[Federal Register Volume 61, Number 242 (Monday, December 16, 1996)]
[Notices]
[Pages 66067-66068]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31853]


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DEPARTMENT OF STATE

[Public Notice No. 2476]


Additional Information for the Iran and Libya Sanctions Act

    This notice provides additional information about the Iran and 
Libya Sanctions Act of 1996 (P.L. 104-172--``the Act'').

Enactment and Delegation

    The Act, signed by the President on August 5, 1996, does not 
replace or supersede existing sanctions against Iran or Libya. The 
Iranian Assets Control Regulations (31 C.F.R. Part 535), the Iranian 
Transactions Regulations (31 C.F.R. Part 560), and the Libyan Sanctions 
Regulations (31 C.F.R. Part 550) remain in effect and will continue to 
be administered by the Office of Foreign Assets Control at the U.S. 
Department of the Treasury.
    On November 21, 1996, the President delegated to the Secretary of 
State responsibilities in the following sections of the Act, in some 
cases to be exercised in consultation with other agencies: Sections 4, 
5, 6(1), 6(2), 9, and 10 (see, 61 Fed. Reg. 64249 (Dec. 4, 1996)). The 
Office of Economic Sanctions Policy will administer the Act for the 
Department of State.
    Public inquiries regarding the Act may be sent to: Iran and Libya 
Sanctions Act Unit, Office of Economic Sanctions Policy, Room 3329, 
U.S. Department of State, 2201 C Street N.W., Washington, DC 20520; 
Attn.: John Finkbeiner, Telephone: (202) 647-7299.

Investment Definition

    Section 14(9) INVESTMENT--The term ``investment'' means any of the 
following activities if such activity is undertaken pursuant to an 
agreement, or pursuant to the exercise of rights under such an 
agreement, that is entered into with the Government of Iran or a 
nongovernmental entity in Iran, or with the Government of Libya or a 
nongovernmental entity in Libya, on or after the date of enactment of 
the Act:

    (A) The entry into a contract that includes responsibility for 
the development of petroleum resources located in Iran or Libya (as 
the case may be), or the entry into a contract providing for the 
general supervision and guarantee of another person's performance of 
such a contract.
    (B) The purchase of a share of ownership, including an equity 
interest, in that development.
    (C) The entry into a contract providing for the participation in 
royalties, earnings, or profits in that development without regard 
to the form of the participation.

    The term ``investment'' does not include the entry into, 
performance, or financing of a contract to sell or purchase goods, 
services, or technology.

Timing of Investment

    In order for a contract or the purchase of a share of ownership to 
be considered under the definition of investment it must be undertaken 
``pursuant to an agreement * * * that is entered into with the 
Government of Iran or a nongovernmental entity in Iran, or with the 
Government of Libya or a nongovernmental entity in Libya on or after 
the date of enactment of the Act.'' The House Ways and Means Committee 
Report states that ``Companies may perform existing contracts, and 
complete existing investments, such as subcontracts, farm-in 
arrangements, and the like in connection with contracts entered into 
prior to the date of enactment.'' The term ``agreement'' includes, 
inter alia, option contracts and contracts subject to extension.

What is ``Responsibility for the Development of Petroleum 
Resources?''

    Section 14(4) defines ``development'' as ``the exploration for, or 
the extraction, refining, or transportation by pipeline of, petroleum 
resources.'' Therefore, the entry into a contract that includes 
responsibility for those activities could be considered an investment.
    The investment definition specifically excludes contracts for the 
sale or purchase of goods, services or technology.
    The definitions contained in Section 16 of the Export 
Administration Act (whose provisions are being carried out under the 
authority of the International Emergency Economic Powers Act) will be 
used for the terms ``goods'' and ``technology.'' The term ``good'' is 
defined as ``any article, natural or manmade substance, material, 
supply or manufactured product, including inspection and test 
equipment, and excluding technical data. ``Technology'' means ``the 
information know-how (whether in tangible form, such as models, 
prototypes, drawings, sketches,

[[Page 66068]]

diagrams, blueprints, or manuals, or in intangible form, such as 
training or technical services) that can be used to design, produce, 
manufacture, utilize, or reconstruct goods, including software and 
technical data, but not the goods themselves.''
    With respect to the definition of ``services'', the House Ways and 
Means Committee Report states that the term investment is meant to 
include ``entry into a contract for the provision of management 
services entailing overall responsibility for the development of 
Iranian or Libyan petroleum resources or entailing general supervision 
and guarantee of another person's performance of such a contract.'' 
General concepts of investment can be used to determine whether a 
contract for such management services is an ``investment'' rather than 
a ``service contract.'' In making such a determination, factors such as 
whether capital is put at risk by the person involved, whether the 
person receives a share in the income or profits of the development 
(bearing in mind that the entry into a contract providing for such 
participation already falls within the definition of investment), 
whether the person receives an equity stake in the petroleum resources 
(bearing in mind that the purchase of a share of ownership in the 
development of petroleum resources already falls within the 
definition), whether compensation is based on the investment's 
performance, whether the person receives a share in the assets of the 
enterprise upon dissolution, can all be considered.
    Any contract that includes overall responsibility for the 
development of petroleum resources could be captured by the definition, 
regardless of the parties involved, as long as the contract is entered 
into pursuant to an agreement with the Government of Iran, a 
nongovernmental entity in Iran, the Government of Libya, or a 
nongovernmental entity in Libya.

Parents and Subsidiaries

    Section 5(c) states that sanctions will be imposed on:

    (1) any person the President determines has carried out 
[sanctionable activities]; and
    (2) any person the President determines--
    (A) is a successor entity to the person referred to in paragraph 
(1);
    (B) is a parent or subsidiary of the person referred to in 
paragraph (1) if that parent or subsidiary, with actual knowledge, 
engaged in the activities referred to in paragraph (1); or
    (C) is an affiliate of the person referred to in paragraph (1) 
if that affiliate, with actual knowledge, engaged in the activities 
referred to in paragraph (1) and if that affiliate is controlled in 
fact by the person referred to in paragraph (1).

    For parents of sanctioned persons, the term ``engaged in'' refers 
to facilitation and authorization of the entry into a contract that 
falls within the definition of investment. For subsidiaries and 
affiliates, it refers to actual participation in the implementation of 
the contract--for example, if the contract provided for certain 
elements to be carried out by subsidiary companies.

    Dated: December 11, 1996.
Robert M. Maxim,
Acting, Deputy Assistant Secretary, Energy, Sanctions, and Commodities.
[FR Doc. 96-31853 Filed 12-13-96; 8:45 am]
BILLING CODE 4710-07-M