,,ii #aafth ,,congress #ast ,session ,s4 #b ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,january #c1 #bjai,mr4 ,rubio 7for himself and ,ms4 ,baldwin7 introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,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 ,china1 and for other purposes4 #a4 ,short title2 table of contents 7a7 ,short title ,this ,act may be cited as the ,fair ,trade with ,china ,enforcement ,act4 7b7 ,table of contents ,the table of contents for this ,act is as follows3 ,sec4 #a4 ,short title2 table of contents4 ,sec4 #b4 ,sense of ,congress4 ,sec4 #c4 ,statement of policy4 ,,title ,i--,safeguards against foreign influence in ,united ,states national and economic security by the ,people's ,republic of ,china ,sec4 #aja4 ,establishment of list of certain products receiving support from ,government of ,people's ,republic of ,china pursuant to ,made in ,china #bjbe policy4 ,sec4 #ajb4 ,prohibition on export to ,people's ,republic of ,china of national security sensitive technology and intellectual property4 ,sec4 #ajc4 ,imposition of shareholder cap on ,chinese investors in ,united ,states corporations4 ,sec4 #ajd4 ,prohibition on use of certain telecommunications services or equipment4 ,,title ,,ii--,fair trade enforcement actions with respect to the ,people's ,republic of ,china ,sec4 #bja4 ,countervailing duties with respect to certain industries in the ,people's ,republic of ,china4 ,sec4 #bjb4 ,repeal of reduced withholding rates for residents of ,china4 ,sec4 #bjc4 ,taxation of obligations of the ,united ,states held by the ,government of the ,people's ,republic of ,china4 #b4 ,sense of ,congress ,it is the ,sense of ,congress that-- 7#a7 since joining the ,world ,trade ,organization in #bjja1 the ,people's ,republic of ,china has offered the ,united ,states a contradictory bargain1 which promised openness in the global trade order1 but through state mercantilism delivered a severely imbalanced trading relationship2 7#b7 it was erroneous for the ,united ,states ,government to have ignored the contradictions and risks of free trade with the ,people's ,republic of ,china on the assumption that the ,people's ,republic of ,china would liberalize economically and politically2 7#c7 benefiting enormously from a more open global economy to drive its own industries1 the ,government of the ,people's ,republic of ,china and the ,communist ,party of the ,people's ,republic of ,china have only tightened their grip on power1 brutally suppressing dissent at home and pursuing policies abroad that are a far cry from being a responsible global stakeholder2 7#d7 malevolent economic behavior by persons in the ,people's ,republic of ,china is made clear by the theft of intellectual property from the ,united ,states1 as ,chinese theft of ,united ,states intellectual property alone costs the ,united ,states nearly #fjj1jjj1jjj1jjj annually1 according to the ,united ,states ,trade ,representative2 7#e7 stealing ,united ,states intellectual property advances the ,made in ,china #bjbe initiative of the ,government of the ,people's ,republic of ,china to eventually dominate global exports in #aj critical sectors1 namely artificial intelligence and next-generation information technology1 robotics1 new-energy vehicles1 biotechnology1 energy and power generation1 aerospace1 high-tech shipping1 advanced railway1 new materials1 and agricultural machinery1 among others2 7#f7 the targets of the ,made in ,china #bjbe initiative reveal the goal of the ,people's ,republic of ,china for the near-total displacement of advanced manufacturing in the ,united ,states2 and 7#g7 the ,united ,states ,government should act to strengthen the position of the ,united ,states in its policy toward the ,people's ,republic of ,china in order to create a more balanced economic relationship by safeguarding strategic assets from ,chinese influence1 reducing ,chinese involvement in the ,united ,states economy1 and encouraging ,united ,states companies to produce domestically1 instead of in the ,people's ,republic of ,china4 #c4 ,statement of policy ,it is the policy of the ,united ,states-- 7#a7 to impose restrictions on ,chinese investment in the ,united ,states in strategic industries targeted by the ,made in ,china #bjbe initiative set forth by the ,government of the ,people's ,republic of ,china2 7#b7 to tax ,chinese investment in the ,united ,states due to its negative effect on the ,united ,states trade deficit and wages of workers in the ,united ,states2 7#c7 to increase the cost of transnational production operations in the ,people's ,republic of ,china in a manner consistent with the economic cost of the risk of loss of unique access by the ,united ,states to intellectual property1 technology1 and industrial base2 and 7#d7 to support democratization in and the human rights of the people of ,hong ,kong1 including the findings and declarations set forth under section #b of the ,united ,states-,hong ,kong ,policy ,act of #aiib 7#bb ,u4,s4,c4 #egja74 ,i ,safeguards against foreign influence in ,united ,states national and economic security by the ,people's ,republic of ,china #aja4 ,establishment of list of certain products receiving support from ,government of ,people's ,republic of ,china pursuant to ,made in ,china #bjbe policy 7a7 ,in general ,chapter #h of title ,i of the ,trade ,act of #aigd 7#ai ,u4,s4,c4 #bbda et seq47 is amended by adding at the end the following3 #ahc4 ,list of certain products receiving support from ,government of ,people's ,republic of ,china 7a7 ,in general ,not later than #abj days after the date of the enactment of the ,fair ,trade with ,china ,enforcement ,act1 and every year thereafter1 the ,united ,states ,trade ,representative shall set forth a list of products manufactured or produced in1 or exported from1 the ,people's ,republic of ,china that are determined by the ,trade ,representative to receive support from the ,government of the ,people's ,republic of ,china pursuant to the ,made in ,china #bjbe industrial policy of that ,government4 7b7 ,criteria for list 7#a7 ,in general ,the ,trade ,representative shall include in the list required by subsection 7a7 the following products3 7,a7 ,any product specified in the following documents set forth by the ,government of the ,people's ,republic of ,china3 7i7 ,notice on ,issuing ,made in ,china #bjbe4 7ii7 ,china ,manufacturing #bjbe4 7iii7 ,notice on ,issuing the #acth ,five-year ,national ,strategic ,emerging ,industries ,development ,plan4 7iv7 ,guiding ,opinion on ,promoting ,international ,industrial ,capacity and ,equipment ,manufacturing ,cooperation4 7v7 ,any other document that expresses a national strategy or stated goal in connection with the ,made in ,china #bjbe industrial policy set forth by the ,government of the ,people's ,republic of ,china1 the ,communist ,party of ,china1 or another entity or individual capable of impacting the national strategy of the ,people's ,republic of ,china4 7,b7 ,any product receiving support from the ,government of the ,people's ,republic of ,china that has or will in the future displace net exports of like products by the ,united ,states1 as determined by the ,trade ,representative4 7#b7 ,included products ,in addition to such products as the ,trade ,representative shall include pursuant to paragraph 7#a7 in the list required by subsection 7a71 the ,trade ,representative shall include products in the following industries3 7,a7 ,civil aircraft4 7,b7 ,motor car and vehicle4 7,c7 ,advanced medical equipment4 7,d7 ,advanced construction equipment4 7,e7 ,agricultural machinery4 7,f7 ,railway equipment4 7,g7 ,diesel locomotive4 7,h7 ,moving freight4 7,i7 ,semiconductor4 7,j7 ,lithium battery manufacturing4 7,k7 ,artificial intelligence4 7,l7 ,high-capacity computing4 7,m7 ,quantum computing4 7,n7 ,robotics4 7,o7 ,biotechnology4 4 7b7 ,clerical amendment ,the table of contents for the ,trade ,act of #aigd is amended by inserting after the item relating to section #ahb the following3 ,sec4 #ahc4 ,list of certain products receiving support from ,government of ,people's ,republic of ,china4 4 #ajb4 ,prohibition on export to ,people's ,republic of ,china of national security sensitive technology and intellectual property 7a7 ,in general ,the ,secretary of ,commerce shall prohibit the export to the ,people's ,republic of ,china of any national security sensitive technology or intellectual property subject to the jurisdiction of the ,united ,states or exported by any person subject to the jurisdiction of the ,united ,states4 7b7 ,definitions ,in this section3 7#a7 ,intellectual property ,the term intellectual property includes patents1 copyrights1 trademarks1 or trade secrets4 7#b7 ,national security sensitive technology or intellectual property ,the term national security sensitive technology or intellectual property includes the following3 7,a7 ,technology or intellectual property that would make a significant contribution to the military potential of the ,people's ,republic of ,china that would prove detrimental to the national security of the ,united ,states4 7,b7 ,technology or intellectual property necessary to protect the economy of the ,united ,states from the excessive drain of scarce materials and to reduce the serious inflationary impact of demand from the ,people's ,republic of ,china4 7,c7 ,technology or intellectual property that is a component of the production of products included in the most recent list required under section #ahc of the ,trade ,act of #aigd1 as added by section #aja7;a71 determined in consultation with the ,united ,states ,trade ,representative4 7#c7 ,technology ,the term technology includes goods or services relating to information systems1 ,internet-based services1 production-enhancing logistics1 robotics1 artificial intelligence1 biotechnology1 or computing4 #ajc4 ,imposition of shareholder cap on ,chinese investors in ,united ,states corporations ,section #ac7;d7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #ghm7d77 is amended by adding at the end the following3 7#g7 7,a7 ,in this paragraph1 the term covered issuer means any issuer that produces components that may be used in the production of goods manufactured or produced in1 or exported from1 the ,people's ,republic of ,china and included in the most recent list required under section #ahc of the ,trade ,act of #aigd1 determined in consultation with the ,united ,states ,trade ,representative4 7,b7 ,no covered issuer that is incorporated under the laws of a ,state1 or whose principal place of business is within a ,state1 may be majority-owned by a person whose principal place of business is in the ,people's ,republic of ,china4 7,c7 ,the prohibition in subparagraph 7,b7 shall apply to any acquisition on or after the date of enactment of this paragraph4 4 #ajd4 ,prohibition on use of certain telecommunications services or equipment 7a7 ,findings ,congress makes the following findings3 7#a7 ,in its #bjaa ,annual ,report to ,congress on ,military and ,security ,developments ,involving the ,people's ,republic of ,china1 the ,department of ,defense stated1 ,china's defense industry has benefited from integration with a rapidly expanding civilian economy and science and technology sector1 particularly elements that have access to foreign technology4 ,progress within individual defense sectors appears linked to the relative integration of each1 through ,china's civilian economy1 into the global production and ,r,d chain ''' ,information technology companies in particular1 including ,huawei1 ,datang1 and ,zhongxing1 maintain close ties to the ,,pla44 7#b7 ,in a #bjaa report titled ,the ,national ,security ,implications of ,investments and ,products from the ,people's ,republic of ,china in the ,telecommunications ,sector1 the ,united ,states ,china ,economic and ,security ,review ,commission stated that national security concerns have accompanied the dramatic growth of ,china's telecom sector4 ''' ,additionally1 large ,chinese companies--particularly those national champions prominent in ,china's going out strategy of overseas expansion--are directly subject to direction by the ,chinese ,communist ,party1 to include support for ,,prc state policies and goals44 7#c7 ,the ,commission further stated in its report that from this point of view1 the clear economic benefits of foreign investment in the ,u4,s4 must be weighed against the potential security concerns related to infrastructure components coming under the control of foreign entities4 ,this seems particularly applicable in the telecommunications industry1 as ,chinese companies continue systematically to acquire significant holdings in prominent global and ,u4,s4 telecommunications and information technology companies44 7#d7 ,in its #bjaa ,annual ,report to ,congress1 the ,united ,states ,china ,economic and ,security ,review ,commission stated that the extent of the state's control of the ,chinese economy is difficult to quantify4 ''' ,there is also a category of companies that1 though claiming to be private1 are subject to state influence4 ,such companies are often in new markets with no established ,,soe leaders and enjoy favorable government policies that support their development while posing obstacles to foreign competition4 ,examples include ,chinese telecoms giant ,huawei and such automotive companies as battery maker ,,byd and vehicle manufacturers ,geely and ,chery44 7#e7 ,in the bipartisan ,investigative ,report on the ,united ,states ,national ,security ,issues ,posed by ,chinese ,telecommunication ,companies ,huawei and ,,zte released in #bjab by the ,permanent ,select ,committee on ,intelligence of the ,house of ,representatives1 it was recommended that ,u4,s4 government systems1 particularly sensitive systems1 should not include ,huawei or ,,zte equipment1 including in component parts4 ,similarly1 government contractors--particularly those working on contracts for sensitive ,u4,s4 programs--should exclude ,,zte or ,huawei equipment in their systems44 7#f7 ,general ,michael ,hayden1 who served as ,director of the ,central ,intelligence ,agency and ,director of the ,national ,security ,agency1 stated in ,july #bjac that ,huawei had shared with the ,chinese state intimate and extensive knowledge of foreign telecommunications systems it is involved with4 7#g7 ,the ,federal ,bureau of ,investigation1 in a ,february #bjae ,counterintelligence ,strategy ,partnership ,intelligence ,note stated that1 with the expanded use of ,huawei ,technologies ,inc4 equipment and services in ,u4,s4 telecommunications service provider networks1 the ,chinese ,government's potential access to ,u4,s4 business communications is dramatically increasing4 ,chinese ,government-supported telecommunications equipment on ,u4,s4 networks may be exploited through ,chinese cyber activity1 with ,china's intelligence services operating as an advanced persistent threat to ,u4,s4 networks44 7#h7 ,the ,federal ,bureau of ,investigation further stated in its ,february #bjae counterintelligence note that ,china makes no secret that its cyber warfare strategy is predicated on controlling global communications network infrastructure4 7#i7 ,at a hearing before the ,committee on ,armed ,services of the ,house of ,representatives on ,september #cj1 #bjae1 ,deputy ,secretary of ,defense ,robert ,work1 responding to a question about the use of ,huawei telecommunications equipment1 stated1 ,in the ,office of the ,secretary of ,defense1 absolutely not4 ,and ,i know of no other--,i don't believe we operate in the ,pentagon1 any ,huawei systems in the ,pentagon44 7#aj7 ,at that hearing1 the ,commander of the ,united ,states ,cyber ,command1 ,admiral ,mike ,rogers1 responding to a question about why such ,huawei telecommunications equipment is not used1 stated1 ,as we look at supply chain and we look at potential vulnerabilities within the system1 that it is a risk we felt was unacceptable44 7#aa7 ,in ,march #bjag1 ,,zte ,corporation pled guilty to conspiring to violate the ,international ,emergency ,economic ,powers ,act by illegally shipping ,united ,states-origin items to ,iran1 paying the ,united ,states ,government a penalty of #hib1cfj1jfd for activity between ,january #bjaj and ,january #bjaf4 7#ab7 ,the ,office of ,foreign ,assets ,control of the ,department of the ,treasury issued a subpoena to ,huawei as part of a ,federal investigation of alleged violations of trade restrictions on ,cuba1 ,iran1 and ,sudan4 7b7 ,prohibition on agency use or procurement ,the head of an agency may not procure or obtain1 may not extend or renew a contract to procure or obtain1 and may not enter into a contract 7or extend or renew a contract7 with an entity that uses1 or contracts with any other entity that uses1 any equipment1 system1 or service that uses covered telecommunications equipment or services as a substantial or essential component of any system1 or as critical technology as part of any system4 7c7 ,report ,not later than one year after the date of the enactment of this ,act1 and annually thereafter1 the ,secretary of ,commerce1 in consultation with the ,secretary of ,defense and the ,united ,states ,trade ,representative1 shall submit to ,congress a report on sales by the ,government of the ,people's ,republic of ,china of covered telecommunications equipment or services through partial ownership or any other methods4 7d7 ,definitions ,in this section3 7#a7 ,agency ,the term agency has the meaning given that term in section #eea of title #e1 ,united ,states ,code4 7#b7 ,covered telecommunications equipment or services ,the term covered telecommunications equipment or services means any of the following3 7,a7 ,telecommunications equipment produced by ,huawei ,technologies ,company1 ,,zte ,corporation1 or any other ,chinese telecom entity identified by the ,director of ,national ,intelligence1 the ,secretary of ,defense1 or the ,director of the ,federal ,bureau of ,investigation as a security concern 7or any subsidiary or affiliate of any such entity74 7,b7 ,telecommunications services provided by such entities or using such equipment4 7,c7 ,telecommunications equipment or services produced or provided by an entity that the head of the relevant agency reasonably believes to be an entity owned or controlled by1 or otherwise connected to1 the ,government of the ,people's ,republic of ,china4 ,,ii ,fair trade enforcement actions with respect to the ,people's ,republic of ,china #bja4 ,countervailing duties with respect to certain industries in the ,people's ,republic of ,china 7a7 ,policy ,it is the policy of the ,united ,states-- 7#a7 to reduce the import of finished goods from the ,people's ,republic of ,china relating to the ,made in ,china #bjbe plan set forth by the ,government of the ,people's ,republic of ,china2 and 7#b7 to encourage allies of the ,united ,states to reduce the import of finished goods from the ,people's ,republic of ,china relating to the ,made in ,china #bjbe plan4 7b7 ,inclusion of ,made in ,china #bjbe products in definition of countervailable subsidy ,paragraph 7#e7 of section #gga of the ,tariff ,act of #aicj 7#ai ,u4,s4,c4 #afgg7 is amended by adding at the end the following3 7,g7 ,treatment of certain ,chinese merchandise ,notwithstanding any other provision of this title1 if a person presents evidence in a petition filed under section #gjb7;b7 that merchandise covered by the petition is manufactured or produced in1 or exported from1 the ,people's ,republic of ,china and included in the most recent list required under section #ahc of the ,trade ,act of #aigd1 determined in consultation with the ,united ,states ,trade ,representative1 the administrating authority shall determine that a countervailable subsidy is being provided with respect to that merchandise4 4 7c7 ,inclusion of ,made in ,china #bjbe products in definition of material injury ,paragraph 7#g77;,f7 of such section is amended by adding at the end the following3 7iv7 ,treatment of certain ,chinese merchandise ,notwithstanding any other provision of this title1 if a petition filed under section #gjb7;b7 alleges that an industry in the ,united ,states is materially injured or threatened with material injury or that the establishment of an industry in the ,united ,states is materially retarded by reason of imports of merchandise manufactured or produced in1 or exported from1 the ,people's ,republic of ,china and included in the most recent list required under section #ahc of the ,trade ,act of #aigd1 determined in consultation with the ,united ,states ,trade ,representative1 the ,commission shall determine that material injury or such a threat exists4 4 #bjb4 ,repeal of reduced withholding rates for residents of ,china 7a7 ,in general ,section #hid of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by striking ,the provisions of in subsection 7a7 and inserting ,except as otherwise provided in this section1 the provisions of2 and 7#b7 by adding at the end the following new subsection3 7d7 ,exception for ,people's ,republic of ,china 7#a7 ,in general ,the rates of tax imposed under sections #hga and #hha1 and the rates of withholding tax imposed under chapter #c1 with respect to any resident of the ,people's ,republic of ,china shall be determined without regard to any provision of the ,agreement between the ,government of the ,united ,states of ,america and the ,government of the ,people's ,republic of ,china for the ,avoidance of ,double ,taxation and the ,prevention of ,tax ,evasion with ,respect to ,taxes on ,income1 signed at ,beijing on ,april #cj1 #aihd4 7#b7 ,regulations ,the ,secretary shall promulgate regulations to prevent the avoidance of the purposes of this subsection through the use of foreign entities4 4 7b7 ,effective date ,the amendments made by this section shall apply to income received after the date of the enactment of this ,act4 #bjc4 ,taxation of obligations of the ,united ,states held by the ,government of the ,people's ,republic of ,china 7a7 ,in general ,section #hib of the ,internal ,revenue ,code of #aihf is amended by redesignating subsection 7c7 as subsection 7d7 and by inserting after subsection 7b7 the following new subsection3 7c7 ,exception ,this section shall not apply to the ,government of the ,people's ,republic of ,china4 4 7b7 ,central bank ,section #hie of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by striking ,income and inserting the following3 7a7 ,in general ,income 2 and 7#b7 by adding at the end the following new subsection3 7b7 ,exception ,this section shall not apply to the any central bank of the ,people's ,republic of ,china4 4 7c7 ,effective date ,the amendments made by this section shall apply to income received or derived after the date of the enactment of this ,act4