Tough New Iran Sanctions Could Impact Automotive Suppliers

14 March 2013 Dashboard Insights Blog
Authors: Christopher Swift Gregory Husisian

Multinational companies in the automotive supply sector could face heightened enforcement risks under new sanctions on Iran. Effective March 8, 2013, U.S. parent companies will become liable for Iran-related sanctions violations committed by their foreign subsidiaries–including subsidiaries incorporated as separate legal entities outside U.S. jurisdiction. The move represents a sudden change in Treasury Department’s previous approach, which permitted foreign entities to deal with Iran so long as there was no U.S.-person involvement. Now U.S. parents must disclose their subsidiaries’ Iran-related dealing to the Securities and Exchange Commission.

Sanctions against Iran are now the broadest and toughest in Washington’s arsenal. From banning dealings with Iran’s banking, shipping, or energy sectors, to targeting foreign entities that attempt to evade the U.S. embargo, these measures rival the kinds of restrictions previously placed on countries at war with the United States. They could also prove disruptive to multinational corporations that sell to, or source from, the Middle East. Between expanded liability, enhanced investigations, and aggressively applying existing rules against facilitation, the United States is determined to deter suppliers from dealing with Iran, as well as punish those who do.

Faced with these realities, multinational companies in the automotive sector should carefully examine their current business practice and sanctions compliance programs. Fresh risk assessments are also prudent, especially in light of the new sanctions’ effort on foreign subsidiaries, supplies, and affiliates. Even companies that were previously outside U.S. jurisdiction should evaluate their risks. With new penalties ranging from travel bans, to exclusion from the U.S. financial system, to freezing the assets of foreign officers and directors, nearly all Iran-related business now carries serious enforcement and compliance risks.

Foley & Larder’s recent newsletter U.S. regulation of Exports and International Conduct contains fuller summary of the new Iran sanctions and other regulations affecting international trade and investment. The summary is available online at Persons that wish to receive Foley’s free monthly newsletter should contact Greg Husisian ( / +1 202.945.6149) or Christopher Swift ( / +1 202.295.4103) with their contact information or vCard.

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