I 

109TH CONGRESS 

1ST SESSION H. R. 1498 

To clarify that exchange-rate manipulation by the People’s Republic of China 

is actionable under the countervailing duty provisions and the productspecific safeguard mechanisms of the trade laws of the United States, 

and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 6, 2005 

Mr. RYAN of Ohio (for himself and Mr. HUNTER) introduced the following bill; 

which was referred to the Committee on Ways and Means, and in addition to the Committee on Armed Services, 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 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. 

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. 

4 This Act may be cited as the ‘‘Chinese Currency Act 

5 of 2005’’. 
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1 SEC. 2. FINDINGS. 

2 Congress makes the following findings: 

3 (1) The economy and national security of the 

4 United States are critically dependent upon a vi5 brant manufacturing base. 

6 (2) The good health of the United States manu7 facturing industry requires, among other things, un8 fettered access to open markets abroad and fairly 

9 traded raw materials and products in accord with 

10 the international legal principles and agreements of 

11 the World Trade Organization and the International 

12 Monetary Fund. 

13 (3) Since 1994, the People’s Republic of China 

14 has aggressively intervened in currency markets to 

15 peg the Chinese currency, known as the renminbi or 

16 yuan, at a fixed rate of approximately 8.28 yuan to 

17 the United States dollar. 

18 (4) Economists generally agree that this policy 

19 by the People’s Republic of China has resulted in 

20 substantial undervaluation of the renminbi, perhaps 

21 by 40 percent or more. 

22 (5) Evidence of this undervaluation can be 

23 found in the large and growing annual trade sur24 pluses of the People’s Republic of China, foreign-di25 rect investment in China, and rapidly increasing ag26 gregate amount of foreign-currency reserves. 
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1 (6) The renminbi’s undervaluation acts as both 

2 a subsidy for exports from the People’s Republic of 

3 China and a non-tariff barrier against imports into 

4 China, to the serious detriment of the United States 

5 manufacturing industry. 

6 (7)(A) As a member of both the World Trade 

7 Organization and the International Monetary Fund, 

8 the People’s Republic of China has assumed a series 

9 of international legal obligations that proscribe sub10 sidization of exports and exchange-rate manipula11 tion. 

12 (B) These prohibitions are most prominently 

13 set forth in Articles VI, XV, and XVI of the GATT 

14 1994 (as defined in section 2(1)(B) of the Uruguay 

15 Round Agreements Act (19 U.S.C. 3501(1)(B)), in 

16 the Agreement on Subsidies and Countervailing 

17 Measures (as defined in section 101(d)(12) of the 

18 Uruguay Round Agreements Act (19 U.S.C. 

19 3511(d)(12)), and in Articles IV and VIII of the 

20 International Monetary Fund’s Articles of Agree21 ment. 

22 (8) In addition, as a further condition of its ac23 cession agreement to become a member of the World 

24 Trade Organization on December 11, 2001, the Peo25 ple’s Republic of China agreed to a transitional 
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1 product-specific safeguard mechanism to address 

2 market disruption to an importing member’s domes3 tic industry due to increased imports of products of 

4 Chinese origin. 

5 (9) Despite its international legal obligations, 

6 and notwithstanding extended and ongoing negotia7 tions with the United States, the People’s Republic 

8 of China has given no indication of any intent to 

9 correct the renminbi’s undervaluation in the foresee10 able future. 

11 (10) Under the foregoing circumstances, it is 

12 consistent with the international legal obligations of 

13 the People’s Republic of China and with the cor14 responding international legal rights of the United 

15 States to amend relevant United States trade laws 

16 to make explicit that exchange-rate manipulation is 

17 actionable as either or both a countervailable export 

18 subsidy and as a cause of present or threatened 

19 market disruption to United States domestic pro20 ducers. 
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1 SEC. 3. CLARIFICATION TO INCLUDE EXCHANGE-RATE MA2 NIPULATION AS COUNTERVAILABLE SUBSIDY 

3 UNDER TITLE VII OF THE TARIFF ACT OF 

4 1930. 

5 (a) AMENDMENTS TO DEFINITION OF

6 COUNTERVAILABLE SUBSIDY.— 

7 (1) FINANCIAL CONTRIBUTION.—Section 

8 771(5)(D) of the Tariff Act of 1930 (19 U.S.C. 

9 1677(5)(D)) is amended— 

10 (A) by striking ‘‘The term’’ and inserting 

11 ‘‘(i) The term’’; 

12 (B) by redesignating clauses (i) through 

13 (iv) as subclauses (I) through (IV), respectively; 

14 and 

15 (C) by adding at the end the following: 

16 ‘‘(ii) In addition to clause (i), the term 

17 ‘provides a financial contribution’ means to en18 gage in exchange-rate manipulation (as defined 

19 in paragraph (5C)).’’. 

20 (2) BENEFIT CONFERRED.—Section 771(5)(E) 

21 of the Tariff Act of 1930 (19 U.S.C. 1677(5)(E)) is 

22 amended— 

23 (A) in clause (iii), by striking ‘‘, and’’ and 

24 inserting a comma; 

25 (B) in clause (iv), by striking the period at 

26 the end and inserting ‘‘, and’’; and 
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1 (C) by adding at the end the following new 

2 clause: 

3 ‘‘(v) in the case of exchange-rate ma4 nipulation (as defined in paragraph (5C)), 

5 if the price of exported goods is less than 

6 what the price of such goods would be ab7 sent the exchange-rate manipulation.’’. 

8 (3) SPECIFICITY.—Section 771(5A)(B) of the 

9 Tariff Act of 1930 (19 U.S.C. 1677(5A)(B)) is 

10 amended by adding at the end before the period the 

11 following: ‘‘, such as exchange-rate manipulation (as 

12 defined in paragraph (5C))’’. 

13 (b) DEFINITION OF EXCHANGE-RATE MANIPULA14 TION.—Section 771 of the Tariff Act of 1930 (19 U.S.C. 

15 1677) is amended by inserting after paragraph (5B) the 

16 following new paragraph: 

17 ‘‘(5C) DEFINITION OF EXCHANGE-RATE MANIP18 ULATION.— 

19 ‘‘(A) IN GENERAL.—For purposes of para20 graphs (5) and (5A), the term ‘exchange-rate 

21 manipulation’ means protracted large-scale 

22 intervention by an authority to undervalue its 

23 currency in the exchange market that prevents 

24 effective balance-of-payments adjustment or 
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1 that gains an unfair competitive advantage over 

2 any other country. 

3 ‘‘(B) FACTORS.—In determining whether 

4 exchange-rate manipulation is occurring and a 

5 benefit thereby conferred, the administering au6 thority in each case— 

7 ‘‘(i) shall consider the exporting coun8 try’s— 

9 ‘‘(I) bilateral balance-of-trade 

10 surplus or deficit with the United 

11 States; 

12 ‘‘(II) balance-of-trade surplus or 

13 deficit with its other trading partners 

14 individually and in the aggregate; 

15 ‘‘(III) foreign direct investment 

16 in its territory; 

17 ‘‘(IV) currency-specific and ag18 gregate amounts of foreign currency 

19 reserves; and 

20 ‘‘(V) mechanisms employed to 

21 maintain its currency at a fixed ex22 change rate relative to another cur23 rency and, particularly, the nature, 

24 duration, and monetary expenditures 

25 of those mechanisms; 
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1 ‘‘(ii) may consider such other eco2 nomic factors as are relevant; and 

3 ‘‘(iii) shall measure the trade sur4 pluses or deficits described in subclauses 

5 (I) and (II) of clause (i) with reference to 

6 the trade data reported by the United 

7 States and the other trading partners of 

8 the exporting country, unless such trade 

9 data are not available or are demonstrably 

10 inaccurate, in which case the exporting 

11 country’s trade data may be relied upon if 

12 shown to be sufficiently accurate and 

13 trustworthy. 

14 ‘‘(C) TYPE OF ECONOMY.—An authority 

15 found to be engaged in exchange-rate manipula16 tion may have either a market economy or a 

17 nonmarket economy or a combination thereof.’’. 

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

19 this section apply with respect to a countervailing duty 

20 investigation initiated under subtitle A of title VII of the 

21 Tariff Act of 1930 before, on, or after the date of the 

22 enactment of this Act. 
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1 SEC. 4. CLARIFICATION TO INCLUDE EXCHANGE-RATE MA2 NIPULATION BY THE PEOPLE’S REPUBLIC OF 

3 CHINA AS MARKET DISRUPTION UNDER 

4 CHAPTER 2 OF TITLE IV OF THE TRADE ACT 

5 OF 1974. 

6 (a) MARKET DISRUPTION.— 

7 (1) IN GENERAL.—Section 421(c) of the Trade 

8 Act of 1974 (19 U.S.C. 2451(c)) is amended by add9 ing at the end the following new paragraph: 

10 ‘‘(3) For purposes of this section, the term ‘under 

11 such conditions’ includes, but is not limited to, by reason 

12 of exchange-rate manipulation (as defined in paragraph 

13 (4)).’’. 

14 (2) DEFINITION OF EXCHANGE-RATE MANIPU15 LATION.—Section 421(c) of the Trade Act of 1974 

16 (19 U.S.C. 2451(c)), as amended by paragraph (1), 

17 is further amended by adding at the end the fol18 lowing new paragraph: 

19 ‘‘(4)(A) For purposes of this section, the term ‘ex20 change-rate manipulation’ means protracted large-scale 

21 intervention by the Government of the People’s Republic 

22 of China or any other public entity within the territory 

23 of the People’s Republic of China to undervalue its cur24 rency in the exchange market that prevents effective bal25 ance-of-payments adjustment or that gains an unfair com26 petitive advantage over the United States. 
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1 ‘‘(B) In determining whether exchange-rate manipu2 lation is occurring, the Commission in each case— 

3 ‘‘(i) shall consider China’s— 

4 ‘‘(I) bilateral balance-of-trade surplus or 

5 deficit with the United States; 

6 ‘‘(II) balance-of-trade surplus or deficit 

7 with its other trading partners individually and 

8 in the aggregate; 

9 ‘‘(III) foreign direct investment in its terri10 tory; 

11 ‘‘(IV) currency-specific and aggregate 

12 amounts of foreign currency reserves; and 

13 ‘‘(V) mechanisms employed to maintain its 

14 currency at a fixed exchange rate relative to an15 other currency and, particularly, the nature, du16 ration, and monetary expenditures of those 

17 mechanisms; 

18 ‘‘(ii) may consider such other economic factors 

19 as are relevant; and 

20 ‘‘(iii) shall measure the trade surpluses or defi21 cits described in subclauses (I) and (II) of clause (i) 

22 with reference to the trade data reported by the 

23 United States and the other trading partners of 

24 China, unless such trade data are not available or 

25 are demonstrably inaccurate, in which case China’s 
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1 trade data may be relied upon if shown to be suffi2 ciently accurate and trustworthy.’’. 

3 (b) CRITICAL CIRCUMSTANCES.—Section 421(i)(1) of 

4 the Trade Act of 1974 (19 U.S.C. 2451(i)(1)) is amend5 ed— 

6 (1) in subparagraph (A), by striking ‘‘and’’ at 

7 the end; 

8 (2) in subparagraph (B), by striking the period 

9 at the end and inserting ‘‘; and’’; and 

10 (3) by inserting after subparagraph (B) the fol11 lowing new subparagraph: 

12 ‘‘(C) in those instances in which the petition al13 leges and reasonably documents that exchange-rate 

14 manipulation is occurring, shall consider that factor 

15 as weighing in favor of affirmative findings under 

16 subparagraphs (A) and (B).’’. 

17 (c) STANDARD FOR PRESIDENTIAL ACTION.—Section 

18 421(k)(2) of the Trade Act of 1974 (19 U.S.C. 

19 2451(k)(2)) is amended by adding at the end the following 

20 new sentence: ‘‘In those instances in which the Commis21 sion has made an affirmative determination that ex22 change-rate manipulation is occurring, the President shall 

23 consider that factor as weighing in favor of providing im24 port relief in accordance with subsection (a).’’. 
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1 (d) MODIFICATIONS OF RELIEF.—Section 421(n)(2) 

2 of the Trade Act of 1974 (19 U.S.C. 2451(n)(2)) is 

3 amended by adding at the end the following new sentence: 

4 ‘‘In those instances in which the Commission has made 

5 an affirmative determination that exchange-rate manipu6 lation is occurring, the Commission and the President 

7 shall consider that factor as weighing in favor of finding 

8 that continuation of relief is necessary to prevent or rem9 edy the market disruption at issue.’’. 

10 (e) EXTENSION OF ACTION.—Section 421(o) of the 

11 Trade Act of 1974 (19 U.S.C. 2451(o)) is amended— 

12 (1) in paragraph (1), by adding at the end the 

13 following new sentence: ‘‘In those instances in which 

14 the Commission has made an affirmative determina15 tion that exchange-rate manipulation is occurring, 

16 the Commission shall consider that factor as weigh17 ing in favor of finding that an extension of the pe18 riod of relief is necessary to prevent or remedy the 

19 market disruption at issue.’’; and 

20 (2) in paragraph (4), by adding at the end the 

21 following new sentence: ‘‘In those instances in which 

22 the Commission has made an affirmative determina23 tion that exchange-rate manipulation is occurring, 

24 the President shall consider that factor as weighing 

25 in favor of finding that an extension of the period 
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1 of relief is necessary to prevent or remedy the mar2 ket disruption at issue.’’. 

3 (f) EFFECTIVE DATE.—The amendments made by 

4 this section apply with respect to an investigation initiated 

5 under chapter 2 of title IV of the Trade Act of 1974 be6 fore, on, or after the date of the enactment of this Act. 

7 SEC. 5. PROHIBITION ON PROCUREMENT BY THE DEPART8 MENT OF DEFENSE OF CERTAIN DEFENSE 

9 ARTICLES IMPORTED FROM THE PEOPLE’S 

10 REPUBLIC OF CHINA. 

11 (a) COPY OF PETITION, REQUEST, OR RESOLUTION

12 TO BE TRANSMITTED TO THE SECRETARY OF DE13 FENSE.—Section 421(b)(4) of the Trade Act of 1974 (19 

14 U.S.C. 2451(b)(4)) is amended by inserting ‘‘, the Sec15 retary of Defense’’ after ‘‘, the Trade Representative’’. 

16 (b) DETERMINATION OF SECRETARY OF DEFENSE.— 

17 Section 421(b) of the Trade Act of 1974 (19 U.S.C. 

18 2451(b)) is amended by adding at the end the following 

19 new paragraph: 

20 ‘‘(6) Not later than 15 days after the date on which 

21 an investigation is initiated under this subsection, the Sec22 retary of Defense shall submit to the Commission a report 

23 in writing which contains the determination of the Sec24 retary as to whether or not the articles of the People’s 

25 Republic of China that are the subject of the investigation 
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1 are like or directly competitive with articles produced by 

2 a domestic industry that are critical to the defense indus3 trial base of the United States.’’. 

4 (c) PROHIBITION ON PROCUREMENT BY THE DE5 PARTMENT OF DEFENSE OF CERTAIN DEFENSE ARTI6 CLES.— 

7 (1) PROHIBITION.—If the United States Inter8 national Trade Commission makes an affirmative 

9 determination under section 421(b) of the Trade Act 

10 of 1974 (19 U.S.C. 2451(b)), or a determination 

11 which the President or the United States Trade 

12 Representative may consider as affirmative under 

13 section 421(e) of such Act (19 U.S.C. 2451(e)), with 

14 respect to articles of the People’s Republic of China 

15 that the Secretary of Defense has determined are 

16 like or directly competitive with articles produced by 

17 a domestic industry that are critical to the defense 

18 industrial base of the United States, the Secretary 

19 of Defense may not procure, directly or indirectly, 

20 such products of the People’s Republic of China. 

21 (2) WAIVER.—The President may waive the ap22 plication of the prohibition contained in paragraph 

23 (1) on a case-by-case basis if the President deter24 mines and certifies to Congress that it is in the na-
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1 tional security interests of the United States to do 

2 so. 

Æ