[House Report 118-330]
[From the U.S. Government Publishing Office]


118th Congress }                                          { REPORT 
                        HOUSE OF REPRESENTATIVES
 1st Session   }                                          { 118-330

======================================================================
 
                STOPPING ILLICIT OIL SHIPMENTS ACT OF 2023

                                _______
                                

 December 19, 2023.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

 Mr. McHenry, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 6365]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 6365) to protect against illicit oil shipments, 
and for other purposes, having considered the same, reports 
favorably thereon with an amendment and recommends that the 
bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Stopping Illicit Oil Shipments Act of 
2023''.

SEC. 2. FINDINGS.

  The Congress finds the following:
          (1) When countries are designated under economic and trade 
        sanctions by the United States and its allies, they are largely 
        excluded from the licit global financial system, including the 
        movement, sale, and profit derived from their oil and gas 
        resources.
          (2) For U.S. persons, American maritime sanctions, including 
        on nations like Iran, Russia, and North Korea, restrict the 
        financing of vessels and cargo, insurance and re-insurance, 
        companies using vessels to transport their goods, shipowners, 
        charterers, and those providing maritime services such as 
        classification and certification.
          (3) One method by which Iran and Russia frequently attempt to 
        evade these U.S. sanctions on oil is to ``false flag'', which 
        means to avoid sanctions scrutiny by registering a vessel in a 
        permissive country or by sailing under another country's flag 
        without communicating this to the country whose flag is being 
        used.
          (4) According to Foreign Policy, approximately two million 
        barrels of oil from sanctioned countries, including Iran and 
        Russia, are transported under false flags every day.
          (5) In order to evade a sanctions regime, vessels 
        transporting oil and gas resources from sanctioned countries 
        must carry insurance policies to allow them to dock at a port, 
        unload their goods, or use a port's services, such as 
        refueling.
          (6) The veracity of a vessel's flag is subject to examination 
        by port authorities, but verification by the port and service 
        providers does not always occur.
          (7) Given the lack of comprehensive checks on the veracity of 
        flags, this Act will force a change in behavior within the 
        maritime shipping industry by limiting the availability of 
        insurance products to those not verifying flag registration and 
        providing a direct route for the Office of Foreign Assets 
        Control (``OFAC'') to gain possibly actionable information that 
        could lead to OFAC enforcement actions as well as additional 
        targets for sanctions designations.

SEC. 3. MATERIAL MISREPRESENTATION.

  (a) In General.--In maritime insurance contracts, failure to verify a 
vessel's registration shall be deemed a material misrepresentation by 
the policyholder.
  (b) Rulemaking.--The Undersecretary for Terrorism and Financial 
Crimes shall issue rules to carry out this section.

SEC. 4. IDENTIFICATION OF VESSELS WITH ILLICIT MARITIME INSURANCE.

  (a) In General.--The primary insurance regulatory authority of a 
State may report to the Undersecretary for Terrorism and Financial 
Crimes when, in the sole discretion of the primary insurance regulatory 
authority, the primary insurance regulatory authority has determined 
that the conditions exist for a maritime insurance contract to be 
voidable pursuant to section 3.
  (b) Limitations.--With respect to a maritime insurance contract, a 
report may only be made under subsection (a) if the primary insurance 
regulatory authority--
          (1) establishes that the maritime insurance contract has been 
        issued by an insurer subject to the authority of the primary 
        insurance regulatory authority;
          (2) establishes that the maritime insurance contract 
        satisfies the conditions established by the Undersecretary for 
        Terrorism and Financial Crimes to be voidable pursuant to 
        section 3; and
          (3) possesses, to the satisfaction of the primary insurance 
        regulatory authority, clear and compelling credible factual 
        evidence that a policyholder has failed to verify the 
        registration of a vessel.

SEC. 5. REPORT.

  (a) In General.--Not later than the end of the 180-day period 
beginning on the date of the enactment of this Act, and annually 
thereafter for 5 years, the Secretary of the Treasury shall issue a 
report to the appropriate committees of the Congress--
          (1) detailing any reports received by the Undersecretary for 
        Terrorism and Financial Crimes from a primary insurance 
        regulatory authority under section 4;
          (2) detailing any steps taken by the Secretary of the 
        Treasury on the receipt of that information;
          (3) describing of activities taken by the Secretary of the 
        Treasury, including meetings and advisories, to engage with the 
        maritime community, foreign governments, and civil society to 
        improve outreach and understanding of the compliance 
        expectations related to maritime sanctions evasion; and
          (4) describing any proposed improvements to existing 
        authorities or resources that could be provided by Congress.
  (b) Exception for Ongoing Investigations.--The Secretary of the 
Treasury may not include information in a report required under 
subsection (a) related to ongoing investigations.

SEC. 6. REPORT.

  Not later than the end of the 180-day period beginning on the date of 
the enactment of this Act, the Secretary of the Treasury shall issue a 
report to the appropriate committees of the Congress containing 
recommendations for receiving determinations described under section 4 
from persons other than a primary insurance regulatory authority of a 
State, including establishing a whistleblower program.

SEC. 7. DEFINITIONS.

  In this Act:
          (1) Appropriate committees of the congress.--The term 
        ``appropriate committees of the Congress'' means the Committee 
        on Financial Services of the House of Representatives and the 
        Committee on Banking, Housing, and Urban Affairs of the Senate.
          (2) Maritime insurance.--The term ``maritime insurance''--
                  (A) means insurance coverage for physical loss or 
                damage of vessels, cargo, terminals, and any transport 
                by which the cargo is transferred, acquired, or held 
                between the points of origin and the final destination; 
                and
                  (B) includes cargo insurance, freight insurance, hull 
                insurance, and protection and indemnity.
          (3) Registration.--The term ``registration'' means the 
        process--
                  (A) by which a vessel is formally recognized by a 
                country's maritime authority, resulting in the vessel's 
                inclusion in the national vessel registry; and
                  (B) conferring upon a vessel the nationality of the 
                registering state;
                  (C) entailing the right to fly the flag of such 
                registering state; and
                  (D) subjecting a vessel to the responsibility to 
                adhere to maritime laws and regulations enforced by 
                such registering state.
          (4) State.--The term ``State'' means any of the several 
        States, the District of Columbia, a territory of the United 
        States, an Indian Tribe, and a jurisdiction subject to the 
        Compact of Free Association Act of 2003.
          (5) Vessel.--The term ``vessel'' has the meaning given such 
        term in section 3 of title 1, United States Code.

                          PURPOSE AND SUMMARY

    Introduced on November 13, 2023, by Representative Maxine 
Waters, H.R. 6365, the Stopping Illicit Oil Shipments Act of 
2023, would stop illicit oil shipments and ensure that each 
policy for maritime insurance contains a voiding provision. The 
bill would establish that each state insurance commissioner 
should require maritime insurance policies to contain a voiding 
provision.

                  BACKGROUND AND NEED FOR LEGISLATION

    Since 2021, Iran has generated roughly $80 billion in 
revenue from its illicit oil sales, due in part to the 
Administration's relaxed sanctions regime against the Iranian 
government. The Administration's posture has enabled Iranian 
oil exports to hit a five-year high.\1\ These revenue 
generators have allowed Iran to fund terrorist organizations 
such as Hamas in Gaza and Hezbollah in Lebanon. A ``large 
portion of this oil is shipped into China, which counts Tehran 
as one of its top patrons.''\2\ Ensuring that voiding 
provisions are incorporated in contracts between maritime 
insurance providers and vessels that are not registered, but 
are still insured, is critical to limiting countries like Iran 
from continuing to ship illicit oil while generating 
substantial revenues.
---------------------------------------------------------------------------
    \1\https://freebeacon.com/national-security/irans-illicit-oil-
exports-hit-five-year-high/, Iran's Illicit Oil Exports Hit Five-Year 
High, The Washington Free Beacon (Aug. 1, 2023), https://
freebeacon.com/national-security/irans-illicit-oil-exports-hit-five-
year-high/.
    \2\Adam Kredo, Iran has made $80 Billion in Illicit Oil Sales Since 
Biden Took Office, The Washington Free Beacon (Oct. 10, 2023), https://
freebeacon.com/national-security/iran-has-made-80-billion-in-illicit-
oil-sales-since-biden-took-office/.
---------------------------------------------------------------------------

                                HEARING

    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearing was used to develop H.R. 6365: The Subcommittee on 
National Security, Illicit Finance, and International Financial 
Institutions of the Committee on Financial Services held a 
hearing on October 25, 2023, titled ``How America and Its 
Allies Can Stop Hamas, Hezbollah, and Iran from Evading 
Sanctions and Financing Terror.''

                        COMMITTEE CONSIDERATION

    The Committee on Financial Services met in open session on 
November 14, 2023, and ordered H.R. 6365 to be reported 
favorably to the House as amended by a recorded vote of 50 ayes 
to 0 nays (Record vote no. FC-118), a quorum being present. 
Before the question was called to order the bill favorably 
reported, the Committee adopted an amendment in the nature of a 
substitute offered by Ms. Waters by voice vote.

                            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 order to report legislation and amendments thereto. H.R. 
6365 was ordered reported favorably to the House as amended by 
a recorded vote of 50 ayes to 0 nays (Record vote no. FC-118), 
a quorum being present.




                      COMMITTEE OVERSIGHT FINDINGS

    Pursuant to clause 3(c) 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 goal of H.R. 6365 is to protect 
against illicit oil shipments and ensure that each policy for 
maritime insurance should contain a voiding provision.

                 CONGRESSIONAL BUDGET OFFICE ESTIMATES

    The Committee has requested but not received a cost 
estimate from the Director of the Congressional Budget Office. 
However, pursuant to clause 3(d)(1) of House rule XIII, the 
Committee will adopt as its own the cost estimate by the 
Director of the Congressional Budget Office once it has been 
prepared.

   NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

    The Committee has requested but not received an estimate 
from the Director of the Congressional Budget Office. However, 
pursuant to clause 3(c)(2) of rule XIII of the Rules of the 
House of Representatives, once an estimate has been prepared by 
the Director of the Congressional Budget Office, as required by 
section 402 of the Congressional Budget Act of 1973, the 
Committee will adopt as its own the estimate of new budget 
authority, entitlement authority, or tax expenditures or 
revenues contained in the cost estimate.

                       FEDERAL MANDATES STATEMENT

    The Committee has requested but not received an estimate of 
the Federal mandates from the Director of the Congressional 
Budget Office, pursuant to section 423 of the Unfunded Mandates 
Reform Act. The Committee will adopt the estimate once it has 
been prepared by the Director.

                      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 section 
102(b)(3) of the Congressional Accountability Act.

                         EARMARK IDENTIFICATION

    Pursuant to clause 9 of rule XXI of the Rules of the House 
of Representatives, the Committee has carefully reviewed the 
provisions of the bill and states that the provisions of the 
bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                    DUPLICATION OF FEDERAL PROGRAMS

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes a program of 
the Federal Government known to be duplicative of another 
Federal program, including any program that was included in a 
report to Congress pursuant to section 21 of the Public Law 
111-139 or the most recent Catalog of Federal Domestic 
Assistance.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

    This Act may be cited as the ``Stopping Illicit Oil 
Shipments Act of 2023''.

Section 2. Findings

    The Congress finds the following:
          1. Countries that are designated under economic and 
        trade sanctions by the United States and its allies are 
        largely excluded from the licit global financial 
        system--including the movement, sale, and profits 
        received from their oil and gas resources.
          2. U.S. maritime sanctions, such as the ones imposed 
        on nations like Iran, Russia, and North Korea, restrict 
        U.S. persons within the spheres of the following: 
        financing of vessels and cargo, insurance and re-
        insurance, companies using vessels to transport their 
        goods, shipowners, charterers, and those providing 
        maritime services like classification and 
        certification.
          3. Iran and Russia notoriously and frequently attempt 
        to evade U.S. oil sanctions using ``false flags.'' This 
        method avoids sanctions scrutiny by registering a 
        vessel in a permissive country or by sailing under 
        another country's flag without communicating this to 
        the country whose flag is being used.
          4. Approximately two million barrels of oil from 
        sanctioned countries, like Iran and Russia, are 
        transported under false flags every day.
          5. Vessels transporting oil and gas resources from 
        sanctioned countries must carry insurance policies to 
        allow them to dock at a port, unload their goods, or 
        use a port's services--such as refueling--in order to 
        evade a sanctions regime.
          6. The veracity of a vessel's flag is subject to 
        examination by port authorities, but verification by 
        the port and service providers does not always occur.
          7. This Act will force a change in behavior within 
        the maritime shipping industry by limiting the 
        availability of insurance products to those not 
        verifying flag registration. This Act will additionally 
        provide a direct route for the Office of Foreign Assets 
        Control (OFAC) to gain possibly actionable information 
        that could lead to OFAC enforcement actions, as well as 
        additional targets for sanctions designations.

Section 3. Material misinterpretations

    Failure to verify a vessel's registration will be deemed a 
material misrepresentation by the policyholder in maritime 
insurance contracts moving forward.

Section 4. Identification of vessels with illicit maritime insurance

    In the sole discretion of the primary insurance regulatory 
authority, the primary insurance regulatory authority of a 
State may report to the Undersecretary for Terrorism and 
Financial Crimes when they have determined that the conditions 
exist for a maritime insurance contract be voided pursuant to 
section 3.
    Limitations
           A subsection (a) report may only be made 
        if the primary insurance regulatory authority:
                  1. Establishes that maritime insurance 
                contract has been issued by an insurer subject 
                to the authority of the primary insurance 
                regulatory authority;
                  2. Establishes that the maritime insurance 
                contract satisfies the conditions established 
                by the Undersecretary for Terrorism and 
                Financial Crimes to be voidable pursuant to 
                section 3; and
                  3. Possesses, to the satisfaction of the 
                primary insurance regulatory authority, clear 
                and compelling credible evidence that a 
                policyholder has failed to verify the 
                registration of a vessel.

Section 5. Report

    The Secretary of the Treasury will issue a report to the 
appropriate committees of the Congress no later than the 180-
day period beginning on the date of this Act's enactments, and 
for the following 5 years, with the following:
          1. details of any report received by the 
        Undersecretary for Terrorism and Financial Crimes from 
        primary insurance regulatory authorities under section 
        4;
          2. details of any steps taken by the Secretary of the 
        Treasury on the receipt of that information;
          3. description of activities undertaken by the 
        Secretary of the Treasury, including meetings and 
        advisories, to engage with the maritime community, 
        foreign governments, and civil society to improve 
        outreach and understanding of the compliance 
        expectations related to maritime sanctions evasion; and
          4. description of any proposed improvements to 
        existing authorities or resources that could be 
        provided by Congress.
    --The Secretary of the Treasury will not include 
information related to ongoing investigations in a subsection 
(a) required report.

Section 6. Report

    --The Secretary of the Treasury will issue a report to the 
appropriate committees of the Congress, no later than the 180-
day period beginning on the date of this Act's enactment, 
containing recommendations for receiving determinations 
described under section 4 from persons other than a primary 
insurance regulatory authority of a State. This will also 
establish a whistleblower program.

Section 7. Definitions

    1. Appropriate Committees of the Congress
          a. This term refers to the House Committee on 
        Financial Services and the Senate Committee on Banking, 
        Housing, and Urban Affairs.
    2. Maritime Insurance
          a. This term:
                  i. Means insurance coverage for physical loss 
                or damage of vessels, cargo, terminals, and any 
                transport by which the cargo is transferred, 
                acquired, or held between the points of origin 
                and final destination; and
                  ii. Includes cargo insurance, freight 
                insurance, hull insurance, and protection and 
                indemnity.
    3. Registration
          a. This term refers to the process:
                  i. By which a vessel is formally recognized 
                by a country's maritime authority, resulting in 
                the vessel's including in the national vessel 
                registry;
                  ii. Conferring upon a vessel the nationality 
                of the registering state;
                  iii. Entailing the right to fly the flag of 
                such a registering state; and
                  iv. Subjecting a vessel to the responsibility 
                to adhere to maritime laws and regulations 
                enforced by such registering state.
    4. State
          a. This term refers to any of the several States, the 
        District of Columbia, a territory of the United States, 
        and Indian Tribe, and a jurisdiction subject to the 
        Compact of Free Association Act of 2003.
    5. Vessel
          a. This term has the meaning given to such term in 
        section 3 of title 1, United States Code.

                                  [all]