Yesterday the Senate Finance Committee held a hearing on the Iran Counter-Proliferation Act of 2007, which was introduced on March 22 by Senator Gordon Smith and has 70 sponsors equally divided between Democrats and Republicans.

Among the proposed sanctions is a provision that would make U.S. parent companies liable for activities of their foreign subsidiaries that would violate the sanctions against Iran if such activities had been undertaken by the parent company. This reverses current law which allows foreign subsidiaries to trade with Iran as long as no U.S. persons are directly involved in the trading activities and as long as the subsidiary has legitimate additional business activities other than trading with Iran. (The article linked above from Congressional Quarterly by Matt Karode misreads the bill and claims that it would penalize U.S. subsidiaries of foreign parent companies for the parent company’s trading with Iran).

The legislation would ban all exports to Iran other than “food and medicine grown, produced or manufactured in the United States.” The impact of this proposed provision on the Trade Sanctions Reform Act of 2000, which permits exports of medical devices in addition to food and medicine, and the Berman Amendment, which permits exports of informational materials, is unclear since the legislation doesn’t explicitly repeal the prior legislation. Nor is it clear that Congress understands that this provision would also prohibit exports under section 560.528 of the Iranian Transaction Regulations of goods, services and technology to insure the safety of civil aviation.

Imports are also banned by the proposed legislation. Currently imports of foodstuffs and carpets from Iran are permitted.

Other provisions of the proposed legislation include:

• A prohibition of U.S. actions that would lead to accession of Iran to the World Trade Organization;
• A requirement that the President freeze the assets of Iranian diplomats, government officials and their family “at such time as the United States has access to [their] names”; and
• A reduction of U.S. contributions to the World Bank based on amounts loaned by the Bank to Iran.

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