U.S. Sanctions Against Iran Impact Canadian Companies

The United States fully re-imposed sanctions against Iran on November 5 that had been lifted in January 2016 as part of the global deal to curtail Iran’s development of nuclear weapons. The “snap-back” of sanctions affects Canadian and other non-U.S. companies by reinstating “secondary sanctions” against non-U.S. persons and entities that continue to do business with Iran.

What You Need To Know

  • The sanctions focus on the Iranian financial, energy, shipping and aviation industries.
  • Canadian and other non-U.S. companies that do business with Iran legally under their own jurisdictions’ laws are at risk of being sanctioned by the U.S. pursuant to “secondary sanctions.”
  • Eight countries, but not Canada, received six-month exemptions to continue to import oil from Iran.

Snap-Back of U.S. Sanctions Against Iran

On May 8, 2018, the Trump administration announced the U.S. was withdrawing from the multilateral agreement with Iran concerning that country’s development of nuclear weapons, formally known as the Joint Comprehensive Plan of Action (JCPOA).

For its part of the JCPOA, the U.S. lifted sanctions in January 2016 that had pressured non-U.S. persons and companies, including those in Canada, from doing business with numerous Iranian banks, oil and gas companies, shipping concerns and airlines. The so-called “secondary sanctions” included a range of potential penalties against such non-U.S. persons—from denying access to U.S. financial resources to listing on the U.S. Specially Designated Nationals (SDN) list, which freezes all assets within reach of the United States. U.S. persons remained largely prohibited from transacting with business in Iran following implementation of the JCPOA, so its impact was felt mostly outside the U.S.

The May 8 announcement included 90- and 180-day wind-down periods based on the activity or industry. The 90-day wind-down period, which ended on August 6 this year, affected trade with Iran in various metals, currency, and Iran’s automotive sector. The 180-day wind-down period, which ended November 4 this year affects a more substantial range of businesses, including Iran’s port operators, and shipping and shipbuilding sectors; Iran’s energy industry, including oil, petroleum products and petrochemical products; and Iran’s banking, financial and insurance sector.

An important carve-out for Canadian and other non-U.S. companies that transacted business with Iran during the wind-down periods: the U.S. will allow such companies to receive payment after November 5 for the delivery of goods or services during the wind-down periods pursuant to contracts entered into before May 8, 2018.

Additional actions in connection with the U.S. snap-back of sanctions against Iran include:

  • the U.S. relisted on the SDN list over 700 sanctions targets, including 50 Iranian banks and their foreign and domestic subsidiaries, over 200 persons and vessels in Iran’s shipping and energy sectors, and Iran’s flag carrier Iran Air and its aircraft;
  • Canadian and other non-U.S. companies owned or controlled by U.S. persons are no longer permitted to engage in transactions with Iran and are again treated as U.S. persons directly subject to U.S. sanctions; and
  • among the potential consequences of re-imposed secondary sanctions, the U.S. will block a non-U.S. person’s property and assets in the U.S., or within possession or control of a U.S. person, if the non-U.S. person is determined to have “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of” the following.
    • The National Iranian Oil Company (NIOC).
    • The Naftiran Intertrade Company (NICO).
    • Any company owned or controlled by NIOC or NICO.
    • The Central Bank of Iran.
    • The purchase or acquisition of U.S. bank notes or precious metals by the Government of Iran.

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

For permission to republish this or any other publication, contact Janelle Weed.

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