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[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6349 Introduced in House (IH)]

<DOC>

118th CONGRESS
  1st Session
                                H. R. 6349

To prohibit or require notification with respect to certain activities 
of United States persons involving countries of concern, and for other 
                               purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            November 9, 2023

 Mr. McCaul (for himself and Mr. Meeks) introduced the following bill; 
         which was referred to the Committee on Foreign Affairs

_______________________________________________________________________

                                 A BILL

 
To prohibit or require notification with respect to certain activities 
of United States persons involving countries of concern, and for other 
                               purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Preventing Adversaries from 
Developing Critical Capabilities Act''.

SEC. 2. EXERCISE OF AUTHORITIES UNDER THE INTERNATIONAL EMERGENCY 
              ECONOMIC POWERS ACT.

    (a) In General.--The President may exercise all authorities 
provided under the International Emergency Economic Powers Act (50 
U.S.C. 1701 et seq.) necessary to carry out the provisions of this Act, 
including authorities to impose penalties under section 206 of such 
Act.
    (b) Delegation.--The President may delegate the authorities 
described in subsection (a) to the head of any Federal agency the 
President determines appropriate in order to carry out the provisions 
of this Act.

SEC. 3. PROHIBITION ON COVERED ACTIVITIES IN COVERED SECTORS THAT POSE 
              PARTICULARLY ACUTE THREATS TO UNITED STATES NATIONAL 
              SECURITY.

    (a) Identification of Categories of Technologies and Products.--
            (1) In general.--Not later than one year after the date of 
        the enactment of this Act, and annually thereafter as described 
        in paragraph (2), the President--
                    (A) shall identify categories of technologies and 
                products in covered sectors that may pose a 
                particularly acute threat to the national security of 
                the United States if developed or acquired by a country 
                of concern; and
                    (B) publish a list of the categories of 
                technologies and products identified under paragraph 
                (1) in the Federal Register.
            (2) Updates.--The President shall annually review and 
        update the list of the categories of technologies and products 
        identified under paragraph (1)(A) and update the Federal 
        Register under paragraph (1)(B) as appropriate.
    (b) Prohibition on Covered Activities.--The President shall, on or 
after the date on which the initial list of categories of technologies 
and products is published in the Federal Register pursuant to 
subsection (a)(1)(B), prescribe, subject to public notice and comment, 
regulations to prohibit a United States person from engaging, directly 
or indirectly, in a covered activity involving a category of 
technologies and products on such list of categories of technologies 
and products in a covered sector. Such regulations should--
            (1) require that a United States person take all reasonable 
        steps to prohibit and prevent any transaction by a foreign 
        entity under the control of the United States person that would 
        be a prohibited transaction if engaged in by a United States 
        person; and
            (2) exclude any transaction consisting of the acquisition 
        of an equity or other interest in an entity located outside a 
        country of concern, where the President has determined that the 
        government of the country in which that entity is established 
        or has its principal place of business has in place a program 
        for the restriction of certain activities involving countries 
        of concern that is comparable to the provisions provided for in 
        this Act.
    (c) Sense of Congress.--It is the sense of Congress that the 
covered sectors include certain categories of technologies and products 
that would pose a particularly acute threat to the national security of 
the United States if developed or acquired by a country of concern, and 
that the President should identify certain technologies and products in 
the covered sectors as categories of technologies and products in 
covered sectors for purposes of subsection (a)(1).

SEC. 4. MANDATORY NOTIFICATION OF COVERED ACTIVITIES IN COVERED SECTORS 
              THAT MAY POSE THREATS TO UNITED STATES NATIONAL SECURITY.

    (a) Identification of Categories of Technologies and Products.--Not 
later than one year after the date of the enactment of this Act, the 
President shall--
            (1) identify categories of technologies and products in 
        covered sectors that may pose a threat to the national security 
        of the United States if developed or acquired by a country of 
        concern;
            (2) publish a list of the categories of technologies and 
        products identified under paragraph (1) in the Federal 
        Register; and
            (3) annually thereafter, review the categories of 
        technologies and products identified under paragraph (1) and 
        publish an updated list of the categories of technologies and 
        products in the Federal Register under paragraph (2) if the 
        list identified in paragraph (2) has changed.
    (b) Mandatory Notification.--
            (1) In general.--Beginning on the date that is 90 days 
        after the date on which the initial list of categories of 
        technologies and products is published in the Federal Register 
        pursuant to subsection (a)(2), a United States person engaging 
        in a covered activity involving a category identified in 
        subsection (a)(1), or controlling a foreign entity engaging in 
        an activity that would be a covered activity if engaged in by a 
        United States person, shall submit to the President a complete 
        written notification of the activity not later than 14 days 
        after the completion date of the activity.
            (2) Circulation of notification.--
                    (A) In general.--The President shall, upon receipt 
                of a notification under paragraph (1), promptly inspect 
                the notification for completeness.
                    (B) Incomplete notification.--If a notification 
                submitted under paragraph (1) is incomplete, the 
                President shall promptly inform the United States 
                person that submits the notification that the 
                notification is not complete and provide an explanation 
                for relevant material respect in which the notification 
                is not complete.
            (3) Identification of non-notified activity.--The President 
        shall establish a process to identify a covered activity 
        involving a category identified under subsection (a)(1) for 
        which--
                    (A) a notification is not submitted to the 
                President under paragraph (1); and
                    (B) information is reasonably available.
    (c) Confidentiality of Information.--
            (1) In general.--Except as provided in paragraph (2), any 
        information or documentary material filed with the President 
        pursuant to this section shall be exempt from disclosure under 
        section 552(b)(3) of title 5, United States Code, and no such 
        information or documentary material may be made public by any 
        government agency or Member of Congress.
            (2) Exceptions.--Subject to appropriate confidentiality and 
        classification requirements, the exemption from disclosure 
        provided by paragraph (1) shall not prevent the disclosure of 
        the following:
                    (A) Information relevant to any administrative or 
                judicial action or proceeding.
                    (B) Information provided to Congress or any of the 
                appropriate congressional committees.
                    (C) Information important to national security 
                analysis or actions of the President to any domestic 
                government entity, or to any foreign governmental 
                entity of an ally or partner of the United States, 
                under the direction and authorization of the President, 
                only to the extent necessary for national security 
                purposes.
                    (D) Information that the parties have consented to 
                be disclosed to third parties.

SEC. 5. REPORTING REQUIREMENTS.

    (a) In General.--Not later than one year after the date on which 
the regulations prescribed under section 6 take effect, and not less 
frequently than annually thereafter, the President shall submit to the 
appropriate congressional committees a report that--
            (1) lists all notifications submitted under section 4(b) 
        during the year preceding submission of the report, 
        disaggregated by--
                    (A) sector;
                    (B) covered activity;
                    (C) covered foreign entity; and
                    (D) country of concern;
            (2) an assessment of whether to amend the regulations, 
        including whether to amend the definition of ``covered 
        sectors'' to enhance national security;
            (3) provides additional context and information regarding 
        trends in the sectors, the types of covered activity, and the 
        countries involved in those notifications, including--
                    (A) the location of the relevant covered foreign 
                entities; and
                    (B) the country in which the United States person 
                or foreign entity controlled by such United States 
                person involved in the relevant covered activity is 
                located; and
            (4) assesses the overall impact of those notifications, 
        including recommendations for--
                    (A) expanding existing Federal programs to support 
                the production or supply of covered sectors in the 
                United States, including the potential of existing 
                authorities to address any related national security 
                concerns; and
                    (B) the continuation, expansion, or modification of 
                the implementation and administration of this Act.
    (b) Form.--Each report required by this section shall be submitted 
in unclassified form, but may include a classified annex.
    (c) Prohibition on Disclosure.--Information contained in each 
report required by this section may be withheld from disclosure only to 
the extent otherwise permitted by statute, except that all information 
included pursuant to subsection (a)(1) shall be withheld from public 
disclosure.

SEC. 6. REQUIREMENT FOR REGULATIONS.

    (a) In General.--Not later than 180 days after the date on which 
the initial list of categories of technologies and products have been 
published in the Federal Register pursuant to sections 3(a)(1)(B) and 
4(a)(2), the President shall prescribe and finalize proposed 
regulations to carry out this Act.
    (b) Elements.--Regulations prescribed to carry out this Act shall 
specify--
            (1) the types of activities that will be considered to be 
        covered activities;
            (2) the technologies and products in covered sectors with 
        respect to which covered activities are prohibited under 
        section 3(b) or require a notification under section 4(b); and
            (3) a process by which parties can ask questions and get 
        timely guidance as to whether a covered activity is prohibited 
        under section 3(b) or requires a notification under section 
        4(b).
    (c) Requirements for Certain Regulations.--The President shall 
prescribe regulations further defining the terms used in this Act, 
including the terms ``covered activity'', ``covered foreign entity'', 
and ``party'', to maximize the effectiveness of carrying out this Act 
in accordance with subchapter II of chapter 5 and chapter 7 of title 5 
(commonly known as the ``Administrative Procedure Act'').
    (d) Public Notice and Comment.--Regulations issued pursuant to 
subsection (a) shall be subject to public notice and comment.
    (e) Low-Burden Regulations.--In prescribing regulations under this 
section, the President shall, to the extent practicable, structure the 
regulations--
            (1) to minimize the cost and complexity of compliance for 
        affected parties;
            (2) to ensure the benefits of the regulations outweigh 
        their costs;
            (3) to adopt the least burdensome alternative that achieves 
        regulatory objectives;
            (4) to prioritize transparency and stakeholder involvement 
        in the process of prescribing the regulations; and
            (5) to regularly review and streamline existing regulations 
        promulgated pursuant to this Act to reduce redundancy and 
        complexity.
    (f) Penalties With Respect to Unlawful Acts.--Regulations issued 
under this section shall, consistent with the authority provided by 
section 2(a), provide for the imposition of civil penalties for 
violations of this section, that involve--
            (1) engaging in a covered activity prohibited under section 
        3(b) pursuant to the regulations issued under this section;
            (2) failing to submit a timely notification under section 
        4(b) with respect to a covered activity or to submit other 
        information as required by the designated agency; or
            (3) submitting a material misstatement or omitting a 
        material fact in any information submitted in a notification 
        under section 4(b).
    (g) Enforcement.--Consistent with the authority provided by section 
2(a), the President may direct the Attorney General to seek appropriate 
relief in the district courts of the United States, in order to 
implement and enforce this Act.
    (h) Congressional Notification.--The President shall submit to the 
appropriate congressional committees all regulations prescribed to 
carry out this Act not later than 30 days before such regulations are 
to take effect.

SEC. 7. MULTILATERAL ENGAGEMENT AND COORDINATION.

    (a) In General.--The President shall delegate the authorities and 
functions under this section to the Secretary of State.
    (b) Authorities.--The Secretary of State, in coordination with the 
heads or other relevant Federal agencies, should--
            (1) conduct bilateral and multilateral engagement with the 
        governments of countries that are allies and partners of the 
        United States to promote and increase coordination of protocols 
        and procedures to facilitate the effective implementation of 
        and appropriate compliance with the prohibitions and 
        notifications pursuant to this Act;
            (2) upon adoption of protocols and procedures described in 
        paragraph (1), work with those governments to establish 
        mechanisms for sharing information, including trends, with 
        respect to such activities; and
            (3) work with and encourage the governments of countries 
        that are allies and partners of the United States to develop 
        similar mechanisms of their own.
    (c) Strategy for Multilateral Engagement and Coordination.--Not 
later than 180 days after the date of the enactment of this Act, the 
Secretary of State, in coordination with the heads of other relevant 
Federal agencies, should--
            (1) develop a strategy to work with the governments of 
        countries that are allies and partners of the United States to 
        develop mechanisms that are comparable to the prohibitions and 
        notifications pursuant to this Act; and
            (2) assess opportunities to provide technical assistance to 
        those countries with respect to the development of those 
        mechanisms.
    (d) Report.--Not later than one year after the date of the 
enactment of this Act, and annually thereafter for 4 years, the 
Secretary of State shall submit to the appropriate congressional 
committees a report that includes--
            (1) a discussion of any strategy developed pursuant to 
        subsection (c)(1), including key tools and objectives for the 
        development of comparable mechanisms by the governments of 
        allies and partners of the United States;
            (2) a list of partner and allied countries to target for 
        cooperation in developing their own screening programs;
            (3) the status of the strategy's implementation and 
        outcomes; and
            (4) a description of impediments to the establishment of 
        comparable mechanisms by governments of allies and partners of 
        the United States.

SEC. 8. AUTHORIZATION OF APPROPRIATIONS.

    (a) In General.--There is authorized to be appropriated 
$25,000,000, to be derived from amounts otherwise authorized to be 
appropriated to the President, for each of the first two fiscal years 
beginning on or after the date of the enactment of this Act, to carry 
out this Act, including to provide outreach to industry and persons 
affected by this Act.
    (b) Hiring Authority.--
            (1) President.--The President may appoint, without regard 
        to the provisions of sections 3309 through 3318 of title 5, 
        United States Code, not more than 15 candidates directly to 
        positions in the competitive service (as defined in section 
        2102 of that title).
            (2) Agency.--The head of the Federal department or agency 
        designated under section 2(b) to hold primary responsibility 
        for administering this Act may appoint, without regard to the 
        provisions of sections 3309 through 3318 of title 5, United 
        States Code, not fewer than 25 candidates directly to positions 
        in the competitive service (as defined in section 2102 of that 
        title) of such department or agency.
            (3) Primary responsibility.--The primary responsibility of 
        individuals in positions authorized to be hired under this 
        subsection shall be to administer this Act.

SEC. 9. RULE OF CONSTRUCTION.

    Nothing in this Act may be construed to--
            (1) restrain or deter United States activities abroad if 
        such activities do not pose a risk to the national security of 
        the United States; or
            (2) alter or negate the authority of the President under 
        any authority, process, regulation, investigation, enforcement 
        measure, or review provided by or established under any other 
        provision of Federal law, or any other authority of the 
        President or the Congress under the Constitution of the United 
        States.

SEC. 10. NATIONAL INTEREST WAIVER.

    (a) In General.--Subject to subsection (b), the President is 
authorized to exempt from any applicable prohibition or notification 
requirement any activity determined by the President, in consultation 
with the heads of relevant Federal agencies, as appropriate, to be in 
the national interest of the United States.
    (b) Congressional Notification.--The President shall--
            (1) notify the appropriate congressional committees not 
        later than 48 hours after issuing a waiver under subsection 
        (a); and
            (2) include in such notification an identification of the 
        national interest justifying the use of the waiver.

SEC. 11. DEFINITIONS.

    In this Act:
            (1) Appropriate congressional committees.--The term 
        ``appropriate congressional committees'' means--
                    (A) the Committee on Foreign Affairs, the Committee 
                on Financial Services, the Committee on Ways and Means, 
                the Committee on Appropriations, and the Permanent 
                Select Committee on Intelligence of the House of 
                Representatives; and
                    (B) the Committee on Foreign Relations, the 
                Committee on Banking, Housing, and Urban Affairs, the 
                Committee on Finance, the Committee on Appropriations, 
                and the Select Committee on Intelligence of the Senate.
            (2) Country of concern.--The term ``country of concern''--
                    (A) means--
                            (i) the Democratic People's Republic of 
                        North Korea;
                            (ii) the People's Republic of China, 
                        including the Hong Kong Special Administrative 
                        Region and the Macau Special Administrative 
                        Region;
                            (iii) the Russian Federation; and
                            (iv) the Islamic Republic of Iran; and
                    (B) includes any other country the President 
                determines necessary to ensure a country specified in 
                clause (i), (ii), (iii), or (iv) of subparagraph (A) is 
                unable to circumvent the provisions of this Act and the 
                regulations issued pursuant to this Act.
            (3) Covered activity.--
                    (A) In general.--Subject to such regulations as may 
                be prescribed in accordance with section 7, and except 
                as provided in subparagraph (B), the term ``covered 
                activity'' means any activity engaged in by a United 
                States person that involves--
                            (i) an acquisition by such United States 
                        person of an equity interest or contingent 
                        equity interest, or monetary capital 
                        contribution, in a covered foreign entity, 
                        directly or indirectly, by contractual 
                        commitment or otherwise, with the goal of 
                        generating income or gain;
                            (ii) an arrangement for an interest held by 
                        such United States person in the short- or 
                        long-term debt obligations of a covered foreign 
                        entity that includes governance rights that are 
                        characteristic of an equity investment, 
                        management, or other important rights;
                            (iii) the establishment of a wholly owned 
                        subsidiary in a country of concern, such as a 
                        greenfield investment, for the purpose of 
                        production, design, testing, manufacturing, 
                        fabrication, or development related to one or 
                        more covered sectors;
                            (iv) the establishment by such United 
                        States person of a joint venture in a country 
                        of concern or with a covered foreign entity for 
                        the purpose of production, design, testing, 
                        manufacturing, fabrication, or research, or 
                        other contractual or other commitments 
                        involving a covered foreign entity to jointly 
                        research and develop new innovation, including 
                        through the transfer of capital or intellectual 
                        property or other business proprietary 
                        information; or
                            (v) the acquisition by a United States 
                        person with a covered foreign entity of--
                                    (I) operational cooperation, such 
                                as through supply or support 
                                arrangements;
                                    (II) the right to board 
                                representation (as an observer, even if 
                                limited, or as a member) or an 
                                executive role (as may be defined 
                                through regulation) in a covered 
                                foreign entity;
                                    (III) the ability to direct or 
                                influence such operational decisions as 
                                may be defined through such 
                                regulations;
                                    (IV) formal governance 
                                representation in any operating 
                                affiliate, such as a portfolio company, 
                                of a covered foreign entity; or
                                    (V) a new relationship to share or 
                                provide business services, such as 
                                financial services, marketing services, 
                                maintenance, or assembly functions; or
                            (vi) knowingly directing transactions by 
                        foreign persons that would constitute covered 
                        activity if engaged in by a United States 
                        person.
                    (B) Exceptions.--The term ``covered activity'' does 
                not include--
                            (i) any transaction the value of which the 
                        President determines is de minimis, as defined 
                        in regulations prescribed in accordance with 
                        section 6;
                            (ii) any category of transactions that the 
                        President determines is in the national 
                        interest of the United States, as may be 
                        defined in regulations prescribed in accordance 
                        with section 6;
                            (iii) an investment in--
                                    (I) a publicly traded security (as 
                                such term is defined in section 
                                3(a)(10) of the Securities Exchange Act 
                                of 1934); or
                                    (II) an index fund, mutual fund, 
                                exchange-traded fund, or a similar 
                                instrument (including associated 
                                derivatives) offered by an investment 
                                company (as such term is defined in 
                                section 3(a)(1) of the Investment 
                                Company Act of 1940), or by a private 
                                investment fund;
                                    (III) a venture capital fund, 
                                private equity fund, fund of funds, or 
                                other pooled investment funds, as the 
                                limited partner, in each case in which 
                                the limited partner's contribution is 
                                solely capital in a limited partnership 
                                structure and--
                                            (aa) the limited partner 
                                        cannot make managerial 
                                        decisions, is not responsible 
                                        for any debts beyond its 
                                        investment, and does not have 
                                        the ability (formally or 
                                        informally) to influence or 
                                        participate in the fund's or a 
                                        covered foreign entity's 
                                        decision making or operations; 
                                        and
                                            (bb) the investment is 
                                        below a de minimis threshold to 
                                        be determined by the President;
                            (iv) the acquisition of the equity or other 
                        interest owned or held by a covered foreign 
                        entity in an entity or assets located outside 
                        of a country of concern in which the United 
                        States person is acquiring all interests in the 
                        entity or assets held by covered foreign 
                        entity;
                            (v) an intracompany transfer of funds from 
                        a United States parent company to a subsidiary 
                        located in a country of concern;
                            (vi) a transaction made pursuant to a 
                        binding, uncalled capital commitment entered 
                        into before the date on which the regulations 
                        prescribed in accordance with section 6 take 
                        effect; or
                            (vii) any ordinary or administrative 
                        business transaction as may be defined in such 
                        regulations.
            (4) Covered foreign entity.--Subject to regulations 
        prescribed in accordance with section 6, the term ``covered 
        foreign entity'' means the following:
                    (A) Any entity that is incorporated in, has a 
                principal place of business in, or is organized under 
                the laws of a country of concern.
                    (B) Any entity the equity securities of which are 
                traded in the ordinary course of business on one or 
                more exchanges in a country of concern.
                    (C) Any agency or instrumentality of the government 
                of a country of concern.
                    (D) Any other entity that is not a United States 
                person and that meets such criteria as may be specified 
                by the President in such regulations prescribed in 
                accordance with section 6.
            (5) Covered sectors.--Subject to regulations prescribed in 
        accordance with section 6, the term ``covered sectors'' 
        includes sectors within the following areas:
                    (A) Semiconductors and microelectronics.
                    (B) Artificial intelligence.
                    (C) Quantum information science and technology.
                    (D) Hypersonics.
                    (E) High-performance computing and supercomputing.
            (6) Party.--The term ``party'', with respect to an 
        activity, has the meaning given that term in regulations 
        prescribed in accordance with section 7.
            (7) United states person.--The term ``United States 
        person'' means--
                    (A) an individual who is a United States citizen or 
                an alien lawfully admitted for permanent residence to 
                the United States; or
                    (B) an entity organized under the laws of the 
                United States or of any jurisdiction within the United 
                States, including any foreign branch of such an entity.
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