What is a U.S. Person as defined by the Office of Foreign Assets Control (OFAC)?
Recently the U.S. sanctions against Iran, under the Iranian Transactions Regulations (I.T.R.) are being strictly enforced by the U.S. Department of Treasury. These sanctions were created as Executive Orders first issued in 1979 after the Iranian hostage crisis and have been in existence during all subsequent administrations. These sanctions in present form are being implemented and enforced as a response to the threat of nuclear weapons in Iran, as a penalty for Iran’s support for international terrorism, and used in order to gain accountability for goods, services or technology which may be imported or exported to or from Iran.
Anyone classified as a U.S. person by the I.T.R. is subject to restrictions contained in the Regulations’ laws. The Office of Foreign Assets Control ( “OFAC”), a division of the U.S. Department of Treasury, administers the sanctions program under the Iranian Transactions Regulations, 31 C.F.R. Part 560, and the Iranian Assets Control Regulations, 31 C.F.R. Part 535. Thus, a complete understanding of who classifies as a U.S. person is necessary for all individuals seeking to fully comply with these government directives.
OFAC defines a “U.S. Person” as:
1. U.S. Citizens, regardless of where they live in the U.S.;
2. U.S. Permanent Residents (Green Card Holders);
3. All persons or entities within the U.S.;
4. U.S. Citizens or U.S. Permanent Residents located outside the U.S.;
5. All U.S. incorporated entities and their foreign branches or subsidiaries owned or controlled by U.S. entities.
If you fall in the abovementioned categories, it is of extreme importance to ensure that you are not violating any of the Regulations’ provisions.
Please note that if you employ a third party who is NOT classified as a U.S. person, to import or export goods, services, or technology on your behalf to or from Iran, you would still be in violation of the I. T.R. In other words, you cannot delegate an import or export to a third party in another country if you yourself cannot engage in the transaction(s). For example, if you export goods, services, or technology to a person in Dubai and have that person re-export the goods, services, or technology to Iran, you would be in violation of the I.T.R. Therefore, attempting to shortcut, undermine, or circumvent the provisions of the I.T.R. would result in violation(s) including severe criminal penalties.
Luckily, you are not strictly prohibited from engaging in transactions to or from Iran, as long as you obtain proper authorization from OFAC or if your transactions are exempted by I.T.R. Such actions, authorizations, and exemptions will be further defined in our next week’s blog post.