59–006 

110TH CONGRESS REPT. 110–163 " ! HOUSE OF REPRESENTATIVES 1st Session Part I 

EXPANSION AND CLARIFICATION OF ENTITIES AGAINST 

WHICH SANCTIONS MAY BE IMPOSED PURSUANT TO THE 

IRAN SANCTIONS ACT OF 1996 

MAY 22, 2007.—Ordered to be printed 

Mr. LANTOS, from the Committee on Foreign Affairs, 

submitted the following 

R E P O R T 

[To accompany H.R. 957] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Foreign Affairs, to whom was referred the bill 

(H.R. 957) to amend the Iran Sanctions Act of 1996 to expand and 

clarify the entities against which sanctions may be imposed, having 

considered the same, reports favorably thereon with an amendment 

and recommends that the bill as amended do pass. 

TABLE OF CONTENTS 

Page 

The Amendment ...................................................................................................... 2 

Purpose and Summary ............................................................................................ 2 

Hearings and Briefings ........................................................................................... 4 

Committee Consideration ........................................................................................ 4 

Votes of the Committee ........................................................................................... 4 

Committee Oversight Findings ............................................................................... 4 

New Budget Authority and Tax Expenditures ...................................................... 4 

Congressional Budget Office Cost Estimate .......................................................... 4 

Performance Goals and Objectives ......................................................................... 5 

Constitutional Authority Statement ...................................................................... 5 

New Advisory Committees ...................................................................................... 5 

Congressional Accountability Act ........................................................................... 5 

Section-by-Section Analysis .................................................................................... 5 

Changes in Existing Law Made by the Bill, as Reported ..................................... 6 

THE AMENDMENT

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

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SECTION 1. EXPANSION AND CLARIFICATION OF ENTITIES AGAINST WHICH SANCTIONS MAY 

BE IMPOSED PURSUANT TO THE IRAN SANCTIONS ACT OF 1996. 

Section 14 of the Iran Sanctions Act of 1996 (50 U.S.C. 1701 note) is amended— (1) in paragraph (13)(B)— (A) by inserting after ‘‘trust,’’ the following: ‘‘financial institution, insurer, 

underwriter, guarantor, any other business organization, including any foreign subsidiaries of the foregoing,’’; and 

(B) by inserting before the semicolon at the end the following: ‘‘, such as 

an export credit agency’’; and 

(2) in paragraph (14), by inserting after ‘‘petroleum’’ the second place it appears the following: ‘‘, petroleum by-products, liquified natural gas,’’. 

SEC. 2. LIABILITY OF PARENT COMPANIES FOR VIOLATIONS OF SANCTIONS BY FOREIGN ENTITIES. 

(a) IN GENERAL.—In any case in which an entity engages in an act outside the 

United States which, if committed in the United States or by a United States person, would violate Executive Order No. 12959 of May 6, 1995, Executive Order No. 

13059 of August 19, 1997, or any other prohibition on transactions with respect to 

Iran that is imposed under the International Emergency Economic Powers Act (50 

U.S.C. 1701 et seq.) and if that entity was created or availed of for the purpose of 

engaging in such an act, the parent company of that entity shall be subject to the 

penalties for such violation to the same extent as if the parent company had engaged in that act. 

(b) DEFINITIONS.—In this section—

(1) an entity is a ‘‘parent company’’ of another entity if it owns, directly or 

indirectly, more than 50 percent of the equity interest in that other entity and 

is a United States person; and 

(2) the term ‘‘entity’’ means a partnership, association, trust, joint venture, 

corporation, or other organization. 

PURPOSE AND SUMMARY

H.R. 957, to amend the Iran Sanctions Act of 1996 to expand and 

clarify the entities against which sanctions may be imposed, 

strengthens two earlier laws regarding Iran sanctions: the Iran and 

Libya Sanctions Act of 1996, and the Iran Freedom Support Act. 

On February 15, 2007, H.R. 957 was considered by the Committee 

on Foreign Affairs, and reported favorably to the House, as amended. 

Iran poses a significant threat to the United States and our allies 

in the region. It is a vital U.S. national security priority to undertake steps to prevent Iran from acquiring weapons of mass destruction, in particular nuclear weapons, and to end its support for 

international terrorism. 

Iran’s economy, and its ability to influence events, is heavily dependent on the revenue derived from energy exports. As such, recent U.S. efforts to prevent Iran from acquiring weapons of mass 

destruction have focused on deterring and prohibiting investment 

in Iran’s petroleum sector. 

Although U.S. law prohibits American firms from investing in 

Iran, foreign entities which fall outside of United States jurisdiction continue to invest there. Such activity has enhanced the Iranian economy, allowed Iran access to sophisticated technology and 

know-how, as well as foreign currency, and thereby contributed significantly to Iran’s ability to fund terror groups, and to finance the 

regime’s weapons of mass destruction programs, including its nuclear program. 

To address this problem, Congress passed, and President Bill 

Clinton signed into law, Public Law 104–172, the ‘‘Iran and Libya 

Sanctions Act of 1996’’ (ILSA). The purpose of this law was to discourage foreign entities from investing in Iran’s petroleum sector 

by imposing certain sanctions on them. However, since its enactmstockstill on PROD1PC66 with HEARING

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ment, not a single entity has been sanctioned pursuant to P.L. 

104–172. Presidential authority has been used to waive sanctions 

against foreign entities investing in Iran’s petroleum sector, and a 

number of investigations of possible investment in Iran remain active. 

To further strengthen sanctions targeting these investments, on 

September 30, 2006, Congress passed, and President George W. 

Bush signed into law, Public Law 109–293, the ‘‘Iran Freedom Support Act’’ (IFSA). 

Among other provisions, the IFSA strengthened sanctions under 

the Iran Sanctions Act (‘‘ISA’’—as the former ‘‘Iran and Libya Sanctions Act of 2006’’ is now known), including by raising certain waiver thresholds to ‘‘vital to the national security interests of the 

United States,’’ by enlarging the scope of those who might be subject to sanctions, and by enhancing tools for using financial means 

to address Iran’s activities of concern. 

Since enactment of Public Law 109–293, there have been multiple reports of memoranda of understanding regarding investment 

deals in Iran’s energy sector that would be in violation of the ISA. 

Some of the firms named include Royal Dutch Shell Oil Company, 

China’s National Offshore Oil Corporation (CNOOC), Australian 

LNG Co., and Malaysia’s SKS. In many of these proposed investment deals, foreign governments and export credit agencies helped 

subsidize these investments. 

In February 2007, Gregory L. Schulte, the chief U.S. representative to the International Atomic Energy Agency, called on European governments to cease giving credits to ‘‘subsidize exports to 

Iran,’’ and to take ‘‘more measures to discourage investment and financial transactions’’ with Iran. 

The enacted version of IFSA did not include language that would 

make export credit agencies, insurers, and other financial institutions subject to sanctions for their facilitation of investments in 

Iran’s oil industry. To address these gaps, the House Foreign Affairs Committee passed H.R. 957. This bill also expands the activities covered under the law to include production of petrochemicals 

and liquefied natural gas. 

Although the IFSA codified Section 3 of Executive Order 12959 

(which authorizes the Secretary of the Treasury to take legal action 

against United States persons based on oil transactions engaged in 

by their foreign affiliates with Iran), and Section 2(f) of Executive 

Order 13059 (which includes foreign subsidiaries as entities subject 

to sanctions for violating U.S. law), concerns remained that existing law required the clarification that sanctions under the ISA 

should apply to certain foreign subsidiaries of U.S. companies. 

To eliminate these concerns, H.R. 957 was amended by an 

Amendment in the Nature of a Substitute, which was adopted during consideration of the bill by the House Foreign Affairs Committee on February 15, 2007. The amendment provided for imposition of liability on parent companies for violations of sanctions by 

their foreign subsidiaries. 

HEARINGS AND BRIEFINGS

In recent years, the Full Committee has held several hearings regarding Iran: 

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February 26, 2003 (Russia’s Policies Toward the Axis of Evil: 

Money and Geopolitics in Iraq and Iran); June 4, 2003 (U.S. Nonproliferation Policy After Iraq); March 30, 2004 (The Bush Administration and Nonproliferation: A New Strategy Emerges); and February 16, 2005 and March 8, 2006 (both entitled ‘United States Policy Toward Iran—Next Steps’). The Full Committee recently held 

a briefing about Iran—January 11, 2007 (Next Steps in the Iran 

Crisis), and a hearing—January 31, 2007 (Understanding the Iran 

Crisis). 

COMMITTEE CONSIDERATION

On February 15, 2007, the Full Committee marked up the bill, 

H.R. 957, pursuant to notice, in open session. The Committee 

agreed to a motion to favorably report the bill, as amended, by a 

voice vote, a quorum being present. 

VOTES OF THE COMMITTEE

There were no recorded votes taken during consideration of H.R. 

957. 

COMMITTEE OVERSIGHT FINDINGS

In compliance with clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives, the Committee reports that 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. 

NEW BUDGET AUTHORITY AND TAX EXPENDITURES

Clause 3(c)(2) of House Rule XIII is inapplicable because this legislation does not provide new budgetary authority or increased tax 

expenditures. 

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, the Committee sets forth, with respect to 

the bill, H.R. 957, the following estimate and comparison prepared 

by the Director of the Congressional Budget Office under section 

402 of the Congressional Budget Act of 1974: 

February 27, 2007 

H.R. 957—To amend the Iran Sanctions Act of 1996 to expand and 

clarify the entities against which sanctions may be imposed 

H.R. 957 would amend current law to expand the definition of 

persons who are subject to sanctions for making investments that 

increase Iran’s ability to develop its petroleum resources. The new 

definition would add financial institutions, insurers, underwriters, 

guarantors, and any other business organizations, including any 

foreign subsidiaries, to the list of entities already barred from investing in Iran. The bill also would add several petroleum by-products to the definition of petroleum resources. Finally, the bill would 

make parent companies that create entities to invest in Iran subject to the same penalties that would apply if the parent company 

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had actually engaged in such activity. The provisions of H.R. 957 

would codify existing prohibitions on the private sector that are 

contained in Executive Orders 12957, 12959, and 13059. 

CBO estimates that enacting H.R. 957 would have no significant 

budgetary effect. H.R. 957 contains no intergovernmental mandates 

as defined in the Unfunded Mandates Reform Act (UMRA) and 

would not affect the budgets of state, local, or tribal governments. 

This bill contains no new private-sector mandates as defined in 

UMRA. 

The CBO staff contact for this estimate is Sam Papenfuss. This 

estimate was approved by Robert A. Sunshine, Assistant Director 

for Budget Analysis. 

Intergovernmental and Private Sector Impact 

H.R. 957 contains no intergovernmental or private-sector mandates as defined in UMRA and would not affect the budgets of 

state, local, or tribal governments 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause (3)(c) of House rule XIII, upon enactment of 

this legislation, the Department of State should expand its investigation of violations under the Iran Sanctions Act to include financing of investments in Iran’s energy sector. 

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d) (1) of rule XIII of the Rules of the House 

of Representatives, the Committee finds the authority for this legislation in article I, section 8 of the Constitution. 

NEW ADVISORY COMMITTEES

H.R. 957 does not establish or authorize any new advisory committees. 

CONGRESSIONAL ACCOUNTABILITY ACT

H.R. 957 does not apply to the Legislative Branch. 

Earmark Identification 

H.R. 957 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9(d), 9(e), 

or 9(f) of rule XXI. 

SECTION-BY-SECTION ANALYSIS

Section 1. Expansion and Clarification of Entities Against Which 

Sanctions May be Imposed Pursuant to the Iran Sanctions Act 

of 1996. 

Section 1 amends Section 14 of the Iran Sanctions Act of 1996 

by adding financial institutions, guarantors, export credit agencies 

and any other business organizations, including any of their foreign 

subsidiaries, as subject to sanctions. 

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Section 2. Liability of Parent Companies for Violations of Sanctions 

by Foreign Entities. 

Section 2 requires that a parent company be subject to sanctions 

for the activities committed by its foreign subsidiary, if those activities, were they committed by the parent company itself, would be 

in violation of U.S. law. 

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 (new matter is printed in italics 

and existing law in which no change is proposed is shown in 

roman): 

SECTION 14 OF THE IRAN SANCTIONS ACT OF 1996 

SEC. 14. DEFINITIONS. 

As used in this Act: 

(1) * * * 

* * * * * * * 

(13) PERSON.—The term ‘‘person’’ means—

(A) a natural person; 

(B) a corporation, business association, partnership, society, trust, financial institution, insurer, underwriter, guarantor, any other business organization, including any foreign subsidiaries of the foregoing, any other nongovernmental entity, organization, or group, and any governmental entity operating as a business enterprise, such as 

an export credit agency; and 

* * * * * * * 

(14) PETROLEUM RESOURCES.—The term ‘‘petroleum resources’’ includes petroleum, petroleum by-products, liquified 

natural gas, and natural gas resources. 

* * * * * * * 

Æ 

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