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The Franchise Memorandum

OFAC Clarifies That Iranian Sanctions Program Remains in Place

Franchisors seeking to do business in Iran will continue to face challenges because Iranian sanctions will remain substantially in place for most industries. On October 7, 2016, the United States Department of Treasury’s Office of Foreign Assets Control (“OFAC”) updated the FAQs related to the Iranian Sanctions Program to provide further clarity regarding the scope of the sanctions lifting that occurred as part of the Joint Comprehensive Plan of Action (“JCPOA”) reached in 2015.

In July 2015, the U.S. and other countries entered into the JCPOA to ensure that Iran’s nuclear program will be exclusively peaceful. As part of the JCPOA, the U.S. agreed to lift certain sanctions against Iran as of January 16, 2016. Despite widespread press suggesting that a substantial portion of the sanctions against Iran were removed, the opposite is true. The U.S. agreed to permit trade in certain specific industries, allowed U.S. companies to seek special licenses in other areas, removed a number of individuals and entities from the SDN list (prohibited persons), and removed certain nuclear-related secondary sanctions involving U.S. owned or controlled foreign entities. OFAC has clarified in its FAQs that, with the exception of specific restrictions that have been lifted or modified, OFAC’s Iranian Sanctions Program will remain in place and will generally maintain the trade embargo against Iran (OFAC FAQ A.3). Because many franchised businesses do not fit within any of the special industries impacted by the JCPOA (e.g., aviation, humanitarian foodstuffs, energy, etc.), franchisors wishing to conduct business in Iran will generally need to seek assistance from another source of permitted activity. The JCPOA does indicate, however, that the U.S. will review the Iranian Sanctions Program in 2023 and possibly remove additional restrictions at that time.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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