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114th Congress } { Rept. 114-866
HOUSE OF REPRESENTATIVES
2d Session } { Part 1
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STOP U.S. SUPPORT FOR STATE SPONSORS OF TERRORISM ACT
_______
December 12, 2016.--Ordered to be printed
_______
Mr. Hensarling, from the Committee on Financial Services, submitted the
following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 5729]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 5729) to prohibit the Secretary of the Treasury
from issuing certain licenses in connection with the export or
re-export of a commercial passenger aircraft to the Islamic
Republic of Iran, to require annual reports by the Secretary of
the Treasury and the Export-Import Bank on financing issues
related to the sale or lease of such a commercial passenger
aircraft or spare parts for such an aircraft, and for other
purposes, having considered the same, report favorably thereon
with an amendment and recommend that the bill as amended do
pass.
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Stop U.S. Support for State Sponsors
of Terrorism Act''.
SEC. 2. EXPORT PROHIBITION.
The Secretary of the Treasury may not issue a license for the export
or re-export of a commercial passenger aircraft to the Islamic Republic
of Iran.
SEC. 3. TREASURY REPORT ON FINANCING.
The Secretary of the Treasury shall issue an annual report to the
Committees on Financial Services and Foreign Affairs of the House of
Representatives and the Committees on Banking, Housing, and Urban
Affairs and Foreign Relations of the Senate--
(1) stating whether any U.S. financial institution is
involved with the sale or lease of commercial passenger
aircraft or spare parts for such aircraft to the Islamic
Republic of Iran by a non-U.S. manufacturer, and whether any
such involvement is with respect to a commercial passenger
aircraft or spare parts comprising 10 percent or more U.S.
content; and
(2) containing a description of the risks related to
repayment, money laundering, and the financing of terrorism
faced by U.S. financial institutions if they were to be
involved in the sale or lease of a commercial passenger
aircraft to the Islamic Republic of Iran.
SEC. 4. EXPORT-IMPORT BANK REPORT.
The Export-Import Bank of the United States shall issue an annual
report to the Committees on Financial Services and Foreign Affairs of
the House of Representatives and the Committees on Banking, Housing,
and Urban Affairs and Foreign Relations of the Senate on the Bank's
assistance for exports that may be used in connection with the sale or
lease of passenger aircraft and spare parts for such aircraft to the
Islamic Republic of Iran by a non-U.S. manufacturer, and whether any
such assistance for exports may be used in connection with a commercial
passenger aircraft or spare parts comprising 10 percent or more U.S.
content.
PURPOSE AND SUMMARY
Introduced by Representative Pittenger on July 12, 2016,
H.R. 5729 would prohibit the Secretary of the Treasury from
issuing licenses authorizing the export or re-export of
passenger aircraft to Iran. The bill also requires an annual
report from the Department of Treasury on U.S. financial
institutions' involvement with the export of non-U.S. aircraft
or spare parts to Iran. Additionally, this report would
describe risks related to repayment, money laundering, and the
financing of terrorism faced by U.S. financial institutions if
they were to be involved in the sale or lease of aircraft to
Iran. Finally, the legislation would require the Export-Import
Bank of the United States to prepare an annual report on Bank
assistance for U.S. exports that may be used in connection with
non-U.S. aircraft sales to Iran.
BACKGROUND AND NEED FOR LEGISLATION
Under the Joint Comprehensive Plan of Action (JCPOA), the
Obama Administration agreed to license the export of passenger
planes to Iran. On March 24, 2016, the Treasury Department's
Office of Foreign Assets Control (OFAC) issued a general
license that permitted U.S. aircraft manufacturers to begin
negotiations with Iran. On June 21, Boeing announced it had
reached a tentative sales agreement with Iran Air, the
country's flagship state-owned carrier. According to this
agreement, Iran Air intends to purchase 80 commercial planes
with a value of $17.6 billion, along with the lease of 29
Boeing 737s. Previously, Iran had announced it would also
purchase 118 Airbus planes worth $27 billion. Non-U.S.
manufacturers such as Airbus are subject to OFAC licensing
requirements as well, provided their aircraft's U.S. content
equals or exceeds 10 percent.
In September 2016, OFAC issued specific licenses permitting
the export of up to 17 Airbus and 80 Boeing aircraft. In
November 2016, OFAC licensed an additional 106 Airbus planes
for purchase by Iran Air.
Iran Air's deployment of civilian planes for military
purposes is well-documented. In 2011, the airline was
sanctioned by Treasury for its use of commercial planes to
transport rockets, missiles, and other military cargo on behalf
of the Islamic Revolutionary Guard Corps (IRGC). At that time,
Treasury found that Iran Air had also transported missile or
rocket components to Syria, another state sponsor of terrorism
and the site of a civil war that has claimed an estimated
400,000 lives.
Although Iran Air was delisted in 2016, it appears that the
carrier's support for the IRGC remains unchanged. Appearing
before the Financial Services Committee, Mark Dubowitz,
Executive Director of the Foundation for Defense of
Democracies, testified:
As a result of the nuclear deal, the U.S. lifted sanctions
against Iran Air, despite the fact that the original
designations were not related to Iran's nuclear program and
despite the administration's commitment to retain non-nuclear
sanctions.
But when asked why sanctions were lifted, State Department
Spokesman John Kirby did not argue that Iran Air's behavior had
changed, nor that the IRGC is no longer using the airline to
ship weapons to Syria. Instead, he said merely that the
administration was comfortable with its decision, though he was
``not at liberty to go into the reasons behind'' the de-
listing.
And it seems that Iran Air is not keeping out of trouble.
Three times in June, Iran Air flew routes known to be used to
resupply Syrian President Assad.
Eric Lorber of the Financial Integrity Network informed the
Committee:
This Committee is right to consider legislation
significantly restricting the sale of these aircraft.
In any prospective sale of aircraft to Iran, the
impetus must remain on Iran to prove that it is not and
will not use them for illicit or dangerous purposes.
Lorber continued:
Given the opacity of Iran's economy and the
likelihood that Iranian companies with whom Western
firms are doing business are owned or controlled by
designated parties, the risks Western firms face in
dealing directly or indirectly with supporters of
terrorism, human rights abuses, and weapons
proliferation remain high. In the case of Boeing's
proposed sale of up to $25 billion worth of new
aircraft and associated services, these risks are even
higher.
In addition, Lorber cautioned, Iran Air's assurances that
it would use U.S. aircraft exports for exclusively civilian
purposes could not be taken at face value:
Given Iran Air's historical record of supporting the
IRGC, President Assad, and Hezbollah, in addition to
recent indications that it has not changed such
activity, Boeing risks selling aircraft and associated
parts and services that will be directly used by
designated parties for sanctionable purposes. Further,
Iran has a long history of employing sanctions evasion
techniques, meaning that even if Boeing believes Iran
Air is employing these aircraft for commercial
purposes, the airline could be surreptitiously using
them to support illicit activity.
The U.S. financial system may face similar risks through
such sales, particularly since OFAC has authorized U.S.
financing in the aircraft licenses it has issued. These risks
may be present even when financing does not appear to be
connected to an Iranian transaction. In June 2016, for
instance, it was reported that blacklisted Iranian airlines had
been able to bypass sanctions by purchasing 23 Boeing and
Airbus planes through third-country carriers.
Recalling that Treasury continues to classify Iran as ``a
jurisdiction of primary money laundering concern,'' Eric Lorber
warned:
Though the recent business attention on Iran has
understandably focused on sanctions-related issues,
banks and businesses must remember that other financial
crimes concerns in the Islamic Republic remain
pervasive. In particular, the nature of the Iranian
economy and the role of the government within the
economy present serious risks related to bribery and
corruption, money laundering, and illicit financing.
Prohibiting aircraft exports to Iran is a policy that has
previously garnered Congressional support: in July, the House
approved, by voice vote, an aircraft prohibition as an
amendment to H.R. 5485, the Financial Services and General
Government Appropriations Act, 2017.
HEARINGS
The Subcommittee on Monetary Policy and Trade held a held a
hearing titled ``The Implications of U.S. Aircraft Sales to
Iran'' on July 7, 2016, which examined matters relating to H.R.
5729.
COMMITTEE CONSIDERATION
The Committee on Financial Services met in open session on
July 13, 2016 and considered H.R. 5729. An amendment offered by
Rep. Pittenger was adopted by voice vote. Two amendments
offered en bloc by Mr. Sherman were withdrawn. The motion to
report the bill as amended to the House with a favorable
recommendation was agreed to by a recorded vote of 33 yeas to
21 nays (Record vote no. FC-124), a quorum being present.
COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. The
sole recorded vote was on a motion by Chairman Hensarling to
report the bill favorably to the House as amended. The motion
was agreed to by a recorded vote of 33 yeas to 21 nays (Record
vote no. FC-124), a quorum being present.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
COMMITTEE OVERSIGHT FINDINGS
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
PERFORMANCE GOALS AND OBJECTIVES
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee states that H.R. 5729
will protect American depositors and taxpayers by preventing
U.S. financial institutions from engaging in transactions with
a country that poses acute regulatory, reputational, and
default risk.
NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
COMMITTEE COST ESTIMATE
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
CONGRESSIONAL BUDGET OFFICE ESTIMATES
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, August 31, 2016.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 5729, the Stop
U.S. Support for State Sponsors of Terrorism Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Matthew
Pickford.
Sincerely,
Keith Hall.
Enclosure.
H.R. 5729--Stop U.S. Support for State Sponsors of Terrorism Act
H.R. 5729 would amend current law to prohibit the
Department of the Treasury from issuing a license for the
export of commercial aircraft to Iran. The bill also would
require the Treasury and the Export-Import Bank to provide an
annual report on the financing and sale of aircraft and
aircraft parts to Iran.
CBO estimates that implementing H.R. 5729 would increase
administrative costs at the Treasury and the Export-Import Bank
by less than $500,000 annually; such spending would be subject
to the availability of appropriated funds. In addition, on the
basis of information from the Export-Import Bank, CBO estimates
that implementing the bill would have no effect on the bank's
lending activities.
Because the bill would expand prohibited types of trade
with Iran that are subject to civil and criminal penalties, it
could increase revenues and associated direct spending;
therefore, pay-as-you-go procedures apply. However, CBO
estimates that the net budgetary effect of any additional
penalties would be negligible for each year.
CBO estimates that enacting H.R. 5729 would not increase
net direct spending or on-budget deficits in any of the four
consecutive 10-year periods beginning in 2027.
H.R. 5729 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA) and would not affect
the budgets of state, local, or tribal governments.
The bill contains a private-sector mandate as defined in
UMRA because it would prohibit U.S. aircraft manufacturers from
exporting commercial passenger aircraft to Iran. As part of the
multilateral nuclear agreement, known as the Joint
Comprehensive Plan of Action, the United States agreed to allow
the sale of commercial passenger aircraft and related parts and
services to Iran. Subsequently, a major U.S. aircraft
manufacturer negotiated a preliminary agreement with Iran Air,
the country's state-run airline, for the sale and lease of
commercial aircraft. Any final sales agreement with Iran would
have to be approved by the Treasury.
Numerous news reports indicate the value of the sales
agreement could total tens of billions of dollars. The cost of
the mandate would be any profits such manufacturers would
forego as a result of the prohibition. If the bill would
prevent the sale of aircraft that otherwise may be approved
under current law, the cost of the mandate on the manufacturer
would be substantial; CBO estimates that the aggregate cost of
the mandate would probably exceed the annual threshold
established in UMRA for private-sector mandates ($154 million
in 2016, adjusted annually for inflation).
The CBO staff contacts for this estimate are Sunita
D'Monte, Pamela Greene and Matthew Pickford (for federal
revenues and costs) and Logan Smith (for private-sector
mandates).
This estimate was approved by H. Samuel Papenfuss, Deputy
Assistant Director for Budget Analysis.
FEDERAL MANDATES STATEMENT
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
ADVISORY COMMITTEE STATEMENT
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
APPLICABILITY TO LEGISLATIVE BRANCH
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of the section
102(b)(3) of the Congressional Accountability Act.
EARMARK IDENTIFICATION
H.R. 5729 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
DUPLICATION OF FEDERAL PROGRAMS
Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015),
the Committee states that no provision of H.R. 5729 establishes
or reauthorizes a program of the Federal Government known to be
duplicative of another Federal program, a program that was
included in any report from the Government Accountability
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most
recent Catalog of Federal Domestic Assistance.
DISCLOSURE OF DIRECTED RULEMAKING
Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015),
the Committee estimates that H.R. 5729 contains no directed
rule making.
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
Section 1. Short title
This Section provides for this Act to be cited as the
``Stop U.S. Support for State Sponsors of Terrorism Act.''
Section 2. Export prohibition
This Section prohibits the Department of Treasury from
issuing a license for the export or re-export of commercial
passenger aircraft to Iran.
Section 3. Treasury report on financing
This Section requires an annual report by Treasury stating
whether any U.S. financial institution is involved with the
sale or lease of passenger aircraft to Iran by a non-U.S.
manufacturer. If this is the case, Treasury must also report
whether the financed aircraft contains 10 percent or more U.S.
content. The report must also contain a description of risks
related to repayment, money laundering, and terrorism financing
faced by U.S. financial institutions if they were to be
involved in the sale or lease of passenger aircraft to Iran.
Section 4. Export-Import Bank report
This Section requires the Export-Import Bank to issue an
annual report on any Bank assistance for U.S. exports that may
be used in connection with the sale or lease of aircraft and
spare parts to Iran by a non-U.S. manufacturer. The Bank must
also report whether such assistance may be used in connection
with aircraft or spare parts containing 10 percent or more U.S.
content.
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
H.R. 5729 does not repeal or amend any section of a
statute. Therefore, the Office of Legislative Counsel did not
prepare the report contemplated by Clause 3(e)(1)(B) of rule
XIII of the House of Representatives.
MINORITY VIEWS
H.R. 5729 would expressly violate commitments made by the
United States as part of the Joint Comprehensive Plan of Action
(JCPOA) to license the sale of commercial passenger aircraft to
non-Sanctioned parties in Iran. The bill also includes
miscellaneous reporting requirements.
The licensing prohibition in the bill would block not only
U.S. aircraft manufacturers, but also all major foreign
aircraft manufacturers, from exporting commercial passenger
aircraft to Iran, as was agreed to under the JCPOA, because the
export-controlled U.S.-origin content would also make the non-
U.S. manufacturers subject to a U.S. license. By barring the
licensing of commercial passenger aircraft to Iran, the bill
would put the U.S. in breach of our commitments under Annex II
of the JCPOA, and would also prevent other world powers who
joined us in negotiating the Iran nuclear deal from realizing
their obligations under the Agreement.
We note that, to date, Iran has upheld its obligations
under the nuclear agreement, and we strongly believe the United
States has a responsibility to do the same. Moreover, if Iran
violates the deal and uses aircraft for non-civilian purposes,
in contravention of the deal, the JCPOA very clearly states
that our commitments with regard to selling aircraft and spare
parts would terminate. The deal also addresses the possibility
that Iran could violate the aircraft provisions in the deal by
requiring such risk to be managed by effective due diligence
and through the licensing conditions imposed by the Treasury
Department.
There is also a significant humanitarian aspect to the
commercial aviation relief provided in the nuclear agreement.
It is widely recognized that Iran has one of the worst civilian
aviation records in the world. Since 1990, there have been over
200 airline accidents and 2,000 deaths involving Iranian
planes. The risk of death on an Iranian airline is 100 times
higher than the risk to a passenger flying on one of the
world's other major airlines.
Upholding our end of the Iran nuclear deal is critical to
promoting our national security interests by erecting a barrier
to Iranian nuclear proliferation for well over a decade and
ensuring nuclear inspectors unprecedented access for over a
quarter century. Passage of H.R. 5729 would be a dangerous step
towards unravelling the JCPOA, which would reinforce questions
around the world about the U.S. commitment to multilateralism,
and seriously damage our ability to lead any future diplomatic
efforts on terrorism and on a range of other issues important
to U.S. national security.
For all of these reasons, we oppose this measure.
Maxine Waters.
Wm. Lacy Clay.
Ruben Hinojosa.
Keith Ellison.
Al Green.
[all]
