Congress Extends Statute of Limitations for Sanctions Violations; Introduces New Sanctions

On April 24, 2024, President Biden signed H.R. 815 into law, enacting long-awaited Congressional action on the provision of aid to Ukraine, Israel, and Taiwan.  The bill is separated into twenty distinct divisions covering a variety of subjects, including numerous sanctions-related measures that had not been anticipated. These additions to the bill, which address areas as varied as the statute of limitations, secondary sanctions,  Iranian petroleum shipments, and fentanyl, will have compliance implications for companies across the globe.

Given the breadth of these changes, we present below brief summaries of the most  significant changes to emerge from the many sanctions-related Acts included in H.R. 815.

Sanctions Statute of Limitations Extended to Ten Years (Division E)

Headlining the sanctions-related provisions was the revision of the statute of limitations from five to ten years for violations of the International Emergency Economic Powers Act (“IEEPA,” 50 U.S.C. § 1701 et seq.), the statutory basis for nearly all sanctions programs, and Trading with the Enemy Act (“TWEA,” 50 U.S.C. § 4301 et seq.), the statutory basis for the Cuba sanctions. 

The Office of Foreign Assets Control (OFAC) has yet to update its recordkeeping regulations, found in 31 CFR § 501.601, which currently require records to be kept for at least five years after a transaction. Moreover, it remains unclear what impact the doubling of the statute of limitations will have on pending investigations and voluntary self-disclosures.  Additional guidance from OFAC is expected to clarify the steps companies will need to take going forward in order to maintain compliance. 

Iranian Oil Sanctions (Divisions J & S)

To reduce Iranian revenues from the sale of its petroleum, petroleum products, and unmanned aerial vehicles (UAVs), Congress provided for the mandatory imposition of sanctions on persons engaged, on or after April 24, 2024:

• in owning or operating a foreign port and knowingly permitting a vessel to dock that has been (1) included on OFAC’s specially designated nationals and blocked persons list for transporting Iranian crude oil or petroleum products or (2) is knowingly engaged in a significant transaction to transport, offload, or deal petroleum or petrochemical products originating in Iran; 
• in owning or operating a vessel and knowingly conducting a significant ship-to-ship transfer of petroleum products originating in Iran; 
• in owning or operating a refinery and knowingly processing, refining, or otherwise dealing in a significant transaction of petroleum products originating in Iran; or
• covered family members of the foregoing persons (spouse, adult child, parent, sibling, or demonstrable beneficiary of the foregoing activities), or entities owned or controlled by the foregoing persons that engage in the foregoing activities.

Sanctioned vessels may be barred from landing at any U.S. port for two years.  

Finally, the Iran-China Energy Sanctions Act of 2023 expands the definition of “significant financial transaction” to existing sanctions laws (22 U.S.C. § 8513a), specifically its applicability to Chinese financial institutions and transactions involving Iranian petroleum and UAVs.  This effectively expands secondary sanctions with respect to Iran, and allows for the imposition of sanctions on financial institutions who engage in the following transactions:

• Any transaction by a Chinese financial institution involving the purchase of petroleum or petroleum products from Iran; and 
• Any transaction by a foreign financial institution involving the purchase of Iranian unmanned aerial vehicles (UAVs), UAV parts, or related systems.

180 days after April 24, 2024, and every year for five years afterwards, the President must transmit to Congress a determination whether any such conduct has occurred.  

Iranian Missile-Related Sanctions (Division K)

Congress also provided for the mandatory imposition of sanctions on persons knowingly engaged, on or after April 24, 2024:

• in any effort to acquire, possess, develop, transport, transfer, or deploy covered technology (goods, technology, software, or related material specified in the Missile Technology Control Regime Annex) to, from, or involving the Iranian government or Iran-aligned entities;
• in providing entities owned or controlled by the Iranian government or Iran-aligned entities with goods, technology, parts, or components that may contribute to the development of covered technology;
• in joint missile or drone development (technical, training, storage, transport, etc.), including the development of covered technology, with the Iranian government or Iran-aligned entities;
• import, export, or re-export to, into, or from Iran, whether directly or indirectly, any significant arms or related material covered by UNSC Resolution 2231 (2015), Annex B, ¶(5)-(6) (e.g., battle tanks, armored combat vehicles, large caliber artillery systems, combat aircraft, attack helicopters, warships, missiles or missile systems, and spare parts). 
• providing significant financial, material, or technological support to, or engaging in a significant transaction with, a foreign person subject to sanctions for the foregoing activities; and

Sanctions Related to Iranian Human Rights Abuses (Division L)

In response to abuses of human rights perpetuated against Iranians by their leadership, as recited in Section 2 of Division L, this portion of the law instructs the President to consider whether certain members and associates of the Iranian government’s senior political leadership are eligible for sanctions under the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA; 22 U.S.C. § 8514(c)); the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2021 (§ 7031(c)); or Executive Orders 13224, 13553, 13818, or 13876.

Within three months, the President is obliged to determine whether any of these persons meet the sanctions criteria, sanction such persons, and report such action (including the details of the sanctions applied) to Congress in an unclassified form.

This also creates a mechanism by which the chairman and ranking member of designated congressional committees may submit person(s) to the President, who must then determine within 60 days whether such person: 

• Was appointed by the Supreme Leader of Iran or his Office, or the President of Iran or his Office to a position as an Iranian state official, head of any entity in Iran, or head of any entity outside of Iran that is owned or controlled by one or more entities in Iran;
• Has materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of any person whose property and interests in property are blocked pursuant to any of the above-listed sanctions programs or authorities;
• Is owned or controlled by, or acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to any of the above-listed sanctions programs or authorities; or
• Is a member of the board of directors or a senior executive officer of any person whose property and property interests are blocked pursuant to any of the above-listed sanctions programs or authorities.

If so, the President must furthermore determine whether to impose sanctions on any such qualifying person.

Sanctions Related to Hamas and Other Palestinian Terrorist Groups (Division M)

In response to Hamas’s terror attack on Israel, the President is obligated to impose IEEPA sanctions on any foreign person who, on or after April 24, 2024, knowingly:

• assists in sponsoring or providing significant financial, material, or technological support for, or goods or other services to enable, acts of terrorism; or 
• engages, directly or indirectly, in a significant transaction with a senior member of:
  • Hamas, Palestinian Islamic Jihad, Al-Aqsa Martyrs Brigade, the Lion’s Den, or any affiliate or successor thereof, or
  • any foreign terrorist organization designated pursuant to Immigration and Nationality Act Section 219 that is responsible for providing direct or indirect support to the organizations above.

The law permits Presidential waivers of sanctions for up to 180 days on a case-by-case basis, and exempts the provision of agricultural commodities, food, medicine, medical devices, or humanitarian assistance from the application of sanctions.

Separately, any foreign state that knowingly: 

• provides significant material or financial support for acts of international terrorism pursuant to any provision of law (e.g., Export Control Reform Act of 2018, Foreign Assistance Act of 1961, Arms Export Control Act); or
• provides significant material support to, or engages in a significant transaction that materially contributes to the terrorist activities of, Hamas, the Palestinian Islamic Jihad, Al-Aqsa Martyrs Brigade, the Lion’s Den, or any affiliate or successor thereof.

shall be subject to the suspension of U.S. foreign assistance for at least one year; U.S. votes against extending loans, financial assistance, or technical assistance by international financial institutions for at least one year; and a one-year prohibition on the export of items on the United States Munitions List or the Commerce Control List.  However, Presidential waivers of up to 180 days are permitted on a case-by-case basis.  

This division as a whole has an automatic seven-year termination date.

New Foreign Direct Product Rule for Iran (Division N)

The law introduces export licensing requirements for exports, re-exports, or in-country transfers to Iran or involving the Iranian government of foreign-produced items described below that are (A) known to be destined for Iran or (B) incorporated into or used to produce or develop any part, component, or equipment subject to the Export Administration Regulations (EAR)that is destined for Iran or produced in Iran.

The types of products covered are those that are: 

• a direct product of U.S.-origin technology or software subject to the EAR that is specified in a covered Export Control Classification Number (ECCN) or is identified in supplement no. 7 to part 746 of the EAR; or
• produced by any plant or major component of a plant that is located outside the United States, if the plant or major component of a plant, whether made in the United States or a foreign country, itself is a direct product of U.S.-origin technology or software subject to the EAR that is specified in a covered ECCN.

Licenses are not required for:

• food, medicine, or medical devices designated as EAR99 or not designated under or listed on the Commerce Control List;
• services, software, or hardware not for end-users owned or controlled by the Iranian government and necessarily and ordinarily incident to communications or designated as EAR99 and subject to a general license.

The Secretary of Commerce may also waive licensing requirements in the national interest.

This division as a whole has an automatic seven-year termination date.

Sanctions of Malicious Cyber Activities and Threats to U.S. Officials (Division O)

The law allows for IEEPA sanctions, inadmissibility, and visa revocation for any foreign person that, on or after April 24, 2024:

• is responsible for, complicit in, or has engaged knowingly in, significant cyber-enabled activities originating from, or directed by persons located, in whole or in substantial part, outside the United States that are reasonably likely to result in, or have materially contributed to, a significant threat to the national security, foreign policy, or economic health or financial stability of the United States;
• materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any activity described above or any person subject to IEEPA sanctions under this section;
• has attempted to engage in any of the activities described above; or
• is owned or controlled by, or has acted or purported to act for or on behalf of, directly or indirectly, any person subject to IEEPA sanctions under this section.

The law additionally creates a Congressional designation procedure similar to that described in connection with Division L, whereby the Secretary of the Treasury must determine whether any person proposed by the leaders of certain Congressional committees has engaged in sanctionable activity and, if so, declare whether sanctions will be imposed.

Sanctions for Trafficking of Captagon (Division P)

Captagon is an amphetamine-type stimulant being illicitly produced in territories held by Syria, with the involvement of the Syrian government and Hizballah. The law requires the imposition of IEEPA sanctions and penalties with respect to any foreign person who, on or after April 24, 2024: 

• engages in, or attempts, activities or transactions that have or significantly risk material contribution to the illicit production and international illicit proliferation of captagon; or
• knowingly receives any property or interest in property that the foreign person knows—
  • constitutes or is derived from proceeds of activities or transactions that have or significantly risk material contribution to the illicit production and international illicit proliferation of captagon; or
  • was used or intended to be used to commit or to facilitate activities or transactions that have or significantly risk material contribution to the illicit production and international illicit proliferation of captagon.

The law furthermore provides a list of persons that the President is required to assess for sanctions eligibility and report to Congress within the next six months.

Other Measures 

H.R. 815 also includes several other measures targeting fentanyl, harmonizing U.S.-EU sanctions, and developing a catalogue of information on U.S. suppliers of entities developing PRC military technology. To summarize the main points:

• (Div. E, §3101-3105, 3301) Provides for the imposition of sanctions and penalties on any foreign person “knowingly” involved in “significant” trafficking of fentanyl, fentanyl precursors, and related opioids, or related activities of a transnational criminal organization.  
• (Div. E, §3201-3203) Designates illicit fentanyl transactions of sanctioned persons as a primary money laundering concern.  And empowers the Secretary of the Treasury to impose requirements on domestic financial institutions/agencies and prohibit or impose conditions upon transmittals of fund by domestic financial institutions/agencies with any institution, class of transaction, or type of accounts that are of primary money laundering concern.  Guidance for U.S. financial institutions in reporting suspicious transactions related to suspected fentanyl trafficking by transnational criminal organizations will be published within six months by the Financial Crimes Enforcement Network (FINCEN).
• (Div. G, §1) A sweeping harmonization provision that permits the President to sanction any person falling within the scope of the Magnitsky Act, EO 14024, EO 14068, or EO 14071 that is already sanctioned pursuant to EU Regulation 269/2014 but not sanctioned by the United States.  While this does not expand the President’s sanction authority per se, it streamlines the process.
• (Div. G, §2) Requires that the annual China Military Power report cover emerging technological developments involving the PRC, including at least five fields of critical or emerging technologies invested by the People’s Liberation Army or PRC Military-Civil Fusion Development Strategy.  For each field, the report is specifically required to identify at least 10 involved entities that are domiciled in, controlled by, or directed by the PRC (including subsidiaries) and describe, inter alia, whether each entity has procured components from any known U.S. suppliers (whether or not subject to export controls).
• (Div. O, §3) Amends the Sanction the Use of Civilians as Defenseless Shields Act to cover members of Palestine Islamic Jihad that knowingly order, control, or otherwise direct the use of civilians protected as such by the law of war to shield military objectives from attack, and creating a Congressional designation mechanism like that described above in connection with Division L.
• (Div. O, §4) Requires the Secretary of Defense provide a report in four months on the lessons learned by the U.S. and its allies and partners in addressing the use of human shields by terrorist organizations and a description of the plan of action to incorporate those lessons into U.S. operations and multinational centers of excellence, and to mobilize allied nations to deter such uses. Finally, three classified reports and briefings were mandated to occur within the next six months.  Each of these may presage further action from Congress to refocus the executive branch or redirect resources in accordance with Congressional priorities.
• (Div. E, §3112) Requires the Director of the Office of Foreign Assets Control (“OFAC”) to report to Congress on staffing, including on a per-sanctions-program and per-country basis.  
• (Div. E, §3113) Requires the Secretary of the Treasury to report to Congress on efforts to target drug transportation routes and modalities, including an assessment of the prevalence of false cargo labeling and shipment of precursor chemicals without accurate tracking of the customers purchasing the chemicals.
• (Div. E, §3114) Requires the Secretary of the Treasury to report to Congress on actions by the People’s Republic of China (“PRC”) with respect to persons involved in the shipment of fentanyl, fentanyl analogues, fentanyl precursors, fentanyl precursor analogues, and equipment for fentanyl and counterfeit pill manufacturing.

Cassidy Levy Kent supports clients’ trade compliance efforts and is available to answer questions about these new sanctions developments or their potential impact on your business.