OFAC Issues Interpretations on Iran and the Palestinian Authority

September 7, 2006

The Office of Foreign Assets Control ("OFAC") has taken two recent actions related to transactions with countries and entities in the Middle East. On July 20, 2006, OFAC issued a Statement of Licensing Policy that establishes a favorable licensing regime through which U.S. persons can request OFAC approval of participation in projects in support of the Iranian people and their aspirations for freedom. Also on July 20, 2006, OFAC published a set of guidelines on transactions with the Palestinian Authority that explain the scope of OFAC sanctions against the Palestinian Authority and describe OFAC’s specific licensing policy with respect to transactions with the Palestinian Authority.

Statement of Licensing Policy for Iran

This policy statement explains that specific licenses may be issued to U.S. nongovernmental organizations and other corporate entities authorizing them to (1) engage in projects, including conferences and training, to support human rights, democratic freedoms and democratic institutions and to meet basic human needs; and (2) to establish or support of independent civic organizations. 

Specific licenses may also be issued to U.S. persons (both entities and individuals) authorizing them to engage in the following projects or activities: (1) the provision of donated professional medical services; (2) certain targeted educational, cultural and sports exchange programs, provided such programs are not in furtherance of Iranian military, industrial or technological infrastructure or potential; (3) environmental projects, provided such projects are not in furtherance of Iranian military or industrial infrastructure or potential; and (4) projects, including exchanges and technical training, to improve the flow of public information through independent media available to the Iranian public. 

The guidance notes that specific licenses issued pursuant to this policy generally will not authorize the exportation or reexportation to Iran of goods (including software) and technology listed on the Commerce Control List. 

Guidance on Palestinian Authority

This guidance explains that the OFAC sanctions against the Palestinian Authority affect only transactions by U.S. persons with the Palestinian Authority. Therefore, the sanctions generally do not prohibit U.S. persons from providing assistance to, or engaging in business dealings with, private individuals, corporations, or organizations in the West Bank or Gaza. 

In regard to licensing policy, the guidance notes that on April 12, 2006, OFAC issued 6 general licenses authorizing U.S. persons to engage in certain transactions with the Palestinian Authority. The guidance also explains that specific licenses may be issued on a case-by-case basis to authorize U.S. persons to engage in the following types of transactions with the Palestinian Authority: 

  1. Assistance projects for critical food, health, or welfare aid that is distributed from Palestinian Authority-run facilities such as schools, hospitals and clinics. 
  2. In-kind donation of medicines, medical supplies and medical devices to hospitals, clinics or other health care facilities owned or operated by the Ministry of Health. 
  3. Donated medical services in the West Bank and Gaza involving the Ministry of Health. 
  4. Goods and services related to disease eradication. 
  5. Dealings with universities and other educational institutions in the West Bank and Gaza. 
  6. Goods and services relating to education, including teaching, in the West Bank and Gaza. 
  7. Provision to and receipt from the Palestinian Authority of informational materials.
  8. Small-scale water projects in the West Bank and Gaza, for the benefit of municipalities not controlled by a Hamas mayor and/or a Hamas majority in the municipal council. 

The guidance further notes that specific license applications are more likely to receive favorable treatment when they meet all three of the following conditions: (1) a compelling case exists that there is no practical means to achieve the desired humanitarian goal outside of the proposed transactions with the Palestinian Authority; (2) the activities are designed to benefit directly persons in the West Bank and Gaza under circumstances in which, notwithstanding the practical need to involve the Palestinian Authority, the activities will not be subject to the control of the Palestinian Authority other than for routine administrative approvals; (3) the activities will not provide any significant material benefit, including technical advisory assistance, to the Palestinian Authority. 

Gibson, Dunn & Crutcher’s International Trade Regulation and Compliance Practice Group is monitoring these issues. For further information, please contact the Gibson Dunn attorney with whom you work or Judith A. Lee (202-887-3591, [email protected]), or Matthew Crispino (202-887-3617, [email protected]) in the firm’s Washington, DC office.

© 2006 Gibson, Dunn & Crutcher LLP

The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.