Today’s revocation of U.S. participation in the Iran nuclear deal principally resurrects a number of secondary sanctions aimed at European allies and other countries. Those that relied on the nuclear deal will now see that commercial arrangements with Iran that they entered into relying on that deal and on their false hopes that the U.S. would not later simply walk away from it will be the collateral damage of the White House’s new trade war on Iran.

Shortly after the announcement of the U.S. withdrawal from the deal, OFAC issued FAQs explaining the action. (Why on earth are these called FAQs? They were issued within seconds of the announcement. How can there already be “frequently asked questions”? Perhaps OFAC thinks that FAQs stands for something else — maybe “frightening answers to questions.”)

Those FAQs preface the explanation of the wind-down provisions with this:

The U.S. government has a past practice of working with U.S. or third-country companies to minimize the impact of sanctions on the legitimate activities of those parties undertaken prior to the imposition of sanctions.

Any hopes that this is a true statement are quickly dashed by looking at the wind-down provisions themselves. Depending on the sanctions, companies have either 90 or 180 days to finish up activities commenced before today’s date. For activities engaged in under General License H — which permits foreign subsidiaries of U.S. companies to engage in certain activities with Iran — the wind-down period is 180 days. If a company has a contract to deliver goods to Iran, then, according to FAQ 2.1, those goods must be “fully delivered” within the wind-down period. Payment can be made outside that period for those fully delivered goods provided that payment is made pursuant to the terms of the written agreement.

But suppose you’ve made an investment in producing a complex item, have started to manufacture it, but can’t complete it within the wind-down period. You’re out of luck. Plus, when the Iranian customer sues you and gets a judgment in the court of your home country, you can’t pay the judgment without violating U.S. law. That’s not a good position to be in.

Another conundrum: what’s meant by fully delivered? Is the item fully delivered if the contract specifies FOB Incoterms 2010 and the item is placed on the boat before the wind-down period expires but is delivered to the customer in Iran after the wind-down period? Your guess is as good as mine, even though under an FOB delivery term the seller has satisfied its delivery obligations once the item is on the boat.

FAQ 2.2 provides the answer, of sorts, to the question about new business in Iran that starts after today but is completed before the wind-down period expires. OFAC says in that case you’re okay, but that if there is an enforcement action based on things done after the period expires, these new activities undertaken after today will be considered in determining the penalty. In other words, engage in new activities after today at your own risk.

Of course, it’s not at all clear what might count as new activities. Suppose you have an office in Tehran to assist in completing the contract. Can you order more paper when the copying machine runs out? Can you order lunch for a working meeting in the office? Hire a temp?

There’s one thing that can be guaranteed by these wind-down provisions:  full employment for sanctions lawyers.

A few weeks ago, the attendance of Iranian Foreign Minister Javad Zarif at the Munich Security Conference led to a little brouhaha when German fuel companies, worried about U.S. sanctions on Iran, indicated that they would not be able to refuel Zarif’s airplane for his trip home, citing their fear of U.S. sanctions and presumably not wishing to be thrown into a U.S. jail the next time they took their family on a trip to Disneyland. Zarif was able to attend the conference and return home only because the German military stepped in and refueled his airplane.

Although that might seem a bit of an overreaction by the German fuel companies, it probably was not. For starters, based on reports (here and here) from plane spotters, Zarif has been ferried around on an Airbus operated by Meraj Airlines, an Iranian charter company that the U.S. thinks has carried around not just tourists and Iranian officials but also arms and reinforcements for Syria. As a result, Meraj is on the SDN list and sanctioned under the Global Terrorism Sanctions Regulations. This meant that Meraj remained on the SDN List even after the implementation of the JCPOA. The problem then, for the German fuel companies, is that section 2 of Executive Order 13645, which allows OFAC to designate anyone who supplies “goods or services to or in support of any Iranian person included on the SDN list,” would apply to any refueling of a Meraj aircraft.

But wait, what about the travel exemption? You know, OFAC’s least favorite exemption, right up there next to the information exemption. Wouldn’t refueling the plane be, to quote 50 U.S.C. 1702(b)(4), a transaction “ordinarily incident to travel to or from any country”? Of course it is, but OFAC, in FAQ J.7, says this:

U.S. persons are allowed to engage in transactions that are ordinarily incident to travel to or from Iran, including flying on Iranian airlines, with the exception of airlines, such as Mahan Air, that are designated under the Global Terrorism Sanctions Regulations, 31
C.F.R. part 594 (GTSR).

Sigh. We’ve been here before when OFAC recently said you could go to jail for giving a Bible to a member of the Islamic Revolutionary Guard Corps. The argument that OFAC tried to make in that case was that since the sanctions are authorized under a statute other than the International Emergency Economic Powers Act, it was free to ignore the travel and information exemptions. The problem with that argument in the IRGC case was that the other statute cited by OFAC directed it to impose sanctions under IEEPA.

In this case, the Executive Order in question relies on Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”) and the Iran Freedom and Counter-Proliferation Act of 2012 (“IFCA”). But neither of those acts authorizes  permitting designation of anyone providing material support to any Iranian on the SDN List. Section 112 of CISADA allows imposition of travel restrictions on affiliates of the IRGC, but that does not authorize such restrictions on every other Iranian on the SDN list that is unaffiliated with the Islamic Revolutionary Guard Corps (“IRGC”).  For Iranian SDNs that are not IRGC affiliates, section 2 of Executive Order 13645, is authorized by IEEPA alone; and the travel exemption, therefore, remains in force for those cases.

The designation of Meraj did not rely on any affiliation with the IRGC. So, the travel exemption should apply to the foreign refueling of Meraj aircraft. That being said, one can certainly understand why the German companies would simply rather refuse to service the plane rather than relying on an argument that the travel exemption applies.  The question is now whether OFAC will go after the German military and designate it under Executive Order 13645.   I have to admit that these days nothing, including OFAC saber rattling over the German military letting Zarif go home, would surprise me.

Photo Credit: By Dreamliner 2012 (Own work) [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons https://commons.wikimedia.org/wiki/File%3AA320SYZ.JPG [cropped and processed]. Copyright 2014 Dreamliner 2012