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Iranian Sanctions Extended by Executive Order

Foreign subsidiaries of U.S. parent companies are deemed fully subject to U.S. jurisdiction regarding all Iranian sanctions.

On October 9, an Executive Order was issued by President Barack Obama, fully implementing Section 218 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (the Act), P.L. 112-158, which was signed into law on August 10, 2012.[1]

Section 218 of the Act provides that non-U.S. companies that are incorporated, organized, and operating outside of the United States andare owned or controlled by U.S. parent companies must comply with all U.S. laws and regulations related to transacting business in or with Iran, as if they were themselves U.S. companies.

The October 9 Executive Order has the effect of bringing any foreign subsidiary of a U.S. parent company within the scope of all the Iranian sanctions regulations administered by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC). The U.S. sanctions apply to all such companies, notwithstanding the effect of inconsistent non-U.S. laws otherwise applicable to a foreign subsidiary regarding transactions with Iran.

Thus, absent an OFAC license, no U.S. company's foreign subsidiary is permitted to export, reexport, import, sell, or supply any U.S.-origin or non-U.S.-origin product, technology, or service directly or indirectly to or for Iran. Section 218 of the Act provides that a U.S. parent company can be directly sanctioned by OFAC for the violations committed by its foreign subsidiary.

Also in connection with foreign subsidiaries' activities, Section 219 of the Act requires that an "issuer" disclose certain information in either its annual or quarterly report filed with the Securities and Exchange Commission (SEC) if the issuer or any "affiliate" of the issuer (as defined for purposes of the Securities Exchange Act of 1934) has knowingly conducted or engaged in any activity that includes, but is not strictly limited to, the following:

  • Any activity involving the development of (a) petroleum resources in Iran, (b) weapons of mass destruction, or (c) other Iranian military capabilities
  • Any activity involving or destined to Iran's energy sectors (petroleum, petrochemical, and gas)
  • Any transactions or dealings with any person or entity identified by OFAC as a Specially Designated National (SDN) or blocked party

The Act further defines what information needs to be disclosed for any of the above reasons. The disclosed information will be made public on the SEC's website and the U.S. government is required to initiate an investigation. This disclosure becomes effective for reports filed with the SEC after February 9, 2013.

As a result of the Executive Order, U.S. companies with foreign subsidiaries should examine the practices of their foreign subsidiaries to ensure compliance with the Act.

[1]. Read the Executive Order here.

Copyright © 2023 by Morgan, Lewis & Bockius LLP. All Rights Reserved.National Law Review, Volume II, Number 290

About this Author

Margaret Gatti, Securities Lawyer, Morgan Lewis

Margaret Gatti represents US and non-US companies, universities, and financial institutions in matters involving economic sanctions, export controls under the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (EAR), customs and import regulations, free trade agreements, antiboycott regulations (EAR and IRS), anticorruption laws (FCPA and UKBA), anti-money laundering legislation, international commercial sales terms (INCOTERMS), international e-commerce, and Bureau of Economic Analysis (BEA) reporting, as well as national security...

Louis Rothberg, Morgan Lewis, Regulations attorney
Of Counsel

Louis Rothberg represents US and international enterprises in export license compliance and national security-related matters. Clients seek his counsel in matters related to munitions and dual-use export controls, economic sanctions and embargoes, and acquisitions in the United States by foreign persons concerning the Committee on Foreign Investment in the United States (CFIUS). Louis has experience with ITAR and EAR export controls, and with domestic and non-US company compliance with Office of Foreign Assets Control (OFAC) regulations involving US embargoed countries...


We help clients untangle the web of international trade regulations and provide representation in connection with Foreign Corrupt Practices Act violations and anti-boycott laws; customs classification, valuation, reduction and elimination; export licensing and other export controls involving compliance under the Export Administration Act, Office of Foreign Assets Control regulations, International Traffic in Arms Regulations, Trading with the Enemy Act and International Economic Emergency Powers Act; and antidumping and countervailing duty proceedings. We also help develop, update and...