[House Report 118-333]
[From the U.S. Government Publishing Office]


118th Congress   }                                     {        Report
                        HOUSE OF REPRESENTATIVES
 1st Session     }                                     {       118-333

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



 
                IRAN-CHINA ENERGY SANCTIONS 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. 5923]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 5923) to impose restrictions on correspondent 
and payable-through accounts in the United States with respect 
to Chinese financial institutions that conduct transactions 
involving the purchase of petroleum or petroleum products from 
Iran, 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 ``Iran-China Energy Sanctions Act of 
2023''.

SEC. 2. SANCTIONS ON CHINESE FINANCIAL INSTITUTIONS THAT PURCHASE 
                    PETROLEUM PRODUCTS FROM IRAN.

  Section 1245(d) of the National Defense Authorization Act for Fiscal 
Year 2012 (22 U.S.C. 8513a(d)) is amended--
          (1) by redesignating paragraph (5) as paragraph (6); and
          (2) by inserting after paragraph (4) the following new 
        paragraph:
          ``(5) Applicability of sanctions with respect to chinese 
        financial institutions.--
                  ``(A) In general.--For the purpose of paragraph 
                (1)(A), a `significant financial transaction' includes 
                any transaction by a Chinese financial institution 
                (without regard to the size, number, frequency, or 
                nature of the transaction) involving the purchase of 
                petroleum or petroleum products from Iran.
                  ``(B) Determination required.--Not later than 180 
                days after the date of the enactment of this paragraph 
                and every year thereafter for 5 years, the President 
                shall--
                          ``(i) determine whether any Chinese financial 
                        institution has engaged in a significant 
                        financial transaction as described in paragraph 
                        (1)(A); and
                          ``(ii) transmit the determination under 
                        clause (i) to the Committee on Financial 
                        Services of the House of Representatives and 
                        the Committee on Banking, Housing, and Urban 
                        Affairs of the Senate.''.

                          Purpose and Summary

    Introduced on October 11, 2023, by Representative Michael 
Lawler, H.R. 5923, the Iran-China Energy Sanctions Act of 2023, 
would expand secondary sanctions involving Iran to cover all 
transactions between Chinese financial institutions and 
sanctioned Iranian banks that transact for the purchase of 
petroleum and petroleum products. The bill would also require 
an annual determination as to whether Chinese financial 
institutions have engaged in sanctionable conduct.

                  Background and Need for Legislation

    Iran's crude oil exports stand at a four-year high of 1.5 
million barrels per day, 80 percent of which is sent to 
China.\1\ While China's large, state-owned refineries have 
reportedly refrained from engaging in this trade due to 
sanctions risk, smaller independent refineries known as 
``teapots'' continue to import Iranian crude.
---------------------------------------------------------------------------
    \1\``China `Teapot Refiners' Mop Up Swelling Iranian Crude, Defying 
U.S. Curbs,'' Reuters, September 14, 2023. https://www.reuters.com/
business/energy/chinas-teapot-refiners-mop-up-swelling-iranian-crude-
defying-us-curbs-2023-09-14/.
---------------------------------------------------------------------------
    Under the National Defense Authorization Act for Fiscal 
Year 2012, foreign financial institutions run the risk of 
``secondary sanctions'' for conducting a ``significant 
financial transaction'' with a sanctioned Iranian bank in 
connection with the purchase of petroleum from Iran. (Note: The 
entire financial sector of Iran is sanctionable, even if 
individual entities have not yet been designated by Treasury).
    While modifying sanctionable transactions with the term 
``significant'' is ordinarily advisable in order to focus 
sanctions targeting on activities of most importance to U.S. 
interests, it is clear that small-scale Iranian crude exports 
to teapot refineries have become a major source of revenue for 
Tehran. H.R. 5923 therefore clarifies that any transaction by a 
Chinese financial institution for the purchase of oil from Iran 
qualifies as a ``significant financial transaction.''

                                Hearing

    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearing was used to develop H.R. 5923: 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. 5923 to be reported 
favorably to the House as amended by a recorded vote of 47 ayes 
to 0 nays (Record vote no. FC-109), 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 Mr. Lawler 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. 
5923 was ordered reported favorably to the House as amended by 
a recorded vote of 47 ayes to 0 nays (Record vote no. FC-109), 
a quorum being present.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      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. 5923 is to expand 
secondary sanctions involving Iran to cover all transactions 
between Chinese financial institutions and sanctioned Iranian 
banks that transact for the purchase of petroleum and petroleum 
products.

                 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:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    Pursuant to 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 prepared by the Director of the 
Congressional Budget Office pursuant to section 402 of the 
Congressional Budget Act of 1973.

                       Federal Mandates Statement

    Pursuant to section 423 of the Unfunded Mandates Reform 
Act, the Committee adopts as its own the estimate of the 
Federal mandates prepared by the Director of the Congressional 
Budget Office.

                      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 ``Iran-China Energy Sanctions 
Act of 2023''.

Section 2. Sanctions on Chinese financial institutions that purchase 
        petroleum products from Iran

    Section 2 amends Section 1245(d) of the National Defense 
Authorization Act for Fiscal Year 2012 (22 U.S.C. 8513a(d)) 
with the following:
          D By redesignating paragraph (5) as paragraph (6) and 
        inserting the following new paragraph after paragraph 
        (4): A ``significant financial transaction'' includes 
        any transaction by a Chinese financial institution 
        involving the purchase of Iranian petroleum or 
        petroleum products.
    No later than 180 days after this paragraph is enacted, and 
for the following 5 years, the President shall:
          D Decide whether any significant financial 
        transactions, as defined above, have been made by any 
        Chinese financial institution; and
          D Transmit this determination to both the House 
        Committee on Financial Services and the Senate 
        Committee on Banking, Housing, and Urban Affairs.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, and existing law in which no 
change is proposed is shown in roman):

        NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2012




           *       *       *       *       *       *       *
DIVISION A--DEPARTMENT OF DEFENSE AUTHORIZATIONS

           *       *       *       *       *       *       *


TITLE XII--MATTERS RELATING TO FOREIGN NATIONS

           *       *       *       *       *       *       *


Subtitle C--Reports and Other Matters

           *       *       *       *       *       *       *


SEC. 1245. IMPOSITION OF SANCTIONS WITH RESPECT TO THE FINANCIAL SECTOR 
                    OF IRAN.

  (a) Findings.--Congress makes the following findings:
          (1) On November 21, 2011, the Secretary of the 
        Treasury issued a finding under section 5318A of title 
        31, United States Code, that identified Iran as a 
        jurisdiction of primary money laundering concern.
          (2) In that finding, the Financial Crimes Enforcement 
        Network of the Department of the Treasury wrote, ``The 
        Central Bank of Iran, which regulates Iranian banks, 
        has assisted designated Iranian banks by transferring 
        billions of dollars to these banks in 2011. In mid-
        2011, the CBI transferred several billion dollars to 
        designated banks, including Saderat, Mellat, EDBI and 
        Melli, through a variety of payment schemes. In making 
        these transfers, the CBI attempted to evade sanctions 
        by minimizing the direct involvement of large 
        international banks with both CBI and designated 
        Iranian banks.''.
          (3) On November 22, 2011, the Under Secretary of the 
        Treasury for Terrorism and Financial Intelligence, 
        David Cohen, wrote, ``Treasury is calling out the 
        entire Iranian banking sector, including the Central 
        Bank of Iran, as posing terrorist financing, 
        proliferation financing, and money laundering risks for 
        the global financial system.''.
  (b) Designation of Financial Sector of Iran as of Primary 
Money Laundering Concern.--The financial sector of Iran, 
including the Central Bank of Iran, is designated as a primary 
money laundering concern for purposes of section 5318A of title 
31, United States Code, because of the threat to government and 
financial institutions resulting from the illicit activities of 
the Government of Iran, including its pursuit of nuclear 
weapons, support for international terrorism, and efforts to 
deceive responsible financial institutions and evade sanctions.
  (c) Freezing of Assets of Iranian Financial Institutions.--
The President shall, pursuant to the International Emergency 
Economic Powers Act (50 U.S.C. 1701 et seq.), block and 
prohibit all transactions in all property and interests in 
property of an Iranian financial institution if such property 
and interests in property are in the United States, come within 
the United States, or are or come within the possession or 
control of a United States person.
  (d) Imposition of Sanctions With Respect to the Central Bank 
of Iran and Other Iranian Financial Institutions.--
          (1) In general.--Except as specifically provided in 
        this subsection, beginning on the date that is 60 days 
        after the date of the enactment of this Act, the 
        President--
                  (A) shall prohibit the opening, and prohibit 
                or impose strict conditions on the maintaining, 
                in the United States of a correspondent account 
                or a payable-through account by a foreign 
                financial institution that the President 
                determines has knowingly conducted or 
                facilitated any significant financial 
                transaction with the Central Bank of Iran or 
                another Iranian financial institution 
                designated by the Secretary of the Treasury for 
                the imposition of sanctions pursuant to the 
                International Emergency Economic Powers Act (50 
                U.S.C. 1701 et seq.); and
                  (B) may impose sanctions pursuant to the 
                International Emergency Economic Powers Act (50 
                U.S.C. 1701 et seq.) with respect to the 
                Central Bank of Iran.
          (2) Exception for sales of agricultural commodities, 
        food, medicine, and medical devices.--The President may 
        not impose sanctions under paragraph (1) with respect 
        to any person for conducting or facilitating a 
        transaction for the sale of agricultural commodities, 
        food, medicine, or medical devices to Iran.
          (3) Applicability of sanctions with respect to 
        foreign central banks.--Except as provided in paragraph 
        (4), sanctions imposed under paragraph (1)(A) shall 
        apply with respect to a central bank of a foreign 
        country, only insofar as it engages in a financial 
        transaction for the sale or purchase of petroleum or 
        petroleum products to or from Iran conducted or 
        facilitated on or after that date that is 180 days 
        after the date of the enactment of this Act.
          (4) Applicability of sanctions with respect to 
        petroleum transactions.--
                  (A) Report required.--Not later than October 
                25, 2012, and the last Thursday of every other 
                month thereafter, the Administrator of the 
                Energy Information Administration, in 
                consultation with the Secretary of the 
                Treasury, the Secretary of State, and the 
                Director of National Intelligence, shall submit 
                to Congress a report on the availability and 
                price of petroleum and petroleum products 
                produced in countries other than Iran in the 2-
                month period preceding the submission of the 
                report.
                  (B) Determination required.--Not later than 
                90 days after the date of the enactment of this 
                Act, and every 180 days thereafter, the 
                President shall make a determination, based on 
                the reports required by subparagraph (A), of 
                whether the price and supply of petroleum and 
                petroleum products produced in countries other 
                than Iran is sufficient to permit purchasers of 
                petroleum and petroleum products from Iran to 
                reduce significantly in volume their purchases 
                from Iran.
                  (C) Application of sanctions.--Except as 
                provided in subparagraph (D), sanctions imposed 
                under paragraph (1)(A) shall apply with respect 
                to a financial transaction conducted or 
                facilitated by a foreign financial institution 
                on or after the date that is 180 days after the 
                date of the enactment of this Act for the 
                purchase of petroleum or petroleum products 
                from Iran if the President determines pursuant 
                to subparagraph (B) that there is a sufficient 
                supply of petroleum and petroleum products from 
                countries other than Iran to permit a 
                significant reduction in the volume of 
                petroleum and petroleum products purchased from 
                Iran by or through foreign financial 
                institutions.
                  (D) Exception.--
                          (i) In general.--Sanctions imposed 
                        pursuant to paragraph (1) shall not 
                        apply with respect to a financial 
                        transaction described in clause (ii) 
                        conducted or facilitated by a foreign 
                        financial institution if the President 
                        determines and reports to Congress, not 
                        later than 90 days after the date on 
                        which the President makes the 
                        determination required by subparagraph 
                        (B), and every 180 days thereafter, 
                        that the country with primary 
                        jurisdiction over the foreign financial 
                        institution--
                                  (I) has significantly reduced 
                                reduced its volume of crude oil 
                                purchases from Iran during the 
                                period beginning on the date on 
                                which the President submitted 
                                the last report with respect to 
                                the country under this 
                                subparagraph; or
                                  (II) in the case of a country 
                                that has previously received an 
                                exception under this 
                                subparagraph, has, after 
                                receiving the exception, 
                                reduced its crude oil purchases 
                                from Iran to zero.
                          (ii) Financial transactions 
                        described.--A financial transaction 
                        conducted or facilitated by a foreign 
                        financial institution is described in 
                        this clause if--
                                  (I) the financial transaction 
                                is only for trade in goods or 
                                services between the country 
                                with primary jurisdiction over 
                                the foreign financial 
                                institution and Iran; and
                                  (II) any funds owed to Iran 
                                as a result of such trade are 
                                credited to an account located 
                                in the country with primary 
                                jurisdiction over the foreign 
                                financial institution.
          (5) Applicability of sanctions with respect to 
        chinese financial institutions.--
                  (A) In general.--For the purpose of paragraph 
                (1)(A), a ``significant financial transaction'' 
                includes any transaction by a Chinese financial 
                institution (without regard to the size, 
                number, frequency, or nature of the 
                transaction) involving the purchase of 
                petroleum or petroleum products from Iran.
                  (B) Determination required.--Not later than 
                180 days after the date of the enactment of 
                this paragraph and every year thereafter for 5 
                years, the President shall--
                          (i) determine whether any Chinese 
                        financial institution has engaged in a 
                        significant financial transaction as 
                        described in paragraph (1)(A); and
                          (ii) transmit the determination under 
                        clause (i) to the Committee on 
                        Financial Services of the House of 
                        Representatives and the Committee on 
                        Banking, Housing, and Urban Affairs of 
                        the Senate.
          [(5)] (6) Waiver.--The President may waive the 
        imposition of sanctions under paragraph (1) for a 
        period of not more than 120 days, and may renew that 
        waiver for additional periods of not more than 120 
        days, if the President--
                  (A) determines that such a waiver is in the 
                national security interest of the United 
                States; and
                  (B) submits to Congress a report--
                          (i) providing a justification for the 
                        waiver;
                          (ii) certifying that the country with 
                        primary jurisdiction over the foreign 
                        financial institution otherwise subject 
                        to the sanctions faced exceptional 
                        circumstances that prevented the 
                        country from being able to reduce 
                        significantly its purchases of 
                        petroleum and petroleum products from 
                        Iran; and
                          (iii) that includes any concrete 
                        cooperation the President has received 
                        or expects to receive as a result of 
                        the waiver.
  (e) Multilateral Diplomacy Initiative.--
          (1) In general.--The President shall--
                  (A) carry out an initiative of multilateral 
                diplomacy to persuade countries purchasing oil 
                from Iran--
                          (i) to limit the use by Iran of 
                        revenue from purchases of oil to 
                        purchases of non-luxury consumers goods 
                        from the country purchasing the oil; 
                        and
                          (ii) to prohibit purchases by Iran 
                        of--
                                  (I) military or dual-use 
                                technology, including items--
                                          (aa) in the Annex to 
                                        the Missile Technology 
                                        Control Regime 
                                        Guidelines;
                                          (bb) in the Annex on 
                                        Chemicals to the 
                                        Convention on the 
                                        Prohibition of the 
                                        Development, 
                                        Production, Stockpiling 
                                        and Use of Chemical 
                                        Weapons and on their 
                                        Destruction, done at 
                                        Paris January 13, 1993, 
                                        and entered into force 
                                        April 29, 1997 
                                        (commonly known as the 
                                        ``Chemical Weapons 
                                        Convention'');
                                          (cc) in Part 1 or 2 
                                        of the Nuclear 
                                        Suppliers Group 
                                        Guidelines; or
                                          (dd) on a control 
                                        list of the Wassenaar 
                                        Arrangement on Export 
                                        Controls for 
                                        Conventional Arms and 
                                        Dual-Use Goods and 
                                        Technologies; or
                                  (II) any other item that 
                                could contribute to Iran's 
                                conventional, nuclear, 
                                chemical, or biological weapons 
                                program; and
                  (B) conduct outreach to petroleum-producing 
                countries to encourage those countries to 
                increase their output of crude oil to ensure 
                there is a sufficient supply of crude oil from 
                countries other than Iran and to minimize any 
                impact on the price of oil resulting from the 
                imposition of sanctions under this section.
          (2) Report required.--Not later than 180 days after 
        the date of the enactment of this Act, and every 180 
        days thereafter, the President shall submit to Congress 
        a report on the efforts of the President to carry out 
        the initiative described in paragraph (1)(A) and 
        conduct the outreach described in paragraph (1)(B) and 
        the results of those efforts.
  (f) Form of Reports.--Each report submitted under this 
section shall be submitted in unclassified form, but may 
contain a classified annex.
  (g) Implementation; Penalties.--
          (1) Implementation.--The President may exercise all 
        authorities provided under sections 203 and 205 of the 
        International Emergency Economic Powers Act (50 U.S.C. 
        1702 and 1704) to carry out this section.
          (2) Penalties.--The penalties provided for in 
        subsections (b) and (c) of section 206 of the 
        International Emergency Economic Powers Act (50 U.S.C. 
        1705) shall apply to a person that violates, attempts 
        to violate, conspires to violate, or causes a violation 
        of this section or regulations prescribed under this 
        section to the same extent that such penalties apply to 
        a person that commits an unlawful act described in 
        section 206(a) of that Act.
  (h) Definitions.--In this section:
          (1) Account; correspondent account; payable-through 
        account.--The terms ``account'', ``correspondent 
        account'', and ``payable-through account'' have the 
        meanings given those terms in section 5318A of title 
        31, United States Code.
          (2) Foreign financial institution.--The term 
        ``foreign financial institution'' has the meaning of 
        that term as determined by the Secretary of the 
        Treasury pursuant to section 104(i) of the 
        Comprehensive Iran Sanctions, Accountability, and 
        Divestment Act of 2010 (22 U.S.C. 8513(i)).
          (3) Significant reductions.--The terms ``reduce 
        significantly'', ``significant reduction'', and 
        ``significantly reduced'', with respect to purchases 
        from Iran of petroleum and petroleum products, include 
        a reduction in such purchases in terms of price or 
        volume toward a complete cessation of such purchases.
          (4) United states person.--The term ``United States 
        person'' means--
                  (A) a natural person who is a citizen or 
                resident of the United States or a national of 
                the United States (as defined in section 101(a) 
                of the Immigration and Nationality Act (8 
                U.S.C. 1101(a))); and
                  (B) an entity that is organized under the 
                laws of the United States or a jurisdiction 
                within the United States.
  (i) Termination.--The provisions of this section shall 
terminate on the date that is 30 days after the date on which 
the President submits to Congress the certification described 
in section 401(a) of the Comprehensive Iran Sanctions, 
Accountability, and Divestment Act of 2010 (22 U.S.C. 8551(a)).

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