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F e d er a l r e s e r v e b a n k of DALLAS. TEXAS D a lla s 75222 Circular No. 82-41 April 7, 1982 IRANIAN ASSETS CONTROL REGULATIONS Final Rule TO ALL MEMBER BANKS IN THE ELEVENTH FEDERAL RESERVE DISTRICT: The Office of Foreign Assets Control is amending the Iranian Assets Control Regulations. The purpose of the amendment is outlined in the material submitted for publication in the Federal Register printed on the following pages. The effective date of the amendment is March 19, 1982. Questions regarding the amendment should be directed to Raymond W. Konan, Chief Counsel, Office of Foreign Assets Control, Department of the Treasury, Washington, D.C. 20220, Telephone (202) 376-0236. Additional copies of this circular will be furnished upon request to the Department of Communications, Financial and Community Affairs, Ext. 6289. Sincerely yours, William H. Wallace First Vice President Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank: 1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the extension referred to above. 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 AMENDMENT DEPARTMENT OF THE TREASURY OFFICE OF FOREIGN ASSETS CONTROL 31 CFR PART 535 Irani an Assets Control Regulations: Time to E s t ab l i sh Blocked Accounts in Lieu of Payments under Standby L e t t er s of Credit AGENCY: Office of Foreign Assets Control ACTION: Final Rule SUMMARY: The Office of Foreign Assets Control is amending §535.568 of the Irani an Assets Control Re gula t ions. The purposes of t h i s amendment are: (1) to e s t a b l i s h procedures f or the est abl ishment of a blocked account by the account p ar t y to a standby l e t t e r of c r e d i t in cases where a demand for payment is out st andi ng and payment was barred by a court i nj u n ct i on which i s removed; (2) to provide t h a t the account p ar ty may apply for a s p e c i f i c l i c e n s e providing an extension of time to e s t a b l i s h a blocked account where a demand for payment has been made and the account p ar t y has f i l e d a p e t i t i o n in an a p p r o p r i a t e cour t for a j u d i c i a l order bar ri ng payment of a standby l e t t e r of c r e d i t . EFFECTIVE DATE: March 19, 1982. FOR FURTHER INFORMATION CONTACT: Raymond W. Konan, Chief Counsel, Office of Foreign Assets Control, Department of the Treasury, Washington, D.C. 20220, Tel. (202) 376-0236. SUPPLEMENTARY INFORMATION: Since the Regulations involve a f or ei gn a f f a i r s f u n c t i o n , the pr ovi si ons of the Admi ni st rat i ve Procedure Act, 5 U.S.C. 553, r e q u i r i n g no t i ce of proposed rulemaking, o p p or t uni t y for public p a r t i c i p a t i o n and delay in e f f e c t i v e d a t e , are i n a p p l i c a b l e . Simi l a r l y , because the Regulations are issued with r e s p e c t to a f or ei gn a f f a i r s funct i on of the United S t a t e s , t hey are not s ub j e c t to Executive Order 12291 of February 17, 1981, deal i ng with Federal r e g u l a t i o n s . Section 535.568 is amended by the a d d i t i o n of a new paragraph ( c) , t he a p p r o p r i a t e r e l e t t e r i n g of subsequent paragraphs, the a d d i t i o n of ap p r o p r i a t e r e f er en ce s to new paragraph ( c ), and the r e v i s i o n of former par agra ph_(h). _§535.568 Certain Standby L e t t e r s of Credi t and Performance Bonds, /amended/ (a) Notwithstanding any ot her pr ovi si on of law, payment i n t o a blocked account in a domestic bark by an i s s ui n g or confirming bank under a standby l e t t e r of c r e d i t in favor of an Irani an e n t i t y is p r oh i b i t e d by §535.201 and not a u t h o r i z e d , notwithst andi ng the provi si ons of §535.508, i f e i t h e r (1) a s p e c i f i c l i c e n s e has been issued pursuant to the provi si ons of paragraph (b) hereof or (2) e i g h t business days have not expired a f t e r n o t ice to the account par t y pursuant to paragraph (b) hereof. -2 - (b) Whenever an i ss ui ng or confirming bank sha l l r e c e i ve such demand for payment under a standby l e t t e r of c r e d i t , i t shal l promptly n o t i f y the person for whose account the c r e d i t was opened. Such person may then apply within f i ve business days f o r a s p e c i f i c l i c e n s e a u t h o r i z ing the account p ar t y to e s t a b l i s h a blocked account on i t s books in the name of the Iranian e n t i t y in the amount payable under the c r e d i t , in l i e u of payment by the i ss ui ng or confirming bank i n t o a blocked account and reimbursement t h e r e f o r by the account p a r ty . (c) Where t h e r e is out st andi ng a demand for payment under a standby l e t t e r of c r e d i t , and t he i ss u i ng or confirming bank has been enjoined from making payment, upon removal of the i n j u n c t i o n , the person f or whose account the c r e d i t was opened may apply for a s p e c i f i c l i c e n s e f or the same purpose and in the same manner as t h a t s e t f o r t h in paragraph (b) of t h i s s e c t i o n . The i ss ui ng or confirming bank shall not make payment under the standby l e t t e r of c r e d i t unless (1) e i g h t business days have expired si nce the bank has recei ved n o ti ce of the removal of t he i nj u n c t i o n and (2) a s p e c i f i c l i c e n s e issued to the account part y pursuant to the provi si ons of t h i s paragraph has not been presented to the bank. (d) I f necessary to as sur e the a v a i l a b i l i t y of t he funds blocked, the S ecr et ary may a t any time r eq ui re the payment of the amounts due under any l e t t e r of c r e d i t described in paragraph (a) i n t o a blocked account in a domestic bank or the supplying of any form of s e c u r i t y deemed neces sar y. (e) Nothing in t h i s s e c t i on precludes any person for whose account a standby l e t t e r of c r e d i t was opened or any ot her person from a t any time c o n t e s t i n g the l e g a l i t y of t he demand from the Iranian e n t i t y or from r a i s i n g any ot her l egal defense to payment under the standby l e t t e r of c r e d i t . ( f) This se ct i on does not a f f e c t the o b l i g a t i o n of the various p a r t i e s of t he i nstruments covered by t h i s s e c t i o n i f the instruments and payment thereunder are subsequently unblocked. (g) For the purposes of t h i s s e c t i o n , the term "standby l e t t e r of c r e d i t " sh a l l mean a l e t t e r of c r e d i t securi ng performance o f , or repayment of , any advance payments of d e p o s i t s , under a c o n t r a c t with Iran or an Irani an e n t i t y , or any s i m i l a r o b l i g a t i o n in the nat ure of a p e r f o r mance bond. (h)The r e g u l a t i o n s do not a u t h o r i z e any person s u b j e c t to the j u r i s d i c t i o n of the United S tat es to reimburse a non-U.S. bank for payment to Iran or an I rani an e n t i t y under a standby l e t t e r of c r e d i t , except by payment i n t o a blocked account in accordance with §535.508 or paragraph (b) or (c) of t h i s s e c t i o n . (i) A person r e c e i vi ng a s p e c i f i c l i c e n s e under paragraph (b) or (c) of t h i s s e c t i on sh a l l c e r t i f y to the Office o f Foreign Assets Control within f i ve business days a f t e r r e c e i p t of t h a t l i c e n s e t h a t i t has e s t a b l i s h e d the blocked account on i t s books as provided for in those paragraphs However, in a p p r o p r i a t e ca s es , t h i s time may be extended upon a p p l i c a t i o n to the Office of Foreign Assets Control when the account p ar t y has f i l e d a p e t i t i o n with an a p p r o p r i a t e court seeking a j u d i c i a l order bar ri ng payment by the i ss u i n g or confirming bank. -3- ( j ) The ext ensi on or renewal of a standby l e t t e r o f c r e d i t is a u t ho r iz e d . ( signed) Dennis M. O'Connell Dennis M. O'Connell Di re ct or Office o f Foreign Assets Control Approved: (signed) John M. Walker, J r . John M. Walker, J r . A s s i s t a n t Secr et ary (Enforcement and Operations) Publ i ca t i on d a t e: March 23, 1982 F i l i n g Date: March 19, 1982