Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRSHRA”) requires that publicly-traded companies disclose in their annual and quarterly filings with the Securities and Exchange Commission (“SEC”) certain dealings that the filers or any of their “affiliates” have had with Iran during the reporting period. Among the transactions required to be reported are any transactions with the Government of Iran “without the specific authorization of a Federal department or agency.”

There is no materiality or dollar amount threshold to this obligation to report dealings with Iranian government.  As a result, this obligation  seemingly extends to even the most trivial transaction, including legal transactions by foreign “affiliates” that are not controlled by U.S. persons and are therefore not subject to the prohibitions of section 218 of ITRSHRA

With that in mind, we have the latest Form 10-Q filed by Toyota Motor Credit Corporation (“TMCC”) which discloses that in the last quarter of 2012 an Indonesian subsidiary of Toyota Motor Company (“TMC”), a Japanese company, manufactured two automobiles worth $37,000 which another Indonesian subsidiary of TMC sold to the Iranian Embassy in Jakarta.

Because the two Indonesian companies were not controlled by TMCC these sales weren’t prohibited by Section 218 of ITRSHRA. Further, because the two cars were manufactured in Indonesia, they weren’t otherwise subject to the U.S. sanctions given that they likely had less than 10 percent U.S. origin controlled content. But since TMCC and the two Indonesian companies were under common control of TMC, they were “affiliates” of TMCC (as defined by Exchange Act Rule 12b-2), meaning that these miniscule transactions had to be reported by TMCC.

It is not clear what purpose is served by requiring companies to report such stuff other than, I suppose, to impose the regulatory hassle on any and every public company to ferret out penny ante deals by distant foreign affiliates with Iran. I, for one, look forward to upcoming revelations of, say,  some U.S. company that has an affiliated foreign grocery store chain that sold a loaf  of bread to an Iranian diplomat in Vilnius.

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