New Extraterritorial U.S. Restrictions on Reexports to Iran and WMD-Designated Entities

On January 15, 2009, the Department of Commerce, Bureau of Industry and Security (BIS) published an interim final rule amending the Export Administration Regulations (EAR) to expand restrictions on the reexport to Iran of U.S.-origin items with more than de minimis U.S. content. This action significantly expands the extraterritorial reach of the U.S. sanctions regime against Iran by imposing new restrictions on non-U.S. persons who engage in reexport transactions involving affected U.S. goods.

Expanded List of Items Subject to Iran Reexport Restrictions. BIS’ action identifies certain classifications of items subject to the EAR that are now prohibited for reexport to Iran by foreign companies and persons not otherwise subject to the U.S. sanctions regime against Iran administered by the Treasury Department’s Office of Foreign Assets Control (OFAC). The list of affected items touches on a number of industries, including, but not limited to, aviation, electronics and telecommunications.

Export Ban on WMD-Designated Entities. The new rule also imposes new licensing restrictions that block reexports by non-U.S. companies or persons of U.S.-controlled items to any party that has been blacklisted by OFAC as a “Specially Designated” proliferator of weapons of mass destruction (WMD). These entities may be located in any country. This effectively expands the impact of OFAC’s designation of these entities to give it extraterritorial effect and application to non-U.S. persons when they participate in transactions involving U.S.-controlled items.

U.S. and foreign companies with an interest in offshore transactions involving U.S.-origin goods and other items subject to U.S. export controls should evaluate the potential impact of these new restrictions on their business activities to determine whether they deal with affected items and to determine what actions may be required to assure compliance with the new U.S. reexport restrictions. This includes—

  • determining whether any U.S.-origin items affected by the new U.S. restrictions are relevant to their business activities
  • reviewing Iran-related reexport transactions to evaluate whether U.S. export licensing requirements apply
  • implementing procedures to assure that transactions involving possible reexports of U.S.-origin items are screened effectively against relevant OFAC Specially Designated Nationals (SDN) lists to prevent prohibited reexports of U.S. controlled items.

A. Revisions to the EAR Expanding Licensing Requirements for Reexports to Iran

The January 15, 2009, interim final rule, which is effective immediately, establishes a new license requirement for the reexport of a number of items that previously did not require a license for reexport to Iran under the EAR. According to BIS, the new rule implements these changes to the EAR in order to promote consistency and to clarify the role of BIS in the enforcement of U.S. export control policy for Iran.

The new reexport restrictions for Iran affect 10 specific commodity classification headings under the EAR. These include classifications for a variety of items, ranging from general purpose electronic equipment and electronic test equipment to navigation equipment and aircraft parts and components. Moreover, the new rule mandates that items controlled under these classification headings now be treated as “controlled U.S. content” when incorporated into foreign-made items that are to be exported from third countries to Iran in determining whether the foreign-made item had sufficient “controlled U.S. content” to be subject to U.S. export controls under the EAR.

B. New Restrictions on Reexports to Parties Designated under OFAC Sanctions Programs

The rule also amends EAR reexport restrictions for Iran affecting non-U.S. persons in reference to OFAC designations of certain blacklisted parties, effectively expanding the extraterritorial impact of U.S. sanctions measures. Specifically, the rule—

  • establishes a new licensing requirement for affected reexports to parties that OFAC has designated as proliferators of weapons of mass destruction (or their supporters)
  • reinforces the general BIS policy of denial on licensing for any proposed export or reexport to Iran, with only limited exceptions to allow case-by-case review of cases associated with humanitarian or civil aviation safety considerations.


Because this new rule establishes new U.S. restrictions on trade with Iran that apply to non-U.S. persons, including foreign subsidiaries of U.S. companies and foreign entities that may have no other connection with the United States, it is important for anyone who participates in transactions involving potential reexports of U.S.-controlled items to Iran to evaluate the potential impact of this rule on their business activities. This should include a review of the expanded list of items subject to U.S. reexport restrictions for Iran to determine whether any of the affected items are relevant to their own business activities. To the extent any are, it is important to establish effective internal controls to assure compliance with the new U.S. reexport restrictions as they apply with respect to Iran. Consideration should be given to both relevant U.S.-origin items and to foreign-made goods that incorporate more than 10 percent U.S.-origin content, such that they are subject to EAR controls for Iran. Separately, this new rule highlights the need to incorporate business transaction screening mechanisms to account for relevant OFAC SDN designations whenever non-U.S. persons deal with U.S.-controlled items.


If you have questions regarding this alert, please contact:

Wynn H. Segall 202.887.4573 Washington, D.C.
Tamer A. Soliman 202.887.4430 Washington, D.C.
Nnedi C. Ifudu 202.887.4013 Washington, D.C.
Christopher T. Timura 202.887.4597 Washington, D.C.