OFAC Issues Guidance on Exports of Personal Communications Services and Software to Iran

March 26, 2012

On March 20, 2012, the Treasury Department’s Office of Foreign Assets Control (OFAC) issued interpretive guidance and a new licensing policy regarding its rule authorizing the export to Iran of certain services and software incident to the exchange of personal communications over the Internet.   Because the scope of the original rule was unclear, many companies chose not to rely on it and simply avoided offering services or exporting software to Iran.  The new guidance makes explicit that certain free services and software for personal communications, data storage, and browsers are within the scope of the general license.  The new licensing policy makes clear that OFAC will grant licenses on a case-by-case basis for similar paid products not covered by the existing authorization.

As we reported previously, in March 2010, OFAC published a rule authorizing exports to Iran, Cuba, and Sudan of certain services “incident to the exchange of personal communications over the Internet, such as instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, and blogging.”  The rule also authorized the export – to Iran and Sudan, but not Cuba – of software necessary to enable the services listed above, as long as the software was classified as EAR99 or ECCN 5D992 mass market software, or not subject to the Export Administration Regulations (EAR).  The general license was subject to several restrictions, including a requirement that the services and software must be publicly available for free.  OFAC issued this rule to implement US foreign policy that encouraged the free download to Iran of mass market software necessary for the exchange of personal communications and sharing of information over the internet.

The scope of OFAC’s rule, however, was not entirely clear.  Many exporters chose not to rely on OFAC’s rule – both to avoid misreading it and because of the risk of doing business with Iran generally.  In response to these concerns, OFAC has issued interpretive guidance on the scope of the personal communications services and software license.  Below is a non-exhaustive list of products that OFAC has determined are within the scope of the authorization (subject to the restrictions in the rule), with examples in parentheses

  • Personal Communications (e.g., Yahoo! Messenger, Google Talk, Microsoft Live, Skype (non-fee based))
  • Updates to Personal Communications Software
  • Personal Data Storage (e.g., Dropbox)
  • Browsers/Updates (e.g., Google Chrome, Firefox, Internet Explorer)
  • Plug-ins (e.g., Flashplayer, Shockwave, Java)
  • Document Readers (e.g., Acrobat Readers)
  • Free Mobile Apps Related to Personal Communications
  • RSS Feed Readers and Aggregators (e.g., Google Feed Burner)

OFAC’s guidance makes clear that free VoIP services and software are covered, along with other common Internet communications tools, and may be exported license-free to Iran under the rule.  Despite the continued tightening of US sanctions against Iran, OFAC issued this guidance to “ensure that the sanctions on Iran do not have an unintended chilling effect on the ability of companies to provide personal communications tools to individuals in that country.” 

In addition, OFAC clarified its Statement of Licensing Policy to establish a favorable licensing policy for requests to export personal communications services and software to Iran that are not covered by the existing authorization (for example, because they are not free).  Specifically, OFAC announced a favorable licensing policy for services and software including web hosting, online advertising, fee-based mobile apps, and fee-based Internet communications services.  OFAC expressly noted Skype Credit and Google Talk in the last category.  OFAC thus is likely to grant export licenses to Iran on a case-by-case basis for similar personal communications services and software, as long as the items are classified as EAR99 or ECCN 5D992 mass market software, or are not subject to the EAR.  However, we understand that these OFAC licenses will generally include a restriction on dealing with designated Iranian banks.  This restriction may limit the utility of such licenses as they are designed to allow exports to individual Iranians, who are not likely to maintain accounts at third-country banks.

This rule is a welcome clarification of OFAC regulations, but  raises at least a couple of notable issues. 

First, OFAC’s guidance and statement of licensing policy apply only to its Iran sanctions program, while its original rule applied to Cuba and Sudan as well.  While this scope clarification presumably applies to the similar rules for Cuba and Sudan, OFAC has not explicitly confirmed this point. 

As we explained in our previous advisory, OFAC’s rule may have different practical effects for exports to Iran as compared to exports to Cuba and Sudan.  Exports to Iran that are licensed by OFAC do not require separate authorization from the US Department of Commerce’s Bureau of Industry and Security (BIS), under Section 746.7 of the EAR.  Since the EAR do not contain a similar provision for Sudan, a BIS license may still be required to export certain 5D992 software to Sudan, and BIS has not made any public statements about its licensing policy in these cases.  In addition, software exports to Cuba are never permitted without separate BIS authorization.  BIS has not made any public statements, however, on this subject since OFAC published its final rule in 2010.  Further, it is possible that BIS already considers some of these items authorized for export to Cuba and Sudan based on its September 2009 advisory opinion, which permits the publication of “mass market” encryption software on the Internet where it may be freely and anonymously downloaded by anyone, including sanctioned country nationals. 

Second, Internet-based personal communication is one of the very few areas in which the US Government currently encourages exports to Iran.  In the context of ever-tightening economic sanctions against Iran, OFAC presumably issued this guidance and licensing policy in an effort to promote the free flow of information to Iranian citizens through the export of Internet-based services and software and its action is consistent with US foreign policy with respect to Iran.   Specifically, OFAC’s licensing policy is consistent with the State Department’s current approach to Internet freedom as a foreign policy tool.  Accordingly, depending on the circumstances in a particular case, OFAC also may consider approval of specific license requests that promote Internet freedom outside the personal communications context. 

We will continue to keep you apprised of developments regarding sanctions against Iran.  If you have questions about this advisory or related sanctions questions,  please contact Ed Krauland at 202-429-8083 in our Washington office.