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F ederal Reserv e

bank of

DALLAS, TEXAS

Dallas

75222

Circular No. 80-1
Jan u ary 3, 1980

IRANIAN ASSETS CONTROL REGULATIONS

TO ALL BANKS
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
Enclosed a re additional amendments effective December 18, 1979 and
December 26, 1979 to the T rea su ry Department's Iranian Assets Control Regulations.
Sincerely y o u rs,
Robert H. Boykin
First Vice President

Enclosures

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

IN ADVANCE OF PRINTED COPY
DEPARTMENT OF THE TREASURY
FOREIGN ASSETS CONTROL OFFICE
31 CFR Part 535
Iranian Assecs 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 amend

§535.531 concerning the payment of certain checks and drafts; to add
certain definitional provisions; and to add §535.806 describing the rule
making activities of the Office.

The need for the amendments is to extend

certain provisions of §535.531 which expired on December 14, 1979; to set
forth policy concerning payment of checks and drafts; and to announce that
the Office will consider, on a case-by-case basis, payment under certain
Irrevocable letters of credit.

The effect of the amendment is that the

authorization for payment for certain checks and drafts will continue for
31 days (not including the previous authorization for documentary drafts
drawn under irrevocable letters of credit, which expired December 14, 1979);
and that affected parties will be made aware of Office policy on accepted
drafts, of the opportunity to submit certain letter of credit problems to the
Office for case-by-case consideration, and of certain definitional provisions
of the Regulations.
EFFECTIVE DATE:

December 18, 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:

2-

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 partici­
pation, and delay in effective date are inapplicable.
S535.531

now incorporates the overall policy under the Regula­

tions concerning the payment of checks and drafts involving debits to
blocked accounts.
(1)

The main features of that policy are as follows:

§535.531(a) extends the general license for payment of checks

and drafts drawn or issued prior to the effective date until January 14,
1980.
(2)

§535.531(b) revises and recodifies, as a general license, the

provisions of former §535.417 (published December 3, 1979) concerning the
payment of accepted drafts and other obligations.
(3)

The general license for payment of certain documentary drafts

under irrevocable letters of credit, which expired on December 14, 1979,
has not been extended.

However, §535.531(c) gives notice that applications

for specific licenses for such payments will be considered on a case-by-case
basis.

Submissions should cover all such letters of credit in which the appli­

cant is involved, and should be submitted not later than January 10, 1980.
(4)

§535.531(d) states that any payments made under the provisions

of paragraph (a) or (b) of the section in favor of Iran or an Iranian
entity must be made into a blocked account in a domestic bank.
§535.531(b), by its terms, deals only with accepted drafts where the
payee is a person subject to the jurisdiction of the United States.

However,

the Office will also consider, without commitment, applications to authorize
payment of accepted drafts to persons not subject to the jurisdiction of the

-

United States on a case-by-case basis.

3-

Submissions should cover all

accepted drafts in which the applicant is involved and should be sub­
mitted not later than January 10, 1980.
31

CFR Part 535 is amended as follows:

1.

§535.310 is added to read as follows:

$535,310

Transfer.

The term "transfer" shall mean any actual or purported act or trans­
action, whether or not evidenced by writing, and whether or not done or per­
formed within the United States, the purpose, intent, or effect of which is
to create, surrender, release, transfer, or alter, directly or indirectly,
any right, remedy, power, privilege, or interest with respect to any property
and, without limitation upon the foregoing, shall include Che making, execu­
tion, or delivery of any assignment, power, conveyance,check, declaration,
deed, deed of trust, power of attorney, power ofappointment, bill

of sale,

mortgage, receipt, agreement, contract, certificate, gift, sale, affidavit,
or statement; the appointment of any agent, trustee, or other fiduciary;
the creation or transfer of any lien; the issuance, docketing, filing, or
the levy of or under any judgment, decree, attachment, execution, or other
judicial or administrative process or order, or the service of any garnish­
ment; the acquisition of any interest of any nature whatsoever by reason
of a judgment or decree of any foreign country; the fulfillment of any
condition, or the exercise of any power of appointment, power of attorney,
or other power.
2.

$535,312 is added to read as follows:

-

S535.312

4-

Interest.

Except as otherwise provided la this part, the term "Interest" when
used with respect to property shall mean an Interest of any nature whatsoever,
direct or Indirect.
3.

5535.417 is revoked.

4.

$535,531 is amended to read as follows:

S535.531

Payment of certain checks and drafts.

(a) A bank subject to the jurisdiction of the United States Is hereby
authorized to make payments from blocked accounts with such banking Institu­
tion of checks and drafts drawn or issued prior to the effective date,
Provided, that:
(1)

The amount involved in any one payment, acceptance, or debit does

not exceed $3,000; or
(2)

The check or draft was within the United States in process of

collection by a domestic bank on or prior to the

effective date and does

not exceed $50,000.
(3)

The authorization contained in this paragraph shall expire at the

close of business on January 14, 1980.
(b)

A bank subject to the jurisdiction of the United States as its

own obligation may make payment to a person subject to the jurisdiction of
the United States who is the beneficiary of any letter of credit issued or
confirmed by it, or on a draft accepted by it, prior to the effective date,
where the letter of credit was issued or confirmed on behalf of Iran or an
Iranian entity, Provided that:
(1)

Notwithstanding the provisions of §535.902, no blocked account

may at any time be debited in connection with such a payment.
(2)

Such a payment shall give the bank making payment no special

priority or other right to blocked accounts it holds in the event that

-

5-

such blocked accounts are vested or otherwise lawfully used in connection
with a settlement of claims.
(3)

Nothing in this paragraph prevents payment being made to the

beneficiary of any draft or letter of credit or to any banking institution
pursuant to §535.904.
(c)

The Office will consider on a case-by-case basis, without any

conmitment on its part to authorize any transaction or class of transac­
tions, applications for specific licenses to make payments from blocked
accounts of documentary drafts drawn under irrevocable letters of credit
issued or confirmed by a domestic bank prior to the effective date, in
favor of any person subject to the jurisdiction of the United States.

Any

bank or payee submitting such an application should include data on all
such letters of credit in which it is involved.

Applications should be

submitted not later than January 10, 1980.
(d)

Paragraphs (a) and (b) do not authorize any payment to Iran or

an Iranian entity except payments into a blocked account in a domestic
bank unless Iran or the Iranian entity is otherwise licensed to receive
such payment.
5.

§535.806 is added to read as follows:

§535.806

Rule Making.

(a)

In general, rule making by the Office of Foreign Assets Control

involves foreign affairs functions of the United States to which the pro­
visions of the Administrative Procedure Act, 5 U.S.C. 553, requiring notice
of proposed rule making, the opportunity for public participation and a
delay in effective date are inapplicable.

However, the Office of Foreign

Assets Control may consult with interested groups or persons in connection
with the issuance of rules or the establishment of licensing policies.

-

(b)

6-

Any Interested person may recomnend in writing to the Director

of the Office of Foreign Assets Control the issuance, amendment or the
repeal of any rule.

Dated: December 18. 1979

(s) Stanley L. Soamerfield
Stanley L. Soamerfield
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. 0. Ho. 12170, 44 FR 65729.1

Filed:

December 18, 1979

IN ADVANCE OF PRINTED COPT

Title 31 - MONET AND FINANCE:

Treasury

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

AGENCY:

Office of Foreign AsseCs Control

ACTION:

Final Rule

SUMMARY: The Office of Foreign AsseCs Control is amending Che Iranian Assets
Control Regulations.

The purpose of Che amendmenCs is Co clarify Che rules

and policies dealing wlch letter of credic situations, to add certain
interpretative provisions, and to add Subpart F concerning reports.

The

need for the amendments is that the Office has received many telephone and
written inquiries regarding the interpretation of the relevant provisions.
The effect of the amendments is that the effect of the Regulations on various
transactions will be clarified.
EFFECTIVE DATE:

December 18, 1979,

FOR FURTHER INFORMATION CONTACT:
Dennis M. O'Connell
Chief Counsel
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.
In addition to other miscellaneous provisions, the amendments
herein include the following:

-

2-

1. Letter of credit rules.

Section 535.416 provides inter­

pretations as to the applicability of these regulations
to possible transactions involving letters of credit.
The amendments to this section published today are
Intended to amplify some of the interepretations previously
given.
2. Pre-judgment attachments.

New section 535.418 makes

clear that section 535.504 authorizes pre-judgment attach­
ments, but does not authorize any payment or delivery of
blocked property to a court, marshal, sheriff or similar
entity.
3. Advised letters of credit.

Section 535.567 is being

modified to make clear that specific licenses will be
granted under the criteria described to allow payments
from blocked accounts only in hardship cases.

This has

always been the purpose of this licensing policy.
4. Standby letters of credit and performance bonds.

Section

535.568, relating to certain standby letters of credit and
performance bonds, is being amended to include a provision
that notwithstanding any other provision of law no payment
may be made under any such instrument before sufficient
time (.eight business days) has passed to allow the account
party to apply for a specific license under section 535.568(b).
31 CFR, Part 535 is amended as follows:

-

1.

3-

Section 535.416(d) and (e) are amended to read as follows:

Section 535.416 Letters of Credit
*

(d)

*

g.

*

*

*

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 non-Iranian account party waive the documentary

deficiency and authorize the bank to 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 regulations to exercise a waiver of documentary deflcienles.
In cases where such a waiver is not exercised, the bank's payment obligation,
if any, under the letter of credit remains blocked, as does any obligation,
contingent or otherwise, of the account party.

The documents are also

blocked.
(e)

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 does not make timely, complete, or proper

presentation of documents, and the letter of credit expires.

Does there

remain a blocked payment obligation held by the bank?
A.
blocked.

No, but any documents held by the bank continue to be

It is also possible that the account party still has a related

obligation to the Iranian entity and any such obligation would be blocked.
*

*

*

*

*

-

2.

4-

Section 535.418 is added to read as follows:

Section 535.418

Authorization of judicial proceedings under

Section 535.504
*

*

*

*

*

The general authorization for judicial proceedings contained in
Section 535.504(a) includes pre-judgment attachment.

However, Section

535.504(a) does not authorize payment or delivery of any blocked property to
any court, marshal, sheriff, or similar entity, and any such transfer of
blocked property is prohibited without a specific license.

It would not

be consistent with licensing policy to issue such a license.
3.

Section 535.502 is amended by revising the heading and adding

new paragraph (c) as follows:
Section 535.502
*

(c)

Effect of license or authorization
*

*

*

*

Any regulation, ruling, instruction or license authorizing

a transaction otherwise prohibited under this part has the effect of
removing a prohibition or prohibitions in Subpart B from the transaction,
but only to the extent specifically stated by its terms.

Unless the

regulation, ruling, instruction or license otherwise specifies, such an
authorization does

not create any right, duty, obligation, claim, or

interest in, or with respect to, any property which would not otherwise
exist under ordinary principles of law.
4.

Section 535.567 is amended to read as follows:

Section 535.567
*

(a)

Payment 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

-

5-

Iranian entity and advised by a domestic bank or an Iranian bank subject
to the jurisdiction of the United States, provided, that:
(1)

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

(2)

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;
(3)

The beneficiary is a person subject to the jurisdiction of

the United States.
Cb)

As a general matter, licenses will not be issued if the

amount to be paid to asingle payee exceeds $500,000, or if hardship cannot
be shown.
S.

Section 535.568 is amended t o read as follows:
:

Section 535.568

Certain standby letters of credit and performance

bonds
(a)

Notwithstanding any other provision of law, payment into a

blocked account In a domestic bank by an issuing or confirming bank under
a standby letter of credit in favor of an Iranian entity is prohibited by
Section 535.201 and not authorized, notwithstanding the provisions of
Section 535.508, if either Cl) a specific license has been issued pursuant
to the provisions of paragraph Cb) hereof or C2) eight business days have
not expired after notice to the account party pursuant to paragraph Cb)
hereof.
Cb)

Whenever an issuing or confirming bank shall receive such

demand for payment under a standby letter of credit, it shall promptly
notify the person for whose account the credit was opened.

Such person

may then apply within five business days for a specific license authorizing

-

6-

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 domestic bank or the supplying of any form of security deemed
necessary.
(d)

Nothing in this section precludes any person for uhose

account a standby letter of credit was opened or any other person from
at any time contesting 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 obligation 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 jurisdiction 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,

-

7-

except by payment into a blocked account in accordance with Section
535.508 or paragraph (b) of this section.
(h)

A person receiving a specific license under this section

shall certify to the Office of Foreign Assets Control within five
business days after receipt of that license that it has established
the blocked account on its books as provided by paragraph (b) thereof.
6.

Subpart F is added to read as follows:

Subpart F - Reports
9535.601 Records.
Every person engaging in any transaction subject to the
provisions of this part shall keep a full and accurate record of each
such transaction engaged In by him, regardless of whether such
transaction is effected pursuant to license or otherwise, and such
record shall be available for examination for at least two years after
the date of such transaction,
1535.602 Reports to be furnished on demand.
Every person is required to furnish under oath, in the form
of reports or otherwise, from time to time and at any time as may be
required by the Secretary of the Treasury or any person acting under
his direction or authorization complete information relative to any
transaction subject to the provisions of this part or relative to any
property in which any foreign country or any national thereof has any
interest of any nature whatsoever, direct or indirect.

The Secretary of

the Treasury or any person acting under his direction may require that such
reports include the production of any books of account, contracts, letters
or other papers, connected with any such transaction or property, in the
custody or control of the persons required to make such reports.

-

8-

Reports with respect to transactions may be required either before
or after such transactions are completed.

The Secretary of the Treasury

may, through any person or agency, investigate any such transaction or
property or any violation of the provisions of this part regardless of
whether any report has been required or filed In connection therewith.
Dated;

December 18, 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. 1628; 50 U.S.C, 1701 - 1706;
E. 0. No. 12170, 44 FR 65729^/

Filed:

December 18, 1979.

IN ADVANCE OF PRINTED COPY

DEPARTMENT OF THE TREASURY
OFFICE OF FOREIGN ASSETS CONTROL
31 CFR 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

anendients is to add interpretative provisions to the Regulations. The
need for the amendments is to make it clear that extensions
of credit to Iran, except for fully collateralized trade
credits, by persons subject to U.S. jurisdiction are covered
by the prohibitions of 5535.201, and that transfers of
blocked accounts from demand to interest-bearing status at
the instruction of the depositor are authorized under
S535.508.

The effect of the amendments is that these inter­

pretations will now be available in published form.
EFFECTIVE DATE:

December 26, 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.

The interpretation

contained in £535.419 will- clarify

the fact that the prohibitions of $535,201 prohibit any
person subject to the jurisdiction of the United States from
extending credit to Iran or an Iranian entity after the
"effective date" (i.e., November 14, 1979) in the absence of
a license.

This prohibition applies to post-effective date

renewals of credits in existence on November 14, 1979.

The

prohibition applies regardless of the currency in which the
credit was to be denominated.

It does not apply to fully

collateralized trade credits in view of §535.901.
§535.420 clarifies the fact that Iranian owners of
blocked assets are authorized by §535.508 to instruct banks
holding their accounts to transfer funds from demand to
interest-bearing status at any time.
31 CRF Part 535 is amended as follows:
1.

§535.419 is added to read as follows:

§535.419
(a)

Extensions of Credit to Iran.
§535.201 prohibits the unlicensed extension

of

credit to Iran or any Iranian entity, by persons subject to
the jurisdiction of the United States, after the effective
date.
(b)

This prohibition applies to

the unlicensed

renewal of credits in existence on the

effective date.

(c)

This prohibition applies to

any currency.

credit extended in

(d)

In view of the provisions of SS535.566 and

535.901, the prohibition does not apply to trade credits
which are fully collateralized in foreign currency or in
unblocked U.S. dollars received after the effective date.
2.

$535,420 is added to read as follows:

$535,420

Transfers of accounts under $535.508 from demand

to interest-bearing status.
$535,508 authorizes transfer of a blocked demand
deposit account to interest-bearing status at the instruc­
tion of the Iranian depositor at any time.
Dated: December 26, 1979

Star
Director
/
Office of Foreign Assets Control

“
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.]

Filed: December 26, 1979
Publication date: December 28, 1979


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102