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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Fair Trade with China Enforcement Act’’. 


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1 (b) TABLE OF CONTENTS.—The table of contents for 

2 this Act is as follows: 

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 equipment. 

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 People’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. 

3 SEC. 2. SENSE OF CONGRESS. 

4 It is the sense of Congress that— 

5 (1) since joining the World Trade Organization 

6 in 2001, the People’s Republic of China has offered 

7 the United States a contradictory bargain, which 

8 promised openness in the global trade order, but 

9 through state mercantilism delivered a severely im10 balanced trading relationship; 


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1 (2) it was erroneous for the United States Gov2 ernment to have ignored the contradictions and risks 

3 of free trade with the People’s Republic of China on 

4 the assumption that the People’s Republic of China 

5 would liberalize economically and politically; 

6 (3) benefitting enormously from a more open 

7 global economy to drive its own industries, the Gov8 ernment of the People’s Republic of China and the 

9 Communist Party of the People’s Republic of China 

10 have only tightened their grip on power, brutally 

11 suppressing dissent at home and pursuing policies 

12 abroad that are a far cry from being a responsible 

13 global stakeholder; 

14 (4) malevolent economic behavior by persons in 

15 the People’s Republic of China is made clear by the 

16 theft of intellectual property from the United States, 

17 as Chinese theft of United States intellectual prop18 erty alone costs the United States nearly 

19 $600,000,000,000 annually, according to the United 

20 States Trade Representative; 

21 (5) stealing United States intellectual property 

22 advances the ‘‘Made in China 2025’’ initiative of the 

23 Government of the People’s Republic of China to 

24 eventually dominate global exports in 10 critical sec25 tors, namely artificial intelligence and next-generaVerDate Sep 11 2014 00:51 Feb 03, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H704.IH H704

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1 tion information technology, robotics, new-energy ve2 hicles, biotechnology, energy and power generation, 

3 aerospace, high-tech shipping, advanced railway, new 

4 materials, and agricultural machinery, among oth5 ers; 

6 (6) the targets of the Made in China 2025 ini7 tiative reveal the goal of the People’s Republic of 

8 China for the near-total displacement of advanced 

9 manufacturing in the United States; and 

10 (7) the United States Government should act to 

11 strengthen the position of the United States in its 

12 policy toward the People’s Republic of China in 

13 order to create a more balanced economic relation14 ship by safeguarding strategic assets from Chinese 

15 influence, reducing Chinese involvement in the 

16 United States economy, and encouraging United 

17 States companies to produce domestically, instead of 

18 in the People’s Republic of China. 

19 SEC. 3. STATEMENT OF POLICY. 

20 It is the policy of the United States— 

21 (1) to impose restrictions on Chinese invest22 ment in the United States in strategic industries 

23 targeted by the Made in China 2025 initiative set 

24 forth by the Government of the People’s Republic of 

25 China; 


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1 (2) to tax Chinese investment in the United 

2 States due to its negative effect on the United 

3 States trade deficit and wages of workers in the 

4 United States; 

5 (3) to increase the cost of transnational produc6 tion operations in the People’s Republic of China in 

7 a manner consistent with the economic cost of the 

8 risk of loss of unique access by the United States to 

9 intellectual property, technology, and industrial base; 

10 and 

11 (4) to support democratization in and the 

12 human rights of the people of Hong Kong, including 

13 the findings and declarations set forth under section 

14 2 of the United States-Hong Kong Policy Act of 

15 1992 (22 U.S.C. 5701). 


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1 TITLE I—SAFEGUARDS AGAINST 

2 FOREIGN INFLUENCE IN 

3 UNITED STATES NATIONAL 

4 AND ECONOMIC SECURITY BY 

5 THE PEOPLE’S REPUBLIC OF 

6 CHINA 

7 SEC. 101. ESTABLISHMENT OF LIST OF CERTAIN PRODUCTS 

8 RECEIVING SUPPORT FROM THE GOVERN9 MENT OF THE PEOPLE’S REPUBLIC OF CHINA 

10 PURSUANT TO THE MADE IN CHINA 2025 POL11 ICY. 

12 (a) IN GENERAL.—Chapter 8 of title I of the Trade 

13 Act of 1974 (19 U.S.C. 2241 et seq.) is amended by add14 ing at the end the following: 

15 ‘‘SEC. 183. LIST OF CERTAIN PRODUCTS RECEIVING SUP16 PORT FROM THE GOVERNMENT OF THE PEO17 PLE’S REPUBLIC OF CHINA. 

18 ‘‘(a) IN GENERAL.—Not later than 120 days after 

19 the date of the enactment of the Fair Trade with China 

20 Enforcement Act, and every year thereafter, the United 

21 States Trade Representative shall set forth a list of prod22 ucts manufactured or produced in, or exported from, the 

23 People’s Republic of China that are determined by the 

24 Trade Representative to receive support from the GovernVerDate Sep 11 2014 00:51 Feb 03, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H704.IH H704

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1 ment of the People’s Republic of China pursuant to the 

2 Made in China 2025 industrial policy of that Government. 

3 ‘‘(b) CRITERIA FOR LIST.— 

4 ‘‘(1) IN GENERAL.—The Trade Representative 

5 shall include in the list required by subsection (a) 

6 the following products: 

7 ‘‘(A) Any product specified in the following 

8 documents set forth by the Government of the 

9 People’s Republic of China: 

10 ‘‘(i) Notice on Issuing Made in China 

11 2025. 

12 ‘‘(ii) China Manufacturing 2025. 

13 ‘‘(iii) Notice on Issuing the 13th Five14 Year National Strategic Emerging Indus15 tries Development Plan. 

16 ‘‘(iv) Guiding Opinion on Promoting 

17 International Industrial Capacity and 

18 Equipment Manufacturing Cooperation. 

19 ‘‘(v) Any other document that ex20 presses a national strategy or stated goal 

21 in connection with the Made in China 2025 

22 industrial policy set forth by the Govern23 ment of the People’s Republic of China, 

24 the Communist Party of China, or another 

25 entity or individual capable of impacting 


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1 the national strategy of the People’s Re2 public of China. 

3 ‘‘(B) Any product receiving support from 

4 the Government of the People’s Republic of 

5 China that has or will in the future displace net 

6 exports of like products by the United States, 

7 as determined by the Trade Representative. 

8 ‘‘(2) INCLUDED PRODUCTS.—In addition to 

9 such products as the Trade Representative shall in10 clude pursuant to paragraph (1) in the list required 

11 by subsection (a), the Trade Representative shall in12 clude products in the following industries: 

13 ‘‘(A) Civil aircraft. 

14 ‘‘(B) Motor car and vehicle. 

15 ‘‘(C) Advanced medical equipment. 

16 ‘‘(D) Advanced construction equipment. 

17 ‘‘(E) Agricultural machinery. 

18 ‘‘(F) Railway equipment. 

19 ‘‘(G) Diesel locomotive. 

20 ‘‘(H) Moving freight. 

21 ‘‘(I) Semiconductor. 

22 ‘‘(J) Lithium battery manufacturing. 

23 ‘‘(K) Artificial intelligence. 

24 ‘‘(L) High-capacity computing. 

25 ‘‘(M) Quantum computing. 


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1 ‘‘(N) Robotics. 

2 ‘‘(O) Biotechnology.’’. 

3 (b) CLERICAL AMENDMENT.—The table of contents 

4 for the Trade Act of 1974 is amended by inserting after 

5 the item relating to section 182 the following: 

‘‘Sec. 183. List of certain products receiving support from the Government of 

the People’s Republic of China.’’. 

6 SEC. 102. PROHIBITION ON EXPORT TO THE PEOPLE’S RE7 PUBLIC OF CHINA OF NATIONAL SECURITY 

8 SENSITIVE TECHNOLOGY AND INTELLEC9 TUAL PROPERTY. 

10 (a) IN GENERAL.—The Secretary of Commerce shall 

11 prohibit the export to the People’s Republic of China of 

12 any national security sensitive technology or intellectual 

13 property subject to the jurisdiction of the United States 

14 or exported by any person subject to the jurisdiction of 

15 the United States. 

16 (b) DEFINITIONS.—In this section: 

17 (1) INTELLECTUAL PROPERTY.—The term ‘‘in18 tellectual property’’ includes patents, copyrights, 

19 trademarks, or trade secrets. 

20 (2) NATIONAL SECURITY SENSITIVE TECH21 NOLOGY OR INTELLECTUAL PROPERTY.—The term 

22 ‘‘national security sensitive technology or intellectual 

23 property’’ includes the following: 


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1 (A) Technology or intellectual property 

2 that would make a significant contribution to 

3 the military potential of the People’s Republic 

4 of China that would prove detrimental to the 

5 national security of the United States. 

6 (B) Technology or intellectual property 

7 necessary to protect the economy of the United 

8 States from the excessive drain of scarce mate9 rials and to reduce the serious inflationary im10 pact of demand from the People’s Republic of 

11 China. 

12 (C) Technology or intellectual property 

13 that is a component of the production of prod14 ucts included in the most recent list required 

15 under section 183 of the Trade Act of 1974, as 

16 added by section 101(a), determined in con17 sultation with the United States Trade Rep18 resentative. 

19 (3) TECHNOLOGY.—The term ‘‘technology’’ in20 cludes goods or services relating to information sys21 tems, internet-based services, production-enhancing 

22 logistics, robotics, artificial intelligence, biotechnolo23 gy, or computing. 


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1 SEC. 103. IMPOSITION OF SHAREHOLDER CAP ON CHINESE 

2 INVESTORS IN UNITED STATES CORPORA3 TIONS. 

4 Section 13(d) of the Securities Exchange Act of 1934 

5 (15 U.S.C. 78m(d)) is amended by adding at the end the 

6 following: 

7 ‘‘(7)(A) In this paragraph, the term ‘covered issuer’ 

8 means any issuer that produces components that may be 

9 used in the production of goods manufactured or produced 

10 in, or exported from, the People’s Republic of China and 

11 included in the most recent list required under section 183 

12 of the Trade Act of 1974, determined in consultation with 

13 the United States Trade Representative. 

14 ‘‘(B) No covered issuer that is incorporated under the 

15 laws of a State, or whose principal place of business is 

16 within a State, may be majority-owned by a person whose 

17 principal place of business is in the People’s Republic of 

18 China. 

19 ‘‘(C) The prohibition in subparagraph (B) shall apply 

20 to any acquisition on or after the date of enactment of 

21 this paragraph.’’. 

22 SEC. 104. PROHIBITION ON USE OF CERTAIN TELE23 COMMUNICATIONS SERVICES OR EQUIP24 MENT. 

25 (a) FINDINGS.—Congress makes the following find26 ings: 


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1 (1) In its 2011 ‘‘Annual Report to Congress on 

2 Military and Security Developments Involving the 

3 People’s Republic of China’’, the Department of De4 fense stated, ‘‘China’s defense industry has benefited 

5 from integration with a rapidly expanding civilian 

6 economy and science and technology sector, particu7 larly elements that have access to foreign technology. 

8 Progress within individual defense sectors appears 

9 linked to the relative integration of each, through 

10 China’s civilian economy, into the global production 

11 and R&D chain . . . Information technology compa12 nies in particular, including Huawei, Datang, and 

13 Zhongxing, maintain close ties to the PLA.’’. 

14 (2) In a 2011 report titled ‘‘The National Secu15 rity Implications of Investments and Products from 

16 the People’s Republic of China in the Telecommuni17 cations Sector’’, the United States China Economic 

18 and Security Review Commission stated that 

19 ‘‘[n]ational security concerns have accompanied the 

20 dramatic growth of China’s telecom sector. . . . Ad21 ditionally, large Chinese companies—particularly 

22 those ‘national champions’ prominent in China’s 

23 ‘going out’ strategy of overseas expansion—are di24 rectly subject to direction by the Chinese Communist 


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1 Party, to include support for PRC state policies and 

2 goals.’’. 

3 (3) The Commission further stated in its report 

4 that ‘‘[f]rom this point of view, the clear economic 

5 benefits of foreign investment in the U.S. must be 

6 weighed against the potential security concerns re7 lated to infrastructure components coming under the 

8 control of foreign entities. This seems particularly 

9 applicable in the telecommunications industry, as 

10 Chinese companies continue systematically to ac11 quire significant holdings in prominent global and 

12 U.S. telecommunications and information technology 

13 companies.’’. 

14 (4) In its 2011 Annual Report to Congress, the 

15 United States China Economic and Security Review 

16 Commission stated that ‘‘[t]he extent of the state’s 

17 control of the Chinese economy is difficult to quan18 tify . . . There is also a category of companies that, 

19 though claiming to be private, are subject to state 

20 influence. Such companies are often in new markets 

21 with no established SOE leaders and enjoy favorable 

22 government policies that support their development 

23 while posing obstacles to foreign competition. Exam24 ples include Chinese telecoms giant Huawei and 


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1 such automotive companies as battery maker BYD 

2 and vehicle manufacturers Geely and Chery.’’. 

3 (5) In the bipartisan ‘‘Investigative Report on 

4 the United States National Security Issues Posed by 

5 Chinese Telecommunication Companies Huawei and 

6 ZTE’’ released in 2012 by the Permanent Select 

7 Committee on Intelligence of the House of Rep8 resentatives, it was recommended that ‘‘U.S. govern9 ment systems, particularly sensitive systems, should 

10 not include Huawei or ZTE equipment, including in 

11 component parts. Similarly, government contrac12 tors—particularly those working on contracts for 

13 sensitive U.S. programs—should exclude ZTE or 

14 Huawei equipment in their systems.’’. 

15 (6) General Michael Hayden, who served as Di16 rector of the Central Intelligence Agency and Direc17 tor of the National Security Agency, stated in July 

18 2013 that Huawei had ‘‘shared with the Chinese 

19 state intimate and extensive knowledge of foreign 

20 telecommunications systems it is involved with’’. 

21 (7) The Federal Bureau of Investigation, in a 

22 February 2015 Counterintelligence Strategy Part23 nership Intelligence Note stated that, ‘‘[w]ith the ex24 panded use of Huawei Technologies Inc. equipment 

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1 vider networks, the Chinese Government’s potential 

2 access to U.S. business communications is dramati3 cally increasing. Chinese Government-supported tele4 communications equipment on U.S. networks may be 

5 exploited through Chinese cyber activity, with Chi6 na’s intelligence services operating as an advanced 

7 persistent threat to U.S. networks.’’. 

8 (8) The Federal Bureau of Investigation fur9 ther stated in its February 2015 counterintelligence 

10 note that ‘‘China makes no secret that its cyber war11 fare strategy is predicated on controlling global com12 munications network infrastructure’’. 

13 (9) At a hearing before the Committee on 

14 Armed Services of the House of Representatives on 

15 September 30, 2015, Deputy Secretary of Defense 

16 Robert Work, responding to a question about the 

17 use of Huawei telecommunications equipment, stat18 ed, ‘‘In the Office of the Secretary of Defense, abso19 lutely not. And I know of no other—I don’t believe 

20 we operate in the Pentagon, any [Huawei] systems 

21 in the Pentagon.’’. 

22 (10) At that hearing, the Commander of the 

23 United States Cyber Command, Admiral Mike Rog24 ers, responding to a question about why such 

25 Huawei telecommunications equipment is not used, 


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1 stated, ‘‘As we look at supply chain and we look at 

2 potential vulnerabilities within the system, that it is 

3 a risk we felt was unacceptable.’’. 

4 (11) In March 2017, ZTE Corporation pled 

5 guilty to conspiring to violate the International 

6 Emergency Economic Powers Act by illegally ship7 ping United States-origin items to Iran, paying the 

8 United States Government a penalty of 

9 $892,360,064 for activity between January 2010 

10 and January 2016. 

11 (12) The Office of Foreign Assets Control of 

12 the Department of the Treasury issued a subpoena 

13 to Huawei as part of a Federal investigation of al14 leged violations of trade restrictions on Cuba, Iran, 

15 and Sudan. 

16 (b) PROHIBITION ON AGENCY USE OR PROCURE17 MENT.—The head of an agency may not procure or obtain, 

18 may not extend or renew a contract to procure or obtain, 

19 and may not enter into a contract (or extend or renew 

20 a contract) with an entity that uses, or contracts with any 

21 other entity that uses, any equipment, system, or service 

22 that uses covered telecommunications equipment or serv23 ices as a substantial or essential component of any system, 

24 or as critical technology as part of any system. 


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1 (c) REPORT.—Not later than one year after the date 

2 of the enactment of this Act, and annually thereafter, the 

3 Secretary of Commerce, in consultation with the Secretary 

4 of Defense and the United States Trade Representative, 

5 shall submit to Congress a report on sales by the Govern6 ment of the People’s Republic of China of covered tele7 communications equipment or services through partial 

8 ownership or any other methods. 

9 (d) DEFINITIONS.—In this section: 

10 (1) AGENCY.—The term ‘‘agency’’ has the 

11 meaning given that term in section 551 of title 5, 

12 United States Code. 

13 (2) COVERED TELECOMMUNICATIONS EQUIP14 MENT OR SERVICES.—The term ‘‘covered tele15 communications equipment or services’’ means any 

16 of the following: 

17 (A) Telecommunications equipment pro18 duced by Huawei Technologies Company, ZTE 

19 Corporation, or any other Chinese telecom enti20 ty identified by the Director of National Intel21 ligence, the Secretary of Defense, or the Direc22 tor of the Federal Bureau of Investigation as a 

23 security concern (or any subsidiary or affiliate 

24 of any such entity). 


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1 (B) Telecommunications services provided 

2 by such entities or using such equipment. 

3 (C) Telecommunications equipment or 

4 services produced or provided by an entity that 

5 the head of the relevant agency reasonably be6 lieves to be an entity owned or controlled by, or 

7 otherwise connected to, the Government of the 

8 People’s Republic of China. 

9 TITLE II—FAIR TRADE EN10 FORCEMENT ACTIONS WITH 

11 RESPECT TO THE PEOPLE’S 

12 REPUBLIC OF CHINA 

13 SEC. 201. COUNTERVAILING DUTIES WITH RESPECT TO 

14 CERTAIN INDUSTRIES IN THE PEOPLE’S RE15 PUBLIC OF CHINA. 

16 (a) POLICY.—It is the policy of the United States— 

17 (1) to reduce the import of finished goods from 

18 the People’s Republic of China relating to the Made 

19 in China 2025 plan set forth by the Government of 

20 the People’s Republic of China; and 

21 (2) to encourage allies of the United States to 

22 reduce the import of finished goods from the Peo23 ple’s Republic of China relating to the Made in 

24 China 2025 plan. 


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1 (b) INCLUSION OF MADE IN CHINA 2025 PRODUCTS

2 IN DEFINITION OF COUNTERVAILABLE SUBSIDY.—Para3 graph (5) of section 771 of the Tariff Act of 1930 (19 

4 U.S.C. 1677) is amended by adding at the end the fol5 lowing: 

6 ‘‘(G) TREATMENT OF CERTAIN CHINESE

7 MERCHANDISE.—Notwithstanding any other 

8 provision of this title, if a person presents evi9 dence in a petition filed under section 702(b) 

10 that merchandise covered by the petition is 

11 manufactured or produced in, or exported from, 

12 the People’s Republic of China and included in 

13 the most recent list required under section 183 

14 of the Trade Act of 1974, determined in con15 sultation with the United States Trade Rep16 resentative, the administrating authority shall 

17 determine that a countervailable subsidy is 

18 being provided with respect to that merchan19 dise.’’. 

20 (c) INCLUSION OF MADE IN CHINA 2025 PRODUCTS

21 IN DEFINITION OF MATERIAL INJURY.—Paragraph 

22 (7)(F) of such section is amended by adding at the end 

23 the following: 

24 ‘‘(iv) TREATMENT OF CERTAIN CHI25 NESE MERCHANDISE.—Notwithstanding 


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1 any other provision of this title, if a peti2 tion filed under section 702(b) alleges that 

3 an industry in the United States is materi4 ally injured or threatened with material in5 jury or that the establishment of an indus6 try in the United States is materially re7 tarded by reason of imports of merchan8 dise manufactured or produced in, or ex9 ported from, the People’s Republic of 

10 China and included in the most recent list 

11 required under section 183 of the Trade 

12 Act of 1974, determined in consultation 

13 with the United States Trade Representa14 tive, the Commission shall determine that 

15 material injury or such a threat exists.’’. 

16 SEC. 202. REPEAL OF REDUCED WITHHOLDING RATES FOR 

17 RESIDENTS OF CHINA. 

18 (a) IN GENERAL.—Section 894 of the Internal Rev19 enue Code of 1986 is amended— 

20 (1) by striking ‘‘The provisions of’’ in sub21 section (a) and inserting ‘‘Except as otherwise pro22 vided in this section, the provisions of’’, and 

23 (2) by adding at the end the following new sub24 section: 


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1 ‘‘(d) EXCEPTION FOR PEOPLE’S REPUBLIC OF

2 CHINA.— 

3 ‘‘(1) IN GENERAL.—The rates of tax imposed 

4 under sections 871 and 881, and the rates of with5 holding tax imposed under chapter 3, with respect to 

6 any resident of the People’s Republic of China shall 

7 be determined without regard to any provision of the 

8 Agreement between the Government of the United 

9 States of America and the Government of the Peo10 ple’s Republic of China for the Avoidance of Double 

11 Taxation and the Prevention of Tax Evasion with 

12 Respect to Taxes on Income, signed at Beijing on 

13 April 30, 1984. 

14 ‘‘(2) REGULATIONS.—The Secretary shall pro15 mulgate regulations to prevent the avoidance of the 

16 purposes of this subsection through the use of for17 eign entities.’’. 

18 (b) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to income received after the date 

20 of the enactment of this Act. 

21 SEC. 203. TAXATION OF OBLIGATIONS OF THE UNITED 

22 STATES HELD BY THE GOVERNMENT OF THE 

23 PEOPLE’S REPUBLIC OF CHINA. 

24 (a) IN GENERAL.—Section 892 of the Internal Rev25 enue Code of 1986 is amended by redesignating subsection 


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1 (c) as subsection (d) and by inserting after subsection (b) 

2 the following new subsection: 

3 ‘‘(c) EXCEPTION.—This section shall not apply to the 

4 Government of the People’s Republic of China.’’. 

5 (b) CENTRAL BANK.—Section 895 of the Internal 

6 Revenue Code of 1986 is amended— 

7 (1) by striking ‘‘Income’’ and inserting the fol8 lowing: 

9 ‘‘(a) IN GENERAL.—Income’’; and 

10 (2) by adding at the end the following new sub11 section: 

12 ‘‘(b) EXCEPTION.—This section shall not apply to the 

13 any central bank of the People’s Republic of China.’’. 

14 (c) EFFECTIVE DATE.—The amendments made by 

15 this section shall apply to income received or derived after 

16 the date of the enactment of this Act. 

17 SEC. 204. SURTAX ON CERTAIN INCOME DERIVED FROM 

18 CHINA. 

19 (a) IN GENERAL.—Subpart D of part II of sub20 chapter N of chapter 1 of the Internal Revenue Code of 

21 1986 is amended by adding at the end the following new 

22 section: 


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1 ‘‘SEC. 899. IMPOSITION OF SURTAX ON CERTAIN INCOME 

2 FROM CHINA. 

3 ‘‘(a) IN GENERAL.—In addition to other taxes, there 

4 is imposed on the China source income of any applicable 

5 United States person a tax equal to 2 percent of such in6 come. 

7 ‘‘(b) APPLICABLE UNITED STATES PERSON.—For 

8 purposes of this subsection, the term ‘applicable United 

9 States person’ means any United States person who— 

10 ‘‘(1) holds an investment through a partnership 

11 with a resident of the People’s Republic of China, or 

12 ‘‘(2) participates in a joint shareholding venture 

13 with a resident of the People’s Republic of China. 

14 ‘‘(c) CHINA SOURCE INCOME.—For purposes of this 

15 section, the term ‘China source income’ means any 

16 amount received from sources within the People’s Republic 

17 of China which is attributable to an investment described 

18 in subsection (b)(1) or a venture described in subsection 

19 (b)(2). Such amount shall be reduced so as to take into 

20 account deductions (including taxes) properly allocable to 

21 such income under rules similar to the rules of section 

22 954(b)(5).’’. 

23 (b) TAX NOT TREATED AS PART OF REGULAR TAX

24 LIABILITY.—Section 26(b)(2) of such Code is amended by 

25 striking ‘‘and’’ at the end of subparagraph (X), by striking 

26 the period at the end of subparagraph (Y) and inserting 


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1 ‘‘, and’’, and by adding at the end the following new sub2 paragraph: 

3 ‘‘(Z) section 899 (relating to surtax on cer4 tain income from China).’’. 

5 (c) CLERICAL AMENDMENT.—The table of sections 

6 for subpart D of part II of subchapter N of chapter 1 

7 of such Code is amended by adding at the end the fol8 lowing new item: 

‘‘Sec. 899. Imposition of surtax on certain income from China.’’. 

9 (d) EFFECTIVE DATE.—The amendments made by 

10 this section shall apply to income received after the date 

11 of the enactment of this Act. 

12 TITLE III—STOPPING FOREIGN 

13 BUSINESSES SANCTUARY ACT 

14 OF 2019 

15 SEC. 301. SHORT TITLE. 

16 This title may be cited as the ‘‘Stopping Foreign 

17 Businesses Sanctuary Act of 2019’’. 

18 SEC. 302. JURISDICTION OVER CERTAIN FOREIGN ENTI19 TIES. 

20 Section 1605 of title 28, United States Code, is 

21 amended by inserting after subsection (d) the following: 

22 ‘‘(e) Notwithstanding any other provision of law, an 

23 entity is not immune from the jurisdiction of the courts 

24 of the United States or of the States if the entity— 


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25 

•HR 704 IH

1 ‘‘(1) is incorporated in a foreign state in which 

2 state-owned or state-controlled entities commonly en3 gage in commercial activity; and 

4 ‘‘(2) conducts commercial activity in the United 

5 States.’’. 

6 SEC. 303. COMMERCIAL ACTIVITY OF AFFILIATE ENTITIES. 

7 Section 1603(d) of title 28, United States Code, is 

8 amended— 

9 (1) by inserting ‘‘(1)’’ before ‘‘A’’; and 

10 (2) by adding at the end the following: 

11 ‘‘(2) For purposes of this chapter, a commercial 

12 activity of an agency or instrumentality of a foreign 

13 state, or of an entity described in section 1605(e), 

14 shall be attributable to any corporate affiliate of the 

15 agency, instrumentality, or entity that— 

16 ‘‘(A) directly or indirectly owns a majority 

17 of shares of the agency, instrumentality, or en18 tity; and 

19 ‘‘(B) is also an agency or instrumentality 

20 of a foreign state, or an entity described in sec21 tion 1605(e).’’. 

Æ 


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