Notices to Exporters

Notices to Exporters

Read updates issued by the Export Control Organisation including details about imposition of arms embargoes, Open General Export Licence amendments or announcements about Control List changes. Detailed guidance about UK strategic export controls is published at www.gov.uk.

Notice to Exporters 2012/47 – New Financial Restrictions (Iran) Order announced by HM Treasury: impact on exporters trading with Iran

21 November 2012 by eosborne

Overview

1. On 21 November 2012, the Chancellor announced a new Financial Restrictions (Iran) Order.

2. The new Order is made on the same terms as that previously issued by HM Treasury on 21 November 2011 (read Notice to Exporters 2011/27). The Order means that the prohibitions originally introduced under the 2011 Order will remain in place.

3. As with the 2011 Order, the 2012 Order contains a Direction (the “Direction”) which prohibits all financial transactions and business relationships between UK financial and credit institutions and banks incorporated in Iran. This includes all subsidiaries and branches, wherever located, of banks, incorporated in Iran and the Central Bank of Iran.

4. The Direction is an obligation on financial and credit institutions. It does not restrict trade directly. However indirectly it makes it harder for an exporter to trade with Iran, as your bank cannot handle payments from or to banks in Iran.

Background to the financial restrictions

5. Financial institutions in Iran actively provide many of the financial services which underpin the procurement of goods and material from abroad for their nuclear and ballistic missile programme. Any Iranian bank is potentially exposed to the risk of being used by proliferators in Iran’s nuclear and ballistic missile programme.

6. The latest report by the Director General of the International Atomic Energy Agency (IAEA), highlighted the Agency’s continuing concerns about

“the possible existence in Iran of undisclosed nuclear related activities involving military-related organisations, including activities related to the development of a nuclear payload for a missile”

In addition, the Financial Action Task Force (FATF), an inter-governmental body, has recently reiteratered its calls for countries to apply effective counter-measures to protect their financial sectors from money laundering and financing of terrorism risks emanating from Iran.

7.  All exporters based in the European Union are bound by the current Regulations in place regarding trade with Iran. These include prohibitions and restrictions on trade in a wide range of goods, a ban on certain investments, measures to freeze funds and economic resources, restrictions on giving financial assistance or concessional loans to the government of Iran or to any listed targeteed persons and entities, restrictions on financing of any of the prohibited activities relating to the exploration, production, refining or liquefaction of oil and gas by any Iranian person, entity or body and arms embargo. Full details are published on the GOV.UK website at: https://www.gov.uk/sanctions-on-iran

Effect of the latest financial restrictions on UK companies doing busienss in Iran

8. The Direction will continue to make it difficult for UK companies to trade with Iranian companies who have a banking relationship with an Iranian bank. See the questions and answers below:

Questions and Answers

Q1: What’s changed since HM Treasury announced the previous Iran financial restrictions?

A1: The Government believes there continues to be a risk to UK national interests since the last restrictions were announced. The International Atomic Energy Agency’s Report of 30 August 2012 set out their concerns about ‘the possible existence in Iran of undisclosed nuclear related activities involving military related organisations, including activities related to the development of a nuclear payload for a missile’.  In addition, the  Financial Action Task Force (or ‘FATF’, the global standard setting body for anti-money laundering and combating the financing of terrorism) reiterated calls on 19 October for countries to apply effective counter-measures to protect their financial sectors from money laundering and financing of terrorism risks emanating fromIran.

Q2: Is this a Trade Ban with Iran?

A2: No. The Direction requires UK financial institutions to cease transactions and business relationships with Iranian banks and their branches and subsidiaries. Exporters are unlikely to be caught directly, unless they are also operating as a financial or credit institution in the UK. So, the Direction is not a trade ban with Iranian companies, even though the UK Government does not encourage such trade.

Q3: What do I have to do to ensure I get paid for my exports?

A3: Exporters will no longer be able to use UK credit or financial institutions to make or receive payments to or from Iranian banks, unless the Treasury has licensed the transaction. Nor will they be able to use financial services from aUK credit or financial institution if providing those services involves theUK credit or financial institution in a business relationship with an Iranian bank. For example, the Direction prohibits a UK bank from entering into a new letter of credit arrangement with an Iranian bank.

If you want to make a transaction between aUKfinancial or credit institution and an Iranian bank, you will need to apply to HM Treasury for a licence for the transaction. You should also discuss this with your bank.

The Treasury is aware that some companies will be due payments under existing contracts and is ready to consider licence applications for those payments.

It should be noted, however, that the Direction has been given because of the risks posed to theUK’s national interests by activities inIranand the support given to those activities by the Iranian banking sector. Given the importance of an effective response to those risks, it is unlikely that the Treasury will issue licences for business with Iranian banks on an ongoing basis under new contracts.

Q4: Can I apply for a licence from HM Treasury exempting me from this Direction?

A4: Any person affected by the Direction can apply for a licence from HM Treasury (contact details below) exempting a transaction or business relationship from the requirements. Exporters as well as relevant persons can make a licence application.

It should be noted, however, that the Direction has been given because of the risks posed to theUK’s national interests by activities inIranand the support given to those activities by the Iranian banking sector. Given the importance of an effective response to those risks, it is unlikely that the Treasury will issue licences for business with Iranian banks on an ongoing basis under new contracts.

Q5: How long will it take for HM Treasury to issue a licence?

A5: That will depend on the licence application and you should discuss directly with HMT. If you have a particularly urgent application, you should explain the urgency to HMT when you submit the application.

Q6: I have a licence from HM Treasury for an existing transaction related to a contract which I have serviced – will I get paid for that contract?

A6: The Treasury is aware that relevant persons and others will have existing contracts with Iranian banks at the time at which the Direction came into effect. The Treasury will consider applications for licences which would enable payments due under such existing contracts to be made. Where exporters have an existing contract with an Iranian importer or exporter that requires a payment to be made or received by an Iranian bank, they should apply to the Treasury for a licence. Exporters should discuss their intention to apply for a licence with their bank, in order to ensure duplicate applications are not made.

Q7: I have notified the Department for Business of a transaction under articles 10, 12, 14, 19, 20 or 21 of Regulation 267/2012. Will I get a licence to receive payment for this transaction?

A7: If the Export Control Organisation (Department for Business, Innovation and Skills) have agreed that your contract is a pre-existing contract under any of the relevant Articles of Regulation 267/2012, then it is likely that HMT will agree that you should receive payment. However, you will need to apply separately to the Treasury for a licence from them and Treasury will need to scrutinise the application accordingly.

Q8: Does this apply to overseas subsidiaries of UK companies or to UK nationals working overseas?

A8: The restrictions apply toUK financial and credit institutions, including their branches wherever located. It does not apply to companies outside the financial sector, nor to overseas subsidiaries orUK nationals working overseas.  

Q9: I have been granted an export licence by the Export Control Organisation to export to Iran. Are you now telling me that I won’t get paid for the transaction?

A9: You will need to apply separately to the Treasury for a licence from them and Treasury will need to scrutinise the application accordingly.

As now, an export licence – or advice that an export licence is not required – may become invalid if circumstances change and this is a particular risk in respect ofIran.

Q10: How will this impact on new contracts that I am negotiating?

A10: The Direction has been given because of the risks posed to the UK’s national interests by activities in Iran, and the support given to those activities by the Iranian banking sector. Given the importance of an effective response to these risks, it is unlikely the Treasury will issue licences for transactions with Iranian banks on an ongoing basis under new contracts.

Q11: I have several contracts for Iran – how will HM Treasury assess licence applications?

A11: HMT will consider every licence application on its merits on a case-by-case basis.

Q12: Are banks in other EU countries affected by this?

A12: No. However, you should be aware that on 15 October 2012 the EU Foreign Affairs Council announced a decision to prohibit transactions between EU financial institutions and Iranian banks. At the time of issuing this notice the EU measure had not yet come into effect, but it will do so soon once an EU Regulation to implement the measure has been issued.

Q13: My bank wasn’t letting me do business with Iran anyway. What’s changed?

A13: That would have been a commercial decision for your bank. Now it is subject toUK law.

Q14: Won’t this harm UK companies because other companies in Europe will pick up the business instead?

A14: All EU companies are already subject to a variety of restrictions on trade with Iran, including export controls, investment restrictions, sanctions on named Iranian entities and the requirement to seek a licence when transferring large sums of money to or from an Iranian person, entity or body.  On 15 October 2012 the EU Foreign Affairs Council announced a decision to prohibit transactions between EU financial institutions and Iranian banks. At the time of issuing this notice the EU measure had not yet come into effect, but it will do so soon once an EU Regulation to implement the measure has been issued.

Further Details

9. Further information on the reasons for giving this Directiion can be found in a Written Ministerial Statement laid in Parliament which is available at: http://www.hm-treasury.gov.uk/fin_restrictions_under_cta2008.htm

10. For further details about the financial restrictions provided in this Notice and to apply for a licence, please contact:

HMT Sanctions and Illicit Finance Team
HM Treasury
1 Horse Guards Road
London, SW1A 2HQ
Email: AFU@hmtreasury.gsi.gov.uk

Other enquiries should be directed to the Treasury’s Correspondence and Enquiries Unit on 020 7270 4558.

Refer also HM Treasury’s sanctions pages published at http://www.hm-treasury.gov.uk/fin_sanctions_index.htm

Further details about ‘Sanctions on Iran’ are published on https://www.gov.uk/sanctions-on-iran

11. For further details of strategic export controls, please contact:

Export Control Organisation
Department for Business, Innovation and Skills
1 Victoria Street
London, SW1H 0ET
Tel: 020 7215 4594
Fac: 020 7215 2635
Email: eco.help@bis.gsi.gov.uk
Website: https://www.gov.uk
SPIRE (export licensing database): https://www.spire.bis.gov.uk

This Notice is for information purposes only and has no force in law. Please note that where legal advice is required UK end users and consignees should make their own arrangements.

If the Notice is relevant to your exports, you are recommended to take appropriate action as necessary. You are also advised to keep a copy of this notice for your compiance records.

21 November 2012
Export Control Organisation
NTE201247