For starters, Iraq definitely does not have a Navy, unless you count one boat a Navy. If they did and they sent ships to sit off our coast, then I suppose it’d depend on the level of threat we felt, and if there were open hostilities going on between us. If there were, then the ships would be sunk. If not, and there was no tension between us, and if the ships were inside 12 miles, they’d probably be intercepted and escorted out of our territorial waters. If there was tension but no hostilities, they’d probably be targeted either by our surface ships or our subs and closely monitored.
Keep in mind that a country may claim waters out beyond 12 miles. This doesn’t mean other countries recognize it, though. They may claim it as territorial or economic exclusion zones, etc. And some of this involves international perception as to what’s right and what’s not. Look at China when it downed our EP-3, which was well out of their airspace. IIRC, they claimed it was in their airspace (economic exclusion zone or something silly) and so they were within their rights to do what they did. And they did a pretty good job of acting the victim.
Anyway, as TBone asked, what would the goal of such an action by Iraq be?