Simultaneously with the executive order, the Office of Foreign Assets Control issued two new general licenses — cleverly named General License A and General License B — that would nevertheless permit certain transactions involving the newly blocked parties. It also updated the FAQs on the OFAC website to provide further explanations of the effect of the executive order and the two new general licenses.

The first fear that you might have is that the blocking of the Government of Iran and all Iranian financial institutions might effectively end certain transactions authorized under the ITR, say, for example, the payment of fees in connection with the registration of trademarks in Iran permitted under section 560.509 of the ITR. General License A was issued to take care of that. It permits activities already authorized under specific licenses or general licenses issued under the ITR. “General license” in this context doesn’t just refer to documents titled “General License” like this General License A but also refers to activities specifically authorized by the regulations itself, like the previously mentioned authorization of certain activities relating to trademarks in Iran. General License A specifically excludes from its scope transactions relating to closing or liquidating Iranian accounts otherwise authorized by section 560.517.

General B permits non-commercial personal remittances as long as they are not made through Iranian banks or other entities that were previously blocked, such as Bank Saderat or Bank Melli, not including the Iranian financial institutions that were blocked by this latest executive order.

The real impact of this is that this may well signal the end of legal exports of agricultural products, medicine and medical devices to Iran under the authority of the Trade Sanctions Reform and Export Enhancement Act of 2000, or TSRA (tis’-ruh) in Exporteranto, the lingua franca of export professionals. Exports to Iran licensed by OFAC require that the exporter must deal directly with a non-Iranian bank and that the non-Iranian banking intermediary may not use an Iranian bank on the SDN List to complete the financial aspects of the transaction.

Here is a link to a comprehensive list of Iranian financial institutions on the SDN List. As you can see, the U.S. has now designated what I believe to be all Iranian banks that are involved in international financial transactions. Here is a list on Wikipedia purporting to be all the private banks in Iran, but I am unaware of whether any of these other banks are able to engage in international transactions, although the website of EN Bank suggests that it may be able to handle international financial transactions.

That may mean, I’m afraid, that as a practical matter, TSRA exports to Iran will be cut off because there is no way for the U.S. exporter to be paid. If anyone is aware of any other banks that can be used for TSRA exports to Iran and that are not on the SDN List, please share that in the comments section.

Couple this with OFAC’s recent action putting most (and perhaps all) shipping ports in Iran on the SDN List when it designated Tidewater Marine, the executive branch has now effectively nullified the intent of Congress when it passed TSRA. This nullification could easily have been avoided if OFAC issued (or issues) general licenses that permit licensed TSRA transactions to use Iranian banks even if they are on the SDN List and to use ports on the SDN List for licensed TSRA transactions. But there is no indication that this is going to happen.

Of course, in the present environment, it is unlikely that Congress will protest this de facto executive repeal of the act.

Any U.S. companies doing business with the Thai government are going to have to exercise some additional caution after Thailand’s Prime Minister Yingluck Shinawatra appointed Nalinee Taveesin as PM’s Office Minister. Ms. Taveesin is on the SDN List maintained by the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”). U.S. persons are forbidden by law to engage in any transactions with individuals on the SDN List.

Ms. Taveesin was placed on the list because of her alleged involvement in various transactions with Grace Mugabe, the wife of Zimbabwe’s President Robert Mugabe. Taveesin claims it’s all a huge misunderstanding, that she never was involved in any business deals with Grace Mugabe, and that she merely had become friends with Grace Mugabe when she came to Thailand for a New Year’s holiday vacation.

The issue now is whether Ms. Taveesin’s presence on the SDN list has any impact on business deals with the Thai government in which she may be involved. The SDN list would seemingly bar transactions with her both in her private and in her official capacity. OFAC has, at least in the case of the Palestinian Authority, held that the presence of sanctioned individuals in a government agency or body could prevent transactions with the government agency itself, effectively eliminating any notion that someone can be sanctioned vis-à-vis their private activities but not their official governmental activities.

I’ll have to be honest and say that I have no idea what the PM’s Office Minister in Thailand does, but U.S. businesses doing business with the government of Thailand should be wary and make sure that Ms. Taveesin has no connection with, or involvement in, the transaction.

A spokesman for the Treasury Department’s Office of Foreign Assets Control (“OFAC”) told Export Law Blog this morning that discussions between OFAC and the North Pole over Santa Claus’s Christmas Eve itinerary had broken down and were not expected to be resumed before Santa’s scheduled departure on December 24 at 10 pm EST.

The dispute arose from a dilemma that the U.S. sanctions against Cuba posed for Santa’s planned delivery of toys to children in Cuba. If Santa delivers toys for U.S. children first, there will be toys destined for Cuba in the sleigh in violation of 31 C.F.R. § 515.207(b). That rule prohibits Santa’s sleigh from entering the United States with “goods in which Cuba or a Cuban national has an interest.” On the other hand, if Santa delivers the toys to Cuban children first, then 31 C.F.R. § 515.207(a) prohibits the sleigh from entering the United States and “unloading freight for a period of 180 days from the date the vessel departed from a port or place in Cuba.”

A press release from the North Pole announced that the OFAC rules left Santa no choice but to bypass the children of the United States this Christmas. A spokesman from OFAC warned that if Santa attempted to overfly the United States, his sleigh would be forced to land and his cargo seized. He continued:

We know that the outcome is harsh, but we cannot allow Fidel Castro’s regime to continue to be propped up by Santa’s annual delivery of valuable Christmas toys to Cuban children.

Congressional leaders did not return our calls.

This post is an annual tradition and appeared previously in 2007, 2008, 2009 and 2010 in slightly altered form. Export Law Blog would like to take the opportunity of this post to extend its best holiday wishes to all of its readers. Posting will be light between now and the end of the holidays.

But before you get too excited there is a major limitation. As the hilariously prolix disclaimer attached to the site notes, all searches are literal. No close matches are returned. Misspelled names won’t yield any results. This is a big deal since a large number of the names on the list are roman character transliterations from the Arabic and Persian where there is no agreed convention on transliteration.

Let’s just pull an example that immediately comes to mind like . . . say . . . Khadaffi. Enter that last name and you get no results, even though there are members of the Khadaffi family that are alike, kicking and still on the SDN list. In all fairness, ABC News reports that there are more spellings of the notorious family name than you can shake a stick at.

Beyond that, the lawyers have gotten to the page with an OFAC version of the “don’t try this at home, kids” disclaimer:

Use of this system implies understanding that searches performed by SDN Search are conducted at the user’s own risk, and that the search results provided by SDN Search do not represent an official confirmation by the Office of Foreign Assets Control or the Department of the Treasury of the existence or absence of a match between any information entered by the user and any information contained on the SDN List. The use of SDN Search does not limit or excuse any liability for any act undertaken as a result of, or in reliance on, such use.

In other words, use at or own risk and if the site misses a match, well, that’s your problem and OFAC reserves the right to fine you $250,000 anyway. Even if the mistake was OFAC’s fault.

This is not much different from the ridiculous disclaimer that OFAC prints each time it prints a new version of the SDN list in the Federal Register:

The list published as Appendix A is not definitive or all-inclusive, and new or updated information may be added to OFAC’s Web site and published in the Federal Register at any time. U.S. persons or persons subject to U.S. jurisdiction, depending on the sanctions program, are advised to check the Federal Register and the most recent version of the SDN List posted on OFAC’s Web site for updated information on designations and blocking actions before engaging in transactions

So even with the printed SDN list, OFAC has to tell you that you can’t rely on it and that you can’t engage in any transaction without searching the last century of the Federal Register all the way back to the first issue in 1936 to see if a party was designated by OFAC but inadvertently left off the SDN list. Right.

(For a humorous rewrite of the search site disclaimer, go read Scott Kinney’s blog post on it.)

The new sanctions expand on the sanctions on foreign persons dealing with the Iranian energy sector that started with the Iran Sanctions Act of 1996 and continued with last year’s Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (“CISADA”).

Under CISADA, foreign persons can be sanctioned if they make investments that contribute to the development of petroleum resources in Iran. Investment is defined to exclude the simple sale of goods to Iranian petroleum companies. Under the new sanctions, the transactional amounts are reduced to $1,000,000 per transaction or $5,000,000 in a twelve-month period. Additionally, the new sanctions will cover the simple sale of goods in excess of these amounts.

The new sanctions now go beyond the petroleum industry in Iran and will include the petrochemical industry. Foreign companies will face sanctions if they provide goods, services, or technology to Iran that could “directly and significantly facilitate the maintenance or expansion of its domestic production of petrochemical products.” The triggers for these petrochemical sales are even lower than the triggers for petroleum investments and cover a single transaction that has a fair market value of $250,000 or more or a series of transactions valued at $1 million or more over a 12-month period.

This blog has pointed out before that secondary boycotts of this sort violate U.S. obligations under GATT. The European Union filed a complaint with the WTO against the secondary boycotts contained in the Iran Sanctions Act, a complaint that was withdrawn when the Clinton administration agreed to use the national security exception in the Act to permit certain European investments in Iran. However, given all the accumulating evidence that Iran is in fact attempting to develop a nuclear bomb, it seems unlikely that the E.U. will seek a WTO remedy with respect to these new sanctions.

(For an excellent summary of Iran sanctions legislation, take a look at this excellent CRS study from October.)

The student was trying to wire money to herself from her account in the United States when she was told by her bank that the funds were blocked and that perhaps she should take a gander at the SDN list. She did that and, unable to find her name on the list, optimistically wrote to OFAC for some assistance. (Hey, I heard you back there. Stop snickering at the poor idealistic student.)

Miraculously enough she gets an anonymous response from OFAC, asking for more information, which she sends.

Two days later comes another message from OFAC, this time signed by “Michael Z.” Like Afghans, or spies, he evidently has only one name, but my hopes that he might be an actual person inexplicably rise anyway — only to sink again when he claims OFAC needs yet more information. All this so that Michael Z., presumed person, may help me “more effectively.” (More than what, I wonder?) He is, he insists, trying to locate my money with the help of my bank, which by the way is now blocking me from seeing information about my own account online.

Somewhat later, without explanation, the student’s funds are unblocked, giving a happy, if not particularly satisfying, ending to this odd story.

But here’s the rub. I haven’t mentioned her name yet. I haven’t done so on purpose. This story might make sense if her name was something like Aisha Qadhafi. But it wasn’t. It was Ann Jones.

I had an inquiry recently to list all of the Iranian ports managed by Tidewater Middle East which was recently placed on the list of Specially Designated Nationals and Blocked Persons List (the “SDN List”) by the Office of Foreign Assets Control (“OFAC”). U.S. exporters legally shipping items such as food to Iran under the Trade Sanctions Reform and Export Enhancement Act of 2000 (“TSRA”) need to know this because, as a result of the recent sanctions, such licensed shipments cannot go through ports managed by Tidewater. Only TSRA exports licensed prior to June 23, 2011, could transit those ports pursuant to a general license that expired on August 23, 2011.

OFAC, when announcing the sanctions, provided the a list of Tidewater ports affected by the sanctions not in the SDN list itself but in a separate press release:

• Bandar Abbas (Shahid Rajaee Container Terminal)
• Bandar Imam Khomeini Grain Terminal
• Bandar Anzali
• Khorramshahr Port (one terminal)
• Assaluyeh Port
• Aprin Port
• Amir Abad Port Complex

The southern ports of Bushehr and Chabahar do not appear to be operated by Tidewater currently and, in theory, could be used for TSRA exports. I did, however, find other evidence, such as this, that suggested that Tidewater also operated at those two ports.

Interestingly, however, the Tidewater website appears to have disabled the pages that specify which ports it operates. The menu link for “Ports and Terminals Mng” is, oddly, dead and does not supply a list of ports operated by Tidewater. Presumably the only reason Tidewater would kill that link is to make compliance with the OFAC sanctions more difficult.

Frankly, there is no reason why the SDN list should name Tidewater only and not the specific ports that are sanctioned. Leaving such uncertainty with respect to available ports for TSRA exports improperly interferes with Congress’s direction in TSRA that OFAC was to permit exports of agricultural products, medicine and medical devices to Iran.

UPDATE (11-4-11):An alert reader (Bradley Allen at ATTUS Technologies) found an earlier version of the Tidewater site on the Wayback Machine before Tidewater scrubbed the names of the ports it operated. Click on the tabbed link for “Port and Terminals Mng” and you’ll get, in this older version, a list of Tidewater’s ports. This confirms that one of Tidewater’s responses to the U.S. sanctions was to try to obscure and conceal which ports it operated.

He said that the US Departments of Commerce and the Treasury have a long-standing practice of providing licenses to address environmental challenges in Cuban waters, and that DOC’s Bureau of Industry and Security has issued a number of them for booms, skimmers, dispersants, pumps, and other equipment and supplies to minimize environmental damage from a spill. “I believe the Commerce and Treasury departments would move quickly to approve more licenses if needed,” he said.

Not all witnesses before the Committee shared Bromwich’s rosy view of our ability to respond to a Cuban spill:

Paul A. Schuler, president of Clean Caribbean & Americas, an international spill response cooperative operating in the region, said only three US companies have such licenses that must be renewed every 1-2 years. “It needs to be handled in advance, and not as an ad hoc action as part of a response to an oil spill,” Schuler said. “Others would have to go through the entire licensing process, and my experience has been that it has not been quick.”

I suspect that exporters with experience obtaining licenses from BIS and OFAC might also share Schuler’s scepticism about whether the agencies could move quickly on licenses by U.S. companies to provide clean-up services in Cuban waters (which would require an OFAC license) and export equipment to be used in that clean-up effort (which would require a BIS license).

The general license specifically covers “food” which is a subset of agricultural products. The new rules will define food as

items that are intended to be consumed by and provide nutrition to humans or animals … ,
including vitamins and minerals, food additives and supplements, and bottled drinking water, and seeds that germinate into items that are intended to be consumed by and provide nutrition to humans or animals.

Items that are agricultural products but not food will still require licenses.

The rules make some specific exceptions to the definition of food, including, not surprisingly, castor beans. Thriller enthusiasts and news junkies will understand this exception: castor beans are used to manufacture the highly powerful poison ricin (although Iran can easily grow castor beans or import them from other countries other than the United States.) Also excluded are Rosary/Jequirity peas, the source of ricin’s more potent cousin abrin, which although more powerful than ricin is not known, according to the CDC, to have been weaponized or used in terrorist attacks.

My favorite part of the new rule is the exclusion of alcoholic beverages from the general license for Iran. I have not figured out whether this exclusion is made from ignorance, Puritanism or a desire by OFAC to enforce Islamic law. It should probably come as no surprise to anyone with even a passing acquaintance with Iran or Islam that alcoholic beverages are illegal in Iran and that people trying to import them into Iran are subject to being shot or sentenced to prison.

UPDATE: This post has been updated to correct a mistake I made in reading the new rule which does in fact permit export under general license of food to the Government of Iran and to purchasers outside Iran for export to Iran. My apologies for any confusion.