[House Report 116-636]
[From the U.S. Government Publishing Office]


116th Congress }                                          { Report
                        HOUSE OF REPRESENTATIVES
  2d Session   }                                          { 116-636

======================================================================
 
                        FAIR AND OPEN SKIES ACT

                                _______
                                

December 9, 2020.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. DeFazio, from the Committee on Transportation and Infrastructure, 
                        submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 3632]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Transportation and Infrastructure, to whom 
was referred the bill (H.R. 3632) to ensure that authorizations 
issued by the Secretary of Transportation to foreign air 
carriers do not undermine labor rights or standards, and for 
other purposes, having considered the same, reports favorably 
thereon without amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose of Legislation...........................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     3
Legislative History and Consideration............................     3
Committee Votes..................................................     3
Committee Oversight Findings.....................................     4
New Budget Authority and Tax Expenditures........................     4
Congressional Budget Office Cost Estimate........................     4
Performance Goals and Objectives.................................     5
Duplication of Federal Programs..................................     6
Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
  Benefits.......................................................     6
Federal Mandates Statement.......................................     6
Preemption Clarification.........................................     6
Advisory Committee Statement.....................................     6
Applicability to Legislative Branch..............................     6
Section-by-Section Analysis of the Legislation...................     6
Changes in Existing Law Made by the Bill, as Reported............     7
Additional Views.................................................    18

                         Purpose of Legislation

    The purpose of H.R. 3632 is to ensure that future foreign 
air carrier permits granted by the U.S. Department of 
Transportation (DOT), which allow foreign operators to conduct 
revenue air service to the United States, include additional 
DOT review and analysis in order to preserve fair competition 
and labor standards in international aviation.

                  Background and Need for Legislation

    On December 2, 2016, the DOT issued a foreign air carrier 
permit to Norwegian Air International (NAI). Numerous U.S. 
aviation stakeholders objected to the DOT decision, arguing, 
among other things, that NAI's business model was an attempt to 
subvert fair competition and labor standards. Specifically, 
although the majority of NAI's long-haul flights to the United 
States operate from Scandinavian countries and others in 
continental Europe, the carrier organized itself under the laws 
of Ireland, thereby permitting the carrier to hire crewmembers 
on short-term contracts governed under Singapore law.
    Opponents of the issuance of a foreign air carrier permit 
to Norwegian contended that such an outsourcing practice runs 
contrary to U.S. labor laws and afoul of the fair labor 
principles of Norway, the European Union, and the United States 
incorporated by reference in the multilateral United States-
European Union-Norway-Iceland Air Transportation Agreement of 
April 2007 (as amended) (U.S.-EU Open Skies Agreement). This 
``flag of convenience'' business model offered NAI an unfair 
competitive advantage in the transatlantic market, according to 
U.S. aviation stakeholders.
    In addition to the threat posed by ``flag of convenience'' 
business models to U.S. aviation industry and labor interests, 
other foreign air carriers are similarly venturing into 
atypical employment models. For example, some foreign air 
carriers employ pilots and flight crew members under individual 
or temporary contracts, like NAI, which remove the direct 
relationship between the carrier and flight crew. Such business 
models undermine labor standards by allowing the carrier to 
exploit employees through a third party when negotiating 
employment terms, salary, and benefits, according to U.S. 
aviation stakeholders.
    H.R. 3632 precludes the DOT from permitting a future 
foreign air carrier to serve the United States under the U.S.-
EU Open Skies Agreement unless the Secretary of Transportation 
determines the foreign air carrier permit or exemption is 
consistent with the fair labor standards and fair competition 
requirements of the U.S.-EU Open Skies Agreement and imposes on 
the permit any conditions necessary to ensure compliance with 
those standards and requirements. H.R. 3632 further requires 
the Secretary, when granting a permit to a future foreign air 
carrier, to find the foreign air transportation to be provided 
under the permit will be in the public interest. H.R. 3632 
provides that preventing entry into U.S. markets by a ``flag of 
convenience'' carrier--defined in the legislation as a carrier 
established in a country other than the home country of its 
majority owner to avoid regulations of its home country--or 
otherwise undermining labor standards is within the public 
interest.
    This legislation is necessary because a foreign air carrier 
seeking to serve the United States under an existing 
international air transportation agreement, such as the U.S.-EU 
Open Skies Agreement, should not per se be deemed in the U.S. 
public interest, as the DOT determined when it granted the 2016 
foreign air carrier permit to NAI. In fact, such determinations 
can incentivize other foreign air carriers to follow suit. A 
foreign air carrier, like NAI, that establishes itself in a 
location outside of its home country in order to take advantage 
of more permissive labor, tax, and safety laws than those of 
the United States and certain other countries poses a threat to 
U.S. aviation commercial, economic, and labor interests. This 
legislation seeks to help prevent market access opportunities 
created under the U.S.-EU Open Skies Agreement and other 
international air transport agreements from undermining and 
eroding the highest fair competition principles, labor and wage 
standards, and aviation safety rules.

                                Hearings

    For the purposes of section 103(i) of H. Res. 6 of the 
116th Congress, the following hearing was used to develop or 
consider H.R. 3632:
    On July 17, 2019, the Subcommittee on Aviation held a 
hearing titled, ``State of Aviation Safety.'' The purpose of 
the hearing was to gather government and stakeholder 
perspectives on the state of aviation safety, including 
identifying current challenges facing the aviation system and 
actions needed to maintain and ensure the safety of the 
traveling public. Witnesses included: Paul Njoroge and Michael 
Stumo, on behalf of the families of Ethiopian Airlines flight 
302; Dana Schulze, Acting Director of Aviation Safety, National 
Transportation Safety Board; Joe DePete, President, Air Line 
Pilots Association, International; Lori Bassani, National 
President, The Association of Professional Flight Attendants; 
Mike Perrone, National President, Professional Aviation Safety 
Specialists; and John Samuelsen, International President, 
Transport Workers Union.

                 Legislative History and Consideration

    H.R. 3632 was introduced in the House on July 9, 2019, by 
Mr. DeFazio, Mr. Larsen of Washington, Mr. Rodney Davis of 
Illinois, Mr. Ferguson, and Ms. Davids of Kansas and was 
referred to the Committee on Transportation and Infrastructure. 
Within the Committee, H.R. 3632 was referred to the 
Subcommittee on Aviation.
    The Subcommittee on Aviation was discharged from further 
consideration of H.R. 3632 on September 19, 2019.
    The Full Committee met in open session to consider H.R. 
3632 on September 19, 2019, and ordered the measure to be 
reported to the House with a favorable recommendation, without 
amendment, by voice vote, a quorum being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires each committee report to include the 
total number of votes cast for and against on each record vote 
on a motion to report and on any amendment offered to the 
measure or matter, and the names of those members voting for 
and against.
    No recorded votes were taken during consideration of H.R. 
3632.

                      Committee Oversight Findings

    With respect to the requirements of clause 3(c)(1) of rule 
XIII of the Rules of the House of Representatives, the 
Committee's oversight findings and recommendations are 
reflected in this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives does not apply where a cost estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974 has been timely submitted prior to the filing of the 
report and is included in the report. Such a cost estimate is 
included in this report.

               Congressional Budget Office Cost Estimate

    With respect to the requirement of clause 3(c)(3) of rule 
XIII of the Rules of the House of Representatives and section 
402 of the Congressional Budget Act of 1974, the Committee has 
received the enclosed cost estimate for H.R. 3632.

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, October 29, 2019.
Hon. Peter A. DeFazio,
Chairman, Committee on Transportation and Infrastructure,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3632, the Fair and 
Open Skies Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Aaron 
Krupkin.
            Sincerely,
                                         Phillip L. Swagel,
                                                          Director.
    Enclosure.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

    H.R. 3632 would amend the criteria that the Department of 
Transportation (DOT) must consider when processing permit 
applications for foreign air carriers to provide foreign air 
transportation in the United States. Specifically, the bill 
would prohibit DOT from issuing new permits to foreign air 
carriers unless the carrier adheres to labor standards 
reflected in the guidelines to the United States-European Union 
Air Transport Agreement of April 2007 (as amended). Active 
permits would not be affected.
    H.R. 3632 would increase DOT's administrative costs related 
to processing and reviewing permits. The bill also could affect 
DOT's collections of permit filing fees if the legislation 
caused certain foreign air carriers to not apply for permits. 
However, most filing fees, which are treated as discretionary 
offsetting collections, are waived under current law as part of 
international agreements with approximately 80 countries. Using 
information from DOT, CBO estimates that implementing H.R. 3632 
would cost about $1 million over the 2020-2024 period; any 
spending would be subject to the availability of appropriated 
funds.
    The CBO staff contact for this estimate is Aaron Krupkin. 
The estimate was reviewed by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                    Performance Goals and Objectives

    With respect to the requirement of clause 3(c)(4) of rule 
XIII of the Rules of the House of Representatives, the 
performance goal and objective of this legislation is to 
guarantee that when considering whether to grant a foreign air 
carrier permit to an applicant to perform revenue service to 
the United States, the DOT undertakes additional review and 
analysis to examine whether the applicant is undermining fair 
competition and labor standards and ensures the granting of a 
permit is in fact within the U.S. public interest.

                    Duplication of Federal Programs

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that no provision 
of H.R. 3632 establishes or reauthorizes a program of the 
federal government known to be duplicative of another federal 
program, a program that was included in any report from the 
Government Accountability Office to Congress pursuant to 
section 21 of Public Law 111-139, or a program related to a 
program identified in the most recent Catalog of Federal 
Domestic Assistance.

   Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    In compliance with clause 9 of rule XXI of the Rules of the 
House of Representatives, this bill, as reported, contains no 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(e), 9(f), or 9(g) of the rule 
XXI.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act (Public Law 104-4).

                        Preemption Clarification

    Section 423 of the Congressional Budget Act of 1974 
requires the report of any Committee on a bill or joint 
resolution to include a statement on the extent to which the 
bill or joint resolution is intended to preempt state, local, 
or tribal law. The Committee finds that H.R. 3632 does not 
preempt any state, local, or tribal law.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation, as amended.

                  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 (Public Law 
104-1).

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section provides that this bill may be cited as the 
``Fair and Open Skies Act''.

Sec. 2. Foreign air transportation under United States-European Union 
        air transport agreement

    This section precludes the DOT from issuing a foreign air 
carrier permit or exemption to a person seeking to provide 
foreign air transportation to the United States under the U.S.-
EU Open Skies Agreement unless the DOT determines that issuance 
of such a permit or exemption is consistent with Article 17 bis 
of the U.S.-EU Open Skies Agreement--declaring that the 
``opportunities created by the Agreement are not intended to 
undermine labour standards or the labour-related rights and 
principles contained in the [signatories''] respective laws''--
and imposes on the permit or exemption such conditions 
necessary to ensure compliance with Article 17 bis.

Sec. 3. Public interest test

    This section amends the finding the Secretary must make 
before authorizing a permit to a foreign air carrier to serve 
the United States. Specifically, this section requires the 
Secretary, before issuing a foreign air carrier permit, to find 
(1) that the applicant is qualified and has been designated by 
its home government to provide foreign air transportation, and 
(2) after considering the totality of the circumstances, that 
issuance of the foreign air carrier permit will be in the 
public interest. When considering the totality of the 
circumstances, this section requires the Secretary to consider 
all factors listed in section 40101(a) of title 49, United 
States Code, when deciding under their authority to conduct 
economic regulation of air commerce in a manner consistent with 
the public interest and public convenience and necessity.

Sec. 4. Public interest requirements

    This section amends the DOT's economic regulation policy 
over air commerce established under section 40101(a) of title 
49, United States Code, by adding the following two items to 
the current list of 16 criteria that are to be considered as in 
the public interest and consistent with public convenience and 
necessity: (1) preventing entry into United States markets by 
``flag of convenience carriers'' and (2) preventing the 
undermining of labor standards. This section defines ``flags of 
convenience carrier'' to mean a foreign air carrier established 
in a country other than the home country of its majority owner 
or owners in order to avoid regulations of the home country.
    This section also requires the DOT and Department of State, 
in formulating United States international air transportation 
policy, to develop a negotiating policy emphasizing the 
greatest degree of competition compatible within a well-
functioning international air transportation, including 
eliminating discrimination and unfair competitive practices 
faced by U.S. airlines in foreign air transportation and not 
undermining labor standards.

         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):

                      TITLE 49, UNITED STATES CODE




           *       *       *       *       *       *       *
SUBTITLE VII--AVIATION PROGRAMS

           *       *       *       *       *       *       *


PART A--AIR COMMERCE AND SAFETY

           *       *       *       *       *       *       *


SUBPART I--GENERAL

           *       *       *       *       *       *       *


CHAPTER 401--GENERAL PROVISIONS

           *       *       *       *       *       *       *



Sec. 40101. Policy

  (a) Economic Regulation.--In carrying out subpart II of this 
part and those provisions of subpart IV applicable in carrying 
out subpart II, the Secretary of Transportation shall consider 
the following matters, among others, as being in the public 
interest and consistent with public convenience and necessity:
          (1) assigning and maintaining safety as the highest 
        priority in air commerce.
          (2) before authorizing new air transportation 
        services, evaluating the safety implications of those 
        services.
          (3) preventing deterioration in established safety 
        procedures, recognizing the clear intent, 
        encouragement, and dedication of Congress to further 
        the highest degree of safety in air transportation and 
        air commerce, and to maintain the safety vigilance that 
        has evolved in air transportation and air commerce and 
        has come to be expected by the traveling and shipping 
        public.
          (4) the availability of a variety of adequate, 
        economic, efficient, and low-priced services without 
        unreasonable discrimination or unfair or deceptive 
        practices.
          (5) coordinating transportation by, and improving 
        relations among, air carriers, and encouraging fair 
        wages and working conditions.
          (6) placing maximum reliance on competitive market 
        forces and on actual and potential competition--
                  (A) to provide the needed air transportation 
                system; and
                  (B) to encourage efficient and well-managed 
                air carriers to earn adequate profits and 
                attract capital, considering any material 
                differences between interstate air 
                transportation and foreign air transportation.
          (7) developing and maintaining a sound regulatory 
        system that is responsive to the needs of the public 
        and in which decisions are reached promptly to make it 
        easier to adapt the air transportation system to the 
        present and future needs of--
                  (A) the commerce of the United States;
                  (B) the United States Postal Service; and
                  (C) the national defense.
          (8) encouraging air transportation at major urban 
        areas through secondary or satellite airports if 
        consistent with regional airport plans of regional and 
        local authorities, and if endorsed by appropriate State 
        authorities--
                  (A) encouraging the transportation by air 
                carriers that provide, in a specific market, 
                transportation exclusively at those airports; 
                and
                  (B) fostering an environment that allows 
                those carriers to establish themselves and 
                develop secondary or satellite airport 
                services.
          (9) preventing unfair, deceptive, predatory, or 
        anticompetitive practices in air transportation.
          (10) avoiding unreasonable industry concentration, 
        excessive market domination, monopoly powers, and other 
        conditions that would tend to allow at least one air 
        carrier or foreign air carrier unreasonably to increase 
        prices, reduce services, or exclude competition in air 
        transportation.
          (11) maintaining a complete and convenient system of 
        continuous scheduled interstate air transportation for 
        small communities and isolated areas with direct 
        financial assistance from the United States Government 
        when appropriate.
          (12) encouraging, developing, and maintaining an air 
        transportation system relying on actual and potential 
        competition--
                  (A) to provide efficiency, innovation, and 
                low prices; and
                  (B) to decide on the variety and quality of, 
                and determine prices for, air transportation 
                services.
          (13) encouraging entry into air transportation 
        markets by new and existing air carriers and the 
        continued strengthening of small air carriers to ensure 
        a more effective and competitive airline industry.
          (14) promoting, encouraging, and developing civil 
        aeronautics and a viable, privately-owned United States 
        air transport industry.
          (15) strengthening the competitive position of air 
        carriers to at least ensure equality with foreign air 
        carriers, including the attainment of the opportunity 
        for air carriers to maintain and increase their 
        profitability in foreign air transportation.
          (16) ensuring that consumers in all regions of the 
        United States, including those in small communities and 
        rural and remote areas, have access to affordable, 
        regularly scheduled air service.
          (17) preventing entry into United States markets by 
        flag of convenience carriers.
          (18) preventing the undermining of labor standards.
  (b) All-Cargo Air Transportation Considerations.--In carrying 
out subpart II of this part and those provisions of subpart IV 
applicable in carrying out subpart II, the Secretary of 
Transportation shall consider the following matters, among 
others and in addition to the matters referred to in subsection 
(a) of this section, as being in the public interest for all-
cargo air transportation:
          (1) encouraging and developing an expedited all-cargo 
        air transportation system provided by private 
        enterprise and responsive to--
                  (A) the present and future needs of shippers;
                  (B) the commerce of the United States; and
                  (C) the national defense.
          (2) encouraging and developing an integrated 
        transportation system relying on competitive market 
        forces to decide the extent, variety, quality, and 
        price of services provided.
          (3) providing services without unreasonable 
        discrimination, unfair or deceptive practices, or 
        predatory pricing.
  (c) General Safety Considerations.--In carrying out subpart 
III of this part and those provisions of subpart IV applicable 
in carrying out subpart III, the Administrator of the Federal 
Aviation Administration shall consider the following matters:
          (1) the requirements of national defense and 
        commercial and general aviation.
          (2) the public right of freedom of transit through 
        the navigable airspace.
  (d) Safety Considerations in Public Interest.--In carrying 
out subpart III of this part and those provisions of subpart IV 
applicable in carrying out subpart III, the Administrator shall 
consider the following matters, among others, as being in the 
public interest:
          (1) assigning, maintaining, and enhancing safety and 
        security as the highest priorities in air commerce.
          (2) regulating air commerce in a way that best 
        promotes safety and fulfills national defense 
        requirements.
          (3) encouraging and developing civil aeronautics, 
        including new aviation technology.
          (4) controlling the use of the navigable airspace and 
        regulating civil and military operations in that 
        airspace in the interest of the safety and efficiency 
        of both of those operations.
          (5) consolidating research and development for air 
        navigation facilities and the installation and 
        operation of those facilities.
          (6) developing and operating a common system of air 
        traffic control and navigation for military and civil 
        aircraft.
          (7) providing assistance to law enforcement agencies 
        in the enforcement of laws related to regulation of 
        controlled substances, to the extent consistent with 
        aviation safety.
  (e) International Air Transportation.--In formulating United 
States international air transportation policy, the Secretaries 
of State and Transportation shall develop a negotiating policy 
emphasizing the greatest degree of competition compatible with 
a well-functioning international air transportation system, 
including the following:
          (1) strengthening the competitive position of air 
        carriers to ensure at least equality with foreign air 
        carriers, including the attainment of the opportunity 
        for air carriers to maintain and increase their 
        profitability in foreign air transportation.
          (2) freedom of air carriers and foreign air carriers 
        to offer prices that correspond to consumer demand.
          (3) the fewest possible restrictions on charter air 
        transportation.
          (4) the maximum degree of multiple and permissive 
        international authority for air carriers so that they 
        will be able to respond quickly to a shift in market 
        demand.
          (5) eliminating operational and marketing 
        restrictions to the greatest extent possible.
          (6) integrating domestic and international air 
        transportation.
          (7) increasing the number of nonstop United States 
        gateway cities.
          (8) opportunities for carriers of foreign countries 
        to increase their access to places in the United States 
        if exchanged for benefits of similar magnitude for air 
        carriers or the traveling public with permanent linkage 
        between rights granted and rights given away.
          (9) eliminating discrimination and unfair competitive 
        practices faced by United States airlines in foreign 
        air transportation, including--
                  (A) excessive landing and user fees;
                  (B) unreasonable ground handling 
                requirements;
                  (C) unreasonable restrictions on operations;
                  (D) prohibitions against change of gauge; 
                [and]
                  (E) similar restrictive practices[.]; and
                  (F) undermining labor standards.
          (10) promoting, encouraging, and developing civil 
        aeronautics and a viable, privately-owned United States 
        air transport industry.
  (f) Strengthening Competition.--In selecting an air carrier 
to provide foreign air transportation from among competing 
applicants, the Secretary of Transportation shall consider, in 
addition to the matters specified in subsections (a) and (b) of 
this section, the strengthening of competition among air 
carriers operating in the United States to prevent unreasonable 
concentration in the air carrier industry.

Sec. 40102. Definitions

  (a) General Definitions.--In this part--
          (1) ``aeronautics'' means the science and art of 
        flight.
          (2) ``air carrier'' means a citizen of the United 
        States undertaking by any means, directly or 
        indirectly, to provide air transportation.
          (3) ``air commerce'' means foreign air commerce, 
        interstate air commerce, the transportation of mail by 
        aircraft, the operation of aircraft within the limits 
        of a Federal airway, or the operation of aircraft that 
        directly affects, or may endanger safety in, foreign or 
        interstate air commerce.
          (4) ``air navigation facility'' means a facility 
        used, available for use, or designed for use, in aid of 
        air navigation, including--
                  (A) a landing area;
                  (B) runway lighting and airport surface 
                visual and other navigation aids;
                  (C) apparatus, equipment, software, or 
                service for distributing aeronautical and 
                meteorological information to air traffic 
                control facilities or aircraft;
                  (D) communication, navigation, or 
                surveillance equipment for air-to-ground or 
                air-to-air applications;
                  (E) any structure, equipment, or mechanism 
                for guiding or controlling flight in the air or 
                the landing and takeoff of aircraft; and
                  (F) buildings, equipment, and systems 
                dedicated to the national airspace system.
          (5) ``air transportation'' means foreign air 
        transportation, interstate air transportation, or the 
        transportation of mail by aircraft.
          (6) ``aircraft'' means any contrivance invented, 
        used, or designed to navigate, or fly in, the air.
          (7) ``aircraft engine'' means an engine used, or 
        intended to be used, to propel an aircraft, including a 
        part, appurtenance, and accessory of the engine, except 
        a propeller.
          (8) ``airman'' means an individual--
                  (A) in command, or as pilot, mechanic, or 
                member of the crew, who navigates aircraft when 
                under way;
                  (B) except to the extent the Administrator of 
                the Federal Aviation Administration may provide 
                otherwise for individuals employed outside the 
                United States, who is directly in charge of 
                inspecting, maintaining, overhauling, or 
                repairing aircraft, aircraft engines, 
                propellers, or appliances; or
                  (C) who serves as an aircraft dispatcher or 
                air traffic control-tower operator.
          (9) ``airport'' means a landing area used regularly 
        by aircraft for receiving or discharging passengers or 
        cargo.
          (10) ``all-cargo air transportation'' means the 
        transportation by aircraft in interstate air 
        transportation of only property or only mail, or both.
          (11) ``appliance'' means an instrument, equipment, 
        apparatus, a part, an appurtenance, or an accessory 
        used, capable of being used, or intended to be used, in 
        operating or controlling aircraft in flight, including 
        a parachute, communication equipment, and another 
        mechanism installed in or attached to aircraft during 
        flight, and not a part of an aircraft, aircraft engine, 
        or propeller.
          (12) ``cargo'' means property, mail, or both.
          (13) ``charter air carrier'' means an air carrier 
        holding a certificate of public convenience and 
        necessity that authorizes it to provide charter air 
        transportation.
          (14) ``charter air transportation'' means charter 
        trips in air transportation authorized under this part.
          (15) ``citizen of the United States'' means--
                  (A) an individual who is a citizen of the 
                United States;
                  (B) a partnership each of whose partners is 
                an individual who is a citizen of the United 
                States; or
                  (C) a corporation or association organized 
                under the laws of the United States or a State, 
                the District of Columbia, or a territory or 
                possession of the United States, of which the 
                president and at least two-thirds of the board 
                of directors and other managing officers are 
                citizens of the United States, which is under 
                the actual control of citizens of the United 
                States, and in which at least 75 percent of the 
                voting interest is owned or controlled by 
                persons that are citizens of the United States.
          (16) ``civil aircraft'' means an aircraft except a 
        public aircraft.
          (17) ``civil aircraft of the United States'' means an 
        aircraft registered under chapter 441 of this title.
          (18) ``conditional sales contract'' means a 
        contract--
                  (A) for the sale of an aircraft, aircraft 
                engine, propeller, appliance, or spare part, 
                under which the buyer takes possession of the 
                property but title to the property vests in the 
                buyer at a later time on--
                          (i) paying any part of the purchase 
                        price;
                          (ii) performing another condition; or
                          (iii) the happening of a contingency; 
                        or
                  (B) to bail or lease an aircraft, aircraft 
                engine, propeller, appliance, or spare part, 
                under which the bailee or lessee--
                          (i) agrees to pay an amount 
                        substantially equal to the value of the 
                        property; and
                          (ii) is to become, or has the option 
                        of becoming, the owner of the property 
                        on complying with the contract.
          (19) ``conveyance'' means an instrument, including a 
        conditional sales contract, affecting title to, or an 
        interest in, property.
          (20) ``Federal airway'' means a part of the navigable 
        airspace that the Administrator designates as a Federal 
        airway.
          (21) ``flag of convenience carrier'' means a foreign 
        air carrier that is established in a country other than 
        the home country of its majority owner or owners in 
        order to avoid regulations of the home country.
          [(21)] (22) ``foreign air carrier'' means a person, 
        not a citizen of the United States, undertaking by any 
        means, directly or indirectly, to provide foreign air 
        transportation.
          [(22)] (23) ``foreign air commerce'' means the 
        transportation of passengers or property by aircraft 
        for compensation, the transportation of mail by 
        aircraft, or the operation of aircraft in furthering a 
        business or vocation, between a place in the United 
        States and a place outside the United States when any 
        part of the transportation or operation is by aircraft.
          [(23)] (24) ``foreign air transportation'' means the 
        transportation of passengers or property by aircraft as 
        a common carrier for compensation, or the 
        transportation of mail by aircraft, between a place in 
        the United States and a place outside the United States 
        when any part of the transportation is by aircraft.
          [(24)] (25) ``interstate air commerce'' means the 
        transportation of passengers or property by aircraft 
        for compensation, the transportation of mail by 
        aircraft, or the operation of aircraft in furthering a 
        business or vocation--
                  (A) between a place in--
                          (i) a State, territory, or possession 
                        of the United States and a place in the 
                        District of Columbia or another State, 
                        territory, or possession of the United 
                        States;
                          (ii) a State and another place in the 
                        same State through the airspace over a 
                        place outside the State;
                          (iii) the District of Columbia and 
                        another place in the District of 
                        Columbia; or
                          (iv) a territory or possession of the 
                        United States and another place in the 
                        same territory or possession; and
                  (B) when any part of the transportation or 
                operation is by aircraft.
          [(25)] (26) ``interstate air transportation'' means 
        the transportation of passengers or property by 
        aircraft as a common carrier for compensation, or the 
        transportation of mail by aircraft--
                  (A) between a place in--
                          (i) a State, territory, or possession 
                        of the United States and a place in the 
                        District of Columbia or another State, 
                        territory, or possession of the United 
                        States;
                          (ii) Hawaii and another place in 
                        Hawaii through the airspace over a 
                        place outside Hawaii;
                          (iii) the District of Columbia and 
                        another place in the District of 
                        Columbia; or
                          (iv) a territory or possession of the 
                        United States and another place in the 
                        same territory or possession; and
                  (B) when any part of the transportation is by 
                aircraft.
          [(26)] (27) ``intrastate air carrier'' means a 
        citizen of the United States undertaking by any means 
        to provide only intrastate air transportation.
          [(27)] (28) ``intrastate air transportation'' means 
        the transportation by a common carrier of passengers or 
        property for compensation, entirely in the same State, 
        by turbojet-powered aircraft capable of carrying at 
        least 30 passengers.
          [(28)] (29) ``landing area'' means a place on land or 
        water, including an airport or intermediate landing 
        field, used, or intended to be used, for the takeoff 
        and landing of aircraft, even when facilities are not 
        provided for sheltering, servicing, or repairing 
        aircraft, or for receiving or discharging passengers or 
        cargo.
          [(29)] (30) ``large hub airport'' means a commercial 
        service airport (as defined in section 47102) that has 
        at least 1.0 percent of the passenger boardings.
          [(30)] (31) ``mail'' means United States mail and 
        foreign transit mail.
          [(31)] (32) ``medium hub airport'' means a commercial 
        service airport (as defined in section 47102) that has 
        at least 0.25 percent but less than 1.0 percent of the 
        passenger boardings.
          [(32)] (33) ``navigable airspace'' means airspace 
        above the minimum altitudes of flight prescribed by 
        regulations under this subpart and subpart III of this 
        part, including airspace needed to ensure safety in the 
        takeoff and landing of aircraft.
          [(33)] (34) ``navigate aircraft'' and ``navigation of 
        aircraft'' include piloting aircraft.
          [(34)] (35) ``nonhub airport'' means a commercial 
        service airport (as defined in section 47102) that has 
        less than 0.05 percent of the passenger boardings.
          [(35)] (36) ``operate aircraft'' and ``operation of 
        aircraft'' mean using aircraft for the purposes of air 
        navigation, including--
                  (A) the navigation of aircraft; and
                  (B) causing or authorizing the operation of 
                aircraft with or without the right of legal 
                control of the aircraft.
          [(36)] (37) ``passenger boardings''--
                  (A) means, unless the context indicates 
                otherwise, revenue passenger boardings in the 
                United States in the prior calendar year on an 
                aircraft in service in air commerce, as the 
                Secretary determines under regulations the 
                Secretary prescribes; and
                  (B) includes passengers who continue on an 
                aircraft in international flight that stops at 
                an airport in the 48 contiguous States, Alaska, 
                or Hawaii for a nontraffic purpose.
          [(37)] (38) ``person'', in addition to its meaning 
        under section 1 of title 1, includes a governmental 
        authority and a trustee, receiver, assignee, and other 
        similar representative.
          [(38)] (39) ``predatory'' means a practice that 
        violates the antitrust laws as defined in the first 
        section of the Clayton Act (15 U.S.C. 12).
          [(39)] (40) ``price'' means a rate, fare, or charge.
          [(40)] (41) ``propeller'' includes a part, 
        appurtenance, and accessory of a propeller.
          [(41)] (42) ``public aircraft'' means any of the 
        following:
                  (A) Except with respect to an aircraft 
                described in subparagraph (E), an aircraft used 
                only for the United States Government, except 
                as provided in section 40125(b).
                  (B) An aircraft owned by the Government and 
                operated by any person for purposes related to 
                crew training, equipment development, or 
                demonstration, except as provided in section 
                40125(b).
                  (C) An aircraft owned and operated by the 
                government of a State, the District of 
                Columbia, or a territory or possession of the 
                United States or a political subdivision of one 
                of these governments, except as provided in 
                section 40125(b).
                  (D) An aircraft exclusively leased for at 
                least 90 continuous days by the government of a 
                State, the District of Columbia, or a territory 
                or possession of the United States or a 
                political subdivision of one of these 
                governments, except as provided in section 
                40125(b).
                  (E) An aircraft owned or operated by the 
                armed forces or chartered to provide 
                transportation or other commercial air service 
                to the armed forces under the conditions 
                specified by section 40125(c). In the preceding 
                sentence, the term ``other commercial air 
                service'' means an aircraft operation that (i) 
                is within the United States territorial 
                airspace; (ii) the Administrator of the Federal 
                Aviation Administration determines is available 
                for compensation or hire to the public, and 
                (iii) must comply with all applicable civil 
                aircraft rules under title 14, Code of Federal 
                Regulations.
                  (F) An unmanned aircraft that is owned and 
                operated by, or exclusively leased for at least 
                90 continuous days by, an Indian Tribal 
                government, as defined in section 102 of the 
                Robert T. Stafford Disaster Relief and 
                Emergency Assistance Act (42 U.S.C. 5122), 
                except as provided in section 40125(b).
          [(42)] (43) ``small hub airport'' means a commercial 
        service airport (as defined in section 47102) that has 
        at least 0.05 percent but less than 0.25 percent of the 
        passenger boardings.
          [(43)] (44) ``spare part'' means an accessory, 
        appurtenance, or part of an aircraft (except an 
        aircraft engine or propeller), aircraft engine (except 
        a propeller), propeller, or appliance, that is to be 
        installed at a later time in an aircraft, aircraft 
        engine, propeller, or appliance.
          [(44)] (45) ``State authority'' means an authority of 
        a State designated under State law--
                  (A) to receive notice required to be given a 
                State authority under subpart II of this part; 
                or
                  (B) as the representative of the State before 
                the Secretary of Transportation in any matter 
                about which the Secretary is required to 
                consult with or consider the views of a State 
                authority under subpart II of this part.
          [(45)] (46) ``ticket agent'' means a person (except 
        an air carrier, a foreign air carrier, or an employee 
        of an air carrier or foreign air carrier) that as a 
        principal or agent sells, offers for sale, negotiates 
        for, or holds itself out as selling, providing, or 
        arranging for, air transportation.
          [(46)] (47) ``United States'' means the States of the 
        United States, the District of Columbia, and the 
        territories and possessions of the United States, 
        including the territorial sea and the overlying 
        airspace.
          [(47)] (48) ``air traffic control system'' means the 
        combination of elements used to safely and efficiently 
        monitor, direct, control, and guide aircraft in the 
        United States and United States-assigned airspace, 
        including--
                  (A) allocated electromagnetic spectrum and 
                physical, real, personal, and intellectual 
                property assets making up facilities, 
                equipment, and systems employed to detect, 
                track, and guide aircraft movement;
                  (B) laws, regulations, orders, directives, 
                agreements, and licenses;
                  (C) published procedures that explain 
                required actions, activities, and techniques 
                used to ensure adequate aircraft separation; 
                and
                  (D) trained personnel with specific technical 
                capabilities to satisfy the operational, 
                engineering, management, and planning 
                requirements for air traffic control.
  (b) Limited Definition.--In subpart II of this part, 
``control'' means control by any means.

           *       *       *       *       *       *       *


SUBPART II--ECONOMIC REGULATION

           *       *       *       *       *       *       *


CHAPTER 413--FOREIGN AIR TRANSPORTATION

           *       *       *       *       *       *       *


Sec. 41302. Permits of foreign air carriers

  The Secretary of Transportation may issue a permit to a 
person (except a citizen of the United States) authorizing the 
person to provide foreign air transportation as a foreign air 
carrier if the Secretary finds that--
          (1) the person is fit, willing, and able to provide 
        the foreign air transportation to be authorized by the 
        permit and to comply with this part and regulations of 
        the Secretary; and
          (2)(A) the person is qualified, and has been 
        designated by the government of its country, to provide 
        the foreign air transportation [under an agreement with 
        the United States Government; or]; and
          (B) [the foreign air transportation] after 
        considering the totality of the circumstances, 
        including the factors set forth in section 40101(a), 
        the foreign air transportation to be provided under the 
        permit will be in the public interest.

           *       *       *       *       *       *       *


                            ADDITIONAL VIEWS

    While we support the intent behind H.R. 3632, the ``Fair 
and Open Skies Act,'' we are concerned about the unintended 
consequences of the legislation as reported out of the 
Committee. During Committee mark-up, the Chair was asked for 
and gave his commitment to work though stakeholder concerns to 
achieve a balanced approach before going to the House floor 
with this bill. The importance of and need for achieving a more 
balanced approach is described in greater detail below.

                         Background Information


Open Skies Agreements

    Open Skies agreements are bilateral agreements that the 
U.S. government negotiates with other countries to provide 
rights for airlines to offer international passenger and cargo 
services.\1\ Since 1992, the U.S. has entered into Open Skies 
agreements with over 120 countries.\2\ ``These liberalized air 
service agreements have led to lower fares and increased travel 
choices for consumers, more robust and seamless U.S. trade, and 
more American jobs.''\3\
---------------------------------------------------------------------------
    \1\See: https://2009-2017.state.gov/r/pa/pl/262022.htm.
    \2\Id.
    \3\Don't Close Open Skies, by Doug Lavin, Vice President, Member 
and External Relations, for the International Air Transport Association 
(IATA), Aviation Daily (September 16, 2019).
---------------------------------------------------------------------------
    According to the U.S. Department of State, the following 
are some of the impacts of Open Skies Agreements:\4\
---------------------------------------------------------------------------
    \4\See: https://2009-2017.state.gov/r/pa/pl/262022.htm.
---------------------------------------------------------------------------
           ``The business model for the international 
        package delivery sector, employing over half a million 
        people, depends on Open Skies to operate competitively 
        in foreign markets. U.S. air freight services to fast-
        growing regions like the Middle East, Indian 
        Subcontinent, and Africa exceeded $1 billion in 2013 
        and contributed over $3 billion to the U.S. trade 
        balance in the last five years.''\5\
---------------------------------------------------------------------------
    \5\Id.
---------------------------------------------------------------------------
           ``The Brookings Institution estimates that 
        Open Skies agreements add approximately $4 billion in 
        annual economic gains to consumers.''\6\
---------------------------------------------------------------------------
    \6\Id.
---------------------------------------------------------------------------
           ``U.S. Airlines for Open Skies estimates 
        that full liberalization through Open Skies agreements 
        would lead to a 16-percent increase in air traffic and 
        support 9 million jobs in aviation and related 
        industries.''\7\
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    \7\Id.
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           ``Open Skies has dramatically expanded 
        direct international connections to cities like Dallas-
        Fort Worth, Denver, Detroit, Las Vegas, Memphis, 
        Minneapolis, Orlando, Portland, and Salt Lake 
        City.''\8\
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    \8\Id.
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           ``A private study found that new direct 
        service between a U.S. city and a point in the European 
        Union generates up to $720 million annually in new 
        economic activity for the U.S. city and its local 
        region, depending on the size of the markets.''\9\
---------------------------------------------------------------------------
    \9\Id.
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           ``Portland International Airport estimates 
        that its direct international flights to Tokyo, 
        Amsterdam, and Frankfurt generate over $240 million in 
        airport and visitor revenue.''\10\
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    \10\Id.
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           ``The Greater Orlando Aviation Authority 
        estimates that aviation liberalization with Brazil 
        helped increase the number of visitors from Brazil to 
        Orlando from 74,000 in 2004 to 768,000 in 2013, and 
        that Emirates' service from Dubai will add $100 million 
        in new economic activity in Central Florida and create 
        1,500 jobs.''\11\
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    \11\Id.
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Norwegian Air International

    In December 2013, Norwegian Air International (NAI), an 
Ireland-based subsidiary of Norwegian Air Shuttle, filed an 
initial application with the Department of Transportation (DOT) 
for a foreign air carrier permit and exemption authority to 
begin service to the United States. NAI met fierce opposition 
from United States and European aviation labor groups because 
of its business model. American, Delta, and United also filed 
in opposition to NAI's application. In response, NAI stated 
that it was based in Ireland to benefit from the US-EU Open 
Skies Agreement, and that it was not trying to avoid Norwegian 
labor laws. Rather, NAI stated it would comply with U.S. labor 
laws and intended to hire U.S. crew and flight attendants for 
all flights operating to and from the United States.
    On April 15, 2016, the DOT, under the Obama Administration, 
issued a tentative decision to grant NAI a foreign air carrier 
permit. The two-and-a-half-year review process is believed to 
be the longest ever processing time. Prior to issuing its 
decision, DOT took the ``unprecedented step'' of consulting 
with both the Departments of Justice and State regarding the 
interpretation of international law. After the consultations, 
DOT concluded that Article 17 bis is simply a recognition of 
the value of ``high labor standards'' but an insufficient basis 
to deny a permit to NAI under the E.U.-U.S. Open Skies 
Agreement. On December 6, 2016, DOT (again during the Obama 
Administration) issued a final order approving NAI's foreign 
air carrier permit, days after the European Commission formally 
requested arbitration over the delay in approval. The 
controversy continued and in January 2017, ALPA and three other 
airline employee unions filed suit against DOT to block 
approval of the permit. On May 11, 2018, the D.C. Court of 
Appeals ruled that although the potential loss of union jobs 
was a sufficient injury to grant the unions standing in court, 
there was no Federal or international legal basis to challenge 
DOT's decision.\12\
---------------------------------------------------------------------------
    \12\Air Line Pilots Association International et al. v. Elaine L. 
Chao, No. 17-1012 (D.C. Cir. 2018).
---------------------------------------------------------------------------
    On August 14, 2019, NAI announced that it will stop flying 
routes between Ireland and North America. The decision, 
effective September 15, 2019, was made after the airline 
concluded the routes were not commercially viable.

                              Bill Summary

    H.R. 3632 would prohibit the DOT Secretary from issuing a 
permit or an exemption authorizing a person to provide foreign 
air transportation as a foreign air carrier under the United 
States-European Union (U.S.-E.U.) Air Transport Agreement of 
April 2007 (as amended), unless the Secretary--(1) finds that 
issuing the permit or exemption would be consistent with 
Article 17 bis of the Agreement; and (2) imposes on the permit 
or exemption such conditions as may be necessary to ensure that 
the person complies with Article 17 bis. Article 17 bis 
expresses that both the U.S. and E.U. ``recognize the 
importance of the social dimension agreement and the benefits 
that arise when open markets are accompanied by high labor 
standards'' and that the agreement was not intended to 
undermine labor standards. Article 17 was added three years 
after the initial signing of the agreement.
    H.R. 3632 also would amend the statutory public interest 
test applied by the DOT Secretary when determining whether to 
issue a permit to a foreign air carrier by adding to the list 
of matters to be considered by the Secretary ``as being in the 
public interest and consistent with public convenience and 
necessity'' the following two matters--(1) preventing entry 
into United States markets by flag of convenience carriers; and 
(2) preventing the undermining of labor standards.
    Lastly, H.R. 3632 would define the term ``flag of 
convenience carrier'' to mean ``a foreign air carrier that is 
established in a country other than the home country of its 
majority owner or owners in order to avoid regulations of the 
home country.''

          Concerns About Unintended Consequences of H.R. 3632

    The issues underlying this bill are complicated and divide 
the aviation industry. H.R. 3632 is intended to prevent any 
foreign air carrier seeking a permit to operate in the United 
States from employing a business model that many feel is 
unfair. But, in addressing that issue, there is great concern 
that the bill will cause the United States to violate various 
international aviation agreements and risk harmful retaliation 
by other countries. Given this, a more balanced approach is 
needed.
    While no one wants aircraft registration and airline 
certification to operate like the maritime sector; where ships 
are registered in a few, small countries with minimal 
regulation, allowing foreign air carriers using legal loopholes 
to arbitrarily relocate and directly compete against U.S. 
carriers while paying pennies on the dollar to their pilots, 
flight attendants, and maintenance personnel, puts the U.S. 
carriers at a competitive disadvantage. However, a significant 
portion of the diverse aviation industry has raised serious 
issues that Congress should explore more thoroughly before 
legislating a solution.
    Concerns have been raised about H.R. 3632 related to the 
United States' standing in the international community and the 
bill's impact on U.S. industry. According to the DOT, H.R. 3632 
would put the U.S. in the position of taking actions that 
foreign countries may allege violate international 
agreements.\13\ The bill would also require the Department to 
determine the intent of commercial decisions made by foreign 
air carriers in deciding where to establish their operations. 
This mandate is likely impossible to comply with. Additionally, 
concerns have been raised about whether foreign governments 
would feel likewise entitled to examine the intent behind 
commercial decisions made by U.S. companies. The European Union 
has already threatened to retaliate against U.S. passenger and 
cargo carriers if this legislation becomes law.\14\ Finally, 
there are concerns about how the bill might impact the United 
States' standing in future trade negotiations, particularly if 
trade agreements have the potential to be nullified at any 
future date by Congressional action. We believe it appropriate 
to thoroughly consider and review these concerns prior to 
taking further legislative action.
---------------------------------------------------------------------------
    \13\Email to Republican Staff from U.S. DOT Congressional Affairs 
Staff (September 11, 2019) (on file with Republican Committee Staff).
    \14\IATA opposes U.S. airline labor unions in `flag of convenience' 
dispute, Travel Weekly (September 17, 2018). See: https://
www.travelweekly.com/Travel-News/Airline-News/IATA-opposes-labor-
unions-in-flag-of-convenience-dispute.
---------------------------------------------------------------------------
    The DOT summarized its position on H.R. 3632 as follows: 
``In short, implementation of H.R. 3632 could result in 
retaliatory action by foreign governments that would harm U.S. 
carriers, their employees, and U.S. travelers and shippers. It 
would place DOT in the untenable position of having to execute 
inconsistent statutory mandates and potentially, act 
inconsistently with obligations undertaken by the U.S. in 
international agreements. H.R. 3632 should not be 
adopted.''\15\
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    \15\Id.
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Concerns of those supporting H.R. 3632:

           The NAI business model is allegedly intended 
        to skirt the costs of complying with ``home country'' 
        laws and regulations, including labor laws.
           Avoiding such costs both undermines labor 
        standards and provides an unfair competitive advantage.

Concerns of those opposed to H.R. 3632:

           The bill would place the U.S. in violation 
        of its Open Skies agreements with the European Union 
        (E.U). and other countries by imposing additional 
        criteria on the approval of foreign air carrier permits 
        that were not agreed to in negotiations.
           One of the purposes of the E.U. is to allow 
        the free movement of companies and persons within a 
        common market. There is no difference between a carrier 
        based in Norway, Ireland, Germany, or Greece for 
        purposes of the U.S.-EU Open Skies Agreement.
           There is a real danger of the E.U. or other 
        countries retaliating against the U.S. in ways that 
        further degrade existing Open Skies agreements.
           U.S. international airports are concerned 
        that any escalation could depress lucrative 
        international air travel, placing downward pressures on 
        airport enplanements and impacting local economies.

                               Conclusion

    While we support the intent behind H.R. 3632, it must be 
done in such a way that ensures a level playing field for the 
global aviation industry while avoiding violations of our 
country's existing international agreements. As noted above, 
during Committee mark-up, the Chairman was asked for and gave 
his commitment to work though stakeholder concerns to achieve a 
balanced approach before going to the House floor with this 
bill.
    The concerns raised by those on both sides of the issue 
have merit and, as the bill moves forward the Chairman's 
willingness to address those concerns will result in a balanced 
and fair approach to the complicated and controversial issues 
behind H.R. 3632.

                                   Sam Graves,
                                           Ranking Member.

                                  [all]