UNITED STATES ANNOUNCES COMPLETE WITHDRAWAL FROM THE JCPOA, AND PROVIDES WINDING-DOWN PERIOD BEFORE SANCTIONS RE-IMPOSITION

On May 8, 2018, President Trump announced that the United States will completely withdraw from the Joint Comprehensive Plan of Action (the "JCPOA"). The JCPOA, signed in July 2015 and implemented on January 16, 2016, lifted most US nuclear related secondary sanctions and certain US primary sanctions targeting Iran. Prior to the JCPOA, the US had also imposed a broad range of "secondary sanctions" – applicable to dealings of non-US persons with sanctioned Iranian parties – in a number of key economic sectors in Iran, including automobile, energy and finance. The President's announcement today states that all pre-JCPOA nuclear related sanctions will be re-imposed (both primary and secondary), and indicates that the US may impose new and additional sanctions in the future, going beyond the already highly restrictive sanctions regime which preceded the JCPOA.

Shortly after the presidential announcement, the US Department of the Treasury's Office of Foreign Assets Control ("OFAC") issued new FAQs providing details relating to actions the US would take to implement the withdrawal. In particular, while most of the pre-JCPOA secondary sanctions will be re-imposed, and many persons removed from the Specially Designated Persons ("SDNs") list will be re-designated, the US will provide a 90-day and a 180-day wind-down period for certain activities involving Iran.

After the 90-day wind down period ends on August 6, 2018, the US government will re-impose the following sanctions, including sanctions on associated services related to the activities below:

• by the Government of Iran;
• sanctions on Iran’s trade in gold or precious metals;
• sanctions on the direct or indirect sale, supply, or transfer to or from Iran of graphite, raw, or semi-finished metals such as aluminum and steel, coal, and software for integrating industrial processes;
• sanctions on significant transactions related 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;
• sanctions on the purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt; and
• sanctions on Iran’s automotive sector.

In addition, following the 90-day wind-down period, the US will re-impose restrictions on certain imports from Iran, certain exports to Iran, and activities relating to the entry into contingent contracts for activities eligible for authorization under the JCPOA.

The secondary sanctions that would be re-imposed following the 180-day wind down period are broader and are likely to have a more significant impact upon businesses currently trading in or with Iran. In particular, following the 180-day wind-down period ending on November 4, 2018, the US government will re-impose the following sanctions, including sanctions on associated services related to the activities below:

• sanctions on Iran’s port operators, and shipping and shipbuilding sectors, including on the Islamic Republic of Iran Shipping Lines (IRISL) and South Shipping Line Iran and their affiliates;
• sanctions on petroleum-related transactions with, among others, the National Iranian Oil Company (NIOC), Naftiran Intertrade Company (NICO), and National Iranian Tanker Company (NITC), including the purchase of petroleum, petroleum products, or petrochemical products from Iran;
• sanctions on transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions in relation to the purchase of crude oil from Iran (subject to country-specific significant reduction exemptions);
• sanctions on the provision of specialized financial messaging services to the Central Bank of Iran and Iranian financial institutions
• sanctions on the provision of underwriting services, insurance, or reinsurance; and
• sanctions on Iran’s energy sector.

US-owned or controlled foreign entities will also have until November 5, 2018 to wind down any operations authorized under General License H, which permitted foreign subsidiaries of US companies to engage in certain Iran-related business.

November 5, 2018 also marks the beginning of the period when secondary sanctions can be imposed for non-US persons' dealing with SDNs. The re-designation will not happen immediately in order to facilitate an orderly wind-down period.

OFAC's guidance, released today, discourages non-US persons from engaging in new activity during the wind down period, and states that any such new activity will be a factor in future enforcement action for actions taken after the wind-down period.

Herbert Smith Freehills continues to monitor developments in this area.