On 6 February 2013, U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued guidance regarding the impact of section 504 of the Iran Threat Reduction and Syria Human Rights Act (ITRA). As previously reported in our Iran-related client alerts and blog entries, ITRA was enacted on 10 August 2012 and imposed a number of new sanctions against Iran. Section 504 became effective on 6 February 2013, amending section 1245(d)(4)(D) of the National Defense Authorization Act for Fiscal Year 2012 (NDAA), enacted on 31 December 2011, that targets foreign financial institutions who process transactions involving purchases or sale of Iranian crude oil (or other petroleum products). While certain countries have received a temporary exemption under the NDAA for significant reduction of their purchases of Iranian oil, section 504 effectively narrows exemption only to transactions (1) that involve bilateral trade in goods or services between Iran and the country granted the exemption, and (2) where the funds owed to Iran as a result of such trade are credited to an account located in the country granted the exemption. The same provision also clarifies that countries that have reduced their Iranian crude oil purchases to zero may continue to receive the temporary exemption. We note that the transactions involving Iranian petrochemical products remain sanctionable because they are not subject to the temporary exemption.
OFAC’s FAQs on the implementation of section 504 of ITRA are available here. OFAC noted that amendments to the Iranian Financial Sanctions Regulations are expected in the near term.