Sentence Correction

Received a PM asking me to respond. The PM also specified that this is a GMATPrep problem; thanks for citing the source!

One of Ronald Reagan's first acts as President was to rescind President Carter's directive that any chemical banned on medical grounds in the United States be prohibited from sale to other countries.

(A) that any chemical banned on medical grounds in the United States be prohibited from sale to other countries
(B) that any chemical be prohibited from sale to other countries that was banned on medical grounds in the United States
(C) prohibiting the sale to other countries of any chemical banned on medical grounds in the United States
(D) prohibiting that any chemical banned on medical grounds in the United States is sold to other countries
(E) that any chemical banned in the United States on medical grounds is prohibited from being sold to other countries

Yes, it's a twisted sentence - that's what makes these hard!

"directive" is a noun. That might be hidden because of the "President Carter's" bit, but try stripping that out and see how you'd have to write it:

"was to rescind [the] directive..."

So, it's a noun, right?

Generally, command subjunctive is constructed:
<demand signal> + that + <agent> + <base form of verb>

There are a couple of ways to give that "demand signal." The most basic way is a "bossy" verb:

I propose that uptowngirl92 be made class president.

That's not what we've got in this sentence, because "directive" is a noun.

We could also use "It is X," where X is an adjective conveying urgency (important, essential, crucial, imperative...)

That's not what's going on in this problem either.

Finally, certain conjunctions could also be the signal. I agree to vote for uptowngirl92 on condition that she pay me $5.

Still not what's going on in this problem.

So: we don't have a proper subjunctive set-up for this problem. Therefore, we're not required to use subjunctive. Therefore, we shouldn't use subjunctive.