EU Companies Dealing With Iran: Your Frequent Questions Answered by the Due Diligence Helpdesk

March 19, 2021

ACSS asked the EU Due Diligence Helpdesk to answer questions on this new initiative. Below are their answers.

Disclaimer: The answers, views and opinions expressed in this article are those of the EU Due Diligence HelpDesk and do not reflect the policy or position of ACSS. Please get the advice of an attorney before engaging in transactions or business dealings that may involve sanctioned jurisdictions.

  1. ACSS: How did the idea to establish a Due Diligence Helpdesk and Due Diligence Analysis Tool for EU SMEs come about and what are the aims?

Answer Due Diligence Helpdesk: The Due Diligence Helpdesk on EU Sanctions is an initiative funded by the European Union. It aims to support EU businesses, in particular Small and Medium-sized Enterprises (SMEs), that are willing to engage with Iran, to do so legitimately in compliance with EU law and in the framework of the Joint Comprehensive Plan of Action (JCPOA). The initiative recognizes that EU SMEs may lack the internal legal knowledge or resources required to navigate the due diligence compliance steps with EU restrictive measures (sanctions). The Helpdesk provides free-of-charge support to EU SMEs on how to complete due diligence on EU sanctions compliance for specific business projects in Iran. The Helpdesk facilitates the efforts of EU SMEs in realizing legitimate business opportunities in Iran and the financing of legitimate business activities in Iran by European banks, thus demonstrating the EU’s continued commitment to the JCPOA. 

  1. What are the current EU sanctions against Iranian persons or entities, and what broadly is their impact on EU-Iran commerce?

Answer Due Diligence Helpdesk: On Implementation Day (16 January 2016), the limited sanctions relief provided to Iran under the 2013-interim agreement (Joint Plan of Action – JPOA) was superseded by the lifting of all economic and financial sanctions taken in connection with the Iranian nuclear programme, in accordance with the nuclear deal (Joint Comprehensive Plan of Action – JCPOA). Therefore, with a few exceptions, all economic activity between the EU and Iran is permissible.

To check whether a planned economic activity with Iran is subject to EU sanctions, one can use the EU Sanctions Tool. Broadly, the measures still in force are related to proliferation (arms embargo, sanctions related to missile technology, restrictions on certain nuclear-related transfers and activities, provisions concerning certain metals and software), to serious human rights violations (financial restrictions and travel bans against listed persons, export ban on certain goods used for internal repression and monitoring of telecommunication) as well as listings under the Syria regime and the so-called CP931 list.

More information can be found at the following links: https://www.consilium.europa.eu/en/policies/sanctions/iran/#
https://eeas.europa.eu/delegations/iran/32286/nuclear-agreement_en#JCPOA+Information+Note
https://sanctionsmap.eu
https://ec.europa.eu/info/sanctions
https://sanctions-tool.ec.europa.eu 

  1. ACSS: How much, and what type of commerce is taking place currently between the EU and Iran?

Answer Due Diligence Helpdesk:

  • The EU was Iran’s biggest trading partner before the current sanctions regime. It now stands as Iran’s third main trading partner, accounting for 16.3% of Iran’s overall trade.
  • The EU’s balance in trade with Iran was €3.7 billion in 2019. Trade balances since 2012 with Iran have been mostly positive; for the previous five years they were mostly negative.
  • The EU exported over €4.4 billion worth of goods to Iran in 2019. EU exports to Iran are mainly machinery and transport equipment (€1.5 billion, 35.1%), chemicals (€1.3 billion, 29.2%), and manufactured goods (€0.5 billion, 11.2%).
  • The EU imported over €0.7 billion worth of goods from Iran in 2019. Most EU imports from Iran are food-related including live animals (€205 million, 30.0%), followed by manufactured goods (€184 million, 27.0%), and chemicals (€148 million, 21.7%).
  • In 2019, EU imports from Iran decreased by 92.8% and EU exports decreased by 49.4%.
  1. ACSS: Is the Helpdesk limited strictly to SMEs? How are SMEs defined by the Helpdesk?

Answer Due Diligence Helpdesk: The Helpdesk is designed primarily to assist SMEs but assesses other enquiries on a case-by-case basis. Small and medium-sized enterprises are defined in EU Recommendation 2003/361.

 The main factors determining whether an enterprise is an SME are:

  1. Staff headcount
  2. Either turnover or balance sheet total
Company category Staff headcount Turnover or Balance sheet total
Medium-sized < 250 ≤ € 50 m ≤ € 43 m
Small < 50 ≤ € 10 m ≤ € 10 m
Micro < 10 ≤ € 2 m ≤ € 2 m

 

  1. ACSS: What services does the Helpdesk provide?

Answer Due Diligence Helpdesk:

The free-of-charge services of the Due Diligence Helpdesk on EU Sanctions include:

Helpdesk Enquiry Service – Confidential Consultation

Individual EU SMEs can submit enquiries via a query form on the Helpdesk website, accessing a panel of experts to receive confidential first-line information on their specific business case. The Helpdesk can inform EU SMEs about whether their planned business activities fall under EU sanctions, and the level of due diligence required.

Information Materials

EU SMEs can download information materials from the Helpdesk website concerning EU sanctions and due diligence requirements pertaining to Iran’s business environment. The Helpdesk also publishes a regular newsletter which describes the due diligence approaches generally adopted in the emerging business sectors of interest to EU SMEs. News items are regularly posted on the Helpdesk website to keep EU SMEs up-to-date with the most important developments in the Iranian business environment.

Webinars
The Helpdesk delivers webinars for EU SMEs conducting business in Iran. Introduced by renowned experts, they cover EU sanctions and other due diligence compliance requirements when conducting business in Iran.

  1. ACSS: What risk areas do the Helpdesk and Due Diligence Analysis Tool address (sanctions, money laundering, corruption, etc)?

Answer Due Diligence Helpdesk: The Due Diligence Helpdesk on EU Sanctions provides free-of-charge support to EU SMEs on how to complete due diligence checks on EU sanctions compliance for specific business projects. Thus, EU SMEs can be informed whether their initiatives in Iran are in accordance with EU sanctions law. Thanks to the Helpdesk’s assistance in providing due diligence compliance documents, EU SMEs can also reassure financial institutions of the legitimacy of their business projects, which would help in obtaining the needed funds.

  1. ACSS: What practical steps are involved when using the Helpdesk Due Diligence Analysis Tool?

Answer Due Diligence Helpdesk:

The Helpdesk’s approach to due diligence

EU SMEs can submit a request for due diligence using the Sanctions Due Diligence Analysis Tool, available on the Helpdesk website under the https://sanctions-helpdesk.eu/sanctions-dd-analysis-tool link. EU SMEs are asked to submit a few details (contact person/email address for follow-up, Member State/number of employees/yearly turnover to verify that the applicant is an EU SME), and to identify the potential Iranian business partner they would request due diligence on. All personal data of EU SMEs are treated in accordance with GDPR guidelines and are not shared with non-EU entities.

Once these details have been received by the Helpdesk, initial due diligence will be conducted based on self-declaration and the provision of supporting organisational documents submitted by the proposed Iranian business partner as well as verification in EU sanctions databases. If necessary, where appropriate to ensure EU sanctions compliance, additional in-depth verification tools will be made available. Following due diligence completion, EU SMEs will receive a detailed due diligence output report from the Helpdesk.

  1. ACSS: Can users treat the Helpdesk and Due Diligence Analysis Tool as a substitute for obtaining advice from a law firm or private compliance consultancy?

Answer Due Diligence Helpdesk: The Helpdesk is made available to all EU economic operators interested in engaging in business with Iran. It aims to provide a user-friendly mechanism to assess whether a proposed activity involving Iran is compliant with EU sanctions. The assessments of the Helpdesk are to be understood as providing first-line guidance.

Best efforts were used in developing and designing the Helpdesk, with attention to the accuracy of the information provided, for example in using the most up-to-date, publicly available information sources such as EU sanctions lists. However, no representation or warranty, express or implied, is given by or on behalf of the European Commission or by any of its affiliates or partners, or the Helpdesk operators, with respect to the accuracy or completeness of the information contained within or on which the Helpdesk is based, or of any other information or representations supplied or made in connection with the Helpdesk, or as with respect to the reasonableness of any expectations therefrom. The Commission does not assume any liability in this regard.

EU economic operators that use the Helpdesk must make all trading and investment decisions on the basis of their own judgment, and, if in doubt, they should seek legal advice or consult the competent authority in their respective Member States.

Note that Member States’ national competent authorities (NCA) are in charge of enforcing EU sanctions and the ensuing penalties in case of a breach. EU economic operators are strongly encouraged to gather all the available information at the national level and to contact their NCA in case of doubt.

  1. ACSS: The Helpdesk is funded by the EU and its services are free of charge. Why is the EU investing so much in EU-Iran commerce?

Answer Due Diligence Helpdesk:

The EU has allocated significant resources to enhance legitimate trade with Iran from the very beginning of sanctions lifting. For instance, the European Commission supported the Member States, which set up INSTEX, and has put in place several other initiatives, of which the Helpdesk is one. The Commission has also recently launched the Sanctions Tool, an online self-assessment tool designed to help EU companies determine whether EU sanctions apply to their business dealings with Iran.

The EU commitment also gives effect to its vision of sanctions, which are meant to be smart and targeted and which seek to avoid unintended consequences of all sorts. Supporting operators to engage in legitimate activities with Iranian counterparts, and to avoid those which could potentially breach sanctions, is a means to achieve this vision.

  1. ACSS: Does the EU have any plans to establish more Helpdesks addressing EU commerce with other countries affected by EU sanctions – say, for example, Turkey or Russia?

Answer Due Diligence Helpdesk:

The European Commission’s initiative to launch the Helpdesk sought to address the recurring issues reported by EU SMEs interested in doing legitimate business with Iran. The Commission, moreover, assesses implementation issues in the context of all other sanctions regimes, as well as the impact of sanctions on bilateral EU operators and potentially other EU policies. If reports from operators or the Commission’s own assessments point to the need to set up similar initiatives, the Commission will duly consider those, within the limits of existing resources. The valuable experience gathered in the operation of the Iran Helpdesk would certainly be useful in this regard.

  1. ACSS: Will the Helpdesk advise on US nexus and the risk of extraterritorial sanctions by third countries?

Answer Due Diligence Helpdesk:  The Helpdesk covers solely EU sanctions. It is not applicable to sanctions imposed by third countries against Iran. Moreover, it is important to highlight that the European Union does not recognize the extraterritorial application of laws adopted by third countries and considers such extraterritorial application to be contrary to international law. The EU’s Blocking Statute (Council Regulation (EC) No 2271/96) protects EU economic operators from the extraterritorial application of third-country legislation and counteracts its effects, prohibiting compliance by EU operators with any requirement or prohibition based on or resulting from the foreign laws specified in its annex.

  1. ACSS: What is the EU doing at present to enhance the resilience of EU businesses to extraterritorial sanctions by third countries?

Answer Due Diligence Helpdesk:  As announced in the Work Programme for 2020, the Commission has very recently published a Communication on fostering openness, strength, and resilience in the European economic and financial system. The Communication put forward a strategy relying on three pillars: enabling a stronger international role of the euro, further developing EU financial market infrastructures and increasing their resilience (including to extraterritorial application of unilateral sanctions by third countries), and further promoting the uniform implementation and enforcement of the EU’s own sanctions.

More details are available at the following link:

https://ec.europa.eu/commission/presscorner/detail/en/ip_21_108

  1. ACSS: Part of the challenge faced by EU businesses wanting to engage in commerce with Iran has to do with cautiousness by European banks. What steps if any does the Helpdesk intend to take to encourage European banks to support commerce with Iran?

Answer Due Diligence Helpdesk:

As the conclusion of the due diligence process on potential Iranian business partners requested by EU SMEs, the Helpdesk provides EU SMEs with a detailed Output Report summarising the most important findings of the due diligence investigation. In case the Helpdesk concludes that the proposed Iranian partner is not subject to EU sanctions, this will be reflected in the Output Report. The Helpdesk highly encourages European banks and other financial institutions to accept the Output Report as proof that according to the due diligence investigation concluded by the Helpdesk, the proposed Iranian business partner is not subject to EU sanctions.

  1. ACSS: Please tell us about the Helpdesk’s partnership with INSTEX.

Answer Due Diligence Helpdesk:  The Helpdesk works closely with various institutions (diplomatic missions, Chambers of Commerce, trade promotion agencies etc.) which might be able to assist SMEs with various issues that fall outside the scope of the Helpdesk services, by referring the EU SME to such third parties. For that reason, the Helpdesk is continuously building partnerships to expand its reach towards institutions that are better positioned to handle certain enquiries. The partnership with INSTEX works on the same principle and the Helpdesk encourages EU SMEs to reach out to INSTEX for payment-specific questions.

You can find further information on the Helpdesk’s partners under the ‘Partners’ tab of the Helpdesk website. EU SMEs are encouraged to reach out to these institutions through the Helpdesk’s staff, the contact information shared on the website and/or during Helpdesk events.

  1. ACSS: Please tell us about your team at the Helpdesk – how many of you are there, what disciplines do you come from, what is the structure, and so on.

Answer Due Diligence Helpdesk:

The Helpdesk Team is formed by a consortium of partners, specialising respectively in EU project management consultancy, European law and Iran-based research and consulting. The Helpdesk team comprises a Team Leader, a Senior Compliance Expert, as well as marketing and administrative executives. The Helpdesk team works to reflect the highest professional quality expected by European companies with regards to due diligence in Iran.

  1. ACSS: What are the most common queries or themes received by the Helpdesk to date?

Answer Due Diligence Helpdesk:  To date, the Helpdesk has received the following frequent queries:

  1. Why should I use the Helpdesk?
  2. Are the Helpdesk services free of charge?
  • How should I approach the due diligence process?
  1. What if my Iranian Business Partner is unable or does not agree to provide certain information as required by the Helpdesk?
  2. How long does it take to generate the Output Report?
  3. I want to sell my product/service to Iran but do not have a potential Iranian business partner. Can the Helpdesk help?
  • I am an EU citizen and want to provide consulting services to an Iranian company. Do I have to conduct due diligence on the Iranian company?
  • Does the Helpdesk provide any additional on-the-ground legal or business consulting services, or advice on banking matters on the Iranian market?
  1. How does the Helpdesk ensure the security of my data?
  2. Whom should I contact if I encounter problems accessing certain parts of the website?
    For more information please visit:
    https://sanctions-helpdesk.eu/faq