On October 9, 2012, President Obama issued an executive order implementing certain statutory requirements of the Iran Threat Reduction and Syria Human Rights Act of 2012 (TRA) and expanding a prohibition on US persons from transacting with Iran to include foreign branches or subsidiaries.

Section 4 of the executive order specifically prohibits an entity owned or controlled by a US person (or company) and established or maintained outside the US from knowingly engaging in any transaction, directly or indirectly, with the government of Iran or any person subject to the jurisdiction of the government of Iran. Civil penalties for a foreign subsidiary's violation will also be applied to the US parent company to the same extent that they would apply to a US person or company for the same conduct.

Foreign subsidiaries may engage in transactions authorized under a general license, but whether a license granted to a parent company applies to subsidiaries depends on the license's terms. A safe harbor in the executive order allows US persons to avoid the application of civil penalties by divesting or terminating their business with the violating foreign subsidiary by February 6, 2013.

The TRA was signed on August 10, 2012, and seeks, among other things, to tighten sanctions on Iran to pressure the country to abandon its alleged nuclear weapons program.

For more information regarding the TRA, see the FAQs from the Office of Foreign Assets Control.