To clarify that exchange-rate manipulation by the People's Republic of China is actionable under the countervailing duty provisions and the product-specific safeguard mechanisms of the trade laws of the United States, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Chinese Currency Act of 2005''.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) The economy and national security of the United States 
        are critically dependent upon a vibrant manufacturing base.
            (2) The good health of the United States manufacturing 
        industry requires, among other things, unfettered access to 
        open markets abroad and fairly traded raw materials and 
        products in accord with the international legal principles and 
        agreements of the World Trade Organization and the 
        International Monetary Fund.
            (3) Since 1994, the People's Republic of China has 
        aggressively intervened in currency markets to peg the Chinese 
        currency, known as the renminbi or yuan, at a fixed rate of 
        approximately 8.28 yuan to the United States dollar.
            (4) Economists generally agree that this policy by the 
        People's Republic of China has resulted in substantial 
        undervaluation of the renminbi, perhaps by 40 percent or more.
            (5) Evidence of this undervaluation can be found in the 
        large and growing annual trade surpluses of the People's 
        Republic of China, foreign-direct investment in China, and 
        rapidly increasing aggregate amount of foreign-currency 
        reserves.
            (6) The renminbi's undervaluation acts as both a subsidy 
        for exports from the People's Republic of China and a non-
        tariff barrier against imports into China, to the serious 
        detriment of the United States manufacturing industry.
            (7)(A) As a member of both the World Trade Organization and 
        the International Monetary Fund, the People's Republic of China 
        has assumed a series of international legal obligations that 
        proscribe subsidization of exports and exchange-rate 
        manipulation.
            (B) These prohibitions are most prominently set forth in 
        Articles VI, XV, and XVI of the GATT 1994 (as defined in 
        section 2(1)(B) of the Uruguay Round Agreements Act (19 U.S.C. 
        3501(1)(B)), in the Agreement on Subsidies and Countervailing 
        Measures (as defined in section 101(d)(12) of the Uruguay Round 
        Agreements Act (19 U.S.C. 3511(d)(12)), and in Articles IV and 
        VIII of the International Monetary Fund's Articles of 
        Agreement.
            (8) In addition, as a further condition of its accession 
        agreement to become a member of the World Trade Organization on 
        December 11, 2001, the People's Republic of China agreed to a 
        transitional product-specific safeguard mechanism to address 
        market disruption to an importing member's domestic industry 
        due to increased imports of products of Chinese origin.
            (9) Despite its international legal obligations, and 
        notwithstanding extended and ongoing negotiations with the 
        United States, the People's Republic of China has given no 
        indication of any intent to correct the renminbi's 
        undervaluation in the foreseeable future.
            (10) Under the foregoing circumstances, it is consistent 
        with the international legal obligations of the People's 
        Republic of China and with the corresponding international 
        legal rights of the United States to amend relevant United 
        States trade laws to make explicit that exchange-rate 
        manipulation is actionable as either or both a countervailable 
        export subsidy and as a cause of present or threatened market 
        disruption to United States domestic producers.

SEC. 3. CLARIFICATION TO INCLUDE EXCHANGE-RATE MANIPULATION AS 
              COUNTERVAILABLE SUBSIDY UNDER TITLE VII OF THE TARIFF ACT 
              OF 1930.

    (a) Amendments to Definition of Countervailable Subsidy.--
            (1) Financial contribution.--Section 771(5)(D) of the 
        Tariff Act of 1930 (19 U.S.C. 1677(5)(D)) is amended--
                    (A) by striking ``The term'' and inserting ``(i) 
                The term'';
                    (B) by redesignating clauses (i) through (iv) as 
                subclauses (I) through (IV), respectively; and
                    (C) by adding at the end the following:
                    ``(ii) In addition to clause (i), the term 
                `provides a financial contribution' means to engage in 
                exchange-rate manipulation (as defined in paragraph 
                (5C)).''.
            (2) Benefit conferred.--Section 771(5)(E) of the Tariff Act 
        of 1930 (19 U.S.C. 1677(5)(E)) is amended--
                    (A) in clause (iii), by striking ``, and'' and 
                inserting a comma;
                    (B) in clause (iv), by striking the period at the 
                end and inserting ``, and''; and
                    (C) by adding at the end the following new clause:
                            ``(v) in the case of exchange-rate 
                        manipulation (as defined in paragraph (5C)), if 
                        the price of exported goods is less than what 
                        the price of such goods would be absent the 
                        exchange-rate manipulation.''.
            (3) Specificity.--Section 771(5A)(B) of the Tariff Act of 
        1930 (19 U.S.C. 1677(5A)(B)) is amended by adding at the end 
        before the period the following: ``, such as exchange-rate 
        manipulation (as defined in paragraph (5C))''.
    (b) Definition of Exchange-Rate Manipulation.--Section 771 of the 
Tariff Act of 1930 (19 U.S.C. 1677) is amended by inserting after 
paragraph (5B) the following new paragraph:
            ``(5C) Definition of exchange-rate manipulation.--
                    ``(A) In general.--For purposes of paragraphs (5) 
                and (5A), the term `exchange-rate manipulation' means 
                protracted large-scale intervention by an authority to 
                undervalue its currency in the exchange market that 
                prevents effective balance-of-payments adjustment or 
                that gains an unfair competitive advantage over any 
                other country.
                    ``(B) Factors.--In determining whether exchange-
                rate manipulation is occurring and a benefit thereby 
                conferred, the administering authority in each case--
                            ``(i) shall consider the exporting 
                        country's--
                                    ``(I) bilateral balance-of-trade 
                                surplus or deficit with the United 
                                States;
                                    ``(II) balance-of-trade surplus or 
                                deficit with its other trading partners 
                                individually and in the aggregate;
                                    ``(III) foreign direct investment 
                                in its territory;
                                    ``(IV) currency-specific and 
                                aggregate amounts of foreign currency 
                                reserves; and
                                    ``(V) mechanisms employed to 
                                maintain its currency at a fixed 
                                exchange rate relative to another 
                                currency and, particularly, the nature, 
                                duration, and monetary expenditures of 
                                those mechanisms;
                            ``(ii) may consider such other economic 
                        factors as are relevant; and
                            ``(iii) shall measure the trade surpluses 
                        or deficits described in subclauses (I) and 
                        (II) of clause (i) with reference to the trade 
                        data reported by the United States and the 
                        other trading partners of the exporting 
                        country, unless such trade data are not 
                        available or are demonstrably inaccurate, in 
                        which case the exporting country's trade data 
                        may be relied upon if shown to be sufficiently 
                        accurate and trustworthy.
                    ``(C) Type of economy.--An authority found to be 
                engaged in exchange-rate manipulation may have either a 
                market economy or a nonmarket economy or a combination 
                thereof.''.
    (c) Effective Date.--The amendments made by this section apply with 
respect to a countervailing duty investigation initiated under subtitle 
A of title VII of the Tariff Act of 1930 before, on, or after the date 
of the enactment of this Act.

SEC. 4. CLARIFICATION TO INCLUDE EXCHANGE-RATE MANIPULATION BY THE 
              PEOPLE'S REPUBLIC OF CHINA AS MARKET DISRUPTION UNDER 
              CHAPTER 2 OF TITLE IV OF THE TRADE ACT OF 1974.

    (a) Market Disruption.--
            (1) In general.--Section 421(c) of the Trade Act of 1974 
        (19 U.S.C. 2451(c)) is amended by adding at the end the 
        following new paragraph:
    ``(3) For purposes of this section, the term `under such 
conditions' includes, but is not limited to, by reason of exchange-rate 
manipulation (as defined in paragraph (4)).''.
            (2) Definition of exchange-rate manipulation.--Section 
        421(c) of the Trade Act of 1974 (19 U.S.C. 2451(c)), as amended 
        by paragraph (1), is further amended by adding at the end the 
        following new paragraph:
    ``(4)(A) For purposes of this section, the term `exchange-rate 
manipulation' means protracted large-scale intervention by the 
Government of the People's Republic of China or any other public entity 
within the territory of the People's Republic of China to undervalue 
its currency in the exchange market that prevents effective balance-of-
payments adjustment or that gains an unfair competitive advantage over 
the United States.
    ``(B) In determining whether exchange-rate manipulation is 
occurring, the Commission in each case--
            ``(i) shall consider China's--
                    ``(I) bilateral balance-of-trade surplus or deficit 
                with the United States;
                    ``(II) balance-of-trade surplus or deficit with its 
                other trading partners individually and in the 
                aggregate;
                    ``(III) foreign direct investment in its territory;
                    ``(IV) currency-specific and aggregate amounts of 
                foreign currency reserves; and
                    ``(V) mechanisms employed to maintain its currency 
                at a fixed exchange rate relative to another currency 
                and, particularly, the nature, duration, and monetary 
                expenditures of those mechanisms;
            ``(ii) may consider such other economic factors as are 
        relevant; and
            ``(iii) shall measure the trade surpluses or deficits 
        described in subclauses (I) and (II) of clause (i) with 
        reference to the trade data reported by the United States and 
        the other trading partners of China, unless such trade data are 
        not available or are demonstrably inaccurate, in which case 
        China's trade data may be relied upon if shown to be 
        sufficiently accurate and trustworthy.''.
    (b) Critical Circumstances.--Section 421(i)(1) of the Trade Act of 
1974 (19 U.S.C. 2451(i)(1)) is amended--
            (1) in subparagraph (A), by striking ``and'' at the end;
            (2) in subparagraph (B), by striking the period at the end 
        and inserting ``; and''; and
            (3) by inserting after subparagraph (B) the following new 
        subparagraph:
            ``(C) in those instances in which the petition alleges and 
        reasonably documents that exchange-rate manipulation is 
        occurring, shall consider that factor as weighing in favor of 
        affirmative findings under subparagraphs (A) and (B).''.
    (c) Standard for Presidential Action.--Section 421(k)(2) of the 
Trade Act of 1974 (19 U.S.C. 2451(k)(2)) is amended by adding at the 
end the following new sentence: ``In those instances in which the 
Commission has made an affirmative determination that exchange-rate 
manipulation is occurring, the President shall consider that factor as 
weighing in favor of providing import relief in accordance with 
subsection (a).''.
    (d) Modifications of Relief.--Section 421(n)(2) of the Trade Act of 
1974 (19 U.S.C. 2451(n)(2)) is amended by adding at the end the 
following new sentence: ``In those instances in which the Commission 
has made an affirmative determination that exchange-rate manipulation 
is occurring, the Commission and the President shall consider that 
factor as weighing in favor of finding that continuation of relief is 
necessary to prevent or remedy the market disruption at issue.''.
    (e) Extension of Action.--Section 421(o) of the Trade Act of 1974 
(19 U.S.C. 2451(o)) is amended--
            (1) in paragraph (1), by adding at the end the following 
        new sentence: ``In those instances in which the Commission has 
        made an affirmative determination that exchange-rate 
        manipulation is occurring, the Commission shall consider that 
        factor as weighing in favor of finding that an extension of the 
        period of relief is necessary to prevent or remedy the market 
        disruption at issue.''; and
            (2) in paragraph (4), by adding at the end the following 
        new sentence: ``In those instances in which the Commission has 
        made an affirmative determination that exchange-rate 
        manipulation is occurring, the President shall consider that 
        factor as weighing in favor of finding that an extension of the 
        period of relief is necessary to prevent or remedy the market 
        disruption at issue.''.
    (f) Effective Date.--The amendments made by this section apply with 
respect to an investigation initiated under chapter 2 of title IV of 
the Trade Act of 1974 before, on, or after the date of the enactment of 
this Act.

SEC. 5. PROHIBITION ON PROCUREMENT BY THE DEPARTMENT OF DEFENSE OF 
              CERTAIN DEFENSE ARTICLES IMPORTED FROM THE PEOPLE'S 
              REPUBLIC OF CHINA.

    (a) Copy of Petition, Request, or Resolution to Be Transmitted to 
the Secretary of Defense.--Section 421(b)(4) of the Trade Act of 1974 
(19 U.S.C. 2451(b)(4)) is amended by inserting ``, the Secretary of 
Defense'' after ``, the Trade Representative''.
    (b) Determination of Secretary of Defense.--Section 421(b) of the 
Trade Act of 1974 (19 U.S.C. 2451(b)) is amended by adding at the end 
the following new paragraph:
    ``(6) Not later than 15 days after the date on which an 
investigation is initiated under this subsection, the Secretary of 
Defense shall submit to the Commission a report in writing which 
contains the determination of the Secretary as to whether or not the 
articles of the People's Republic of China that are the subject of the 
investigation are like or directly competitive with articles produced 
by a domestic industry that are critical to the defense industrial base 
of the United States.''.
    (c) Prohibition on Procurement by the Department of Defense of 
Certain Defense Articles.--
            (1) Prohibition.--If the United States International Trade 
        Commission makes an affirmative determination under section 
        421(b) of the Trade Act of 1974 (19 U.S.C. 2451(b)), or a 
        determination which the President or the United States Trade 
        Representative may consider as affirmative under section 421(e) 
        of such Act (19 U.S.C. 2451(e)), with respect to articles of 
        the People's Republic of China that the Secretary of Defense 
        has determined are like or directly competitive with articles 
        produced by a domestic industry that are critical to the 
        defense industrial base of the United States, the Secretary of 
        Defense may not procure, directly or indirectly, such products 
        of the People's Republic of China.
            (2) Waiver.--The President may waive the application of the 
        prohibition contained in paragraph (1) on a case-by-case basis 
        if the President determines and certifies to Congress that it 
        is in the national security interests of the United States to 
        do so.

Summary: Chinese Currency Act of 2005 - Amends the Tariff Act of 1930 regarding countervailing duty investigations to revise the definition of countervailable subsidy to include exchange-rate manipulation. Defines exchange-rate manipulation as protracted large-scale intervention by an authority to undervalue its currency in the exchange market that prevents effective balance-of-payments adjustment or that gains an unfair competitive advantage over any other country. Specifies factors for determining whether exchange-rate manipulation is occurring and a benefit thereby conferred. Applies the definition of exchange-rate manipulation to the Government of the People's Republic of China (PRC) or any other public entity within its territory. Specifies: (1) factors for determining whether exchange-rate manipulation is occurring in the PRC. (2) actions to be taken, if a petition for an investigation alleges and reasonably documents that it is occurring. And (3) the standard for presidential action to prevent or remedy the market disruption at issue . Directs the Secretary of Defense, upon proper request or resolution, to report to the US International Trade Commission any determination as to whether or not the articles of the PRC that are the subject of the investigation are like or directly competitive with domestically produced articles critical to the US defense industrial base. Prohibits the Secretary from procuring, directly or indirectly, such products if the Commission or the President or the US Trade Representative makes an affirmative determination that the Secretary's determination is accurate. Provides for presidential waiver of the prohibition in the national security interests of the United States.