On November 2, 2015, the US Department of the Treasury's Office of Foreign Assets Control ("OFAC") updated and expanded the list of "medical supplies" that can qualify for export or re-export to Iran under the existing general license for medicine and medical supplies. While this modification does not, by its terms, relax the general commercial embargo on Iran, or the wide range of extraterritorial or "secondary" sanctions, it does provide additional opportunities for lawful trade with Iran—subject to certain limitations on the types and terms of financing, delivery and performance obligations, which parties can be involved and alignment with export control considerations.
US sanctions and the general license for medical supplies
The Iranian Transactions and Sanctions Regulations ("ITSR," 31 CFR Part 560) prohibit US Persons1 and entities they own or control, including foreign subsidiaries, from engaging in or facilitating nearly all commercial transactions involving Iran.
However, the ITSR contains a general license, which authorizes the exportation or re-exportation of certain "medical supplies" to Iran. This general license also authorizes "related transactions," such as "making of shipping and cargo inspection arrangements, the obtaining of insurance, the arrangement of financing and payment, shipping of the goods, receipt of payment, and the entry into contracts (including executory contracts)." 31 CFR 560.530(a)(3)(i). So long as a given export or re-export is in line with the terms of the general license, no further authorization from OFAC is required to proceed. (A "specific license" from OFAC would be required for any transaction not within the parameters of the general license.)
OFAC's expansion of the medical supplies list
The general license in Part 560.530(a)(3)(i) covers the "medical supplies" expressly listed by OFAC on its website. The November 2, 2015, change removes the word "basic" from the title of the list of medical supplies covered by the license2 and alphabetizes and expands the items listed. You may find the revised list here. Notably, the revised list adds two new categories of products: (1) Inherited Preventative Care, which covers genetic testing products, and (2) Otology and Neurotology, which covers hearing aids, accessories and components. The revised list also adds several items to the categories of General Medical Equipment and Supplies, Cardiology, Dental Equipment and Supplies, Gynecology & Urology, Laboratory, Neurology, Obstetrics and Maternity Care, Ophthalmology and Optometry, Physical and Occupational Therapy, Radiology, and Surgery. The Anaesthesiology, Apparel, Nephrology, and Sterilization categories did not change.
The general license remains limited
As a result of the November 2, 2015 update, a wider range of items can qualify for the general license. However, the general license contains several important conditions with which subject transactions must comply:
- Financing and payment terms. The general license applies only to transactions involving payment of cash in advance; certain sales on open account; financing by third-country (i.e., non-US, non-Iranian) financial institutions that are not owned or controlled by a US Person (though a US financial institution can confirm or advise on such financing); or certain types of letters of credit issued by an Iranian financial institution blocked solely for being Iranian (and not because of its association with terrorism, for example) so long as the letter of credit is initially advised, confirmed, or otherwise dealt in by a third-country financial institution. See § 560.532. Transactions pursuant to the general license cannot involve debiting a blocked or frozen account, or debits or credits to Iranian accounts on the books of a US depository institution.
- Contract duration and performance. All exports or re-exports under the general license must be shipped within the 12-month period beginning on the date of the signing of the contract for export or re-export.
- Prohibited counterparties. The general license does not authorize exports or re-exports to military and law enforcement purchasers or importers. It also does not authorize exports or re-exports to certain persons on OFAC's Specially Designated Nationals and Blocked Persons List who have been targeted for sanctions because of, among other things, their connections to terrorism, or the proliferation of weapons of mass destruction,
- Export control considerations. The general license applies only to medical supplies that are designated as "EAR99" for purposes of US export controls or which would be so designated if they were located in the United States.
Conclusion
The expanded list of "medical supplies" eligible for the general license may create additional opportunities for lawful trade with Iran. However, significant restrictions on trade with Iran remain in place, including under the general license itself.
The commercial landscape for doing business with Iran remains fluid. The recent agreement on Iran's nuclear program is likely to significantly impact this landscape. Accordingly, active monitoring of this issue is critical to identifying opportunities as well as understanding the evolving restrictions.
Below is the list of newly added items to the Medical Supplies list under 31 C.F.R. 560.530(a)(3)(ii) on November 2, 2015:
General Medical Equipment and Supplies:
- Bottles (prescription)
- Capnographs
- Contraceptives (inter-uterine devices (IUDs), hormonal therapy methods, barrier methods)
- Continuous positive airway pressure (CPAP) systems and all components
- Humidifiers
- Medical flowmeters: oxygen & air
- Medical pumps
- Oxygen apparatus, all
- Pulse oximeters
- Refrigerator: compartmental for morgues
- Spirometers
- Aspirators – all sizes and types; including kits
- Tents: pediatric, aerosol, and mist
- Ventilator: adult and tubing and accessories
Cardiology:
- Ablation devices and accessories: radio frequency
- Balloons extractor, retrieval
- Cardiac monitors: implantable or external
- Cardiac pacemakers
- Cardiac programmers
- Cardiopulmonary oxygenation systems, devices, and monitors
- Coagulation machines
- Filters: arterial
- Grafts: peripheral bypass
- Heart positioners: surgical revascularization
- Heart valves: surgical transcatheter (non-surgical)
- Inflation devices: interventional
Dental equipment and supplies
- Bone graft matrices
- Dentures, crowns, molds, orthodontics, all
Gynecology & Urology
- Extracorporeal lithotripters
Laboratory
- Autoclaves (20 liters or smaller only) for medical instrument sterilization and accessories
- Flow cytometry accessories, reagents, and components
Neurology
- Neurostimulators, implantable
Obstetrics and Maternity Care
- Assisted reproductive technology and related equipment
- Incubators/Isolettes
- Infant radiant warmer and parts and accessories
- Neonatal equipment (phototherapy, nasal CPAP, etc. and all components)
- Ventilator: infant/pediatric and tubing and accessories
Ophthalmology and Optometry
- Phoropters
- Tonomets
- Vision/Optometry related machines and supplies
Physical and Occupational Therapy
- Bath cubes, therapy
- Boots, mitts, and liners for therapeutic pain relief
- Manipulation boards
- Orthopedic shoes, boots, etc.
Radiology
- Computer tomography scanners (CT, MDCT)
- Contrasting agents, both injectable or non-injectable
- Magnetic resonance imaging (MRI) machines
- Medical/Dental film
- Nuclear medicine imaging machines
- Positron Emission Tomography (PET)
- PET cyclotron machines
- PET radiopharmaceutical tracer machines, including cassettes
- Scintillation Camera/Anger cameras for medical imaging
- Single Photon Emission Computed Tomography (SPECT) machines
- X-ray machines, including mammography machines
- Parts and accessories for medical imaging devices above that do not contain nuclear or chemical components
Surgery
- Cervical fusion kits
- Cosmetic or reconstructive implants (jaw implants, breast implants, skin grafts)
- Orthopedic plates/screws, fixators, implants, cement
- Surgical imaging machines; including image-guiding surgery products, ear, nose and throat
- Surgical shunts
- Tissue stabilizers, surgical revascularizations
Footnotes
1 The ITSR defines a US Person to mean "any United States citizen, permanent resident alien, entity organized under the laws of the United States (including foreign branches), or any person in the United States." 31 CFR 560.314. Under 31 CFR 560.215(b), an entity is "owned or controlled" by a US Person if the US Person (i) holds 50 percent or more interest in the entity, (ii) holds a majority of seats on the entity's board of directors, or (iii) "otherwise controls the actions, policies, or personnel decisions of the entity."
2 OFAC had removed the term "basic" from the definition of medical supplies in the general license itself in April 2014, but the "List of Basic Medical Supplies" on OFAC's website had not been updated since 2013.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
