On Friday, January 12, 2018, President Trump agreed for the third time to waive the application of certain nuclear-related sanctions on Iran, pursuant to the United States’ commitments under the Joint Comprehensive Plan of Action (JCPOA). Pursuant to the JCPOA, the U.S. President is required to regularly “waive” the application of certain U.S. sanctions on Iran. Failing to issue the waivers would cause these sanctions to be re-imposed, which arguably would constitute a violation by the United States of its commitments under the JCPOA. (In contrast to President Trump’s failure to certify Iran’s compliance with the JCPOA to the U.S. Congress in October, which was a requirement of U.S. law but had no direct effect on the JCPOA.)

However, President Trump stated that this would be the last time he would issue these waivers unless the European signatories to the deal (Germany, France, and the United Kingdom) agree to rewrite the nuclear deal within the next 120 days.

The 120-day deadline reflects the date on which the next waiver is due. As shown in the chart below, the United States must waive portions of four laws on staggered timelines to meet its commitments under the JCPOA. The next deadline is a waiver of sections of the National Defense Authorization Act (NDAA) for FY 2012, which would need to be renewed on or before May 13, 2018.

U.S. Sanctions Relief under the JCPOA

Law Must be Renewed Every Last Decision Update Current Decision Expiration Date
National Defense Authorization Act (NDAA) for FY 2012 120 days January 13, 2018 May 13, 2018
Iran Freedom and Counter-Proliferation Act of 2012 (IFCA) 180 days Mid-Jan 2018 Mid-July 2018
Iran Sanctions Act (ISA) 180 days Mid-Jan 2018 Mid-July 2018
Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRA) 180 days Mid-Jan 2018 Mid-July 2018

 

President Trump’s ultimatum has already met strong resistance in both Europe and Iran. It is unknown how successful U.S. diplomacy will be in building support to renegotiate the JCPOA. There is also the impact of the recent populist uprising in Iran to consider.

Office of Foreign Assets Control (OFAC)

  • On December 6, OFAC announced that DENTSPLY SIRONA Inc. (DSI), a U.S. company incorporated in Delaware, the successor in interest to DENTSPLY International Inc. (DII), agreed to pay $1.2 million to settle its potential civil liability for 37 apparent violations of the Iranian Transactions and Sanctions Regulations. Between 2009 and 2012, DII subsidiaries exported 37 shipments of dental equipment and supplies from the U.S. to third countries, with knowledge or reason to know the goods were ultimately destined for Iran. OFAC determined this was a non-egregious case and that DII did not voluntarily disclose the apparent violations.
    • Aggravating factors included:
      • The subsidiaries acted willfully and had knowledge or reason to know the goods were destined for Iran;
      • Management knew of the apparent violations; and
      • DENTSPLY is a large and commercially sophisticated company with knowledge of U.S. sanctions requirements.
    • Mitigating factors included:
      • DENTSPLY had not received a penalty notice or Finding of Violation from OFAC in the five years preceding the date of the first transaction, although DENTSPLY was previously the subject of a settlement involving substantially similar apparent violations in 2001;
      • The harm to the ITSR program objectives was limited because the exports were likely eligible for a specific license;
      • DENTSPLY took remedial steps, including voluntarily expanding the scope of the review to include a full, company-wide inquiry following a subpoena to one of its subsidiaries that led to the subsequent revelations involving the other subsidiary; and
      • DENTSPLY cooperated with OFAC’s investigation, including by providing detailed and well-organized information for its review, and by agreeing to toll the statute of limitations for a total of 1,104 days.

The U.S. Treasury’s Office of Foreign Assets Control (OFAC) published new guidance in October related to the implementation of the Countering America’s Adversaries Through Sanctions Act (CAATSA). As we have previously summarized, the new law is divided into three parts: Title I-Sanctions with Respect to Iran; Title II-Sanctions with Respect to the Russian Federation and Combating Terrorism and Illicit Financing; and Title III-Sanctions with Respect to North Korea.

Although guidance is pending on Title III, OFAC has now published FAQs or updated FAQs on Titles I and II as follows.

Guidance on Title I / Iran Sanctions Developments

On October 13, in accordance with Section 105 of CAATSA, OFAC imposed sanctions on the Iranian Revolutionary Guard Corps (IRGC) applicable under global terrorism Executive Order 13224. On October 31, OFAC amended its Global Terrorism Sanctions Regulations to block the property and interests in property of foreign persons identified by OFAC as officials, agents, or affiliates of the IRGC.

As OFAC FAQs 533 and 534 explain, although the IRGC was previously sanctioned by OFAC under other programs, the new designation does not allow for certain exemptions related to personal communications, humanitarian donations, information or information materials, and travel, which were previously available.

Guidance on Title II / Russia Sanctions Guidance

OFAC and the State Department have also now published substantial guidance related to implementation of the various Russia-related sanctions. The following table summarizes the recent changes, issued at three separate times in the last six weeks (September 29, October 27, and October 31):

 

Section of CAATSA

Topic

Agency

Guidance / Regulations Issued

Section 223

Modification of sectoral sanctions

OFAC

Amended FAQs Nos. 370, 394-95, 405, 408-10, 415, & 419

Published Modified Directive 1
Published Modified Directive 2
Published Modified Directive 4

Sectoral sanctions related to railways and mining / metals

OFAC

Published New FAQ No. 539

Section 225

Secondary sanctions related to special Russian crude oil projects

State

Published New Guidance and FAQ

Section 226

Secondary sanctions on FFIs related to financing transactions with sanctioned persons and related to special crude oil projects

OFAC

Published New FAQs Nos. 541-543

Section 228

Primary sanctions related to foreign sanctions evaders and serious human rights abusers in the Russian Federation

OFAC

Published New FAQs Nos. 544-546

Section 231

Secondary sanctions related to Russian defense or intelligence sector

State

Published New Guidance and FAQs

Published List of Persons Operating in Russian Defense or Intelligence Sectors

Section 232

Secondary sanctions related to Russian energy export pipelines

State

Published New Guidance

Section 233

Secondary sanctions related to unjust privatization of Russian state-owned assets

OFAC

Published New FAQ No. 540

The guidance represents a continuation of OFAC’s recent trend of issuing guidance at the same time as implementing regulatory changes, but taken together with the State Department’s guidance, arguably represents the most substantial guidance ever issued by the two agencies in advance of implementation of newly enacted Congressional legislation.

For more details regarding the contents of the guidance, or with respect to any questions it raises, please contact one of the professionals listed below.

For more information, contact: Jeff Snyder, Carlton Greene, Cari Stinebower, Chris Monahan, Dj Wolff

On August 2, President Trump signed into law the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA), which imposes new sanctions on Russia, Iran, and North Korea.

While President Trump noted his view that the legislation was “significantly flawed”, its passage represents the successful culmination of months of Congressional negotiations and its provisions will have an immediate and material impact, particularly on companies undertaking transactions in Russia.

CAATSA represents, in effect, the combination of three separate pieces of legislation imposing new sanctions on Russia, Iran, and North Korea. Each piece of the legislation contains a series of new restrictions, but several key highlights are summarized below:

  • Russia: New Primary Sanction Authorities: CAATSA provides the President with new authorities to sanction (1) persons knowingly engaging in significant activities undermining cybersecurity on behalf of the Russian Government; (2) non-U.S. persons who evade existing Russia-related sanctions; (3) non-U.S. persons responsible for, complicit in, or otherwise directing, the commission of serious human rights abuses in Russia; and (4) non-U.S. persons who provide significant support that materially contributes to the ability of the Government of Syria to acquire chemical, biological, or nuclear weapons, ballistic missiles, or other similar items (e.g., those on the U.S. Munitions List). The Legislation does not itself designate any persons
  • Russia: Sectoral Sanctions – Reduced Payment Terms and New Sectors: The Legislation modifies existing restrictions by reducing permissible maturity periods under Directive 1 and Directive 2 (from 30 and 90 days to 14 and 60 days, respectively) and expanding the territorial scope of Directive 4 to certain types of oil exploration and production activities globally, not just in Russia. Second, it also authorizes the expansion of sectoral sanctions to state-owned enterprises in Russia’s mining, metals, and railway sectors.
  • Russia: Secondary Sanctions on Defense, Intelligence, and Export Pipelines Sectors: The Legislation imposes several new mandatory and discretionary “secondary” sanctions. These include (1) mandatory secondary sanctions on persons conducting “significant” transactions with Russia’s defense or intelligence sectors (or persons operating in that sector); (2) discretionary secondary sanctions on non-U.S. persons undertaking an investment or providing goods, services, or support for the construction of Russian energy export pipelines; (3) mandatory secondary sanctions on persons making an investment in excess of certain thresholds in the privatization of Russian state-owned assets in a way that unjustly benefits Russian officials or their families; and (4) modifies, to make mandatory, existing secondary sanctions on non-U.S. persons undertaking significant transactions in support of exploration or production of oil from shale, arctic offshore, or deep-water locations in Russia.
  • Russia: Codification of Existing Sanctions: The Legislation also codifies all of the existing Executive Orders on Russia (both those related to Ukraine and to Cyber activities) as well as the existing designations as of August 2, 2017. While the President retains discretion to relax the provisions, the Legislation requires that he provide advance notice and written justification for any such relaxations, and then allow Congress at least 30 days to potentially object to the relaxation.
  • North Korea: The Legislation imposes a series of new designation authorities for the President, which broadly relate to persons that are in violation of existing U.S. and United Nations sanctions on North Korea. CAATSA also imposes new obligations on U.S. financial institutions to cut-off correspondent account access for non-U.S. financial institutions that might indirectly be benefiting North Korea. Finally, it calls on the administration to consider re-designating North Korea as a state sponsor of terrorism.
  • Iran: Similarly, the Iran-related aspects of the Legislation primarily focuses on providing the President with a series of new designation-related authorities that focus on Iran’s non-nuclear related activities (e.g., ballistic missile testing, support to terrorism, and enforcing arms embargoes).
  • National Strategy To Combat Terrorism Finance: Finally, the Legislation calls for the development of a national strategy to combat terrorism finance and it opens the opportunity for private sector engagement in the development of that strategy.

CAATSA’s passage has already provoked immediate responses from not only its targets – Russia has requested the removal of several hundred U.S. diplomatic personnel and threatened additional retaliation while Iran has accused the United States of violating the nuclear deal – but U.S. allies, including Germany and Austria who have called CAATSA’s provisions “unacceptable” and indicate they will not “tolerate” sanctions being imposed on their companies pursuant to its provisions.

For more information, contact: Jeffrey Snyder, Cari Stinebower, Carlton Greene, Dj Wolff, J.J. Saulino

With a pause on Capitol Hill because of the July 4th recess, many are taking stock of the prospects for the Senate passed legislation intended to dramatically expand sanctions on Russia. Specifically, a bipartisan group of Senators reached a compromise to combine several pending Russia-related measures and attach them as an amendment to S.722 – The Countering Iran’s Destabilizing Activities Act of 2017. For complete details on the extensive new Russia restrictions contained in the bill, please see Crowell & Moring’s June 19 Client Alert.

The Senate bill passed with a margin of 98-2 and appeared on track for quick approval in the House. However, it was sent back to the Senate last week after the House Parliamentarian objected because the bill ran afoul of the Origination Clause of the Constitution which requires the House to act before the Senate on any bill which raises revenue. With a few technical changes on the eve of the recess, Senate Foreign Relations Committee Chairman Bob Corker (R-TN) submitted a resolution correcting the bill, sending it back to the House for consideration.

The House will take up the bill on the 11th when it returns. Prospects for the bill in the House are cloudy, given not only the otherwise full agenda (including health care and tax reform), but also what appears to be growing opposition among House members to boxing President Trump into a very difficult position on Russia. Other objections are surfacing; including pushback from Representative Pete Sessions (R-TX) who is uncomfortable with the new energy restrictions, believing it could hurt energy companies. Many are awaiting details on this objection, before assessing its weight and validity.

The Trump administration fears the measure will complicate its ability to conduct diplomacy because the bill limits the president’s power to act on sanctions without congressional authorization. If it does pass the House, the administration has not ruled out a veto. If forced to have to consider a veto, Trump would be hard pressed to rely, no matter how much historical precedent there may be, on the valid concerns about constraints being placed on the office of the presidency, because a veto could be perceived as being “soft” on Russia.

For more information, contact: Jeffrey Snyder, Cari Stinebower, Carlton Greene, Dj Wolff

New U.S. sanctions were announced last week on Cuba, Russia, and Iran, though none of the new restrictions has an immediate effect.

After weeks of internal deliberations, President Trump on June 16 partially fulfilled a campaign pledge by announcing a limited re-implementation of sanctions on Cuba. The new Cuba measures will only take effect after the relevant agencies implement new regulations, a revision process that will begin within the next 30 days, but may take several months.

Separately, on June 15, the U.S. Senate overwhelmingly passed new sanctions on both Iran and Russia; that legislation must still be voted on by the U.S. House of Representatives, but appears likely to pass with strong bipartisan support in the next several weeks.

Please click below for more information on what was a busy week in Washington.

Cuba: Presidential Memorandum Announcing New Restrictions

Russia: Senate Legislation Imposes New Primary, Secondary, and Sectoral Sanctions

Iran: Senate Legislation Imposes New Non-Nuclear Sanctions

On February 3, in response to Iran’s latest ballistic missile test, which occurred on January 29, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned multiple entities and individuals involved in procuring technology and/or materials to support Iran’s ballistic missile program as well as supporting the Islamic Revolutionary Guard Corps-Quds Force (IRGC-QF).

Specifically, OFAC designated 13 individuals and 12 entities under several non-nuclear authorities including sanctions targeting global terrorism (designated with the tag [SDGT]) and the proliferation of weapons of mass destruction (designated with the tag [NPWMD]). According to OFAC, the designations were intended to disrupt four separate networks: (1) the Abdollah Asgharzadeh Network, including entities in both Iran and China; (2) the Gulf-based Rostamian Network, including entities in Iran and the United Arab Emirates; (3) an Iran-based network working with Navid Composite and Mabrooka Trading (both previously identified as Specially Designated Nationals (SDNs)); and (4) a Lebanese-based network supporting the IRGC-QF.

While these sanctions represent the first additions to the SDN list under President Trump and come on the heels of a sharp increase in confrontational rhetoric from both the U.S. and Iran, they do not represent a substantial change in U.S. policy and were likely being prepared for months; indeed, President Obama followed a similar pattern after taking office, designating Iran-based individuals and entities under the [SDGT] and [NPWMD] programs within six weeks after first taking office in 2009.

Because the designations were all issued under non-nuclear authorities, they also do not represent a violation of the U.S.’s commitments under the Joint Comprehensive Plan of Action (JCPOA). At most, the designations demonstrate an increased willingness by the new Administration to exercise its enforcement authorities after criticizing the Obama Administration for under-utilizing them.

For more information, contact: Jeff Snyder, Carlton Greene, Cari Stinebower, Chris Monahan, Dj Wolff, Charles De Jager