Calling All Techies: OFAC Issues New General License Allowing Exports of Software and Hardware to Iranian Citizens

On May 30, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a new General License allowing the exportation to Iran of certain services, software, and hardware incident to personal communications. General License D, which is effective May 30, 2013, expands upon the current regulations by authorizing sales to Iranian consumers of hardware, such as mobile telephones and laptop computers and some software, including anti-virus and anti-tracking programs.

The General License can be found on OFAC’s Web site here.

General License D

General License D expands upon the Iranian Transactions and Sanctions Regulations, 31 C.F.R. § 560.540 (ITSR) most notably by opening up the exchange of “fee-based” services and related software, and authorizing the sale of certain hardware and software. US companies have previously been allowed to export to Iran free Internet services, such as chat and email and free related software. However, the sale of fee-based services and software was only allowed through specific licenses on a case-by-case basis.¹ OFAC has now eliminated the need for US companies to apply for a license for these specific transactions, as long as all conditions of the General License are met.

Specifically, the General License authorizes the sale of hardware, software, and services that fall into four new categories:
 

1. Fee-Based Services: fee-based services incident to the exchange of personal communications over the Internet, such as instant messaging, chat and email, social networking, sharing of photos and movies, web browsing and blogging, are authorized;
    

2. Fee-Based Software: fee-based software subject to the Export Administration Regulations, 15 CFR parts 730 through 774 (the EAR), that is necessary to enable the services described above, provided that such software is designated as EAR99, or is classified by the US Department of Commerce on the Commerce Control List, 15 CFR part 774, supplement No. 1 under export control classification number (ECCN) 5D992.C (mass market encryption software), is authorized;
    

3. Software and Hardware: a wide array of enumerated software and hardware subject to the EAR and incident to personal communications (such as anti-virus software, anti-tracking software, mobile telephones, satellite telephones, laptop computers, etc.) are authorized. The list of hardware and software that is authorized is listed in Annex A to the General License (and reprinted below for ease of reference). It is noteworthy that the list contains a number of telecommunications and encryption ECCNs subject to anti-terrorism controls); and
    

4. Internet Connectivity: consumer-grade Internet connectivity services and the provision, sale, or leasing of capacity on telecommunications transmission facilities (such as satellite or terrestrial network connectivity) incident to personal communications are authorized.
    

The new authorization extends to all US companies and their owned or controlled non-US subsidiaries subject to the conditions in 31 C.F.R. § 560.556. Further, the license authorizes the transfer of funds from Iran or on behalf of a person in Iran in furtherance of an underlying transaction authorized by the General License to be processed by US depository institutions and US registered brokers or dealers in securities so long as they are consistent with 31 C.F.R. § 560.516.

This General License additionally provides authorization under the EAR. 15 C.F.R. 746.7(a)(2) of the EAR states that “exporters or reexporters are not required to seek separate authorization from BIS for an export or reexport subject both to the EAR and to OFAC’s Iranian Transactions Regulations.” Therefore, if OFAC authorizes an export or reexport, as it does in General License D, such authorization is considered authorization for purposes of the EAR as well.

The General License largely maintains the same restrictions from Part 560.540, including:
 

• The prohibition of the export of any services, software or hardware to the Government of Iran;
   

• The prohibition of the export of any services, software or hardware to any individual or entity on the Specially Designated Nationals (SDN) list;
   

• The prohibition of the export of commercial-grade internet connectivity services or telecommunications transmission facilities (such as dedicated satellite links or dedicated lines that include quality of service guarantees); and
   

• The prohibition of the export of web-hosting services that are for purposes other than personal communications (e.g., web-hosting services for commercial endeavors) or of domain name registration services. This prohibition is actually quite broad, as it is likely that many web-hosting services are for commercial endeavors.
   

Conclusion

This General License expands substantially upon a prior authorization, but it is also noteworthy because it runs counter to a recent trend of tightening financial and trade restrictions on Iran. The General License likely represents the continued efforts of the US Government to support freedom of information and the democratic movement in Iran, as another presidential election looms on June 14.

Arent Fox has significant experience in helping companies navigate and comply with US economic sanctions and export controls. If you have any questions regarding the above, please contact Kay Georgi and Keith Huffman with Arent Fox’s International Trade practice.

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