Benefits for Business Travelers in the New Iran Personal Communications General License

This post was written by Leigh T. Hansson, Michael J. Lowell, and Joelle E.K. Laszlo.

U.S. persons traveling to Iran for business can now take heart, because they, as well as most laptops and smart phones, may do so without the need for a license. A recent amendment to the wordily-named “General License with Respect to Certain Services, Software, and Hardware Incident to Personal Communications” (formerly “General License D,” now “General License D-1”) permits the export and reexport of a surprisingly broad array of hardware and software to Iran. But even though business travelers to Iran may bring many high-tech devices, they are still advised to exercise great care in planning what they will do in the country.

Whether on purpose or, as some have speculated, by accident, General License D only permitted the export and reexport of specified hardware and software to recipients in Iran, which meant that it did not allow travelers to the country to bring that same hardware and software with them. General License D-1 is a game changer in this regard, permitting individuals traveling from the United States to carry specified hardware and software to Iran, and to bring back items carried out of the U.S. The list of hardware and software authorized for export or reexport under General License D-1, if not actually longer than the list associated with General License D, is more comprehensible. Importantly, the Treasury Department’s Office of Foreign Assets Control (“OFAC”) has clarified that any item on that list, which comprises the Annex to General License D-1, is presumptively “incident to personal communications,” meaning that it may be exported or reexported to Iran under the authority of the License, even if it will not only be used for personal communications. Hence, laptops and smart phones carried to Iran chiefly for business purposes (in addition to the occasional Facebook status update or Skype session with the fam) fall within the License’s scope, as long as they meet the applicable technical criteria in the Annex. Mobile apps and fee-based desktop publishing and productivity software, as long as designated EAR99 or classified under Export Control Classification Number 5D992.c, may also be exported or reexported under the General License.

To be sure, business travelers are not quite the intended beneficiaries of the expanded authorizations under General License D-1. Rather, the new License and its predecessor are the continuation of an effort started by the U.S. Government in 2010 to facilitate the access to and use of personal communications technologies by citizens in some of the most heavily-embargoed countries. Thus, even though travel to Iran from the United States is not prohibited, business travelers should not view General License D-1 as an invitation to pack their bags. U.S. sanctions still greatly limit the ability of U.S. persons to participate in transactions with or provide services to Iran. Business travelers seeking to avoid a forced vacation (or OFAC penalties) are advised to obtain guidance on what they can and cannot do before departing for Iran.

Secretary Clinton Announces an Easing of Sanctions on Burma

This post was written by Michael J. Lowell and Michael A. Grant.

On May 17, U.S. Secretary of State Hillary Clinton announced in remarks with the foreign minister of Burma (Myanmar) that the U.S. government will be taking action to ease sanctions on Burma in the form of a new general license. A general license is similar to an exception to the sanctions and authorizes the performance of certain categories of transactions.

Currently, U.S. sanctions on Burma generally prohibit U.S. Persons from engaging in new investment, exporting financial services, and importing Burmese-origin goods into the United States, among other restrictions, including an arms embargo. Secretary Clinton stated that investment and the export of financial services will soon be authorized:

“The United States will issue a general license that will enable American businesses to invest across the economy, allow citizens access to international credit markets and dollar-based transactions.” Secretary Clinton also said that, “Our presumption is that our companies will be able to deal in every sector of the economy with any business. That is a rebuttable presumption in the event that there is a company whose reputation, whose practices, are not in keeping with our stated policies of corporate responsibility or other matters that rise to our attention. But the presumption is that our oil and gas companies, our mining companies, our financial services companies are all now free to look for investments that can be mutually beneficial to Burma and to them.”

Secretary Clinton’s announcement follows the lead of Canada and the European Union (which recently suspended their sanctions on Burma), and indicates a warming of relations with Burma evident by Secretary Clinton’s recent visit.

It is important to note that Secretary Clinton’s remarks do not have the force of law, and the Office of Foreign Assets Control (“OFAC”) has not yet issued the general license that Secretary Clinton announced. Also, there will continue to be prohibitions against transactions with Specially Designated Nationals in Burma, and other limitations will likely be on the general license. There has not yet been any announcement on the timing for implementation of this new general license.

The Secretary’s full remarks are available here.

 

New OFAC Guidance Promotes Internet Freedom in Iran...As Long As the Internet Is Free

This post was written by Joelle E.K. Laszlo.

What if you issued a general license and no one used it? The Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has faced such a conundrum since March 2010, when it published a final rule amending U.S. regulations on Cuba, Iran, and the Sudan to permit the license-free export of certain services and software incident to the exchange of personal communications over the Internet. But the rule did not have quite the impact that was intended – in particular, the “electronic curtain” around Iran never fell. Thus, OFAC recently issued new interpretive guidance and a policy statement on Internet freedom in Iran. While on its face this is a nice gesture, a closer look confirms that the only Internet services and software free from regulation are those free of charge; fee-based products and services essentially remain subject to the strictest controls on exports to Iran.

OFAC’s interpretive guidance on the personal communications general license for Iran includes the following “illustrative list” of free services and software that fall within the scope of the license:

  • Personal Communications (e.g., Yahoo Messenger, Google Talk, Microsoft Live, Skype (non-fee based))
  • Updates to Personal Communications Software
  • Personal Data Storage (e.g., Dropbox)
  • Browsers/Updates (e.g., Google Chrome, Firefox, Internet Explorer)
  • Plug-ins (e.g., Flashplayer, Shockwave, Java)
  • Document Readers (e.g., Acrobat Readers)
  • Free Mobile Apps Related to Personal Communications
  • RSS Feed Readers and Aggregators (e.g., Google Feed Burner)

As long as they are made publicly available at no cost to the user (and provided the user is not the Iranian government or an agent thereof), such services and their associated software may be exported to Iran from the United States or by a U.S. person, wherever located, without a specific license.

OFAC’s statement of its “favorable” licensing policy on Internet freedom in Iran similarly provides a non-exhaustive list of fee-based services and software eligible for specific licensing, including web hosting, online advertising, fee-based mobile applications, and fee-based Internet communications services. What the statement neglects to mention, however (and what commentators besides us have noticed), is that any specific license issued to provide fee-based personal communications services in Iran will not permit the U.S. service provider to accept payments made through a designated Iranian bank. Unfortunately, these are the very banks likely to be used by most Iranian citizens, who are precisely the anticipated customers of fee-based personal communications services. Thus, while OFAC’s intention may be to approve licenses to provide fee-based personal communications services in Iran, such licenses may not be so readily used.

The result under OFAC’s Iran policy is that freedom’s just another word for Internet you didn’t pay for – at least if it comes from a U.S. provider. If history is any gauge, further developments in this area will not come soon, but we (and Bobby McGee) will be watching for them.

Who Wants Libyan Oil?

With all that had been going on in Libya, the US Government has been working to ensure that regulations are not prohibiting the Administration's anti-Gaddafi policy. OFAC recently released some guidance that should ease the burden on those US persons seeking to do business with the anti-Gaddafi regime in eastern Libya. For more information seek this Reed Smith Client Alert.

Ramped-Up Libyan Sanctions Impacting U.S. Business; More to Come

This post was written by Joelle E.K. Laszlo.

In response to the increasingly grave political, commercial, and humanitarian turmoil that Libya has endured in the recent weeks, the international community has combined forces in an effort to subdue Muammar Qadhafi’s brutal regime. The United Nations Security Council has called its Member States to enact, among other initiatives, trade sanctions targeted against not only Qadhafi and his close associates, but also against the entire Libyan Government.

In affirming this concerted stance against Qadhafi, President Obama put into force an Executive Order Blocking Property and Prohibiting Certain Actions Related to Libya (“the Order”) on February 25, 2011. The Order immediately blocks the assets of and prohibits the provision of goods or services (including humanitarian donations) to: the Libyan Government and its agencies, instrumentalities, and controlled entities; the Central Bank of Libya; and Qadhafi and those closely associated with him. The Order further provides for the blocking of assets of anyone determined by the Secretary of the Treasury, in consultation with the Secretary of State, to be a senior official of the Libyan Government; a child or agent of Qadhafi; a spouse, dependant child, or agent of any of Qadhafi’s children named in the Order; or in any way responsible for or materially involved in “the commission of human rights abuses related to political oppression in Libya.”

On the day the Order was signed, aside from adding the designated Qadhafi family members to the Specially Designated Nationals List (each with a sizeable list of aliases), the Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued a general license authorizing transactions with Libyan Government –owned or –controlled financial institutions organized under the laws of a country other than Libya. On February 26th, the State Department’s Directorate of Defense Trade Controls announced the immediate suspension of all licenses it had issued for exports to Libya, and advised that no exemption in the International Traffic in Arms Regulations may be used to export defense articles and services to Libya until further notice (forthcoming in the Federal Register). Shortly thereafter, OFAC issued a second general license on March 1, 2011 authorizing the provision of and payment for goods and services to Libya’s diplomatic missions to the United States and the United Nations (limited to items to support official business and for employee personal use).

The Order, which actively blocks an estimated $30 billion, was described by the White House as “the most rapid and forceful sanctions” ever, and has already caused considerable commercial backlash. For instance, Morgan Stanley, in complying with the OFAC sanctions, has been left with no alternative but to entirely cease its operations in Libyan oil trade. Other members of the U.S. business community have expressed their concern and continue to seek authorization to provide measures of safety, welfare, and support of their employees and contractors who remain in Libya by paying their salaries and for other routine taxes, fees, benefits, goods and services associated with their employment. As developments with respect to Libya’s political and commercial climate become alarmingly unpredictable, investors and other potential stakeholders should remain aware of the situation at hand and should also exercise a heightened level of prudence, particularly with respect to transactions that may implicate the Libyan government or its agencies, instrumentalities or controlled entities.

Acting alongside the U.S, other nations and coalitions have recently demonstrated their united opposition against Qadhafi with sanctions of their own. A Reed Smith Shipping Alert addressing the measures taken by the U.S., the United Nations, and the European Union is available here.

This post was co-authored by Reed Smith Intern Henry R. Barnes.