The measure also harmonizes Russia sanctions rules with allies, and intensifies penalties against Iran

The National Security Act, 2024 (Pub. L No 118-50) was enacted on April 24, 2024. In addition to the Act’s provisions for military aid for Ukraine, Israel and Taiwan, it contains several significant sanctions-related measures discussed below:

• First, it extends the statute of limitations for targeting sanctions violations from 5 years to 10 years;
• Second, it seeks to harmonize US sanctions on Russia with those of the United Kingdom (UK) and the European Union (EU);
• Third, it provides for additional sanctions on Iranian oil and Iran’s missile program, and it targets Chinese entities for their role in evading Iranian oil sanctions;
• Finally, it expands the foreign direct product rule with respect to certain items destined to Iran.

The Act went into effect immediately and raises several trade, sanctions and national security issues.

Extended Statute of Limitations for Sanctions Violations

The Act amends the International Emergency Economic Powers Act (IEEPA, codified at 50 U.S.C. § 1705) to allow for a civil action, suit or proceeding to be commenced “within 10 years after the latest date of the violation upon which the civil fine, penalty, or forfeiture is based.”¹ Unlawful acts under IEEPA include violating, attempting to violate, conspiring to violate, or causing a violation of any license, order, regulation, or prohibition issued under that Act. The new time period also applies to criminal prosecutions for a person who “willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of” any unlawful act under IEEPA. The same changes are being made to the related Trading with the Enemy Act (TWEA), which currently only applies to Cuba.

These changes raise several questions, such as whether the extensions will cover sanctions violations that have passed the previous five-year mark, whether they only apply to violations occurring on or after April 24, 2024, and how they may affect existing arrangements that parties have reached with the Office of Foreign Assets Control (OFAC) for specific violations.

Harmonization of Ukraine/Russia Sanctions with the EU and the UK

To increase pressure on Russia to end its invasion of Ukraine, the Act includes measures to align US sanctions enforcement with that of the EU and the UK. It instructs the President to submit a report to the Congress within 90 days of enactment that identifies each foreign person currently subject to Ukraine/Russia-related sanctions by the EU or the UK and then identifies each such foreign person that also meets the criteria for US sanctions pursuant to Executive Order (EO) 14024, 14068, 14071 related to Russia or the Global Magnitsky Human Rights Accountability Act of 2016.²

The Act then permits the President to impose relevant US sanctions on the identified persons, thereby harmonizing US sanctions with those of the EU and the UK to close loopholes and enhance multilateral coordination and enforcement of Russia sanctions. For now, it does not contemplate additional harmonization of Russia-related export controls.

Sanctions on Iran

a) Iranian Persons and Vessels Involved in Transporting Iranian Petroleum

Division J of the Act, known as the “Stop Harboring Iranian Petroleum Act” (SHIP Act), imposes additional sanctions on Iranian petroleum to hinder the Iranian government’s financial ability to engage in activities that support terrorism in the region and human rights violations against the Iranian people.

Specifically, on and after 180 days following the date of enactment, the President is required to impose the sanctions with respect to each foreign person that s/he determines knowingly engaged, on or after such date of enactment, any of the following activities:³

• owns or operates a foreign port at which, on or after April 24, 2024, such person knowingly permits to dock a vessel—
  • that is included on the OFAC list of specially designated nationals (SDNs) and blocked persons for transporting Iranian crude oil or petroleum products; or
  • of which the operator or owner of such vessel otherwise knowingly engages in a significant transaction involving such vessel to transport, offload, or deal in significant transactions in condensate, refined, or unrefined petroleum products, or other petrochemical products originating from the Islamic Republic of Iran;
• owns or operates a vessel through which such owner knowingly conducts a ship to ship transfer involving a significant transaction of any petroleum product originating from the Islamic Republic of Iran;
• owns or operates a refinery through which such owner knowingly engages in a significant transaction to process, refine, or otherwise deal in any petroleum product originating from the Islamic Republic of Iran;
• is a covered family member of a foreign person described in paragraph (1), (2), or (3); or
• is owned or controlled by a foreign person described in paragraph (1), (2), or (3), and knowingly engages in an activity described in paragraph (1), (2), or (3).

A foreign person shall not be determined to know that petroleum or petroleum products originated from Iran if such person relied on a certificate of origin or other documentation confirming that the origin of the petroleum or petroleum products was a country other than Iran—unless such person knew or had reason to know that such documentation was falsified.

The President may block and prohibit all transactions in property and interests in property of the foreign persons subject to US jurisdiction; deny or revoke immigration benefits to such persons; and block the identified vessels from landing at any port in the United States for 2 years. We await any new regulations that may be issued in connection with implementation of these provisions.

b) Potential Sanctions against Chinese Entities for Evasion of Iran Sanctions

To further tighten sanctions targeting Iranian petroleum, the Act instructs the Secretary of State to prepare a briefing within 120 days of enactment about the role and magnitude of China in evasion of US sanctions on Iranian-origin petroleum products, along with a strategy that assesses the options to strengthen the enforcement of such sanctions and expand sanctions designations to target the involvement of Chinese entities in the production, transportation, storage, refining, and sale of Iranian-origin petroleum products.⁴ This strategy will include options for detailed monitoring of maritime activity, deterrence through engagement with insurance providers, vessel operators and parent companies, and collaboration with US partners in the Arabian Peninsula.

Separately, Division S of the Act, known as the Iran-China Energy Sanctions Act of 2023,⁵ amends the definition of “significant financial transaction” under the National Defense Authorization Act (NDAA, codified in part at 22 U.S.C. § 8513a) to include any transaction (i) by a Chinese financial institution (without regard to the size, number, frequency, or nature of the transaction) involving the purchase of petroleum or petroleum products from Iran; and (ii) by a foreign financial institution (without regard to the size, number, frequency, or nature of the transaction) involving the purchase of Iranian unmanned aerial vehicles (UAVs), UAV parts, or related systems.

Within 180 days of enactment and annually for the next 5 years, the President must determine and inform Congress whether any Chinese financial institution has engaged in such a significant financial transaction. Identified Chinese financial intuitions will be at risk of sanctions designation and other punitive actions.

c) Expanding Sanctions on Iran’s Missile Program

The Act imposes additional sanctions on foreign persons (and their adult family members) who are determined to knowingly engage in the any effort to acquire, possess, develop, transport, transfer, or deploy covered technology to, from, or involving the Government of Iran or Iran-aligned entities, knowingly participate in joint missile or drone development, or knowingly provide support for such activities. There are exceptions for US intelligence or law enforcement activities.

Expansion of the Foreign Direct Product Rule for Exports to Iran

Beginning 90 days after enactment, a foreign-produced item shall be subject to the Export Administration Regulations (EAR, 50 U.S.C. 4801 et seq.) if:⁶

• it is exported, reexported, or in-country transferred to Iran from abroad (or it will be incorporated into or used in the production of any component subject to the EAR and produced in or destined to Iran) or involved the Government or Iran; and
• it is a direct product of US-origin technology or software subject to the EAR or is produced by a plant or major component of a plant located outside the US that is made with US-origin technology or software subject to the EAR.

Items meeting these requirements may require a license unless they meet an exception (such as for humanitarian purposes) or the Secretary of Commerce determines that a waiver is in the national interests of the United States.

_{1 Pub. L. 118-50, Division D, Title I, Subtitle B, Sec. 3111.}

_{2 Pub. L. 118-50, Division G, Sec. 1.}

_{3 Pub. L. 118-50, Division J, Sec. 3.}

_{4 Pub. L. 118-50, Division J, Sec. 5.}

_{5 Pub. L 118-50, Division S, Sec. 2.}

_{6 Pub. L. 118-50, Division N, Sec. 2.}