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Focus on Regulation

Expanded Iran Sanctions Now Apply to Foreign Subsidiaries of U.S. Companies

 On 9 October 2012, the President issued Executive Order 13628 implementing certain provisions of the Iran Threat Reduction and Syria Human Rights Act of 2012.  Among other things, the Executive Order effectively prohibits non-U.S. entities that are owned or controlled by U.S. persons (including foreign subsidiaries of U.S. companies) from knowingly taking virtually any action involving persons or entities in Iran if that transaction would be prohibited for U.S. persons under the Iranian Transactions and Sanctions Regulations or under certain other orders specifically enumerated in the Executive Order.  The restrictions on dealings extend beyond persons and entities in Iran to entities outside of Iran that are owned or controlled by Iranian companies or persons ordinarily resident in Iran.  Although the Executive Order allows for U.S. companies to divest or terminate their business with foreign subsidiaries that might conduct business related to Iran by 6 February 2013, it does not provide for a more general wind-down period for foreign subsidiaries that will not be divested.  In addition, there is no carve-out for contracts entered into prior to 9 October 2012.  As such, U.S. companies and their foreign subsidiaries should take immediate action to confirm that the foreign subsidiaries do not conduct any activities that directly or indirectly relate to Iran.   For a more detailed description and analysis of the Executive Order, please refer to our Economic Sanctions Alert.