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FEDERAL RESERVE BANK OF NEW YORK F i s c a l A g e n t o f th e U n i t e d S t a t e s Circular No. 9 2 6 9 April 1. 1982 AMENDMENT TO IRANIAN ASSETS CONTROL REGULATIONS Establishment of Blocked Accounts in Lieu of Payments Under Standby Letters of Credit To A ll Hankinq Institutions in the Second Federal Reserec I list rid . and Others Concerned: Printed on the following pages is an amendment to the Iranian Assets Control Regulations issued by the Office of Foreign Assets Control of the United States Treasury Department. The purpose of the amendment is (1) to establish procedures for the establishment of a blocked account by the account party to a standby letter of credit in cases where a demand for payment is outstanding and payment was barred by a court injunction that has been removed, and (2) to permit the account party, under certain circumstances, to apply for a specific license providing for an extension of time to establish a blocked account. Inquiries regarding the amendment should be directed to Daniel M. Rossner, Attorney, Legal Department (Tel. No. 212-791-5040). A nthony M. S olomon. President. AMENDMENT DEPARTMENT OF THE TREASURY OFFICE OF FOREIGN ASSETS CONTROL 31 CFR PART 535 Iranian Assets Control Regulations: Time to Establish Blocked Accounts in Lieu of Payments under Standby Letters of Credit AGENCY: Office of Foreign Assets Control ACTION: Final Rule SUMMARY: The Office of Foreign Assets Control is amending 1535.568 of the Iranian Assets Control Regulations. The purposes of this amendment are: (1) to establish procedures for the establishment of a blocked account by the account party to a standby l e t t e r of credit in cases where a demand for payment is outstanding and payment was barred by a court injunction which is removed; (2) to provide that the account party may apply for a s p e c if ic license providing an extension of time to establish a blocked account where a demand for payment has been made and the account party has f i l e d a petition in an appropriate court for a ju d ic ia l order barring payment of a standby l e t t e r of credi 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, T e l . (202) 376-0236. SUPPLEMENTARY INFORMATION: Since the Regulations involve a foreign a f f a i r s function, the provisions of the Administrative Procedure Act, 5 U.S.C. 553, requiring notice of proposed rulemaking, opportunity for public participation and delay in effective date, are inapplicable. Simi l a r l y , because the Regulations are issued with respect to a foreign a f f a i r s function of the United States, they are not subject to Executive Order 12291 of February 17, 1981, dealing with Federal regulations. Section 535.568 is amended by the addition of a new paragraph (c), the appropriate relet ter ing of subsequent paragraphs, the addition of appropriate references to new paragraph (c ), and the revision of former paragraph_(h). _§535.568 Certain Standby Letters of Credit and Performance Bonds, /amended/ (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 l e t t e r of credit in favor of an Iranian entity is prohibited by §535.201 and not authorized, notwithstanding the provisions of §535.508, i f either (1) a s pe c if ic license has been issued pursuant to the provisions of paragraph (b) hereof or (2) eight business days have not expired after notice to the account party pursuant to paragraph (b) hereof. -2” (b) Whenever an issuing or confirming bank shall receive such demand for payment under a standby le tt er of c re d i t , i t shall promptly notify the person for whose account the credit was opened. Such person may then apply within five business days for a s pe cif ic license authoriz ing the account party to establish a blocked account on i t s books in the name of the Iranian entity in the amount payable under the c r e d i t , in lieu of payment by the issuing or confirming bank into a blocked account and reimbursement therefor by the account party. (c) Where there is outstanding a demand for payment under a standby l e tt e r of c re d it , and the issuing or confirming bank has been enjoined from making payment, upon removal of the injunction, the person for whose account the credit was opened may apply for a s pe c if ic license for the same purpose and in the same manner as that set forth in paragraph (b) of this section. The issuing or confirming bank shall not make payment under the standby l e tt e r of credit unless (1) eight business days have expired since the bank has received notice of the removal of the injunction and (2) a s pe c if ic license issued to the account party pursuant to the provisions of this paragraph has not been presented to the bank. (d) I f necessary to assure the a v a i l a b i l i t y of the funds blocked, the Secretary may at any time require the payment of the -amounts due under any le tte r of credit described in paragraph (a) into a blocked account in a domestic bank or the supplying of any form of security deemed necessary. (e) Nothing in this section precludes any person for whose account a standby l e tt e r of credit was opened or any other person from at any time contesting the le g a l it y of the demand from the Iranian entity or from raising any other legal defense to payment under the standby l e t t e r of credi t. (f) This section does not affect the obligation of the various parties of the instruments covered by this section i f the instruments and payment thereunder are subsequently unblocked. (g) For the purposes of this section, the term "standby l e t t e r of credit" shall mean a l e t t e r of credit securing performance of, or repayment of, any advance payments of deposits, under a contract with Iran or an Iranian entity, or any similar obligation in the nature of a perfor mance bond. (h) The regulations do not authorize any person subject to the j u r i s d ic t i o n of the United States to reimburse a non-U.S. bank for payment to Iran or an Iranian entity under a standby l e t t e r of c r e d i t , except by payment into a blocked account in accordance with S535.508 or paragraph (b) or (c) of this section. ( i ) A person receiving a spec if ic license under paragraph (b) or (c) of this section shall c e r t i f y to the Office of Foreign Assets Control within five business days after receipt of that license that i t has estab lished the blocked account on i t s books as provided for in those paragraphs However, in appropriate cases, this time may be extended upon application to the Office of Foreign Assets Control when the account party has f i l e d a petition with an appropriate court seeking a ju d ic ia l order barring payment by the issuing or confirming bank. -3(j ) authori zed. The extension or renewal of a standby le tte r of credit is (signed) Dennis M. O'Connell Dennis M. O'Connell Di rector Office of Foreign Assets Control Approved: (signed) John M. Walker, Jr. John M. Walker, Jr. Assistant Secretary (Enforcement and Operations) Publication date: March 23, 1982 Fi li n g Date: March 19, 1982
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