I 116TH CONGRESS 1ST SESSION H. R. 3508 To impose sanctions with respect to the People’s Republic of China in relation to activities in the South China Sea and the East China Sea, and for other purposes. IN THE HOUSE OF REPRESENTATIVES JUNE 26, 2019 Mr. GALLAGHER (for himself and Mr. PANETTA) introduced the following bill; which was referred to the Committee on Foreign Affairs, and in addition to the Committees on the Judiciary, Financial Services, Armed Services, and Transportation and Infrastructure, for a period to be subsequently determined by the Speaker, in each case for consideration of such provi- sions as fall within the jurisdiction of the committee concerned A BILL To impose sanctions with respect to the People’s Republic of China in relation to activities in the South China Sea and the East China Sea, 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 ‘‘South China Sea and East China Sea Sanctions Act of 5 2019’’. 6 VerDate Sep 11 2014 01:56 Jul 09, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3508.IH H3508 kjohnson on DSK79L0C42 with BILLS 2 •HR 3508 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. Findings. Sec. 3. Definitions. Sec. 4. Policy of the United States with respect to the South China Sea and the East China Sea. Sec. 5. Sense of Congress with respect to the South China Sea and the East China Sea. Sec. 6. Sanctions with respect to Chinese persons responsible for China’s activi- ties in the South China Sea and the East China Sea. Sec. 7. Determinations and report on Chinese companies active in the South China Sea and the East China Sea. Sec. 8. Prohibition against documents portraying the South China Sea or the East China Sea as part of China. Sec. 9. Prohibition on facilitating certain investments in the South China Sea or the East China Sea. Sec. 10. Department of Justice affirmation of non-recognition of annexation. Sec. 11. Non-recognition of Chinese sovereignty over the South China Sea or the East China Sea. Sec. 12. Prohibition on certain assistance to countries that recognize Chinese sovereignty over the South China Sea or the East China Sea. SEC. 2. FINDINGS. 3 Congress makes the following findings: 4 (1) According to the Asia-Pacific Maritime Se- 5 curity Strategy issued by the Department of Defense 6 in August 2015, ‘‘Although the United States takes 7 no position on competing sovereignty claims to land 8 features in the region, all such claims must be based 9 upon land (which in the case of islands means natu- 10 rally formed areas of land that are above water at 11 high tide), and all maritime claims must derive from 12 such land in accordance with international law.’’. 13 (2) According to the annual report of the De- 14 partment of Defense to Congress on the military 15 power of the People’s Republic of China submitted 16 VerDate Sep 11 2014 01:56 Jul 09, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3508.IH H3508 kjohnson on DSK79L0C42 with BILLS 3 •HR 3508 IH in April 2016, ‘‘Throughout 2015, China continued 1 to assert sovereignty claims over features in the 2 East and South China Seas. In the East China Sea, 3 China continued to use maritime law enforcement 4 ships and aircraft to patrol near the Senkaku 5 (Diaoyu) Islands in order to challenge Japan’s 6 claim. In the South China Sea, China paused its 7 land reclamation effort in the Spratly Islands in late 8 2015 after adding more than 3,200 acres of land to 9 the seven features it occupies in the archipelago. Al- 10 though these artificial islands do not provide China 11 with any additional territorial or maritime rights 12 within the South China Sea, China will be able to 13 use them as persistent civil-military bases to en- 14 hance its long-term presence in the South China Sea 15 significantly.’’. 16 (3) On May 30, 2015, at the Shangri-la Dia- 17 logue of the International Institute for Strategic 18 Studies, Secretary of Defense Ashton Carter stated 19 that ‘‘with its actions in the South China Sea, China 20 is out of step with both the international rules and 21 norms that underscore the Asia-Pacific’s security ar- 22 chitecture, and the regional consensus that favors di- 23 plomacy and opposes coercion’’. 24 VerDate Sep 11 2014 01:56 Jul 09, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3508.IH H3508 kjohnson on DSK79L0C42 with BILLS 4 •HR 3508 IH (4) On July 24, 2015, Admiral Harry Harris, 1 Jr., noted at a forum in Colorado that each year 2 more than $5,300,000,000,000 in global sea-based 3 trade passes through the South China Sea. 4 (5) On June 4, 2016, at the Shangri-la Dia- 5 logue, Secretary of Defense Ashton Carter stated: 6 ‘‘[T]he United States will stand with regional part- 7 ners to uphold core principles, like freedom of navi- 8 gation and overflight and the peaceful resolution of 9 disputes through legal means and in accordance with 10 international law. As I affirmed here last year, and 11 America’s Freedom of Navigation Operations in the 12 South China Sea have demonstrated, the United 13 States will continue to fly, sail and operate wherever 14 international law allows, so that everyone in the re- 15 gion can do the same.’’. 16 (6) On July 12, 2016, the Permanent Court of 17 Arbitration’s Tribunal organized pursuant to the 18 United Nations Convention on the Law of the Sea 19 issued its unanimous award in the arbitration insti- 20 tuted by Republic of the Philippines against the Peo- 21 ple’s Republic of China. The Tribunal noted that its 22 award is final and binding under that Convention. 23 (7) Also according to the award, the Tribunal 24 ‘‘concluded that, to the extent China had historical 25 VerDate Sep 11 2014 01:56 Jul 09, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3508.IH H3508 kjohnson on DSK79L0C42 with BILLS 5 •HR 3508 IH rights to resources in the waters of the South China 1 Sea, such rights were extinguished to the extent they 2 were incompatible with the exclusive economic zones 3 provided for in the Convention. The Tribunal con- 4 cluded that there was no legal basis for China to 5 claim historic rights to resources within the sea 6 areas falling within the ‘nine-dash line’.’’. 7 (8) Also according to the award, the Tribunal 8 ‘‘held that the Spratly Islands cannot generate mari- 9 time zones collectively as a unit. Having found that 10 none of the features claimed by China was capable 11 of generating an exclusive economic zone, the Tri- 12 bunal found that it could—without delimiting a 13 boundary—declare that certain sea areas are within 14 the exclusive economic zone of the Philippines, be- 15 cause those areas are not overlapped by any possible 16 entitlement of China.’’. 17 (9) Also according to the award, the Tribunal 18 ‘‘found that China had violated the Philippines’ sov- 19 ereign rights in its exclusive economic zone by (a) 20 interfering with Philippine fishing and petroleum ex- 21 ploration, (b) constructing artificial islands, and (c) 22 failing to prevent Chinese fishermen from fishing in 23 the zone. The Tribunal also held that fishermen 24 from the Philippines (like those from China) had 25 VerDate Sep 11 2014 05:29 Jul 10, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3508.IH H3508 kjohnson on DSK79L0C42 with BILLS 6 •HR 3508 IH traditional fishing rights at Scarborough Shoal and 1 that China had interfered with these rights in re- 2 stricting access. The Tribunal further held that Chi- 3 nese law enforcement vessels had unlawfully created 4 a serious risk of collision when they physically ob- 5 structed Philippine vessels.’’. 6 (10) On July 12, 2016, the Ministry of Foreign 7 Affairs of the People’s Republic of China issued a 8 statement that China ‘‘declares that the [Tribunal] 9 award is null and void and has no binding force. 10 China neither accepts nor recognizes it. . . . China’s 11 territorial sovereignty and maritime rights and inter- 12 ests in the South China Sea shall under no cir- 13 cumstances be affected by those awards. China op- 14 poses and will never accept any claim or action 15 based on those awards.’’. 16 (11) On July 12, 2016, the Government of the 17 People’s Republic of China issued the fifth state- 18 ment in the name of that Government since 1979 19 that— 20 (A) stated that the People’s Republic of 21 China has sovereignty over the 4 rocks and 22 shoals in the South China Sea; 23 (B) claims internal waters, territorial seas, 24 contiguous zones, one or more exclusive eco- 25 VerDate Sep 11 2014 01:56 Jul 09, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3508.IH H3508 kjohnson on DSK79L0C42 with BILLS 7 •HR 3508 IH nomic zones, and a continental shelf based on 1 that sovereignty claim; and 2 (C) continues to claim historic rights in 3 the South China Sea. 4 (12) On July 12, 2016, Assistant Secretary of 5 State and Department of State Spokesperson John 6 Kirby noted that the ‘‘United States strongly sup- 7 ports the rule of law. We support efforts to resolve 8 territorial and maritime disputes in the South China 9 Sea peacefully, including through arbitration. . . . 10 we urge all claimants to avoid provocative state- 11 ments or actions. This decision can and should serve 12 as a new opportunity to renew efforts to address 13 maritime disputes peacefully.’’. 14 (13) On July 13, 2016, the Vice Foreign Min- 15 ister of the People’s Republic of China, Liu 16 Zhenmin, said that declaring an air defense identi- 17 fication zone in the South China Sea would depend 18 on the threat China faces and stated that ‘‘[i]f our 19 security is threatened, we of course have the right 20 to set it up’’. 21 (14) On July 18, 2016, the People’s Liberation 22 Army Air Force of the People’s Republic of China 23 stated that it had conducted a ‘‘combat air patrol’’ 24 over the South China Sea and that it would become 25 VerDate Sep 11 2014 01:56 Jul 09, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H3508.IH H3508 kjohnson on DSK79L0C42 with BILLS 8 •HR 3508 IH ‘‘regular practice’’ in the future. A spokesperson 1 stated that the People’s Liberation Army Air Force 2 ‘‘will firmly defend national sovereignty, security and 3 maritime interests, safeguard regional peace and 4 stability, and cope with various threats and chal- 5 lenges’’. 6 (15) On August 2, 2016, the Supreme People’s 7 Court of the People’s Republic of China issued a ju- 8 dicial interpretation that people caught illegally fish- 9 ing in Chinese waters could be jailed for up to one 10 year. 11 (16) In the Agreement concerning the Ryukyu 12 Islands and the Daito Islands with Related Arrange- 13 ments, signed at Washington and Tokyo June 17, 14 1971 (23 UST 446), between the United States and 15 Japan (commonly referred to as the ‘‘Okinawa Re- 16 version Treaty’’), the United States agreed to apply 17 the Treaty of Mutual Cooperation and Security, with 18 Agreed Minute and Exchanges of Notes (11 UST 19 1632), signed at Washington January 19, 1961, be- 20 tween the United States and Japan, to the area cov- 21 ered by the Okinawa Reversion Treaty, including the 22 Senkaku Islands. 23 (17) In April 2014, President Barack Obama 24 stated, ‘‘The policy of the United States is clear— 25 VerDate Sep 11 2014 01:56 Jul 09, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H3508.IH H3508 kjohnson on DSK79L0C42 with BILLS 9 •HR 3508 IH the Senkaku Islands are administered by Japan and 1 therefore fall within the scope of Article 5 of the 2 U.S.-Japan Treaty of Mutual Cooperation and Secu- 3 rity. And we oppose any unilateral attempts to un- 4 dermine Japan’s administration of these islands.’’. 5 (18) In February 2017, President Donald 6 Trump and Japanese Prime Minister Shinzo Abe 7 issued a joint statement that ‘‘affirmed that Article 8 V of the U.S.-Japan Treaty of Mutual Cooperation 9 and Security covers the Senkaku Islands’’. 10 SEC. 3. DEFINITIONS. 11 In this Act: 12 (1) ACCOUNT; CORRESPONDENT ACCOUNT; PAY- 13 ABLE-THROUGH ACCOUNT.—The terms ‘‘account’’, 14 ‘‘correspondent account’’, and ‘‘payable-through ac- 15 count’’ have the meanings given those terms in sec- 16 tion 5318A of title 31, United States Code. 17 (2) ALIEN.—The term ‘‘alien’’ has the meaning 18 given that term in section 101(a) of the Immigration 19 and Nationality Act (8 U.S.C. 1101(a)). 20 (3) APPROPRIATE CONGRESSIONAL COMMIT- 21 TEES.—The term ‘‘appropriate congressional com- 22 mittees’’ means— 23 (A) the Committee on Foreign Relations, 24 the Committee on Armed Services, the Com- 25 VerDate Sep 11 2014 01:56 Jul 09, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H3508.IH H3508 kjohnson on DSK79L0C42 with BILLS 10 •HR 3508 IH mittee on Banking, Housing, and Urban Af- 1 fairs, and the Select Committee on Intelligence 2 of the Senate; and 3 (B) the Committee on Foreign Affairs, the 4 Committee on Armed Services, the Committee 5 on Financial Services, and the Permanent Se- 6 lect Committee on Intelligence of the House of 7 Representatives. 8 (4) CHINESE PERSON.—The term ‘‘Chinese 9 person’’ means— 10 (A) an individual who is a citizen or na- 11 tional of the People’s Republic of China; or 12 (B) an entity organized under the laws of 13 the People’s Republic of China or otherwise 14 subject to the jurisdiction of the Government of 15 the People’s Republic of China. 16 (5) FINANCIAL INSTITUTION.—The term ‘‘fi- 17 nancial institution’’ means a financial institution 18 specified in subparagraph (A), (B), (C), (D), (E), 19 (F), (G), (H), (I), (J), (K), (M), (N), (P), (R), (T), 20 (Y), or (Z) of section 5312(a)(2) of title 31, United 21 States Code. 22 (6) FOREIGN FINANCIAL INSTITUTION.—The 23 term ‘‘foreign financial institution’’ has the meaning 24 given that term in section 1010.605 of title 31, Code 25 VerDate Sep 11 2014 01:56 Jul 09, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H3508.IH H3508 kjohnson on DSK79L0C42 with BILLS 11 •HR 3508 IH of Federal Regulations (or any corresponding similar 1 regulation or ruling). 2 (7) KNOWINGLY.—The term ‘‘knowingly’’, with 3 respect to conduct, a circumstance, or a result, 4 means that a person has actual knowledge, or should 5 have known, of the conduct, the circumstance, or the 6 result. 7 (8) PERSON.—The term ‘‘person’’ means any 8 individual or entity. 9 (9) UNITED STATES PERSON.—The term 10 ‘‘United States person’’ means— 11 (A) a United States citizen or an alien law- 12 fully admitted for permanent residence to the 13 United States; or [Text truncated for display. Full text available on Congress.gov.]