On May 8, 2019, President Trump issued an Executive Order that imposed new sanctions focused on Iran’s iron, steel, aluminum, and copper sectors, exactly one year to the day that the President announced the United States’ withdrawal from the Joint Comprehensive Plan of Action (JCPOA).

Iron, Steel, Aluminum, and Copper Sectors

The U.S. Department of Treasury’s Office of Foreign Assets Control’s (OFAC) new sanctions directly target Iran’s iron, steel, aluminum, and copper sectors. Specifically, the new sanctions authorize the blocking of property and interests in property that are in the U.S., come within the U.S., or are within the possession or control of any U.S. person. Such property therefore may not be transferred, paid, exported, withdrawn, or otherwise dealt in. The persons or entities that blocking can apply to include any person or entity determined:

• To be operating in the iron, steel, aluminum, or copper sectors of Iran, or to be a person that owns, controls, or operates an entity that is part of the iron, steel, aluminum, or copper sectors of Iran;
• To have knowingly engaged, on or after the effective date of the Order, in a “significant”1 transaction for the sale, supply, or transfer to Iran of significant goods or services used in connection with the iron, steel, aluminum, or copper sectors of Iran;
• To have knowingly engaged, on or after the effective date of the Order, in a significant transaction for the purchase, acquisition, sale, transport, or marketing of iron, iron products, aluminum, aluminum products, steel, steel products, copper, or copper products from Iran;
• To have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of any person whose property and interests in property are blocked; or
• To be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked.

The May 8, 2019 Executive Order also places certain sanctions on foreign financial institutions (FFIs) determined to have knowingly conducted or facilitated any “significant” financial transactions:

• For the sale, supply, or transfer to Iran of significant goods or services used in connection with the iron, steel, aluminum, or copper sectors of Iran;
• For the purchase, acquisition, sale, transport, or marketing of iron, iron products, aluminum, aluminum products, steel, steel products, copper, or copper products from Iran; or
• For or on behalf of any person whose property and interests in property are blocked.

In addition, for FFIs that engage in certain of the conduct described above, OFAC is permitted to “prohibit the opening, and prohibit or impose strict conditions on maintaining, in the United States of a correspondent account or payable-through account by such [FFI].” May 8, 2019 Executive Order, Section 2(b).

Wind-Down Period

OFAC advises that persons engaged in transactions that could be sanctioned under the May 8, 2019 Executive Order should take the necessary steps to wind down such transactions within 90 days of the Order. Entering into new business that could be sanctionable under the Order will “not be considered wind-down activity and could be sanctioned even during the wind-down period.” OFAC FAQ 668.

Concluding Thoughts

The imposition of the new Iran sanctions signals that the U.S. intends to further isolate the Iranian regime. We anticipate that OFAC will continue its aggressive enforcement of international sanctions, including those imposed on Iran. We will continue to closely follow events in this space and will report on any further developments.

If you have any questions or concerns about U.S. sanctions, please contact Bruce G. Paulsen (212-574-1533), Andrew S. Jacobson (212-574-1477), Noah S. Czarny (212-574-1642), or Paul B. Koepp (212-574-1613) at Seward & Kissel’s Sanctions Practice Group.

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¹ OFAC’s recently-issued FAQ notes that the term “significant” is defined pursuant to 31 C.F.R. § 561.404, which considers the nature; size, number, and frequency; nexus; pattern of conduct; impact; and use of deceptive practices in the transactions, among other factors. See OFAC FAQ 671.