[Code of Federal Regulations]

[Title 31, Volume 3]

[Revised as of July 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 31CFR535.416]



[Page 149-150]

 

                  TITLE 31--MONEY AND FINANCE: TREASURY

 

 CHAPTER V--OFFICE OF FOREIGN ASSETS CONTROL, DEPARTMENT OF THE TREASURY

 

PART 535_IRANIAN ASSETS CONTROL REGULATIONS--Table of Contents

 

                        Subpart D_Interpretations

 

Sec. 535.416  Letters of credit.



    (a) Question. Prior to the effective date, a bank subject to the 

jurisdiction of the United States has issued or confirmed a documentary 

letter of credit for a non-Iranian account party in favor of an Iranian 

entity. Can payment be made upon presentation of documentary drafts?

    Answer. Yes, provided payment is made into a blocked account in a 

domestic bank.

    (b) Question. Prior to the effective date, a domestic branch of a 

bank organized or incorporated under the laws of the United States has 

issued or confirmed a documentary letter of credit for a non-Iranian 

account party in favor of an Iranian entity. Payment is to be made 

through a foreign branch of the bank. Can payment be made upon 

presentation of documentary drafts?

    Answer. Yes, provided payment is made into a blocked account in a 

domestic bank.

    (c) Question. Prior to the effective date, a foreign bank confirms a 

documentary letter of credit issued by its U.S. agency or branch for a 

non-Iranian account party in favor of an Iranian entity. Can the U.S. 

agency or branch of the foreign bank transfer funds to the foreign bank 

in connection with that foreign bank's payment under the letter of 

credit?

    Answer. No, the U.S. agency's payment is blocked, unless the foreign 

bank made payment to the Iranian entity prior to the effective date.

    (d) Question. Prior to the effective date, a bank subject to the 

jurisdiction of the United States has issued or confirmed a documentary 

letter of credit for a non-Iranian account party in favor of an Iranian 

entity. The Iranian entity presents documentry drafts which are 

deficient in some detail. May the non-Iranian account party waive the 

documentary deficiency and authorize the bank to make payment?

    Answer. Yes, provided payment is made into a blocked account in a 

domestic bank. However, the non-Iranian account party is not obligated 

by these Regulations to exercise a waiver of documentary deficiencies. 

In cases where such a waiver is not exercised, the bank's payment 

obligation, if any, under the letter of credit remains blocked, as does 

any obligation, contingent or otherwise, of the account party. The 

documents are also blocked.

    (e) Question. Prior to the effective date, a bank subject to the 

jurisdiction of the United States has issued or confirmed a documentary 

letter of credit for a non-Iranian account party in favor of an Iranian 

entity. The Iranian entity does not make timely, complete, or proper 

presentation of documents, and the letter of credit expires. Does there 

remain a blocked payment obligation held by the bank?

    Answer. No, but any documents held by the bank continue to be 

blocked. It is also possible that the account party still has a related 

obligation to the Iranian entity and any such obligation would be 

blocked.

    (f) Question. A bank subject to the jurisdiction of the United 

States has issued a letter of credit for a U.S. account party in favor 

of an Iranian entity. The letter of credit is confirmed by a foreign 

bank. Prior to or after the effective date, the Iranian entity presents 

documents to the U.S. issuing bank. Payment is deferred. After the 

effective date, the Iranian entity requests that the issuing bank either 

return the documents to the Iranian entity or transfer them to the 

confirming bank. Can the issuing bank do so?

    Answer. No. The U.S. issuing bank can neither return nor transfer 

the documents without a license. The documents constitute blocked 

property under the Regulations.



[[Page 150]]



    (g) Question. Prior to the effective date, a bank subject to the 

jurisdiction of the United States has issued or confirmed a documentary 

letter of credit for a non-Iranian account party in favor of an Iranian 

entity. The Iranian entity presents documentary drafts which are 

deficient in some detail. May the non-Iranian account party waive the 

documentary deficiency and make payment?

    Answer. Yes, provided payment is made into a blocked account in a 

domestic bank. However, the non-Iranian account party is not obligated 

by these Regulations to exercise a waiver of documentary deficiencies. 

In cases where such a waiver is not exercised, the amount of the payment 

held by the account party is blocked.



[44 FR 69287, Dec. 3, 1979, as amended at 44 FR 75353, Dec. 19, 1979]