Nonproliferation Sanctions Under Iran, North Korea, Syria Act

Friday the Office of Missile, Biological, and Chemical Nonproliferation, Bureau of International Security and Nonproliferation, Department of State, named three individuals and two entities as violators of the Iran, North Korea, and Syria Nonproliferation Act (INKSNA).

In addition to a Russian, North Korean and Chinese, Shanghai Growth International Logistics Ltd and Yidatong (Tianjin) Metal Materials Co., Ltd are banned from participating in any commerce or licensure from a U.S. Agency.

INKSNA provides for sanctions for the transfer of equipment or technology having the potential to make a material contribution to the development of weapons of mass destruction or cruise or ballistic missile systems. This category includes:

(a) Items of the same kind as those on multilateral lists but falling below the control list parameters, when it is determined that such items have the potential to make a material contribution to WMD or cruise or ballistic missile systems;

(b) other items with potential to make such a material contribution, when added through case-by-case decisions; and

(c) items on U.S. national control lists for WMD/missile reasons that are not on multilateral lists.

Key Commodities

Iran relies on foreign procurement to obtain items it cannot produce domestically, often preferring U.S.-origin technologies.  Recovered Iranian-origin UAVs used by Russian forces in Ukraine reveal that Iran’s UAV program has used many components produced by third-country suppliers. 

Industry should be aware of its compliance obligations and exercise extra vigilance due to the ubiquitous nature of many of the items, as Iran utilizes commercial-grade components in its weapons.

The following list highlights key commodities sought by Iran for its development of UAVs.

Electronics, such as transceiver modules, processors and controllers, memories, amplifiers, and other electronic integrated circuits.  Most notably, Iran relies on certain U.S.-branded items such as field programmable gate arrays (FPGAs), RF transceivers, microcontrollers, and capacitors. 

Some of these are low-technology items and may not be included on the Commerce Control List (CCL)¹ of the Export Administration Regulations (EAR, 15 C.F.R. Parts 730-774) (i.e., they are designated as “EAR99”) but nonetheless may be controlled for export to Iran under U.S. sanctions or export controls.

Guidance, Navigation and Control Equipment, such as accelerometers, gyroscopes, inertial measurement units (IMUs), and other navigational sensors.

Components, such as aircraft spark-ignition and compression-ignition internal combustion piston engines and associated spare parts, and modules such as flight computers.

Exporters, manufacturers, and distributors of items listed above should be aware of the importance of carrying out customer due diligence in a way consistent with BIS’s “Know Your Customer” Guidance and Red Flags², and should track to whom they are selling and/or shipping their items.  We urge manufacturers that supply UAV-relevant items to establish multiple methods to track such items due to the observed prevalence of methods used to obscure the sources of components found in Iranian UAVs, such as the lasering off of serial numbers and other identifying information.

U.S. Export Controls

The United States has long regulated the export of UAVs and related items via a range of controls, including license requirements for items listed on the United States Munitions List, as set forth in the International Traffic in Arms Regulations (ITAR)³ and for items listed on the Commerce Control List (CCL).⁴  The United States also imposes catch-all controls on items that could contribute to certain UAV systems, even if they are not described on the CCL.

Building on these pre-existing controls, BIS has issued several rules that target Iran’s supply of UAVs to Russia to enhance Russia’s defense industrial base and its military efforts against Ukraine.  On February 24, 2023, BIS amended ⁵ the EAR (15 CFR 746.7 ) to impose additional licensing requirements on certain EAR99 items destined to Iran—regardless of whether the transaction originates in the United States, or whether a U.S. person is involved.⁶  In that same rule, BIS established a new list (Supplement No. 7 to part 746 ) to identify these EAR99 items, including certain engines, navigational equipment, and electronics, by Harmonized Tariff Schedule (HTS) 6 Code⁷, and also imposed license requirements on certain foreign-produced items that met these descriptions.  On May 19, 2023, BIS again amended  the EAR to add additional electronic components to Supplement No. 7 to part 746 of the EAR .⁸

BIS has also created a new Foreign Direct Product (FDP) Rule specific to Iran ⁹ for items in certain categories of the Commerce Control List (CCL) covering electronics, computers, communications and information security, and navigation and avionics, as well as the EAR99 items identified in Supplement No. 7 to Part 746.  As a result of this new FDP Rule, exporters require a U.S. Government authorization for transfer of these items when produced outside the United States with certain U.S. technology, software, or production equipment when exports are destined to Iran or for use in connection with certain equipment destined to Iran, even when such items were never exported from the United States and/or no U.S. person is involved in the transaction.  BIS also expanded the existing Russia and Belarus FDP rule to cover EAR99 items in Supplement. No. 7.¹⁰

BIS has also added numerous entities to the Entity List for their involvement in the production of Iranian UAVs, or in the transfer of UAVs from Iran to Russia, most notably on February 1 ¹¹ and April 17, 2023.¹²   As a result of these actions, a BIS license is required to export, reexport, or transfer (in-country) any item subject to the EAR when the listed entity is a party to the transaction.  BIS has adopted a policy of denial for all such license applications.  Further, BIS and the Department of the Treasury’s Financial Crimes Enforcement Network (FinCen) have issued guidance for financial institutions on the typologies regarding the use of the financial system to evade export controls.

[June 2023 Guidance]