Alert June 03, 2013

U.S. Authorizes Sale of Certain Communications Software, Hardware and Services to Iran

Summary

On May 30, 2013, the U.S. government partially relaxed economic sanctions on Iran by authorizing the sale to Iranian consumers of certain personal communications and Internet connectivity services, consumer electronics (including laptops and smartphones) and software designed to facilitate personal communications. U.S. and foreign companies that are subject to the U.S. sanctions against Iran and market the products and services covered by this general license should evaluate whether it opens new sales opportunities in Iran.

On May 30, 2013, the Office of Foreign Assets Control (“OFAC”) of the United States Department of the Treasury issued a general license authorizing the sale and export to persons in Iran of certain personal communications and Internet connectivity services, consumer electronics (including laptops and smartphones), and software designed to facilitate personal communications.  Effective immediately, U.S. companies — and foreign companies that are owned/controlled by U.S. companies and thus subject to the U.S. sanctions against Iran — may sell specified products and services to Iranian consumers without OFAC’s prior review or approval.

This marked relaxation of the U.S. economic sanctions on Iran aims to “facilitate the free flow of information in Iran” and “empower the Iranian people as their government intensifies its efforts to stifle their access to information.”  And it reopens a potentially significant market, where nearly half of Iran’s approximately 75 million consumers access the Internet weekly, and 90% of households have a mobile phone.

Under the new general license, persons subject to the U.S. sanctions against Iran may now sell and export, subject to certain exceptions, the following hardware and software (together with any services necessary for their operation) to Iran:

  • Mobile phones, smart phones, personal digital assistants, and satellite phones;
  • Laptops, tablets, personal computers and accessories (disk drives, keyboards, mice, etc.);
  • Modems, radio equipment, routers and WiFi access points designated for 50 or fewer concurrent users;
  • Residential satellite terminals and receivers; Anti-virus and anti-malware software; and
  • Communications and connectivity software including virtual private networks, proxy tools, and fee-based tools for voice, text, and video communications.

The new general license also authorizes the sale to persons in Iran of consumer-grade Internet connectivity services, fee-based services to facilitate personal Internet communications (e.g., instant messaging, web browsing, blogging and media-sharing) and similar services.  Previously, the export to Iran of certain services incident to the exchange of personal communications over the Internet was authorized, but only if provided at no cost to the user.

The general license is qualified in several ways. For instance, it only applies to hardware and software classified under specified Export Control Classification Numbers on the Export Administration Regulations’ Commerce Control List. It remains unlawful to transact directly or indirectly with the Government of Iran (including its agencies and instrumentalities) and with certain persons or entities subject to a blocking order (“Specially Designated Nationals”).

Perhaps most importantly, the new general license is limited to services and associated software that facilitate “personal” communications – e.g., it does not authorize the provision of commercial-grade Internet connectivity services, domain name registration services, or web-hosting services for commercial endeavors. For some affected companies, it may be necessary to seek OFAC’s clarification regarding whether the general license covers a given product or service.

Companies that are subject to the U.S. sanctions against Iran and that market the kinds of hardware, software, or services covered by the general license should update their export compliance policies to reflect this change, and may wish to pursue new opportunities in Iran.

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 If you would like additional information about the issues addressed in this Client Alert, please contact Richard Matheny, who chairs Goodwin Procter’s National Security & Foreign Trade Regulation Practice, or the Goodwin Procter attorney with whom you typically consult.

Jacob Osborn contributed to the preparation of this client alert.