Legal Alerts

OFAC Clarifies Regulations Around Technology Sales to Iran

Washington, D.C. (June 7, 2024) - On May 17, 2024, the Treasury Department’s Office of Foreign Asset Control (OFAC) issued a final Rule (2024 Rule) that clarified its regulations pertaining to Iranian sanctions. In large part, these changes expressly clarify what technologies can be provided to Iran. Although the regulations remain largely restrictive, the changes also provide some new opportunities for businesses trading with Iran, since OFAC’s new rule expressly permits the import/export of certain technologies, and therefore gives assurances to businesses that their conduct is permissible. An additional new opportunity is that OFAC will accept licenses for service providers to permit providing unlisted hardware and software to Iranian entities if those applications can meet OFAC’s policy considerations.

Businesses engaged in the mobile and satellite phone industry, wireless communications, computers, anti-virus software, anti-tracking software, anti-censorship, and VPN services now have further assurances that they can conduct and transact with select Iranian entities and individuals, subject to the 2024 Rule and other laws and regulations.

The changes exclusively concern hardware and software relating to internet communication and access - more particularly, software relating to communications, social media, e-learning, e-gaming, user authentication services, and cloud-based services. The 2024 Rule also clarified the permissible uses for the software and to whom the software can be provided. Regarding hardware, the 2024 Rule loosened restrictions on the maintenance of hardware so that hardware already present in Iran can be transported for repair abroad and returned. The 2024 Rule expressly restricts providing such services to Iranian governmental entities. Additionally, the 2024 Rule sets standards regarding the computing power of hardware permissible for export into Iran.

One additional opportunity that the 2024 Rule provides is that businesses seeking to expand services and hardware supply beyond those expressly permitted by the rule can now apply for a specific license permitting the provision of such service/hardware. The application must, however, be premised on supporting internet freedom in Iran. This offers an opportunity to access a market with potentially little competition.

Key Takeaway

These changes provide more certainty for persons desiring to import permitted equipment and software into Iran, but also provide a framework for license applications “that support internet freedom in Iran” and the “development and hosting of anti-censoring software by Iranian software developers and the exportation of certain software development tools to Iranians seeking to create their own anti-surveillance or anti-censorship apps and upload them to mobile app sites.”

Lewis Brisbois’s attorneys are actively engaged in the wide range of legal issues in this area and are advising clients on managing legal and business risk as events continue to develop at an accelerated pace. For more information, contact the author or editors of this alert. Visit our Ukraine Conflict Response Practice page for additional alerts in this area.

Author:

Mamoun Mahayni, Associate

Editors:

Jane C. Luxton, Managing Partner - Washington, D.C.

Andrew Pidgirsky, Partner and Chair of Ukraine Conflict Response Practice

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