International Law Advisory - Foreign Subsidiaries

This is to advise you of a proposed amendment to the International Emergency Economic Powers Act (IEEPA) that would extend prohibitions on dealing with sanctioned countries to foreign subsidiaries of US companies. The IEEPA is the statutory source for most of the US economic sanctions regimes administered by the Department of Treasury, Office of Foreign Assets Control (OFAC), including the comprehensive sanctions programs relating to Iran, Libya and Sudan. Currently, the restrictions in those programs apply only to US companies and foreign branches thereof, not to the activities of independently-run foreign subsidiaries.

On April 22, 2004, Senator Frank Lautenberg (D-NJ) announced his intent to introduce an amendment to the Foreign Sales Corporation/Extraterritorial Income (FSC/ETI) bill, currently pending in the US Senate (S. 1637), that would extend IEEPA-related sanctions programs to cover foreign subsidiaries for which the parent US company owns a greater than 50 percent interest.  The amendment is co-sponsored by Senators Clinton (D-NY) and Feingold (D-WI).  It is unclear whether the amendment, which has been rumored for several weeks, enjoys broader support in the Congress.  If enacted, it would constitute a substantial change to the US embargo policy -- foreign subsidiaries would, for the first time, be subject to the same prohibitions vis-à-vis IEEPA-sanctioned countries as US companies and foreign branches currently are.  This would include, with respect to Iran, Libya and Sudan, prohibitions against the import or export of most goods and services, and bans on investment in the respective countries.

We will continue to monitor the status of the Lautenberg amendment, and will provide you with a text of the amendment as soon as it becomes available.  If you have any questions in the meantime, please contact Ed Krauland at 202.429.8083 or David Lorello at 202.429.6757.