US has more or less a complete ban for US persons (that is US citizens and permanent resident aliens, persons physically in the United States (regardless of citizenship), US-organized entities and their branches, and any foreign entity owned or controlled by a US person) to do any transaction with an Iranian nexus. Sanctions that may be applicable to other persons than US persons are essentially limited to (1) sanctions imposed by EU and (2) secondary imposed by the US.
1. Sanctions imposed by EU
Prohibited cargoes and activities
- Shipment of military goods and technology
- Shipment of missile technology
- Shipment of goods and technology which could contribute to the development of nuclear weapon delivery systems
- Shipment of equipment for internal repression
- Shipment of equipment for monitoring communications
- Involvement of persons or entities on the EUs list of targets
Cargoes that requires a license:
- Goods and technology on the Nuclear Suppliers Group list
- Other listed dual-use goods and technology that could contribute to reprocessing, enrichment-related, heavy water-related or other activities inconsistent with the JCPOA
- Graphite and raw or semi-finished metals
- Enterprise Resource Planning software, designed specifically for use in nuclear and military industries
For detailed information about the EU sanctions please see document below:
Iran Sanctions - European Union (30 June 2016)
2. Secondary sanctions imposed by the US
Non-US persons are generally prohibited to ship US goods to Iran or make any monetary transaction having an Iranian nexus involving the US financial system, or any foreign branch of the US bank, regardless of the currency involved. Other US secondary sanctions, which were essentially lifted under the Iran nuclear deal (JCPOA), will apply as follows following the US withdrawal from the JCPOA on 8 May 2018:
Prohibited cargoes and activites as from 6 August 2018:
- the purchase or acquisition of US dollar banknotes by the Government of Iran;
- Iran’s trade in gold or precious metals;
- the direct or indirect sale, supply, or transfer to or from Iran of graphite, raw, or semi-finished metals such as aluminium and steel, coal, and software for integrating industrial processes if those materials are to be used:
- in connection with the energy, shipping or shipbuilding sectors of Iran or any sector of the economy of Iran determined to be controlled, directly or indirectly, by Iran's Revolutionary Guard Corps, or
- sold, supplied or transferred to or from an Iranian person included on the U.S. list of Specially Designated Nationals, or
- determined to be used in connection with the nuclear, military or ballistic missile programs of Iran.
- significant transactions related to the purchase or sale of Iranian rials, or the maintenance of significant funds or accounts outside the territory of Iran denominated in the Iranian rial;
- the purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt; and
- Iran’s automotive sector.
Prohibited cargoes and activites as from 4 November 2018:
- Iran’s port operators, and shipping and shipbuilding sectors, including on the Islamic Republic of Iran Shipping Lines, South Shipping Line Iran, or their affiliates;
- petroleum-related transactions with, among others, the National Iranian Oil Company, Naftiran Intertrade Company, and National Iranian Tanker Company, including the purchase or transport of petroleum, petroleum products, or petrochemical products from Iran (as defined at page 38948 in Executive Order 13846, see below);
- transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions under Section 1245 of the National Defense
Authorization Act for Fiscal Year 2012 (financial institutions in countries that make significant reductions in their purchases of Iranian crude during and after the wind-down period will be eligible for exemptions from these sanctions);
- the provision of certain specialized financial messaging services to the Central Bank of Iran and Iranian financial institutions;
- the provision of underwriting services, insurance, or reinsurance; and
- Iran’s energy sector.
- Material support for, or goods or services in support of, any Iranian person on the U.S. list of Specially Designated Nationals.
As far as insurance is concerned the following applies:
Section 202 of the Iran Threat Reduction and Syria Human Rights Act of 2012
- Prohibition to insure vessels used to transport crude oil from Iran to another country
Section 1246 of the Iran Freedom and Counter-proliferation Act (IFCA)
- Prohibition to provide underwriting services or insurance or reinsurance for any activity for which sanctions have been imposed under the U.S. laws or regulations or
- to any person in the energy, shipping or shipbuilding sectors of Iran, or
- for the sale, supplier transfer to or from Iran of the materials described in section 1245(d) of IFCA, or
- to any person designated for the imposition of sanctions in connection with Iran's proliferation of weapons of mass destruction or delivery systems for same, or Iran’s support for international terrorism, or
- any Iranian person included on the SDN List
The insurance prohibition includes so called “waiver cargoes” or SREs for countries holding a Significant Reduction Exemption. The Club’s understanding is that countries holding SREs are being advised to import Iranian crude only on NITC or IRISL vessels, or on vessels registered in the country holding the SRE, if those vessels are covered by a sovereign guarantee issued by the nation holding the SRE.
For detailed information about the US secondary sanctions, please see Executive Order 13846 as well as OFAC's explanatory notes to the same.
The US secondary sanctions pose particular problems for members based in EU states or otherwise subject to EU law. Pursuant to Council Regulation 2271/96, as amended by Delegated Regulation 2018/1100, EU companies/persons are required not to comply with US secondary sanctions. In addition, EU companies/persons will be reimbursed for losses, caused by the application of US secondary sanctions. For more information about Delegated Regulation 2018/1100, please see P&I Circular of 9 August 2018.
In sum, the situation regarding US sanctions is complex. EU based companies/persons may find themselves in a position where they either are in breach of US sanctions or EU sanctions. Members are therefore recommended to exercise great caution and to seek legal advice should they contemplate any business relationship or transactions with an Iranian nexus.
Notes on Sanctions and P&I Cover
P&I cover for liabilities arising out of sanctions legislation is available only under limited circumstances. In the event the sanctions legislation will trigger a penalty by way of a fine imposed on the member this will be covered pursuant to the test in P&I Rule 7 Section 6. Consequently, the Club’s position, in line with that of other Clubs, is that the member has a duty to take steps to satisfy the legality of the member’s own actions, and to ensure the vessel is not engaged in any unlawful trade, see inter alia P&I Rules 10 and 11. Hence, unless the member can show that reasonable steps were taken to avoid the sanction and that the circumstances otherwise would justify Club cover then the penalty is likely to fall outside Club cover.
The same test is likely to apply for other liabilities that could arise due to sanctions legislation, for instance if cargo onboard a vessel is damaged in the event the vessel is detained or banned from trading as a result of sanctions legislation, particularly if the legislation and its implications was known or ought to have been known to the member. In certain severe situations where breach of sanctions legislation has been made with knowledge of the member there is a risk that the P&I insurance can cease altogether pursuant to Rule 27 (f). However, it is important to keep in mind that each situation is unique and cover issues have to be decided in the light of prevailing circumstances.
Sanctions legislation affecting the Club and its reinsurers may also have impact on Club cover. Pursuant to Rule 11 Section 4 liabilities may be excluded from cover in case payment of a claim is likely to expose the Club or any of its reinsurers to sanctions. The payment restrictions in the EU Iran sanctions legislation are examples of such legislation. To this end, the Club is subject to Swedish law and to the authority of the Swedish Financial Supervisory Authority although the legislation in other countries may be relevant. Needless to say, payment restrictions may also prevent the Club from assisting a member in providing a guarantee for example providing a Letter of Undertaking to a cargo claimant.
Members are encouraged to seek specific legal advice on any activity or transaction which may involve sanctions legislation in order to assess their exposure to sanctions. This is particularly important because sanctions legislation may have adverse impact on the members’ P&I cover. In addition, the Club’s ability to assist members may become restricted due to sanctions legislation.
In case members have any further questions regarding sanctions and Club cover please contact the Club.