[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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