Press Releases by Iranian American Bar Association, Washington, D.C.
On June 24, 2010, Congress passed the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, which is intended to amend the Iran Sanctions Act of 1996. Following United Nations Security Resolution 1929 passed in June, the new U.S. law was signed by President Obama on July 1. Although primarily a response to Iran's nuclear activities, the law is wide in scope, addressing other areas including human rights violations in Iran following that country's June 2009 presidential election. The new law also eliminates the exception for U.S. imports of pistachios, carpets, caviar, and certain other Iranian products, which can no longer be imported to the United States. This particular provision is effective 90 days after enactment of the law, to give goods currently in transport time to clear customs.
What Does the New Law Cover?
Overall, the new law is very far-reaching in scope and will arguably result in a very drastic change to the form and nature of the U.S. sanctions regime in effect against Iran. As a general matter, the new law constitutes a comprehensive ban on all imports and exports to and from Iran, including items that were previously exempted, such as pistachios, carpets, and caviar. However, the law does not appear to affect other existing exemptions such as trade in informational materials (e.g., books, film, music, periodicals, etc.) or the export of certain agricultural, medicinal and food products to Iran pursuant to a license issued by the U.S. Treasury Department's Office of Foreign Assets Control (OFAC). These exceptions are very limited, and one should consult with an attorney before importing or exporting goods from or to Iran.
The law applies to all United States citizens, lawful permanent residents, and corporations, regardless of where they are located, as well as to anyone who exports goods, technologies or services from the United States. As a general matter, the law covers numerous areas vis-à-vis Iran, including but not limited to, certain:
(1) Energy-related transactions;
(2) Financial transactions;
(3) Export-Control violations; and
(4) Human Rights violations.
The law also touches on other areas such as imports from Iran to the United States, U.S. government contracting, the activities of the Islamic Revolutionary Guard Corps (I.R.G.C.), and the export of certain telecommunications monitoring technologies to Iran.
Given that the U.S. currently maintains very strict unilateral sanctions on Iran that prohibit most transactions between U.S. persons and Iran, the new law effectively leverages the U.S.' large economy as an indirect tool to dissuade third country nationals in certain key industries from doing business with Iran. In other words, the prospect of U.S. sanctions (which can possibly lead to difficulties for sanctioned entities doing business even in third countries) can render doing business with Iran an extremely costly exercise for such entities.
Arguably, one of the most salient aspects of the new law is the restrictions it places on activities related to Iran's energy industry. The law sets a very low threshold on third country entities assisting the Iranian energy sector, including but not limited to the provision of investment, assistance, and certain services and goods (such as refined petroleum products) to Iran. Persons exceeding these thresholds can be subject to a wide range of sanctions, including certain prohibitions on banking, foreign currency activities, and an effective freeze on certain assets.
As indicated above, the new law makes extensive use of financial sanctions, arguably consistent with other financial restrictions imposed by the United States on Iran in recent years. Among the provisions is a call on the President to consider implementing sanctions on the Central Bank of Iran as well as other Iranian financial entities.
Further, the law requires the U.S. Treasury Secretary to prescribe sanctions limiting or prohibiting certain financial institutions from opening or maintaining corresponding accounts in United States financial institutions if the foreign institution provides assistance or services relating to certain activities concerning Iran, such as the acquisition or development of weapons of mass destruction or supporting certain terrorist organizations.
The law also calls on increased monitoring of the diversion to Iran through third countries of "dual-use" (items with both civilian and military application) and certain defense articles, such as controlled U.S.-origin high technology goods. The provision was incorporated to prevent the rising use of certain countries near Iran as well as others such as Malaysia as conduits for the export of certain U.S. goods to Iran. Such third countries can be subject to a designation by the United States as a "Destination of Diversion Concern," which will substantially limit the ability to export such items to that third country.
In the realm of human rights, the law calls on the President to periodically provide to the applicable congressional committees a list of certain persons acting on the Iranian government's behalf who in the aftermath of the June 2009 Iranian presidential election have had a role in major human rights abuses against Iranian citizens or their family matters, wherever such acts occurred, including outside Iran. Such perpetrators of human rights abuses will be subject to a variety of U.S. sanctions
As stated above, the new law covers other areas concerning Iran's economy and foreign trade. For example, the law requires the President to provide certain congressional committees with periodic reports of Iran's trade with other G-20 countries. Furthermore, the law calls on the United States to identify and impose sanctions on entities who provide material support to or engage in commercial or financial transactions with the IRGC as well as its officials, agents, instrumentalities, affiliates, and fronts, among others.
Farhad R. Alavi is a Washington, D.C.-based corporate and international trade lawyer, and serves as a member of the IABA's Board of Directors. He can be reached at email@example.com.
This alert is intended only as a general discussion of these issues. It should not be regarded or relied upon as legal advice, and you should contact a lawyer versed in this body of law should you have any questions.
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