Treasury Issues New Guidance Regarding June 21, 2019 Amendment to the Reporting, Procedures, and Penalties Regulations (“RPPR”)

In late February, the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) published additional guidance regarding the June 21, 2019 amendment to OFAC’s Reporting, Procedures, and Penalties Regulations (“RPPR”).  That guidance caused a stir among manufacturing company compliance personnel and others because it appeared to imply that unsolicited sales inquiries and other contacts from Iranian companies or government entities might require submission of a report to OFAC whether those inquiries were formally rejected or not.

OFAC clarifies that as of June 21, 2019, when the changes to the RPPR took effect, they expected all U.S. persons and persons otherwise subject to U.S. jurisdiction, including entities that are not U.S. financial institutions, to comply fully with all requirements of the RPPR, including the requirement to report rejected transactions within 10 business days of the rejected transaction. (Note: Prior to June 21, 2019, only U.S. financial institutions were required to submit reports to OFAC for rejected funds transfers). Rejection reports must be submitted to OFAC using their Report of Rejected Transaction Form.

The June 21, 2019 changes incorporated new requirements for parties filing reports on blocked property, unblocked property, or rejected transactions. The rule requires more information in blocked property reports in order to prevent multiple requests from OFAC for additional information. 
Continue Reading Do Manufacturers Have to Report All Iranian Sales Inquiries to OFAC or Only Those They Have Formally Rejected? 

Today the president signed a new Executive Order (E.O.) announcing expanded primary and secondary sanctions on Iran, focused on the construction, mining, manufacturing, and textile industries.  OFAC also sanctioned a significant segment of the Iranian metals industry today, targeting the largest iron, steel, aluminum, and copper producers in Iran under an existing sanctions authority focused

Today, the EC announced that it is moving forward with a package of measures to blunt the impact of renewed U.S. sanctions on Iran following the U.S. exit from the Joint Comprehensive Plan of Action (JCPOA).  Included in those measures is the planned activation of the EU blocking statute, which would bar EU companies from complying with the extraterritorial effects of U.S. sanctions requirements on Iran.  The statute is also intended to insulate EU companies from certain U.S. sanctions penalties.  Implementation of blocking statutes can create a situation in which companies must decide which country’s law they are going to violate – if they cannot find an approach that avoids the conflict.      
Continue Reading The EU & Russia Move Forward with “Blocking Statutes” in Response to U.S. Exit from Iran Nuclear Deal

On May 26, the U.S. Court of Appeals for the DC Circuit remanded for further consideration OFAC’s imposition of a $4 million penalty against Epsilon Electronics for 39 shipments found to violate the Iranian Transactions and Sanctions Regulations (“ITSR”).  According to the DC Circuit, OFAC failed to meet its burden to justify its finding of violation with respect to five of the 39 shipments in question.  The Court therefore directed OFAC to reconsider its findings with respect to the five violations and to recalculate the penalty.  Despite this being a rare circumstance in which a company (temporarily?) successfully challenged an OFAC determination in court, this ruling is not a broad rebuke of OFAC’s authority to interpret its regulations.

Even in remanding a portion of OFAC’s determination to the agency, the Court upheld OFAC’s broad interpretation of the ITSR.  OFAC’s final Penalty Notice imposed liability for 39 exports of car audio/visual equipment to the UAE that Epsilon knew, or should have known, were intended for reexport to Iran.  OFAC relied on evidence from the UAE company’s site advertising extensive relationships with Iran, among other factors, to draw its conclusion.  Epsilon argued that OFAC did not prove that any of the 39 shipments actually arrived in Iran.  The Court agreed with the government that actual arrival in Iran is not necessary to find a violation – that exporting with reason to know the items were intended for Iran is sufficient to sustain a finding of violation.
Continue Reading Appeals Court Says That Actual Arrival In Iran Is Not Necessary For OFAC To Find Violation