General License D

To be exportable under OFAC General License D, software, hardware, and services must bear a specific categorization based upon the type of device, technology, and purpose. Specifically, the designation must be either: (1) EAR99 pursuant to Export Administration Regulation or export control classification number (“ECCN”) 5D992.c by the U.S. Department of Commerce pursuant to its Commerce Control List detailed on supplement No. 1. Additionally, the Annex to General License D details EAR and ECCN designations by eleven categories.

For the uninitiated, EAR and ECCN nomenclature may be quite perplexing, but they are simply ways to categorize exportable items according to degree of risk. For example, items related to ballistics would be high-risk, so must be exported with great care to ensure the items do not fall into the hands of the wrong parties. Alternately, items may be so ubiquitous and “mass market” that it makes little sense to regulate their export since they are found all over the world readily. EAR99, for example, indicates that the items are “NLR” – or no license required. But be forewarned: this doesn’t mean the exporter needs no license! It simply means there is one final check required. This last remaining check is to verify the receiving country is not on the “bad boy” list of countries that give rise to an export or other license requirement.

Iran previously was on this “bad boy” list. But recently, effective with General License D, exports to Iran of software, hardware, and services related to “personal communications” for personal use is NLR — so long as each item is designated EAR99 or ECCN 5D922.c or as designated on the Annex to the General License D. To illustrate, information on Apple’s public website provides ECCNs for its iPhone 5 as 5A992.c. Since Mobile Phones are authorized for export on the Annex to General License D and specifically those categorized as 5A992.c, then an iPhone 5 may be exported to Iran for persona use under General License D.

Adam Szubin, Director of the Office of Foreign Assets Control (OFAC) within the U.S. Department of the Treasury recently debuted General License D (“GLD”) which effectuates U.S. exports to Iran of services, hardware, and software incident to “personal communications.” Specific items are detailed on the Annex to the announcement, to include smart phones, tablets, etc. The first glance revealed by pulling aside the curtain might suggest GLD reflects a policy sea-change, as reflecting a departure from prior laws that hardened sanctions on most transactions.

But as was the case with the Metro-Goldwyn-Mayer film version of L. Frank Baum’s novel, the film classic Wizard of Oz, it is much more complex than that. This complexity requires that U.S. entities proceed with caution, as the following two issues show.

First, does General License D really reflect a sea-change? In reality, a review of ITSR shows that GLD is an extension of earlier policies regarding communications and the people of Iran. It should be noted, for example, that the previous iteration of ITSR allowed U.S. entities to export free, publicly-available software. See 31 C.F.R. § 540. Now, permission is being extended to the same items to include those that carry a price tag.

Second, as a practical matter, how can a U.S. company go about exporting services, software, and/or hardware while staying in compliance with the greater regulatory scheme? Remember, there are other laws and regulations in abundance with which U.S. entities and their partners must comply. One set of key laws governs banking transactions . So now GLD permits U.S. entities to export the above to Iran – but pragmatically, how will the U.S. entities manage the physical financial transaction, in light of the OFAC sanctions in place and the many Iranian banks on the SDN black-list.

GLD is certain to further the area’s reliance on the informal hawala money-transfer networks, a consequence that OFAC will presumably not find very desirable. But perhaps OFAC has liberalization of the SDN list in its sights: we will see.

For now, of course, U.S. entities and their partners must be careful to steer clear of the regulatory minefield as they follow the yellow brick road set forth in GLD.

OFAC General License D: EARs, ECCNs, and other data-designations.

OFAC follows the yellow brick road with General License D.