On July 27, 2017, the Senate voted 98-2 to pass a bill, HR 3364, to impose additional sanctions on Russia, Iran, and North Korea. The House of Representatives voted 419 to 3 to pass the same bill the week before. President Trump signed the bill into law, named Countering America’s Adversaries Through Sanctions Act (“CAATSA” or the “Act”), on August 2, 2017.

Unlike the Russian sanctions provisions in the Act that have potentially far-reaching implications for the international business community, the Iran provisions of the Act do not meaningfully impact the scope of the Iran sanctions program, particularly not in a manner likely to affect the international business community.

The Act seeks to strengthen certain Iran sanctions that fall outside the scope of the Joint Comprehensive Plan of Action. The Act requires the President to sanction persons broadly involved in Iran’s ballistic missile program, support for terrorism, or violating the arms embargo on Iran under United Nations Security Council Resolution 2232. The Act also calls upon the President to impose additional sanctions for human rights violations in Iran, and limits the ability of the President to curtail Iran sanctions. The President can waive sanctions for 180 day periods on a case-by-case basis if vital to the national security interests of the United States but must submit detailed reports to Congress.

For the most part, the President has authorized the sanctioning of the conduct targeted in the Iran provisions of the Act by means of Executive Orders although Congress has supplemented and mandated certain of these sanctions in a series of Acts including the Iran Threat Reduction and Human Rights Act of 2012.[1] However, the current Act goes further:

  • Codification of existing sanctions with increased Congressional oversight: The Act codifies these Executive Order sanctions, making them more difficult to remove completely, and it also subjects the President’s waiver of the sanctions to increased monitoring and 6-month reporting to Congress.
  • Creation of a new secondary sanction on non-US persons, violating the UN arms embargo by supplying specified conventional weapons to Iran: The Act also imposes a new secondary sanction requirement on the President, who must now sanction persons who supply specified conventional weapon systems to Iran and persons providing financial and other support to such sales. Previously, this sanction was restricted to the weapons of mass destruction (WMD) area and “destabilizing numbers and types of advanced conventional weapons.”
  • A Nod to Keeping Sanctions in line with EU sanctions: The Act requires the President to report to Congress on differences between US and EU sanctions, but does not require the President to ensure that the sanctions in the US and the EU are the same.

In this second of three alerts, we explain the provisions of the Iran sanctions portion of CAATSA, referred to as the Countering Iran’s Destabilizing Activities Act of 2017.

Section 104 – Additional Sanctions on Iran’s Ballistic Missile Program

The Act requires the President to continue to implement Executive Order 13382, targeting the proliferators of weapons of mass destruction and their supporters. The President is required to block the property of any person that the President determines, on or after enactment of the Act, that:

  1. Knowingly engages in any activity that materially contributes to the Government of Iran’s activities related to its ballistic missile program, or any other program in Iran related to weapons of mass destruction;
  2. Is affiliated with any such person, specifically as
    1. a successor entity;
    2. owns or controls or is owned or control by;
    3. forms an entity for evading sanctions; or
    4. acts for or on behalf of such a sanctioned entity; or
  3. Knowingly provides or attempts to provide financial, material, technological, or other support for, or goods or services in support of, a sanctioned person.

The Act is slightly broader than EO 13382, in that sanctions can be applied to any person and are not limited to foreign persons, as they are in EO13382. The Act also includes exclusion from the United States as a sanction and the resulting sanctions apply to successor entities as well as to any entity formed with the purpose of evading sanctions.

Within 180 days of enactment (Jan. 29, 2018), and every 180 days thereafter, the President is required to submit to Congress a report describing each person meeting these criteria.

Section 105 – Additional Terrorism-Related Sanctions Against the Entire IRGC

The Islamic Revolutionary Guard Corps (IRGC) is already sanctioned under several EOs, namely EO 13382 targeting proliferators of weapons of mass destruction, EO 13553 targeting human rights abuses by the Iranian government, and EO 13606 targeting human rights abuses by the Iranian and Syrian government via information technology and the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (22 U.S.C. 8501 et seq.). One division of the IRGC, the IRGC Quds Force, has also been designated under EO 13224 targeting terrorism since 2007.

The Act requires the President within 90 days of enactment (Oct. 31, 2017) to expand sanctions under EO 13224 from just the IRGC Quds Force to the entire IRGC, and foreign persons that are officials, agents, or affiliates of the IRGC. From the perspective of most companies, this is a distinction without a difference given the multiple other sanction layers against the IRGC.

Section 106 – Additional Sanctions on Persons Responsible for Human Rights Abuses

Although there are already sanctions in place to target human rights abuses in Iran, the Act aims to protect those seeking to:

  1. Expose illegal activity carried out by Iranian government officials; or
  2. Obtain, exercise, defend, or promote internationally recognized human rights and freedoms.

Within 90 days of enactment (Oct. 31, 2017) and annually thereafter, the Secretary of State shall provide Congress a list of persons (and their agents) determined, based on credible evidence, to be responsible for extrajudicial killings, torture, or other gross violations of internationally recognized human rights committed against individuals in Iran who seek (i) to expose illegal activity carried out by officials of the Government of Iran; or (ii) to obtain, exercise, defend, or promote internationally recognized human rights and freedoms, such as the freedoms of religion, expression, association, and assembly, and the rights to a fair trial and democratic elections.

The Act authorizes, but does not require, the President to impose blocking sanctions on the persons identified in the annual reports.

Section 107 – Sanctions and Enforcement of Iranian Arms Embargo

The President is required to impose blocking sanctions against any person determined to knowingly and materially contribute to the supply, sale, or transfer directly or indirectly to or from Iran, or for the use in or benefit of Iran:

  • Any battle tanks;
  • Armored combat vehicles;
  • Large caliber artillery systems;
  • Combat aircraft;
  • Attack helicopters;
  • Warships;
  • Missiles or missile systems, as defined for the purpose of the United Nations Register of Conventional Arms; or
  • Related materiel, including spare parts; or
  • Any technical training, financial resources or services, advice, or other services or assistance related to the supply, sale, transfer, manufacture, maintenance, or use of arms and related materiel.

There is an exception under which the President is not required to impose sanctions on a person otherwise subject to this part, if the President certifies to Congress that:

  1. Permitting the activity is in the US national security interest;
  2. Iran no longer presents a significant threat to the national security of the US and US allies; and
  3. The Government of Iran no longer provides operational or financial support for acts of international terrorism and is no longer designated as a state sponsor of terrorism, as determined by the Secretary of State.

While the United Nations and the US both have arms embargoes on Iran, this provision goes several steps further by requiring the President to sanction by blocking any person who “knowingly and materially” provides specific conventional weapons systems to Iran, as well as financial and other service institutions supporting such transactions.

There is precedent for such sanctions. Specifically, section 203 of the Iran Threat Reduction and Human Rights Act of 2012 expanded Section 5(b)(1) of the Iran Sanctions Act of 1996, (50 USC 1701 note) to require the President to impose sanctions on persons who knew or should have known that:

  • The export, transfer, or transshipment of the goods, services, technology, or other items would likely result in another person exporting, transferring, transshipping, or otherwise providing the goods, services, technology, or other items to Iran; and
  • The export, transfer, transshipment, or other provision of the goods, services, technology, or other items to Iran 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.

This provision of the Iran Sanctions Act was not waived by President Obama’s Administration under the JCPOA and is still in effect. However, Section 207 of CAATSA provides more specificity as to the precise weapon systems whose sale to Iran will trigger mandatory sanctions.

Section 108 – 5-Year Review of Sanctions Relating to Iran’s Support for Terrorism and its Ballistic Missile Program

Within 5 years of enactment of the Act (August 2, 2022), the President shall conduct a review of all persons on the SDN List for activities relating to Iran to:

  1. Assess the conduct of such persons as it relates to any activity that materially contributes to the Government of Iran’s ballistic missile program;
  2. Assess the Government of Iran’s support for acts of international terrorism; and
  3. Determine the applicability of sanctions with respect to such persons under EO 13382 and EO 13224.

If the President determines that either EO applies to any such person, the President shall impose sanctions under the applicable EO or exercise the waiver authority under Section 112 (described below).

Section 109 – Report on Coordination of Sanctions Between the United States and the European Union

Within 180 days of enactment (Jan. 29, 2018), and every 180 days thereafter, the President shall submit a report to Congress describing each instance in which the US has imposed sanctions for the activity described above and the EU has not similarly imposed sanctions. The Act also requires the President to include in the report, a description of each instance in which the US has not imposed sanctions that have been imposed by the EU. The report shall provide an explanation of the reason for each discrepancy.

Nothing in Section 109 requires the United States to coordinate its sanctions with the European Union, but by requiring reports comparing the sanctions and the reasons for differences it should have the effect of ensuring continued coordination on secondary sanctions between the United States and the European Union.

Section 110 – Report on United States Citizens Detained by Iran

Within 90 days of enactment (Oct. 31, 2017), and every 180 days thereafter, the President shall submit to Congress a report on US citizens detained by Iran or groups supported by Iran that includes:

  1. Information on the involvement of any officials of the Government of Iran; and
  2. A summary of efforts the US Government has taken to secure the release of such persons.

Section 111 – Exceptions for National Security and Humanitarian Assistance

The following activities shall be exempt from sanctions under Sections 104, 105, 106, and 107:

  1. Any activity subject to the reporting requirements under title V of the National Security Act of 1947, or to any authorized intelligence US activities;
  2. The admission of a non-US person to the US if required under various international obligations of the US; and
  3. Transactions for the sale of agricultural commodities, food, medicine, or medical devices to Iran or intended for human assistance to the people of Iran, including humanitarian assistance.

Section 112 – Presidential Waiver Authority

Thirty days or more after the President files a report to Congress describing why waiving sanctions is vital to US national security interests, the President may waive, on a case-by-case basis and for no longer than 180 days, such sanctions. Presumably, the 30 day period before the waiver applies is intended to give Congress the ability to pass a bill preventing the waiver from permanently going into effect. However, the President is not required to impose or maintain sanctions during the 30 day period.

The waivers are eligible for renewals not to exceed an additional 180 days provided the President files an additional waiver report at least 15 days before the end of the 180 day period.

The waiver reports to be submitted to Congress must include:

  1. A specific and detailed rationale for how the waiver is vital to US national security interests;
  2. A description of the activity that resulted in the person being subject to sanctions;
  3. An explanation of any US efforts to secure the cooperation of the government with primary jurisdiction over the person or location where the activity occurred; and
  4. An assessment of the significance of the activity in contributing to the ability of Iran to threaten the interests of the US and its allies, develop its WMD program, support acts of international terrorism, or the violation of human rights in Iran.