US Persons

Every US sanctions regime sets its own scope of application.  Generally, US primary sanctions prohibit transactions only by US persons, defined as any United States citizen, permanent resident, entity organized under the laws of the United States or any jurisdiction within the United States, or any person in the United States.1

Non-US Subsidiaries

For Cuba and Iran, the restrictions also apply to foreign entities that are “owned or controlled” by a US person (i.e., foreign subsidiaries of US companies).  “Owned or controlled” is understood to encompass holding at least 50% of the equity interest, a majority of seats on the board, or otherwise controlling actions, policies, and personnel decisions of the foreign entity.2

Non-US Companies

Non-US companies face potential liability for exporting goods or services from the US in violation of US sanctions or for “causing a violation” by involving a US person in a transaction that would be prohibited for that US person.3

OFAC or the State Department may also impose so-called “secondary sanctions” on non-US companies, even with no US nexus to the activity.  Under secondary sanctions, a non-US company may be restricted from US markets or the US financial system if it engages in certain conduct related to Iran, Russia, or North Korea.

1 31 CFR § 560.314.

2 31 CFR §§ 515.329, 560.215.

3 50 USC § 1705.

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