Clifford Chance

Iran Sanctions Expanded by the National Defense Authorization Act for Fiscal Year 2013

4 January 2013

Late on 2 January 2013, President Obama signed into law the National Defense Authorization Act for Fiscal Year 2013 (the "2013 NDAA").  As of 1 July 2013, the 2013 NDAA will significantly increase the range of Iran-related transactions that can attract US extraterritorial sanctions.  It will do so primarily by making significant transactions in any currency with an Iranian Specially Designated National ("SDN") (i.e., Iranian persons included on the list of specially designated nationals and blocked persons maintained by US Treasury's Office of Foreign Assets Control – "OFAC") a basis for designation by OFAC.  An exception will apply for certain transactions with banks that are SDNs of Iran but not weapons of mass destruction ("WMD"), terror or human rights SDNs.  In total, the SDN list contains hundreds of Iranian SDNs.  The 2013 NDAA also expands the risk of designation in regard to a range of specific proscribed activities, through a series of overlapping and redundant designation provisions.  Effectively, the 2013 NDAA repeats the same core set of sanctions multiple times, providing the President with a range of options for addressing specific proscribed conduct.  The end result is a major increase in the US secondary boycott against Iran, i.e., the use of sanctions to deter non-US persons from entirely non-US business with US sanctions targets in Iran.  As of yet, countries that continue to trade with Iran have not protested or threatened any counter-measures, but perhaps that will change as the 1 July 2013 effective date approaches.

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