Friday, August 08, 2008

New Senate Sanctions Bill Introduced

On August 1, 2008, Senator Christopher Dodd (D-CT) introduced S. 3445, a “bill to impose sanctions with respect to Iran, to provide for the divestment of assets in Iran by State and local governments and other entities, to identify locations of concern with respect to transshipment, reexportation, or diversion of certain sensitive items to Iran, and for other purposes.” On the same day, S. 3445 was reported to the Senate from the Committee on Banking, Housing and Urban Affairs with written report Number 110-443 and placed on the Senate Legislative Calendar under General Orders, Calendar No. 939. According to the Summary on THOMAS, Senator Dodd is currently the only co-sponsor of the legislation, even though it was announced on July 15, 2008 that Senator Richard Shelby (R-AL) would join Senator Dodd in introducing the legislation.

Title I of the legislation would prohibit the importation, directly or indirectly, of all Iranian products into the U.S., with the exception of information and informational materials. It would also prohibit the export of all American products, directly or indirectly, to Iran, with the exception of agricultural commodities; medicine; information and informational materials; articles to provide humanitarian assistance; and goods, services or technologies necessary for the safe operation of commercial passenger aircraft manufactured in the U.S. In addition, the bill would freeze the assets of people that have engaged in activities such as terrorism or weapons proliferation. It also extends the assets freeze to assets that sanctioned persons transfer to family members or associates. S. 3445 would also prohibit U.S. and foreign companies that meet sanctions criteria from entering into procurement contracts with the federal government. All of these provisions are subject to a waiver, however, if deemed by the President to be in the national interest.

S. 3445 would also hold parent companies liable for violations of sanctions by foreign subsidiaries, though the President may waive the sanctions if it is in the national interest and if he submits a report describing the reasons for such a determination to appropriate Congressional committees. S. 3445 would also require the President, within 180 days of enactment of the bill and every 180 days thereafter, to report to the appropriate Congressional Committees on eligible foreign investments made in Iran's energy sector since January 1, 2008 and the determination of the President on whether such investments qualify as sanctionable offenses.

Section 107 of the bill expresses the Sense of Congress that the President immediately impose sanctions on the Central Bank of Iran and any other Iranian bank engaged in proliferation activities or support of terrorist groups.

Title II of S. 3445 also enable States, local governments and institutions of higher education to divest public assets from certain companies doing business in Iran. The bill requires any of these entities to provide notice to the Department of Justice when they enact an Iran-related divestment law. It also requires these entities to inform companies before divestment and give the companies at least 90 days to comment on the decision. Section 203 of Title II provides a “safe harbor” for Asset Managers for divestment decisions made in accordance with the bill.

Title III of S. 3445 requires the Director of National Intelligence to identify countries where sensitive U.S. technology is being illegally transshipped to Iran via other countries, and to report annually to the Secretaries of Commerce, State and the Treasury, as well as to Congress. Section 303 would require the Administration to initiate contact with countries of “possible diversion concern” and offer incentives to them to strengthen their export control regimes, improve information sharing and support legitimate trade in high-technology goods. According to the bill “If countries fail to cooperate with such initiatives, then, under subsection (b), the Administration would be required to designate a country as a ‘Destination of Diversion Concern.’ … Exports to a country designated as a `Destination of Diversion Concern' would be subject to additional licensure requirements; more stringent license review, which could result in fewer approvals or more conditions on licenses; delayed authorizations due to increased end-user checks; and finally, a decrease in authorizations due to diversion risks for such countries.” Section 304 would require the Director of National Intelligence to report to Congress on whether or not to extend the “Destination of Diversion Concern” system to countries other than Iran.

The Congressional Budget Office estimates that implementing the bill would cost $121 million in 2009 and $496 million over the 2009-2013. In addition, CBO estimates that enacting the bill would reduce revenues by about $6 million over the 2009-2018 period. The costs of S. 3445 fall within budget functions 150 (international affairs), 370 (commerce and housing credit), and 800 (general government).

The bill would impose private-sector mandates by prohibiting imports from and exports to Iran, as well as by freezing assets of certain individuals. it could also impose a mandate on exporters by specifying additional license requirements on exports to certain countries that are designated “Destinations of Possible Diversion Concern.” According to the CBO, the cost of complying with the mandates in the bill are uncertain and it cannot determine whether the aggregate cost of complying with the mandates would exceed the annual threshold for private-sector mandates established by the Unfunded Mandates Reform Act (UMRA) ($136 million in 2008, adjusted annually for inflation).

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