US sanctions against Iran: Potential risk exposure

US trade sanctions and export controls targeting Iran have attracted increasing attention from Chinese companies doing business in Iran or with Iran counterparties. This article aims to provide a high-level overview on US trade sanctions and export controls targeting Iran, their implications (particularly in terms of their extraterritorial application), and the potential penalties that can be imposed on companies and their executives and employees in the event of violations.

Trade sanctions. The US government currently maintains comprehensive sanctions against Iran, enforced and administered by the US Treasury Department’s Office of Foreign Assets Control (OFAC) under the Iranian Transactions and Sanctions Regulations (ITSR). With limited exceptions, “US persons” and their owned or controlled non-US entities (together, “ITSR parties”) are generally prohibited from engaging directly or indirectly in virtually all transactions involving Iran, the government of Iran (including entities owned or controlled by or acting for the government of Iran), Iranian financial institutions, and any Iranian specially designated national (“SDN”, including any entity 50% or more owned by one or more SDNs).

“US persons” include (i) entities organized under US laws and their non-US branches, (ii) individuals and entities physically located in the US, and (iii) US citizens and permanent resident aliens (green card holders) wherever located or employed. In addition to direct dealings with Iran, ITSR parties are prohibited from facilitating or participating in any transaction by non-US parties involving Iran that would otherwise be prohibited if engaged in directly by an ITSR Party.

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Danian Zhang (Shanghai) at danian.zhang@bakermckenzie.com