Ed. Note: if you’re new to TURBOFAC, please take note that the text string filtration function generally shouldn’t be used for terms such as “ordinarily resident,” “causing” or “new debt”. For research on the meaning of words and phrases such as those, i.e. terms central to the key legal issues in sanctions law that appear on a cross-programmatic basis, you’re typically better off locating and checking the appropriate box in the “Key Legal Issues” search category, which will limit the results to those that have been manually assessed as being relevant for the interpretation of the terms at issue.
Try typing your search term (“ordinarily resident,” “new debt,” or something else) in the “Find a Search Filter” box at the top of the page, and the corresponding “Key Legal Issues” check box will pop up instantly, if one exists. Once you check the box (e.g. “new debt,” with ~55 results), you can always use the text string filtration function to further refine your search (e.g. by typing “invoice” and narrowing the ~55 results to ~10).
Note in addition that the same applies to text string searches such as “14071” (if you’re looking for items related to EO 14071). By typing “14071” in the “Find a Search Filter” field up top, you will be able to instantly narrow the results down to items manually assessed as relating to EO 14071. Ditto terms such as “515.204” or “Iran General License G” (try the “Discrete Legal Provision” search category).
Please contact [email protected] or [email protected] with any questions on search results and efficiency.
Please click "Apply Text String Filters" again after clicking the "Close" button immediately below.
In the runup to what may (or very well may not) be an agreement between the United States and Iran involving sanctions relief, we’re adding a technical take to the conversation about what a deal could look like. More specifically, this note addresses the scope of relief that the President, without the approval of Congress but assuming there’s no veto-proof majority in opposition, could offer. This note does not address the question of what kinds of sanctions relief may be politically or strategically desirable, either from the perspective of the U.S. or Iranian sides. Our contribution is limited to an accounting of the President’s options.
a) High-level Takeaways
Notwithstanding that existing legislation may require President Trump to submit any nuclear and sanctions related agreement with Iran to Congress, absent veto-proof congressional majorities there is no mechanism to prevent the President from offering an extremely broad sanctions relief package, up to and potentially far exceeding what Iran received through the JCPOA. This could be achieved through a combination of (i) outright repeal/revocation of certain primary and secondary sanctions provisions, (ii) “waivers” that leave the sanctions laws on the books but render them inoperable for a period of time, and (iii) the issuance of general licenses and/or formal “non-sanctionability” guidance. The options available vary depending on the legal provision at issue. In any event, and as it relates to OFAC-administered sanctions provisions, we see no current sanctions provision from which the President would be barred from providing at least one of those three forms of relief without the support of Congress.
b) Primary vs Secondary Sanctions and the 2014 JCPOA
For purposes of this note, the term “primary sanctions” means legal provisions administered by OFAC that “prohibit,” or render “unlawful,” certain transactions by U.S. persons, persons owned or controlled by U.S. persons, or any persons that re-export certain items subject to U.S. export controls or “cause” violations of the substantive prohibitions. Primary sanctions are legal requirements capable of “violation” for which civil and criminal penalties are the primary means of enforcement.
By contrast, we use the term “secondary sanctions” (a term undefined in U.S. law) to mean any legal authority that (i) can be used to target transactions that are not subject to OFAC’s primary sanctions prohibitions, and (ii) when invoked, result persons being subject to OFAC-administered sanctions (most commonly by addition to OFAC’s SDN List). In that sense, there is an important interrelationship tween secondary and primary sanctions; since the consequence of a person being targeted for engaging in secondarily sanctionable conduct is that primary sanctions prohibit U.S. persons from dealing with such person. Secondary sanctions can be imposed irrespective of whether “sanctionable” transactions are lawful or unlawful under the laws of the relevant jurisdiction (they are often entirely lawful, even if described by the U.S. government in press releases as “evasive” or “illicit”).
It is commonly said that the 2014 JCPOA dealt with “secondary sanctions” only. This is not true. Many (but not all) “secondary sanctions” authorities targeting Iran that were in force at the time were revoked or otherwise “waived,” but the deal also involved the issuance of “general licenses” (“GLs”) authorizing transactions otherwise prohibited by primary sanctions provisions, as well as and the removal of hundreds of persons from the SDN List. Those SDN List removals, in turn, had significant implications for the ways in which primary sanctions applied to dealings involving such persons.
We note at the outset that the Iran Nuclear Agreement Review Act of 2015 (INARA) , P.L. 114-17) is a U.S. law requiring the President to submit any nuclear deal with Iran to Congress for review, prohibiting sanctions relief during this period. Passed with bipartisan support (98-1 in the Senate), it mandated 90-day compliance certifications and ensured congressional oversight of the Joint Comprehensive Plan of Action (JCPOA).
c) Role of the Iran Nuclear Agreement Review Act of 2015 (INARA)
As an overarching issue affecting the President’s room for action absent Congressional approval, we note that the INARA, which was enacted in connection with the JCPOA, could apply to substantially any agreement made today that has a substantial nuclear and sanctions relief component to it. However, the INARA constitutes a procedural hurdle to the effective date of any such agreement, but not much more. This is because agreements submitted for review pursuant to INARA take effect absent a disapproval resolution, which can then be vetoed by the President and can only be overridden with votes representing two-thirds of both houses of Congress (which we assumed would not be the case here).
d) Primary Sanctions Currently in Effect
As of this writing, “U.S. persons” and U.S. -owned or -controlled persons are prohibited (absent authorization or an exemption) from engaging in substantially all transactions involving Iranian territory, Iranian entities, individuals in or “ordinarily resident” in Iran and “Iranian-origin” goods. OFAC also administers export control-like prohibitions on Iran that prohibit non-U.S. persons form “re-exporting” most items listed on the “Commerce Control List” (i.e. non-“EAR99” items). These prohibitions are codified in the CFR through the “Iranian Transactions and Sanctions Regulations” (“ITSR”), which houses what can be loosely described as the “Iran Embargo”. Separate from those “embargo” prohibitions is an elaborate series of “list-based” Iran- and activity-specific sanctions programs pursuant to which well over 1,000 Iran-linked persons have been placed on the SDN List (and are therefore “blocked persons”).
These programs include executive orders aimed specifically sanctioning Iran-related trade (e.g. EO 13902), and general-purpose terrorism (EO 13224, as amended) and non-proliferation (EO 13382) authorities that disproportionately affect Iran. As a general matter, there is great significance to being a person with whom dealings are prohibited by both the ITSR and one of the other list-based programs, e.g. the Iranian Ministry of Petroleum, which is blocked pursuant to the ITSR as a “Government of Iran” entity as well as EO 13224. The EO 13224 designation means that the Ministry of Petroleum does not qualify for ITSR GLs (unless there is separate authorization under EO 13224), and that the Ministry of Petroleum is subject to the secondary sanctions prohibitions of EO 13224, as amended.
e) Full “Repeal” of Primary Sanctions Through Revocation of EOs vs “Suspension” Through GL
i. Full Repeal
The question of whether a given primary sanctions prohibition can be fully repealed absent congressional approval depends on whether it existence the product of statute enacted by Congress (which may or may not be implemented by an EO and further codified into the CFR) or, instead, whether derives solely from the President’s authority as granted by the International Emergency Economic Powers Act (IEEPA).
Certain Iran-related sanctions authorities, e.g. EOs 13871, 13902, and 13949, were issued solely pursuant to the President’s IEEPA authority. These EOs could be revoked, with the substantive prohibitions ceasing to have effect upon revocation, without any interaction with Congress at all (other than maybe the INARA, as described above). In addition, portions of the ITSR, including the broad prohibitions on dealings in “Iranian origin goods” (implementing a part of EO 13059 of August 19, 1997) and property in which the “Government of Iran” has an interest (EO 13559), could be similarly repealed.
Another category of primary sanctions prohibitions that can be removed absent Congressional interaction beyond INARA is the prohibitions on dealings with all persons currently on the SDN List that were added pursuant to OFAC’s discretionary authorities. This, as was the case in the JCPOA, would be done through a mass delisting action. In some cases, it may not be possible to revoke the authority pursuant to which a given person was designated because the designation authority is a secondary sanctions statute (described further below), but in such cases there is generally nothing limiting the President’s ability to reverse designations made pursuant to such authorities.
Other key primary sanctions prohibitions are “semi-codified” in the sense that a full repeal of the prohibition requires certifications to Congress, some of which may be extremely difficult to make. Most significantly, section 103(a) of CISADA requires the existence of prohibitions specifying that “no good or service of Iranian origin may be imported directly or indirectly into the United States” and “no good, service, or technology of United States origin may be exported to Iran from the United States or by a United States person, wherever located.” In addition, section 218 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (“TRA”) requires the President to prohibit U.S.-owned or -controlled entities from engaging in Iran-related transactions to the extent such transactions are “prohibited by an order or regulation issued pursuant to [IEEPA]…if the transactions were engaged in by a United States Person…” The above described prohibitions, which constitute a significant chunk of the substance of the Iran Embargo, can only be repealed in their entirety if the “President certifies to Congress that” (among other things) “Iran has…and verifiably dismantled its…ballistic missiles and ballistic missile launch technology…” (see sections 605(a) of the TRA and 401(a) of CISADA). Absent a wholesale replacement of the current Iranian government with one that is entirely pliant to the United States, it is virtually impossible to imagine such certification being made. However, as described below, the President’s retained licensing discretion lowers the stakes of the “full repeal” issues.
ii. Primary Sanctions “Suspension” Through Licensing
As discussed above, section 218 extends many primary sanctions requirements to which U.S. persons are subject to foreign persons “owned or controlled” by U.S. persons, and the full repeal of that provision is subject to Congressional certification requirements concerning dismantling of ballistic missile launch technology that would be impossible to meet in the context of an agreement voluntarily entered into by the current Iranian government. However, a significant feature of the JCPOA sanctions relief, and the most important primary sanctions relief, came in the form of the issuance of General License H, which effectively “suspended” section 218 of the TRA by authorizing all otherwise prohibited transactions of U.S.-owned or -controlled entities in a way that restored the status quo prior to the enactment of section 218 of the TRA. At the time, the issuance of GL H (not to mention other aspects of the JCPOA) was criticized by opponents of the deal as an undermining of Congressional authority, but we are not aware of any serious judicial challenge to license, or any statutory provision enacted since then that would prevent the issuance of a substantive equivalent to GL H.
Beyond the prospect of a JCPOA 2.0 equivalent of GL H, the President retains extremely broad licensing discretion, such that substantially all of the Iran-related primary sanctions architecture could be suspended through the issuance of broad general licenses. The most extreme version of this would be a general license such as the GL that existed in the Sudanese Sanctions Regulations (SSR) for a period of time prior to the full repeal of that embargo, which provided that “transactions prohibited by [the SSR]…are authorized.”
There appear to be just a small handful of statutory provisions that assert control over the President’s Iran sanctions related licensing authority. One is section 1603 of the Iran-Iraq Arms Non-Proliferation Act of 1992, which prevents OFAC from licensing the export to Iran of any goods or technology on the Commerce Control List. However, this prohibition may be waived if the Secretary of State determines that a waiver is “essential to the national interest,” and such “national interest” waivers would be expected to play a role in any agreement with Iran, as they did in 2015. (See also section 103(d) of CISADA, imposing a licensing prohibition that applies to importation of Iranian-origin carpets and certain foodstuffs, but can be waived with a “national interest” certification).
There does not appear to be any Iran-related primary sanctions prohibition that cannot be suspended indefinitely through the issuance of a GL in conjunction with a “national interest” waiver. We note that the “material support” criminal law provisions that currently apply to the IRGC are not “sanctions” provisions administered by OFAC, but this can be removed through a determination by the Secretary of State, in accordance with Section 219 of the Immigration and Nationality Act.
f) Secondary Sanctions Authorities Currently in Effect
Every “secondary sanctions” authority that existed prior to the JCPOA exists today, in addition to a series of others some of which are the product of statutes and some of which are the product of Presidential action pursuant to IEEPA. All secondary sanctions authorities imposed pursuant to IEEPA alone can be revoked absent Congressional approval (see e.g. EO 13902, which is a key authority used to sanction Iran-related energy trade).
Of the secondary sanctions authorities that derive from statutes, the outright repeal of these provisions is impossible absent an Act of Congress. Many secondary sanctions provisions, including those that were the subject of the “contingent waivers” in 2015, have “national security interest” waiver provisions (or other waiver requirements) that serve to effectively disable the effect of the secondary sanctions provisions while the waiver is valid. Others do not have any kind of “waiver” provision at all; most of these are provisions (e.g. the standard “material support” provision targeting material assistance provided to SDNs) has the effect of a “secondary sanctions” provision, but is generally not described by OFAC as such.
i. The “License Plus Secondary Sanctions Safe Harbor Guidance” (or Guidance Only) Method for Secondary Sanctions Suspension; the Iran GL U Example
Some secondary sanctions provisions state that the President “shall” impose sanctions on a given person when certain criteria are met, while others state that the president “may” do so. The former are referred to as “mandatory” sanctions. In practice, however, even “mandatory” secondary sanctions provisions are discretionary insofar as the imposition of sanctions only takes effect upon the making of an affirmative “determination,” which presidents frequently decline to make even where there are objective facts demonstrating that a given non-U.S. person has engaged in sanctionable activity. To our understanding, there is no legal mechanism (including judicial review) to require a President to invoke a “mandatory” sanctions authority by sanctioning a given person for engaging in covered sanctionable conduct.
In the context of a potential deal with Iran that seeks to provide market actors with some degree of certainty and predictability with respect to the sanctionablity of their conduct, a mechanism for this has emerged since 2014 that we would expect to play a role in any future deal with Iran.
More specifically, it is now common for OFAC to issue licenses authorizing U.S. persons to engage in otherwise prohibited conduct, and those licenses are read in light of OFAC guidance specifying that “non-U.S. persons do not generally risk being sanctioned for engaging in or facilitating transactions for which a U.S. person would not require a specific license” (see e.g. OFAC FAQ # 7; OFAC FAQ # 1097 (terrorism-specific without the “generally” qualifier)). As an illustration, OFAC recently issued Iran GL U, which licensed against all Iran-related primary sanctions authorities and others disproportionately affecting Iran, and broadly authorized U.S. persons to engage in a wide range of conduct that is prohibited by many primary sanctions programs and “sanctionable” by many others. The GL would, for example, authorize direct cash payments to the IRGC if the were ordinarily incident to covered dealings in Iranian-origin oil, and OFAC’s guidance gives comfort that such transactions would not be “sanctionable”. But for the GL, such transaction could be regarded as “sanctionable” pursuant to no less than 10 different secondary sanctions authorities.
To our knowledge, there are no secondary sanctions authorities the effect of which cannot be functionally suspended either through (i) the combination of general licenses and “secondary sanctions safe harbor” guidance referring to transactions for which U.S. persons would not require a license, or (ii) formal guidance specific to transactions that do not involve general licenses but for which OFAC offers formal assurances that certain classes of transactions not involving U.S. persons will not be the subject to secondary sanctions.