OFAC issued amended FAQs and replaced General License H with a new Section 560.537 to the Iranian Transactions and Sanctions Regulations (ITSR, 31 C.F.R. Part 560) authorizing the following wind down activities related to foreign subsidiaries’ business with Iran:

• Entities owned or controlled by a U.S. company established or maintained outside of the United States may engage in all transactions and activities that are ordinarily incident and necessary to wind down business with Iran;
• U.S. persons may engage in limited activities related to the establishment or alteration of policies and procedures to the extent necessary to allow foreign subsidiaries to wind down business with Iran;
• U.S. persons may also continue to make available automated, global systems (e.g., email, computer systems, etc.) to process documents or data related to wind down activities.

Key point: U.S. companies that have foreign subsidiaries relying on General License H to conduct business in Iran need to change their General License H policies to ensure that only wind down activities occur going forward. While accepting new customers will be prohibited, it will be important for compliance personnel to consult with foreign subsidiaries regarding what qualifies as permissible wind down activity, and monitor ongoing activity to ensure it qualifies. That said, U.S. persons must be careful to avoid operational approval of transactions.

Before the JCPOA, the United States maintained a variety of so-called “secondary” sanctions on Iran, allowing the United States to penalize non-U.S. financial institutions and non-U.S. companies that engaged in certain transactions related to Iran, including those linked to the Iranian energy and petrochemical industry, the banking and finance sector, shipping, the automotive sector, and precious metals, among others. The secondary sanctions were purely extraterritorial in nature – they sought to dissuade non-U.S. companies acting wholly outside the United States from engaging in significant transactions with Iran. Under the JCPOA, the United States committed to lifting most secondary sanctions, which requires the President to issue periodic waivers of the sanctions.

In a strongly-worded statement released on Friday, the President vowed not to issue future waivers unless Europe and the United States can renegotiate certain aspects of the Iran deal and secure a new “supplemental” agreement. Such a renegotiation would be a politically fraught exercise for all sides (European countries have resisted the idea of revisiting the JCPOA) and could result in the United States unilaterally leaving the JCPOA. Given the political uncertainty in Washington DC and resistance among key allies, is not clear whether the administration will actually follow through on the threats made last week or whether secondary or other U.S. sanctions will ultimately be re-imposed on Iran. Given the political uncertainty, non-U.S. companies, including foreign subsidiaries of U.S. companies, should continue to carefully monitor this issue and consider how the re-imposition or “snap back” of secondary or other U.S. sanctions may impact their operations.

The next waiver is due by May 12, 2018, which does not leave much time to conduct the negotiations demanded by the President, even if other JCPOA signatories were willing to start discussions immediately.