U.S. Proposed Legislation Introducing Restrictive Trade Measures on Ships Calling at U.S. Ports: Iran, North Korea, and Syria Sanctions Consolidation Act of 2011

This report alerts members to the U.S. Government's legislative proposals which are likely to introduce tougher measures in support of trade embargoes on Iran, Syria and North Korea.

The measure most directly impacting the shipping industry is a proposed new "180 day rule," which provides that vessels may not knowingly call at any port in the United States to load or unload cargo or engage in the trade of goods or services if the vessel previously entered a port in Iran, North Korea, or Syria during the 180-day period preceding the arrival of the vessel in the United States.

This proposal, which is similar to current US policy for Cuba, has passed the House of Representatives and could become law imminently if passed by the Senate and signed by the President.

The proposed legislative amendment to the Ports and Waterways Safety Act (33 USC 1221 et seq.) would require either "the owner, charterer, operator, or master" of a vessel to "certify" prior to arrival in a US port, "that the vessel did not enter a port in Iran, North Korea, or Syria during the 180-day period ending on the date of arrival of the vessel" in a US port.

In addition to other applicable criminal and civil penalties, ships found to have submitted false declarations could be subject to prohibitions including a prohibition from call at a port in the U.S. for a period of at least 2 years. This could apply to any vessel for which a false declaration was made and to other vessels owned by a parent/associated company.

The draft legislation also contains provisions which

• Direct federal authorities to carry out enhanced inspections on vessels that have landed in Iranian, North Korean or Syrian ports during the preceding 12-months to determine whether the vessel was involved in any sanctioned proliferation-related activity. Data from the US Authorities' vessel tracking systems may be used to establish such activity.
• Provide for new sanctions on any person providing shipping services for the transportation of goods to or from Iran, North Korea, or Syria for purposes relating to nuclear, biological, or chemical weapons, or ballistic or cruise missile development programs. This includes provision of vessels, insurance and reinsurance. The only defence for insurers would appear to be to demonstrate that the vessel, insurance, reinsurance or other shipping service was not in fact provided in respect of a prohibited activity.

Impact on Insurance

The direct impact of the current proposals will be on the shipowner/vessel and there is no direct implication in relation to the provision of insurance cover although there could be indirect insurance consequences in relation to possible vessel detention or deviation.

Engagement with US Authorities

The International Group has sought urgent clarification from the US Administration on a number of issues including the retrospective impact of the 180 day prior trading history, the possible extension of prohibitions for infringements to other vessels in the same or associated ownership, management or control, the levels of due diligence required in relation to ascertaining the prior trading history of newly acquired vessels and the application of the new measures in the context of shipowners' existing contractual obligations to proceed to ports in Iran, Syria or North Korea and the US.

The Group will press for clarification on these issues and will continue to monitor developments with regard to the progress of the proposed legislation.