Proposed US Legislation
The US continues its efforts to isolate Iran through the implementation of sanctions, many of which have direct consequences for the shipping industry, and have application to both US and non-US persons. Below is a summary of legislation which is currently pending in the US.
HR 2105, the Iran, North Korea, and Syria Non-proliferation Reform and Modernization Act of 2011
The measure most directly impacting the shipping industry is a proposed new “180 day” rule.
This proposed measure provides that vessels may not knowingly land at any port in the United States to load or unload cargo or engage in the trade of goods or services if the vessel previously entered a port in Iran, North Korea, or Syria during the 180-day period preceding the arrival of the vessel in the United States.
This proposal, which is similar to current US policy for Cuba, passed the House of Representatives on 14 December 2011, and could become law in 2012 if passed by the Senate and signed by the President.
HR 2105 would amend the Ports and Waterways Safety Act (33 USC 1221 et seq.) to require either “the owner, charterer, operator, or master” of a vessel to “certify” prior to arrival in a US port, “that the vessel did not enter a port in Iran, North Korea, or Syria during the 180-day period ending on the date of arrival of the vessel” in a US port. False certifications would be subject to a two year ban on the offending owner/operator from landing any of its vessels (including vessels owned by a parent company) in any US port, in addition to other applicable criminal and civil penalties.
Regarding vessels, HR 2105 also:
Directs federal authorities to inspect vessels that have landed in Iranian, North Korean or Syrian ports during the preceding 12-months to determine whether the vessel was involved in any sanctioned proliferation-related activity.
Provides for new sanctions on any person providing shipping services for the transportation of goods to or from Iran, North Korea, or Syria for purposes relating to the nuclear, biological, or chemical weapons, or ballistic or cruise missile development programs . This includes provision of vessels, insurance and reinsurance. The only defence would appear to be to demonstrate that the vessel, insurance, reinsurance or other shipping service was not in fact provided in respect of a prohibited activity.
The pending legislation would supplement existing measures implemented under the Maritime Transportation Security Act 2002 (MTSA) in relation to vessels entering U.S. ports that have previously visited ports deemed not to maintain effective anti-terrorism measures (see SIMSL article at http:///Publications/Articles/USEntry0308.html). Iran is on the list of countries whose ports are deemed not to maintain effective anti-terrorism measures. Any vessel calling in the United States after having called at Iran in any of its last five port calls is required to have taken additional security measures while in Iran. Those measures have to be reported to the US Coast Guard (USCG) at the relevant US port prior to the vessel’s arrival in U.S. waters. The USCG will board any such vessel and verify the security measures taken. Failure to have properly taken security measures whilst in Iran may result in delay or denial of entry into the United States. Depending on the USCG findings, the vessel may be required to have armed guards posted at access points to the ship while in U.S. ports.
HR 2105 is now pending in the Senate Foreign Relations Committee.
HR 1905, the Iran Threat Reduction Act of 2011
HR 1905, which was passed by the House of Representatives on 14 December 2011, would force stricter implementation of the Iran Sanctions Act sanctions on Iran’s refined petroleum sector, and would also include a broad range of new sanctions on Iran’s Republican Guard, and third-country entities that support it. Also included are additional restrictions on the banking sector, and new disclosure requirements for US-listed companies.
HR 1905 is now pending in the Senate Foreign Relations Committee.
S. 1048, Iran, North Korea, and Syria Sanctions Consolidation Act of 2011
This bill contains a number of measures similar to HR 2105 and 1905, including a similar (but not identical) 180-day bar on vessels calling in the US if they have called in the sanctioned states.
In addition, S. 1048 provides for new sanctions on shipping services with respect to the exportation of petroleum, oil, or liquefied natural gas to be refined or otherwise processed outside of Iran if Iran’s Republican Guard or any of its affiliates were involved in the development, extraction, production, transportation, or sale of such commodities.
S. 2058 – A Bill To Close Loopholes, Increase Transparency And Improve Effectiveness Of Sanctions In Iranian Trade In Petroleum Products
This bill was introduced to the Senate on 1 Feb 2012 and is currently referred to the Committee on Energy and Natural Resources.
Under Section 1, a person wanting to engage in any sale, purchase or exchange activity involving the US Strategic Petroleum Reserve (the largest emergency oil reserve in the world) would have to certify on an on-going and regular basis to the Secretary of Energy that they are not directly or indirectly conducting transactions in or with Iran or an Iranian entity. Transactions relating to the provision of humanitarian assistance, and agricultural commodities or products, medicine or a medical device to Iran or an Iranian entity are excluded.
Section 2 would require reports to be made to Congress on various matters related to trade with Iran in crude oil and refined petroleum products, including (i) the identity and national origin of persons selling and transporting crude oil or refined petroleum products to or from Iran; (ii) entities providing shipping and insurance services to Iran, (iii) persons who conduct joint ventures with Iran in relation to developing Iran’s upstream oil and gas production capacity, importing advanced technologies to upgrade Iran’s refineries, converting existing chemical plants to petroleum refineries, and maintaining, upgrading or expanding refineries or constructing new refineries.
The range of persons and entities about whom reports could be made to Congress is not limited so is likely to include non-US persons engaging in the activities set out in Section 2.
S. 2101 – An Original Bill To Strengthen The Multilateral Sanctions Regime With Respect To Iran, To Expand Sanctions Relating To The Energy Sector Of Iran…
This bill was introduced to the Senate on 13 Feb 2012 and is now at committee stage. It includes provisions which extend the current scope of ISA and CISADA sanctions.
In particular, Section 211 would require the imposition of sanctions against any person who “knowingly” provides a vessel, insurance or reinsurance or “any other shipping service” (currently undefined) for the transportation to or from Iran of goods that could “materially contribute” to activities of the Government of Iran relating to WMD proliferation or support for acts of international terrorism. Sanctions take the form of freezing assets of the sanctioned person in the US and a prohibition on any US person from engaging in any transactions with the sanctioned entity. Sanctions under this section could also be applied against successor entities, or entities which own or control the sanctioned party if they had actual knowledge or should have known that the sanctioned entity provided the vessel, insurance or reinsurance or other shipping service.
Section 213 would close what is regarded as a loophole in current measures that permits foreign subsidiaries of US companies to conduct limited trade with Iran. The provision would require the President, to "prohibit an entity owned or controlled by a United States person and established or maintained outside the United States from engaging in any transaction directly or indirectly with the Government of Iran or any person subject to the jurisdiction of that Government that would be prohibited . . . if the transaction were engaged in by a United States person or in the United States."
Section 312 of the Bill would require the Secretary of the Treasury to determine within 60 days of enactment whether the National Iranian Oil Company (NIOC) and the National Iranian Tanker Company (NITC) are agents or affiliates of the Iranian Revolutionary Guards Corp, and, with effect from 180 days after enactment, impose sanctions pursuant to CISADA in relation to transactions for the purchase of petroleum or petroleum products from the NIOC or the NITC, or to financial services relating to such a transaction.
Under the Iran Financial Sanctions Regulations (IFSR) (31 C.F.R. Part 561.313), financial services includes loans, transfers, accounts, insurance, investments, securities, guarantees, foreign exchange, letters of credit, and commodity futures or options.
Congressional support for the various proposals is strong although the provisions of the pending bills will inevitably require reconciliation.
UPDATE 6 JUNE 2012
IRAN SANCTIONS, ACCOUNTABILITY, AND HUMAN RIGHTS ACT 2012 ("ISAHA") (H.R. 1905) - passed by U.S. Senate 21 May 2012
On 21 May 2012, on the eve of diplomatic talks between the U.N. Security Council and Iran regarding Iran's nuclear programme, the U.S. Senate passed the Iran Sanctions, Accountability and Human Rights Act 2012 ("ISAHA") as H.R. 1905. This replaces the original H.R. 1905 which was passed by the House of Representatives on 14 December 2011 as "The Iran Threat Reduction Act 2011 : an Act to strengthen Iran sanctions laws for the purpose of compelling Iran to abandon its pursuit of nuclear weapons and other threatening activities, and for other purposes".
If enacted, ISAHA would impose significant additional sanctions against Iran and Syria. ISAHA is a modified version of S. 2101 : "An original bill to strengthen the multilateral sanctions regime with respect fo Iran..." which was introduced to the Senate and placed on the Senate Legislative Calendar on 13 February 2012.
The wording of ISAHA is set to be reviewed further by a joint House and Senate committee, and once approved by both the House and Senate, ISAHA will be presented to President Obama for his signature.
The text of ISAHA as approved by the Senate on 21 May 2012 can be downloaded from the link set out below.
Washington law firm Holland & Knight has issued a Client Alert which helpfully sets out the major provisions of ISAHA. We are grateful to Mr Jonathan Epstein of Holland & Knight, who has kindly given permission for the Alert to be made available via this website. It can be viewed and downloaded from the link below.
