[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] ======================================================================= ----------------------------------------------------------------------- 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