New US Sanctions - The Iran Threat Reduction and Syria Human Rights Act of 2012 ( HR 1905) of 10 August 2012
On 10 August 2012 President Obama signed into law new sanctions legislation in respect of Iran and Syria in the form of the “Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRSHRA)”, (the “Act”).
The new Act strengthens existing sanctions legislation, for example the prohibitions in CISADA with regard to the provision of goods, services, technology and support that enable Iran to develop or expand its domestic production of refined petroleum products and petrochemical products (see section 201 on page 12 of the Act).
Sanctions relating to the abuse of human rights in both Syria and Iran have been strengthened
(see Title IV on page 97 of the Act and Title VII on page 134).
Importantly however there are also some new provisions directly impacting shipping and the provision of related insurance or re-insurance. A detailed summary of the new Act has been prepared by the Eren law firm who have kindly consented to its publication on our website. This summary may be downloaded from the links below, together with a copy of the text of the Act.
We draw specific attention below to the provisions that relate to shipping and insurance.
- Section 202 (p.8 of the Act) sanctions entities (including non US entities) that own, operate or control (or provide insurance or reinsurance to) a vessel that is used 90 days after the date of the Act, to transport crude oil from Iran to another country. A controlling beneficial owner must have actual knowledge that the vessel was so used; other persons who own, operate, control or insure the vessel must know or should have known that the vessel was so used. The sanctions will only be imposed if there are sufficient supplies of crude oil from sources other than Iran to allow the significant reduction of purchases from Iran at the time of transportation of the crude oil. In addition, sanctions will not be imposed if the transportation is to a country which has been granted a waiver by virtue of significantly reduced purchases of crude oil from Iran.
- Sanctions will not be imposed against insurers and reinsurers that provide insurance for the transportation of crude oil or refined petroleum products from Iran if it is determined that they exercised due diligence in establishing and enforcing official policies, procedures and controls to ensure that they do not provide underwriting services or insurance or reinsurance for such transportation.
- Section 202 also sanctions those entities that own, operate, or control vessels, and take steps to conceal the use of such vessels to transport Iranian crude oil or refined petroleum products, for example by suspending the use of the vessel’s satellite tracking device or concealing the ownership, operation or control of a vessel by the Government of Iran, the National Iranian Tanker Company (NITC), the Islamic Republic of Iran Shipping Lines (IRISL), or any other entity determined to be owned or controlled by those bodies. Vessels engaged in the sanctioned activity may be prohibited from entry to US ports for a period of 2 years.
The provisions of section 202 will come into effect 90 days after the date of enactment of the Act.
- Section 203 (p. 10 of the Act) sanctions any person who, after the date of the Act, exported, transferred, permitted or otherwise facilitated the transhipment of, goods, services, technology, or other items that such person knew or should have known would likely end up in Iran and could contribute materially to Iran’s ability to acquire or develop chemical, biological or nuclear weapons or destabilizing numbers and types of advanced conventional weapons. Sanctions available under this and other provisions may include termination of access to the US banking system, blocking of transactions or use of any property in the U.S. or under U.S. jurisdiction, and ineligibility to enter into contracts with the U.S. Government.
- Section 211 (p.15of the Act) provides for the blocking and prohibiting of all transactions in all property and interests in property of sanctioned entities, if such property and interests in property are in the United States, come within the United States, or are or come within the possession or control of a United States person. For the purposes of this Section a sanctioned entity is one that after the date of the Act knowingly sells, leases or provides a vessel, or provides insurance or reinsurance, or any other shipping service for the transportation to or from Iran of goods that could materially contribute to the activities of the Government of Iran with respect to the proliferation of weapons of mass destruction or support for acts of international terrorism. Sanctions may be applied to successor entities or those exercising ownership or control over sanctioned entities.
- Section 211 (p. 15of the Act) also requires the Secretary of the Treasury to report, not later than 90 days after the date of enactment of the Act, identifying operators of vessels and other persons that conduct or facilitate significant financial transactions with persons that manage ports in Iran that have been designated for the imposition of sanctions.
- Section 212 (p.16 of the Act) imposes sanctions on persons who after the date of the Act knowingly provide underwriting services or insurance or reinsurance for the National Iranian Oil Company (NIOC) or the National Iranian Tanker Company (NITC) or successor entities to either company. Sanctions will however not be imposed on insurers who have exercised due diligence in establishing and enforcing official policies, procedures and controls to prevent the provision of underwriting services or insurance/reinsurance to NIOC, NITC or successor companies.
- Section 218 (p. 21 of the Act) prohibits foreign entities owned or controlled by US persons from engaging in transactions with the Government of Iran or any person subject to Iranian jurisdiction, if the transaction would be prohibited if performed by a US person or in the US. US parent companies will face liability for violations of sanctions by their foreign subsidiaries.
- Section 312 requires the Secretary of the Treasury, no later than 45 days after the date of the enactment of the Act, to determine whether the National Iranian Oil Company (NIOC) or the National Iranian Tanker Company (NITC) is an agent or affiliate of Iran’s Islamic Revolutionary Guard Corps (IRGC), and to report to Congress on these determinations and the reasons for them. If they are determined to be so, then foreign persons who knowingly engage in significant transactions with NIOC or NITC after 24 September 2012 could be exposed to US sanctions. (On September 24, 2012, Secretary of the Treasury determined that NIOC is an agent or affiliate of IRGC. Based on the information then available, the Secretary was not able to determine whether NITC is an agent or affiliate of the IRGC).
“Knowingly” as used in Sections 202, 203 and 211 means that the entity either had actual knowledge or “should have known” (constructive knowledge) of the sanctionable activity. Members should beware that those seeking to enforce sanctions may adopt a view of what an operator “should have known” that differs from that of the operator itself in the performance of its commercial activities.
This new Act and other existing US laws create a range of sanctions which is broad in its scope and effect and which impact non- US persons trading with Iran and engaged in transactions wholly outside the US. Ambiguities in drafting increase the reach of the sanctions and the risk of potential infringements. In the light of this Members are urged to continue to exercise a high degree of caution and due diligence in relation to their activities involving Iran. It may be advisable to obtain legal advice in respect of the performance of existing and proposed new contracts involving Iran, in order to avoid violations of sanctions and the imposition of severe penalties.