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March 05, 2020

New General License Reopens Flow of Agricultural Commodities, Medicines and Medical Devices to Iran

On September 20, 2019, the world changed for many exporters of agricultural commodities, medicines and medical devices. Previously, those items had been authorized for export to Iran pursuant to a humanitarian general license under the Iranian Transaction and Sanctions Regulations (ITSR). But in September, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated the Central Bank of Iran as a sponsor of terrorism.

The Central Bank of Iran is responsible, either directly or indirectly, for most currency exchange transactions in Iran. This made the Central Bank of Iran a critical part of the payment mechanism for purchases of agricultural commodities, medicines and medical devices under the general license. The designation of that financial institution as a sponsor of terrorism rendered the general license essentially unusable without running afoul of the ITSR.

As a result, OFAC received a wave of specific license applications from U.S. exporters requesting authorization to process payments for the sale of agricultural commodities, medicines and medical devices through the Central Bank of Iran. On February 27, 2020, OFAC issued General License 8 under the ITSR authorizing transactions and activities with the Central Bank of Iran ordinarily incident and necessary to undertake transactions pursuant to the general license. General License 8 restored the humanitarian general license to its same utility prior to September 20, 2019.

This is a major victory for exporters of those three categories of humanitarian items. OFAC’s policy shift also aligns with the intent of the general license, which was born out of Congress’ desire to ensure sanctions on Iran would not result in a humanitarian crisis. Congress passed the Trade Sanctions Reform and Export Enhancement Act of 2000, and OFAC issued the general license in order to put it into effect.

Exporters of agricultural commodities, medicines and medical devices must still ensure that they comply with the other requirements of the general license, including performing due diligence on all parties involved in the proposed transaction. However, OFAC’s issuance of General License 8 reopens the door to the flow of those items to Iran, which for many exporters in these industries is an important and lucrative market.

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