Iran is listed as a "non-entrant country". Hence, Iranian vessels are not permitted to enter US ports, internal waters, or territorial seas except when engaged in innocent passage, under the conditions of force majeure, or distress situations involving a medical emergency.
US persons and companies (including foreign subsidiaries) are prohibited from transacting business with Iran, either directly or indirectly, with certain exceptions.
On 5 August 1996, the US President signed the "Iran and Libya Sanctions Act of 1996" which unilaterally imposes secondary sanctions against non US nationals/companies investing USD 40,000,000 or more in Iran during a 12 month period.
On 1 July 2010, the US President signed the "Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010" (CISADA) and Executive Order No. 13590 issued 21 November 2011 which enhanced economic sanctions relating to Irans refined petroleum products industry. Additional measures were introduced under Executive Order No. 13590 issued 21 November 2011 and Executive Order issued 31 July 2012.
On 10 August 2012, the US President signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012. This amends the Iran Sanctions Act of 1996 and Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA) by adding additional sanctions.
On 10 October 2012, the US President signed a new Executive Order “Authorizing the Implementation of Certain Sanctions Set Forth in the Iran Threat Reduction and Syria Human Rights Act of 2012 and Additional Sanctions with Respect to Iran” which prohibits foreign subsidiaries of U.S. persons from knowingly violating the Iranian Transactions Regulations.
On 2 January 2013, the US President signed into law the "National Defense Authorization Act for Fiscal Year 2013" which includes the "Iran Freedom and Counter-Proliferation Act of 2012" (IFCPA) under Sections 1241 to 1255, further expanding US sanctions against Iran. Whilst a few of the new sanctions took immediate effect, most will become effective 180 days after the date of enactment (i.e. 1 July 2013).
On 24 November 2013, the P5+1 (the United States, United Kingdom, Germany, France, Russia, and China) reached an initial understanding with Iran, outlined in a Joint Plan of Action (JPOA). In return for Iran’s commitment to place meaningful limits on its nuclear program, the P5+1 committed to provide Iran with limited, targeted, and reversible sanctions relief for a six-month period.
On 12 January 2014, the P5+1 and Iran arrived at technical understandings for the Joint Plan of Action (JPOA), which will be implemented beginning on 20 January 2014 and ending 20 July 2014 (JPOA Period). The relief provided in the JPOA only pertained to conduct and transactions fully completed during the JPOA Period, and, with limited exceptions, involved only certain sanctions on non-U.S. persons not otherwise subject the Iranian Transactions and Sanctions Regulations. The exemption were extended several times.
On 16 January 2016 the Joint Comprehensive Plan of Action (JCPOA) was implemented and the United States lifted its nuclear related sanction as described in the JCPOA. In connection with the lifting OFAC issued the following:
US withdrawal from the Joint Comprehensive Plan of Action (JCPOA)
On 8 May 2018 the President announced the decision to cease the US participation in the JCPOA. The US withdrawal from the JCPOA, and its decision to reactivate the nuclear related laws that were waived in order to implement the JCPOA, will have significant complications for maritime trade with Iran and companies engaged in this.
On 6 August 2018 the President issued Executive Order 13846 which re-imposes secondary sanctions that had been suspended pursuant to the JCPOA. A previously established wind-down period will remain in effect until 4 November 2018 for some categories of transactions which include those relating to shipping, shipbuilding and port sectors of Iran.
It would appear that these sanctions will be relevant not only to entities directly dealing with public and private sector entities in Iran but also third parties who deal with both US and Iranian entities.
Companies based in EU would, however, also need to consider the effects of the EU Blocking Regulation. The EU's updated Blocking Statute which entered into force on 7 August 2018 is intended to protect EU persons and entities from the effects of US secondary sanctions.
In effect the companies must comply with either EU law or the US imposed sanctions on Iran making it a very difficult and highly complex situation. It is, however, possible for companies to apply for an exemption from compliance with the EU blocking regulation.
Despite the blocking regulation, it seems EU operators may still face the ultimate US penalties, that is, a blocking of the operator’s property in the US and loss of access to the US financial system. It consequently remains to be seen to which extent the Blocking Statute will counteract the US secondary sanctions.
While there are many uncertainties related to the sanctions, it is clear that members already conducting, or considering to conduct, business involving Iranian entities or interests must seek input from legal professionals with expertise in the US sanctions programme. If members are based in the EU the input is also needed from specialists in the EU Blocking Regulation.
The P&I Clubs have issued circulars particularly dealing with this topic and more information can also be found on OFAC’s website.
Aside from the reactivated nuclear related laws, the main sanction items of interest are:
Specially Designated Nationals List (SDN List)
The sanctions involve designated entities, referred to as Specially Designated Nationals or SDNs, which list companies and individuals located not just in Iran, but anywhere in the world. The list also includes the names of vessels which have been determined to be owned or controlled by designated entities and numerous banks/financial institutions involved with designated entities.
As companies, individuals, vessels and financial institutions may not appear to be related to the Iranian sanctions, having innocuous names and may be located in countries with which one enjoys harmonious trade relations, it is vitally important to carefully screen all parties involved (i.e. shippers, receivers, charterers, owners, brokers, banks, vessel, port/terminal operator, etc...) to ensure that no designated entity is directly or indirectly involved.
Arms and strategic goods and services embargo
Ban on Arms exports to Iran.
Restrictions on exports to Iran of "Duel Use Items".
Iran Threat Reduction and Syria Human Rights Act of 2012, Sec. 203 will apply sanctions on a person that on or after the date of the enactment of theAct, exported, transferred, permitted or otherwise facilitated the transshipment of, any goods, services, technology, or other items to any other person; and knew or should have known that this would contribute materially to the ability of Iran to acquire or develop chemical, biological, or nuclear weapons or related technologies; or acquire or develop destabilizing numbers and types of advanced conventional weapons.
Iran Threat Reduction and Syria Human Rights Act of 2012, Sec. 211 provides that if the President determines that a person, on or after the date of the enactment of this Act, knowingly sells, leases, or provides a vessel or provides insurance or reinsurance or any other shipping service for the transportation to or from Iran of goods that could materially contribute to the activities of the Government of Iran with respect to the proliferation of weapons of mass destruction or support for acts of international terrorism, the President shall block and prohibit all transactions in all property and interests in property ... if such property and interests in property are in the United States, come within the United States, or are or come within the possession or control of a United States person.
Iron, steel, aluminum, and copper
On 8 May 2019, the President of the United States issued a new Executive Order (E.O.), imposing sanctions with respect to the iron, steel, aluminum, and copper sectors of Iran. The relevant FAQ can be viewed here.
CISADA includes mandatory banking sanctions targeted at foreign banks that knowingly facilitate: Iranian WMD transactions; transactions related to Iran's support for terrorism; the activities of persons sanctioned under Iran related United Nations Security Council Resolutions; significant transactions with the IRGC (Iran's Revolutionary Guard) or its affiliates; or significant transactions with Iranian linked banks designated by the United States.
Freezing of Assets
Includes the freezing of US based property/assets of the Islamic Republic of Iran Shipping Lines (IRISL) and affiliated entities.
Travel ban on named persons
Trading restrictions are administered and enforced by the OFAC. On 13 September 2010, OFAC removed the Iraqi Sanctions Regulations, 31 C.F.R. Part 575, from 31 C.F.R. chapter V, and added the Iraq Stabilization and Insurgency Sanctions Regulations ("ISISR") as new part 576 to 31 C.F.R. chapter V. The ISISR implement Executive Order 13303 of 22 May 2003, Executive Order 13315 of 28 August 2003, Executive Order 13350 of 29 July 2004, Executive Order 13364 of 29 November 2004, and Executive Order 13438 of 17 July 2007.
The term "United States" includes the territories and possessions of the United States and the customs waters of the United States (as defined in section 401 of the Tariff Act of 1930 (19 U.S.C. 1401)). i.e. Guam, Puerto Rico or any other area under the jurisdiction or authority of the United States, including the Trust Territory of the Pacific Islands.
Office of Foreign Assets Control
The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury administers and enforces economic and trade sanctions against targeted countries. OFAC is empowered to impose controls on transactions and freeze foreign assets under US jurisdiction. Several of the sanctions are based on United Nations Security Council Resolution, whilst others are unilaterally imposed by the United States.
It is important to note that US sanctions programmes vary considerably and what is prohibited with regard to one country may be permitted or licensable with regard to another.
OFAC Global Maritime Advisory
On 14 May 2020, OFAC issued an Advisory to alert the Maritime Industry to deceptive shipping practices and includes a detailed set of best practices for private industry to consider adopting to mitigate exposure to sanctions risk.
All U.S. persons must comply with OFAC regulations, including all U.S. citizens and permanent resident aliens regardless of where they are located, all persons and entities within the United States, all U.S. incorporated entities and their foreign branches. In the cases of certain programs, such as those regarding Cuba, Iran and North Korea, all foreign subsidiaries owned or controlled by U.S. companies also must comply. Certain programs also require foreign persons in possession of U.S. origin goods to comply.
Specially Designated Nationals (SDNs)
US sanctions programmes go far beyond the borders of target countries. The US Government has identified and listed thousands of front organisations and individuals known as "Specially Designated Nationals," or SDNs, to further the effectiveness of the sanctions regimes. SDNs are individuals and entities located anywhere in the world that are owned or controlled by, or acting for or on behalf of, the Government of a sanctioned country, as well as designated international narcotics traffickers and terrorists targeted by the United States Government. The list also includes the names of vessels which have been determined to be owned or controlled by the targeted countries.
These vessels, companies, individuals, and banks may not appear to be related to the sanctions targets they actually represent. Many of these SDNs have innocuous names and are located in countries with which the United States enjoys harmonious trade relations, which is why it is important to carefully screen all parties involved in trade transactions using OFAC’s SDN list. All property and interests in property of SDNs that come into the possession of a U.S. corporation will be blocked.
Penalties for sanction violations
Depending on the program, criminal penalties can include fines ranging from $50,000 to $10,000,000 and imprisonment ranging from 10 to 30 years for willful violations. Depending on the program, civil penalties range from $250,000 or twice the amount of each underlying transaction to $1,075,000 for each violation. Vessels involved in trade contrary to the sanctions regulations may be subject to seizure and forfeiture.
OFAC has the authority to authorise transactions which would otherwise be prohibited under specific sanctions provisions. OFAC’s Licensing Division reviews all license applications on a first-in, first-out, case-by-case basis and issues or denies licenses based on US foreign policy and national security goals. Filing a complete application will expedite processing, but there are no guarantees that a license will be issued just because one is requested. The OFAC Licensing Division can be reached at +1 202 622 2480 for further licensing information, applications, or about the status of a pending application.
- Ivory Coast sanctions ended as of 14 September 2016.
On 16 January 2015 the amended Cuban Assets Control Regulations (31 C.F.R. § 515) came into effect upon publication in the Federal Register implementing policy changes as announced by the President on 17 December 2014. One of the amendments is to section 515.550 Certain vessel transactions authorized which broadened the definition of vessels permitted to engage in trade with Cuba, subject to specific licensing requirements.
§515.550 was updated 17 October 2016 to read:
§ 515.550 Certain vessel transactions authorized.
(a) Unless a vessel is otherwise engaging or has otherwise engaged in transactions that would prohibit entry pursuant to § 515.207, § 515.207 shall not apply to a vessel that is:
(1) Engaging or has engaged in trade with Cuba authorized pursuant to this part;
Note to paragraph (a)(1):
The authorization in this paragraph includes, for example, trade with Cuba authorized pursuant to § 515.533, § 515.559, or § 515.582, or by specific license.
(2) Engaging or has engaged in trade with Cuba that is exempt from the prohibitions of this part (see § 515.206);
(3) Engaging or has engaged in the exportation or re-exportation to Cuba from a third country of agricultural commodities, medicine, or medical devices that, were they subject to the Export Administration Regulations (15 CFR parts 730 through 774) (EAR), would be designated as EAR99;
(4) A foreign vessel that has entered a port or place in Cuba while carrying students, faculty, and staff that are authorized to travel to Cuba pursuant to § 515.565(a); or
(5) Carrying or has carried persons between the United States and Cuba or within Cuba pursuant to the authorization in § 515.572(a)(2) or, in the case of a vessel used solely for personal travel (and not transporting passengers), pursuant to a license or other authorization issued by the Department of Commerce for the exportation or re-exportation of the vessel to Cuba.
(b) Unless a vessel is otherwise engaging or has otherwise engaged in transactions that would prohibit entry pursuant to § 515.207, § 515.207(a) shall not apply to a foreign vessel that has engaged in the exportation to Cuba from a third country only of items that, were they subject to the EAR, would be designated as EAR99 or would be controlled on the Commerce Control List only for anti-terrorism reasons.
[81 FR 71376, Oct. 17, 2016]”
§515.207 is set out below:
§515.207 Entry of vessels engaged in trade with Cuba.
Except as specifically authorized by the Secretary of the Treasury (or any person, agency or instrumentality designated by him), by means of regulations, rulings, instructions, licenses or otherwise,
(a) No vessel that enters a port or place in Cuba to engage in the trade of goods or the purchase or provision of services, may enter a U.S. port for the purpose of loading or unloading freight for a period of 180 days from the date the vessel departed from a port or place in Cuba; and
(b) No vessel carrying goods or passengers to or from Cuba or carrying goods in which Cuba or a Cuban national has an interest may enter a U.S. port with such goods or passengers on board.
NOTE TO §515.207: For the waiver of the prohibitions contained in this section for vessels engaged in certain trade and travel with Cuba, see §515.550.
[58 FR 34710, June 29, 1993, as amended at 66 FR 36687, July 12, 2001; 80 FR 2292, Jan. 16, 2015; 80 FR 56918, Sept. 21, 2015]
Cuba is listed as a "non-entrant country". Hence, Cuban vessels are not permitted to enter US ports, internal waters, or territorial seas except when engaged in innocent passage, under the conditions of force majeure, or distress situations involving a medical emergency.
Non Cuban registered, owned, operated or chartered vessels are governed in part by the "Cuban Democracy Act 1992" (CDA) and the "Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996"
The "Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996" (also known as the Helms-Burton Act) is aimed at discouraging foreign investment in Cuba in former U.S. property nationalised by the Cuban government in 1959. The legislation has been drafted in such broad and ambiguous terms that it is very difficult to interpret the effects of this Act on international shipping.
However, Title IV provides for the exclusion from the United States, either through denial of a visa or exclusion at the port of entry, of any foreign national who the Secretary of State determines is a person who, "traffics" in "confiscated" property in Cuba, a claim to which is owned by a US national. Title IV requires the exclusion of corporate officers, principals or controlling shareholders of companies that engage in such trafficking, as well as the spouse, minor child or agent of persons excluded.
Title IV defines "traffics" to include: transfers, distributes, dispenses, brokers or otherwise disposes of confiscated property; purchases, receives, obtains control of, or otherwise acquires confiscated property; or improves or invests in (other than for routine maintenance) or begins to manage, lease, possess, use or hold an interest in confiscated property. The term "traffics" also covers entry into a commercial arrangement using or otherwise benefiting form confiscated property, as well as causing, directing, participating in or profiting from trafficking by or through another person or entity.
Information about e.g. the “180-day rule” and the “goods/passengers-on-board rule” can also be found in the “Frequently Asked Questions” (FAQ) to Cuba sanctions. Please refer to the below link to the U.S. Department of the Treasury – Frequently Asked Questions – Cuba Sanctions