Trade Compliance Flash: President Trump Refuses to Certify JCPOA Compliance Under U.S. Domestic Legislation
In a speech at the White House on October 13, 2017, President Trump announced his administration's long-awaited Iran strategy. As anticipated, he announced that he did not intend to make the certification required by the U.S. Iran Nuclear Agreement Review Act of 2015 (INARA) regarding Iran's compliance with the Joint Comprehensive Plan of Action (JCPOA). The JCPOA, which was entered into by the previous administration and implemented in January 2016, led to the suspension of most U.S. secondary sanctions directed at Iran's nuclear proliferation activities and the removal of most United Nations, European Union, and other sanctions against Iran. The JCPOA generally preserved the U.S. embargo on trade with Iran by U.S. persons, with very few exceptions. Notably, the failure to certify does not constitute a formal complaint under the dispute resolution mechanism provided in the JCPOA that Iran is not meeting its commitments. Rather, the president's action triggers a 60-day period established by INARA during which Congress can consider legislation reinstating statutory sanctions with respect to Iran on an expedited basis.
INARA was enacted as the U.S. Congress's response to the Obama administration's negotiation of the JCPOA. It granted Congress the right to review and oversee compliance with any agreements reached with Iran relating to Iran's nuclear program. The president was required to transmit the JCPOA to Congress for review. Congress did not enact a resolution favoring the agreement, but Congress also was not successful in passing a joint resolution stating that Congress did not favor the agreement. Failing such a resolution, the administration was free to adopt and implement the JCPOA.
INARA also imposed requirements for congressional oversight of the JCPOA, including a requirement for semi-annual reports to Congress regarding Iran's nuclear program and its compliance with the JCPOA, as well as a requirement for certifications to Congress every 90 days regarding whether Iran is fully implementing JCPOA, has not materially breached the agreement, and has not taken any action that could significantly advance its nuclear weapons program. INARA also requires the president to certify whether suspension of sanctions pursuant to the JCPOA is "appropriate and proportionate" to the measures taken by Iran to terminate its "illicit nuclear program" and "vital to the national security interests of the United States." In his announcement, President Trump signaled that he intended to refrain from certifying that continued suspension of sanctions would be "appropriate and proportionate." Significantly, the president did not claim that Iran was in material breach of the JCPOA, and the Secretary of State emphasized that the INARA process is a U.S. domestic law process separate from the dispute resolution mechanism of the JCPOA.
Nevertheless, under INARA, failure to submit the certification has the same impact as a determination that Iran has materially breached the JCPOA – namely, that Congress now has 60 days to consider legislation reinstating sanctions. This poses the risk that the United States would itself be in breach of the JCPOA if Congress overrides waivers of secondary sanctions required by the U.S. JCPOA commitments. To avoid this outcome, rather than simply reviving waived sanctions, Congress and the president may elect to impose new sanctions (perhaps related to ballistic missile proliferation, terrorism or human rights violations – all areas specifically excluded from the scope of the JCPOA), although it is not clear that INARA's procedural mechanisms allowing for expedited consideration of proposals to reimpose waived sanctions would apply to legislation imposing entirely new sanctions. However, the president stated that he had directed the administration to work with Congress and U.S. allies to address the agreement's "serious flaws" and the Secretary of State hinted that amendments to INARA requiring automatic reimposition of sanctions if Iran crosses new statutory "trigger points" might be under discussion.
Concurrently with President Trump's announcement, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) imposed sanctions on Iran's Islamic Revolutionary Guard Corps (IRGC) and its supporters under authorities not affected by the U.S. commitments under the JCPOA. The IRGC was designated under Executive Order 13224 (EO 13224) for supporting its subsidiary organization, the IRGC-Qods Force (IRGC-QF), which itself was designated 10 years ago under EO 13224 for providing support to terrorist groups. IRGC also was designated previously for its support for Iran's ballistic missile program and in connection with Iran's human rights abuses. The designation of the IRGC under anti-terrorism authorities is particularly noteworthy because it could signal that the U.S. Department of State is preparing to designate the IRGC as a Foreign Terrorist Organization (FTO). If the IRGC were designated as an FTO, it could have far-reaching implications due to the IRGC's deeply entrenched role in Iran's economy and the possibility that doing business with an FTO, even for non-U.S. persons, could be construed under certain circumstances as violating U.S. laws prohibiting material support to terrorism.
In addition, OFAC designated three Iranian entities and one Chinese entity for their support for Iran's ballistic missile program. As a result of the designations, U.S. persons are required to block (or freeze) the assets of the designated parties and may not do business with them, directly or indirectly.
For now, apart from the new designations, nothing has changed, but all eyes will be on Congress and the administration over the next two months as they wrestle with the challenge of adopting a bipartisan approach to U.S.-Iran policy that does not place the United States in breach of its JCPOA commitments or alienate U.S. allies. In the meantime, uncertainty over the future of the JCPOA remains, as both President Trump and the Secretary of State left open the possibility that the United States may withdraw from the JCPOA if a satisfactory solution that addresses U.S. concerns about the "totality of threats from and malign activities by the Government of Iran" cannot be achieved.
For more information, please contact:
Barbara D. Linney**
**Former Miller & Chevalier attorney
This, and related communications, are protected by copyright laws and treaties. You may make a single copy for personal use. You may make copies for others, but not for commercial purposes. If you give a copy to anyone else, it must be in its original, unmodified form, and must include all attributions of authorship, copyright notices, and republication notices. Except as described above, it is unlawful to copy, republish, redistribute, and/or alter this presentation without prior written consent of the copyright holder.