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F ederal

reserve

Ba n k

DALLAS, TEXAS

of

D allas

75222

Ci rcu la r No. 79-199
December 3, 1979

IRANIAN ASSETS CONTROL REGULATIONS

TO ALL BANKS
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:

Enclosed ar e additional amendments effective November 28 and
November 29, 1979 to th e T r e a s u r y Department's Iranian Assets Control
Regulations.
Sincerely y o u r s ,
Robert H. Boykin
F ir st Vice President

Enclosures (2)

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

authorization for pre-judgment attachment with respect to such property is
excluded from the privileges of paragraph (a) hereof.
*

Dated:

*

*

*

November 29. 1979
s/Stanley L. Sommerfield
Stanley L. Sommerfield
Director

Approved:

s/Richard J. Davis______
Richard J. Davis
Assistant Secretary

[AUTHORITY:
Secs. 201-207, 91 Stat. 1626; 50 U.S.C. 1701-1706; E.O. No.
12170, 44 FR 65729]

Title 31 - MONEY AND FINANCE:

Treasury

Chapter V - Foreign Assets Control
Department of the Treasury
Part 535 - Iranian Assets Control Regulations

AGENCY:

Office of Foreign Assets Control

ACTION:

Final Rule

SUMMARY:
The Office of Foreign Assets Control is amending the Iranian
Assets Control Regulations.
The purpose of the amendment is to add new
paragraph (d) to §535.504.
That section authorizes certain judicial pro­
ceedings with respect to property of Iran or Iranian entities.
The need
for the amendment is to exclude from that authorization any pre-judgment
attachment of certain types of property of Iran and Iranian entities brought
into the United States under specific license from the Office of Foreign
Assets Control.
The effect of the amendment is that attachments are not
authorized with respect to such specifically licensed Iranian property.
EFFECTIVE DATE:

November 29, 1979

FOR FURTHER INFORMATION CONTACT:
Dennis M. O'Connell
Chief Counsel
Office of Foreign Assets Control
Department of the Treasury
Washington, D. C. 20220
(202) 376-0236
SUPPLEMENTARY INFORMATION:
Since the regulations involve a foreign affairs
function, the provisions of the Administrative Procedure Act, 5 U.S.C. 553,
requiring notice of proposed rule making, opportunity for public participatio
and delay in effective date are inapplicable.
31
as follows:

CFR, Part 535 is amended by the addition of paragraph (d) to §535.504

§535.504 Certain judicial proceedings with respect to property of Iran
or Iranian entities.
*

*

*

*

(d)
Property transferred into or held in the United States by Iran or
an Iranian entity under a specific license which by its terms withdraws the

Title 31 - MONEY AND FINANCE:

Treasury

Chapter V - Foreign Assets Control
Department of the Treasury
Part 535 - Iranian Assets Control Regulations

AGENCY:

Office of Foreign Assets Control

ACTION:

Final Rule

SUMMARY:
The Office of Foreign
Assets Control is amending the Iranian Assets
Control Regulations.
The purpose of the amendments is to clarify the effect
of the Regulations on various types of letters of credit in which Iran or an
Iranian entity has an interest.The need for the
amendments is to set forth
interpretations and licensing policies with respect to letter of credit prob­
lems.
The effect of the amendment will be that there will be available to
interested parties an explanation of the effect of the Regulations on letters
of credit in which Iran or an Iranian entity has an interest and the licensing
policies of the Office with respect to various letter of credit problems.
EFFECTIVE DATE:

November 28, 1979

FOR FURTHER INFORMATION CONTACT:
Dennis M. O'Connell
Chief Counsel
Office of Foreign Assets Control
Department of the Treasury
Washington, D. C. 20220
(202) 376-0236
SUPPLEMENTARY INFORMATION:
Since the regulations involve a foreign affairs
function, the provisions of the Administrative Procedure Act, 5 U.S.C. 553,
requiring notice of proposed rule making, opportunity for public participation
and delay in effective date are inapplicable.
31 CFR, Part 535 is amended as follows:
§535.416 Letters of credit.
(a)
Prior to the effective date, a bank subject to the jurisdiction
of the United States has issued or confirmed a documentary letter of credit
for a non-Iranian account party in favor of an Iranian entity.
Can payment be
made upon presentation of documentary drafts?
A
bank.

Yes, provided payment is made into a blocked account in a domestic

-

2

-

(b) £ Prior to the effective date, a domestic branch of a bank
organized or incorporated under the laws of the United States has issued
or confirmed a documentary letter of credit for a non-Iranian account party
in favor of an Iranian entity.
Payment is to be made through a foreign
branch of the bank. Can payment be made upon presentation of documentary
drafts?
A

Yes, provided payment is made into a blocked account in a domestic

bank.
(c) ( Prior to the effective date, a foreign bank confirms a documentary
J
letter of credit issued by its U.S. agency or branch for a non-Iranian account
party in favor of an Iranian entity. Can the U.S. agency or branch of the
foreign bank transfer funds to the foreign bank in connection with that foreign
bank1s payment under the letter of credit?
A No, the U.S. agency's payment is blocked, unless the foreign bank
made payment to the Iranian entity prior to the effective date.
(d) Q Prior to the effective date, a bank subject to the jurisdiction
of the United States has issued or confirmed a documentary letter of credit for
a non-Iranian account party in favor of an Iranian entity.
The Iranian entity
presents documentary drafts which are deficient in some detail. May the nonIranian account party waive the documentary deficiency and make payment?
A Yes, provided payment is made into a blocked account in a domestic
bank.
However, the non-Iranian account party is not obligated by these Regula­
tions to exercise a waiver of documentary deficiencies.
In cases where such a
waiver is not exercised, the amount of the payment held by the account party
is blocked.
(e) Q If the facts are the same as in the preceding question except
that the Iranian entity permits the letter of credit to expire, does the bank
hold a blocked asset?
A No, but depending on the facts, the account party may hold a blocked
obligation to the Iranian entity.
(f) Q A bank subject to the jurisdiction of the United States has issued
a letter of credit for a U.S. account party in favor of an Iranian entity.
The
letter of credit is confirmed by a foreign bank. Prior to or after the effective
date, the Iranian entity presents documents to the U.S. issuing bank.
Payment
is deferred. After the effective date, the Iranian entity requests that the
issuing bank either return the documents to the Iranian entity or transfer them
to the confirming bank.
Can the issuing bank do so?
A No.
The U.S. issuing bank can neither return nor transfer the
documents without a license.
The documents constitute blocked property under
the Regulations.

t

- 3 §535.417

Payment of Accepted Drafts and Other Obligations

(a) A banking institution as its own obligation may make payment to the
beneficiary of a letter of credit issued by it or on a draft accepted by it,
which letter of credit or draft is in favor of a non-Iranian person subject to
the jurisdiction of the United States and which was issued on behalf of Iran
or an Iranian entity or was accepted prior to the effective date provided that
notwithstanding the provisions of §535.902, no blocked account may at any time
be debited in connection with such a payment.
(b) A payment under paragraph (a) shall give the banking institution
making payment no special priority or other right to blocked accounts it holds
in the event that such blocked accounts are vested or otherwise lawfully used
in connection with a settlement of claims.
(c) Nothing in this section prevents payment being made to the beneficiary
of any draft or letter of credit or to any banking institution pursuant to
§535.904.
§535.567

Payments under Advised Letters of Credit

Specific licenses may be issued for presentation, acceptance, or payment
of documentary drafts under a letter of credit opened by an Iranian entity and
advised by a domestic bank, Provided, that:
(a)

The letter of credit was advised prior to the effective date;

(b) The property which is the subject of the payment under the letter of
credit was not in the possession or control of the exporter on or after the
effective date;
(c)
States.

The beneficiary is a person subject to the jurisdiction of the United

As a general
to a single payee

matter, licenses will not
exceeds $500,000.

§535.568

Standby Letters of Credit

Certain

be issuedif the amount to be

paid

and Performance Bonds

(a) Notwithstanding the provisions of
§535.508,an issuing or confirming
bank may not make
payment into a blocked account in a domestic bank under
a
standby letter of credit in favor of an Iranian entity if a specific license
has been issued pursuant to the provisions of paragraph (b) hereof.

(b) Whenever an issuing or confirming bank shall receive such demand
for payment under a standby letter of credit, it shall promptly notify the per­
son for whose account the credit was opened.
Such person may then apply within
5 days for a specific license authorizing the account party to establish a
blocked account on its books in the name of the Iranian entity in the amount
payable under the credit, in lieu of payment by the issuing or confirming bank
into a blocked account and reimbursement therefor by the account party.
(c)
If necessary to assure the availability of the funds blocked, the
Secretary may at any time require the payment of the amounts due under any
letter of credit described in paragraph (a) into a blocked account in a domes­
tic bank or the supplying of any form of security deemed necessary.

(d) Nothing in this section precludes any person for whose account a
standby letter of credit was opened or any other person from at any time con­
testing the legality of the demand from the Iranian entity or from raising any
other legal defense to payment under the standby letter of credit.
(e) This section does not affect the obligations of the various parties
to the instruments covered by this section if the instruments and payments
thereunder are subsequently unblocked.
(f) For the purposes of this section, the term "standby letter of credit"
shall mean a letter of credit securing performance of, or repayment of, any
advance payments or deposits, under a contract with Iran or an Iranian entity,
or any similar obligation in the nature of a performance bond.
(g) The regulations do not authorize any person subject to the jurisdic­
tion of the United States to reimburse a non-U.S. bank for payment to Iran
or
an
Iranian entity under a standby letter of credit, except by payment into
a
blocked account in accordance with Section 535.508 or paragraph (b) of this
section.

Dated:

November 28. 1979

Approved:

s/Stanley L. Sommerfield
Stanley L. Sommerfield
Director
Foreign Assets Control

s/Richard J. Davis
Richard J. Davis
Assistant Secretary

[AUTHORITY:
Secs. 201-207, 91 Stat. 1626; 50U.S.C. 1701 - 1706; E.O.
No. 12170, 44 FR 65729.]


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