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114th Congress     }                               {    Rept. 114-866
                        HOUSE OF REPRESENTATIVES
 2d Session        }                               {           Part 1

======================================================================



 
         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]