Iranian Metal Sanctions Update

On 8 May 2019, the one-year anniversary of President Trump's announcement that the United States would cease to participate in the Joint Comprehensive Plan of Action, the US imposed sweeping new sanctions targeting Iran's metal sector. In the press release announcing the sanctions, President Trump stated, "Today’s action targets Iran’s revenue from the export of industrial metals—10 percent of its export economy—and puts other nations on notice that allowing Iranian steel and other metals into your ports will no longer be tolerated."

The sanctions, issued by Executive Order 13871, provide for the blocking of any non-US person that is determined:

1. "to be operating in the iron, steel, aluminum, or copper sector of Iran, or to be a person that owns, controls, or operates an entity that is part of the iron, steel, aluminum, or copper sector of Iran;
2. to have knowingly engaged, on or after the date of this order, in a significant transaction for the sale, supply, or transfer to Iran of significant goods or services used in connection with the iron, steel, aluminum, or copper sectors of Iran;
3. to have knowingly engaged, on or after the date of this order, in a significant transaction for the purchase, acquisition, sale, transport, or marketing of iron, iron products, aluminum, aluminum products, steel, steel products, copper, or copper products from Iran;
4. to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of any person whose property and interests in property are blocked pursuant to this section; or
5. to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this section."

The US Treasury Department's Office of Foreign Asset Control ("OFAC") has explained that it will carry out a facts and circumstances analysis to determine whether transactions are "significant". This analysis will take a number of factors into account, including—but not limited to—the size, frequency, complexity and impact of the transactions. OFAC FAQ 671.

The executive order also includes provisions that target non-US financial institutions that facilitate Iranian metals transactions. Blocking action may be taken against any foreign financial institution found to have "knowingly conducted or facilitated any significant financial transaction:

1. for the sale, supply, or transfer to Iran of significant goods or services used in connection with the iron, steel, aluminum, or copper sectors of Iran;
2. for the purchase, acquisition, sale, transport, or marketing of iron, iron products, aluminum, aluminum products, steel, steel products, copper, or copper products from Iran; or
3. for or on behalf of any person whose property and interests in property are blocked pursuant to this order."

As described above, OFAC will carry out a facts and circumstances test to determine whether a transaction was significant.

The breadth of Executive Order 13871 and the discretion that OFAC is given in interpreting it mean that any Norwegian company or bank that is engaged in iron, aluminium, steel or copper transactions with an Iranian connection now faces the risk of being blocked from the US financial system.

OFAC has provided a wind-down period that gives companies and financial institutions 90 days from 8 May 2019 to end any Iranian metals transactions; however, this wind-down period only applies for transactions that began before 8 May 2019.

The Iranian metals sanctions are part of a concerted US effort to increase pressure on the Iranian economy. On the same day that the metals sanctions took effect, there were reports that US Secretary of State Mike Pompeo had threatened to impose secondary sanction on INSTEX, the special purpose vehicle created by France, Germany and the UK to facilitate European-Iranian trade. And on 30 May 2019, US Special Representative for Iran Brian Hook warned that the US will impose secondary sanctions targeting countries that continue to buy Iranian oil. For more on this topic and other sanctions news, please visit Wikborg Rein's Trade Compliance alert centre.

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WR Sanctions Alerts provide you with updates on material developments in the country-specific sanctions programs implemented by the US, the UN, the UK, the EU and Norway. We will not provide updates on mere prolongations, without material changes, of existing sanctions programs, nor on any listings or de-listings of individuals/entities placed on implemented sanctions lists . Please note that the WR Sanctions Alerts are provided as general information and do not constitute legal advice.