(1) What is the current status of E.U. and U.S. sanctions against Iran?
On 8th May the U.S. announced its withdrawal from the Joint Comprehensive Plan of Action (“JCPOA”). The U.S. has thus begun re-imposing nuclear-related secondary sanctions (sanctions targeting non-US persons) . The E.U., in contrast, has reiterated its commitment to the JCPOA.
The sanctions position has not reverted to that prior to the JCPOA nor that following the interim agreement of November 2013. Before agreement was reached with Iran there was general convergence between the U.S. and E.U. positions. This is now obviously not the case. The E.U. sanctions that were lifted will not be reimposed. The E.U. specific restrictions such as the need for Iranian sterling/euro payments to be notified or authorised have not therefore been reintroduced.
The E.U. has also replaced the annex to Council Regulation (E.C.) No 2271/96, otherwise known as the Blocking Regulation (see North circular 2018/021). Under the Blocking Regulation, a national of an E.U. Member State or a legal person incorporated within the European Union who suffers a detriment as a result of another legal person in the European Union complying with the U.S. measures, may seek recovery of damages arising from that legal person.
(2) Which goods are targeted by the re-imposed U.S. sanctions?
Sanctions are being reimposed subject to two “wind down” periods. Transport of the following cargoes became potentially sanctionable on 7 August:
- Gold and precious metals;
- Depending on end use and underlying circumstances:
- Graphite, raw or semi-finished metals such as aluminium, steel;
- Software for integrated software purposes;
- Goods for Iran’s automotive sector;
Also from 7 August it became sanctionable to conduct significant transactions relating to the purchase or sale of Iranian rials, or the maintenance of significant funds or accounts outside the territory of Iran denominated in the Iranian rial. The purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt is also now sanctionable,
The second wind down period ends on 4 November and sanctions will then be reimposed on:
- Refined petroleum products;
- Crude oil;
- Petroleum or petroleum products;
- Goods or services in connection with the energy, shipping or shipbuilding sectors of Iran;
- Petrochemical products;
- Goods or services that could facilitate the maintenance or expansion of Iran’s domestic production of refined petroleum products or petrochemical products or its ability to develop petroleum resources;
Petroleum products are defined as including:
unfinished oils, liquefied petroleum gases, pentanes plus, aviation gasoline, motor gasoline, naphtha-type jet fuel, kerosene-type jet fuel, kerosene, distillate fuel oil, residual fuel oil, petrochemical feedstocks, special naphthas, lubricants, waxes, petroleum coke, asphalt, road oil, still gas, and miscellaneous products obtained from the processing of: crude oil (including lease condensate), natural gas, and other hydrocarbon compounds.
Petrochemical products are defined as including:
any aromatic, olefin, and synthesis gas, and any of their derivatives, including ethylene, propylene, butadiene, benzene, toluene, xylene, ammonia, methanol, and urea.
Sanctions are also being reimposed from 4 November in relation to the provision of underwriting services, insurance, or reinsurance; transactions by foreign financial institutions with the Central Bank of Iran and other designated foreign financial institutions; on Iran’s port operators; and on the provision of specialized financial messaging services to the Central Bank of Iran and other Iranian financial institutions.
It should also be highlighted that not all cargo related sanctions were lifted pursuant to the JCPOA. For example, there have always been restrictions on the carriage of graphite and raw or semi-finished metals and there remain human rights and arms/military related sanctions against Iran.
Finally, there is the potential for the U.S. to grant waivers to countries to continue buying Iranian oil after the wind down period, but it is currently uncertain whether it will do so.
(3) Is it permissible to carry a targeted cargo during the applicable “wind down” period?
The wind down periods are designed to permit the winding down of existing obligations. In relation to the entering into a new contract, the updated guidance from OFAC is as follows:
Provided that the new contract or business is in furtherance of, a written contract or written agreement entered into prior to May 8, 2018, and is necessary and ordinarily incident to the wind down of activities under the pre-May 8, 2018 written contract or written agreement, generally, then OFAC would not consider entering into such new contracts during the relevant wind-down period to be sanctionable as new business. OFAC will evaluate matters falling outside these parameters on a case-by-case basis to determine whether the activity is sanctionable or violates OFAC regulations.
The guidance does not state whether the new contract must be linked to a pre-8 May contract to which the same company is a party, and clearly there is also scope for ambiguity as to how “necessary and ordinarily incident” should be interpreted.
There thus remain inherent risks in the entering into of any such “new” business even if connected to a pre-8 May contract (and of course, as set out below, there may be other reasons why the transportation is sanctionable, such as the parties involved).
(4) Do specific cargoes fall outside of the U.S. sanctions?
Transactions for the sale of agricultural commodities, food, medicine, or medical devices to Iran are not generally sanctionable unless there is another sanctions issue because of, for example, the parties involved.
(5) What is the position with cargoes that do not fall within the scope of the re-imposed sanctions but not do they appear to fall within the agricultural commodities, food, medicine, or medical devices authorisations and exceptions?
Guidance from OFAC is that non-US persons should ensure that export of consumer goods not explicitly within an exception must ensure, as ever, that there are no sanctioned parties involved. Also, because the carriage of these cargoes by U.S. persons is prohibited, transactions must not involve U.S. persons or transit the U.S. financial system.
(6) Is the purchasing of Iranian bunkers potentially sanctionable?
(7) As sanctions are also being reimposed on Iran’s port operators and shipping and shipbuilding sectors, can port fees be paid when the cargo is not sanctionable and the parties involved are not sanctioned?
OFAC has clarified the position indicating that where:
- The port operators are not designated by the U.S.; and
- Such payments are limited to strictly to routine fees including port dues, docking fees, or cargo handling fees, paid for the loading and unloading; and
- The goods are not sanctioned
then it “anticipates” that such payments will not constitute sanctionable activity.
(8) Where can details of the Iranian companies and individuals targeted by the sanctions be found?
Even before the U.S. withdrew from the JCPOA there still remained many companies and individuals targeted by the U.S. and the E.U. and with whom almost all dealings are prohibited. This remains the case but the U.S. authorities are now re-designating Iranian entities and individuals that were removed from the Specially Designated Nationals (“SDN”) list as a result of the JCPOA. It is therefore important to seek to establish not only whether any Iranian party is now listed but also whether they are likely to be re-listed if they were removed as part of the sanctions relaxation. Lists of designated individuals and entities are maintained here:
The list of entities that were removed from the SDN list on 16 January 2016 can be found here under the heading “JCPOA Annex 2 – Attachments”, at attachments 3 and 4.
Even if the Iranian entity is not expressly listed, in respect of the U.S. sanctions, where any entity is owned in the aggregate, directly or indirectly, 50% or more by one or more listed persons it is itself considered a listed person. Likewise, if a search of the E.U. list reveals no hits, where a party is majority owned or controlled by a designated party it may fall within the prohibitions.
It will be expected that Iranian parties involved in a trade will be checked against these lists (including banks), although that may not of itself be sufficient to establish that due diligence has been exercised.
(9) Where the cargo is not sanctionable, the parties involved are not targeted and there is no other sanctions issue, will the Club be able to provide its usual level of support?
The ability of the Club to assist its Members is severely compromised by the U.S. sanctions. Making any payments to or from Iran is extremely difficult and Members should not expect the Club to be able to provide its usual level of support. It is difficult to foresee circumstances in which the Club would be able to provide security.
The reimposition of U.S. sanctions and revocation of General License H also impacts on the ability of U.S.-owned or -controlled foreign reinsurers who participate on the International Group Excess Loss Reinsurance (GXL) programme to pay Iran related claims and means that there is a risk of a reinsurance shortfall. If there is such a shortfall then the Club’s Rules provide that the Club is not liable to a Member for any part of the claim it cannot recover.
(10) How does the E.U. blocking legislation impact upon the Club’s stance on covering Iranian voyages?
If a vessel has been employed in a carriage, trade or voyage which would expose the Club to the risk of U.S. secondary sanctions (see P&I Rule 38(h)) then our Rules provide that cover ceases automatically. There might be no risk of sanctions against the Member, but the cesser would still apply if the Club was at risk. If there was no risk to the Club but the Member could be sanctioned by the U.S. as a result of the trade, the unlawful or imprudent trading exclusion might apply (see P&I Rule 26) and any claim would not be covered. The impact of the E.U. blocking legislation remains under consideration; the U.S. has, however, also been clear that it expects E.U. companies to comply with the U.S. secondary sanctions.
Sanctions is a complex area and these FAQS are not intended to be a comprehensive guide. Members are encouraged to contact North’s sanctions advice team at: email@example.com with any sanctions related queries.
 Primary sanctions, having jurisdiction only over U.S. persons, fall outside the scope of this guide.
The purpose of this publication is to provide a source of information which is additional to that available to the maritime industry from regulatory, advisory, and consultative organisations. Whilst care is taken to ensure the accuracy of any information made available no warranty of accuracy is given and users of that information are to be responsible for satisfying themselves that the information is relevant and suitable for the purposes to which it is applied. In no circumstances whatsoever shall North be liable to any person whatsoever for any loss or damage whensoever or howsoever arising out of or in connection with the supply (including negligent supply) or use of information.
Unless the contrary is indicated, all articles are written with reference to English Law. However it should be noted that the content of this publication does not constitute legal advice and should not be construed as such. Members should contact North for specific advice on particular matters.