On March 8, 2010, the Department of the Treasury's Office of Foreign Assets Control ("OFAC") announced that it was relaxing U.S. restrictions on the export of certain internet services and mass market software to Sudan, Iran and Cuba.1 The move comes after the U.S. Department of State ("State Department"), in a December 15, 2009 letter, notified the Senate Committee on Armed Services that it would be waiving certain provisions of the Iran-Iraq Arms Non-Proliferation Act of 1992 ("IIANPA") to allow for "downloads of free mass market software by companies such as Microsoft and Google to Iran necessary for the exchange of personal communications and/or sharing of information over the internet such as instant messaging, chat and email, and social networking" as well as "related services."2
The impetus for the change came from the Iranian government crackdown that followed last June's presidential elections in Iran. After the disputed vote, the Iranian government issued a ban on other media outlets and means of communication, so social networking sites such as Twitter and Youtube became pivotal in the effort to report on the election protests. At the time, the U.S. government even took the extraordinary step of asking Twitter to delay a planned system maintenance so as to ensure that Iranians could continue to report on what was happening in the country.3
In recent years, concern over the reach of the Sudan, Iran and Cuba transaction regulations has led companies such as Microsoft Corp. ("Microsoft") and Google, Inc. ("Google") to disable downloads to these sanctioned countries.4 The events that followed Iran's 2009 presidential election, however, highlighted the valuable role such mass market software can play in promoting U.S. interests. To address these developments and comply with the recommendations from the State Department, OFAC amended its transaction regulations earlier this week by issuing general licenses that authorize exports to persons in Iran and Sudan of (a) free mass-marketed services incident to personal communication over the internet, including "instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, and blogging" and (b) free mass-marketed software necessary to enable these services. To qualify, software must be either not be subject to the EAR (i.e., publicly available or excluded by the de minimis rules), be classified as EAR99, or be classified as mass market software under the export control classification number 5D992.5 The amendments also permit for the issuance of specific licenses for services and software "incident to the sharing of information over the Internet" that are not covered by the general licenses.6 OFAC regulations regarding Cuba were similarly amended with respect to free mass-marketed services incident to personal communication over the internet, but not software as the export of goods and technology (including software) to Cuba is handled by the Department of Commerce's Bureau of Industry and Security.7
Unlike the Sudan and Cuba amendments, OFAC's revisions to the Iranian Transaction Regulations required waiver by the State Department (acting on behalf of the President) since much of the software necessary to engage in personal communications or share information over the internet are listed as nominally dual-use goods on the Commerce Control List ("CCL") (by virtue of the low-level encryption involved). Under by IIANPA, OFAC is generally precluded from issuing general or specific licenses of items on the CCL without explicit waiver by the President.8
For all they offer, these general licenses still do not authorize the exportation of services or software with knowledge or reason to know that the services or software are intended for the governments of Sudan, Iran or Cuba. They also do not authorize the exportation of internet connectivity services or telecommunications transmission facilities, web-hosting services for purposes other than personal communications, domain name registration services, or any goods on the CCL beyond those outlined above.9
In announcing these general licenses, Deputy Treasury Secretary Neal Wolin said their issuance would "enable Iranian, Sudanese and Cuban citizens to exercise their most basic rights" and make it easier for them "to use the Internet to communicate with each other and with the outside world." Wolin stressed, however, that these new licenses notwithstanding, "the Administration will continue aggressively to enforce existing sanctions and to work with our international partners to increase the pressure on the Government of Iran to meet its international obligations."10 With regards to Iran, overall existing sanctions are actually due to significantly increase once the competing versions of the pending legislation to amend the Iranian Sanctions Act are merged in conference and signed into law by the President.11
- Potential of the New Licenses: Given the policy purpose of the general license to promote personal communications in U.S. embargoed countries, companies should evaluate whether their commodities, software, and services fall within the scope of the new general licenses or could alternatively benefit from the specific licenses provided for by the amendments.
- "Incident to the Sharing of Information": As noted earlier, if a service or software is not considered "incident to personal communication," specific licenses are available under the new amendments if the service or software is "incident to the sharing of information over the Internet," provided the other general license requirements are met. It remains to be seen how far OFAC will extend these general and specific licenses— especially with regard to software "not incident to personal communication"— and whether companies such as Google will seek to use the licenses to distribute mass market software such as Google Earth.
- Use by Embargoed Governments: At this point it is unclear what steps OFAC will expect companies to take to ensure that their services and software are not knowingly being provided to or used by the governments of Sudan, Iran and Cuba.
1 Office of Foreign Assets Control, Announcement of Regulation Change, 31 C.F.R pts. 515, 538, and 560, 75 Fed. Reg. 10,997 (Mar. 8, 2010).
2 Letter from Richard R. Verma to Carl Levin, Senate Committee on Armed Services (Dec.15, 2009).
3 Reuters, U.S. State Department Speaks to Twitter Over Iran (Jun. 16, 2009), http://www.reuters.com/article/idUSWBT01137420090616.
4 See, e.g., ExportLawBlog, Microsoft Shuts Off IM Service in Sudan and Other Sanctioned Countries (May 26, 2009), http://www.exportlawblog.com/archives/508; ExportLawBlog, U.S. Export Laws Block Access to Website on Crisis in Darfur (Apr. 23, 2007), http://www.exportlawblog.com/archives/149.
5 31 C.F.R. pts. §§ 538.533(a), 560.540(a).
6 31 C.F.R. pts. §§ 538.533(c), 560.540(c).
7 31 C.F.R. pt. § 515.578.
8 See, 50 U.S.C. §§ 1701 and 1606; see also, Category 5, Telecommunications and “Informational Security,” Export Administration Regulations, 15 C.F.R. pt. 774, supplement No. 1.
9 31 C.F.R. pts. §§ 538.533(b), 560.540(b), and 515.578(b). Note that, as defined, the term Government of Sudan does not include the regional government of Southern Sudan. 31 C.F.R. § 538.305.
10 Treasury Department Issues New General License to Boost Internet-Based Communication, Free Flow of Information in Iran, Sudan and Cuba, TG-577, OFAC, (Mar. 8, 2010), http://www.treasury.gov/press-center/press-releases/Pages/tg577.aspx.
11 See Iran Refined Petroleum Sanctions Act of 2009, H.R. 2194, and the Dodd-Shelby Comprehensive Iran Sanctions, Accountability, and Divestment Act, S.2799. In order to undercut Iran’s nuclear ambitions, this new legislation imposes new sanctions on Iran’s refined petroleum sector and increases pressure on Iran and its trading partners.
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