U.S. Moves to Block Conventional Arms Sales to Iran - Global Trade Magazine
  September 24th, 2020 | Written by

U.S. Moves to Block Conventional Arms Sales to Iran

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President Trump issued an Executive Order on September 21, 2020, which is effective immediately, imposes secondary sanctions on the transfer and sale of certain conventional arms shipments and the supply of related services to Iran by non-U.S. persons. This Executive Order follows the current administration’s failed effort to reinstate sanctions and a conventional arms embargo by the U.N. Security Council. The Executive Order, titled “Blocking Property of Certain Persons with Respect to the Conventional Arms Activities of Iran”, attempts to enforce such sanctions unilaterally by authorizing the U.S. Secretary of State to impose blocking sanctions on any non-U.S. person who transfers conventional arms to Iran or otherwise performs activities to support such transfers.

If the U.S. Secretary of State, in consultation with the U.S. Secretary of the Treasury, determines that a non-U.S. person has engaged in any of the following activities, then all of that non-U.S. person’s U.S. property (including property in the U.S., which transits through the U.S. financial system or which is otherwise in the possession of a U.S. person) will become blocked. U.S. persons and the U.S. financial system will be prohibited from transacting with those:

-Engaging in any activity that materially contributes to the supply, sale, or transfer, directly or indirectly, to or from Iran, or for the use in or benefit of Iran, of arms or related materiel, including spare parts;

-Providing Iran any technical training, financial resources or services, advice, other services, or assistance related to the supply, sale, transfer, manufacture, maintenance, or use of arms and related materiel;

-Engaging, or attempting to engage, in any activity that materially contributes to, or poses a risk of materially contributing to, the proliferation of arms or related materiel or items intended for military end-uses or military end-users, including any efforts to manufacture, acquire, possess, develop, transport, transfer, or use such items, by the Government of Iran or paramilitary organizations supported by Iran;

-Materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked pursuant to the Executive Order;

-Being owned or controlled by, or to having acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this Executive Order.

The Executive Order clarifies that it does not apply to persons “facilitating a transaction for the provision (including any sale) of agricultural commodities, food, medicine, or medical devices to Iran.”

Following the issuance of the Executive Order, the U.S. Department of Treasury’s Office of Foreign Asset Controls (OFAC) added several individuals and two (2) entities to the Specially Designated Nationals (SDN) list, thereby subjecting the designated entities to the above-described blocking sanctions. The Iranian entities are Mammut Diesel and Mammut Industrial Group P.J.S. (aka Mammut Industrial Group, Mammut Tehran Industrial Group, or Mammut Industries).

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) added five (5) individuals to the Entity List who BIS says “played a critical role in Iran’s nuclear weapons development program and continue to work for the Iranian regime.” By adding these individuals to the Entity List, they are now prohibited from receiving any items or technology that are “subject to the EAR”, which will essentially prohibit any exports or re-exports of U.S. origin items or technology to these individuals.

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Cortney O’Toole Morgan is a Washington D.C.-based partner with the law firm Husch Blackwell LLP. She leads the firm’s International Trade & Supply Chain group.

Grant Leach is an Omaha-based partner with the law firm Husch Blackwell LLP focusing on international trade, export controls, trade sanctions and anti-corruption compliance.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.