Fair Trade with China Enforcement Act

I 116TH CONGRESS 1ST SESSION H. R. 704 To safeguard certain technology and intellectual property in the United States from export to or influence by the People’s Republic of China and to protect United States industry from unfair competition by the People’s Republic of China, and for other purposes. IN THE HOUSE OF REPRESENTATIVES JANUARY 22, 2019 Mr. CONAWAY (for himself and Mr. RYAN) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committees on Financial Services, the Judiciary, Foreign Affairs, and Oversight and Reform, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To safeguard certain technology and intellectual property in the United States from export to or influence by the People’s Republic of China and to protect United States industry from unfair competition by the People’s Republic of China, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 3 (a) SHORT TITLE.—This Act may be cited as the 4 ‘‘Fair Trade with China Enforcement Act’’. 5 VerDate Sep 11 2014 00:51 Feb 03, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H704.IH H704 pbinns on DSK79D2C42PROD with BILLS 2 •HR 704 IH (b) TABLE OF CONTENTS.—The table of contents for 1 this Act is as follows: 2 Sec. 1. Short title; table of contents. Sec. 2. Sense of Congress. Sec. 3. Statement of policy. TITLE I—SAFEGUARDS AGAINST FOREIGN INFLUENCE IN UNITED STATES NATIONAL AND ECONOMIC SECURITY BY THE PEOPLE’S REPUBLIC OF CHINA Sec. 101. Establishment of list of certain products receiving support from the Government of the People’s Republic of China pursuant to the Made in China 2025 policy. Sec. 102. Prohibition on export to the People’s Republic of China of national security sensitive technology and intellectual property. Sec. 103. Imposition of shareholder cap on Chinese investors in United States corporations. Sec. 104. Prohibition on use of certain telecommunications services or equip- ment. TITLE II—FAIR TRADE ENFORCEMENT ACTIONS WITH RESPECT TO THE PEOPLE’S REPUBLIC OF CHINA Sec. 201. Countervailing duties with respect to certain industries in the Peo- ple’s Republic of China. Sec. 202. Repeal of reduced withholding rates for residents of China. Sec. 203. Taxation of obligations of the United States held by the Government of the People’s Republic of China. Sec. 204. Surtax on certain income derived from China. TITLE III—STOPPING FOREIGN BUSINESSES SANCTUARY ACT OF 2019 Sec. 301. Short title. Sec. 302. Jurisdiction over certain foreign entities. Sec. 303. Commercial activity of affiliate entities. SEC. 2. SENSE OF CONGRESS. 3 It is the sense of Congress that— 4 (1) since joining the World Trade Organization 5 in 2001, the People’s Republic of China has offered 6 the United States a contradictory bargain, which 7 promised openness in the global trade order, but 8 through state mercantilism delivered a severely im- 9 balanced trading relationship; 10 VerDate Sep 11 2014 00:51 Feb 03, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H704.IH H704 pbinns on DSK79D2C42PROD with BILLS 3 •HR 704 IH (2) it was erroneous for the United States Gov- 1 ernment to have ignored the contradictions and risks 2 of free trade with the People’s Republic of China on 3 the assumption that the People’s Republic of China 4 would liberalize economically and politically; 5 (3) benefitting enormously from a more open 6 global economy to drive its own industries, the Gov- 7 ernment of the People’s Republic of China and the 8 Communist Party of the People’s Republic of China 9 have only tightened their grip on power, brutally 10 suppressing dissent at home and pursuing policies 11 abroad that are a far cry from being a responsible 12 global stakeholder; 13 (4) malevolent economic behavior by persons in 14 the People’s Republic of China is made clear by the 15 theft of intellectual property from the United States, 16 as Chinese theft of United States intellectual prop- 17 erty alone costs the United States nearly 18 $600,000,000,000 annually, according to the United 19 States Trade Representative; 20 (5) stealing United States intellectual property 21 advances the ‘‘Made in China 2025’’ initiative of the 22 Government of the People’s Republic of China to 23 eventually dominate global exports in 10 critical sec- 24 tors, namely artificial intelligence and next-genera- 25 VerDate Sep 11 2014 00:51 Feb 03, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H704.IH H704 pbinns on DSK79D2C42PROD with BILLS 4 •HR 704 IH tion information technology, robotics, new-energy ve- 1 hicles, biotechnology, energy and power generation, 2 aerospace, high-tech shipping, advanced railway, new 3 materials, and agricultural machinery, among oth- 4 ers; 5 (6) the targets of the Made in China 2025 ini- 6 tiative reveal the goal of the People’s Republic of 7 China for the near-total displacement of advanced 8 manufacturing in the United States; and 9 (7) the United States Government should act to 10 strengthen the position of the United States in its 11 policy toward the People’s Republic of China in 12 order to create a more balanced economic relation- 13 ship by safeguarding strategic assets from Chinese 14 influence, reducing Chinese involvement in the 15 United States economy, and encouraging United 16 States companies to produce domestically, instead of 17 in the People’s Republic of China. 18 SEC. 3. STATEMENT OF POLICY. 19 It is the policy of the United States— 20 (1) to impose restrictions on Chinese invest- 21 ment in the United States in strategic industries 22 targeted by the Made in China 2025 initiative set 23 forth by the Government of the People’s Republic of 24 China; 25 VerDate Sep 11 2014 00:51 Feb 03, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H704.IH H704 pbinns on DSK79D2C42PROD with BILLS 5 •HR 704 IH (2) to tax Chinese investment in the United 1 States due to its negative effect on the United 2 States trade deficit and wages of workers in the 3 United States; 4 (3) to increase the cost of transnational produc- 5 tion operations in the People’s Republic of China in 6 a manner consistent with the economic cost of the 7 risk of loss of unique access by the United States to 8 intellectual property, technology, and industrial base; 9 and 10 (4) to support democratization in and the 11 human rights of the people of Hong Kong, including 12 the findings and declarations set forth under section 13 2 of the United States-Hong Kong Policy Act of 14 1992 (22 U.S.C. 5701). 15 VerDate Sep 11 2014 00:51 Feb 03, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H704.IH H704 pbinns on DSK79D2C42PROD with BILLS 6 •HR 704 IH TITLE I—SAFEGUARDS AGAINST 1 FOREIGN INFLUENCE IN 2 UNITED STATES NATIONAL 3 AND ECONOMIC SECURITY BY 4 THE PEOPLE’S REPUBLIC OF 5 CHINA 6 SEC. 101. ESTABLISHMENT OF LIST OF CERTAIN PRODUCTS 7 RECEIVING SUPPORT FROM THE GOVERN- 8 MENT OF THE PEOPLE’S REPUBLIC OF CHINA 9 PURSUANT TO THE MADE IN CHINA 2025 POL- 10 ICY. 11 (a) IN GENERAL.—Chapter 8 of title I of the Trade 12 Act of 1974 (19 U.S.C. 2241 et seq.) is amended by add- 13 ing at the end the following: 14 ‘‘SEC. 183. LIST OF CERTAIN PRODUCTS RECEIVING SUP- 15 PORT FROM THE GOVERNMENT OF THE PEO- 16 PLE’S REPUBLIC OF CHINA. 17 ‘‘(a) IN GENERAL.—Not later than 120 days after 18 the date of the enactment of the Fair Trade with China 19 Enforcement Act, and every year thereafter, the United 20 States Trade Representative shall set forth a list of prod- 21 ucts manufactured or produced in, or exported from, the 22 People’s Republic of China that are determined by the 23 Trade Representative to receive support from the Govern- 24 VerDate Sep 11 2014 00:51 Feb 03, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H704.IH H704 pbinns on DSK79D2C42PROD with BILLS 7 •HR 704 IH ment of the People’s Republic of China pursuant to the 1 Made in China 2025 industrial policy of that Government. 2 ‘‘(b) CRITERIA FOR LIST.— 3 ‘‘(1) IN GENERAL.—The Trade Representative 4 shall include in the list required by subsection (a) 5 the following products: 6 ‘‘(A) Any product specified in the following 7 documents set forth by the Government of the 8 People’s Republic of China: 9 ‘‘(i) Notice on Issuing Made in China 10 2025. 11 ‘‘(ii) China Manufacturing 2025. 12 ‘‘(iii) Notice on Issuing the 13th Five- 13 Year National Strategic Emerging Indus- 14 tries Development Plan. 15 ‘‘(iv) Guiding Opinion on Promoting 16 International Industrial Capacity and 17 Equipment Manufacturing Cooperation. 18 ‘‘(v) Any other document that ex- 19 presses a national strategy or stated goal 20 in connection with the Made in China 2025 21 industrial policy set forth by the Govern- 22 ment of the People’s Republic of China, 23 the Communist Party of China, or another 24 entity or individual capable of impacting 25 VerDate Sep 11 2014 00:51 Feb 03, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H704.IH H704 pbinns on DSK79D2C42PROD with BILLS 8 •HR 704 IH the national strategy of the People’s Re- 1 public of China. 2 ‘‘(B) Any product receiving support from 3 the Government of the People’s Republic of 4 China that has or will in the future displace net 5 exports of like products by the United States, 6 as determined by the Trade Representative. 7 ‘‘(2) INCLUDED PRODUCTS.—In addition to 8 such products as the Trade Representative shall in- 9 clude pursuant to paragraph (1) in the list required 10 by subsection (a), the Trade Representative shall in- 11 clude products in the following industries: 12 ‘‘(A) Civil aircraft. 13 ‘‘(B) Motor car and vehicle. 14 ‘‘(C) Advanced medical equipment. 15 ‘‘(D) Advanced construction equipment. 16 ‘‘(E) Agricultural machinery. 17 ‘‘(F) Railway equipment. 18 ‘‘(G) Diesel locomotive. 19 ‘‘(H) Moving freight. 20 ‘‘(I) Semiconductor. 21 ‘‘(J) Lithium battery manufacturing. 22 ‘‘(K) Artificial intelligence. 23 ‘‘(L) High-capacity computing. 24 ‘‘(M) Quantum computing. 25 VerDate Sep 11 2014 00:51 Feb 03, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H704.IH H704 pbinns on DSK79D2C42PROD with BILLS 9 •HR 704 IH ‘‘(N) Robotics. 1 ‘‘(O) Biotechnology.’’. 2 (b) CLERICAL AMENDMENT.—The table of contents 3 for the Trade Act of 1974 is amended by inserting after 4 the item relating to section 182 the following: 5 ‘‘Sec. 183. List of certain products receiving support from the Government of the People’s Republic of China.’’. SEC. 102. PROHIBITION ON EXPORT TO THE PEOPLE’S RE- 6 PUBLIC OF CHINA OF NATIONAL SECURITY 7 SENSITIVE TECHNOLOGY AND INTELLEC- 8 TUAL PROPERTY. 9 (a) IN GENERAL.—The Secretary of Commerce shall 10 prohibit the export to the People’s Republic of China of 11 any national security sensitive technology or intellectual 12 property subject to the jurisdiction of the United States 13 or exported by any person subject to the jurisdiction of 14 the United States. 15 (b) DEFINITIONS.—In this section: 16 (1) INTELLECTUAL PROPERTY.—The term ‘‘in- 17 tellectual property’’ includes patents, copyrights, 18 trademarks, or trade secrets. 19 (2) NATIONAL SECURITY SENSITIVE TECH- 20 NOLOGY OR INTELLECTUAL PROPERTY.—The term 21 ‘‘national security sensitive technology or intellectual 22 property’’ includes the following: 23 VerDate Sep 11 2014 00:51 Feb 03, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H704.IH H704 pbinns on DSK79D2C42PROD with BILLS 10 •HR 704 IH (A) Technology or intellectual property 1 that would make a significant contribution to 2 the military potential of the People’s Republic 3 of China that would prove detrimental to the 4 national security of the United States. 5 (B) Technology or intellectual property 6 necessary to protect the economy of the United 7 States from the excessive drain of scarce mate- 8 rials and to reduce the serious inflationary im- 9 pact of demand from the People’s Republic of 10 China. 11 (C) Technology or intellectual property 12 that is a component of the production of prod- 13 ucts included in the most recent list required 14 under section 183 of the Trade Act of 1974, as 15 added by section 101(a), determined in con- 16 sultation with the United States Trade Rep- 17 resentative. 18 (3) TECHNOLOGY.—The term ‘‘technology’’ in- 19 cludes goods or services relating to information sys- 20 tems, internet-based services, production-enhancing 21 logistics, robotics, artificial intelligence, biotechnolo- 22 gy, or computing. 23 VerDate Sep 11 2014 00:51 Feb 03, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H704.IH H704 pbinns on DSK79D2C42PROD with BILLS 11 •HR 704 IH SEC. 103. IMPOSITION OF SHAREHOLDER CAP ON CHINESE 1 INVESTORS IN UNITED STATES CORPORA- 2 TIONS. 3 Section 13(d) of the Securities Exchange Act of 1934 4 (15 U.S.C. 78m(d)) is amended by adding at the end the 5 following: 6 ‘‘(7)(A) In this paragraph, the term ‘covered issuer’ 7 means any issuer that produces components that may be 8 used in the production of goods manufactured or produced 9 in, or exported from, the People’s Republic of China and 10 included in the most recent list required under section 183 11 of the Trade Act of 1974, determined in consultation with 12 the United States Trade Representative. 13 ‘‘(B) No covered issuer that is incorporated under the 14 laws of a State, or whose principal place of business is 15 within a State, may be majority-owned by a person whose 16 principal place of business is in the People’s Republic of 17 China. 18 ‘‘(C) The prohibition in subparagraph (B) shall apply 19 to any acquisition on or after the date of enactment of 20 this paragraph.’’. 21 SEC. 104. PROHIBITION ON USE OF CERTAIN TELE- 22 COMMUNICATIONS SERVICES OR EQUIP- 23 MENT. 24 (a) FINDINGS.—Congress makes the following find- 25 ings: 26 VerDate Sep 11 2014 00:51 Feb 03, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H704.IH H704 pbinns on DSK79D2C42PROD with BILLS 12 •HR 704 IH (1) In its 2011 ‘‘Annual Report to Congress on 1 Military and Security Developments Involving the 2 People’s Republic of China’’, the Department of De- 3 fense stated, ‘‘China’s defense industry has benefited 4 from integration with a rapidly expanding civilian 5 economy and science and technology sector, particu- 6 larly elements that have access to foreign technology. 7 Progress within individual defense sectors appears 8 linked to the relative integration of each, through 9 China’s civilian ec [Text truncated for display. Full text available on Congress.gov.]