Late last night the U.S. Senate voted to approve the Iran Threat Reduction and Syria Human Rights Act of 2012, a vote which the House has taken and approved earlier in the day. The Act now awaits the signature of President Obama. As noted in our earlier coverage, this latest round of sanctions further targets the petroleum and shipping industries while imposing new and significant restrictions with Iran.

One of the most significant new restrictions is Section 218 “Liability of parent companies for violations of sanctions by foreign subsidiaries.” Within 60 days of the President’s signature, foreign subsidiaries of U.S. companies will be prohibited from conducting transactions with Iran, as if they were themselves U.S. companies. The penalties for violations by foreign subsidiaries will be imposed not on the foreign subsidiary, but on the U.S. Parent company.

Now is the time for U.S. companies to understand the full scope of their foreign subsidiaries’ activities in Iran. Section 218 does provide an exemption from penalties if the U.S. Person, within 180 days of enactment, divests or terminates their businesses with the foreign entity.