[House Report 104-523]
[From the U.S. Government Publishing Office]



                                                                       
104th Congress                                            Rept. 104-523
                        HOUSE OF REPRESENTATIVES

 2d Session                                                      Part 2
_______________________________________________________________________


 
                  IRAN AND LIBYA SANCTIONS ACT OF 1996

_______________________________________________________________________


 June 14, 1996.--Committed to the Committee on the Whole House on the 
              State of the Union and ordered to be printed

                                _______


    Mr. Archer, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3107]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Ways and Means to whom was referred the bill 
(H.R. 3107) to impose sanctions on persons exporting certain 
goods or technology that would enhance Iran's ability to 
explore for, extract, refine, or transport by pipeline 
petroleum resources, and for other purposes, having considered 
the same, report favorably thereon with amendments and 
recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
  I. Introduction.....................................................9
          A. Purpose and Summary.................................     9
          B. Background and Need for Legislation.................     9
          C. Legislative History.................................    10
 II. Explanation of Provisions.......................................10
          A. Short Title.........................................    10
          B. Congressional Findings..............................    10
          C. Declaration of Policy...............................    11
          D. Multilateral Regime.................................    11
          E. Imposition of Sanctions.............................    12
          F. Description of Sanctions............................    15
          G. Advisory Opinions...................................    16
          H. Termination of Sanctions............................    17
          I. Duration of Sanctions; Presidential Waiver..........    17
          J. Reports Required....................................    18
          K. Determinations Not Reviewable.......................    18
          L. Expulsion of Certain Activities.....................    19
          M. Effective Date; Sunset..............................    19
          N. Definitions.........................................    19
III. Votes of the Committee..........................................20
 IV. Budget Effects of the Bill......................................20
          A. Committee Estimate of Budgetary Effects.............    20
          B. Statement Regarding New Budget Authority and Tax 
              Expenditures.......................................    20
          C. Cost Estimates Prepared by the Congressional Budget 
              Office.............................................    21
  V. Other Matters to be Discussed under the Rules of the House......22
          A. Committee Oversight Findings and Recommendations....    22
          B. Summary of Findings and Recommendations of the 
              Government Operations Committee....................    22
          C. Inflationary Impact Statement.......................    22
 VI. Letter from Committee on Banking................................22
VII. Letter from Committee on Government Reform and Oversight........23
VIII.Letter from Committee on International Relations................23


  The amendments are as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Iran and Libya Sanctions Act of 
1996''.

SEC. 2. FINDINGS.

  The Congress makes the following findings:
          (1) The efforts of the Government of Iran to acquire weapons 
        of mass destruction and the means to deliver them and its 
        support of acts of international terrorism endanger the 
        national security and foreign policy interests of the United 
        States and those countries with which the United States shares 
        common strategic and foreign policy objectives.
          (2) The objective of preventing the proliferation of weapons 
        of mass destruction and acts of international terrorism through 
        existing multilateral and bilateral initiatives requires 
        additional efforts to deny Iran the financial means to sustain 
        its nuclear, chemical, biological, and missile weapons 
        programs.
          (3) The Government of Iran uses its diplomatic facilities and 
        quasi-governmental institutions outside of Iran to promote acts 
        of international terrorism and assist its nuclear, chemical, 
        biological, and missile weapons programs.
          (4) The failure of the Government of Libya to comply with 
        Resolutions 731, 748, and 883 of the Security Council of the 
        United Nations, its support of international terrorism, and its 
        efforts to acquire weapons of mass destruction constitute a 
        threat to international peace and security that endangers the 
        national security and foreign policy interests of the United 
        States and those countries with which it shares common 
        strategic and foreign policy objectives.

SEC. 3. DECLARATION OF POLICY.

  (a) Policy With Respect to Iran.--The Congress declares that it is 
the policy of the United States to deny Iran the ability to support 
acts of international terrorism and to fund the development and 
acquisition of weapons of mass destruction and the means to deliver 
them by limiting the development of Iran's ability to explore for, 
extract, refine, or transport by pipeline petroleum resources of Iran.
  (b) Policy With Respect to Libya.--The Congress further declares that 
it is the policy of the United States to seek full compliance by Libya 
with its obligations under Resolutions 731, 748, and 883 of the 
Security Council of the United Nations, including ending all support 
for acts of international terrorism and efforts to develop or acquire 
weapons of mass destruction.

SEC. 4. MULTILATERAL REGIME.

  (a) Multilateral Negotiations.--In order to further the objectives of 
section 3, the Congress urges the President to commence immediately 
diplomatic efforts, both in appropriate international fora such as the 
United Nations, and bilaterally with allies of the United States, to 
establish a multilateral sanctions regime against Iran, including 
provisions limiting the development of petroleum resources, that will 
inhibit Iran's efforts to carry out activities described in section 2.
  (b) Reports to Congress.--The President shall report to the 
appropriate congressional committees, not later than 1 year after the 
date of the enactment of this Act, and periodically thereafter, on the 
extent that diplomatic efforts described in subsection (a) have been 
successful. Each report shall include--
          (1) the countries that have agreed to undertake measures to 
        further the objectives of section 3 with respect to Iran, and a 
        description of those measures; and
          (2) the countries that have not agreed to measures described 
        in paragraph (1), and, with respect to those countries, other 
        measures (in addition to that provided in subsection (d)) the 
        President recommends that the United States take to further the 
        objectives of section 3 with respect to Iran.
  (c) Waiver.--The President may waive the application of section 5(a) 
with respect to nationals of a country if--
          (1) that country has agreed to undertake substantial 
        measures, including economic sanctions, that will inhibit 
        Iran's efforts to carry out activities described in section 2 
        and information required by subsection (b)(1) has been included 
        in a report submitted under subsection (b); and
          (2) the President, at least 30 days before the waiver takes 
        effect, notifies the appropriate congressional committees of 
        his intention to exercise the waiver.
  (d) Enhanced Sanction.--
          (1) Sanction.--With respect to nationals of countries except 
        those with respect to which the President has exercised the 
        waiver authority of subsection (c), at any time after the first 
        report is required to be submitted under subsection (b), 
        section 5(a) shall be applied by substituting ``$20,000,000'' 
        for ``$40,000,000'' each place it appears, and by substituting 
        ``$5,000,000'' for ``$10,000,000''.
          (2) Report to congress.--The President shall report to the 
        appropriate congressional committees any country with respect 
        to which paragraph (1) applies.
  (e) Interim Report on Multilateral Sanctions; Monitoring.--The 
President, not later than 90 days after the date of the enactment of 
this Act, shall report to the appropriate congressional committees on--
          (1) whether the member states of the European Union, the 
        Republic of Korea, Australia, Israel, or Japan have legislative 
        or administrative standards providing for the imposition of 
        trade sanctions on persons or their affiliates doing business 
        or having investments in Iran or Libya;
          (2) the extent and duration of each instance of the 
        application of such sanctions; and
          (3) the disposition of any decision with respect to such 
        sanctions by the World Trade Organization or its predecessor 
        organization.

SEC. 5. IMPOSITION OF SANCTIONS.

  (a) Sanctions With Respect to Iran.--Except as provided in subsection 
(f), the President shall impose 2 or more of the sanctions described in 
paragraphs (1) through (6) of section 6 if the President determines 
that a person has, with actual knowledge, on or after the date of the 
enactment of this Act, made an investment of $40,000,000 or more (or 
any combination of investments of at least $10,000,000 each, which in 
the aggregate equals or exceeds $40,000,000 in any 12-month period), 
that directly and significantly contributed to the enhancement of 
Iran's ability to develop petroleum resources of Iran.
  (b) Sanctions With Respect to Libya.--
          (1) Trigger of Mandatory sanctions.--Except as provided in 
        subsection (f), the President shall impose 2 or more of the 
        sanctions described in paragraphs (1) through (6) of section 6 
        if the President determines that a person has, with actual 
        knowledge, on or after the date of the enactment of this Act, 
        exported, transferred, or otherwise provided to Libya any 
        goods, services, technology, or other items the provision of 
        which is prohibited under paragraph 4(b) or 5 of Resolution 748 
        of the Security Council of the United Nations, adopted March 
        31, 1992, or under paragraph 5 or 6 of Resolution 883 of the 
        Security Council of the United Nations, adopted November 11, 
        1993, if the provision of such items significantly and 
        materially--
                  (A) contributed to Libya's ability to acquire 
                chemical, biological, or nuclear weapons or 
                destabilizing numbers and types of advanced 
                conventional weapons or enhanced Libya's military or 
                paramilitary capabilities;
                  (B) contributed to Libya's ability to develop its 
                petroleum resources; or
                  (C) contributed to Libya's ability to maintain its 
                aviation capabilities.
          (2) Trigger of discretionary sanctions.--Except as provided 
        in subsection (f), the President may impose 1 or more of the 
        sanctions described in paragraphs (1) through (6) of section 6 
        if the President determines that a person has, with actual 
        knowledge, on or after the date of the enactment of this Act, 
        made an investment of $40,000,000 or more (or any combination 
        of investments of at least $10,000,000 each, which in the 
        aggregate equals or exceeds $40,000,000 in any 12-month 
        period), that directly and significantly contributed to the 
        enhancement of Libya's ability to develop its petroleum 
        resources.
  (c) Persons Against Which the Sanctions Are To Be Imposed.--The 
sanctions described in subsections (a) and (b) shall be imposed on--
          (1) any person the President determines has carried out the 
        activities described in subsection (a) or (b); and
          (2) any person the President determines--
                  (A) is a successor entity to the person referred to 
                in paragraph (1);
                  (B) is a parent or subsidiary of the person referred 
                to in paragraph (1) if that parent or subsidiary, with 
                actual knowledge, engaged in the activities referred to 
                in paragraph (1); or
                  (C) is an affiliate of the person referred to in 
                paragraph (1) if that affiliate, with actual knowledge, 
                engaged in the activities referred to in paragraph (1) 
                and if that affiliate is controlled in fact by the 
                person referred to in paragraph (1).
For purposes of this Act, any person or entity described in this 
subsection shall be referred to as a ``sanctioned person''.
  (d) Publication in Federal Register.--The President shall cause to be 
published in the Federal Register a current list of persons and 
entities on whom sanctions have been imposed under this Act. The 
removal of persons or entities from, and the addition of persons and 
entities to, the list, shall also be so published.
  (e) Publication of Projects.--The President shall cause to be 
published in the Federal Register a list of all significant projects 
which have been publicly tendered in the oil and gas sector in Iran.
  (f) Exceptions.--The President shall not be required to apply or 
maintain the sanctions under subsection (a) or (b)--
          (1) in the case of procurement of defense articles or defense 
        services--
                  (A) under existing contracts or subcontracts, 
                including the exercise of options for production 
                quantities to satisfy requirements essential to the 
                national security of the United States;
                  (B) if the President determines in writing that the 
                person to which the sanctions would otherwise be 
                applied is a sole source supplier of the defense 
                articles or services, that the defense articles or 
                services are essential, and that alternative sources 
                are not readily or reasonably available; or
                  (C) if the President determines in writing that such 
                articles or services are essential to the national 
                security under defense coproduction agreements;
          (2) in the case of procurement, to eligible products, as 
        defined in section 308(4) of the Trade Agreements Act of 1979 
        (19 U.S.C. 2518(4)), of any foreign country or instrumentality 
        designated under section 301(b)(1) of that Act (19 U.S.C. 
        2511(b)(1));
          (3) to products, technology, or services provided under 
        contracts entered into before the date on which the President 
        publishes in the Federal Register the name of the person on 
        whom the sanctions are to be imposed;
          (4) to--
                  (A) spare parts which are essential to United States 
                products or production;
                  (B) component parts, but not finished products, 
                essential to United States products or production; or
                  (C) routine servicing and maintenance of products, to 
                the extent that alternative sources are not readily or 
                reasonably available;
          (6) to information and technology essential to United States 
        products or production; or
          (7) to medicines, medical supplies, or other humanitarian 
        items.

SEC. 6. DESCRIPTION OF SANCTIONS.

  The sanctions to be imposed on a sanctioned person under section 5 
are as follows:
          (1) Export-import bank assistance for exports to sanctioned 
        persons.--The President may direct the Export-Import Bank of 
        the United States not to give approval to the issuance of any 
        guarantee, insurance, extension of credit, or participation in 
        the extension of credit in connection with the export of any 
        goods or services to any sanctioned person.
          (2) Export sanction.--The President may order the United 
        States Government not to issue any specific license and not to 
        grant any other specific permission or authority to export any 
        goods or technology to a sanctioned person under--
                  (i) the Export Administration Act of 1979;
                  (ii) the Arms Export Control Act;
                  (iii) the Atomic Energy Act of 1954; or
                  (iv) any other statute that requires the prior review 
                and approval of the United States Government as a 
                condition for the export or re-export of goods or 
                services.
          (3) Loans from united states financial institutions.--The 
        United States Government may prohibit any United States 
        financial institution from making loans or providing credits to 
        any sanctioned person totaling more than $10,000,000 in any 12-
        month period unless such person is engaged in activities to 
        relieve human suffering and the loans or credits are provided 
        for such activities.
          (4) Prohibitions on financial institutions.--The following 
        prohibitions may be imposed against a sanctioned person that is 
        a financial institution:
                  (A) Prohibition on designation as primary dealer.--
                Neither the Board of Governors of the Federal Reserve 
                System nor the Federal Reserve Bank of New York may 
                designate, or permit the continuation of any prior 
                designation of, such financial institution as a primary 
                dealer in United States Government debt instruments.
                  (B) Prohibition on service as a repository of 
                government funds.--Such financial institution may not 
                serve as agent of the United States Government or serve 
                as repository for United States Government funds.
        The imposition of either sanction under subparagraph (A) or (B) 
        shall be treated as 1 sanction for purposes of section 5, and 
        the imposition of both such sanctions shall be treated as 2 
        sanctions for purposes of section 5.
          (5) Procurement sanction.--The United States Government may 
        not procure, or enter into any contract for the procurement of, 
        any goods or services from a sanctioned person.
          (6) Additional sanctions.--The President may impose 
        sanctions, as appropriate, to restrict imports with respect to 
        a sanctioned person, in accordance with the International 
        Emergency Economic Powers Act (50 U.S.C. 1701 and following).

SEC. 7. ADVISORY OPINIONS.

  The Secretary of State may, upon the request of any person, issue an 
advisory opinion to that person as to whether a proposed activity by 
that person would subject that person to sanctions under this Act. Any 
person who relies in good faith on such an advisory opinion which 
states that the proposed activity would not subject a person to such 
sanctions, and any person who thereafter engages in such activity, will 
not be made subject to such sanctions on account of such activity.

SEC. 8. TERMINATION OF SANCTIONS.

  (a) Iran.--The requirement under section 5(a) to impose sanctions 
shall no longer have force or effect with respect to Iran if the 
President determines and certifies to the appropriate congressional 
committees that Iran--
          (1) has ceased its efforts to design, develop, manufacture, 
        or acquire--
                  (A) a nuclear explosive device or related materials 
                and technology;
                  (B) chemical and biological weapons; and
                  (C) ballistic missiles and ballistic missile launch 
                technology; and
          (2) has been removed from the list of countries the 
        governments of which have been determined, for purposes of 
        section 6(j) of the Export Administration Act of 1979, to have 
        repeatedly provided support for acts of international 
        terrorism.
  (b) Libya.--The requirement under section 5(b) to impose sanctions 
shall no longer have force or effect with respect to Libya if the 
President determines and certifies to the appropriate congressional 
committees that Libya has fulfilled the requirements of United Nations 
Security Council Resolution 731, adopted January 21, 1992, United 
Nations Security Council Resolution 748, adopted March 31, 1992, and 
United Nations Security Council Resolution 883, adopted November 11, 
1993.

SEC. 9. DURATION OF SANCTIONS; PRESIDENTIAL WAIVER.

  (a) Delay of Sanctions.--
          (1) Consultations.--If the President makes a determination 
        described in section 5(a) or 5(b) with respect to a foreign 
        person, the Congress urges the President to initiate 
        consultations immediately with the government with primary 
        jurisdiction over that foreign person with respect to the 
        imposition of sanctions under this Act.
          (2) Actions by government of jurisdiction.--In order to 
        pursue consultations under paragraph (1) with the government 
        concerned, the President may delay imposition of sanctions 
        under this Act for up to 90 days. Following such consultations, 
        the President shall immediately impose sanctions unless the 
        President determines and certifies to the Congress that the 
        government has taken specific and effective actions, including, 
        as appropriate, the imposition of appropriate penalties, to 
        terminate the involvement of the foreign person in the 
        activities that resulted in the determination by the President 
        under section 5(a) or 5(b) concerning such person.
          (3) Additional delay in imposition of sanctions.--The 
        President may delay the imposition of sanctions for up to an 
        additional 90 days if the President determines and certifies to 
        the Congress that the government with primary jurisdiction over 
        the person concerned is in the process of taking the actions 
        described in paragraph (2).
          (4) Report to congress.--Not later than 90 days after making 
        a determination under section 5(a) or 5(b), the President shall 
        submit to the appropriate congressional committees a report on 
        the status of consultations with the appropriate foreign 
        government under this subsection, and the basis for any 
        determination under paragraph (3).
  (b) Duration of Sanctions.--A sanction imposed under section 5 shall 
remain in effect--
          (1) for a period of not less than 2 years from the date on 
        which it is imposed; or
          (2) until such time as the President determines and certifies 
        to the Congress that the person whose activities were the basis 
        for imposing the sanction is no longer engaging in such 
        activities and that the President has received reliable 
        assurances that such person will not knowingly engage in such 
        activities in the future, except that such sanction shall 
        remain in effect for a period of at least 1 year.
  (c) Presidential Waiver.--
          (1) Authority.--The President may waive the requirement in 
        section 5 to impose a sanction or sanctions on a person 
        described in section 5(c), and may waive the continued 
        imposition of a sanction or sanctions under subsection (b) of 
        this section, 30 days or more after the President determines 
        and so reports to the appropriate congressional committees that 
        it is important to the national interest of the United States 
        to exercise such waiver authority.
          (2) Contents of report.--Any report under paragraph (1) shall 
        provide a specific and detailed rationale for the determination 
        under paragraph (1), including--
                  (A) a description of the conduct that resulted in the 
                determination under section 5(a) or (b), as the case 
                may be;
                  (B) in the case of a foreign person, an explanation 
                of the efforts to secure the cooperation of the 
                government with primary jurisdiction over the 
                sanctioned person to terminate or, as appropriate, 
                penalize the activities that resulted in the 
                determination under section 5(a) or (b), as the case 
                may be;
                  (C) an estimate as to the significance--
                          (i) of the provision of the items described 
                        in section 5(a) to Iran's ability to develop 
                        its petroleum resources, or
                          (ii) of the provision of the items described 
                        in section 5(b)(1) to the abilities of Libya 
                        described in subparagraph (A), (B), or (C) of 
                        section 5(b)(1), or of the investment described 
                        in section 5(b)(2) on Libya's ability to 
                        develop its petroleum resources,
                as the case may be; and
                  (D) a statement as to the response of the United 
                States in the event that the person concerned engages 
                in other activities that would be subject to section 
                5(a) or (b).
          (3) Effect of report on waiver.--If the President makes a 
        report under paragraph (1) with respect to a waiver of 
        sanctions on a person described in section 5(c), sanctions need 
        not be imposed under section 5(a) or (b) on that person during 
        the 30-day period referred to in paragraph (1).

SEC. 10. REPORTS REQUIRED.

  (a) Report on Certain International Initiatives.--Not later than 6 
months after the date of the enactment of this Act, and every 6 months 
thereafter, the President shall transmit a report to the appropriate 
congressional committees describing--
          (1) the efforts of the President to mount a multilateral 
        campaign to persuade all countries to pressure Iran to cease 
        its nuclear, chemical, biological, and missile weapons programs 
        and its support of acts of international terrorism;
          (2) the efforts of the President to persuade other 
        governments to ask Iran to reduce the presence of Iranian 
        diplomats and representatives of other government and military 
        or quasi-governmental institutions of Iran and to withdraw any 
        such diplomats or representatives who participated in the 
        takeover of the United States embassy in Tehran on November 4, 
        1979, or the subsequent holding of United States hostages for 
        444 days;
          (3) the extent to which the International Atomic Energy 
        Agency has established regular inspections of all nuclear 
        facilities in Iran, including those presently under 
        construction; and
          (4) Iran's use of Iranian diplomats and representatives of 
        other government and military or quasi-governmental 
        institutions of Iran to promote acts of international terrorism 
        or to develop or sustain Iran's nuclear, chemical, biological, 
        and missile weapons programs.
  (b) Other Reports.--The President shall ensure the continued 
transmittal to the Congress of reports describing--
          (1) the nuclear and other military capabilities of Iran, as 
        required by section 601(a) of the Nuclear Non-Proliferation Act 
        of 1978 and section 1607 of the National Defense Authorization 
        Act for Fiscal Year 1993; and
          (2) the support provided by Iran for acts of international 
        terrorism, as part of the Department of State's annual report 
        on international terrorism.

SEC. 11. DETERMINATIONS NOT REVIEWABLE.

  A determination to impose sanctions under this Act shall not be 
reviewable in any court.

SEC. 12. EXCLUSION OF CERTAIN ACTIVITIES.

  Nothing in this Act shall apply to any activities subject to the 
reporting requirements of title V of the National Security Act of 1947.

SEC. 13. EFFECTIVE DATE; SUNSET.

  (a) Effective Date.--This Act shall take effect on the date of the 
enactment of this Act.
  (b) Sunset.--This Act shall cease to be effective on the date that is 
5 years after the date of the enactment of this Act.

SEC. 14. DEFINITIONS.

  As used in this Act:
          (1) Act of international terrorism.--The term ``act of 
        international terrorism'' means an act--
                  (A) which is violent or dangerous to human life and 
                that is a violation of the criminal laws of the United 
                States or of any State or that would be a criminal 
                violation if committed within the jurisdiction of the 
                United States or any State; and
                  (B) which appears to be intended--
                          (i) to intimidate or coerce a civilian 
                        population;
                          (ii) to influence the policy of a government 
                        by intimidation or coercion; or
                          (iii) to affect the conduct of a government 
                        by assassination or kidnapping.
          (2) Appropriate congressional committees.--The term 
        ``appropriate congressional committees'' means the Committee on 
        Finance, the Committee on Banking, Housing, and Urban Affairs, 
        and the Committee on Foreign Relations of the Senate and the 
        Committee on Ways and Means, the Committee on Banking and 
        Financial Services, and the Committee on International 
        Relations of the House of Representatives.
          (3) Component part.--The term ``component part'' has the 
        meaning given that term in section 11A(e)(1) of the Export 
        Administration Act of 1979 (50 U.S.C. App. 2410a(e)(1)).
          (4) Develop and development.--To ``develop'', or the 
        ``development'' of, petroleum resources means the exploration 
        for, or the extraction, refining, or transportation by pipeline 
        of, petroleum resources.
          (5) Financial institution.--The term ``financial 
        institution'' includes--
                  (A) a depository institution (as defined in section 
                3(c)(1) of the Federal Deposit Insurance Act), 
                including a branch or agency of a foreign bank (as 
                defined in section 1(b)(7) of the International Banking 
                Act of 1978);
                  (B) a credit union;
                  (C) a securities firm, including a broker or dealer;
                  (D) an insurance company, including an agency or 
                underwriter; and
                  (E) any other company that provides financial 
                services.
          (6) Finished product.--The term ``finished product'' has the 
        meaning given that term in section 11A(e)(2) of the Export 
        Administration Act of 1979 (50 U.S.C. App. 2410a(e)(2)).
          (7) Foreign person.--The term ``foreign person'' means--
                  (A) an individual who is not a United States person 
                or an alien lawfully admitted for permanent residence 
                into the United States; or
                  (B) a corporation, partnership, or other 
                nongovernmental entity which is not a United States 
                person.
          (8) Goods and technology.--The terms ``goods'' and 
        ``technology'' have the meanings given those terms in section 
        16 of the Export Administration Act of 1979 (50 U.S.C. app. 
        2415).
          (9) Investment.--The term ``investment'' means any of the 
        following activities if such activity is undertaken pursuant to 
        an agreement, or pursuant to the exercise of rights under such 
        an agreement, that is entered into with the Government of Iran 
        or a nongovenmental entity in Iran, or with the Government of 
        Libya or a nongovernmental entity in Libya, on or after the 
        date of the enactment of this Act:
                  (A) The entry into a contract that includes 
                responsibility for the development of petroleum 
                resources located in Iran or Libya (as the case may 
                be), or the entry into a contract providing for the 
                general supervision and guarantee of another person's 
                performance of such a contract.
                  (B) The purchase of a share of ownership, including 
                an equity interest, in that development.
                  (C) The entry into a contract providing for the 
                participation in royalties, earnings, or profits in 
                that development, without regard to the form of the 
                participation.
        The term ``investment'' does not include the entry into, 
        performance, or financing of a contract to sell or purchase 
        goods, services, or technology.
          (10) Iran.--The term ``Iran'' includes any agency or 
        instrumentality of Iran.
          (11) Iranian diplomats and representatives of other 
        government and military or quasi-governmental institutions of 
        iran.--The term ``Iranian diplomats and representatives of 
        other government and military or quasi-governmental 
        institutions of Iran'' includes employees, representatives, or 
        affiliates of Iran's--
                  (A) Foreign Ministry;
                  (B) Ministry of Intelligence and Security;
                  (C) Revolutionary Guard Corps;
                  (D) Crusade for Reconstruction;
                  (E) Qods (Jerusalem) Forces;
                  (F) Interior Ministry;
                  (G) Foundation for the Oppressed and Disabled;
                  (H) Prophet's Foundation;
                  (I) June 5th Foundation;
                  (J) Martyr's Foundation;
                  (K) Islamic Propagation Organization; and
                  (L) Ministry of Islamic Guidance.
          (12) Libya.--The term ``Libya'' includes any agency or 
        instrumentality of Libya.
          (13) Nuclear explosive device.--The term ``nuclear explosive 
        device'' means any device, whether assembled or disassembled, 
        that is designed to produce an instantaneous release of an 
        amount of nuclear energy from special nuclear material (as 
        defined in section 11aa. of the Atomic Energy Act of 1954) that 
        is greater than the amount of energy that would be released 
        from the detonation of one pound of trinitrotoluene (TNT).
          (14) Person.--The term ``person'' means--
                  (A) a natural person;
                  (B) a corporation, business association, partnership, 
                society, trust, any other nongovernmental entity, 
                organization, or group, and any governmental entity 
                operating as a business enterprise; and
                  (C) any successor to any entity described in 
                subparagraph (B).
          (15) Petroleum resources.--The term ``petroleum resources'' 
        includes petroleum and natural gas resources.
          (16) United states or state.--The term ``United States'' or 
        ``State'' means the several States, the District of Columbia, 
        the Commonwealth of Puerto Rico, the Commonwealth of the 
        Northern Mariana Islands, American Samoa, Guam, the United 
        States Virgin Islands, and any other territory or possession of 
        the United States.
          (17) United states person.--The term ``United States person'' 
        means--
                  (A) a natural person who is a citizen of the United 
                States or who owes permanent allegiance to the United 
                States; and
                  (B) a corporation or other legal entity which is 
                organized under the laws of the United States, any 
                State or territory thereof, or the District of 
                Columbia, if natural persons described in subparagraph 
                (A) own, directly or indirectly, more than 50 percent 
                of the outstanding capital stock or other beneficial 
                interest in such legal entity.

  Amend the title so as to read:

      A bill to impose sanctions on persons making certain 
investments directly and significantly contributing to the 
enhancement of the ability of Iran or Libya to develop its 
petroleum resources, and on persons exporting certain items 
that enhance Libya's weapons or aviation capabilities or 
enhance Libya's ability to develop its petroleum resources, and 
for other purposes.

                            I. INTRODUCTION

                         A. PURPOSE AND SUMMARY

    H.R. 3107, The ``Iran and Libya Sanctions Act of 1996'' was 
ordered reported by the Committee on International Relations on 
March 21, 1996. The bill, as introduced, was sequentially 
referred to the Committee on Ways and Means. The bill, as 
repoprted by the Committee on Ways and Means as amended by the 
Committee on Ways and Means is designed: (1) to help deter Iran 
and Libya from supporting international terrorism or acquiring 
weapons of mass destruction and; (2) to urge the President to 
pursue negotiations to establish a multilateral sanctions 
regime with respect to Iran.
    As approved by the Committee on Ways and Means, the bill 
mandates sanctions on persons making investments that would 
enhance the ability of Iran to explore for, extract, refine, or 
transport by pipeline petroleum resources. H.R. 3107 as 
reported, would also establish a mandatory ``trade trigger'' 
for sanctions on foreign persons who violate United Nations 
Security Council Resolutions 748 and 883 by selling weapons, 
aviation equipment and oil equipment to Libya.
    The measure would require the President to choose from a 
list of specified sanctions including: (1) a denial of Eximbank 
assistance; (2) denial of export licenses; (3) a prohibition on 
any U.S. financial institutions from making any loan to a 
sanctioned person over $10 million per year; (4) a prohibition 
on a sanctioned financial institution from serving as a primary 
dealer of U.S. Government bonds, or as a repository of U.S. 
Government funds; (5) a ban on any U.S. Government procurement 
of any goods or services from a sanctioned person, and; (6) 
import sanctions taken by the President in accordance with the 
International Emergency Economic Powers Act (IEEPA).

                 B. BACKGROUND AND NEED FOR LEGISLATION

    Pledged to undermine the Middle East Peace Process, the 
Government of Iran continues to sponsor international 
terrorism, develop weapons of mass destruction and otherwise 
engage in behavior adverse to the national interest of the U.S. 
and to world stability. The United States and its allies are 
under increasing pressure to address these activities through 
economic sanctions and other means.
    Likewise, the failure of the Government of Libya to comply 
with Resolutions 731, 748 and 883 of the United Nations 
Security Council, its support of international terrorism, and 
its efforts to acquire weapons of mass destruction constitute a 
threat to international peace and security that endangers the 
national security and foreign policy interests of the United 
States and other nations. The Committee is extremely concerned 
about Libya's refusal to relinquish the two individuals accused 
of blowing up Pan Am flight 103 over Scotland to face criminal 
indictment.
    It is the Committee's primary objective to urge the 
President to seek the cooperation of our allies in restricting 
the ability of Iran and Libya to gain resources to support 
these activities through the development of their petroleum 
sectors.

                         C. LEGISLATIVE HISTORY

    H.R. 3107, The ``Iran Oil Sanctions Act of 1996,'' was 
ordered reported by the Committee on International Relations on 
March 21, 1996. The bill, as introduced, was sequentially 
referred to the Committee on Ways and Means.
    On May 22, 1996 the Subcommittee on Trade held a hearing on 
Iran and Libya sanctions. Testimony was received from the 
Administration on its policy goals with respect to ending 
support for terrorist activities by these countries, and on the 
potential effectiveness of the proposed legislation in 
deterring these activities.
    On June 13, 1996, the full Committee met to consider H.R. 
3107. At that time, the Committee adopted an amendment in the 
nature of a substitute Chairman Crane. The bill, as amended, 
was ordered favorably reported by voice vote.

                      II. EXPLANATION OF THE BILL

                        A. SHORT TITLE (SEC. 1)

    The title of the bill is the ``Iran and Libya Sanctions Act 
of 1996''.

                   B. CONGRESSIONAL FINDINGS (SEC. 2)

Explanation of provision

    This section states that the efforts of the Government of 
Iran to acquire weapons of mass destruction and the means to 
deliver them, as well as its support for international 
terrorism, endanger the interest of the United States and those 
countries sharing common strategic and foreign policy 
objectives.
    Additional bilateral and multilateral efforts are needed to 
deny Iran the financial means to develop its nuclear, chemical, 
biological and missile weapons programs. While multilateral 
efforts to reduce the flow of new credits, sensitive dual use 
technology and new weapons systems going to Iran are now under 
way, much more remains to be done by the United States to 
implement its containment policy and to ensure that Iran does 
not attract significant new investment from any foreign 
company.
    This section also states that Iran uses its diplomatic 
facilities and quasi-governmental institutions outside that 
country to promote acts of international terrorism and assist 
its nuclear, chemical, biological and missile weapons programs.
    In the case of the Government of Libya, its failure to 
comply with United Nations Security Council Resolutions 731, 
748 and 883, its support of international terrorism, and its 
efforts to acquire weapons of mass destruction constitute a 
threat to international peace and security that endangers the 
national security and foreign policy interests of the United 
States and those countries with which the U.S. shares common 
strategic and foreign policy objectives.

Reason for change

    The provision states the findings of Congress with respect 
to Iran and Libya.

                   C. DECLARATION OF POLICY (SEC. 3)

Explanation of provisions

    This section states that it is U.S. policy to deny Iran the 
means to threaten U.S. interests and those of our allies by 
limiting its ability to extract, refine, process, store, or 
transport by pipeline the petroleum resources of Iran.
    With respect to Libya, the bill declares that it is the 
policy of the U.S. to seek full compliance by Libya with its 
obligations under Resolutions 731, 748, and 883 of the Security 
Council of the United Nations, including ending all support for 
acts of international terrorism and efforts to develop or 
acquire weapons of mass destruction.

Reason for change

    The provision states U.S. policy with respect to Iran and 
Libya.

                    D. MULTILATERAL REGIME (SEC. 4)

Explanation of provision

    In Section 4, as amended by the Committee, Congress urges 
the President to commence immediately diplomatic efforts, both 
in appropriate international fora such as the United Nations, 
and bilaterally with allies of the United States, to establish 
a multilateral sanctions regime against Iran that will inhibit 
Iran's efforts to carry out activities described in section 2. 
The Committee intends that these negotiations should be aimed 
at achieving a multilateral regime, including provisions 
limiting that will limit the development of petroleum resources 
in Iran.
    Section 4(b) requires the President to report to the 
appropriate congressional committees, not later than one year 
after the date of the enactment of this Act, and periodically 
thereafter, on the extent to which that diplomatic efforts to 
establish a multilateral sanctions regime have been successful. 
Each report shall include: (1) the countries that have agreed 
to undertake measures to further the objectives of Section (3) 
with respect to Iran, along with a description of those 
measures and; (2) with respect to countries that have not 
agreed to take measures described in paragraph (1), other 
measures the President recommends that the United States take 
to further the objectives of Section 3 with respect to Iran.
    Under section 4(c) the President may waive the application 
of sanctions with respect to nationals of a country if: (1) 
that country has agreed to undertake substantial measures, 
including economic sanctions, that will inhibit Iran's efforts 
to carry out activities described in section 2; and (2) 
information about the countries that have agreed to undertake 
measures to further the objectives of the bill has been 
submitted in the report described above on negotiations to 
achieve a multilateral sanctions regime. The President must 
notify the appropriate congressional committees of his 
intention to take a waiver 30 days before the waiver takes 
effect.
    Section 4(d) describes an enhanced sanction which will be 
applied to nationals of countries except those with respect to 
which the President has exercised the waiver authority. The 
enhanced sanction is a reduction in the trigger level for 
investment in Iran from $40,000,000 to $20,000,000.
    Section 4(e) requires the President to submit a report on 
whether or not member states of the European Union, the 
Republic of Korea, Australia, Israel, or Japan have legislative 
or administrative standards providing for the imposition of 
trade sanctions on persons or their affiliates doing business 
or having investments in Iran or Libya. The report shall 
included the extent and duration of the application of such 
sanctions, including whether sanctions have been waived. This 
subsection further provides that the report shall include a 
discussion of whether sanctions imposed by these countries have 
been the subject of any decision in the World Trade 
Organization or in its predecessor organization, the General 
Agreement on Tariffs and Trade. This report is due 90 days 
after enactment of this Act.

Reason for change

    It is the strong view of the Committee that a multilateral 
approach to containing threats from Iran will prove to be the 
most effective in the long run. Section 4 calls upon the 
President to seek the adoption by other states of measures that 
will impede Iran's ability to develop weapons of mass 
destruction or to sponsor acts of international terrorism.
    The Committee acknowledges that there may be approaches or 
actions by other countries to inhibit Iran's activities that 
differ from the current U.S. embargo on Iran, and that measures 
can be taken individually or collectively, and need not be 
modeled precisely on U.S. measures. However, the test must be 
whether measures undertaken by U.S. allies constitute 
substantial measures to inhibit Iran efforts to threaten 
international peace and security. Where the President 
determines that a country has agreed to undertake such 
measures, section 4(c) permits the waiver of sanctions with 
respect to nationals of that country.

                  E. IMPOSITION OF SANCTIONS (SEC. 5)

Explanation of provision

    Section 5(a)--Trigger of Mandatory Sanctions with Respect 
to Iran. Subsection (a) requires the President to impose two or 
more of the sanctions described in Section 6 if the President 
determines that the person has, with actual knowledge, on or 
after the date of enactment of this Act, made an investment of 
$40,000,000 or more (or any combination of $10,000,000 
investments each, which exceeds $40,000,000 in any 12 month 
period), that significantly and materially contributed to the 
development of petroleum resources in Iran.
    Section 5(b)(1)--Trigger of Mandatory Sanctions with 
Respect to Libya. Subsection (b)(1) requires the President to 
impose 2 or more of the sanctions described in section 6 if the 
President determines that a person has, with actual knowledge, 
on or after the date of enactment of this Act, exported, 
transferred, or otherwise provided to Libya any goods, 
services, technology or other items which are prohibited under 
paragraph 4(b) or 5 of Resolution 748 of the United Nations 
Security Council, adopted March 31, 1992, or under paragraph 5 
or 6 of Resolution 883 of the United Nations Security Council, 
adopted November 11, 1993, if the provision of such items 
significantly and materially: (a) contributed to Libya's 
ability to acquire chemical, biological, nuclear, or 
destabilizing numbers and types of advanced conventional 
weapons or enhanced its military or paramilitary capabilities, 
(b) contributed to Libya's ability to exploit its petroleum 
resources, or (c) contributed to Libya's ability to maintain 
its aviation capabilities.
    Section 5(b)(2)--Trigger of Discretionary Sanctions with 
Respect to Libya--This section authorizes the President to 
impose one or more of the sanctions described in Section 6 if 
the President determines that a person has, with actual 
knowledge, on or after the date of enactment of this Act, made 
an investment of $40,000,000 or more, or any combination of 
investments of $10,000,000 each, which in the aggregate equals 
or exceeds $40,000,000 in any 12-month period), that directly 
and significantly contributed to the enhancement of Libya's 
ability to develop its petroleum resources.
    Section 5(c)(2)--Persons Against which the Sanctions are to 
be Imposed--The sanctions described in section 5(a) and 5(b) 
above shall be imposed on any person the President determines 
has carried out the activities described in 5(a) and 5(b) and 
on: (1) any successor entity to that person; (2) any person 
that is a parent or subsidiary of that person if that parent or 
subsidiary, with actual knowledge, engaged in the activities 
which were the basis of that determination or (3) is an 
affiliate of the person the President determines carried out 
the activities in section 5(a) and 5(b) if that affiliate, with 
actual knowledge, engaged in the sanctionable activities, and 
if that affiliate is controlled in fact by the person the 
President determines carried out the activities described in 
5(a) and 5(b).
    Section 5(d)--This section requires the President to 
publish a current list of persons and entities on whom 
sanctions have been imposed under this Act. The removal of 
persons or entities from and the addition of persons and 
entities to the list shall also be published.
    Section 5(e) directs the President to publish a list of all 
significant projects which have been publicly tendered in the 
oil and gas section in Iran.
    Section 5(f) permits the exceptions to application of 
sanctions. The President is not required to impose sanctions in 
the case of procurement of defense articles and services 
meeting certain conditions, or to goods and services under 
existing contracts, or if the President determines the supplier 
to be a sole source supplier of defense products or parts. 
Sanctions also do not apply to humanitarian items or to 
component or spare parts essential to United States production.
    Section 5(f)(2) provides an exception to application of the 
government procurement sanction to ensure that it is applied in 
a manner consistent with U.S. obligations under the World Trade 
Organization. Exceptions to the application of the WTO 
Agreement, for national security reason for example, must be 
done in the context of the Agreement on Government Procurement.

Reason for change

    The Committee believes that investment in the petroleum 
sector in Iran and Libya is generating revenues which 
facilitate the ability of the Government of Iran and the 
Government of Libya to carry out unlawful and immensely 
threatening behavior. H.R. 3107 as reported from the Committee 
on International Relations would have imposed sanctions on 
companies that invest in Iran or Libya's oil and gas sector or 
that trade with these countries in oil equipment. The 
Committee's view is that sanctions legislation should treat the 
cases of Iran and Libya differently, due to their different 
economic histories and distinct geopolitical circumstances.
    In the case of Iran, the Committee believes that it will be 
more effective to impose sanctions on companies that invest in 
Iran's oil and gas resources. This includes contracts for the 
development of petroleum resources, contracts for the 
supervision and guarantee of such development projects, and the 
acquisition of an ownership share or participation in the 
profits of such projects. Without foreign investment, 
production in Iran's oil and gas sector will fall, which will 
choke off revenue to the government of Iran and thereby deny it 
resources it employs to threaten the national security 
interests of the United States. These provisions do not deal 
with financing or trade which would be far less effective, 
create substantial difficulties in monitoring and cause 
unnecessary adverse economic effects on U.S. businesses and 
those of our allies. Similarly these provisions would not, 
under section 14(9)(b), reach purchases or equity interests in 
a non-Iranian company subject to this section unless the 
purchasing party is covered by Section 5(c)(2)(B) of the bill 
(which deals with parent-subsidiary relationships
    However, the Committee did not believe it was wise to 
include a requirement in the bill that the President sanction 
trade with Iran (the so-called ``trade trigger'') because the 
cost to U.S. interests of imposing such a broadly based 
secondary boycott would be too high.
    For example, monitoring international trade with Iran, 
especially in common goods like drill pipe and drill bits, 
would be a difficult if not an unworkable task. The number of 
trade transactions will be significantly higher than the number 
of investment contracts and the flow of components impossible 
to trace. The incidence of sanctions required by the trade 
trigger would be greater. The Committee believes it would be so 
high as to cause serious damage to our relations with trusted 
allies. By contrast an investment trigger is more workable for 
the President and more potent when applied. Equipped with an 
investment sanction the President is in a better position to 
convince countries trading with Iran to join the U.S. in 
denying Iran the opportunity to earn hard currency from its 
petroleum resources.
    Libya represents a different case by virtue of 
multilaterally agreed trade sanctions adopted by the United 
Nations Security Resolutions, which prohibit trade in weapons, 
aviation equipment, and oil equipment significant to the 
refining sector. For Libya, the bill establishes a mandatory 
sanction framework for violations of the internationally agreed 
trade regime. By contrast a discretionary ``investment 
trigger,'' for Libya gives the President adequate flexibility 
to implement the law in a judicious manner so that U.S. 
interests, including relations with respected allies, are not 
unduly harmed.
    With respect to the list required by section 5(e), the fact 
that a project does not appear on the list does not indicate 
that the project is immune from or, at any less vulnerable to, 
sanction under this bill.
    Section 5(f) of the bill permits certain exceptions to the 
imposition of sanctions including the exception of spare and 
component parts essential to United States products or 
production, and an exception related to applying the government 
procurement sanction in a manner that is consistent with 
international obligations.
    In order to ensure that sanctions are selected and 
implemented in a way consistent with the legislation and in a 
fashion that would minimize harm to the United States economy, 
the Committee believes it would be worthwhile for the 
Administration to create an opportunity for public comment both 
in the selection of sanctions and on whether any exceptions are 
applicable. In this way, the potentially adverse effects of 
sanctions on the United States economy can be minimized and 
sufficient information can be developed to determine whether 
any exception applies.
    Section 5(f)(4) provides that import restrictions or other 
sanctions are not required on spare parts, components or other 
goods and services that are essential to U.S. products or 
production or as to which, in the case of servicing and 
maintenance, alternative sources are not readily and reasonably 
available.
    It is the Committee's intention that the Administration 
have broad latitude in making determinations as to which 
sanctions to impose under this section depending on the 
circumstances of each investment in Iran or Libya. The $40 
million investment threshold is intended as a cap on each 
person's investment in any project or projects increasing the 
ability of Iran or Libya to develop its petroleum resources. 
The Committee does not intend that the sanctions provided in 
this section would extend to portfolio investments made by any 
other person in a sanctioned person.

                  f. description of sanctions (sec. 6)

Explanation of provision

    This section lists the sanctions to be imposed on a person 
sanctioned under section 5; as follows.
          (1) Directive to deny approval of Eximbank assistance 
        for exports to a sanctioned person;
          (2) Denial of export licenses or any other permission 
        or authority to export any goods or technology to a 
        sanctioned person;
          (3) Prohibition of loans or credits by U.S. financial 
        institutions exceeding $10,000 in the year to a 
        sanctioned person unless such person is engaged in 
        activities to relieve human suffering and the loans and 
        credits are provided for such purpose;
          (4) The following prohibitions may be imposed against 
        a sanctioned person that is a financial institution: 
        (a) prohibition against being designated a primary 
        dealer of U.S. Government debt instruments and/or; (b) 
        prohibition on serving as an agent of the United States 
        Government or as a repository of U.S. government funds. 
        Imposition of either of these sanctions shall be 
        treated as one sanction; imposition of both shall be 
        treated as two sanctions.
          (5) The United States Government may not procure any 
        good or services from a sanctioned person, subject to 
        an exception of international trade agreement 
        obligations provided in section 5(f)(2);
          (6) The President may impose sanctions, as 
        appropriate, to restrict some or all imports with 
        respect to a sanctioned person, in accordance with the 
        International Emergency Economic Powers Act.

Reason for change

    The Committee made several changes to this section in the 
original bill which are designed to give the President more 
discretion in applying trade sanctions against imports. First, 
the import sanction is not coupled in the same section with the 
export sanctions in order to give the President more options to 
choose an effective response. The language of the Committee 
bill also allows the President to choose to ban imports of any 
or all products by sanctioned persons. This reduces the chance 
that the import sanction will be used in a way that would 
engender trade retaliation against U.S. exports.
    Finally, the import sanction language in section 6 is 
authority that can only be invoked pursuant to procedures 
established under existing law, specifically the International 
Emergency Economic Powers Act. For example, a national economic 
emergency declared by the President would have to be in 
existence before import sanctions could be imposed.

                     g. advisory opinions (sec. 7)

Explanation of provision

    Section 7 provides an opportunity for any person to request 
the Secretary of State to issue an advisory opinion as to 
whether a proposed activity by that person would subject that 
person to sanctions under the Act. Any person who relies in 
good faith on an advisory opinion stating that the activity 
would not lead to the imposition of sanctions would not be made 
subject to sanctions for that specific activity.

Reason for change

    This provision provides an opportunity for persons to 
investigate ahead of time whether proposed behavior is of a 
sanctionable nature.

                  H. TERMINATION OF SANCTIONS (SEC. 8)

Explanation of provision

    Section 8(a)--Termination of Sanctions with Respect to 
Iran--In the case of Iran the requirement to impose sanctions 
will be terminated if the President determines and certifies to 
congressional committees that: (1) this country has ceased its 
efforts to design, develop, manufacture, or acquire a nuclear 
explosive device or related materials and technology; chemical 
and biological weapons and ballistic missiles and ballistic 
missile launch technology; and (2) has been removed from the 
list of state sponsors of international terrorism established 
pursuant to section 6(j) of the Export Administration Act of 
1979.
    Section 8(b)--Termination of Sanction with Respect to 
Libya--In the case of Libya, the requirement to impose 
sanctions shall no longer apply if the President determines and 
certifies that Libya has fulfilled the requirements of United 
Nations Security Council Resolution 731 adopted on January 21, 
1992, United Nations Security Council Resolution 748, adopted 
March 31, 1992, and United Nations Security Council Resolution 
883, adopted November 11, 1993.

Reason for change

    Sanctions will be terminated when the objectives of the 
bill have been achieved.

         I. DURATION OF SANCTIONS; PRESIDENTIAL WAIVER (SEC. 9)

Explanation of provision

    In section 9(a), Congress urges the President to begin 
consultations with the government with primary jurisdiction 
over any foreign person sanctioned under the provisions of this 
Act. The President may delay imposition of sanctions under this 
Act for up to 90 days in order to pursue consultations with 
this government of jurisdiction. He shall then impose sanctions 
on this person unless he certifies to Congress that the 
government has taken very specific and effective actions 
including, as appropriate, the imposition of appropriate 
penalties to terminate involvement of the foreign person in the 
sanctionable activities.
    Section 9(a)(3) authorizes the President to delay the 
imposition of sanctions for an additional 90 days if he 
certifies to the Congress that the government with primary 
jurisdiction over the person concerned is in the process of 
taking the actions described above to terminate involvement of 
the sanctioned person.
    Section 9(a)(4) directs the President to submit a report to 
the appropriate congressional committees 90 days after making a 
determination regarding sanctionable activities, on the status 
of his negotiations with the foreign government with primary 
jurisdiction. This report should also lay out in detail the 
circumstances leading to any delays in the implementation of 
sanctions.
    Section 9(b) provides that sanctions shall be imposed for a 
period of not less than two years, or until the President 
determines and certifies to the Congress that the person is no 
longer engaging in the activity and will not engage in future 
activity that led to the imposition of sanctions. The sanction 
shall remain in effect for at least one year unless the 
President exercises his waiver authority.
    Section (c) authorizes the President to waive the 
requirement to impose sanctions if he determines and reports to 
Congress that doing so is important to the national interest of 
the United States to exercise such waiver authority. This 
report shall provide a specific and detailed rationale for the 
waiver determination.

Reason for change

    The Committee has included Presidential authority to waive 
the sanctions requirement to ensure that the Administration has 
sufficient flexibility to protect important U.S. national 
interests. Circumstances in which the President might consider 
use of this authority would include cases in which imposition 
of sanctions would threaten U.S. intelligence sources and 
methods, where a particular sanction would raise significant 
issues under the international obligations of the U.S., and 
where international cooperation in pursuit of the goals of the 
bill could be jeopardized, rather than assisted, through 
unilateral U.S. action, or where sanctions would lead to 
unacceptable costs to U.S. economic interests. It is the 
intention and expectation of the Committee that the President 
will interpret and implement this Act in a manner consistent 
with the international obligations of the United States. It is 
further the intention of the Committee that the President will 
exercise the discretion granted to him by the Act, including 
the waiver, in a manner that gives due regard to the risks to 
U.S. interests involved in potentially conflicting exercises of 
jurisdiction by sovereign states.
    Where the President chooses to use the waiver authority he 
must provide a detailed rationale to the Congress (protecting 
intelligence information as appropriate).

                     J. REPORTS REQUIRED (SEC. 10)

Explanation of provision

    This section requires the President to report to Congress 
on the President's efforts to mount a multilateral campaign to 
persuade all countries to pressure Iran to cease its nuclear, 
chemical, biological, and missile weapons programs and its 
support of acts of international terrorism. The report must 
describe the Administration's efforts to persuade other 
governments to ask Iran to limit its use of its diplomats, 
diplomatic facilities and quasi-governmental institutions to 
promote terrorism or sustain its weapons of mass destruction 
programs.

Reason for change

    The Committee believes this report will contribute to its 
ability to evaluate the effectiveness of this legislation.

               K. DETERMINATIONS NOT REVIEWABLE (SEC. 11)

Explanation of provision

    The determination to impose sanctions shall not be subject 
to judicial review.

Reason for change

    The provision provides rules for judicial review.

              L. EXCLUSION OF CERTAIN ACTIVITIES (SEC. 12)

Explanation of provision

    Nothing in this Act shall apply to any activities subject 
to the reporting requirements of Title V of the National 
Security Act of 1947.

Reason for change

    This section contains an exemption for intelligence 
activities similar to that contained in 22 U.S.C.2780 (h).

                  M. EFFECTIVE DATE; SUNSET (SEC. 13)

Explanation of provision

    The bill shall take effect on the date of enactment and 
cease to be effective five years after this date.

Reason for change

    Because this bill deals with a difficult policy area, the 
Committee intends that it should not be permanent. Five years 
is adequate time to gauge its effectiveness at achieving the 
Committee's objectives. The Committee believes it will be 
important for Congress to revisit the issue in five years and 
to evaluate the behavior of Libya and Iran and the 
effectiveness of this bill.

                        N. DEFINITIONS (SEC. 14)

Explanation of provision

    This section defines terms contained in the Act, including 
``component part,'' ``develop and development,'' ``investment'' 
and several other terms.

Reason for change

    The Committee focused closely on the question of developing 
a proper definition of investment, and is of the view that this 
definition is integral to effective and fair implementation of 
this bill. The bill authorizes the imposition of sanctions on 
persons that, after the effective date of the legislation and 
with actual knowledge, made certain investments that directly 
and significantly contributed to the enhancement of Iran's or 
Libya's ability to develop its petroleum resources. The 
Committee emphasizes that the bill is not intended to have a 
retroactive effect or to require disinvestment. With few 
exceptions, and subject to waiver by the President, the 
investment sanctions are mandatory in the case of Iran and 
discretionary in the case of Libya.
    Section 14, item 11, defines investments to refer to 
activities undertaken pursuant to the exercise of rights and 
under an agreement, that is entered into, on or after the date 
of enactment, with the governments of, or nongovernmental 
entities in, Iran or Libya. Investments subject to sanctions 
may take any of the following forms: (a) the entry into a 
contract that includes responsibility for the development of 
petroleum resources located in Iran or Libya, or the entry into 
a contract for the general supervision and guarantee of another 
person's performance of such a contract; (b) the purchase of a 
share of ownership, including an equity investment, in that 
development or; (c) the entry into a contract providing for the 
participation in royalties, earnings, or profits in that 
development, without regard for the form of the participation.
    The Committee intends to include in the term ``investment'' 
the entry into a contract for the provision of management 
services entailing overall responsibility for the development 
of Iranian or Libyan petroleum resources or entailing general 
supervision and guarantee of another person's performance of 
such a contract.
    Investments under $40,000,000 (or any combination of 
investments of under $10,000,000 that do not aggregate to 
$40,000,000 in any 12-month period) are not subject to the 
legislation, though the President must in some instances lower 
these thresholds to $20,000,000 per year as they apply to Iran. 
Also not subject to the legislation is the entry into, 
performance of, or financing of contracts to sell or purchase 
goods, services, or technology.
    Companies may perform existing contracts, and complete 
existing investments, such as subcontracts, farm-in 
arrangements, and the like in connection with contracts entered 
into prior to the date of enactment without being deemed a 
sanctioned person under the Act. This definition ensures that 
actions under contracts and agreements concluded prior to the 
date of enactment, and transactions contemplated by those 
agreements, even if undertaken after date of enactment, are 
beyond the reach of the bill.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 2(l)(2)(B) of rule XI of the 
Rules of the House of Representatives, the following statements 
are made concerning the votes of the Committee in its 
consideration of the bill, H.R. 3107.

Motion to Report H.R. 3107

    H.R. 3107 was ordered favorably reported, with an amendment 
in the nature of a substitute, by voice vote, on June 13, 1996, 
with a quorum present.

                     IV. BUDGET EFFECTS OF THE BILL

               A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

    In compliance with clause 7(a) of rule XIII of the Rules of 
the House of Representatives, the following statement is made:
    The Committee agrees with the estimate prepared by the 
Congressional Budget Office (CBO), which is included below.

    B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX EXPENDITURES

    In compliance with subdivision (B) of clause 2(l)(3) of 
rule XI of the Rules of the House of Representatives, the 
Committee states that the provisions of H.R. 3107 do not affect 
receipts or direct spending and would not be subject to pay-as-
you-go procedures under section 252 of the Balanced Budget and 
Emergency Deficit Control Act of 1985.

      C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET OFFICE

    In compliance with subdivision (C) of clause 2(l)(3) of 
rule XI of the Rules of the House of Representatives, requiring 
a cost estimate prepared by the Congressional Budget Office, 
the following report prepared by CBO is provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 13, 1996.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
reviewed H.R. 3107, the Iran and Libya Sanctions Act of 1996, 
as ordered reported by the House Committee on Ways & Means on 
June 13, 1996. The bill would require the President to impose 
sanctions on any person who he determines has enhanced the 
development of the petroleum resources of Iran or Libya through 
the export, transfer, or release of goods or technology, or 
through direct investment.
    The bill would not affect receipts or direct spending and 
would not be subject to pay-as-you-go procedures under section 
252 of the Balanced Budget and Emergency Deficit Control Act of 
1985. The bill could increase spending subject to 
appropriations action to cover the cost of gathering and 
analyzing information, publishing lists of sanctioned persons, 
and providing advisory opinions. Based on information provided 
by the Office of Management and Budget, CBO estimates that such 
costs would total less than $1 million a year.
    Section 4 of the Unfunded Mandates Reform Act of 1995, 
Public Law 104-4, excludes legislative provisions that are 
necessary for the national security from the application of 
that act. CBO has determined that all provisions of H.R. 3107 
fit within that exclusion.
    On March 27, 1996, CBO prepared a cost estimate for H.R. 
3107 as ordered reported by the House Committee on 
International Relations on March 21, 1996. Although the two 
Committees ordered reported different versions of the bill, the 
estimated budgetary impacts are the same.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Joseph C. 
Whitehill for impacts on the federal budget, Pepper Santalucia 
for impacts on state, local, and tribal governments, and Amy 
Downs for private sector impacts.
            Sincerely,
                                         June E. O'Neill, Director.

 V. OTHER MATTERS REQUIRED TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

          A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

     In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee concludes 
that the actions taken in this legislation are appropriate 
given its oversight of international trade matters.

B. SUMMARY OF FINDINGS AND RECOMMENDATIONS OF THE GOVERNMENT OPERATIONS 
                               COMMITTEE

     In compliance with clause 2(l)(3)(D) of rule XI of the 
Rules of the House of Representatives, the Committee state that 
no oversight findings and recommendations have been submitted 
to this Committee by the Committee on Government Operations 
with respect to the provisions contained in H.R. 3107.

                    C. INFLATIONARY IMPACT STATEMENT

     In compliance with clause 2(l)(4) of rule XI of the Rules 
of the House of Representatives, the Committee states that the 
provisions of H.R. 3107 are not expected to have any 
inflationary impact on the economy.

                  VI. LETTER FROM COMMITTEE ON BANKING

                     U.S. House of Representatives,
               Committee on Banking and Financial Services,
                                      Washington, DC, May 21, 1996.
Hon. Bill Archer,
Chairman, Committee on Ways & Means,
House of Representatives, Washington, DC.
    Dear Bill: It is my understanding that the Ways & Means 
Committee will begin consideration shortly of H.R. 3107, the 
Iran Oil Sanctions Act of 1996. The legislation as reported by 
the International Relations Committee contains a series of 
provisions that fall under the jurisdiction of the Committee on 
Banking & Financial Services. Please find attached a letter 
sent to the Speaker outlining the Banking Committee's concerns 
with H.R. 3107 and waiving the Committee's jurisdiction in the 
event certain modifications are made to the legislation.
    As the Ways & Means Committee considers this bill, it would 
be most helpful if the Banking Committee's recommendations 
could be incorporated as base text. Most particularly, as 
described in the letter to the Speaker, the Banking Committee's 
suggestion would be to incorporate language from the Senate 
companion measure related to the ``imposition of sanctions'' 
and the definition of ``investment.'' These modifications are 
favored by Treasury and would alleviate much of the concern the 
legislation has generated in the financial community.
    Thank you for your consideration and I look forward to 
working with you and Chairman Gilman on this important 
legislation. If you have any questions or comments regarding my 
request, please contact either Tony Cole, Joe Seidel or Jamie 
McCormick of my staff.
            Sincerely,
                                          James A. Leach, Chairman.

     VII. LETTER FROM COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT

                     Congress of the United States,
              Committee on Government Reform and Oversight,
                                      Washington, DC, June 3, 1996.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Bill: It is my understanding that the Committee on 
Ways and Means will begin consideration shortly of H.R. 3107, 
the ``Iran Oil Sanctions Act of 1996.'' This legislation as 
reported by the Committee on International Relations included 
provisions relating to government procurement which fall within 
the Rule X jurisdiction of this committee. Please find the 
attached letter sent to the Speaker in which the Committee on 
Government Reform and Oversight waived its right to take up 
this bill.
    It also is my understanding that the Committee on Ways and 
Means intends, among other things, to make changes to the 
sanctions relating to government procurement. In order to 
expedite consideration of this bill, the Committee on 
Government Reform and Oversight would not object to your 
committee reporting these amended provisions. We wish to make 
it clear, however, that this lack of objection is specifically 
limited to these provisions in this single instance and should 
not be construed as a waiver of the committee's jurisdiction 
with respect to any of the legislative provisions in H.R. 3107 
that fall within its jurisdiction.
    The Committee on Government Reform and Oversight continues 
to preserve its prerogative with respect to any House-Senate 
conference on these provisions and any Senate amendments 
thereto, including the appointment of an equal number of 
conferees to those appointed for any other House committee with 
respect to the provisions of H.R. 3107 which fall within this 
committee's jurisdiction.
            Sincerely,
                                 William F. Clinger, Jr., Chairman.

         VIII. LETTER FROM COMMITTEE ON INTERNATIONAL RELATIONS

                     Congress of the United States,
                      Committee on International Relations,
                                     Washington, DC, June 13, 1996.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Bill: I am sending this letter to confirm the 
understanding reached between our two Committees yesterday 
concerning mark-up by your Committee of H.R. 3107, the ``Iran 
Oil Sanctions Act of 1996''.
    The amendment in the nature of a substitute to be adopted 
by your Committee includes changes to the bill as reported by 
the Committee on International Relations that are within the 
exclusive jurisdiction of this Committee. I have agreed to 
those changes, however, and accordingly do not object to their 
inclusion in the amendment in the nature of a substitute to be 
adopted by your Committee. My agreement to adoption by your 
Committee of these changes is, of course, without prejudice to 
the jurisdiction of this Committee as set forth in Rule X of 
the Rules of the House of Representatives.
    I appreciate your assistance in this matter and look 
forward to continued close cooperation between our Committees.
    With best wishes,
            Sincerely,
                                      Benjamin A. Gilman, Chairman.