avoid operational approval of transactions.