Interim Rule Implements Iran Sanctions Procurement Certification Requirement, Etc.

Written comments must be received by November 29, 2010 to be considered in the formulation of the final rule.

(In the preamble to the interim rule, DoD¹ states that CISADA Section 102 is effective September 29 and requires a certification from each person that is a prospective contractor (offeror), that the person, and any person owned or controlled by the person, does not engage in any activity for which sanctions may be imposed under section 5 of the Iran Sanctions Act of 1996, as amended.

However, with respect to CISADA Section 106, DoD states it was effective upon enactment (July 1, 2010), and bans activity that takes place on or after September 29, 2010. Section 106 imposes a procurement prohibition relating to contracts with persons that export certain sensitive technology to Iran. There will be further implementation of section 106 in FAR Case 2010--018.)

Certification of Iran Sanctions Compliance for Government Procurement

This interim rule has added a new section 25.703 (Prohibition on contracting with entities that engage in certain activities relating to Iran) to FAR subpart 25.7.

Highlights of the certification provisions of new section 25.703 include:

Certification required. New FAR 25.703--2 implements section 102 of Public Law 111--195. New 25.703-2(a) states that unless excepted or waived, each offeror must certify that the offeror, and any person owned or controlled by the offeror, does not engage in any activity for which sanctions may be imposed under section 5 of the Iran Sanctions Act.

(OFAC states that sanctioned activities are in the areas of development of the petroleum resources of Iran, production of refined petroleum products in Iran, sale and provision of refined petroleum products to Iran, and contributing to Iran’s ability to acquire or develop certain weapons.³)

Sanctions for false certification. Remedies for false certifications are located in new FAR 25.703--2(b). If the head of an executive agency determines that a person has submitted a false certification, the agency shall take one or more of the following actions:

• The contracting officer may terminate the contract.
• The suspending official may suspend the contractor in accordance with the procedures in FAR subpart 9.4.
• The debarring official may debar the contractor for a period not to exceed 3 years in accordance with the procedures in FAR subpart 9.4.

Exception for trade agreements. New FAR 25.703-2(c) says that the certification requirements do not apply with respect to the procurement of eligible products as defined in 19 USC 2518(4), of any foreign country or instrumentality designated under 19 USC 2511(b).

Waiver of certification requirement. This interim rule establishes a waiver procedure at FAR 25.703--2(d), as authorized by the statute. The President may waive the certification requirement on a case-by-case basis, if he determines and certifies in writing to the appropriate congressional committees that it is in the national interest to do so.

Other Regulations Amended to Reflect Iran Certification Requirement

This interim rule also amends the following regulations to reflect the new certification requirement:

• 48 CFR 25.1103 (Other Provisions and Clauses)
• 48 CFR 52.204-8 (Annual Representations and Certifications (SEP 2010)
• 48 CFR 52.212-3 (Offeror Representations and Certifications -- Commercial Items (SEP 2010), and
• 48 CFR 52.225-25 (Prohibition on Engaging in Sanctioned Activities Relating to Iran -- Certification (SEP 2010).

DoD¹ has determined that it is in the best interest of the Federal Government to apply the interim rule to: (i) all acquisitions including contracts at or below the simplified acquisition threshold, as defined at FAR 2.101; (ii) contracts for the acquisition of commercial items, as defined at FAR 2.101; and (iii) contracts for the acquisition of commercially available off-the-shelf items, as defined at FAR 2.101.

Ban on Procurements from Persons Exporting Sensitive Technology to Iran

Section 106 is partially implemented in new FAR subsection 25.703--3 under which agencies are prohibited from entering into or extending a contract for the procurement of goods or services with a person that exports certain sensitive technology to Iran, as determined by the President and listed on the Excluded Parties List System. There will be further implementation of section 106 in FAR Case 2010--018.

¹DoD, the General Services Administration, and National Aeronautics and Space Administration.

²CISADA, which became Public Law 111-195 on July 1, 2010, amended the Iran Sanctions Act (ISA) to expand the sanctions imposed against Iran. (See ITT’s Online Archives or 06/30/10 and 09/20/10 news, 10063049 and 10092013, for BP summaries of the major trade-related provisions of the CISADA.)

³In general, the following activities, which are described in detail in section 5 of the Iran Sanctions Act, are activities for which sanctions may be imposed on or after July 1, 2010:

• Knowingly making an investment of $20 million or more, or a combination of investments of $5 million or more that equal or exceed $20 million in a 12-month period, that directly and significantly contribute to the enhancement of Iran’s ability to develop petroleum resources.
• Knowingly selling, leasing or providing to Iran goods, services, technology, information, or support with a fair market value of $1 million or more, or during a 12-month period with an aggregate fair market value of $5 million or more, that could directly and significantly facilitate the maintenance or expansion of Iran’s domestic production of refined petroleum products, including any direct and significant assistance with respect to the construction, modernization, or repair of petroleum refineries.
• Knowingly selling or providing to Iran refined petroleum products with a fair market value of $1 million or more, or during a 12-month period with an aggregate fair market value of $5 million or more.
• Knowingly selling, leasing, or providing to Iran goods, services, technology, information, or support with a fair market value of $1 million or more, or during a 12-month period with an aggregate fair market value of $5 million or more, that could directly and significantly contribute to the enhancement of Iran’s ability to import refined petroleum products, including (i) Certain insurance or reinsurance, underwriting, financing, or brokering for the sale, lease, or provision of such items, or (ii) Providing ships or shipping services to deliver refined petroleum products to Iran.
• Exporting, transferring, or otherwise providing to Iran any goods, services, technology or other items knowing that it would contribute materially to the ability of Iran to acquire or develop chemical, biological, or nuclear weapons or related technologies, or acquire or develop destabilizing numbers and types of advanced conventional weapons.)

DoD contact -- Cecelia David (202) 219-0202

(Interim rule, Docket 2010-0102; FR Pub 09/29/10)