House and Senate conferees announced yesterday that they had reached agreement on the Iran sanctions legislation passed earlier this year by the House and Senate. The conferees also released the text of the newly agreed bill, now titled the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010.

The act’s most significant feature is its extraterritorial scope: it imposes sanctions on foreign persons and companies outside the United States that engage in transactions in Iran that violate the act. Such secondary boycotts have prompted objections from our allies in the past with respect to the Iran Sanctions Act of 1996, 50 U.S.C. § 1701 note, which the new act, if signed into law, would amend. And these same allies are likely to object once again to the enhanced extraterritorial effect of the new provisions.

The extraterritorial sanctions relate to foreign entities that (a) invest in Iran’s petroleum sector, (b) provide refining technology to Iran or (c) export refined petroleum to Iran. Since these activities by U.S. persons are already prohibited by current sanctions, the focus of this legislation is clearly on persons and companies outside the United States.

Threshold amounts of investments and exports are specified in the new act before sanctions are imposed. For example, for exports of refining products or refined petroleum, the threshold is a value of $1 million for one export or more than $5 million for all exports in a 12-month period. The thresholds for investment in Iran’s petroleum sector would be halved from the current limit of $10,00,000 per transaction and $40,000,000 over a 12-month period to $5,000,000 and $20,000,000 respectively. If those thresholds are exceeded, then mandatory sanctions would have to be imposed.

The number of mandatory sanctions that must be imposed would be increased from two to three and the list from which those three mandatory sanctions must be chosen would be increased from six to nine. The three new mandatory sanctions are denial of access to U.S. foreign exchange markets, denial of access to U.S. financial institutions and, even more significantly, an order prohibiting the import or export of any items from or to the United States by the sanctions party. Under the 1996 Act, the equivalent sanctions only included a possible ban on exports from the United States of military, dual-use and nuclear items.

The new act would forbid all imports from Iran except for informational materials (books, DVDs, etc.) and “accompanied baggage for personal use.” Gifts under $100, carpets, and foodstuffs, all permitted by current regulations, would no longer be able to be imported into the United States if this act becomes law.

Less change would be effected by the new act if signed into law with respect to exports to Iran. Exports of agricultural products, medicine and medical, as permitted under the Trade Sanctions Reform and Export Enhancement Act of 2000, would continue to be permitted, as would exports of informational materials, humanitarian assistance and parts and technologies necessary to assure the safety of civilian aviation. The law does codify, at least with respect to Iran, recent exceptions that the Treasury Department’s Office of Foreign Assets Control (“OFAC”) made to the export ban for goods and services incident to the exchange of personal communications over the Internet or for access to the Internet.