[House Report 114-810]
[From the U.S. Government Publishing Office]


114th Congress    }                                     {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                     {      114-810

======================================================================
 
  TO PROHIBIT THE SECRETARY OF THE TREASURY FROM AUTHORIZING CERTAIN 
  TRANSACTIONS BY A U.S. FINANCIAL INSTITUTION IN CONNECTION WITH THE 
 EXPORT OR RE-EXPORT OF A COMMERCIAL PASSENGER AIRCRAFT TO THE ISLAMIC 
                            REPUBLIC OF IRAN

                                _______
                                

 November 14, 2016.--Committed to the Committee of the Whole House on 
            the State of the Union and 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. 5711]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 5711) to prohibit the Secretary of the Treasury 
from authorizing certain transactions by a U.S. financial 
institution in connection with the export or re-export of a 
commercial passenger aircraft to the Islamic Republic of Iran, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.
    The amendment is as follows:
  Add at the end the following:

SEC. 2. REVOCATION OF PRIOR AUTHORIZATIONS.

  If the Secretary of the Treasury authorized any transaction described 
under section 1 before the date of the enactment of this Act, such 
authorization is hereby revoked.

                          PURPOSE AND SUMMARY

    Introduced by Representative Huizenga on July 11, 2016, 
H.R. 5711 would prohibit the Secretary of the Treasury from 
authorizing transactions by U.S. financial institutions in 
connection with the export or re-export of passenger aircraft 
to Iran. As amended, this legislation would also revoke any 
such authorization made prior to enactment of the bill.

                  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, and to lease 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. These 
licenses included authorization for U.S. financial institutions 
to undertake all financial transactions necessary to effectuate 
the sale of the aircraft. Such an authorization would 
potentially mean that U.S. citizens' deposits and investments 
could be used to finance the Iranian regime, which the State 
Department characterizes as ``the world's foremost state 
sponsor of terrorism.''
    Iran's deployment of civilian planes for military purposes 
is well-documented. Iran Air's use of commercial planes to 
transport rockets, missiles, and other military cargo on behalf 
of the Islamic Revolutionary Guard Corps (IRGC) led to Treasury 
sanctioning the carrier in 2011. 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.

    In addition to the violence that U.S. financing for Iran 
Air may contribute to, commercial involvement with Iran could 
pose acute money laundering risks for financial institutions. 
Recalling that Iran was designated by Treasury in 2011 as a 
``jurisdiction of primary money laundering concern,'' Eric 
Lorber of the Financial Integrity Network issued the following 
warning in testimony to the Committee:

          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.

    Lorber went on to argue:

          Given Iran's history of abusing the international 
        financial system, the United States should refrain from 
        providing legal authorization to any financial 
        institution that wants to re-enter Iranian markets in 
        all but the rarest of circumstances (e.g., providing 
        financing for the shipment of humanitarian goods).

    Due to the opacity and illegality that characterizes Iran's 
economy, repayment risk is added to the regulatory and 
reputational uncertainties facing U.S. financial institutions, 
a risk that could potentially be transferred to taxpayers. As 
Mr. Dubowitz testified before the Committee:

          My big concern is that we may face in the coming 
        years a $70 billion Iran bailout, where the U.S. 
        taxpayer is going to have to stand behind all of the 
        unpaid debts from Iran Air and other Iranian airlines. 
        So when you think about jobs and the exposure of the 
        U.S. economy, I would hate to have U.S. taxpayers have 
        to step up with a $70 billion bailout when Iran reneges 
        on its commitments.

    Prohibiting Iranian access to U.S. financial institutions 
is a policy that has previously garnered congressional support: 
in July, the House approved, by voice vote, an aircraft 
financing 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. 
5711.

                        COMMITTEE CONSIDERATION

    The Committee on Financial Services met in open session on 
July 13, 2016 to consider the bill. Mr. Huizenga offered the 
sole amendment, which was adopted by voice vote. The Committee 
ordered H.R. 5711 to be favorably reported to the House as 
amended by a recorded vote of 33 yeas to 21 nays (Record vote 
no. FC-123), 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-123), a quorum being present.


                      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. 5711 
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. 5711, a bill to 
prohibit the Secretary of the Treasury from authorizing certain 
transactions by a U.S. financial institution in connection with 
the export of a commercial passenger aircraft to the Islamic 
Republic of Iran.
    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. 5711--A bill to prohibit the Secretary of the Treasury from 
        authorizing certain transactions by a U.S. financial 
        institution in connection with the export of a commercial 
        passenger aircraft to the Islamic Republic of Iran

    CBO estimates that implementing H.R. 5711 would have no 
significant cost to the federal government. Enacting the 
legislation could affect direct spending and revenues; 
therefore, pay-as-you-go procedures apply. However, CBO 
estimates that any effects on direct spending or revenues would 
be negligible.
    H.R. 5711 would amend current law to prohibit U.S. 
financial institutions from facilitating the sale of commercial 
aircraft to Iran. CBO estimates that administering the 
prohibition would have a negligible cost to the Treasury 
Department; any spending would be subject to the availability 
of appropriated funds.
    Because the bill would expand the types of trade with Iran 
that are prohibited and subject from civil and criminal 
penalties under current law, it could increase revenues and 
associated direct spending; however, CBO estimates that the net 
budgetary effect of any additional penalties assessed and spent 
under the bill would be negligible in any year.
    CBO estimates that enacting H.R. 5711 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2027.
    H.R. 5711 would impose a private-sector mandate, as defined 
in Unfunded Mandates Reform Act (UMRA), on U.S. financial 
institutions by prohibiting them from engaging in transactions 
that facilitate the sale of commercial aircraft to Iran. The 
prohibition would limit an activity that may be permitted under 
current law. The cost of the mandate would be the value of 
income that U.S. financial institutions would forgo. Although 
some manufacturers have tentative agreements to sell or lease 
aircraft to Iran under current law, those sales are contingent 
on approval by the Treasury Department.
    The size and timing of mandate costs are uncertain and 
would depend on the timing and likelihood of those institutions 
engaging in transactions to facilitate such sales and on the 
potential financing structure of such transactions. Should a 
U.S. financial institution engage in such a transaction, annual 
interest payments alone (which would be forgone under the bill) 
could easily reach UMRA's $154 million threshold. However, 
because the exact structure and terms of any potential deal are 
uncertain, CBO cannot determine the amount of lost profits that 
would result from forfeiting a potential deal. Current 
restrictions, including a ban on certain transactions with Iran 
appear to be making U.S. banks reluctant to finance any deals 
with Iran. They may be allowing foreign institutions to lead 
the way by financing the initial sales of aircraft to Iran in 
order to learn more about the potential risks to such an 
investment. Given these uncertainties, CBO cannot determine 
whether the cost of the mandate would exceed the annual 
threshold established in UMRA for private-sector mandates ($154 
million in 2016, adjusted annually for inflation) in the first 
five years the mandate is effective.
    H.R. 5711 contains no intergovernmental mandate as defined 
in UMRA and would not affect the budgets of state, local, or 
trial governments.
    The CBO staff contacts for this estimate are Pamela Greene 
and Matthew Pickford (for federal revenues and spending) and 
Logan Smith (for the private-sector impact). 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. 5711 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. 5711 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. 5711 contains no directed 
rulemaking.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Prohibition

    This Section prevents the Secretary of the Treasury from 
authorizing a transaction by a U.S. financial institution for 
the purpose of exporting or re-exporting commercial passenger 
aircraft to Iran.

Section 2. Revocation of prior authorizations

    This Section revokes any such authorization that is issued 
prior to the date of the bill's enactment.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    H.R. 5711 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. 5711 would prohibit the Secretary of Treasury from 
authorizing any transaction by a U.S. financial institution 
that is ordinarily incident to the export or re-export of 
commercial passenger aircraft to Iran.
    We oppose this legislation because it would undermine the 
U.S. commitment under the Joint Comprehensive Plan of Action 
(``JCPOA'') to license the financial services necessary and 
ordinarily incident to the sale of aircraft to Iran. Moreover, 
the bill would put the U.S. in breach of the `good faith' 
provision in the JCPOA, whereby all parties agree ``to refrain 
from any action inconsistent with the letter, spirit and intent 
of [the] JCPOA that would undermine its successful 
implementation.''
    We also note that prohibiting the involvement of U.S. 
financial institutions would put U.S. aircraft manufacturers at 
a competitive disadvantage with their foreign competitors, 
whose access to financing would not be subject to the same 
constraints.
    Ironically, critics who previously raised alarm that Iran 
is getting front-loaded access to an estimated $50 billion of 
unfrozen oil escrow funds as a result of the nuclear deal seem 
to overlook the fact that H.R. 5711 would, in fact, prevent 
Iran from redirecting a huge chunk of Iranian funds freed up by 
the JCPOA away from malign activities, and towards the U.S. and 
European economies. If some of the licensing conditions that 
have previously been discussed were put in place--including 
especially big down payments--the aircraft sales could be a 
serious plus in terms of our national security interests 
because of how they direct the money.
    H.R. 5711 is a clear attempt to undermine the JCPOA and the 
activity that is legal under the deal. For this reason, we 
oppose the bill.
                                   Maxine Waters.
                                   Joyce Beatty.
                                   Stephen F. Lynch.
                                   Ruben Hinojosa.

                                  [all]