The primary emphasis of this article focuses on the exemptions of the OFAC Regulations as introduced in last week’s blog post. While prohibitions are strictly enforced by the Office of Foreign Assets Control within the Department of Treasury, there are certainly exemptions which are highly relevant and must be addressed.
As discussed last week, it is important to know and understand how OFAC defines a “U.S. person”:
1. U.S. Citizen, 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 US. 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.
Exemptions to these Regulations for any individuals who are “U.S. Persons” are presented within the following paragraphs.
The I.T.R. outlines several and specific exemptions for obtaining a license (i.e. these specified actions are permitted and do not require a license). There are five different types of transactions which the I.T.R. specifies and they are as follows:
1. Personal Communications such as letters, e-mail, etc.
2. Humanitarian Donations: articles intended to alleviate human suffering such as food, clothing, medicine, and gifts valued at $100.00 U.S. dollars or less.
3. Information and Informational Materials: goods that are exempted under the International Emergency Economic Powers Acts (IEEPA), as depicted within the Berman Amendment, include: publications, films, posters, phonograph records, photos, microfilms, microfiche, tapes, compact disks, CD ROMs, artwork and news wire feeds. This exemption does NOT cover technical software, in which, obtaining a license becomes required.
4. Travel: an example would be the importation of baggage for personal use and for living purposes.
5. Letters of Credit (financing agreements): trade so long as the transaction happened before 1995. Any form of Letters of Credit after 1995 requires the individual to seek a license. Here, “trade” means “trade contracts,” or engaging in international sale contracts, contract joint venture, contract for international distribution, etc.
It is important to realize that there are two different types of licenses a “U.S. Person” can apply for. There are “General Licenses and Specific Licensees”. A general license allows an individual or entity to engage in actions which are otherwise prohibited. An example of a general license is 90 day general license that the Office of Foreign Assets Control issues for individuals seeking to send donations and aid in response to the 2003 earthquake in Iran. It is highly relevant to note that a general license does NOT give an individual or entity the ability to violate subsequent prohibitions contained within the I.T.R. A general license is also revocable and lasts for a specific and clearly labeled period of time to engage in an authorized and particular transaction(s). A specific license is established by the U.S. government to a specified person or entity which allows that person or entity to engage in specific transactions in reaction to an acknowledged formally written license application. An example of a specific license is for an individual or an entity to engage in commodities trading, typically involving the U.S. and any capacity of the Iranian Government.
Furthermore, of the utmost importance is: “Any transactions with anyone in Iran, including sale of personal or real property in Iran REQUIRES a “Specific License” PRIOR to engaging in such a transaction”. In the next blog, I will discuss the variation in form by which a “U.S. Person” who many own an interest in a property in Iran would require a license from OFAC.