Feb

14

OFAC Expands License for Personal Communications Items to Iran

Posted by at 1:24 pm on February 14, 2014
Category: Iran Sanctions

By Alireza Javaheri (http://www.panoramio.com/photo/50249960) [CC-BY-3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ATehran_-_Azadi_Tower.jpgLast week, the Office of Foreign Assets Control issued General License D-1 relating to provision of personal communications software, services and hardware to Iran.  This general license amends and replaces, as of February 7, 2014, General License D on the same subject. The following changes are made by the amendment

  • The amended license now permits exports of covered software, services and hardware by non-U.S. persons to Iran.
  • Additionally, hardware and software that is not subject to the EAR, because it is located outside the United States or otherwise, can be exported to Iran by U.S. and foreign persons.
  • The amendment also cleans up an embarrassing drafting error. General License D permit exports to “persons in Iran” rather than “to Iran,” meaning that it did not authorize persons traveling to Iran to carry covered hardware and software with them for personal use when traveling to Iran. General License D-1 makes clear that exports are authorized “to Iran” and that this covers travelers to Iran.
  • Exports of publicly available, no-cost services and software to the Iranian Government are now authorized.
  • A footnote makes clear that payments can involve indirect dealings with Iranian financial institutions blocked only under Executive Order 13599 (as opposed to Iranian banks like Bank Saderat and Bank Melli that are sanctioned under terrorism and WMD sanctions).

The FAQs on General License D-1 provide some insight into why this General License, rather unusually, permits dealings with the Government of Iran. They note that the authorization includes the Government of Iran “to further ensure that the sanctions on Iran do not have an unintended chilling effect” on companies seeking to make available publicly available, no-cost personal communications tools to persons in Iran. What this means, I think, is that when no-cost software or services are at issue, it is impossible for the provider to tell whether the recipient is an Iranian government official or not. This exception is limited to no-cost software and services presumably because when payment is required the provider will at least have a name of the supposed end-user of the software and services. Even then, it’s not clear how a company providing fee-based personal communications software to, say, Edward Casaubon in Tehran can tell whether Mr. Casaubon is an Iranian government official or simply a tiresome and frustrated author bearing an uncanny resemblance to John Locke.

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One Comment:

I’m glad to see that OFAC is now taking care to ensure that complying with their regulations is feasible. It’s unfortunate that they didn’t exercise similar caution when authorizing transactions with Cuba.

For example, the regulations authorizing the export of internet-based services to Cuba stipulate that transactions with “Prohibited officials of the Government of Cuba” are prohibited. This includes, among other persons, “employees of the Ministry of Defense”. Unfortunately, (as in other countries such as India), the defense ministry’s commercial enterprises make up about one-third of the country’s economic activity, including the sugar industry, the hotel industry, airlines, and any stores which sell imported goods to consumers. (This prohibition also appears in license exception CCD, which authorizes the export of hardware and software, as it contains identical language).

As a consequence, when a Cuban hotel maid or department store clerk performs a Google search, Google is apparently performing an unauthorized export of services to a “Cuban government official”. It could be argued that Google has no “reason to know” of the user’s employment (as the “reason to know” provision appears in the OFAC regulation), but given that over a million Cubans probably fall into this category, when would their ignorance become willful? Other regulations even lack the “reason to know” caveat, making the situation even more perilous for businesses such as those that forward packages or facilitate cell phone top-ups for Cuban nationals.

It seems likely that the regulation writers did not intend to establish a prohibited class of sugar-cane harvesters, airline flight attendants, and TV salesmen. Unfortunately, rather than coming out of any ordinary regulation writing process, this provision resulted from a recommendation in a report written by political appointees (the CAFC report commissioned by Bush and released in 2004). I guess this is what happens when you let political appointees write the law.

Comment by cubasanctions on February 15th, 2014 @ 12:11 pm