Congress-Passed Sanctions Bill to Ban Imports of Iranian Carpet and Food, Require Procurement Certification, Etc.

(On December 15, 2009, the House of Representatives passed H.R. 2194, and on January 29, 2010, the Senate passed its version of the bill, S. 2799. On June 24, 2010, the conference version of H.R. 2194 was agreed to by both the House and the Senate, clearing the bill for the President, who is expected to sign it into law.)

The following are the trade-related highlights of H.R. 2194:

Carpet & Foodstuff Import Exceptions to Trade Ban Will be Eliminated

H.R. 2194 will eliminate the existing exemptions under 31 CFR 560.534(a) to the current trade embargo of the ISA. Therefore, the importation into the U.S. from Iran or a third country will no longer be authorized for: (i) foodstuffs intended for human consumption that are classified under HTS Chapters 2--23 (including pistachios, caviar, etc); or (ii) carpets and other textile floor coverings and carpets used as wall hangings that are classified under HTS Chapter 57 or heading 9706.00.0060. This change is effective 90 days after the date of enactment.

(Note that these imports could be allowed if the President prescribes a regulation providing for an exception, if it is in the U.S. national interest to allow it.)

Certification of Iran Sanctions Compliance for Government Procurement

H.R. 2194 will also require the heads of federal agencies to require a certification from each person that is a prospective contractor that certifies that they, and any person owned or controlled by them, do not engage in any sanctionable activity under the Iran sanctions provisions. If it is determined that the person submitted a false contract, the head of the executive agency would terminate the contract with that person or debar or suspend them from eligibility for Federal contracts for a period of not more than 3 years. This change is effective 90 days after the date of enactment.

Procurement Ban for Companies that Export Sensitive Technology to Iran

In addition, the heads of federal executive will be prohibited from purchasing goods from companies that export “sensitive technology” to Iran. Sensitive technology is defined to include hardware, software, or any technology that the President determines will be used to restrict the free flow of unbiased information in Iran or that will be used to disrupt, monitor, or otherwise restrict the speech of the people of Iran. This change is effective 90 days after the date of enactment.

Criminal Penalties to Increase for Violating UN Security Council Resolutions

Under H.R. 2194, criminal penalties will increase substantially from $10,000 to $1,000,000, with a maximum jail sentence of 20 years (from 10 years) for violations of United Nations Security Council resolutions imposing sanctions.

Expanded Sanctions for Violators of Iran Petroleum Provisions

Persons who knowingly engage in certain activities related to Iran’s refined petroleum industry currently face a set of six¹ possible sanctions under ISA. Under H.R. 2194, these sanctionable activities will be expanded to include selling, leasing or providing to Iran goods, services, or other support² to facilitate Iran’s domestic oil production of refined petroleum; selling or providing Iran with refined petroleum products that have a fair market value of $1 million or more, etc. According to Representative Berman, Chair of the House Foreign Affairs Committee, H.R. 2194 plugs a critical gap in the current sanctions regime by imposing sanctions on foreign entities that sell Iran goods or services that help it develop its energy sector -- not just those that invest in that sector.

To the existing list of six¹ possible sanctions, H.R. 2194 will also add three more: (1) a prohibition on access to certain foreign exchange in the U.S.; (2) a prohibition on access to certain U.S. banking transactions; and (3) a prohibition from acquiring, holding, transporting, importing, exporting, etc. any property that is subject to the jurisdiction of the U.S. and with respect to which the sanctioned person has any interest.

From the expanded list of nine possible sanctions, H.R. 2194 will require the President to impose at least three of the sanctions (instead of just two) against those violating the petroleum prohibitions.

President Expected to Sign Legislation

The Department of State issued a press release on June 25, 2010 in which Secretary of State Clinton joined President Obama in welcoming Congressional passage of H.R. 2149 to strengthen sanctions against Iran.

Clinton states that these new measures, along with action by the European Union and Australia, build on United Nations Security Council Resolution 1929 and underscore the resolve of the international community to prevent Iran from developing nuclear weapons and to hold it accountable for its international obligations.

(See ITT’s Online Archives or 06/10/10 and 06/22/10 news, 10061023 and 10061865, for BP summaries of the UN approving a new round of sanctions on Iran and the EU issuing a declaration on Iran.)

¹The existing six sanctions include the following: (1) denial of any guarantee, insurance, or extension of credit from the U.S. Export-Import Bank; (2) denial of licenses for the U.S. export of military or militarily-useful technology to the entity; (3) denial of U.S. bank loans exceeding $10 million in one year to the entity; (4) if the entity is a financial institution, a prohibition on its service as a primary dealer in U.S. government bonds; and/or a prohibition on its serving as a repository for U.S. government funds (each counts as one sanction); (5) prohibition on U.S. government procurement from the entity; and (6) restriction on imports from the entity, in accordance with the International Emergency Economic Powers Act (IEEPA, 50 USC 1701).

²These are goods, services, technology, information, or support that could directly and significantly contribute to the enhancement of Iran’s ability to import refined petroleum products, including; (i) financing or brokering such sale, lease, or provision; or (ii) providing ships or shipping services to deliver refined petroleum products to Iran; or (iii) underwriting or entering into a contract to provide insurance or reinsurance for the sale, lease, or provision of such goods, services, technology, information, or support.

(See ITT’s Online Archives or 12/17/09 and 02/02/10 news, 09121725 and 10020215, for BP summaries of House-passed H.R. 2194 and Senate-passed S. 2799. See ITT’s Online Archives or 06/25/10 news, 10062523, for BP summary of the House and Senate agreeing to the conference report for H.R. 2194.)

House Foreign Affairs Committee information on H.R. 2194, including brief summaries and the joint explanatory statement available here.