II 

110TH CONGRESS 

1ST SESSION S. 554 

To reduce the Federal budget deficit, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 12, 2007 

Mr. DORGAN introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To reduce the Federal budget deficit, 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 ‘‘Act For Our Kids’’. 

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

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—REDUCTIONS IN FEDERAL SPENDING 

Subtitle A—Specific Reductions 

Sec. 101. Prohibition on television broadcasting to Cuba. 

Sec. 102. Termination of United States Court of Federal Claims. 

Sec. 103. Reduction of administrative expenses of agencies. 


hmoore on PROD1PC68 with HMBILLS
2 

•S 554 IS

Sec. 104. Elimination of Medicare Advantage regional plan stabilization (slush) 

fund. 

Subtitle B—Reform of Federal Contracting 

PART I—ELIMINATION OF FRAUD AND ABUSE

Sec. 111. Prohibition of war profiteering and fraud. 

Sec. 112. Suspension and debarment of unethical contractors. 

Sec. 113. Disclosure of audit reports. 

PART II—CONTRACT MATTERS

SUBPART A—COMPETITION IN CONTRACTING

Sec. 114. Prohibition on award of monopoly contracts. 

Sec. 115. Competition in multiple award contracts. 

SUBPART B—CONTRACT PERSONNEL MATTERS

Sec. 116. Contractor conflicts of interest. 

Sec. 117. Elimination of revolving door between Federal personnel and contractors. 

PART III—OTHER PERSONNEL MATTERS

Sec. 118. Minimum requirements for political appointees holding public contracting and safety positions. 

Sec. 119. Protection of certain disclosures of information by Federal employees. 

Subtitle C—Importation of Prescription Drugs 

Sec. 121. Short title. 

Sec. 122. Findings. 

Sec. 123. Repeal of certain section regarding importation of prescription drugs. 

Sec. 124. Importation of prescription drugs; waiver of certain import restrictions. 

Sec. 125. Disposition of certain drugs denied admission into United States. 

Sec. 126. Wholesale distribution of drugs; statements regarding prior sale, purchase, or trade. 

Sec. 127. Internet sales of prescription drugs. 

Sec. 128. Prohibiting payments to unregistered foreign pharmacies. 

Sec. 129. Importation exemption under Controlled Substances Import and Export Act. 

Sec. 130. Severability. 

Subtitle D—Royalties Under Offshore Oil and Gas Leases 

Sec. 141. Price thresholds for royalty suspension provisions. 

Sec. 142. Clarification of authority to impose price thresholds for certain lease 

sales. 

Sec. 143. Eligibility for new leases and the transfer of leases; conservation of 

resources fees. 

TITLE II—REVENUE ENHANCEMENTS 

Sec. 200. Amendment of 1986 Code. 

Subtitle A—Rescission of Various Tax Cuts for Millionaire Taxpayers 


hmoore on PROD1PC68 with HMBILLS
3 

•S 554 IS

Sec. 201. Repeal of top income tax rate reduction for taxpayers with 

$1,000,000 or more of taxable income. 

Sec. 202. Elimination of the scheduled phaseout of the limitations on personal 

exemptions and itemized deductions for taxpayers earning in 

excess of $1,000,000. 

Sec. 203. Modification of tax rates on capital gains and dividends for taxpayers 

with $1,000,000 or more of taxable income. 

Subtitle B—Provisions to Discourage Offshore Shelters and Expatriation 

Sec. 211. Taxation of income of controlled foreign corporations attributable to 

imported property. 

Sec. 212. Tax treatment of controlled foreign corporations established in tax 

havens. 

Sec. 213. Revision of tax rules on expatriation of individuals. 

Sec. 214. Modification of effective date of leasing provisions of the American 

Jobs Creation Act of 2004. 

Sec. 215. Application of rules treating inverted corporations as domestic corporations to certain transactions occurring after March 20, 

2002. 

Subtitle C—Economic Substance Doctrine 

Sec. 221. Clarification of economic substance doctrine. 

Sec. 222. Penalty for understatements attributable to transactions lacking economic substance, etc. 

Sec. 223. Denial of deduction for interest on underpayments attributable to 

noneconomic substance transactions. 

Subtitle D—Penalties and Fines 

Sec. 231. Denial of deduction for certain fines, penalties, and other amounts. 

Sec. 232. Denial of deduction for punitive damages. 

Subtitle E—Duty Surcharge 

Sec. 241. Temporary emergency duty surcharge. 

Subtitle F—Other Provisions 

Sec. 251. Offshore oil and gas leasing in 181 Area of Gulf of Mexico. 

Sec. 252. Transfer of surplus funds of Federal Reserve Banks to Treasury. 

Sec. 253. Permanent extension of FCC authority to auction licenses to use 

radio spectrum. 

Sec. 254. Travel between the United States and Cuba. 


hmoore on PROD1PC68 with HMBILLS
4 

•S 554 IS

1 TITLE I—REDUCTIONS IN 

2 FEDERAL SPENDING 

3 Subtitle A—Specific Reductions 

4 SEC. 101. PROHIBITION ON TELEVISION BROADCASTING TO 

5 CUBA. 

6 (a) REPEAL OF THE TELEVISION BROADCASTING TO

7 CUBA ACT.— 

8 (1) IN GENERAL.—The Television Broadcasting 

9 to Cuba Act (22 U.S.C. 1465aa et seq.) is repealed. 

10 (2) CONFORMING AMENDMENT.—Section 107 

11 of the Cuban Liberty and Democratic Solidarity 

12 (LIBERTAD) Act of 1996 (22 U.S.C. 6037) is 

13 amended to read as follows: 

14 ‘‘SEC. 107. TERMINATION OF RADIO BROADCASTING AU15 THORITY. 

16 ‘‘Upon transmittal of a determination under section 

17 203(c)(3), the Radio Broadcasting to Cuba Act (22 U.S.C. 

18 1465 et seq.) is repealed.’’. 

19 (b) PROHIBITION ON FUNDING OF TELEVISION

20 BROADCASTING TO CUBA.—Notwithstanding any other 

21 provision of law, no funds may appropriated or otherwise 

22 made available to carry out any program of the United 

23 States Government to provide television broadcasting to 

24 Cuba. 


hmoore on PROD1PC68 with HMBILLS
5 

•S 554 IS

1 SEC. 102. TERMINATION OF UNITED STATES COURT OF 

2 FEDERAL CLAIMS. 

3 (a) FILING OF CLAIMS.—Notwithstanding any other 

4 provision of law, no claim may be filed in the United 

5 States Court of Federal Claims on or after the date of 

6 enactment of this Act. 

7 (b) PENDING CLAIMS.—Not later than 60 days after 

8 the date of enactment of this Act, the Chief Justice of 

9 the United States shall promulgate regulations to carry 

10 out an orderly transfer of all claims pending before the 

11 United States Court of Federal Claims to appropriate 

12 courts of the United States. Such transfers shall be com13 pleted during the 1-year period beginning on the date of 

14 enactment of this Act. Regulations under this subsection 

15 may provide for some claims to proceed in the United 

16 States Court of Federal Claims during that 1-year period. 

17 A congressional reference case for which a report is not 

18 transmitted to the appropriate House of Congress before 

19 the end of that 1-year period shall not be transferred and 

20 shall terminate. 

21 (c) TERMINATION.—Notwithstanding any other pro22 vision of law, the United States Court of Federal Claims 

23 is terminated effective on and after the date occurring 1 

24 year after the date of enactment of this Act. 


hmoore on PROD1PC68 with HMBILLS
6 

•S 554 IS

1 SEC. 103. REDUCTION OF ADMINISTRATIVE EXPENSES OF 

2 AGENCIES. 

3 (a) REQUIREMENT TO REDUCE EXPENSES.—An 

4 agency (as defined under section 101 of title 31, United 

5 States Code) shall not make, or obligate to make, expendi6 tures for administrative expenses— 

7 (1) in the case of each of the fiscal years 2008 

8 through 2012, in an aggregate amount greater than 

9 95 percent of the amount of such expenses for the 

10 preceding fiscal year (determined after application of 

11 this section); and 

12 (2) in the case of fiscal year 2013 and each fis13 cal year thereafter, in an aggregate amount greater 

14 than the aggregate amount of such expenses for fis15 cal year 2012 (determined after application of this 

16 section). 

17 (b) EXCEPTION FOR PROGRAM EXPENSES.—Nothing 

18 in this section shall be treated as requiring any reduction 

19 in program expenses. 

20 (c) IDENTIFICATION OF AFFECTED EXPENSES.—The 

21 Director of the Office of Management and Budget shall, 

22 not later than September 1, 2007, establish guidelines for 

23 the determination of what expenses constitute administra24 tive expenses or program expenses for purposes of this sec25 tion. The guidelines shall identify specific expenses, and 


hmoore on PROD1PC68 with HMBILLS
7 

•S 554 IS

1 classes of expenses, that are to be treated as administra2 tive expenses or program expenses. 

3 SEC. 104. ELIMINATION OF MEDICARE ADVANTAGE RE4 GIONAL PLAN STABILIZATION (SLUSH) FUND. 

5 (a) ELIMINATION.— 

6 (1) IN GENERAL.—Subsection (e) of section 

7 1858 of the Social Security Act (42 U.S.C. 1395w– 

8 27a) is repealed. 

9 (2) CONFORMING AMENDMENT.—Section 

10 1858(f)(1) of the Social Security Act (42 U.S.C. 

11 1395w–27a(f)(1)) is amended by striking ‘‘subject to 

12 subsection (e),’’. 

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

14 this section shall take effect on the date of enactment of 

15 this Act. 

16 Subtitle B—Reform of Federal 

17 Contracting 

18 PART I—ELIMINATION OF FRAUD AND ABUSE 

19 SEC. 111. PROHIBITION OF WAR PROFITEERING AND 

20 FRAUD. 

21 (a) PROHIBITION.— 

22 (1) IN GENERAL.—Chapter 47 of title 18, 

23 United States Code, is amended by adding at the 

24 end the following: 


hmoore on PROD1PC68 with HMBILLS
8 

•S 554 IS

1 ‘‘§ 1039. War profiteering and fraud 

2 ‘‘(a) PROHIBITION.— 

3 ‘‘(1) IN GENERAL.—Whoever, in any matter in4 volving a contract or the provision of goods or serv5 ices, directly or indirectly, in connection with a war 

6 or military action knowingly and willfully— 

7 ‘‘(A) executes or attempts to execute a 

8 scheme or artifice to defraud the United States 

9 or the entity having jurisdiction over the area 

10 in which such activities occur; 

11 ‘‘(B) falsifies, conceals, or covers up by 

12 any trick, scheme, or device a material fact; 

13 ‘‘(C) makes any materially false, fictitious, 

14 or fraudulent statements or representations, or 

15 makes or uses any materially false writing or 

16 document knowing the same to contain any ma17 terially false, fictitious, or fraudulent statement 

18 or entry; or 

19 ‘‘(D) materially overvalues any good or 

20 service with the specific intent to excessively 

21 profit from the war or military action; 

22 shall be fined under paragraph (2), imprisoned not 

23 more than 20 years, or both. 

24 ‘‘(2) FINE.—A person convicted of an offense 

25 under paragraph (1) may be fined the greater of— 

26 ‘‘(A) $1,000,000; or 


hmoore on PROD1PC68 with HMBILLS
9 

•S 554 IS

1 ‘‘(B) if such person derives profits or other 

2 proceeds from the offense, not more than twice 

3 the gross profits or other proceeds. 

4 ‘‘(b) EXTRATERRITORIAL JURISDICTION.—There is 

5 extraterritorial Federal jurisdiction over an offense under 

6 this section. 

7 ‘‘(c) VENUE.—A prosecution for an offense under 

8 this section may be brought— 

9 ‘‘(1) as authorized by chapter 211 of this title; 

10 ‘‘(2) in any district where any act in further11 ance of the offense took place; or 

12 ‘‘(3) in any district where any party to the con13 tract or provider of goods or services is located.’’. 

14 (2) CLERICAL AMENDMENT.—The table of sec15 tions for chapter 47 of title 18, United States Code, 

16 is amended by adding at the end the following: 

‘‘1039. War profiteering and fraud.’’. 

17 (b) CIVIL FORFEITURE.—Section 981(a)(1)(C) of 

18 title 18, United States Code, is amended by inserting 

19 ‘‘1039,’’ after ‘‘1032,’’. 

20 (c) CRIMINAL FORFEITURE.—Section 982(a)(2)(B) 

21 of title 18, United States Code, is amended by striking 

22 ‘‘or 1030’’ and inserting ‘‘1030, or 1039’’. 

23 (d) TREATMENT UNDER MONEY LAUNDERING OF24 FENSE.—Section 1956(c)(7)(D) of title 18, United States 

25 Code, is amended by inserting the following: ‘‘, section 


hmoore on PROD1PC68 with HMBILLS
10 

•S 554 IS

1 1039 (relating to war profiteering and fraud)’’ after ‘‘liq2 uidating agent of financial institution),’’. 

3 SEC. 112. SUSPENSION AND DEBARMENT OF UNETHICAL 

4 CONTRACTORS. 

5 (a) IN GENERAL.—Not later than 90 days after the 

6 date of enactment of this Act, the Federal Acquisition 

7 Regulation issued pursuant to section 25 of the Office of 

8 Federal Procurement Policy Act (41 U.S.C. 421) shall be 

9 revised to provide that no prospective contractor shall be 

10 considered to have a satisfactory record of integrity and 

11 business ethics if it— 

12 (1) has exhibited a pattern of overcharging the 

13 Government under Federal contracts; or 

14 (2) has exhibited a pattern of failing to comply 

15 with the law, including tax, labor and employment, 

16 environmental, antitrust, and consumer protection 

17 laws. 

18 (b) EFFECTIVE DATE.—The revised regulation re19 quired by this section shall apply with respect to all con20 tracts for which solicitations are issued after the date that 

21 is 90 days after the date of the enactment of this Act. 

22 SEC. 113. DISCLOSURE OF AUDIT REPORTS. 

23 (a) DISCLOSURE OF INFORMATION TO CONGRESS.— 

24 (1) IN GENERAL.—The head of each executive 

25 agency shall maintain a list of audit reports issued 


hmoore on PROD1PC68 with HMBILLS
11 

•S 554 IS

1 by the agency during the current and previous cal2 endar years that— 

3 (A) describe significant contractor costs 

4 that have been identified as unjustified, unsup5 ported, questioned, or unreasonable under any 

6 contract, task or delivery order, or subcontract; 

7 or 

8 (B) identify significant or substantial defi9 ciencies in any business system of any con10 tractor under any contract, task or delivery 

11 order, or subcontract. 

12 (2) SUBMISSION OF INDIVIDUAL AUDITS.—The 

13 head of each executive agency shall provide, within 

14 14 days of a request in writing by the chairman or 

15 ranking member of a committee of jurisdiction, a 

16 full and unredacted copy of— 

17 (A) the current version of the list main18 tained pursuant to paragraph (1); or 

19 (B) any audit or other report identified on 

20 such list. 

21 (b) PUBLICATION OF INFORMATION ON FEDERAL

22 CONTRACTOR PENALTIES AND VIOLATIONS.— 

23 (1) IN GENERAL.—Not later than 180 days 

24 after the date of the enactment of this Act, the FedVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
12 

•S 554 IS

1 eral Procurement Data System shall be modified to 

2 include— 

3 (A) information on instances in which any 

4 major contractor has been fined, paid penalties 

5 or restitution, settled, plead guilty to, or had 

6 judgments entered against it in connection with 

7 allegations of improper conduct; and 

8 (B) information on all sole source contract 

9 awards in excess of $2,000,000 entered into by 

10 an executive agency. 

11 (2) PUBLICLY AVAILABLE WEBSITE.—The in12 formation required by paragraph (1) shall be made 

13 available through the publicly available website of 

14 the Federal Procurement Data System. 

15 PART II—CONTRACT MATTERS 

16 Subpart A—Competition in Contracting 

17 SEC. 114. PROHIBITION ON AWARD OF MONOPOLY CON18 TRACTS. 

19 (a) CIVILIAN AGENCY CONTRACTS.—Section 

20 303H(d) of the Federal Property and Administrative 

21 Services Act of 1949 (41 U.S.C. 253h(d)) is amended by 

22 adding at the end the following new paragraph: 

23 ‘‘(4)(A) No task or delivery order contract in an 

24 amount estimated to exceed $100,000,000 (including all 


hmoore on PROD1PC68 with HMBILLS
13 

•S 554 IS

1 options) may be awarded to a single contractor unless the 

2 head of the agency determines in writing that— 

3 ‘‘(i) because of the size, scope, or method of 

4 performance of the requirement, it would not be 

5 practical to award multiple task or delivery order 

6 contracts; 

7 ‘‘(ii) the task orders expected under the con8 tract are so integrally related that only a single con9 tractor can reasonably perform the work; or 

10 ‘‘(iii) for any other reason, it is necessary in the 

11 public interest to award the contract to a single con12 tractor. 

13 ‘‘(B) The head of the agency shall notify Congress 

14 within 30 days of any determination under subparagraph 

15 (A)(iii).’’. 

16 (b) DEFENSE CONTRACTS.—Section 2304a(d) of title 

17 10, United States Code, is amended by adding at the end 

18 the following new paragraph: 

19 ‘‘(4)(A) No task or delivery order contract in an 

20 amount estimated to exceed $100,000,000 (including all 

21 options) may be awarded to a single contractor unless the 

22 head of the agency determines in writing that— 

23 ‘‘(i) because of the size, scope, or method of 

24 performance of the requirement, it would not be 


hmoore on PROD1PC68 with HMBILLS
14 

•S 554 IS

1 practical to award multiple task or delivery order 

2 contracts; 

3 ‘‘(ii) the task orders expected under the con4 tract are so integrally related that only a single con5 tractor can reasonably perform the work; or 

6 ‘‘(iii) for any other reason, it is necessary in the 

7 public interest to award the contract to a single con8 tractor. 

9 ‘‘(B) The head of the agency shall notify Congress 

10 within 30 days of any determination under subparagraph 

11 (A)(iii).’’. 

12 SEC. 115. COMPETITION IN MULTIPLE AWARD CONTRACTS. 

13 (a) REGULATIONS REQUIRED.—Not later than 180 

14 days after the date of the enactment of this section, the 

15 Federal Acquisition Regulation shall be revised to require 

16 competition in the purchase of goods and services by each 

17 executive agency pursuant to multiple award contracts. 

18 (b) CONTENT OF REGULATIONS.—(1) The regula19 tions required by subsection (a) shall provide, at a min20 imum, that each individual purchase of goods or services 

21 in excess of $1,000,000 that is made under a multiple 

22 award contract shall be made on a competitive basis unless 

23 a contracting officer of the executive agency— 

24 (A) waives the requirement on the basis of a 

25 determination that— 


hmoore on PROD1PC68 with HMBILLS
15 

•S 554 IS

1 (i) one of the circumstances described in 

2 paragraphs (1) through (4) of section 303J(b) 

3 of the Federal Property and Administrative 

4 Services Act of 1949 (41 U.S.C. 253j(b)) ap5 plies to such individual purchase; or 

6 (ii) a statute expressly authorizes or re7 quires that the purchase be made from a speci8 fied source; and 

9 (B) justifies the determination in writing. 

10 (2) For purposes of this subsection, an individual 

11 purchase of goods or services is made on a competitive 

12 basis only if it is made pursuant to procedures that— 

13 (A) require fair notice of the intent to make 

14 that purchase (including a description of the work to 

15 be performed and the basis on which the selection 

16 will be made) to be provided to all contractors offer17 ing such goods or services under the multiple award 

18 contract; and 

19 (B) afford all contractors responding to the no20 tice a fair opportunity to make an offer and have 

21 that offer fairly considered by the official making 

22 the purchase. 

23 (3) Notwithstanding paragraph (2), notice may be 

24 provided to fewer than all contractors offering such goods 

25 or services under a multiple award contract described in 


hmoore on PROD1PC68 with HMBILLS
16 

•S 554 IS

1 subsection (c)(2)(A) if notice is provided to as many con2 tractors as practicable. 

3 (4) A purchase may not be made pursuant to a notice 

4 that is provided to fewer than all contractors under para5 graph (3) unless— 

6 (A) offers were received from at least three 

7 qualified contractors; or 

8 (B) a contracting officer of the executive agency 

9 determines in writing that no additional qualified 

10 contractors were able to be identified despite reason11 able efforts to do so. 

12 (c) DEFINITIONS.—In this section: 

13 (1) The term ‘‘individual purchase’’ means a 

14 task order, delivery order, or other purchase. 

15 (2) The term ‘‘multiple award contract’’ 

16 means— 

17 (A) a contract that is entered into by the 

18 Administrator of General Services under the 

19 multiple award schedule program referred to in 

20 section 309(b)(3) of the Federal Property and 

21 Administrative Services Act of 1949 (41 U.S.C. 

22 259(b)(3)); 

23 (B) a multiple award task order contract 

24 that is entered into under the authority of sec25 tions 2304a through 2304d of title 10, United 


hmoore on PROD1PC68 with HMBILLS
17 

•S 554 IS

1 States Code, or sections 303H through 303K of 

2 the Federal Property and Administrative Serv3 ices Act of 1949 (41 U.S.C. 253h through 

4 253k); and 

5 (C) any other indefinite delivery, indefinite 

6 quantity contract that is entered into by the 

7 head of an executive agency with two or more 

8 sources pursuant to the same solicitation. 

9 (d) APPLICABILITY.—The revisions to the Federal 

10 Acquisition Regulation pursuant to subsection (a) shall 

11 take effect not later than 180 days after the date of the 

12 enactment of this Act, and shall apply to all individual 

13 purchases of goods or services that are made under mul14 tiple award contracts on or after the effective date, with15 out regard to whether the multiple award contracts were 

16 entered into before, on, or after such effective date. 

17 (e) CONFORMING AMENDMENTS TO DEFENSE CON18 TRACT PROVISION.—Section 803 of the National Defense 

19 Authorization Act for Fiscal Year 2002 (Public Law 107– 

20 107; 10 U.S.C. 2304 note) is amended as follows: 

21 (1) GOODS COVERED.—(A) The section heading 

22 is amended by inserting ‘‘GOODS OR’’ before 

23 ‘‘SERVICES’’. 

24 (B) Subsection (a) is amended by inserting 

25 ‘‘goods and’’ before ‘‘services’’. 


hmoore on PROD1PC68 with HMBILLS
18 

•S 554 IS

1 (C) The following provisions are amended by in2 serting ‘‘goods or’’ before ‘‘services’’ each place it 

3 appears: 

4 (i) Paragraphs (1), (2), and (3) of sub5 section (b). 

6 (ii) Subsection (d). 

7 (D) Such section is amended by adding at the 

8 end the following new subsection: 

9 ‘‘(e) APPLICABILITY TO GOODS.—The Secretary shall 

10 revise the regulations promulgated pursuant to subsection 

11 (a) to cover purchases of goods by the Department of De12 fense pursuant to multiple award contracts. The revised 

13 regulations shall take effect in final form not later than 

14 180 days after the date of the enactment of this subsection 

15 and shall apply to all individual purchases of goods that 

16 are made under multiple award contracts on or after the 

17 effective date, without regard to whether the multiple 

18 award contracts were entered into before, on, or after such 

19 effective date.’’. 

20 (f) PROTEST RIGHTS FOR CERTAIN AWARDS.— 

21 (1) CIVILIAN AGENCY CONTRACTS.—Section 

22 303J(d) of the Federal Property and Administrative 

23 Services Act (41 U.S.C. 253j(d)) is amended by in24 serting ‘‘with a value of less than $500,000’’ after 

25 ‘‘task or delivery order’’. 


hmoore on PROD1PC68 with HMBILLS
19 

•S 554 IS

1 (2) DEFENSE CONTRACTS.—Section 2304c(d) 

2 of title 10, United States Code, is amended by in3 serting ‘‘with a value of less than $500,000’’ after 

4 ‘‘task or delivery order’’. 

5 Subpart B—Contract Personnel Matters 

6 SEC. 116. CONTRACTOR CONFLICTS OF INTEREST. 

7 (a) PROHIBITION ON CONTRACTS RELATING TO IN8 HERENTLY GOVERNMENTAL FUNCTIONS.—The head of 

9 an agency may not enter into a contract for the perform10 ance of any inherently governmental function. 

11 (b) PROHIBITION ON CONTRACTS FOR CONTRACT

12 OVERSIGHT.— 

13 (1) PROHIBITION.—The head of an agency may 

14 not enter into a contract for the performance of ac15 quisition functions closely associated with inherently 

16 governmental functions with any entity unless the 

17 head of the agency determines in writing that— 

18 (A) neither that entity nor any related en19 tity will be responsible for performing any of 

20 the work under a contract which the entity will 

21 help plan, evaluate, select a source, manage or 

22 oversee; and 

23 (B) the agency has taken appropriate steps 

24 to prevent or mitigate any organizational conVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00019 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
20 

•S 554 IS

1 flict of interest that may arise because the enti2 ty— 

3 (i) has a separate ongoing business 

4 relationship, such as a joint venture or 

5 contract, with any of the contractors to be 

6 overseen; 

7 (ii) would be placed in a position to 

8 affect the value or performance of work it 

9 or any related entity is doing under any 

10 other Government contract; 

11 (iii) has a reverse role with the con12 tractor to be overseen under one or more 

13 separate Government contracts; or 

14 (iv) has some other relationship with 

15 the contractor to be overseen that could 

16 reasonably appear to bias the contractor’s 

17 judgment. 

18 (2) RELATED ENTITY DEFINED.—In this sub19 section, the term ‘‘related entity’’, with respect to a 

20 contractor, means any subsidiary, parent, affiliate, 

21 joint venture, or other entity related to the con22 tractor. 

23 (c) DEFINITIONS.—In this section: 


hmoore on PROD1PC68 with HMBILLS
21 

•S 554 IS

1 (1) The term ‘‘inherently governmental func2 tions’’ has the meaning given to such term in part 

3 7.5 of the Federal Acquisition Regulation. 

4 (2) The term ‘‘functions closely associated with 

5 governmental functions’’ means the functions de6 scribed in section 7.503(d) of the Federal Acquisi7 tion Regulation. 

8 (3) The term ‘‘organizational conflict of inter9 est’’ has the meaning given such term in part 9.5 of 

10 the Federal Acquisition Regulation. 

11 (d) EFFECTIVE DATE AND APPLICABILITY.—This 

12 section shall take effect on the date of the enactment of 

13 this Act and shall apply to— 

14 (1) contracts entered into on or after such date; 

15 (2) any task or delivery order issued on or after 

16 such date under a contract entered into before, on, 

17 or after such date; and 

18 (3) any decision on or after such date to exer19 cise an option or otherwise extend a contract for the 

20 performance of a function relating to contract over21 sight regardless of whether such contract was en22 tered into before, on, or after such date. 


hmoore on PROD1PC68 with HMBILLS
22 

•S 554 IS

1 SEC. 117. ELIMINATION OF REVOLVING DOOR BETWEEN 

2 FEDERAL PERSONNEL AND CONTRACTORS. 

3 (a) ELIMINATION OF LOOPHOLES ALLOWING

4 FORMER FEDERAL OFFICIALS TO ACCEPT COMPENSA5 TION FROM CONTRACTORS OR RELATED ENTITIES.— 

6 (1) IN GENERAL.—Paragraph (1) of subsection 

7 (d) of section 27 of the Office of Federal Procure8 ment Policy Act (41 U.S.C. 423) is amended— 

9 (A) by striking ‘‘or consultant’’ and insert10 ing ‘‘consultant, lawyer, or lobbyist’’; 

11 (B) by striking ‘‘one year’’ and inserting 

12 ‘‘two years’’; and 

13 (C) in subparagraph (C), by striking ‘‘per14 sonally made for the Federal agency—’’ and in15 serting ‘‘participated personally and substan16 tially in—’’. 

17 (2) DEFINITION.—Paragraph (2) of such sub18 section is amended to read as follows: 

19 ‘‘(2) For purposes of paragraph (1), the term ‘con20 tractor’ includes any division, affiliate, subsidiary, parent, 

21 joint venture, or other related entity of a contractor.’’. 

22 (b) PROHIBITION ON AWARD OF GOVERNMENT CON23 TRACTS TO FORMER EMPLOYERS.—Such section is fur24 ther amended by adding at the end the following new sub25 section: 


hmoore on PROD1PC68 with HMBILLS
23 

•S 554 IS

1 ‘‘(i) PROHIBITION ON INVOLVEMENT BY CERTAIN

2 FORMER CONTRACTOR EMPLOYEES IN PROCURE3 MENTS.—A former employee of a contractor who becomes 

4 an employee of the Federal Government shall not be per5 sonally and substantially involved with any Federal agency 

6 procurement involving the employee’s former employer, in7 cluding any division, affiliate, subsidiary, parent, joint 

8 venture, or other related entity of the former employer, 

9 for a period of two years beginning on the date on which 

10 the employee leaves the employment of the contractor un11 less the designated agency ethics officer for the agency 

12 determines in writing that the government’s interest in the 

13 former employee’s participation in a particular procure14 ment outweighs any appearance of impropriety.’’. 

15 (c) REQUIREMENT FOR FEDERAL PROCUREMENT

16 OFFICERS TO DISCLOSE JOB OFFERS MADE TO REL17 ATIVES.—Subsection (c)(1) of such section is amended by 

18 inserting after ‘‘that official’’ the following: ‘‘, or for a rel19 ative of that official (as defined in section 3110 of title 

20 5, United States Code),’’. 

21 (d) ADDITIONAL CRIMINAL PENALTIES.—Paragraph 

22 (1) of subsection (e) of such section is amended to read 

23 as follows: 

24 ‘‘(1) CRIMINAL PENALTIES.—Whoever engages 

25 in conduct constituting a violation of— 


hmoore on PROD1PC68 with HMBILLS
24 

•S 554 IS

1 ‘‘(A) subsection (a) or (b) for the purpose 

2 of either— 

3 ‘‘(i) exchanging the information cov4 ered by such subsection for anything of 

5 value, or 

6 ‘‘(ii) obtaining or giving anyone a 

7 competitive advantage in the award of a 

8 Federal agency procurement contract; or 

9 ‘‘(B) subsection (c) or (d); 

10 shall be imprisoned for not more than 5 years, fined 

11 as provided under title 18, Untied States Code, or 

12 both.’’. 

13 (e) REGULATIONS.—Such section is further amended 

14 by adding at the end the following new subsection: 

15 ‘‘(j) REGULATIONS.—The Director of the Office of 

16 Government Ethics, in consultation with the Adminis17 trator, shall— 

18 ‘‘(1) promulgate regulations to carry out and 

19 ensure the enforcement of this section; and 

20 ‘‘(2) monitor and investigate individual and 

21 agency compliance with this section.’’. 


hmoore on PROD1PC68 with HMBILLS
25 

•S 554 IS

1 PART III—OTHER PERSONNEL MATTERS 

2 SEC. 118. MINIMUM REQUIREMENTS FOR POLITICAL AP3 POINTEES HOLDING PUBLIC CONTRACTING 

4 AND SAFETY POSITIONS. 

5 (a) IN GENERAL.—A position specified in subsection 

6 (b) may not be held by any political appointee who does 

7 not meet the requirements of subsection (c). 

8 (b) SPECIFIED POSITIONS.—A position specified in 

9 this subsection is any position as follows: 

10 (1) A public contracting position. 

11 (2) A public safety position. 

12 (c) MINIMUM REQUIREMENTS.—An individual shall 

13 not, with respect to any position, be considered to meet 

14 the requirements of this subsection unless such indi15 vidual— 

16 (1) has academic, management, and leadership 

17 credentials in one or more areas relevant to such po18 sition; 

19 (2) has a superior record of achievement in one 

20 or more areas relevant to such position; 

21 (3) has training and expertise in one or more 

22 areas relevant to such position; and 

23 (4) has not, within the 2-year period ending on 

24 the date of such individual’s nomination for or ap25 pointment to such position, been a lobbyist for any 

26 entity or other client that is subject to the authority 


hmoore on PROD1PC68 with HMBILLS
26 

•S 554 IS

1 of the agency within which, if appointed, such indi2 vidual would serve. 

3 (d) POLITICAL APPOINTEE.—For purposes of this 

4 section, the term ‘‘political appointee’’ means any indi5 vidual who— 

6 (1) is employed in a position listed in sections 

7 5312 through 5316 of title 5, United States Code 

8 (relating to the Executive Schedule); 

9 (2) is a limited term appointee, limited emer10 gency appointee, or noncareer appointee in the Sen11 ior Executive Service; or 

12 (3) is employed in the executive branch of the 

13 Government in a position which has been excepted 

14 from the competitive service by reason of its policy15 determining, policy-making, or policy-advocating 

16 character. 

17 (e) PUBLIC CONTRACTING POSITION.—For purposes 

18 of this section, the term ‘‘public contracting position’’ 

19 means the following: 

20 (1) The Administrator for Federal Procurement 

21 Policy. 

22 (2) The Administrator of the General Services 

23 Administration. 

24 (3) The Chief Acquisition Officer of any execu25 tive agency, as appointed or designated pursuant to 


hmoore on PROD1PC68 with HMBILLS
27 

•S 554 IS

1 section 16 of the Office of Federal Procurement Pol2 icy Act (41 U.S.C. 414). 

3 (4) The Under Secretary of Defense for Acqui4 sition, Technology, and Logistics. 

5 (5) Any position (not otherwise identified under 

6 any of the preceding provisions of this subsection) a 

7 primary function of which involves government pro8 curement and procurement policy, as identified by 

9 the head of each employing agency in consultation 

10 with the Office of Personnel Management. 

11 (f) PUBLIC SAFETY POSITION.—For purposes of this 

12 section, the term ‘‘public safety position’’ means the fol13 lowing: 

14 (1) The Under Secretary for Emergency Pre15 paredness and Response, Department of Homeland 

16 Security. 

17 (2) The Director of the Federal Emergency 

18 Management Agency, Department of Homeland Se19 curity. 

20 (3) Each regional director of the Federal Emer21 gency Management Agency, Department of Home22 land Security. 

23 (4) The Recovery Division Director of the Fed24 eral Emergency Management Agency, Department 

25 of Homeland Security. 


hmoore on PROD1PC68 with HMBILLS
28 

•S 554 IS

1 (5) The Assistant Secretary for Immigration 

2 and Customs Enforcement, Department of Home3 land Security. 

4 (6) The Assistant Secretary for Public Health 

5 Emergency Preparedness, Department of Health 

6 and Human Services. 

7 (7) The Assistant Administrator for Solid 

8 Waste and Emergency Response, Environmental 

9 Protection Agency. 

10 (8) Any position (not otherwise identified under 

11 any of the preceding provisions of this subsection) a 

12 primary function of which involves responding to a 

13 direct threat to life or property or a hazard to 

14 health, as identified by the head of each employing 

15 agency in consultation with the Office of Personnel 

16 Management. 

17 (g) PUBLICATION OF POSITIONS.—Beginning not 

18 later than 30 days after the date of the enactment of this 

19 Act, the head of each agency shall maintain on such agen20 cy’s public website a current list of all public contracting 

21 positions and public safety positions within such agency. 

22 (h) COORDINATION WITH OTHER REQUIREMENTS.— 

23 The requirements set forth in subsection (c) shall be in 

24 addition to, and not in lieu of, any requirements that 


hmoore on PROD1PC68 with HMBILLS
29 

•S 554 IS

1 might otherwise apply with respect to any particular posi2 tion. 

3 (i) DEFINITIONS.—In this section: 

4 (1) The term ‘‘agency’’ means an Executive 

5 agency (as defined by section 105 of title 5, United 

6 States Code). 

7 (2) The terms ‘‘limited term appointee’’, ‘‘lim8 ited emergency appointee’’, and ‘‘noncareer ap9 pointee’’ have the meanings given such terms in sec10 tion 3132 of title 5, United States Code. 

11 (3) The term ‘‘Senior Executive Service’’ has 

12 the meaning given such term by section 2101a of 

13 title 5, United States Code. 

14 (4) The term ‘‘competitive service’’ has the 

15 meaning given such term by section 2102 of title 5, 

16 United States Code. 

17 (5) The terms ‘‘lobbyist’’ and ‘‘client’’ have the 

18 respective meanings given them by section 3 of the 

19 Lobbying Disclosure Act of 1995 (2 U.S.C. 1602). 

20 (j) CONFORMING AMENDMENT.—Section 16(a) of the 

21 Office of Federal Procurement Policy Act (41 U.S.C. 

22 414(a)) is amended by striking ‘‘non-career employee as’’. 


hmoore on PROD1PC68 with HMBILLS
30 

•S 554 IS

1 SEC. 119. PROTECTION OF CERTAIN DISCLOSURES OF IN2 FORMATION BY FEDERAL EMPLOYEES. 

3 (a) CLARIFICATION OF DISCLOSURES COVERED.— 

4 Section 2302(b)(8) of title 5, United States Code, is 

5 amended— 

6 (1) in subparagraph (A)— 

7 (A) by striking ‘‘which the employee or ap8 plicant reasonably believes evidences’’ and in9 serting ‘‘, without restriction to time, place, 

10 form, motive, context, or prior disclosure made 

11 to any person by an employee or applicant, in12 cluding a disclosure made in the ordinary 

13 course of an employee’s duties, that the em14 ployee or applicant reasonably believes is evi15 dence of’’; and 

16 (B) in clause (i), by striking ‘‘a violation’’ 

17 and inserting ‘‘any violation’’; 

18 (2) in subparagraph (B)— 

19 (A) by striking ‘‘which the employee or ap20 plicant reasonably believes evidences’’ and in21 serting ‘‘, without restriction to time, place, 

22 form, motive, context, or prior disclosure made 

23 to any person by an employee or applicant, in24 cluding a disclosure made in the ordinary 

25 course of an employee’s duties, of information 


hmoore on PROD1PC68 with HMBILLS
31 

•S 554 IS

1 that the employee or applicant reasonably be2 lieves is evidence of’’; and 

3 (B) in clause (i), by striking ‘‘a violation’’ 

4 and inserting ‘‘any violation (other than a viola5 tion of this section)’’; and 

6 (3) by adding at the end the following: 

7 ‘‘(C) any disclosure that— 

8 ‘‘(i) is made by an employee or appli9 cant of information required by law or Ex10 ecutive order to be kept secret in the inter11 est of national defense or the conduct of 

12 foreign affairs that the employee or appli13 cant reasonably believes is direct and spe14 cific evidence of— 

15 ‘‘(I) any violation of any law, 

16 rule, or regulation; 

17 ‘‘(II) gross mismanagement, a 

18 gross waste of funds, an abuse of au19 thority, or a substantial and specific 

20 danger to public health or safety; or 

21 ‘‘(III) a false statement to Con22 gress on an issue of material fact; and 

23 ‘‘(ii) is made to— 

24 ‘‘(I) a member of a committee of 

25 Congress; 


hmoore on PROD1PC68 with HMBILLS
32 

•S 554 IS

1 ‘‘(II) any other Member of Con2 gress; or 

3 ‘‘(III) an employee of Congress 

4 who has the appropriate security 

5 clearance and is authorized to receive 

6 information of the type disclosed.’’. 

7 (b) COVERED DISCLOSURES.—Section 2302(a)(2) of 

8 title 5, United States Code, is amended— 

9 (1) in subparagraph (B)(ii), by striking ‘‘and’’ 

10 at the end; 

11 (2) in subparagraph (C)(iii), by striking the pe12 riod at the end and inserting ‘‘; and’’; and 

13 (3) by adding at the end the following: 

14 ‘‘(D) ‘disclosure’ means a formal or informal 

15 communication or transmission, but does not include 

16 a communication concerning policy decisions that 

17 lawfully exercise discretionary authority unless the 

18 employee providing the disclosure reasonably believes 

19 that the disclosure evidences— 

20 ‘‘(i) any violation of any law, rule, or regu21 lation; or 

22 ‘‘(ii) gross mismanagement, a gross waste 

23 of funds, an abuse of authority, or a substantial 

24 and specific danger to public health or safety.’’. 


hmoore on PROD1PC68 with HMBILLS
33 

•S 554 IS

1 (c) REBUTTABLE PRESUMPTION.—Section 2302(b) 

2 of title 5, United States Code, is amended by amending 

3 the matter following paragraph (12) to read as follows: 

4 ‘‘This subsection shall not be construed to authorize the 

5 withholding of information from Congress or the taking 

6 of any personnel action against an employee who discloses 

7 information to Congress. For purposes of paragraph (8), 

8 any presumption relating to the performance of a duty by 

9 an employee who has authority to take, direct others to 

10 take, recommend, or approve any personnel action may be 

11 rebutted by substantial evidence. For purposes of para12 graph (8), a determination as to whether an employee or 

13 applicant reasonably believes that they have disclosed in14 formation that evidences any violation of law, rule, regula15 tion, gross mismanagement, a gross waste of funds, an 

16 abuse of authority, or a substantial and specific danger 

17 to public health or safety shall be made by determining 

18 whether a disinterested observer with knowledge of the es19 sential facts known to and readily ascertainable by the em20 ployee would reasonably conclude that the actions of the 

21 Government evidence such violations, mismanagement, 

22 waste, abuse, or danger.’’. 

23 (d) NONDISCLOSURE POLICIES, FORMS, AND AGREE24 MENTS; SECURITY CLEARANCES; AND RETALIATORY IN25 VESTIGATIONS.— 


hmoore on PROD1PC68 with HMBILLS
34 

•S 554 IS

1 (1) PERSONNEL ACTION.—Section 

2 2302(a)(2)(A) of title 5, United States Code, is 

3 amended— 

4 (A) in clause (x), by striking ‘‘and’’ after 

5 the semicolon; and 

6 (B) by redesignating clause (xi) as clause 

7 (xiv) and inserting after clause (x) the fol8 lowing: 

9 ‘‘(xi) the implementation or enforce10 ment of any nondisclosure policy, form, or 

11 agreement; 

12 ‘‘(xii) a suspension, revocation, or 

13 other determination relating to a security 

14 clearance or any other access determina15 tion by a covered agency; 

16 ‘‘(xiii) an investigation, other than 

17 any ministerial or nondiscretionary fact 

18 finding activities necessary for the agency 

19 to perform its mission, of an employee or 

20 applicant for employment because of any 

21 activity protected under this section; and’’. 

22 (2) PROHIBITED PERSONNEL PRACTICE.—Sec23 tion 2302(b) of title 5, United States Code, is 

24 amended— 


hmoore on PROD1PC68 with HMBILLS
35 

•S 554 IS

1 (A) in paragraph (11), by striking ‘‘or’’ at 

2 the end; 

3 (B) in paragraph (12), by striking the pe4 riod and inserting a semicolon; and 

5 (C) by inserting after paragraph (12) the 

6 following: 

7 ‘‘(13) implement or enforce any nondisclosure 

8 policy, form, or agreement, if such policy, form, or 

9 agreement does not contain the following statement: 

10 ‘These provisions are consistent with and do not su11 persede, conflict with, or otherwise alter the em12 ployee obligations, rights, or liabilities created by 

13 Executive Order No. 12958; section 7211 (governing 

14 disclosures to Congress); section 1034 of title 10 

15 (governing disclosure to Congress by members of the 

16 military); section 2302(b)(8) (governing disclosures 

17 of illegality, waste, fraud, abuse, or public health or 

18 safety threats); the Intelligence Identities Protection 

19 Act of 1982 (50 U.S.C. 421 et seq.) (governing dis20 closures that could expose confidential Government 

21 agents); and the statutes which protect against dis22 closures that could compromise national security, in23 cluding sections 641, 793, 794, 798, and 952 of title 

24 18 and section 4(b) of the Subversive Activities Con25 trol Act of 1950 (50 U.S.C. 783(b)). The definiVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00035 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
36 

•S 554 IS

1 tions, requirements, obligations, rights, sanctions, 

2 and liabilities created by such Executive order and 

3 such statutory provisions are incorporated into this 

4 agreement and are controlling’; or 

5 ‘‘(14) conduct, or cause to be conducted, an in6 vestigation, other than any ministerial or nondis7 cretionary fact finding activities necessary for the 

8 agency to perform its mission, of an employee or ap9 plicant for employment because of any activity pro10 tected under this section.’’. 

11 (3) BOARD AND COURT REVIEW OF ACTIONS

12 RELATING TO SECURITY CLEARANCES.— 

13 (A) IN GENERAL.—Chapter 77 of title 5, 

14 United States Code, is amended by inserting 

15 after section 7702 the following: 

16 ‘‘§ 7702a. Actions relating to security clearances 

17 ‘‘(a) In any appeal relating to the suspension, revoca18 tion, or other determination relating to a security clear19 ance or access determination, the Merit Systems Protec20 tion Board or any reviewing court— 

21 ‘‘(1) shall determine whether paragraph (8) or 

22 (9) of section 2302(b) was violated; 

23 ‘‘(2) may not order the President or the des24 ignee of the President to restore a security clearance 


hmoore on PROD1PC68 with HMBILLS
37 

•S 554 IS

1 or otherwise reverse a determination of clearance 

2 status or reverse an access determination; and 

3 ‘‘(3) subject to paragraph (2), may issue declar4 atory relief and any other appropriate relief. 

5 ‘‘(b)(1) If, in any final judgment, the Board or court 

6 declares that any suspension, revocation, or other deter7 mination with regards to a security clearance or access 

8 determination was made in violation of paragraph (8) or 

9 (9) of section 2302(b), the affected agency shall conduct 

10 a review of that suspension, revocation, access determina11 tion, or other determination, giving great weight to the 

12 Board or court judgment. 

13 ‘‘(2) Not later than 30 days after any Board or court 

14 judgment declaring that a security clearance suspension, 

15 revocation, access determination, or other determination 

16 was made in violation of paragraph (8) or (9) of section 

17 2302(b), the affected agency shall issue an unclassified re18 port to the congressional committees of jurisdiction (with 

19 a classified annex if necessary), detailing the cir20 cumstances of the agency’s security clearance suspension, 

21 revocation, other determination, or access determination. 

22 A report under this paragraph shall include any proposed 

23 agency action with regards to the security clearance or ac24 cess determination. 


hmoore on PROD1PC68 with HMBILLS
38 

•S 554 IS

1 ‘‘(c) An allegation that a security clearance or access 

2 determination was revoked or suspended in retaliation for 

3 a protected disclosure shall receive expedited review by the 

4 Office of Special Counsel, the Merit Systems Protection 

5 Board, and any reviewing court. 

6 ‘‘(d) For purposes of this section, corrective action 

7 may not be ordered if the agency demonstrates by a pre8 ponderance of the evidence that it would have taken the 

9 same personnel action in the absence of such disclosure.’’. 

10 (B) TECHNICAL AND CONFORMING AMEND11 MENT.—The table of sections for chapter 77 of 

12 title 5, United States Code, is amended by in13 serting after the item relating to section 7702 

14 the following: 

‘‘7702a. Actions relating to security clearances.’’. 

15 (e) EXCLUSION OF AGENCIES BY THE PRESIDENT.— 

16 Section 2302(a)(2)(C) of title 5, United States Code, is 

17 amended by striking clause (ii) and inserting the following: 

18 ‘‘(ii)(I) the Federal Bureau of Investiga19 tion, the Office of the Director of National In20 telligence, the Central Intelligence Agency, the 

21 Defense Intelligence Agency, the National 

22 Geospatial-Intelligence Agency, and the Na23 tional Security Agency; and 

24 ‘‘(II) as determined by the President, any 

25 executive agency or unit thereof the principal 


hmoore on PROD1PC68 with HMBILLS
39 

•S 554 IS

1 function of which is the conduct of foreign in2 telligence or counterintelligence activities, if the 

3 determination (as that determination relates to 

4 a personnel action) is made before that per5 sonnel action; or’’. 

6 (f) ATTORNEY FEES.—Section 1204(m)(1) of title 5, 

7 United States Code, is amended by striking ‘‘agency in8 volved’’ and inserting ‘‘agency where the prevailing party 

9 is employed or has applied for employment’’. 

10 (g) DISCIPLINARY ACTION.—Section 1215(a)(3) of 

11 title 5, United States Code, is amended to read as follows: 

12 ‘‘(3)(A) A final order of the Board may im13 pose— 

14 ‘‘(i) disciplinary action consisting of re15 moval, reduction in grade, debarment from 

16 Federal employment for a period not to exceed 

17 5 years, suspension, or reprimand; 

18 ‘‘(ii) an assessment of a civil penalty not to 

19 exceed $1,000; or 

20 ‘‘(iii) any combination of disciplinary ac21 tions described under clause (i) and an assess22 ment described under clause (ii). 

23 ‘‘(B) In any case in which the Board finds that 

24 an employee has committed a prohibited personnel 

25 practice under paragraph (8) or (9) of section 


hmoore on PROD1PC68 with HMBILLS
40 

•S 554 IS

1 2302(b), the Board shall impose disciplinary action 

2 if the Board finds that the activity protected under 

3 paragraph (8) or (9) of section 2302(b) was a sig4 nificant motivating factor, even if other factors also 

5 motivated the decision, for the employee’s decision to 

6 take, fail to take, or threaten to take or fail to take 

7 a personnel action, unless that employee dem8 onstrates, by preponderance of evidence, that the 

9 employee would have taken, failed to take, or threat10 ened to take or fail to take the same personnel ac11 tion, in the absence of such protected activity.’’. 

12 (h) SPECIAL COUNSEL AMICUS CURIAE APPEAR13 ANCE.—Section 1212 of title 5, United States Code, is 

14 amended by adding at the end the following: 

15 ‘‘(h)(1) The Special Counsel is authorized to appear 

16 as amicus curiae in any action brought in a court of the 

17 United States related to any civil action brought in con18 nection with section 2302(b) (8) or (9), or subchapter III 

19 of chapter 73, or as otherwise authorized by law. In any 

20 such action, the Special Counsel is authorized to present 

21 the views of the Special Counsel with respect to compli22 ance with section 2302(b) (8) or (9) or subchapter III of 

23 chapter 77 and the impact court decisions would have on 

24 the enforcement of such provisions of law. 


hmoore on PROD1PC68 with HMBILLS
41 

•S 554 IS

1 ‘‘(2) A court of the United States shall grant the ap2 plication of the Special Counsel to appear in any such ac3 tion for the purposes described in subsection (a).’’. 

4 (i) JUDICIAL REVIEW.— 

5 (1) IN GENERAL.—Section 7703(b)(1) of title 

6 5, United States Code, is amended to read as fol7 lows: 

8 ‘‘(b)(1)(A) Except as provided in subparagraph (B) 

9 and paragraph (2), a petition to review a final order or 

10 final decision of the Board shall be filed in the United 

11 States Court of Appeals for the Federal Circuit. Notwith12 standing any other provision of law, any petition for re13 view must be filed within 60 days after the date the peti14 tioner received notice of the final order or decision of the 

15 Board. 

16 ‘‘(B) During the 5-year period beginning on the effec17 tive date of this subsection, a petition to review a final 

18 order or final decision of the Board in a case alleging a 

19 violation of paragraph (8) or (9) of section 2302(b) shall 

20 be filed in the United States Court of Appeals for the Fed21 eral Circuit or any court of appeals of competent jurisdic22 tion as provided under subsection (b)(2).’’. 

23 (2) REVIEW OBTAINED BY OFFICE OF PER24 SONNEL MANAGEMENT.—Section 7703(d) of title 5, 

25 United States Code, is amended to read as follows: 


hmoore on PROD1PC68 with HMBILLS
42 

•S 554 IS

1 ‘‘(d)(1) Except as provided under paragraph (2), this 

2 paragraph shall apply to any review obtained by the Direc3 tor of the Office of Personnel Management. The Director 

4 of the Office of Personnel Management may obtain review 

5 of any final order or decision of the Board by filing, within 

6 60 days after the date the Director received notice of the 

7 final order or decision of the Board, a petition for judicial 

8 review in the United States Court of Appeals for the Fed9 eral Circuit if the Director determines, in his discretion, 

10 that the Board erred in interpreting a civil service law, 

11 rule, or regulation affecting personnel management and 

12 that the Board’s decision will have a substantial impact 

13 on a civil service law, rule, regulation, or policy directive. 

14 If the Director did not intervene in a matter before the 

15 Board, the Director may not petition for review of a Board 

16 decision under this section unless the Director first peti17 tions the Board for a reconsideration of its decision, and 

18 such petition is denied. In addition to the named respond19 ent, the Board and all other parties to the proceedings 

20 before the Board shall have the right to appear in the pro21 ceeding before the Court of Appeals. The granting of the 

22 petition for judicial review shall be at the discretion of the 

23 Court of Appeals. 

24 ‘‘(2) During the 5-year period beginning on the effec25 tive date of this subsection, this paragraph shall apply to 


hmoore on PROD1PC68 with HMBILLS
43 

•S 554 IS

1 any review relating to paragraph (8) or (9) of section 

2 2302(b) obtained by the Director of the Office of Per3 sonnel Management. The Director of the Office of Per4 sonnel Management may obtain review of any final order 

5 or decision of the Board by filing, within 60 days after 

6 the date the Director received notice of the final order or 

7 decision of the Board, a petition for judicial review in the 

8 United States Court of Appeals for the Federal Circuit 

9 or any court of appeals of competent jurisdiction as pro10 vided under subsection (b)(2) if the Director determines, 

11 in his discretion, that the Board erred in interpreting 

12 paragraph (8) or (9) of section 2302(b). If the Director 

13 did not intervene in a matter before the Board, the Direc14 tor may not petition for review of a Board decision under 

15 this section unless the Director first petitions the Board 

16 for a reconsideration of its decision, and such petition is 

17 denied. In addition to the named respondent, the Board 

18 and all other parties to the proceedings before the Board 

19 shall have the right to appear in the proceeding before 

20 the court of appeals. The granting of the petition for judi21 cial review shall be at the discretion of the Court of Ap22 peals.’’. 

23 (j) NONDISCLOSURE POLICIES, FORMS, AND AGREE24 MENTS.— 

25 (1) IN GENERAL.— 


hmoore on PROD1PC68 with HMBILLS
44 

•S 554 IS

1 (A) REQUIREMENT.—Each agreement in 

2 Standard Forms 312 and 4414 of the Govern3 ment and any other nondisclosure policy, form, 

4 or agreement of the Government shall contain 

5 the following statement: ‘‘These restrictions are 

6 consistent with and do not supersede, conflict 

7 with, or otherwise alter the employee obliga8 tions, rights, or liabilities created by Executive 

9 Order No. 12958; section 7211 of title 5, 

10 United States Code (governing disclosures to 

11 Congress); section 1034 of title 10, United 

12 States Code (governing disclosure to Congress 

13 by members of the military); section 2302(b)(8) 

14 of title 5, United States Code (governing disclo15 sures of illegality, waste, fraud, abuse or public 

16 health or safety threats); the Intelligence Iden17 tities Protection Act of 1982 (50 U.S.C. 421 et 

18 seq.) (governing disclosures that could expose 

19 confidential Government agents); and the stat20 utes which protect against disclosure that may 

21 compromise the national security, including sec22 tions 641, 793, 794, 798, and 952 of title 18, 

23 United States Code, and section 4(b) of the 

24 Subversive Activities Act of 1950 (50 U.S.C. 

25 783(b)). The definitions, requirements, obligaVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00044 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
45 

•S 554 IS

1 tions, rights, sanctions, and liabilities created 

2 by such Executive order and such statutory 

3 provisions are incorporated into this agreement 

4 and are controlling.’’. 

5 (B) ENFORCEABILITY.—Any nondisclosure 

6 policy, form, or agreement described under sub7 paragraph (A) that does not contain the state8 ment required under subparagraph (A) may not 

9 be implemented or enforced to the extent such 

10 policy, form, or agreement is inconsistent with 

11 that statement. 

12 (2) PERSONS OTHER THAN GOVERNMENT EM13 PLOYEES.—Notwithstanding paragraph (1), a non14 disclosure policy, form, or agreement that is to be 

15 executed by a person connected with the conduct of 

16 an intelligence or intelligence-related activity, other 

17 than an employee or officer of the United States 

18 Government, may contain provisions appropriate to 

19 the particular activity for which such document is to 

20 be used. Such form or agreement shall, at a min21 imum, require that the person will not disclose any 

22 classified information received in the course of such 

23 activity unless specifically authorized to do so by the 

24 United States Government. Such nondisclosure 

25 forms shall also make it clear that such forms do 


hmoore on PROD1PC68 with HMBILLS
46 

•S 554 IS

1 not bar disclosures to Congress or to an authorized 

2 official of an executive agency or the Department of 

3 Justice that are essential to reporting a substantial 

4 violation of law. 

5 (k) CLARIFICATION OF WHISTLEBLOWER RIGHTS

6 FOR CRITICAL INFRASTRUCTURE INFORMATION.—Section 

7 214(c) of the Homeland Security Act of 2002 (6 U.S.C. 

8 133(c)) is amended by adding at the end the following: 

9 ‘‘For purposes of this section a permissible use of inde10 pendently obtained information includes the disclosure of 

11 such information under section 2302(b)(8) of title 5, 

12 United States Code.’’. 

13 (l) ADVISING EMPLOYEES OF RIGHTS.—Section 

14 2302(c) of title 5, United States Code, is amended by in15 serting ‘‘, including how to make a lawful disclosure of 

16 information that is specifically required by law or Execu17 tive order to be kept secret in the interest of national de18 fense or the conduct of foreign affairs to the Special Coun19 sel, the Inspector General of an agency, Congress, or other 

20 agency employee designated to receive such disclosures’’ 

21 after ‘‘chapter 12 of this title’’. 

22 (m) SCOPE OF DUE PROCESS.— 

23 (1) SPECIAL COUNSEL.—Section 

24 1214(b)(4)(B)(ii) of title 5, United States Code, is 

25 amended by inserting ‘‘, after a finding that a proVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00046 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
47 

•S 554 IS

1 tected disclosure was a contributing factor,’’ after 

2 ‘‘ordered if’’. 

3 (2) INDIVIDUAL ACTION.—Section 1221(e)(2) 

4 of title 5, United States Code, is amended by insert5 ing ‘‘, after a finding that a protected disclosure was 

6 a contributing factor,’’ after ‘‘ordered if’’. 

7 Subtitle C—Importation of 

8 Prescription Drugs 

9 SEC. 121. SHORT TITLE. 

10 This subtitle may be cited as the ‘‘Pharmaceutical 

11 Market Access and Drug Safety Act of 2007’’. 

12 SEC. 122. FINDINGS. 

13 Congress finds that— 

14 (1) Americans unjustly pay up to 5 times more 

15 to fill their prescriptions than consumers in other 

16 countries; 

17 (2) the United States is the largest market for 

18 pharmaceuticals in the world, yet American con19 sumers pay the highest prices for brand pharma20 ceuticals in the world; 

21 (3) a prescription drug is neither safe nor effec22 tive to an individual who cannot afford it; 

23 (4) allowing and structuring the importation of 

24 prescription drugs to ensure access to safe and af25 fordable drugs approved by the Food and Drug AdVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00047 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
48 

•S 554 IS

1 ministration will provide a level of safety to Amer2 ican consumers that they do not currently enjoy; 

3 (5) American spend more than 

4 $200,000,000,000 on prescription drugs every year; 

5 (6) the Congressional Budget Office has found 

6 that the cost of prescription drugs are between 35 

7 to 55 percent less in other highly-developed coun8 tries than in the United States; and 

9 (7) promoting competitive market pricing would 

10 both contribute to health care savings and allow 

11 greater access to therapy, improving health and sav12 ing lives. 

13 SEC. 123. REPEAL OF CERTAIN SECTION REGARDING IM14 PORTATION OF PRESCRIPTION DRUGS. 

15 Chapter VIII of the Federal Food, Drug, and Cos16 metic Act (21 U.S.C. 381 et seq.) is amended by striking 

17 section 804. 

18 SEC. 124. IMPORTATION OF PRESCRIPTION DRUGS; WAIVER 

19 OF CERTAIN IMPORT RESTRICTIONS. 

20 (a) IN GENERAL.—Chapter VIII of the Federal 

21 Food, Drug, and Cosmetic Act (21 U.S.C. 381 et seq.), 

22 as amended by section 123, is further amended by insert23 ing after section 803 the following: 


hmoore on PROD1PC68 with HMBILLS
49 

•S 554 IS

1 ‘‘SEC. 804. COMMERCIAL AND PERSONAL IMPORTATION OF 

2 PRESCRIPTION DRUGS. 

3 ‘‘(a) IMPORTATION OF PRESCRIPTION DRUGS.— 

4 ‘‘(1) IN GENERAL.—In the case of qualifying 

5 drugs imported or offered for import into the United 

6 States from registered exporters or by registered im7 porters— 

8 ‘‘(A) the limitation on importation that is 

9 established in section 801(d)(1) is waived; and 

10 ‘‘(B) the standards referred to in section 

11 801(a) regarding admission of the drugs are 

12 subject to subsection (g) of this section (includ13 ing with respect to qualifying drugs to which 

14 section 801(d)(1) does not apply). 

15 ‘‘(2) IMPORTERS.—A qualifying drug may not 

16 be imported under paragraph (1) unless— 

17 ‘‘(A) the drug is imported by a pharmacy, 

18 group of pharmacies, or a wholesaler that is a 

19 registered importer; or 

20 ‘‘(B) the drug is imported by an individual 

21 for personal use or for the use of a family mem22 ber of the individual (not for resale) from a reg23 istered exporter. 

24 ‘‘(3) RULE OF CONSTRUCTION.—This section 

25 shall apply only with respect to a drug that is imVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00049 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
50 

•S 554 IS

1 ported or offered for import into the United 

2 States— 

3 ‘‘(A) by a registered importer; or 

4 ‘‘(B) from a registered exporter to an indi5 vidual. 

6 ‘‘(4) DEFINITIONS.— 

7 ‘‘(A) REGISTERED EXPORTER; REG8 ISTERED IMPORTER.—For purposes of this sec9 tion: 

10 ‘‘(i) The term ‘registered exporter’ 

11 means an exporter for which a registration 

12 under subsection (b) has been approved 

13 and is in effect. 

14 ‘‘(ii) The term ‘registered importer’ 

15 means a pharmacy, group of pharmacies, 

16 or a wholesaler for which a registration 

17 under subsection (b) has been approved 

18 and is in effect. 

19 ‘‘(iii) The term ‘registration condition’ 

20 means a condition that must exist for a 

21 registration under subsection (b) to be ap22 proved. 

23 ‘‘(B) QUALIFYING DRUG.—For purposes of 

24 this section, the term ‘qualifying drug’ means a 


hmoore on PROD1PC68 with HMBILLS
51 

•S 554 IS

1 drug for which there is a corresponding U.S. 

2 label drug. 

3 ‘‘(C) U.S. LABEL DRUG.—For purposes of 

4 this section, the term ‘U.S. label drug’ means 

5 a prescription drug that— 

6 ‘‘(i) with respect to a qualifying drug, 

7 has the same active ingredient or ingredi8 ents, route of administration, dosage form, 

9 and strength as the qualifying drug; 

10 ‘‘(ii) with respect to the qualifying 

11 drug, is manufactured by or for the person 

12 that manufactures the qualifying drug; 

13 ‘‘(iii) is approved under section 

14 505(c); and 

15 ‘‘(iv) is not— 

16 ‘‘(I) a controlled substance, as 

17 defined in section 102 of the Con18 trolled Substances Act (21 U.S.C. 

19 802); 

20 ‘‘(II) a biological product, as de21 fined in section 351 of the Public 

22 Health Service Act (42 U.S.C. 262), 

23 including— 

24 ‘‘(aa) a therapeutic DNA 

25 plasmid product; 


hmoore on PROD1PC68 with HMBILLS
52 

•S 554 IS

1 ‘‘(bb) a therapeutic synthetic 

2 peptide product; 

3 ‘‘(cc) a monoclonal antibody 

4 product for in vivo use; and 

5 ‘‘(dd) a therapeutic recom6 binant DNA-derived product; 

7 ‘‘(III) an infused drug, including 

8 a peritoneal dialysis solution; 

9 ‘‘(IV) an injected drug; 

10 ‘‘(V) a drug that is inhaled dur11 ing surgery; 

12 ‘‘(VI) a drug that is the listed 

13 drug referred to in 2 or more abbre14 viated new drug applications under 

15 which the drug is commercially mar16 keted; or 

17 ‘‘(VII) a sterile opthlamic drug 

18 intended for topical use on or in the 

19 eye. 

20 ‘‘(D) OTHER DEFINITIONS.—For purposes 

21 of this section: 

22 ‘‘(i)(I) The term ‘exporter’ means a 

23 person that is in the business of exporting 

24 a drug to individuals in the United States 

25 from Canada or from a permitted country 


hmoore on PROD1PC68 with HMBILLS
53 

•S 554 IS

1 designated by the Secretary under sub2 clause (II), or that, pursuant to submitting 

3 a registration under subsection (b), seeks 

4 to be in such business. 

5 ‘‘(II) The Secretary shall designate a 

6 permitted country under subparagraph (E) 

7 (other than Canada) as a country from 

8 which an exporter may export a drug to in9 dividuals in the United States if the Sec10 retary determines that— 

11 ‘‘(aa) the country has statutory 

12 or regulatory standards that are 

13 equivalent to the standards in the 

14 United States and Canada with re15 spect to— 

16 ‘‘(AA) the training of phar17 macists; 

18 ‘‘(BB) the practice of phar19 macy; and 

20 ‘‘(CC) the protection of the 

21 privacy of personal medical infor22 mation; and 

23 ‘‘(bb) the importation of drugs to 

24 individuals in the United States from 


hmoore on PROD1PC68 with HMBILLS
54 

•S 554 IS

1 the country will not adversely affect 

2 public health. 

3 ‘‘(ii) The term ‘importer’ means a 

4 pharmacy, a group of pharmacies, or a 

5 wholesaler that is in the business of im6 porting a drug into the United States or 

7 that, pursuant to submitting a registration 

8 under subsection (b), seeks to be in such 

9 business. 

10 ‘‘(iii) The term ‘pharmacist’ means a 

11 person licensed by a State to practice 

12 pharmacy, including the dispensing and 

13 selling of prescription drugs. 

14 ‘‘(iv) The term ‘pharmacy’ means a 

15 person that— 

16 ‘‘(I) is licensed by a State to en17 gage in the business of selling pre18 scription drugs at retail; and 

19 ‘‘(II) employs 1 or more phar20 macists. 

21 ‘‘(v) The term ‘prescription drug’ 

22 means a drug that is described in section 

23 503(b)(1). 

24 ‘‘(vi) The term ‘wholesaler’— 


hmoore on PROD1PC68 with HMBILLS
55 

•S 554 IS

1 ‘‘(I) means a person licensed as a 

2 wholesaler or distributor of prescrip3 tion drugs in the United States under 

4 section 503(e)(2)(A); and 

5 ‘‘(II) does not include a person 

6 authorized to import drugs under sec7 tion 801(d)(1). 

8 ‘‘(E) PERMITTED COUNTRY.—The term 

9 ‘permitted country’ means— 

10 ‘‘(i) Australia; 

11 ‘‘(ii) Canada; 

12 ‘‘(iii) a member country of the Euro13 pean Union, but does not include a mem14 ber country with respect to which— 

15 ‘‘(I) the country’s Annex to the 

16 Treaty of Accession to the European 

17 Union 2003 includes a transitional 

18 measure for the regulation of human 

19 pharmaceutical products that has not 

20 expired; or 

21 ‘‘(II) the Secretary determines 

22 that the requirements described in 

23 subclauses (I) and (II) of clause (vii) 

24 will not be met by the date on which 

25 such transitional measure for the regVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00055 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
56 

•S 554 IS

1 ulation of human pharmaceutical 

2 products expires; 

3 ‘‘(iv) Japan; 

4 ‘‘(v) New Zealand; 

5 ‘‘(vi) Switzerland; and 

6 ‘‘(vii) a country in which the Sec7 retary determines the following require8 ments are met: 

9 ‘‘(I) The country has statutory or 

10 regulatory requirements— 

11 ‘‘(aa) that require the review 

12 of drugs for safety and effective13 ness by an entity of the govern14 ment of the country; 

15 ‘‘(bb) that authorize the ap16 proval of only those drugs that 

17 have been determined to be safe 

18 and effective by experts employed 

19 by or acting on behalf of such en20 tity and qualified by scientific 

21 training and experience to evalu22 ate the safety and effectiveness of 

23 drugs on the basis of adequate 

24 and well-controlled investigations, 

25 including clinical investigations, 


hmoore on PROD1PC68 with HMBILLS
57 

•S 554 IS

1 conducted by experts qualified by 

2 scientific training and experience 

3 to evaluate the safety and effec4 tiveness of drugs; 

5 ‘‘(cc) that require the meth6 ods used in, and the facilities and 

7 controls used for the manufac8 ture, processing, and packing of 

9 drugs in the country to be ade10 quate to preserve their identity, 

11 quality, purity, and strength; 

12 ‘‘(dd) for the reporting of 

13 adverse reactions to drugs and 

14 procedures to withdraw approval 

15 and remove drugs found not to 

16 be safe or effective; and 

17 ‘‘(ee) that require the label18 ing and promotion of drugs to be 

19 in accordance with the approval 

20 of the drug. 

21 ‘‘(II) The valid marketing au22 thorization system in the country is 

23 equivalent to the systems in the coun24 tries described in clauses (i) through 

25 (vi). 


hmoore on PROD1PC68 with HMBILLS
58 

•S 554 IS

1 ‘‘(III) The importation of drugs 

2 to the United States from the country 

3 will not adversely affect public health. 

4 ‘‘(b) REGISTRATION OF IMPORTERS AND EXPORT5 ERS.— 

6 ‘‘(1) REGISTRATION OF IMPORTERS AND EX7 PORTERS.—A registration condition is that the im8 porter or exporter involved (referred to in this sub9 section as a ‘registrant’) submits to the Secretary a 

10 registration containing the following: 

11 ‘‘(A)(i) In the case of an exporter, the 

12 name of the exporter and an identification of all 

13 places of business of the exporter that relate to 

14 qualifying drugs, including each warehouse or 

15 other facility owned or controlled by, or oper16 ated for, the exporter. 

17 ‘‘(ii) In the case of an importer, the name 

18 of the importer and an identification of the 

19 places of business of the importer at which the 

20 importer initially receives a qualifying drug 

21 after importation (which shall not exceed 3 

22 places of business except by permission of the 

23 Secretary). 

24 ‘‘(B) Such information as the Secretary 

25 determines to be necessary to demonstrate that 


hmoore on PROD1PC68 with HMBILLS
59 

•S 554 IS

1 the registrant is in compliance with registration 

2 conditions under— 

3 ‘‘(i) in the case of an importer, sub4 sections (c), (d), (e), (g), and (j) (relating 

5 to the sources of imported qualifying 

6 drugs; the inspection of facilities of the im7 porter; the payment of fees; compliance 

8 with the standards referred to in section 

9 801(a); and maintenance of records and 

10 samples); or 

11 ‘‘(ii) in the case of an exporter, sub12 sections (c), (d), (f), (g), (h), (i), and (j) 

13 (relating to the sources of exported quali14 fying drugs; the inspection of facilities of 

15 the exporter and the marking of compliant 

16 shipments; the payment of fees; and com17 pliance with the standards referred to in 

18 section 801(a); being licensed as a phar19 macist; conditions for individual importa20 tion; and maintenance of records and sam21 ples). 

22 ‘‘(C) An agreement by the registrant that 

23 the registrant will not under subsection (a) im24 port or export any drug that is not a qualifying 

25 drug. 


hmoore on PROD1PC68 with HMBILLS
60 

•S 554 IS

1 ‘‘(D) An agreement by the registrant to— 

2 ‘‘(i) notify the Secretary of a recall or 

3 withdrawal of a qualifying drug distributed 

4 in a permitted country that the registrant 

5 has exported or imported, or intends to ex6 port or import, to the United States under 

7 subsection (a); 

8 ‘‘(ii) provide for the return to the reg9 istrant of such drug; and 

10 ‘‘(iii) cease, or not begin, the expor11 tation or importation of such drug unless 

12 the Secretary has notified the registrant 

13 that exportation or importation of such 

14 drug may proceed. 

15 ‘‘(E) An agreement by the registrant to 

16 ensure and monitor compliance with each reg17 istration condition, to promptly correct any 

18 noncompliance with such a condition, and to 

19 promptly report to the Secretary any such non20 compliance. 

21 ‘‘(F) A plan describing the manner in 

22 which the registrant will comply with the agree23 ment under subparagraph (E). 

24 ‘‘(G) An agreement by the registrant to 

25 enforce a contract under subsection (c)(3)(B) 


hmoore on PROD1PC68 with HMBILLS
61 

•S 554 IS

1 against a party in the chain of custody of a 

2 qualifying drug with respect to the authority of 

3 the Secretary under clauses (ii) and (iii) of that 

4 subsection. 

5 ‘‘(H) An agreement by the registrant to 

6 notify the Secretary not more than 30 days be7 fore the registrant intends to make the change, 

8 of— 

9 ‘‘(i) any change that the registrant in10 tends to make regarding information pro11 vided under subparagraph (A) or (B); and 

12 ‘‘(ii) any change that the registrant 

13 intends to make in the compliance plan 

14 under subparagraph (F). 

15 ‘‘(I) In the case of an exporter— 

16 ‘‘(i) An agreement by the exporter 

17 that a qualifying drug will not under sub18 section (a) be exported to any individual 

19 not authorized pursuant to subsection 

20 (a)(2)(B) to be an importer of such drug. 

21 ‘‘(ii) An agreement to post a bond, 

22 payable to the Treasury of the United 

23 States that is equal in value to the lesser 

24 of— 


hmoore on PROD1PC68 with HMBILLS
62 

•S 554 IS

1 ‘‘(I) the value of drugs exported 

2 by the exporter to the United States 

3 in a typical 4-week period over the 

4 course of a year under this section; or 

5 ‘‘(II) $1,000,000; 

6 ‘‘(iii) An agreement by the exporter to 

7 comply with applicable provisions of Cana8 dian law, or the law of the permitted coun9 try designated under subsection 

10 (a)(4)(D)(i)(II) in which the exporter is lo11 cated, that protect the privacy of personal 

12 information with respect to each individual 

13 importing a prescription drug from the ex14 porter under subsection (a)(2)(B). 

15 ‘‘(iv) An agreement by the exporter to 

16 report to the Secretary— 

17 ‘‘(I) not later than August 1 of 

18 each fiscal year, the total price and 

19 the total volume of drugs exported to 

20 the United States by the exporter dur21 ing the 6-month period from January 

22 1 through June 30 of that year; and 

23 ‘‘(II) not later than January 1 of 

24 each fiscal year, the total price and 

25 the total volume of drugs exported to 


hmoore on PROD1PC68 with HMBILLS
63 

•S 554 IS

1 the United States by the exporter dur2 ing the previous fiscal year. 

3 ‘‘(J) In the case of an importer, an agree4 ment by the importer to report to the Sec5 retary— 

6 ‘‘(i) not later than August 1 of each 

7 fiscal year, the total price and the total 

8 volume of drugs imported to the United 

9 States by the importer during the 6-month 

10 period from January 1 through June 30 of 

11 that fiscal year; and 

12 ‘‘(ii) not later than January 1 of each 

13 fiscal year, the total price and the total 

14 volume of drugs imported to the United 

15 States by the importer during the previous 

16 fiscal year. 

17 ‘‘(K) Such other provisions as the Sec18 retary may require by regulation to protect the 

19 public health while permitting— 

20 ‘‘(i) the importation by pharmacies, 

21 groups of pharmacies, and wholesalers as 

22 registered importers of qualifying drugs 

23 under subsection (a); and 

24 ‘‘(ii) importation by individuals of 

25 qualifying drugs under subsection (a). 


hmoore on PROD1PC68 with HMBILLS
64 

•S 554 IS

1 ‘‘(2) APPROVAL OR DISAPPROVAL OF REGISTRA2 TION.— 

3 ‘‘(A) IN GENERAL.—Not later than 90 

4 days after the date on which a registrant sub5 mits to the Secretary a registration under para6 graph (1), the Secretary shall notify the reg7 istrant whether the registration is approved or 

8 is disapproved. The Secretary shall disapprove 

9 a registration if there is reason to believe that 

10 the registrant is not in compliance with one or 

11 more registration conditions, and shall notify 

12 the registrant of such reason. In the case of a 

13 disapproved registration, the Secretary shall 

14 subsequently notify the registrant that the reg15 istration is approved if the Secretary deter16 mines that the registrant is in compliance with 

17 such conditions. 

18 ‘‘(B) CHANGES IN REGISTRATION INFOR19 MATION.—Not later than 30 days after receiv20 ing a notice under paragraph (1)(H) from a 

21 registrant, the Secretary shall determine wheth22 er the change involved affects the approval of 

23 the registration of the registrant under para24 graph (1), and shall inform the registrant of 

25 the determination. 


hmoore on PROD1PC68 with HMBILLS
65 

•S 554 IS

1 ‘‘(3) PUBLICATION OF CONTACT INFORMATION

2 FOR REGISTERED EXPORTERS.—Through the Inter3 net website of the Food and Drug Administration 

4 and a toll-free telephone number, the Secretary shall 

5 make readily available to the public a list of reg6 istered exporters, including contact information for 

7 the exporters. Promptly after the approval of a reg8 istration submitted under paragraph (1), the Sec9 retary shall update the Internet website and the in10 formation provided through the toll-free telephone 

11 number accordingly. 

12 ‘‘(4) SUSPENSION AND TERMINATION.— 

13 ‘‘(A) SUSPENSION.—With respect to the 

14 effectiveness of a registration submitted under 

15 paragraph (1): 

16 ‘‘(i) Subject to clause (ii), the Sec17 retary may suspend the registration if the 

18 Secretary determines, after notice and op19 portunity for a hearing, that the registrant 

20 has failed to maintain substantial compli21 ance with a registration condition. 

22 ‘‘(ii) If the Secretary determines that, 

23 under color of the registration, the ex24 porter has exported a drug or the importer 

25 has imported a drug that is not a qualiVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00065 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
66 

•S 554 IS

1 fying drug, or a drug that does not comply 

2 with subsection (g)(2)(A) or (g)(4), or has 

3 exported a qualifying drug to an individual 

4 in violation of subsection (i)(2)(F), the 

5 Secretary shall immediately suspend the 

6 registration. A suspension under the pre7 ceding sentence is not subject to the provi8 sion by the Secretary of prior notice, and 

9 the Secretary shall provide to the reg10 istrant an opportunity for a hearing not 

11 later than 10 days after the date on which 

12 the registration is suspended. 

13 ‘‘(iii) The Secretary may reinstate the 

14 registration, whether suspended under 

15 clause (i) or (ii), if the Secretary deter16 mines that the registrant has demonstrated 

17 that further violations of registration con18 ditions will not occur. 

19 ‘‘(B) TERMINATION.—The Secretary, after 

20 notice and opportunity for a hearing, may ter21 minate the registration under paragraph (1) of 

22 a registrant if the Secretary determines that 

23 the registrant has engaged in a pattern or prac24 tice of violating 1 or more registration condi25 tions, or if on 1 or more occasions the Secretary 


hmoore on PROD1PC68 with HMBILLS
67 

•S 554 IS

1 has under subparagraph (A)(ii) suspended the 

2 registration of the registrant. The Secretary 

3 may make the termination permanent, or for a 

4 fixed period of not less than 1 year. During the 

5 period in which the registration is terminated, 

6 any registration submitted under paragraph (1) 

7 by the registrant, or a person that is a partner 

8 in the export or import enterprise, or a prin9 cipal officer in such enterprise, and any reg10 istration prepared with the assistance of the 

11 registrant or such a person, has no legal effect 

12 under this section. 

13 ‘‘(5) DEFAULT OF BOND.—A bond required to 

14 be posted by an exporter under paragraph (1)(I)(ii) 

15 shall be defaulted and paid to the Treasury of the 

16 United States if, after opportunity for an informal 

17 hearing, the Secretary determines that the exporter 

18 has— 

19 ‘‘(A) exported a drug to the United States 

20 that is not a qualifying drug or that is not in 

21 compliance with subsection (g)(2)(A), (g)(4), or 

22 (i); or 

23 ‘‘(B) failed to permit the Secretary to con24 duct an inspection described under subsection 

25 (d). 


hmoore on PROD1PC68 with HMBILLS
68 

•S 554 IS

1 ‘‘(c) SOURCES OF QUALIFYING DRUGS.—A registra2 tion condition is that the exporter or importer involved 

3 agrees that a qualifying drug will under subsection (a) be 

4 exported or imported into the United States only if there 

5 is compliance with the following: 

6 ‘‘(1) The drug was manufactured in an estab7 lishment— 

8 ‘‘(A) required to register under subsection 

9 (h) or (i) of section 510; and 

10 ‘‘(B)(i) inspected by the Secretary; or 

11 ‘‘(ii) for which the Secretary has elected to 

12 rely on a satisfactory report of a good manufac13 turing practice inspection of the establishment 

14 from a permitted country whose regulatory sys15 tem the Secretary recognizes as equivalent 

16 under a mutual recognition agreement, as pro17 vided for under section 510(i)(3), section 803, 

18 or part 26 of title 21, Code of Federal Regula19 tions (or any corresponding successor rule or 

20 regulation). 

21 ‘‘(2) The establishment is located in any coun22 try, and the establishment manufactured the drug 

23 for distribution in the United States or for distribu24 tion in 1 or more of the permitted countries (without 

25 regard to whether in addition the drug is manufacVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00068 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
69 

•S 554 IS

1 tured for distribution in a foreign country that is 

2 not a permitted country). 

3 ‘‘(3) The exporter or importer obtained the 

4 drug— 

5 ‘‘(A) directly from the establishment; or 

6 ‘‘(B) directly from an entity that, by con7 tract with the exporter or importer— 

8 ‘‘(i) provides to the exporter or im9 porter a statement (in such form and con10 taining such information as the Secretary 

11 may require) that, for the chain of custody 

12 from the establishment, identifies each 

13 prior sale, purchase, or trade of the drug 

14 (including the date of the transaction and 

15 the names and addresses of all parties to 

16 the transaction); 

17 ‘‘(ii) agrees to permit the Secretary to 

18 inspect such statements and related 

19 records to determine their accuracy; 

20 ‘‘(iii) agrees, with respect to the quali21 fying drugs involved, to permit the Sec22 retary to inspect warehouses and other fa23 cilities, including records, of the entity for 

24 purposes of determining whether the facili25 ties are in compliance with any standards 


hmoore on PROD1PC68 with HMBILLS
70 

•S 554 IS

1 under this Act that are applicable to facili2 ties of that type in the United States; and 

3 ‘‘(iv) has ensured, through such con4 tractual relationships as may be necessary, 

5 that the Secretary has the same authority 

6 regarding other parties in the chain of cus7 tody from the establishment that the Sec8 retary has under clauses (ii) and (iii) re9 garding such entity. 

10 ‘‘(4)(A) The foreign country from which the im11 porter will import the drug is a permitted country; 

12 or 

13 ‘‘(B) The foreign country from which the ex14 porter will export the drug is the permitted country 

15 in which the exporter is located. 

16 ‘‘(5) During any period in which the drug was 

17 not in the control of the manufacturer of the drug, 

18 the drug did not enter any country that is not a per19 mitted country. 

20 ‘‘(6) The exporter or importer retains a sample 

21 of each lot of the drug for testing by the Secretary. 

22 ‘‘(d) INSPECTION OF FACILITIES; MARKING OF SHIP23 MENTS.— 

24 ‘‘(1) INSPECTION OF FACILITIES.—A registra25 tion condition is that, for the purpose of assisting 


hmoore on PROD1PC68 with HMBILLS
71 

•S 554 IS

1 the Secretary in determining whether the exporter 

2 involved is in compliance with all other registration 

3 conditions— 

4 ‘‘(A) the exporter agrees to permit the Sec5 retary— 

6 ‘‘(i) to conduct onsite inspections, in7 cluding monitoring on a day-to-day basis, 

8 of places of business of the exporter that 

9 relate to qualifying drugs, including each 

10 warehouse or other facility owned or con11 trolled by, or operated for, the exporter; 

12 ‘‘(ii) to have access, including on a 

13 day-to-day basis, to— 

14 ‘‘(I) records of the exporter that 

15 relate to the export of such drugs, in16 cluding financial records; and 

17 ‘‘(II) samples of such drugs; 

18 ‘‘(iii) to carry out the duties described 

19 in paragraph (3); and 

20 ‘‘(iv) to carry out any other functions 

21 determined by the Secretary to be nec22 essary regarding the compliance of the ex23 porter; and 

24 ‘‘(B) the Secretary has assigned 1 or more 

25 employees of the Secretary to carry out the 


hmoore on PROD1PC68 with HMBILLS
72 

•S 554 IS

1 functions described in this subsection for the 

2 Secretary randomly, but not less than 12 times 

3 annually, on the premises of places of busi4 nesses referred to in subparagraph (A)(i), and 

5 such an assignment remains in effect on a con6 tinuous basis. 

7 ‘‘(2) MARKING OF COMPLIANT SHIPMENTS.—A 

8 registration condition is that the exporter involved 

9 agrees to affix to each shipping container of quali10 fying drugs exported under subsection (a) such 

11 markings as the Secretary determines to be nec12 essary to identify the shipment as being in compli13 ance with all registration conditions. Markings under 

14 the preceding sentence shall— 

15 ‘‘(A) be designed to prevent affixation of 

16 the markings to any shipping container that is 

17 not authorized to bear the markings; and 

18 ‘‘(B) include anticounterfeiting or track19 and-trace technologies, taking into account the 

20 economic and technical feasibility of those tech21 nologies. 

22 ‘‘(3) CERTAIN DUTIES RELATING TO EXPORT23 ERS.—Duties of the Secretary with respect to an ex24 porter include the following: 


hmoore on PROD1PC68 with HMBILLS
73 

•S 554 IS

1 ‘‘(A) Inspecting, randomly, but not less 

2 than 12 times annually, the places of business 

3 of the exporter at which qualifying drugs are 

4 stored and from which qualifying drugs are 

5 shipped. 

6 ‘‘(B) During the inspections under sub7 paragraph (A), verifying the chain of custody of 

8 a statistically significant sample of qualifying 

9 drugs from the establishment in which the drug 

10 was manufactured to the exporter, which shall 

11 be accomplished or supplemented by the use of 

12 anticounterfeiting or track-and-trace tech13 nologies, taking into account the economic and 

14 technical feasibility of those technologies, except 

15 that a drug that lacks such technologies from 

16 the point of manufacture shall not for that rea17 son be excluded from importation by an ex18 porter. 

19 ‘‘(C) Randomly reviewing records of ex20 ports to individuals for the purpose of deter21 mining whether the drugs are being imported 

22 by the individuals in accordance with the condi23 tions under subsection (i). Such reviews shall be 

24 conducted in a manner that will result in a staVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00073 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
74 

•S 554 IS

1 tistically significant determination of compli2 ance with all such conditions. 

3 ‘‘(D) Monitoring the affixing of markings 

4 under paragraph (2). 

5 ‘‘(E) Inspecting as the Secretary deter6 mines is necessary the warehouses and other fa7 cilities, including records, of other parties in the 

8 chain of custody of qualifying drugs. 

9 ‘‘(F) Determining whether the exporter is 

10 in compliance with all other registration condi11 tions. 

12 ‘‘(4) PRIOR NOTICE OF SHIPMENTS.—A reg13 istration condition is that, not less than 8 hours and 

14 not more than 5 days in advance of the time of the 

15 importation of a shipment of qualifying drugs, the 

16 importer involved agrees to submit to the Secretary 

17 a notice with respect to the shipment of drugs to be 

18 imported or offered for import into the United 

19 States under subsection (a). A notice under the pre20 ceding sentence shall include— 

21 ‘‘(A) the name and complete contact infor22 mation of the person submitting the notice; 

23 ‘‘(B) the name and complete contact infor24 mation of the importer involved; 


hmoore on PROD1PC68 with HMBILLS
75 

•S 554 IS

1 ‘‘(C) the identity of the drug, including the 

2 established name of the drug, the quantity of 

3 the drug, and the lot number assigned by the 

4 manufacturer; 

5 ‘‘(D) the identity of the manufacturer of 

6 the drug, including the identity of the establish7 ment at which the drug was manufactured; 

8 ‘‘(E) the country from which the drug is 

9 shipped; 

10 ‘‘(F) the name and complete contact infor11 mation for the shipper of the drug; 

12 ‘‘(G) anticipated arrival information, in13 cluding the port of arrival and crossing location 

14 within that port, and the date and time; 

15 ‘‘(H) a summary of the chain of custody of 

16 the drug from the establishment in which the 

17 drug was manufactured to the importer; 

18 ‘‘(I) a declaration as to whether the Sec19 retary has ordered that importation of the drug 

20 from the permitted country cease under sub21 section (g)(2)(C) or (D); and 

22 ‘‘(J) such other information as the Sec23 retary may require by regulation. 

24 ‘‘(5) MARKING OF COMPLIANT SHIPMENTS.—A 

25 registration condition is that the importer involved 


hmoore on PROD1PC68 with HMBILLS
76 

•S 554 IS

1 agrees, before wholesale distribution (as defined in 

2 section 503(e)) of a qualifying drug that has been 

3 imported under subsection (a), to affix to each con4 tainer of such drug such markings or other tech5 nology as the Secretary determines necessary to 

6 identify the shipment as being in compliance with all 

7 registration conditions, except that the markings or 

8 other technology shall not be required on a drug 

9 that bears comparable, compatible markings or tech10 nology from the manufacturer of the drug. Markings 

11 or other technology under the preceding sentence 

12 shall— 

13 ‘‘(A) be designed to prevent affixation of 

14 the markings or other technology to any con15 tainer that is not authorized to bear the mark16 ings; and 

17 ‘‘(B) shall include anticounterfeiting or 

18 track-and-trace technologies, taking into ac19 count the economic and technical feasibility of 

20 such technologies. 

21 ‘‘(6) CERTAIN DUTIES RELATING TO IMPORT22 ERS.—Duties of the Secretary with respect to an im23 porter include the following: 

24 ‘‘(A) Inspecting, randomly, but not less 

25 than 12 times annually, the places of business 


hmoore on PROD1PC68 with HMBILLS
77 

•S 554 IS

1 of the importer at which a qualifying drug is 

2 initially received after importation. 

3 ‘‘(B) During the inspections under sub4 paragraph (A), verifying the chain of custody of 

5 a statistically significant sample of qualifying 

6 drugs from the establishment in which the drug 

7 was manufactured to the importer, which shall 

8 be accomplished or supplemented by the use of 

9 anticounterfeiting or track-and-trace tech10 nologies, taking into account the economic and 

11 technical feasibility of those technologies, except 

12 that a drug that lacks such technologies from 

13 the point of manufacture shall not for that rea14 son be excluded from importation by an im15 porter. 

16 ‘‘(C) Reviewing notices under paragraph 

17 (4). 

18 ‘‘(D) Inspecting as the Secretary deter19 mines is necessary the warehouses and other fa20 cilities, including records of other parties in the 

21 chain of custody of qualifying drugs. 

22 ‘‘(E) Determining whether the importer is 

23 in compliance with all other registration condi24 tions. 

25 ‘‘(e) IMPORTER FEES.— 


hmoore on PROD1PC68 with HMBILLS
78 

•S 554 IS

1 ‘‘(1) REGISTRATION FEE.—A registration con2 dition is that the importer involved pays to the Sec3 retary a fee of $10,000 due on the date on which 

4 the importer first submits the registration to the 

5 Secretary under subsection (b). 

6 ‘‘(2) INSPECTION FEE.—A registration condi7 tion is that the importer involved pays a fee to the 

8 Secretary in accordance with this subsection. Such 

9 fee shall be paid not later than October 1 and April 

10 1 of each fiscal year in the amount provided for 

11 under paragraph (3). 

12 ‘‘(3) AMOUNT OF INSPECTION FEE.— 

13 ‘‘(A) AGGREGATE TOTAL OF FEES.—Not 

14 later than 30 days before the start of each fis15 cal year, the Secretary, in consultation with the 

16 Secretary of Homeland Security and the Sec17 retary of the Treasury, shall establish an aggre18 gate total of fees to be collected under para19 graph (2) for importers for that fiscal year that 

20 is sufficient, and not more than necessary, to 

21 pay the costs for that fiscal year of admin22 istering this section with respect to registered 

23 importers, including the costs associated with— 

24 ‘‘(i) inspecting the facilities of reg25 istered importers, and of other entities in 


hmoore on PROD1PC68 with HMBILLS
79 

•S 554 IS

1 the chain of custody of a qualifying drug 

2 as necessary, under subsection (d)(6); 

3 ‘‘(ii) developing, implementing, and 

4 operating under such subsection an elec5 tronic system for submission and review of 

6 the notices required under subsection 

7 (d)(4) with respect to shipments of quali8 fying drugs under subsection (a) to assess 

9 compliance with all registration conditions 

10 when such shipments are offered for im11 port into the United States; and 

12 ‘‘(iii) inspecting such shipments as 

13 necessary, when offered for import into the 

14 United States to determine if such a ship15 ment should be refused admission under 

16 subsection (g)(5). 

17 ‘‘(B) LIMITATION.—Subject to subpara18 graph (C), the aggregate total of fees collected 

19 under paragraph (2) for a fiscal year shall not 

20 exceed 2.5 percent of the total price of quali21 fying drugs imported during that fiscal year 

22 into the United States by registered importers 

23 under subsection (a). 

24 ‘‘(C) TOTAL PRICE OF DRUGS.— 


hmoore on PROD1PC68 with HMBILLS
80 

•S 554 IS

1 ‘‘(i) ESTIMATE.—For the purposes of 

2 complying with the limitation described in 

3 subparagraph (B) when establishing under 

4 subparagraph (A) the aggregate total of 

5 fees to be collected under paragraph (2) 

6 for a fiscal year, the Secretary shall esti7 mate the total price of qualifying drugs im8 ported into the United States by registered 

9 importers during that fiscal year by adding 

10 the total price of qualifying drugs imported 

11 by each registered importer during the 6- 

12 month period from January 1 through 

13 June 30 of the previous fiscal year, as re14 ported to the Secretary by each registered 

15 importer under subsection (b)(1)(J). 

16 ‘‘(ii) CALCULATION.—Not later than 

17 March 1 of the fiscal year that follows the 

18 fiscal year for which the estimate under 

19 clause (i) is made, the Secretary shall cal20 culate the total price of qualifying drugs 

21 imported into the United States by reg22 istered importers during that fiscal year by 

23 adding the total price of qualifying drugs 

24 imported by each registered importer dur25 ing that fiscal year, as reported to the SecVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00080 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
81 

•S 554 IS

1 retary by each registered importer under 

2 subsection (b)(1)(J). 

3 ‘‘(iii) ADJUSTMENT.—If the total 

4 price of qualifying drugs imported into the 

5 United States by registered importers dur6 ing a fiscal year as calculated under clause 

7 (ii) is less than the aggregate total of fees 

8 collected under paragraph (2) for that fis9 cal year, the Secretary shall provide for a 

10 pro-rata reduction in the fee due from each 

11 registered importer on April 1 of the sub12 sequent fiscal year so that the limitation 

13 described in subparagraph (B) is observed. 

14 ‘‘(D) INDIVIDUAL IMPORTER FEE.—Sub15 ject to the limitation described in subparagraph 

16 (B), the fee under paragraph (2) to be paid on 

17 October 1 and April 1 by an importer shall be 

18 an amount that is proportional to a reasonable 

19 estimate by the Secretary of the semiannual 

20 share of the importer of the volume of quali21 fying drugs imported by importers under sub22 section (a). 

23 ‘‘(4) USE OF FEES.— 

24 ‘‘(A) IN GENERAL.—Subject to appropria25 tions Acts, fees collected by the Secretary under 


hmoore on PROD1PC68 with HMBILLS
82 

•S 554 IS

1 paragraphs (1) and (2) shall be credited to the 

2 appropriation account for salaries and expenses 

3 of the Food and Drug Administration until ex4 pended (without fiscal year limitation), and the 

5 Secretary may, in consultation with the Sec6 retary of Homeland Security and the Secretary 

7 of the Treasury, transfer some proportion of 

8 such fees to the appropriation account for sala9 ries and expenses of the Bureau of Customs 

10 and Border Protection until expended (without 

11 fiscal year limitation). 

12 ‘‘(B) SOLE PURPOSE.—Fees collected by 

13 the Secretary under paragraphs (1) and (2) are 

14 only available to the Secretary and, if trans15 ferred, to the Secretary of Homeland Security, 

16 and are for the sole purpose of paying the costs 

17 referred to in paragraph (3)(A). 

18 ‘‘(5) COLLECTION OF FEES.—In any case where 

19 the Secretary does not receive payment of a fee as20 sessed under paragraph (1) or (2) within 30 days 

21 after it is due, such fee shall be treated as a claim 

22 of the United States Government subject to sub23 chapter II of chapter 37 of title 31, United States 

24 Code. 

25 ‘‘(f) EXPORTER FEES.— 


hmoore on PROD1PC68 with HMBILLS
83 

•S 554 IS

1 ‘‘(1) REGISTRATION FEE.—A registration con2 dition is that the exporter involved pays to the Sec3 retary a fee of $10,000 due on the date on which 

4 the exporter first submits that registration to the 

5 Secretary under subsection (b). 

6 ‘‘(2) INSPECTION FEE.—A registration condi7 tion is that the exporter involved pays a fee to the 

8 Secretary in accordance with this subsection. Such 

9 fee shall be paid not later than October 1 and April 

10 1 of each fiscal year in the amount provided for 

11 under paragraph (3). 

12 ‘‘(3) AMOUNT OF INSPECTION FEE.— 

13 ‘‘(A) AGGREGATE TOTAL OF FEES.—Not 

14 later than 30 days before the start of each fis15 cal year, the Secretary, in consultation with the 

16 Secretary of Homeland Security and the Sec17 retary of the Treasury, shall establish an aggre18 gate total of fees to be collected under para19 graph (2) for exporters for that fiscal year that 

20 is sufficient, and not more than necessary, to 

21 pay the costs for that fiscal year of admin22 istering this section with respect to registered 

23 exporters, including the costs associated with— 

24 ‘‘(i) inspecting the facilities of reg25 istered exporters, and of other entities in 


hmoore on PROD1PC68 with HMBILLS
84 

•S 554 IS

1 the chain of custody of a qualifying drug 

2 as necessary, under subsection (d)(3); 

3 ‘‘(ii) developing, implementing, and 

4 operating under such subsection a system 

5 to screen marks on shipments of qualifying 

6 drugs under subsection (a) that indicate 

7 compliance with all registration conditions, 

8 when such shipments are offered for im9 port into the United States; and 

10 ‘‘(iii) screening such markings, and 

11 inspecting such shipments as necessary, 

12 when offered for import into the United 

13 States to determine if such a shipment 

14 should be refused admission under sub15 section (g)(5). 

16 ‘‘(B) LIMITATION.—Subject to subpara17 graph (C), the aggregate total of fees collected 

18 under paragraph (2) for a fiscal year shall not 

19 exceed 2.5 percent of the total price of quali20 fying drugs imported during that fiscal year 

21 into the United States by registered exporters 

22 under subsection (a). 

23 ‘‘(C) TOTAL PRICE OF DRUGS.— 

24 ‘‘(i) ESTIMATE.—For the purposes of 

25 complying with the limitation described in 


hmoore on PROD1PC68 with HMBILLS
85 

•S 554 IS

1 subparagraph (B) when establishing under 

2 subparagraph (A) the aggregate total of 

3 fees to be collected under paragraph (2) 

4 for a fiscal year, the Secretary shall esti5 mate the total price of qualifying drugs im6 ported into the United States by registered 

7 exporters during that fiscal year by adding 

8 the total price of qualifying drugs exported 

9 by each registered exporter during the 6- 

10 month period from January 1 through 

11 June 30 of the previous fiscal year, as re12 ported to the Secretary by each registered 

13 exporter under subsection (b)(1)(I)(iv). 

14 ‘‘(ii) CALCULATION.—Not later than 

15 March 1 of the fiscal year that follows the 

16 fiscal year for which the estimate under 

17 clause (i) is made, the Secretary shall cal18 culate the total price of qualifying drugs 

19 imported into the United States by reg20 istered exporters during that fiscal year by 

21 adding the total price of qualifying drugs 

22 exported by each registered exporter dur23 ing that fiscal year, as reported to the Sec24 retary by each registered exporter under 

25 subsection (b)(1)(I)(iv). 


hmoore on PROD1PC68 with HMBILLS
86 

•S 554 IS

1 ‘‘(iii) ADJUSTMENT.—If the total 

2 price of qualifying drugs imported into the 

3 United States by registered exporters dur4 ing a fiscal year as calculated under clause 

5 (ii) is less than the aggregate total of fees 

6 collected under paragraph (2) for that fis7 cal year, the Secretary shall provide for a 

8 pro-rata reduction in the fee due from each 

9 registered exporter on April 1 of the subse10 quent fiscal year so that the limitation de11 scribed in subparagraph (B) is observed. 

12 ‘‘(D) INDIVIDUAL EXPORTER FEE.—Sub13 ject to the limitation described in subparagraph 

14 (B), the fee under paragraph (2) to be paid on 

15 October 1 and April 1 by an exporter shall be 

16 an amount that is proportional to a reasonable 

17 estimate by the Secretary of the semiannual 

18 share of the exporter of the volume of quali19 fying drugs exported by exporters under sub20 section (a). 

21 ‘‘(4) USE OF FEES.— 

22 ‘‘(A) IN GENERAL.—Subject to appropria23 tions Acts, fees collected by the Secretary under 

24 paragraphs (1) and (2) shall be credited to the 

25 appropriation account for salaries and expenses 


hmoore on PROD1PC68 with HMBILLS
87 

•S 554 IS

1 of the Food and Drug Administration until ex2 pended (without fiscal year limitation), and the 

3 Secretary may, in consultation with the Sec4 retary of Homeland Security and the Secretary 

5 of the Treasury, transfer some proportion of 

6 such fees to the appropriation account for sala7 ries and expenses of the Bureau of Customs 

8 and Border Protection until expended (without 

9 fiscal year limitation). 

10 ‘‘(B) SOLE PURPOSE.—Fees collected by 

11 the Secretary under paragraphs (1) and (2) are 

12 only available to the Secretary and, if trans13 ferred, to the Secretary of Homeland Security, 

14 and are for the sole purpose of paying the costs 

15 referred to in paragraph (3)(A). 

16 ‘‘(5) COLLECTION OF FEES.—In any case where 

17 the Secretary does not receive payment of a fee as18 sessed under paragraph (1) or (2) within 30 days 

19 after it is due, such fee shall be treated as a claim 

20 of the United States Government subject to sub21 chapter II of chapter 37 of title 31, United States 

22 Code. 

23 ‘‘(g) COMPLIANCE WITH SECTION 801(a).— 

24 ‘‘(1) IN GENERAL.—A registration condition is 

25 that each qualifying drug exported under subsection 


hmoore on PROD1PC68 with HMBILLS
88 

•S 554 IS

1 (a) by the registered exporter involved or imported 

2 under subsection (a) by the registered importer in3 volved is in compliance with the standards referred 

4 to in section 801(a) regarding admission of the drug 

5 into the United States, subject to paragraphs (2), 

6 (3), and (4). 

7 ‘‘(2) SECTION 505; APPROVAL STATUS.— 

8 ‘‘(A) IN GENERAL.—A qualifying drug that 

9 is imported or offered for import under sub10 section (a) shall comply with the conditions es11 tablished in the approved application under sec12 tion 505(b) for the U.S. label drug as described 

13 under this subsection. 

14 ‘‘(B) NOTICE BY MANUFACTURER; GEN15 ERAL PROVISIONS.— 

16 ‘‘(i) IN GENERAL.—The person that 

17 manufactures a qualifying drug that is, or 

18 will be, introduced for commercial distribu19 tion in a permitted country shall in accord20 ance with this paragraph submit to the 

21 Secretary a notice that— 

22 ‘‘(I) includes each difference in 

23 the qualifying drug from a condition 

24 established in the approved applica25 tion for the U.S. label drug beyond— 


hmoore on PROD1PC68 with HMBILLS
89 

•S 554 IS

1 ‘‘(aa) the variations provided 

2 for in the application; and 

3 ‘‘(bb) any difference in label4 ing (except ingredient labeling); 

5 or 

6 ‘‘(II) states that there is no dif7 ference in the qualifying drug from a 

8 condition established in the approved 

9 application for the U.S. label drug be10 yond— 

11 ‘‘(aa) the variations provided 

12 for in the application; and 

13 ‘‘(bb) any difference in label14 ing (except ingredient labeling). 

15 ‘‘(ii) INFORMATION IN NOTICE.—A 

16 notice under clause (i)(I) shall include the 

17 information that the Secretary may require 

18 under section 506A, any additional infor19 mation the Secretary may require (which 

20 may include data on bioequivalence if such 

21 data are not required under section 506A), 

22 and, with respect to the permitted country 

23 that approved the qualifying drug for com24 mercial distribution, or with respect to 


hmoore on PROD1PC68 with HMBILLS
90 

•S 554 IS

1 which such approval is sought, include the 

2 following: 

3 ‘‘(I) The date on which the quali4 fying drug with such difference was, 

5 or will be, introduced for commercial 

6 distribution in the permitted country. 

7 ‘‘(II) Information demonstrating 

8 that the person submitting the notice 

9 has also notified the government of 

10 the permitted country in writing that 

11 the person is submitting to the Sec12 retary a notice under clause (i)(I), 

13 which notice describes the difference 

14 in the qualifying drug from a condi15 tion established in the approved appli16 cation for the U.S. label drug. 

17 ‘‘(III) The information that the 

18 person submitted or will submit to the 

19 government of the permitted country 

20 for purposes of obtaining approval for 

21 commercial distribution of the drug in 

22 the country which, if in a language 

23 other than English, shall be accom24 panied by an English translation 

25 verified to be complete and accurate, 


hmoore on PROD1PC68 with HMBILLS
91 

•S 554 IS

1 with the name, address, and a brief 

2 statement of the qualifications of the 

3 person that made the translation. 

4 ‘‘(iii) CERTIFICATIONS.—The chief ex5 ecutive officer and the chief medical officer 

6 of the manufacturer involved shall each 

7 certify in the notice under clause (i) that— 

8 ‘‘(I) the information provided in 

9 the notice is complete and true; and 

10 ‘‘(II) a copy of the notice has 

11 been provided to the Federal Trade 

12 Commission and to the State attor13 neys general. 

14 ‘‘(iv) FEE.—If a notice submitted 

15 under clause (i) includes a difference that 

16 would, under section 506A, require the 

17 submission of a supplemental application if 

18 made as a change to the U.S. label drug, 

19 the person that submits the notice shall 

20 pay to the Secretary a fee in the same 

21 amount as would apply if the person were 

22 paying a fee pursuant to section 

23 736(a)(1)(A)(ii). Subject to appropriations 

24 Acts, fees collected by the Secretary under 

25 the preceding sentence are available only to 


hmoore on PROD1PC68 with HMBILLS
92 

•S 554 IS

1 the Secretary and are for the sole purpose 

2 of paying the costs of reviewing notices 

3 submitted under clause (i). 

4 ‘‘(v) TIMING OF SUBMISSION OF NO5 TICES.— 

6 ‘‘(I) PRIOR APPROVAL NO7 TICES.—A notice under clause (i) to 

8 which subparagraph (C) applies shall 

9 be submitted to the Secretary not 

10 later than 120 days before the quali11 fying drug with the difference is intro12 duced for commercial distribution in a 

13 permitted country, unless the country 

14 requires that distribution of the quali15 fying drug with the difference begin 

16 less than 120 days after the country 

17 requires the difference. 

18 ‘‘(II) OTHER APPROVAL NO19 TICES.—A notice under clause (i) to 

20 which subparagraph (D) applies shall 

21 be submitted to the Secretary not 

22 later than the day on which the quali23 fying drug with the difference is intro24 duced for commercial distribution in a 

25 permitted country. 


hmoore on PROD1PC68 with HMBILLS
93 

•S 554 IS

1 ‘‘(III) OTHER NOTICES.—A no2 tice under clause (i) to which subpara3 graph (E) applies shall be submitted 

4 to the Secretary on the date that the 

5 qualifying drug is first introduced for 

6 commercial distribution in a permitted 

7 country and annually thereafter. 

8 ‘‘(vi) REVIEW BY SECRETARY.— 

9 ‘‘(I) IN GENERAL.—In this para10 graph, the difference in a qualifying 

11 drug that is submitted in a notice 

12 under clause (i) from the U.S. label 

13 drug shall be treated by the Secretary 

14 as if it were a manufacturing change 

15 to the U.S. label drug under section 

16 506A. 

17 ‘‘(II) STANDARD OF REVIEW.— 

18 Except as provided in subclause (III), 

19 the Secretary shall review and approve 

20 or disapprove the difference in a no21 tice submitted under clause (i), if re22 quired under section 506A, using the 

23 safe and effective standard for ap24 proving or disapproving a manufac25 turing change under section 506A. 


hmoore on PROD1PC68 with HMBILLS
94 

•S 554 IS

1 ‘‘(III) BIOEQUIVALENCE.—If the 

2 Secretary would approve the dif3 ference in a notice submitted under 

4 clause (i) using the safe and effective 

5 standard under section 506A and if 

6 the Secretary determines that the 

7 qualifying drug is not bioequivalent to 

8 the U.S. label drug, the Secretary 

9 shall— 

10 ‘‘(aa) include in the labeling 

11 provided under paragraph (3) a 

12 prominent advisory that the 

13 qualifying drug is safe and effec14 tive but is not bioequivalent to 

15 the U.S. label drug if the Sec16 retary determines that such an 

17 advisory is necessary for health 

18 care practitioners and patients to 

19 use the qualifying drug safely 

20 and effectively; or 

21 ‘‘(bb) decline to approve the 

22 difference if the Secretary deter23 mines that the availability of 

24 both the qualifying drug and the 


hmoore on PROD1PC68 with HMBILLS
95 

•S 554 IS

1 U.S. label drug would pose a 

2 threat to the public health. 

3 ‘‘(IV) REVIEW BY THE SEC4 RETARY.—The Secretary shall review 

5 and approve or disapprove the dif6 ference in a notice submitted under 

7 clause (i), if required under section 

8 506A, not later than 120 days after 

9 the date on which the notice is sub10 mitted. 

11 ‘‘(V) ESTABLISHMENT INSPEC12 TION.—If review of such difference 

13 would require an inspection of the es14 tablishment in which the qualifying 

15 drug is manufactured— 

16 ‘‘(aa) such inspection by the 

17 Secretary shall be authorized; 

18 and 

19 ‘‘(bb) the Secretary may rely 

20 on a satisfactory report of a good 

21 manufacturing practice inspec22 tion of the establishment from a 

23 permitted country whose regu24 latory system the Secretary rec25 ognizes as equivalent under a 


hmoore on PROD1PC68 with HMBILLS
96 

•S 554 IS

1 mutual recognition agreement, as 

2 provided under section 510(i)(3), 

3 section 803, or part 26 of title 

4 21, Code of Federal Regulations 

5 (or any corresponding successor 

6 rule or regulation). 

7 ‘‘(vii) PUBLICATION OF INFORMATION

8 ON NOTICES.— 

9 ‘‘(I) IN GENERAL.—Through the 

10 Internet website of the Food and 

11 Drug Administration and a toll-free 

12 telephone number, the Secretary shall 

13 readily make available to the public a 

14 list of notices submitted under clause 

15 (i). 

16 ‘‘(II) CONTENTS.—The list under 

17 subclause (I) shall include the date on 

18 which a notice is submitted and 

19 whether— 

20 ‘‘(aa) a notice is under re21 view; 

22 ‘‘(bb) the Secretary has or23 dered that importation of the 

24 qualifying drug from a permitted 

25 country cease; or 


hmoore on PROD1PC68 with HMBILLS
97 

•S 554 IS

1 ‘‘(cc) the importation of the 

2 drug is permitted under sub3 section (a). 

4 ‘‘(III) UPDATE.—The Secretary 

5 shall promptly update the Internet 

6 website with any changes to the list. 

7 ‘‘(C) NOTICE; DRUG DIFFERENCE REQUIR8 ING PRIOR APPROVAL.—In the case of a notice 

9 under subparagraph (B)(i) that includes a dif10 ference that would, under section 506A(c) or 

11 (d)(3)(B)(i), require the approval of a supple12 mental application before the difference could 

13 be made to the U.S. label drug the following 

14 shall occur: 

15 ‘‘(i) Promptly after the notice is sub16 mitted, the Secretary shall notify reg17 istered exporters, registered importers, the 

18 Federal Trade Commission, and the State 

19 attorneys general that the notice has been 

20 submitted with respect to the qualifying 

21 drug involved. 

22 ‘‘(ii) If the Secretary has not made a 

23 determination whether such a supple24 mental application regarding the U.S. label 

25 drug would be approved or disapproved by 


hmoore on PROD1PC68 with HMBILLS
98 

•S 554 IS

1 the date on which the qualifying drug in2 volved is to be introduced for commercial 

3 distribution in a permitted country, the 

4 Secretary shall— 

5 ‘‘(I) order that the importation of 

6 the qualifying drug involved from the 

7 permitted country not begin until the 

8 Secretary completes review of the no9 tice; and 

10 ‘‘(II) promptly notify registered 

11 exporters, registered importers, the 

12 Federal Trade Commission, and the 

13 State attorneys general of the order. 

14 ‘‘(iii) If the Secretary determines that 

15 such a supplemental application regarding 

16 the U.S. label drug would not be approved, 

17 the Secretary shall— 

18 ‘‘(I) order that the importation of 

19 the qualifying drug involved from the 

20 permitted country cease, or provide 

21 that an order under clause (ii), if any, 

22 remains in effect; 

23 ‘‘(II) notify the permitted coun24 try that approved the qualifying drug 


hmoore on PROD1PC68 with HMBILLS
99 

•S 554 IS

1 for commercial distribution of the de2 termination; and 

3 ‘‘(III) promptly notify registered 

4 exporters, registered importers, the 

5 Federal Trade Commission, and the 

6 State attorneys general of the deter7 mination. 

8 ‘‘(iv) If the Secretary determines that 

9 such a supplemental application regarding 

10 the U.S. label drug would be approved, the 

11 Secretary shall— 

12 ‘‘(I) vacate the order under 

13 clause (ii), if any; 

14 ‘‘(II) consider the difference to 

15 be a variation provided for in the ap16 proved application for the U.S. label 

17 drug; 

18 ‘‘(III) permit importation of the 

19 qualifying drug under subsection (a); 

20 and 

21 ‘‘(IV) promptly notify registered 

22 exporters, registered importers, the 

23 Federal Trade Commission, and the 

24 State attorneys general of the deter25 mination. 


hmoore on PROD1PC68 with HMBILLS
100 

•S 554 IS

1 ‘‘(D) NOTICE; DRUG DIFFERENCE NOT RE2 QUIRING PRIOR APPROVAL.—In the case of a 

3 notice under subparagraph (B)(i) that includes 

4 a difference that would, under section 

5 506A(d)(3)(B)(ii), not require the approval of a 

6 supplemental application before the difference 

7 could be made to the U.S. label drug the fol8 lowing shall occur: 

9 ‘‘(i) During the period in which the 

10 notice is being reviewed by the Secretary, 

11 the authority under this subsection to im12 port the qualifying drug involved continues 

13 in effect. 

14 ‘‘(ii) If the Secretary determines that 

15 such a supplemental application regarding 

16 the U.S. label drug would not be approved, 

17 the Secretary shall— 

18 ‘‘(I) order that the importation of 

19 the qualifying drug involved from the 

20 permitted country cease; 

21 ‘‘(II) notify the permitted coun22 try that approved the qualifying drug 

23 for commercial distribution of the de24 termination; and 


hmoore on PROD1PC68 with HMBILLS
101 

•S 554 IS

1 ‘‘(III) promptly notify registered 

2 exporters, registered importers, the 

3 Federal Trade Commission, and the 

4 State attorneys general of the deter5 mination. 

6 ‘‘(iii) If the Secretary determines that 

7 such a supplemental application regarding 

8 the U.S. label drug would be approved, the 

9 difference shall be considered to be a vari10 ation provided for in the approved applica11 tion for the U.S. label drug. 

12 ‘‘(E) NOTICE; DRUG DIFFERENCE NOT RE13 QUIRING APPROVAL; NO DIFFERENCE.—In the 

14 case of a notice under subparagraph (B)(i) that 

15 includes a difference for which, under section 

16 506A(d)(1)(A), a supplemental application 

17 would not be required for the difference to be 

18 made to the U.S. label drug, or that states that 

19 there is no difference, the Secretary— 

20 ‘‘(i) shall consider such difference to 

21 be a variation provided for in the approved 

22 application for the U.S. label drug; 

23 ‘‘(ii) may not order that the importa24 tion of the qualifying drug involved cease; 

25 and 


hmoore on PROD1PC68 with HMBILLS
102 

•S 554 IS

1 ‘‘(iii) shall promptly notify registered 

2 exporters and registered importers. 

3 ‘‘(F) DIFFERENCES IN ACTIVE INGRE4 DIENT, ROUTE OF ADMINISTRATION, DOSAGE

5 FORM, OR STRENGTH.— 

6 ‘‘(i) IN GENERAL.—A person who 

7 manufactures a drug approved under sec8 tion 505(b) shall submit an application 

9 under section 505(b) for approval of an10 other drug that is manufactured for dis11 tribution in a permitted country by or for 

12 the person that manufactures the drug ap13 proved under section 505(b) if— 

14 ‘‘(I) there is no qualifying drug 

15 in commercial distribution in per16 mitted countries whose combined pop17 ulation represents at least 50 percent 

18 of the total population of all permitted 

19 countries with the same active ingre20 dient or ingredients, route of adminis21 tration, dosage form, and strength as 

22 the drug approved under section 

23 505(b); and 

24 ‘‘(II) each active ingredient of 

25 the other drug is related to an active 


hmoore on PROD1PC68 with HMBILLS
103 

•S 554 IS

1 ingredient of the drug approved under 

2 section 505(b), as defined in clause 

3 (v). 

4 ‘‘(ii) APPLICATION UNDER SECTION

5 505(b).—The application under section 

6 505(b) required under clause (i) shall— 

7 ‘‘(I) request approval of the other 

8 drug for the indication or indications 

9 for which the drug approved under 

10 section 505(b) is labeled; 

11 ‘‘(II) include the information that 

12 the person submitted to the govern13 ment of the permitted country for 

14 purposes of obtaining approval for 

15 commercial distribution of the other 

16 drug in that country, which if in a 

17 language other than English, shall be 

18 accompanied by an English trans19 lation verified to be complete and ac20 curate, with the name, address, and a 

21 brief statement of the qualifications of 

22 the person that made the translation; 

23 ‘‘(III) include a right of reference 

24 to the application for the drug ap25 proved under section 505(b); and 


hmoore on PROD1PC68 with HMBILLS
104 

•S 554 IS

1 ‘‘(IV) include such additional in2 formation as the Secretary may re3 quire. 

4 ‘‘(iii) TIMING OF SUBMISSION OF AP5 PLICATION.—An application under section 

6 505(b) required under clause (i) shall be 

7 submitted to the Secretary not later than 

8 the day on which the information referred 

9 to in clause (ii)(II) is submitted to the gov10 ernment of the permitted country. 

11 ‘‘(iv) NOTICE OF DECISION ON APPLI12 CATION.—The Secretary shall promptly no13 tify registered exporters, registered import14 ers, the Federal Trade Commission, and 

15 the State attorneys general of a determina16 tion to approve or to disapprove an appli17 cation under section 505(b) required under 

18 clause (i). 

19 ‘‘(v) RELATED ACTIVE INGREDI20 ENTS.—For purposes of clause (i)(II), 2 

21 active ingredients are related if they are— 

22 ‘‘(I) the same; or 

23 ‘‘(II) different salts, esters, or 

24 complexes of the same moiety. 

25 ‘‘(3) SECTION 502; LABELING.— 


hmoore on PROD1PC68 with HMBILLS
105 

•S 554 IS

1 ‘‘(A) IMPORTATION BY REGISTERED IM2 PORTER.— 

3 ‘‘(i) IN GENERAL.—In the case of a 

4 qualifying drug that is imported or offered 

5 for import by a registered importer, such 

6 drug shall be considered to be in compli7 ance with section 502 and the labeling re8 quirements under the approved application 

9 for the U.S. label drug if the qualifying 

10 drug bears— 

11 ‘‘(I) a copy of the labeling ap12 proved for the U.S. label drug under 

13 section 505, without regard to wheth14 er the copy bears any trademark in15 volved; 

16 ‘‘(II) the name of the manufac17 turer and location of the manufac18 turer; 

19 ‘‘(III) the lot number assigned by 

20 the manufacturer; 

21 ‘‘(IV) the name, location, and 

22 registration number of the importer; 

23 and 


hmoore on PROD1PC68 with HMBILLS
106 

•S 554 IS

1 ‘‘(V) the National Drug Code 

2 number assigned to the qualifying 

3 drug by the Secretary. 

4 ‘‘(ii) REQUEST FOR COPY OF THE LA5 BELING.—The Secretary shall provide such 

6 copy to the registered importer involved, 

7 upon request of the importer. 

8 ‘‘(iii) REQUESTED LABELING.—The 

9 labeling provided by the Secretary under 

10 clause (ii) shall— 

11 ‘‘(I) include the established 

12 name, as defined in section 502(e)(3), 

13 for each active ingredient in the quali14 fying drug; 

15 ‘‘(II) not include the proprietary 

16 name of the U.S. label drug or any 

17 active ingredient thereof; 

18 ‘‘(III) if required under para19 graph (2)(B)(vi)(III), a prominent ad20 visory that the qualifying drug is safe 

21 and effective but not bioequivalent to 

22 the U.S. label drug; and 

23 ‘‘(IV) if the inactive ingredients 

24 of the qualifying drug are different 


hmoore on PROD1PC68 with HMBILLS
107 

•S 554 IS

1 from the inactive ingredients for the 

2 U.S. label drug, include— 

3 ‘‘(aa) a prominent notice 

4 that the ingredients of the quali5 fying drug differ from the ingre6 dients of the U.S. label drug and 

7 that the qualifying drug must be 

8 dispensed with an advisory to 

9 people with allergies about this 

10 difference and a list of ingredi11 ents; and 

12 ‘‘(bb) a list of the ingredi13 ents of the qualifying drug as 

14 would be required under section 

15 502(e). 

16 ‘‘(B) IMPORTATION BY INDIVIDUAL.— 

17 ‘‘(i) IN GENERAL.—In the case of a 

18 qualifying drug that is imported or offered 

19 for import by a registered exporter to an 

20 individual, such drug shall be considered to 

21 be in compliance with section 502 and the 

22 labeling requirements under the approved 

23 application for the U.S. label drug if the 

24 packaging and labeling of the qualifying 

25 drug complies with all applicable regulaVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00107 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
108 

•S 554 IS

1 tions promulgated under sections 3 and 4 

2 of the Poison Prevention Packaging Act of 

3 1970 (15 U.S.C. 1471 et seq.) and the la4 beling of the qualifying drug includes— 

5 ‘‘(I) directions for use by the 

6 consumer; 

7 ‘‘(II) the lot number assigned by 

8 the manufacturer; 

9 ‘‘(III) the name and registration 

10 number of the exporter; 

11 ‘‘(IV) if required under para12 graph (2)(B)(vi)(III), a prominent ad13 visory that the drug is safe and effec14 tive but not bioequivalent to the U.S. 

15 label drug; 

16 ‘‘(V) if the inactive ingredients of 

17 the drug are different from the inac18 tive ingredients for the U.S. label 

19 drug— 

20 ‘‘(aa) a prominent advisory 

21 that persons with an allergy 

22 should check the ingredient list 

23 of the drug because the ingredi24 ents of the drug differ from the 


hmoore on PROD1PC68 with HMBILLS
109 

•S 554 IS

1 ingredients of the U.S. label 

2 drug; and 

3 ‘‘(bb) a list of the ingredi4 ents of the drug as would be re5 quired under section 502(e); and 

6 ‘‘(VI) a copy of any special label7 ing that would be required by the Sec8 retary had the U.S. label drug been 

9 dispensed by a pharmacist in the 

10 United States, without regard to 

11 whether the special labeling bears any 

12 trademark involved. 

13 ‘‘(ii) PACKAGING.—A qualifying drug 

14 offered for import to an individual by an 

15 exporter under this section that is pack16 aged in a unit-of-use container (as those 

17 items are defined in the United States 

18 Pharmacopeia and National Formulary) 

19 shall not be repackaged, provided that— 

20 ‘‘(I) the packaging complies with 

21 all applicable regulations under sec22 tions 3 and 4 of the Poison Preven23 tion Packaging Act of 1970 (15 

24 U.S.C. 1471 et seq.); or 


hmoore on PROD1PC68 with HMBILLS
110 

•S 554 IS

1 ‘‘(II) the consumer consents to 

2 waive the requirements of such Act, 

3 after being informed that the pack4 aging does not comply with such Act 

5 and that the exporter will provide the 

6 drug in packaging that is compliant at 

7 no additional cost. 

8 ‘‘(iii) REQUEST FOR COPY OF SPECIAL

9 LABELING AND INGREDIENT LIST.—The 

10 Secretary shall provide to the registered 

11 exporter involved a copy of the special la12 beling, the advisory, and the ingredient list 

13 described under clause (i), upon request of 

14 the exporter. 

15 ‘‘(iv) REQUESTED LABELING AND IN16 GREDIENT LIST.—The labeling and ingre17 dient list provided by the Secretary under 

18 clause (iii) shall— 

19 ‘‘(I) include the established 

20 name, as defined in section 502(e)(3), 

21 for each active ingredient in the drug; 

22 and 

23 ‘‘(II) not include the proprietary 

24 name of the U.S. label drug or any 

25 active ingredient thereof. 


hmoore on PROD1PC68 with HMBILLS
111 

•S 554 IS

1 ‘‘(4) SECTION 501; ADULTERATION.—A quali2 fying drug that is imported or offered for import 

3 under subsection (a) shall be considered to be in 

4 compliance with section 501 if the drug is in compli5 ance with subsection (c). 

6 ‘‘(5) STANDARDS FOR REFUSING ADMISSION.— 

7 A drug exported under subsection (a) from a reg8 istered exporter or imported by a registered importer 

9 may be refused admission into the United States if 

10 1 or more of the following applies: 

11 ‘‘(A) The drug is not a qualifying drug. 

12 ‘‘(B) A notice for the drug required under 

13 paragraph (2)(B) has not been submitted to the 

14 Secretary. 

15 ‘‘(C) The Secretary has ordered that im16 portation of the drug from the permitted coun17 try cease under paragraph (2) (C) or (D). 

18 ‘‘(D) The drug does not comply with para19 graph (3) or (4). 

20 ‘‘(E) The shipping container appears dam21 aged in a way that may affect the strength, 

22 quality, or purity of the drug. 

23 ‘‘(F) The Secretary becomes aware that— 

24 ‘‘(i) the drug may be counterfeit; 


hmoore on PROD1PC68 with HMBILLS
112 

•S 554 IS

1 ‘‘(ii) the drug may have been pre2 pared, packed, or held under insanitary 

3 conditions; or 

4 ‘‘(iii) the methods used in, or the fa5 cilities or controls used for, the manufac6 turing, processing, packing, or holding of 

7 the drug do not conform to good manufac8 turing practice. 

9 ‘‘(G) The Secretary has obtained an in10 junction under section 302 that prohibits the 

11 distribution of the drug in interstate commerce. 

12 ‘‘(H) The Secretary has under section 

13 505(e) withdrawn approval of the drug. 

14 ‘‘(I) The manufacturer of the drug has in15 stituted a recall of the drug. 

16 ‘‘(J) If the drug is imported or offered for 

17 import by a registered importer without submis18 sion of a notice in accordance with subsection 

19 (d)(4). 

20 ‘‘(K) If the drug is imported or offered for 

21 import from a registered exporter to an indi22 vidual and 1 or more of the following applies: 

23 ‘‘(i) The shipping container for such 

24 drug does not bear the markings required 

25 under subsection (d)(2). 


hmoore on PROD1PC68 with HMBILLS
113 

•S 554 IS

1 ‘‘(ii) The markings on the shipping 

2 container appear to be counterfeit. 

3 ‘‘(iii) The shipping container or mark4 ings appear to have been tampered with. 

5 ‘‘(h) EXPORTER LICENSURE IN PERMITTED COUN6 TRY.—A registration condition is that the exporter in7 volved agrees that a qualifying drug will be exported to 

8 an individual only if the Secretary has verified that— 

9 ‘‘(1) the exporter is authorized under the law of 

10 the permitted country in which the exporter is lo11 cated to dispense prescription drugs; and 

12 ‘‘(2) the exporter employs persons that are li13 censed under the law of the permitted country in 

14 which the exporter is located to dispense prescription 

15 drugs in sufficient number to dispense safely the 

16 drugs exported by the exporter to individuals, and 

17 the exporter assigns to those persons responsibility 

18 for dispensing such drugs to individuals. 

19 ‘‘(i) INDIVIDUALS; CONDITIONS FOR IMPORTA20 TION.— 

21 ‘‘(1) IN GENERAL.—For purposes of subsection 

22 (a)(2)(B), the importation of a qualifying drug by 

23 an individual is in accordance with this subsection if 

24 the following conditions are met: 


hmoore on PROD1PC68 with HMBILLS
114 

•S 554 IS

1 ‘‘(A) The drug is accompanied by a copy of 

2 a prescription for the drug, which prescrip3 tion— 

4 ‘‘(i) is valid under applicable Federal 

5 and State laws; and 

6 ‘‘(ii) was issued by a practitioner who, 

7 under the law of a State of which the indi8 vidual is a resident, or in which the indi9 vidual receives care from the practitioner 

10 who issues the prescription, is authorized 

11 to administer prescription drugs. 

12 ‘‘(B) The drug is accompanied by a copy 

13 of the documentation that was required under 

14 the law or regulations of the permitted country 

15 in which the exporter is located, as a condition 

16 of dispensing the drug to the individual. 

17 ‘‘(C) The copies referred to in subpara18 graphs (A)(i) and (B) are marked in a manner 

19 sufficient— 

20 ‘‘(i) to indicate that the prescription, 

21 and the equivalent document in the per22 mitted country in which the exporter is lo23 cated, have been filled; and 

24 ‘‘(ii) to prevent a duplicative filling by 

25 another pharmacist. 


hmoore on PROD1PC68 with HMBILLS
115 

•S 554 IS

1 ‘‘(D) The individual has provided to the 

2 registered exporter a complete list of all drugs 

3 used by the individual for review by the individ4 uals who dispense the drug. 

5 ‘‘(E) The quantity of the drug does not ex6 ceed a 90-day supply. 

7 ‘‘(F) The drug is not an ineligible subpart 

8 H drug. For purposes of this section, a pre9 scription drug is an ‘ineligible subpart H drug’ 

10 if the drug was approved by the Secretary 

11 under subpart H of part 314 of title 21, Code 

12 of Federal Regulations (relating to accelerated 

13 approval), with restrictions under section 520 of 

14 such part to assure safe use, and the Secretary 

15 has published in the Federal Register a notice 

16 that the Secretary has determined that good 

17 cause exists to prohibit the drug from being im18 ported pursuant to this subsection. 

19 ‘‘(2) NOTICE REGARDING DRUG REFUSED AD20 MISSION.—If a registered exporter ships a drug to 

21 an individual pursuant to subsection (a)(2)(B) and 

22 the drug is refused admission to the United States, 

23 a written notice shall be sent to the individual and 

24 to the exporter that informs the individual and the 


hmoore on PROD1PC68 with HMBILLS
116 

•S 554 IS

1 exporter of such refusal and the reason for the re2 fusal. 

3 ‘‘(j) MAINTENANCE OF RECORDS AND SAMPLES.— 

4 ‘‘(1) IN GENERAL.—A registration condition is 

5 that the importer or exporter involved shall— 

6 ‘‘(A) maintain records required under this 

7 section for not less than 2 years; and 

8 ‘‘(B) maintain samples of each lot of a 

9 qualifying drug required under this section for 

10 not more than 2 years. 

11 ‘‘(2) PLACE OF RECORD MAINTENANCE.—The 

12 records described under paragraph (1) shall be 

13 maintained— 

14 ‘‘(A) in the case of an importer, at the 

15 place of business of the importer at which the 

16 importer initially receives the qualifying drug 

17 after importation; or 

18 ‘‘(B) in the case of an exporter, at the fa19 cility from which the exporter ships the quali20 fying drug to the United States. 

21 ‘‘(k) DRUG RECALLS.— 

22 ‘‘(1) MANUFACTURERS.—A person that manu23 factures a qualifying drug imported from a per24 mitted country under this section shall promptly in25 form the Secretary— 


hmoore on PROD1PC68 with HMBILLS
117 

•S 554 IS

1 ‘‘(A) if the drug is recalled or withdrawn 

2 from the market in a permitted country; 

3 ‘‘(B) how the drug may be identified, in4 cluding lot number; and 

5 ‘‘(C) the reason for the recall or with6 drawal. 

7 ‘‘(2) SECRETARY.—With respect to each per8 mitted country, the Secretary shall— 

9 ‘‘(A) enter into an agreement with the gov10 ernment of the country to receive information 

11 about recalls and withdrawals of qualifying 

12 drugs in the country; or 

13 ‘‘(B) monitor recalls and withdrawals of 

14 qualifying drugs in the country using any infor15 mation that is available to the public in any 

16 media. 

17 ‘‘(3) NOTICE.—The Secretary may notify, as 

18 appropriate, registered exporters, registered import19 ers, wholesalers, pharmacies, or the public of a recall 

20 or withdrawal of a qualifying drug in a permitted 

21 country. 

22 ‘‘(l) DRUG LABELING AND PACKAGING.— 

23 ‘‘(1) IN GENERAL.—When a qualifying drug 

24 that is imported into the United States by an im25 porter under subsection (a) is dispensed by a pharVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00117 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
118 

•S 554 IS

1 macist to an individual, the pharmacist shall provide 

2 that the packaging and labeling of the drug complies 

3 with all applicable regulations promulgated under 

4 sections 3 and 4 of the Poison Prevention Packaging 

5 Act of 1970 (15 U.S.C. 1471 et seq.) and shall in6 clude with any other labeling provided to the indi7 vidual the following: 

8 ‘‘(A) The lot number assigned by the man9 ufacturer. 

10 ‘‘(B) The name and registration number of 

11 the importer. 

12 ‘‘(C) If required under paragraph 

13 (2)(B)(vi)(III) of subsection (g), a prominent 

14 advisory that the drug is safe and effective but 

15 not bioequivalent to the U.S. label drug. 

16 ‘‘(D) If the inactive ingredients of the drug 

17 are different from the inactive ingredients for 

18 the U.S. label drug— 

19 ‘‘(i) a prominent advisory that persons 

20 with allergies should check the ingredient 

21 list of the drug because the ingredients of 

22 the drug differ from the ingredients of the 

23 U.S. label drug; and 


hmoore on PROD1PC68 with HMBILLS
119 

•S 554 IS

1 ‘‘(ii) a list of the ingredients of the 

2 drug as would be required under section 

3 502(e). 

4 ‘‘(2) PACKAGING.—A qualifying drug that is 

5 packaged in a unit-of-use container (as those terms 

6 are defined in the United States Pharmacopeia and 

7 National Formulary) shall not be repackaged, pro8 vided that— 

9 ‘‘(A) the packaging complies with all appli10 cable regulations under sections 3 and 4 of the 

11 Poison Prevention Packaging Act of 1970 (15 

12 U.S.C. 1471 et seq.); or 

13 ‘‘(B) the consumer consents to waive the 

14 requirements of such Act, after being informed 

15 that the packaging does not comply with such 

16 Act and that the pharmacist will provide the 

17 drug in packaging that is compliant at no addi18 tional cost. 

19 ‘‘(m) CHARITABLE CONTRIBUTIONS.—Notwith20 standing any other provision of this section, this section 

21 does not authorize the importation into the United States 

22 of a qualifying drug donated or otherwise supplied for free 

23 or at nominal cost by the manufacturer of the drug to 

24 a charitable or humanitarian organization, including the 


hmoore on PROD1PC68 with HMBILLS
120 

•S 554 IS

1 United Nations and affiliates, or to a government of a for2 eign country. 

3 ‘‘(n) UNFAIR AND DISCRIMINATORY ACTS AND PRAC4 TICES.— 

5 ‘‘(1) IN GENERAL.—It is unlawful for a manu6 facturer, directly or indirectly (including by being a 

7 party to a licensing agreement or other agreement), 

8 to— 

9 ‘‘(A) discriminate by charging a higher 

10 price for a prescription drug sold to a registered 

11 exporter or other person in a permitted country 

12 that exports a qualifying drug to the United 

13 States under this section than the price that is 

14 charged, inclusive of rebates or other incentives 

15 to the permitted country or other person, to an16 other person that is in the same country and 

17 that does not export a qualifying drug into the 

18 United States under this section; 

19 ‘‘(B) discriminate by charging a higher 

20 price for a prescription drug sold to a registered 

21 importer or other person that distributes, sells, 

22 or uses a qualifying drug imported into the 

23 United States under this section than the price 

24 that is charged to another person in the United 

25 States that does not import a qualifying drug 


hmoore on PROD1PC68 with HMBILLS
121 

•S 554 IS

1 under this section, or that does not distribute, 

2 sell, or use such a drug; 

3 ‘‘(C) discriminate by denying, restricting, 

4 or delaying supplies of a prescription drug to a 

5 registered exporter or other person in a per6 mitted country that exports a qualifying drug to 

7 the United States under this section or to a 

8 registered importer or other person that distrib9 utes, sells, or uses a qualifying drug imported 

10 into the United States under this section; 

11 ‘‘(D) discriminate by publicly, privately, or 

12 otherwise refusing to do business with a reg13 istered exporter or other person in a permitted 

14 country that exports a qualifying drug to the 

15 United States under this section or with a reg16 istered importer or other person that distrib17 utes, sells, or uses a qualifying drug imported 

18 into the United States under this section; 

19 ‘‘(E) knowingly fail to submit a notice 

20 under subsection (g)(2)(B)(i), knowingly fail to 

21 submit such a notice on or before the date spec22 ified in subsection (g)(2)(B)(v) or as otherwise 

23 required under subsection (e) (3), (4), and (5) 

24 of section 4 of the Pharmaceutical Market Ac25 cess and Drug Safety Act of 2007, knowingly 


hmoore on PROD1PC68 with HMBILLS
122 

•S 554 IS

1 submit such a notice that makes a materially 

2 false, fictitious, or fraudulent statement, or 

3 knowingly fail to provide promptly any informa4 tion requested by the Secretary to review such 

5 a notice; 

6 ‘‘(F) knowingly fail to submit an applica7 tion required under subsection (g)(2)(F), know8 ingly fail to submit such an application on or 

9 before the date specified in subsection 

10 (g)(2)(F)(ii), knowingly submit such an applica11 tion that makes a materially false, fictitious, or 

12 fraudulent statement, or knowingly fail to pro13 vide promptly any information requested by the 

14 Secretary to review such an application; 

15 ‘‘(G) cause there to be a difference (includ16 ing a difference in active ingredient, route of 

17 administration, dosage form, strength, formula18 tion, manufacturing establishment, manufac19 turing process, or person that manufactures the 

20 drug) between a prescription drug for distribu21 tion in the United States and the drug for dis22 tribution in a permitted country; 

23 ‘‘(H) refuse to allow an inspection author24 ized under this section of an establishment that 

25 manufactures a qualifying drug that is, or will 


hmoore on PROD1PC68 with HMBILLS
123 

•S 554 IS

1 be, introduced for commercial distribution in a 

2 permitted country; 

3 ‘‘(I) fail to conform to the methods used 

4 in, or the facilities used for, the manufacturing, 

5 processing, packing, or holding of a qualifying 

6 drug that is, or will be, introduced for commer7 cial distribution in a permitted country to good 

8 manufacturing practice under this Act; 

9 ‘‘(J) become a party to a licensing agree10 ment or other agreement related to a qualifying 

11 drug that fails to provide for compliance with 

12 all requirements of this section with respect to 

13 such drug; 

14 ‘‘(K) enter into a contract that restricts, 

15 prohibits, or delays the importation of a quali16 fying drug under this section; 

17 ‘‘(L) engage in any other action to restrict, 

18 prohibit, or delay the importation of a quali19 fying drug under this section; or 

20 ‘‘(M) engage in any other action that the 

21 Federal Trade Commission determines to dis22 criminate against a person that engages or at23 tempts to engage in the importation of a quali24 fying drug under this section. 


hmoore on PROD1PC68 with HMBILLS
124 

•S 554 IS

1 ‘‘(2) REFERRAL OF POTENTIAL VIOLATIONS.— 

2 The Secretary shall promptly refer to the Federal 

3 Trade Commission each potential violation of sub4 paragraph (E), (F), (G), (H), or (I) of paragraph 

5 (1) that becomes known to the Secretary. 

6 ‘‘(3) AFFIRMATIVE DEFENSE.— 

7 ‘‘(A) DISCRIMINATION.—It shall be an af8 firmative defense to a charge that a manufac9 turer has discriminated under subparagraph 

10 (A), (B), (C), (D), or (M) of paragraph (1) that 

11 the higher price charged for a prescription drug 

12 sold to a person, the denial, restriction, or delay 

13 of supplies of a prescription drug to a person, 

14 the refusal to do business with a person, or 

15 other discriminatory activity against a person, 

16 is not based, in whole or in part, on— 

17 ‘‘(i) the person exporting or importing 

18 a qualifying drug into the United States 

19 under this section; or 

20 ‘‘(ii) the person distributing, selling, 

21 or using a qualifying drug imported into 

22 the United States under this section. 

23 ‘‘(B) DRUG DIFFERENCES.—It shall be an 

24 affirmative defense to a charge that a manufac25 turer has caused there to be a difference deVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00124 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
125 

•S 554 IS

1 scribed in subparagraph (G) of paragraph (1) 

2 that— 

3 ‘‘(i) the difference was required by the 

4 country in which the drug is distributed; 

5 ‘‘(ii) the Secretary has determined 

6 that the difference was necessary to im7 prove the safety or effectiveness of the 

8 drug; 

9 ‘‘(iii) the person manufacturing the 

10 drug for distribution in the United States 

11 has given notice to the Secretary under 

12 subsection (g)(2)(B)(i) that the drug for 

13 distribution in the United States is not dif14 ferent from a drug for distribution in per15 mitted countries whose combined popu16 lation represents at least 50 percent of the 

17 total population of all permitted countries; 

18 or 

19 ‘‘(iv) the difference was not caused, in 

20 whole or in part, for the purpose of re21 stricting importation of the drug into the 

22 United States under this section. 

23 ‘‘(4) EFFECT OF SUBSECTION.— 

24 ‘‘(A) SALES IN OTHER COUNTRIES.—This 

25 subsection applies only to the sale or distribuVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00125 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
126 

•S 554 IS

1 tion of a prescription drug in a country if the 

2 manufacturer of the drug chooses to sell or dis3 tribute the drug in the country. Nothing in this 

4 subsection shall be construed to compel the 

5 manufacturer of a drug to distribute or sell the 

6 drug in a country. 

7 ‘‘(B) DISCOUNTS TO INSURERS, HEALTH

8 PLANS, PHARMACY BENEFIT MANAGERS, AND

9 COVERED ENTITIES.—Nothing in this sub10 section shall be construed to— 

11 ‘‘(i) prevent or restrict a manufac12 turer of a prescription drug from providing 

13 discounts to an insurer, health plan, phar14 macy benefit manager in the United 

15 States, or covered entity in the drug dis16 count program under section 340B of the 

17 Public Health Service Act (42 U.S.C. 

18 256b) in return for inclusion of the drug 

19 on a formulary; 

20 ‘‘(ii) require that such discounts be 

21 made available to other purchasers of the 

22 prescription drug; or 

23 ‘‘(iii) prevent or restrict any other 

24 measures taken by an insurer, health plan, 


hmoore on PROD1PC68 with HMBILLS
127 

•S 554 IS

1 or pharmacy benefit manager to encourage 

2 consumption of such prescription drug. 

3 ‘‘(C) CHARITABLE CONTRIBUTIONS.— 

4 Nothing in this subsection shall be construed 

5 to— 

6 ‘‘(i) prevent a manufacturer from do7 nating a prescription drug, or supplying a 

8 prescription drug at nominal cost, to a 

9 charitable or humanitarian organization, 

10 including the United Nations and affili11 ates, or to a government of a foreign coun12 try; or 

13 ‘‘(ii) apply to such donations or sup14 plying of a prescription drug. 

15 ‘‘(5) ENFORCEMENT.— 

16 ‘‘(A) UNFAIR OR DECEPTIVE ACT OR PRAC17 TICE.—A violation of this subsection shall be 

18 treated as a violation of a rule defining an un19 fair or deceptive act or practice prescribed 

20 under section 18(a)(1)(B) of the Federal Trade 

21 Commission Act (15 U.S.C. 57a(a)(1)(B)). 

22 ‘‘(B) ACTIONS BY THE COMMISSION.—The 

23 Federal Trade Commission— 

24 ‘‘(i) shall enforce this subsection in 

25 the same manner, by the same means, and 


hmoore on PROD1PC68 with HMBILLS
128 

•S 554 IS

1 with the same jurisdiction, powers, and du2 ties as though all applicable terms and pro3 visions of the Federal Trade Commission 

4 Act (15 U.S.C. 41 et seq.) were incor5 porated into and made a part of this sec6 tion; and 

7 ‘‘(ii) may seek monetary relief three8 fold the damages sustained, in addition to 

9 any other remedy available to the Federal 

10 Trade Commission under the Federal 

11 Trade Commission Act (15 U.S.C. 41 et 

12 seq.). 

13 ‘‘(6) ACTIONS BY STATES.— 

14 ‘‘(A) IN GENERAL.— 

15 ‘‘(i) CIVIL ACTIONS.—In any case in 

16 which the attorney general of a State has 

17 reason to believe that an interest of the 

18 residents of that State have been adversely 

19 affected by any manufacturer that violates 

20 paragraph (1), the attorney general of a 

21 State may bring a civil action on behalf of 

22 the residents of the State, and persons 

23 doing business in the State, in a district 

24 court of the United States of appropriate 

25 jurisdiction to— 


hmoore on PROD1PC68 with HMBILLS
129 

•S 554 IS

1 ‘‘(I) enjoin that practice; 

2 ‘‘(II) enforce compliance with 

3 this subsection; 

4 ‘‘(III) obtain damages, restitu5 tion, or other compensation on behalf 

6 of residents of the State and persons 

7 doing business in the State, including 

8 threefold the damages; or 

9 ‘‘(IV) obtain such other relief as 

10 the court may consider to be appro11 priate. 

12 ‘‘(ii) NOTICE.— 

13 ‘‘(I) IN GENERAL.—Before filing 

14 an action under clause (i), the attor15 ney general of the State involved shall 

16 provide to the Federal Trade Commis17 sion— 

18 ‘‘(aa) written notice of that 

19 action; and 

20 ‘‘(bb) a copy of the com21 plaint for that action. 

22 ‘‘(II) EXEMPTION.—Subclause 

23 (I) shall not apply with respect to the 

24 filing of an action by an attorney gen25 eral of a State under this paragraph, 


hmoore on PROD1PC68 with HMBILLS
130 

•S 554 IS

1 if the attorney general determines 

2 that it is not feasible to provide the 

3 notice described in that subclause be4 fore filing of the action. In such case, 

5 the attorney general of a State shall 

6 provide notice and a copy of the com7 plaint to the Federal Trade Commis8 sion at the same time as the attorney 

9 general files the action. 

10 ‘‘(B) INTERVENTION.— 

11 ‘‘(i) IN GENERAL.—On receiving no12 tice under subparagraph (A)(ii), the Fed13 eral Trade Commission shall have the right 

14 to intervene in the action that is the sub15 ject of the notice. 

16 ‘‘(ii) EFFECT OF INTERVENTION.—If 

17 the Federal Trade Commission intervenes 

18 in an action under subparagraph (A), it 

19 shall have the right— 

20 ‘‘(I) to be heard with respect to 

21 any matter that arises in that action; 

22 and 

23 ‘‘(II) to file a petition for appeal. 

24 ‘‘(C) CONSTRUCTION.—For purposes of 

25 bringing any civil action under subparagraph 


hmoore on PROD1PC68 with HMBILLS
131 

•S 554 IS

1 (A), nothing in this subsection shall be con2 strued to prevent an attorney general of a State 

3 from exercising the powers conferred on the at4 torney general by the laws of that State to— 

5 ‘‘(i) conduct investigations; 

6 ‘‘(ii) administer oaths or affirmations; 

7 or 

8 ‘‘(iii) compel the attendance of wit9 nesses or the production of documentary 

10 and other evidence. 

11 ‘‘(D) ACTIONS BY THE COMMISSION.—In 

12 any case in which an action is instituted by or 

13 on behalf of the Federal Trade Commission for 

14 a violation of paragraph (1), a State may not, 

15 during the pendency of that action, institute an 

16 action under subparagraph (A) for the same 

17 violation against any defendant named in the 

18 complaint in that action. 

19 ‘‘(E) VENUE.—Any action brought under 

20 subparagraph (A) may be brought in the dis21 trict court of the United States that meets ap22 plicable requirements relating to venue under 

23 section 1391 of title 28, United States Code. 

24 ‘‘(F) SERVICE OF PROCESS.—In an action 

25 brought under subparagraph (A), process may 


hmoore on PROD1PC68 with HMBILLS
132 

•S 554 IS

1 be served in any district in which the defend2 ant— 

3 ‘‘(i) is an inhabitant; or 

4 ‘‘(ii) may be found. 

5 ‘‘(G) MEASUREMENT OF DAMAGES.—In 

6 any action under this paragraph to enforce a 

7 cause of action under this subsection in which 

8 there has been a determination that a defend9 ant has violated a provision of this subsection, 

10 damages may be proved and assessed in the ag11 gregate by statistical or sampling methods, by 

12 the computation of illegal overcharges or by 

13 such other reasonable system of estimating ag14 gregate damages as the court in its discretion 

15 may permit without the necessity of separately 

16 proving the individual claim of, or amount of 

17 damage to, persons on whose behalf the suit 

18 was brought. 

19 ‘‘(H) EXCLUSION ON DUPLICATIVE RE20 LIEF.—The district court shall exclude from the 

21 amount of monetary relief awarded in an action 

22 under this paragraph brought by the attorney 

23 general of a State any amount of monetary re24 lief which duplicates amounts which have been 

25 awarded for the same injury. 


hmoore on PROD1PC68 with HMBILLS
133 

•S 554 IS

1 ‘‘(7) EFFECT ON ANTITRUST LAWS.—Nothing 

2 in this subsection shall be construed to modify, im3 pair, or supersede the operation of the antitrust 

4 laws. For the purpose of this subsection, the term 

5 ‘antitrust laws’ has the meaning given it in the first 

6 section of the Clayton Act, except that it includes 

7 section 5 of the Federal Trade Commission Act to 

8 the extent that such section 5 applies to unfair 

9 methods of competition. 

10 ‘‘(8) MANUFACTURER.—In this subsection, the 

11 term ‘manufacturer’ means any entity, including any 

12 affiliate or licensee of that entity, that is engaged 

13 in— 

14 ‘‘(A) the production, preparation, propaga15 tion, compounding, conversion, or processing of 

16 a prescription drug, either directly or indirectly 

17 by extraction from substances of natural origin, 

18 or independently by means of chemical syn19 thesis, or by a combination of extraction and 

20 chemical synthesis; or 

21 ‘‘(B) the packaging, repackaging, labeling, 

22 relabeling, or distribution of a prescription 

23 drug.’’. 

24 (b) PROHIBITED ACTS.—The Federal Food, Drug, 

25 and Cosmetic Act is amended— 


hmoore on PROD1PC68 with HMBILLS
134 

•S 554 IS

1 (1) in section 301 (21 U.S.C. 331), by striking 

2 paragraph (aa) and inserting the following: 

3 ‘‘(aa)(1) The sale or trade by a pharmacist, or by 

4 a business organization of which the pharmacist is a part, 

5 of a qualifying drug that under section 804(a)(2)(A) was 

6 imported by the pharmacist, other than— 

7 ‘‘(A) a sale at retail made pursuant to dis8 pensing the drug to a customer of the pharmacist or 

9 organization; or 

10 ‘‘(B) a sale or trade of the drug to a pharmacy 

11 or a wholesaler registered to import drugs under sec12 tion 804. 

13 ‘‘(2) The sale or trade by an individual of a qualifying 

14 drug that under section 804(a)(2)(B) was imported by the 

15 individual. 

16 ‘‘(3) The making of a materially false, fictitious, or 

17 fraudulent statement or representation, or a material 

18 omission, in a notice under clause (i) of section 

19 804(g)(2)(B) or in an application required under section 

20 804(g)(2)(F), or the failure to submit such a notice or 

21 application. 

22 ‘‘(4) The importation of a drug in violation of a reg23 istration condition or other requirement under section 

24 804, the falsification of any record required to be main25 tained, or provided to the Secretary, under such section, 


hmoore on PROD1PC68 with HMBILLS
135 

•S 554 IS

1 or the violation of any registration condition or other re2 quirement under such section.’’; and 

3 (2) in section 303(a) (21 U.S.C. 333(a)), by 

4 striking paragraph (6) and inserting the following: 

5 ‘‘(6) Notwithstanding subsection (a), any person that 

6 knowingly violates section 301(i) (2) or (3) or section 

7 301(aa)(4) shall be imprisoned not more than 10 years, 

8 or fined in accordance with title 18, United States Code, 

9 or both.’’. 

10 (c) AMENDMENT OF CERTAIN PROVISIONS.— 

11 (1) IN GENERAL.—Section 801 of the Federal 

12 Food, Drug, and Cosmetic Act (21 U.S.C. 381) is 

13 amended by striking subsection (g) and inserting the 

14 following: 

15 ‘‘(g) With respect to a prescription drug that is im16 ported or offered for import into the United States by an 

17 individual who is not in the business of such importation, 

18 that is not shipped by a registered exporter under section 

19 804, and that is refused admission under subsection (a), 

20 the Secretary shall notify the individual that— 

21 ‘‘(1) the drug has been refused admission be22 cause the drug was not a lawful import under sec23 tion 804; 

24 ‘‘(2) the drug is not otherwise subject to a 

25 waiver of the requirements of subsection (a); 


hmoore on PROD1PC68 with HMBILLS
136 

•S 554 IS

1 ‘‘(3) the individual may under section 804 law2 fully import certain prescription drugs from export3 ers registered with the Secretary under section 804; 

4 and 

5 ‘‘(4) the individual can find information about 

6 such importation, including a list of registered ex7 porters, on the Internet website of the Food and 

8 Drug Administration or through a toll-free telephone 

9 number required under section 804.’’. 

10 (2) ESTABLISHMENT REGISTRATION.—Section 

11 510(i) of the Federal Food, Drug, and Cosmetic Act 

12 (21 U.S.C. 360(i)) is amended in paragraph (1) by 

13 inserting after ‘‘import into the United States’’ the 

14 following: ‘‘, including a drug that is, or may be, im15 ported or offered for import into the United States 

16 under section 804,’’. 

17 (3) EFFECTIVE DATE.—The amendments made 

18 by this subsection shall take effect on the date that 

19 is 90 days after the date of enactment of this Act. 

20 (d) EXHAUSTION.— 

21 (1) IN GENERAL.—Section 271 of title 35, 

22 United States Code, is amended— 

23 (A) by redesignating subsections (h) and 

24 (i) as (i) and (j), respectively; and 


hmoore on PROD1PC68 with HMBILLS
137 

•S 554 IS

1 (B) by inserting after subsection (g) the 

2 following: 

3 ‘‘(h) It shall not be an act of infringement to use, 

4 offer to sell, or sell within the United States or to import 

5 into the United States any patented invention under sec6 tion 804 of the Federal Food, Drug, and Cosmetic Act 

7 that was first sold abroad by or under authority of the 

8 owner or licensee of such patent.’’. 

9 (2) RULE OF CONSTRUCTION.—Nothing in the 

10 amendment made by paragraph (1) shall be con11 strued to affect the ability of a patent owner or li12 censee to enforce their patent, subject to such 

13 amendment. 

14 (e) EFFECT OF SECTION 804.— 

15 (1) IN GENERAL.—Section 804 of the Federal 

16 Food, Drug, and Cosmetic Act, as added by sub17 section (a), shall permit the importation of quali18 fying drugs (as defined in such section 804) into the 

19 United States without regard to the status of the 

20 issuance of implementing regulations— 

21 (A) from exporters registered under such 

22 section 804 on the date that is 90 days after 

23 the date of enactment of this Act; and 

24 (B) from permitted countries, as defined in 

25 such section 804, by importers registered under 


hmoore on PROD1PC68 with HMBILLS
138 

•S 554 IS

1 such section 804 on the date that is 1 year 

2 after the date of enactment of this Act. 

3 (2) REVIEW OF REGISTRATION BY CERTAIN EX4 PORTERS.— 

5 (A) REVIEW PRIORITY.—In the review of 

6 registrations submitted under subsection (b) of 

7 such section 804, registrations submitted by en8 tities in Canada that are significant exporters 

9 of prescription drugs to individuals in the 

10 United States as of the date of enactment of 

11 this Act will have priority during the 90 day pe12 riod that begins on such date of enactment. 

13 (B) PERIOD FOR REVIEW.—During such 

14 90-day period, the reference in subsection 

15 (b)(2)(A) of such section 804 to 90 days (relat16 ing to approval or disapproval of registrations) 

17 is, as applied to such entities, deemed to be 30 

18 days. 

19 (C) LIMITATION.—That an exporter in 

20 Canada exports, or has exported, prescription 

21 drugs to individuals in the United States on or 

22 before the date that is 90 days after the date 

23 of enactment of this Act shall not serve as a 

24 basis, in whole or in part, for disapproving a 


hmoore on PROD1PC68 with HMBILLS
139 

•S 554 IS

1 registration under such section 804 from the 

2 exporter. 

3 (D) FIRST YEAR LIMIT ON NUMBER OF

4 EXPORTERS.—During the 1-year period begin5 ning on the date of enactment of this Act, the 

6 Secretary of Health and Human Services (re7 ferred to in this section as the ‘‘Secretary’’) 

8 may limit the number of registered exporters 

9 under such section 804 to not less than 50, so 

10 long as the Secretary gives priority to those ex11 porters with demonstrated ability to process a 

12 high volume of shipments of drugs to individ13 uals in the United States. 

14 (E) SECOND YEAR LIMIT ON NUMBER OF

15 EXPORTERS.—During the 1-year period begin16 ning on the date that is 1 year after the date 

17 of enactment of this Act, the Secretary may 

18 limit the number of registered exporters under 

19 such section 804 to not less than 100, so long 

20 as the Secretary gives priority to those export21 ers with demonstrated ability to process a high 

22 volume of shipments of drugs to individuals in 

23 the United States. 

24 (F) FURTHER LIMIT ON NUMBER OF EX25 PORTERS.—During any 1-year period beginning 


hmoore on PROD1PC68 with HMBILLS
140 

•S 554 IS

1 on a date that is 2 or more years after the date 

2 of enactment of this Act, the Secretary may 

3 limit the number of registered exporters under 

4 such section 804 to not less than 25 more than 

5 the number of such exporters during the pre6 vious 1-year period, so long as the Secretary 

7 gives priority to those exporters with dem8 onstrated ability to process a high volume of 

9 shipments of drugs to individuals in the United 

10 States. 

11 (3) LIMITS ON NUMBER OF IMPORTERS.— 

12 (A) FIRST YEAR LIMIT ON NUMBER OF IM13 PORTERS.—During the 1-year period beginning 

14 on the date that is 1 year after the date of en15 actment of this Act, the Secretary may limit the 

16 number of registered importers under such sec17 tion 804 to not less than 100 (of which at least 

18 a significant number shall be groups of phar19 macies, to the extent feasible given the applica20 tions submitted by such groups), so long as the 

21 Secretary gives priority to those importers with 

22 demonstrated ability to process a high volume 

23 of shipments of drugs imported into the United 

24 States. 


hmoore on PROD1PC68 with HMBILLS
141 

•S 554 IS

1 (B) SECOND YEAR LIMIT ON NUMBER OF

2 IMPORTERS.—During the 1-year period begin3 ning on the date that is 2 years after the date 

4 of enactment of this Act, the Secretary may 

5 limit the number of registered importers under 

6 such section 804 to not less than 200 (of which 

7 at least a significant number shall be groups of 

8 pharmacies, to the extent feasible given the ap9 plications submitted by such groups), so long as 

10 the Secretary gives priority to those importers 

11 with demonstrated ability to process a high vol12 ume of shipments of drugs into the United 

13 States. 

14 (C) FURTHER LIMIT ON NUMBER OF IM15 PORTERS.—During any 1-year period beginning 

16 on a date that is 3 or more years after the date 

17 of enactment of this Act, the Secretary may 

18 limit the number of registered importers under 

19 such section 804 to not less than 50 more (of 

20 which at least a significant number shall be 

21 groups of pharmacies, to the extent feasible 

22 given the applications submitted by such 

23 groups) than the number of such importers 

24 during the previous 1-year period, so long as 

25 the Secretary gives priority to those importers 


hmoore on PROD1PC68 with HMBILLS
142 

•S 554 IS

1 with demonstrated ability to process a high vol2 ume of shipments of drugs to the United 

3 States. 

4 (4) NOTICES FOR DRUGS FOR IMPORT FROM

5 CANADA.—The notice with respect to a qualifying 

6 drug introduced for commercial distribution in Can7 ada as of the date of enactment of this Act that is 

8 required under subsection (g)(2)(B)(i) of such sec9 tion 804 shall be submitted to the Secretary not 

10 later than 30 days after the date of enactment of 

11 this Act if— 

12 (A) the U.S. label drug (as defined in such 

13 section 804) for the qualifying drug is 1 of the 

14 100 prescription drugs with the highest dollar 

15 volume of sales in the United States based on 

16 the 12 calendar month period most recently 

17 completed before the date of enactment of this 

18 Act; or 

19 (B) the notice is a notice under subsection 

20 (g)(2)(B)(i)(II) of such section 804. 

21 (5) NOTICE FOR DRUGS FOR IMPORT FROM

22 OTHER COUNTRIES.—The notice with respect to a 

23 qualifying drug introduced for commercial distribu24 tion in a permitted country other than Canada as of 

25 the date of enactment of this Act that is required 


hmoore on PROD1PC68 with HMBILLS
143 

•S 554 IS

1 under subsection (g)(2)(B)(i) of such section 804 

2 shall be submitted to the Secretary not later than 

3 180 days after the date of enactment of this Act 

4 if— 

5 (A) the U.S. label drug for the qualifying 

6 drug is 1 of the 100 prescription drugs with the 

7 highest dollar volume of sales in the United 

8 States based on the 12 calendar month period 

9 that is first completed on the date that is 120 

10 days after the date of enactment of this Act; or 

11 (B) the notice is a notice under subsection 

12 (g)(2)(B)(i)(II) of such section 804. 

13 (6) NOTICE FOR OTHER DRUGS FOR IMPORT.— 

14 (A) GUIDANCE ON SUBMISSION DATES.— 

15 The Secretary shall by guidance establish a se16 ries of submission dates for the notices under 

17 subsection (g)(2)(B)(i) of such section 804 with 

18 respect to qualifying drugs introduced for com19 mercial distribution as of the date of enactment 

20 of this Act and that are not required to be sub21 mitted under paragraph (4) or (5). 

22 (B) CONSISTENT AND EFFICIENT USE OF

23 RESOURCES.—The Secretary shall establish the 

24 dates described under subparagraph (A) so that 

25 such notices described under subparagraph (A) 


hmoore on PROD1PC68 with HMBILLS
144 

•S 554 IS

1 are submitted and reviewed at a rate that al2 lows consistent and efficient use of the re3 sources and staff available to the Secretary for 

4 such reviews. The Secretary may condition the 

5 requirement to submit such a notice, and the 

6 review of such a notice, on the submission by a 

7 registered exporter or a registered importer to 

8 the Secretary of a notice that such exporter or 

9 importer intends to import such qualifying drug 

10 to the United States under such section 804. 

11 (C) PRIORITY FOR DRUGS WITH HIGHER

12 SALES.—The Secretary shall establish the dates 

13 described under subparagraph (A) so that the 

14 Secretary reviews the notices described under 

15 such subparagraph with respect to qualifying 

16 drugs with higher dollar volume of sales in the 

17 United States before the notices with respect to 

18 drugs with lower sales in the United States. 

19 (7) NOTICES FOR DRUGS APPROVED AFTER EF20 FECTIVE DATE.—The notice required under sub21 section (g)(2)(B)(i) of such section 804 for a quali22 fying drug first introduced for commercial distribu23 tion in a permitted country (as defined in such sec24 tion 804) after the date of enactment of this Act 

25 shall be submitted to and reviewed by the Secretary 


hmoore on PROD1PC68 with HMBILLS
145 

•S 554 IS

1 as provided under subsection (g)(2)(B) of such sec2 tion 804, without regard to paragraph (4), (5), or 

3 (6). 

4 (8) REPORT.—Beginning with the first full fis5 cal year after the date of enactment of this Act, not 

6 later than 90 days after the end of each fiscal year 

7 during which the Secretary reviews a notice referred 

8 to in paragraph (4), (5), or (6), the Secretary shall 

9 submit a report to Congress concerning the progress 

10 of the Food and Drug Administration in reviewing 

11 the notices referred to in paragraphs (4), (5), and 

12 (6). 

13 (9) USER FEES.— 

14 (A) EXPORTERS.—When establishing an 

15 aggregate total of fees to be collected from ex16 porters under subsection (f)(2) of such section 

17 804, the Secretary shall, under subsection 

18 (f)(3)(C)(i) of such section 804, estimate the 

19 total price of drugs imported under subsection 

20 (a) of such section 804 into the United States 

21 by registered exporters during the first fiscal 

22 year in which this Act takes effect to be an 

23 amount equal to the amount which bears the 

24 same ratio to $1,000,000,000 as the number of 


hmoore on PROD1PC68 with HMBILLS
146 

•S 554 IS

1 days in such fiscal year during which this Act 

2 is effective bears to 365. 

3 (B) IMPORTERS.—When establishing an 

4 aggregate total of fees to be collected from im5 porters under subsection (e)(2) of such section 

6 804, the Secretary shall, under subsection 

7 (e)(3)(C)(i) of such section 804, estimate the 

8 total price of drugs imported under subsection 

9 (a) of such section 804 into the United States 

10 by registered importers during— 

11 (i) the first fiscal year in which this 

12 Act takes effect to be an amount equal to 

13 the amount which bears the same ratio to 

14 $1,000,000,000 as the number of days in 

15 such fiscal year during which this Act is 

16 effective bears to 365; and 

17 (ii) the second fiscal year in which 

18 this Act is in effect to be $3,000,000,000. 

19 (C) SECOND YEAR ADJUSTMENT.— 

20 (i) REPORTS.—Not later than Feb21 ruary 20 of the second fiscal year in which 

22 this Act is in effect, registered importers 

23 shall report to the Secretary the total price 

24 and the total volume of drugs imported to 

25 the United States by the importer during 


hmoore on PROD1PC68 with HMBILLS
147 

•S 554 IS

1 the 4-month period from October 1 

2 through January 31 of such fiscal year. 

3 (ii) REESTIMATE.—Notwithstanding 

4 subsection (e)(3)(C)(ii) of such section 804 

5 or subparagraph (B), the Secretary shall 

6 reestimate the total price of qualifying 

7 drugs imported under subsection (a) of 

8 such section 804 into the United States by 

9 registered importers during the second fis10 cal year in which this Act is in effect. Such 

11 reestimate shall be equal to— 

12 (I) the total price of qualifying 

13 drugs imported by each importer as 

14 reported under clause (i); multiplied 

15 by 

16 (II) 3. 

17 (iii) ADJUSTMENT.—The Secretary 

18 shall adjust the fee due on April 1 of the 

19 second fiscal year in which this Act is in 

20 effect, from each importer so that the ag21 gregate total of fees collected under sub22 section (e)(2) for such fiscal year does not 

23 exceed the total price of qualifying drugs 

24 imported under subsection (a) of such sec25 tion 804 into the United States by regVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00147 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
148 

•S 554 IS

1 istered importers during such fiscal year as 

2 reestimated under clause (ii). 

3 (D) FAILURE TO PAY FEES.—Notwith4 standing any other provision of this section, the 

5 Secretary may prohibit a registered importer or 

6 exporter that is required to pay user fees under 

7 subsection (e) or (f) of such section 804 and 

8 that fails to pay such fees within 30 days after 

9 the date on which it is due, from importing or 

10 offering for importation a qualifying drug under 

11 such section 804 until such fee is paid. 

12 (E) ANNUAL REPORT.— 

13 (i) FOOD AND DRUG ADMINISTRA14 TION.—Not later than 180 days after the 

15 end of each fiscal year during which fees 

16 are collected under subsection (e), (f), or 

17 (g)(2)(B)(iv) of such section 804, the Sec18 retary shall prepare and submit to the 

19 House of Representatives and the Senate a 

20 report on the implementation of the au21 thority for such fees during such fiscal 

22 year and the use, by the Food and Drug 

23 Administration, of the fees collected for the 

24 fiscal year for which the report is made 


hmoore on PROD1PC68 with HMBILLS
149 

•S 554 IS

1 and credited to the Food and Drug Admin2 istration. 

3 (ii) CUSTOMS AND BORDER CON4 TROL.—Not later than 180 days after the 

5 end of each fiscal year during which fees 

6 are collected under subsection (e) or (f) of 

7 such section 804, the Secretary of Home8 land Security, in consultation with the Sec9 retary of the Treasury, shall prepare and 

10 submit to the House of Representatives 

11 and the Senate a report on the use, by the 

12 Bureau of Customs and Border Protection, 

13 of the fees, if any, transferred by the Sec14 retary to the Bureau of Customs and Bor15 der Protection for the fiscal year for which 

16 the report is made. 

17 (10) SPECIAL RULE REGARDING IMPORTATION

18 BY INDIVIDUALS.— 

19 (A) IN GENERAL.—Notwithstanding any 

20 provision of this Act (or an amendment made 

21 by this Act), the Secretary shall expedite the 

22 designation of any additional countries from 

23 which an individual may import a qualifying 

24 drug into the United States under such section 

25 804 if any action implemented by the GovernVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00149 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
150 

•S 554 IS

1 ment of Canada has the effect of limiting or 

2 prohibiting the importation of qualifying drugs 

3 into the United States from Canada. 

4 (B) TIMING AND CRITERIA.—The Sec5 retary shall designate such additional countries 

6 under subparagraph (A)— 

7 (i) not later than 6 months after the 

8 date of the action by the Government of 

9 Canada described under such subpara10 graph; and 

11 (ii) using the criteria described under 

12 subsection (a)(4)(D)(i)(II) of such section 

13 804. 

14 (f) IMPLEMENTATION OF SECTION 804.— 

15 (1) INTERIM RULE.—The Secretary may pro16 mulgate an interim rule for implementing section 

17 804 of the Federal Food, Drug, and Cosmetic Act, 

18 as added by subsection (a) of this section. 

19 (2) NO NOTICE OF PROPOSED RULEMAKING.— 

20 The interim rule described under paragraph (1) may 

21 be developed and promulgated by the Secretary with22 out providing general notice of proposed rulemaking. 

23 (3) FINAL RULE.—Not later than 1 year after 

24 the date on which the Secretary promulgates an in25 terim rule under paragraph (1), the Secretary shall, 


hmoore on PROD1PC68 with HMBILLS
151 

•S 554 IS

1 in accordance with procedures under section 553 of 

2 title 5, United States Code, promulgate a final rule 

3 for implementing such section 804, which may incor4 porate by reference provisions of the interim rule 

5 provided for under paragraph (1), to the extent that 

6 such provisions are not modified. 

7 (g) CONSUMER EDUCATION.—The Secretary shall 

8 carry out activities that educate consumers— 

9 (1) with regard to the availability of qualifying 

10 drugs for import for personal use from an exporter 

11 registered with and approved by the Food and Drug 

12 Administration under section 804 of the Federal 

13 Food, Drug, and Cosmetic Act, as added by this sec14 tion, including information on how to verify whether 

15 an exporter is registered and approved by use of the 

16 Internet website of the Food and Drug Administra17 tion and the toll-free telephone number required by 

18 this Act; 

19 (2) that drugs that consumers attempt to im20 port from an exporter that is not registered with and 

21 approved by the Food and Drug Administration can 

22 be seized by the United States Customs Service and 

23 destroyed, and that such drugs may be counterfeit, 

24 unapproved, unsafe, or ineffective; 


hmoore on PROD1PC68 with HMBILLS
152 

•S 554 IS

1 (3) with regard to the suspension and termi2 nation of any registration of a registered importer or 

3 exporter under such section 804; and 

4 (4) with regard to the availability at domestic 

5 retail pharmacies of qualifying drugs imported under 

6 such section 804 by domestic wholesalers and phar7 macies registered with and approved by the Food 

8 and Drug Administration. 

9 (h) EFFECT ON ADMINISTRATION PRACTICES.—Not10 withstanding any provision of this Act (and the amend11 ments made by this Act), the practices and policies of the 

12 Food and Drug Administration and Bureau of Customs 

13 and Border Protection, in effect on January 1, 2004, with 

14 respect to the importation of prescription drugs into the 

15 United States by an individual, on the person of such indi16 vidual, for personal use, shall remain in effect. 

17 (i) REPORT TO CONGRESS.—The Federal Trade 

18 Commission shall, on an annual basis, submit to Congress 

19 a report that describes any action taken during the period 

20 for which the report is being prepared to enforce the provi21 sions of section 804(n) of the Federal Food, Drug, and 

22 Cosmetic Act (as added by this Act), including any pend23 ing investigations or civil actions under such section. 


hmoore on PROD1PC68 with HMBILLS
153 

•S 554 IS

1 SEC. 125. DISPOSITION OF CERTAIN DRUGS DENIED ADMIS2 SION INTO UNITED STATES. 

3 (a) IN GENERAL.—Chapter VIII of the Federal 

4 Food, Drug, and Cosmetic Act (21 U.S.C. 381 et seq.), 

5 as amended by section 124, is further amended by adding 

6 at the end the following section: 

7 ‘‘SEC. 805. DISPOSITION OF CERTAIN DRUGS DENIED AD8 MISSION. 

9 ‘‘(a) IN GENERAL.—The Secretary of Homeland Se10 curity shall deliver to the Secretary a shipment of drugs 

11 that is imported or offered for import into the United 

12 States if— 

13 ‘‘(1) the shipment has a declared value of less 

14 than $10,000; and 

15 ‘‘(2)(A) the shipping container for such drugs 

16 does not bear the markings required under section 

17 804(d)(2); or 

18 ‘‘(B) the Secretary has requested delivery of 

19 such shipment of drugs. 

20 ‘‘(b) NO BOND OR EXPORT.—Section 801(b) does 

21 not authorize the delivery to the owner or consignee of 

22 drugs delivered to the Secretary under subsection (a) pur23 suant to the execution of a bond, and such drugs may not 

24 be exported. 

25 ‘‘(c) DESTRUCTION OF VIOLATIVE SHIPMENT.—The 

26 Secretary shall destroy a shipment of drugs delivered by 


hmoore on PROD1PC68 with HMBILLS
154 

•S 554 IS

1 the Secretary of Homeland Security to the Secretary 

2 under subsection (a) if— 

3 ‘‘(1) in the case of drugs that are imported or 

4 offered for import from a registered exporter under 

5 section 804, the drugs are in violation of any stand6 ard described in section 804(g)(5); or 

7 ‘‘(2) in the case of drugs that are not imported 

8 or offered for import from a registered exporter 

9 under section 804, the drugs are in violation of a 

10 standard referred to in section 801(a) or 801(d)(1). 

11 ‘‘(d) CERTAIN PROCEDURES.— 

12 ‘‘(1) IN GENERAL.—The delivery and destruc13 tion of drugs under this section may be carried out 

14 without notice to the importer, owner, or consignee 

15 of the drugs except as required by section 801(g) or 

16 section 804(i)(2). The issuance of receipts for the 

17 drugs, and recordkeeping activities regarding the 

18 drugs, may be carried out on a summary basis. 

19 ‘‘(2) OBJECTIVE OF PROCEDURES.—Procedures 

20 promulgated under paragraph (1) shall be designed 

21 toward the objective of ensuring that, with respect to 

22 efficiently utilizing Federal resources available for 

23 carrying out this section, a substantial majority of 

24 shipments of drugs subject to described in sub25 section (c) are identified and destroyed. 


hmoore on PROD1PC68 with HMBILLS
155 

•S 554 IS

1 ‘‘(e) EVIDENCE EXCEPTION.—Drugs may not be de2 stroyed under subsection (c) to the extent that the Attor3 ney General of the United States determines that the 

4 drugs should be preserved as evidence or potential evi5 dence with respect to an offense against the United States. 

6 ‘‘(f) RULE OF CONSTRUCTION.—This section may 

7 not be construed as having any legal effect on applicable 

8 law with respect to a shipment of drugs that is imported 

9 or offered for import into the United States and has a 

10 declared value equal to or greater than $10,000.’’. 

11 (b) PROCEDURES.—Procedures for carrying out sec12 tion 805 of the Federal Food, Drug, and Cosmetic Act, 

13 as added by subsection (a), shall be established not later 

14 than 90 days after the date of the enactment of this Act. 

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

16 this section shall take effect on the date that is 90 days 

17 after the date of enactment of this Act. 

18 SEC. 126. WHOLESALE DISTRIBUTION OF DRUGS; STATE19 MENTS REGARDING PRIOR SALE, PURCHASE, 

20 OR TRADE. 

21 (a) STRIKING OF EXEMPTIONS; APPLICABILITY TO

22 REGISTERED EXPORTERS.—Section 503(e) of the Federal 

23 Food, Drug, and Cosmetic Act (21 U.S.C. 353(e)) is 

24 amended— 

25 (1) in paragraph (1)— 


hmoore on PROD1PC68 with HMBILLS
156 

•S 554 IS

1 (A) by striking ‘‘and who is not the manu2 facturer or an authorized distributor of record 

3 of such drug’’; 

4 (B) by striking ‘‘to an authorized dis5 tributor of record or’’; and 

6 (C) by striking subparagraph (B) and in7 serting the following: 

8 ‘‘(B) The fact that a drug subject to subsection (b) 

9 is exported from the United States does not with respect 

10 to such drug exempt any person that is engaged in the 

11 business of the wholesale distribution of the drug from 

12 providing the statement described in subparagraph (A) to 

13 the person that receives the drug pursuant to the export 

14 of the drug. 

15 ‘‘(C)(i) The Secretary shall by regulation establish re16 quirements that supersede subparagraph (A) (referred to 

17 in this subparagraph as ‘alternative requirements’) to 

18 identify the chain of custody of a drug subject to sub19 section (b) from the manufacturer of the drug throughout 

20 the wholesale distribution of the drug to a pharmacist who 

21 intends to sell the drug at retail if the Secretary deter22 mines that the alternative requirements, which may in23 clude standardized anti-counterfeiting or track-and-trace 

24 technologies, will identify such chain of custody or the 

25 identity of the discrete package of the drug from which 


hmoore on PROD1PC68 with HMBILLS
157 

•S 554 IS

1 the drug is dispensed with equal or greater certainty to 

2 the requirements of subparagraph (A), and that the alter3 native requirements are economically and technically fea4 sible. 

5 ‘‘(ii) When the Secretary promulgates a final rule to 

6 establish such alternative requirements, the final rule in 

7 addition shall, with respect to the registration condition 

8 established in clause (i) of section 804(c)(3)(B), establish 

9 a condition equivalent to the alternative requirements, and 

10 such equivalent condition may be met in lieu of the reg11 istration condition established in such clause (i).’’; 

12 (2) in paragraph (2)(A), by adding at the end 

13 the following: ‘‘The preceding sentence may not be 

14 construed as having any applicability with respect to 

15 a registered exporter under section 804.’’; and 

16 (3) in paragraph (3), by striking ‘‘and sub17 section (d)—’’ in the matter preceding subparagraph 

18 (A) and all that follows through ‘‘the term ‘whole19 sale distribution’ means’’ in subparagraph (B) and 

20 inserting the following: ‘‘and subsection (d), the 

21 term ‘wholesale distribution’ means’’. 

22 (b) CONFORMING AMENDMENT.—Section 503(d) of 

23 the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 

24 353(d)) is amended by adding at the end the following: 


hmoore on PROD1PC68 with HMBILLS
158 

•S 554 IS

1 ‘‘(4) Each manufacturer of a drug subject to sub2 section (b) shall maintain at its corporate offices a current 

3 list of the authorized distributors of record of such drug. 

4 ‘‘(5) For purposes of this subsection, the term ‘au5 thorized distributors of record’ means those distributors 

6 with whom a manufacturer has established an ongoing re7 lationship to distribute such manufacturer’s products.’’. 

8 (c) EFFECTIVE DATE.— 

9 (1) IN GENERAL.—The amendments made by 

10 paragraphs (1) and (3) of subsection (a) and by sub11 section (b) shall take effect on January 1, 2010. 

12 (2) DRUGS IMPORTED BY REGISTERED IMPORT13 ERS UNDER SECTION 804.—Notwithstanding para14 graph (1), the amendments made by paragraphs (1) 

15 and (3) of subsection (a) and by subsection (b) shall 

16 take effect on the date that is 90 days after the date 

17 of enactment of this Act with respect to qualifying 

18 drugs imported under section 804 of the Federal 

19 Food, Drug, and Cosmetic Act, as added by section 

20 4. 

21 (3) EFFECT WITH RESPECT TO REGISTERED

22 EXPORTERS.—The amendment made by subsection 

23 (a)(2) shall take effect on the date that is 90 days 

24 after the date of enactment of this Act. 


hmoore on PROD1PC68 with HMBILLS
159 

•S 554 IS

1 (4) ALTERNATIVE REQUIREMENTS.—The Sec2 retary shall issue regulations to establish the alter3 native requirements, referred to in the amendment 

4 made by subsection (a)(1), that take effect not later 

5 than January 1, 2010. 

6 (5) INTERMEDIATE REQUIREMENTS.—The Sec7 retary shall by regulation require the use of stand8 ardized anti-counterfeiting or track-and-trace tech9 nologies on prescription drugs at the case and pallet 

10 level effective not later than 1 year after the date of 

11 enactment of this Act. 

12 (6) ADDITIONAL REQUIREMENTS.— 

13 (A) IN GENERAL.—Notwithstanding any 

14 other provision of this section, the Secretary 

15 shall, not later than 18 months after the date 

16 of enactment of this Act, require that the pack17 aging of any prescription drug incorporates— 

18 (i) a standardized numerical identifier 

19 unique to each package of such drug, ap20 plied at the point of manufacturing and re21 packaging (in which case the numerical 

22 identifier shall be linked to the numerical 

23 identifier applied at the point of manufac24 turing); and 


hmoore on PROD1PC68 with HMBILLS
160 

•S 554 IS

1 (ii)(I) overt optically variable counter2 feit-resistant technologies that— 

3 (aa) are visible to the naked eye, 

4 providing for visual identification of 

5 product authenticity without the need 

6 for readers, microscopes, lighting de7 vices, or scanners; 

8 (bb) are similar to that used by 

9 the Bureau of Engraving and Printing 

10 to secure United States currency; 

11 (cc) are manufactured and dis12 tributed in a highly secure, tightly 

13 controlled environment; and 

14 (dd) incorporate additional layers 

15 of nonvisible convert security features 

16 up to and including forensic capa17 bility, as described in subparagraph 

18 (B); or 

19 (II) technologies that have a function 

20 of security comparable to that described in 

21 subclause (I), as determined by the Sec22 retary. 

23 (B) STANDARDS FOR PACKAGING.—For 

24 the purpose of making it more difficult to coun25 terfeit the packaging of drugs subject to this 


hmoore on PROD1PC68 with HMBILLS
161 

•S 554 IS

1 paragraph, the manufacturers of such drugs 

2 shall incorporate the technologies described in 

3 subparagraph (A) into at least 1 additional ele4 ment of the physical packaging of the drugs, in5 cluding blister packs, shrink wrap, package la6 bels, package seals, bottles, and boxes. 

7 SEC. 127. INTERNET SALES OF PRESCRIPTION DRUGS. 

8 (a) IN GENERAL.—Chapter V of the Federal Food, 

9 Drug, and Cosmetic Act (21 U.S.C. 351 et seq.) is amend10 ed by inserting after section 503A the following: 

11 ‘‘SEC. 503B. INTERNET SALES OF PRESCRIPTION DRUGS. 

12 ‘‘(a) REQUIREMENTS REGARDING INFORMATION ON

13 INTERNET SITE.— 

14 ‘‘(1) IN GENERAL.—A person may not dispense 

15 a prescription drug pursuant to a sale of the drug 

16 by such person if— 

17 ‘‘(A) the purchaser of the drug submitted 

18 the purchase order for the drug, or conducted 

19 any other part of the sales transaction for the 

20 drug, through an Internet site; 

21 ‘‘(B) the person dispenses the drug to the 

22 purchaser by mailing or shipping the drug to 

23 the purchaser; and 

24 ‘‘(C) such site, or any other Internet site 

25 used by such person for purposes of sales of a 


hmoore on PROD1PC68 with HMBILLS
162 

•S 554 IS

1 prescription drug, fails to meet each of the re2 quirements specified in paragraph (2), other 

3 than a site or pages on a site that— 

4 ‘‘(i) are not intended to be accessed 

5 by purchasers or prospective purchasers; or 

6 ‘‘(ii) provide an Internet information 

7 location tool within the meaning of section 

8 231(e)(5) of the Communications Act of 

9 1934 (47 U.S.C. 231(e)(5)). 

10 ‘‘(2) REQUIREMENTS.—With respect to an 

11 Internet site, the requirements referred to in sub12 paragraph (C) of paragraph (1) for a person to 

13 whom such paragraph applies are as follows: 

14 ‘‘(A) Each page of the site shall include ei15 ther the following information or a link to a 

16 page that provides the following information: 

17 ‘‘(i) The name of such person. 

18 ‘‘(ii) Each State in which the person 

19 is authorized by law to dispense prescrip20 tion drugs. 

21 ‘‘(iii) The address and telephone num22 ber of each place of business of the person 

23 with respect to sales of prescription drugs 

24 through the Internet, other than a place of 


hmoore on PROD1PC68 with HMBILLS
163 

•S 554 IS

1 business that does not mail or ship pre2 scription drugs to purchasers. 

3 ‘‘(iv) The name of each individual who 

4 serves as a pharmacist for prescription 

5 drugs that are mailed or shipped pursuant 

6 to the site, and each State in which the in7 dividual is authorized by law to dispense 

8 prescription drugs. 

9 ‘‘(v) If the person provides for medical 

10 consultations through the site for purposes 

11 of providing prescriptions, the name of 

12 each individual who provides such con13 sultations; each State in which the indi14 vidual is licensed or otherwise authorized 

15 by law to provide such consultations or 

16 practice medicine; and the type or types of 

17 health professions for which the individual 

18 holds such licenses or other authorizations. 

19 ‘‘(B) A link to which paragraph (1) applies 

20 shall be displayed in a clear and prominent 

21 place and manner, and shall include in the cap22 tion for the link the words ‘licensing and con23 tact information’. 

24 ‘‘(b) INTERNET SALES WITHOUT APPROPRIATE

25 MEDICAL RELATIONSHIPS.— 


hmoore on PROD1PC68 with HMBILLS
164 

•S 554 IS

1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), a person may not dispense a prescription 

3 drug, or sell such a drug, if— 

4 ‘‘(A) for purposes of such dispensing or 

5 sale, the purchaser communicated with the per6 son through the Internet; 

7 ‘‘(B) the patient for whom the drug was 

8 dispensed or purchased did not, when such 

9 communications began, have a prescription for 

10 the drug that is valid in the United States; 

11 ‘‘(C) pursuant to such communications, the 

12 person provided for the involvement of a practi13 tioner, or an individual represented by the per14 son as a practitioner, and the practitioner or 

15 such individual issued a prescription for the 

16 drug that was purchased; 

17 ‘‘(D) the person knew, or had reason to 

18 know, that the practitioner or the individual re19 ferred to in subparagraph (C) did not, when 

20 issuing the prescription, have a qualifying med21 ical relationship with the patient; and 

22 ‘‘(E) the person received payment for the 

23 dispensing or sale of the drug. 


hmoore on PROD1PC68 with HMBILLS
165 

•S 554 IS

1 For purposes of subparagraph (E), payment is re2 ceived if money or other valuable consideration is re3 ceived. 

4 ‘‘(2) EXCEPTIONS.—Paragraph (1) does not 

5 apply to— 

6 ‘‘(A) the dispensing or selling of a pre7 scription drug pursuant to telemedicine prac8 tices sponsored by— 

9 ‘‘(i) a hospital that has in effect a 

10 provider agreement under title XVIII of 

11 the Social Security Act (relating to the 

12 Medicare program); or 

13 ‘‘(ii) a group practice that has not 

14 fewer than 100 physicians who have in ef15 fect provider agreements under such title; 

16 or 

17 ‘‘(B) the dispensing or selling of a pre18 scription drug pursuant to practices that pro19 mote the public health, as determined by the 

20 Secretary by regulation. 

21 ‘‘(3) QUALIFYING MEDICAL RELATIONSHIP.— 

22 ‘‘(A) IN GENERAL.—With respect to 

23 issuing a prescription for a drug for a patient, 

24 a practitioner has a qualifying medical relationVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00165 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
166 

•S 554 IS

1 ship with the patient for purposes of this sec2 tion if— 

3 ‘‘(i) at least one in-person medical 

4 evaluation of the patient has been con5 ducted by the practitioner; or 

6 ‘‘(ii) the practitioner conducts a med7 ical evaluation of the patient as a covering 

8 practitioner. 

9 ‘‘(B) IN-PERSON MEDICAL EVALUATION.— 

10 A medical evaluation by a practitioner is an in11 person medical evaluation for purposes of this 

12 section if the practitioner is in the physical 

13 presence of the patient as part of conducting 

14 the evaluation, without regard to whether por15 tions of the evaluation are conducted by other 

16 health professionals. 

17 ‘‘(C) COVERING PRACTITIONER.—With re18 spect to a patient, a practitioner is a covering 

19 practitioner for purposes of this section if the 

20 practitioner conducts a medical evaluation of 

21 the patient at the request of a practitioner who 

22 has conducted at least one in-person medical 

23 evaluation of the patient and is temporarily un24 available to conduct the evaluation of the pa25 tient. A practitioner is a covering practitioner 


hmoore on PROD1PC68 with HMBILLS
167 

•S 554 IS

1 without regard to whether the practitioner has 

2 conducted any in-person medical evaluation of 

3 the patient involved. 

4 ‘‘(4) RULES OF CONSTRUCTION.— 

5 ‘‘(A) INDIVIDUALS REPRESENTED AS

6 PRACTITIONERS.—A person who is not a practi7 tioner (as defined in subsection (e)(1)) lacks 

8 legal capacity under this section to have a 

9 qualifying medical relationship with any patient. 

10 ‘‘(B) STANDARD PRACTICE OF PHAR11 MACY.—Paragraph (1) may not be construed as 

12 prohibiting any conduct that is a standard prac13 tice in the practice of pharmacy. 

14 ‘‘(C) APPLICABILITY OF REQUIRE15 MENTS.—Paragraph (3) may not be construed 

16 as having any applicability beyond this section, 

17 and does not affect any State law, or interpre18 tation of State law, concerning the practice of 

19 medicine. 

20 ‘‘(c) ACTIONS BY STATES.— 

21 ‘‘(1) IN GENERAL.—Whenever an attorney gen22 eral of any State has reason to believe that the in23 terests of the residents of that State have been or 

24 are being threatened or adversely affected because 

25 any person has engaged or is engaging in a pattern 


hmoore on PROD1PC68 with HMBILLS
168 

•S 554 IS

1 or practice that violates section 301(l), the State 

2 may bring a civil action on behalf of its residents in 

3 an appropriate district court of the United States to 

4 enjoin such practice, to enforce compliance with such 

5 section (including a nationwide injunction), to obtain 

6 damages, restitution, or other compensation on be7 half of residents of such State, to obtain reasonable 

8 attorneys fees and costs if the State prevails in the 

9 civil action, or to obtain such further and other relief 

10 as the court may deem appropriate. 

11 ‘‘(2) NOTICE.—The State shall serve prior writ12 ten notice of any civil action under paragraph (1) or 

13 (5)(B) upon the Secretary and provide the Secretary 

14 with a copy of its complaint, except that if it is not 

15 feasible for the State to provide such prior notice, 

16 the State shall serve such notice immediately upon 

17 instituting such action. Upon receiving a notice re18 specting a civil action, the Secretary shall have the 

19 right— 

20 ‘‘(A) to intervene in such action; 

21 ‘‘(B) upon so intervening, to be heard on 

22 all matters arising therein; and 

23 ‘‘(C) to file petitions for appeal. 

24 ‘‘(3) CONSTRUCTION.—For purposes of bring25 ing any civil action under paragraph (1), nothing in 


hmoore on PROD1PC68 with HMBILLS
169 

•S 554 IS

1 this chapter shall prevent an attorney general of a 

2 State from exercising the powers conferred on the 

3 attorney general by the laws of such State to con4 duct investigations or to administer oaths or affir5 mations or to compel the attendance of witnesses or 

6 the production of documentary and other evidence. 

7 ‘‘(4) VENUE; SERVICE OF PROCESS.—Any civil 

8 action brought under paragraph (1) in a district 

9 court of the United States may be brought in the 

10 district in which the defendant is found, is an inhab11 itant, or transacts business or wherever venue is 

12 proper under section 1391 of title 28, United States 

13 Code. Process in such an action may be served in 

14 any district in which the defendant is an inhabitant 

15 or in which the defendant may be found. 

16 ‘‘(5) ACTIONS BY OTHER STATE OFFICIALS.— 

17 ‘‘(A) Nothing contained in this section 

18 shall prohibit an authorized State official from 

19 proceeding in State court on the basis of an al20 leged violation of any civil or criminal statute of 

21 such State. 

22 ‘‘(B) In addition to actions brought by an 

23 attorney general of a State under paragraph 

24 (1), such an action may be brought by officers 

25 of such State who are authorized by the State 


hmoore on PROD1PC68 with HMBILLS
170 

•S 554 IS

1 to bring actions in such State on behalf of its 

2 residents. 

3 ‘‘(d) EFFECT OF SECTION.—This section shall not 

4 apply to a person that is a registered exporter under sec5 tion 804. 

6 ‘‘(e) GENERAL DEFINITIONS.—For purposes of this 

7 section: 

8 ‘‘(1) The term ‘practitioner’ means a practi9 tioner referred to in section 503(b)(1) with respect 

10 to issuing a written or oral prescription. 

11 ‘‘(2) The term ‘prescription drug’ means a drug 

12 that is described in section 503(b)(1). 

13 ‘‘(3) The term ‘qualifying medical relationship’, 

14 with respect to a practitioner and a patient, has the 

15 meaning indicated for such term in subsection (b). 

16 ‘‘(f) INTERNET-RELATED DEFINITIONS.— 

17 ‘‘(1) IN GENERAL.—For purposes of this sec18 tion: 

19 ‘‘(A) The term ‘Internet’ means collectively 

20 the myriad of computer and telecommunications 

21 facilities, including equipment and operating 

22 software, which comprise the interconnected 

23 world-wide network of networks that employ the 

24 transmission control protocol/internet protocol, 

25 or any predecessor or successor protocols to 


hmoore on PROD1PC68 with HMBILLS
171 

•S 554 IS

1 such protocol, to communicate information of 

2 all kinds by wire or radio. 

3 ‘‘(B) The term ‘link’, with respect to the 

4 Internet, means one or more letters, words, 

5 numbers, symbols, or graphic items that appear 

6 on a page of an Internet site for the purpose 

7 of serving, when activated, as a method for exe8 cuting an electronic command— 

9 ‘‘(i) to move from viewing one portion 

10 of a page on such site to another portion 

11 of the page; 

12 ‘‘(ii) to move from viewing one page 

13 on such site to another page on such site; 

14 or 

15 ‘‘(iii) to move from viewing a page on 

16 one Internet site to a page on another 

17 Internet site. 

18 ‘‘(C) The term ‘page’, with respect to the 

19 Internet, means a document or other file 

20 accessed at an Internet site. 

21 ‘‘(D)(i) The terms ‘site’ and ‘address’, with 

22 respect to the Internet, mean a specific location 

23 on the Internet that is determined by Internet 

24 Protocol numbers. Such term includes the do25 main name, if any. 


hmoore on PROD1PC68 with HMBILLS
172 

•S 554 IS

1 ‘‘(ii) The term ‘domain name’ means a 

2 method of representing an Internet address 

3 without direct reference to the Internet Protocol 

4 numbers for the address, including methods 

5 that use designations such as ‘.com’, ‘.edu’, 

6 ‘.gov’, ‘.net’, or ‘.org’. 

7 ‘‘(iii) The term ‘Internet Protocol num8 bers’ includes any successor protocol for deter9 mining a specific location on the Internet. 

10 ‘‘(2) AUTHORITY OF SECRETARY.—The Sec11 retary may by regulation modify any definition 

12 under paragraph (1) to take into account changes in 

13 technology. 

14 ‘‘(g) INTERACTIVE COMPUTER SERVICE; ADVER15 TISING.—No provider of an interactive computer service, 

16 as defined in section 230(f)(2) of the Communications Act 

17 of 1934 (47 U.S.C. 230(f)(2)), or of advertising services 

18 shall be liable under this section for dispensing or selling 

19 prescription drugs in violation of this section on account 

20 of another person’s selling or dispensing such drugs, pro21 vided that the provider of the interactive computer service 

22 or of advertising services does not own or exercise cor23 porate control over such person.’’. 

24 (b) INCLUSION AS PROHIBITED ACT.—Section 301 of 

25 the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 


hmoore on PROD1PC68 with HMBILLS
173 

•S 554 IS

1 331) is amended by inserting after paragraph (k) the fol2 lowing: 

3 ‘‘(l) The dispensing or selling of a prescription drug 

4 in violation of section 503B.’’. 

5 (c) INTERNET SALES OF PRESCRIPTION DRUGS; 

6 CONSIDERATION BY SECRETARY OF PRACTICES AND PRO7 CEDURES FOR CERTIFICATION OF LEGITIMATE BUSI8 NESSES.—In carrying out section 503B of the Federal 

9 Food, Drug, and Cosmetic Act (as added by subsection 

10 (a) of this section), the Secretary of Health and Human 

11 Services shall take into consideration the practices and 

12 procedures of public or private entities that certify that 

13 businesses selling prescription drugs through Internet 

14 sites are legitimate businesses, including practices and 

15 procedures regarding disclosure formats and verification 

16 programs. 

17 (d) REPORTS REGARDING INTERNET-RELATED VIO18 LATIONS OF FEDERAL AND STATE LAWS ON DISPENSING

19 OF DRUGS.— 

20 (1) IN GENERAL.—The Secretary of Health and 

21 Human Services (referred to in this subsection as 

22 the ‘‘Secretary’’) shall, pursuant to the submission 

23 of an application meeting the criteria of the Sec24 retary, make an award of a grant or contract to the 

25 National Clearinghouse on Internet Prescribing (opVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00173 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
174 

•S 554 IS

1 erated by the Federation of State Medical Boards) 

2 for the purpose of— 

3 (A) identifying Internet sites that appear 

4 to be in violation of Federal or State laws con5 cerning the dispensing of drugs; 

6 (B) reporting such sites to State medical 

7 licensing boards and State pharmacy licensing 

8 boards, and to the Attorney General and the 

9 Secretary, for further investigation; and 

10 (C) submitting, for each fiscal year for 

11 which the award under this subsection is made, 

12 a report to the Secretary describing investiga13 tions undertaken with respect to violations de14 scribed in subparagraph (A). 

15 (2) AUTHORIZATION OF APPROPRIATIONS.—For 

16 the purpose of carrying out paragraph (1), there is 

17 authorized to be appropriated $100,000 for each of 

18 the first 3 fiscal years in which this section is in ef19 fect. 

20 (e) EFFECTIVE DATE.—The amendments made by 

21 subsections (a) and (b) take effect 90 days after the date 

22 of enactment of this Act, without regard to whether a final 

23 rule to implement such amendments has been promulgated 

24 by the Secretary of Health and Human Services under 

25 section 701(a) of the Federal Food, Drug, and Cosmetic 


hmoore on PROD1PC68 with HMBILLS
175 

•S 554 IS

1 Act. The preceding sentence may not be construed as af2 fecting the authority of such Secretary to promulgate such 

3 a final rule. 

4 SEC. 128. PROHIBITING PAYMENTS TO UNREGISTERED 

5 FOREIGN PHARMACIES. 

6 (a) IN GENERAL.—Section 303 of the Federal Food, 

7 Drug, and Cosmetic Act (21 U.S.C. 333) is amended by 

8 adding at the end the following: 

9 ‘‘(g) RESTRICTED TRANSACTIONS.— 

10 ‘‘(1) IN GENERAL.—The introduction of re11 stricted transactions into a payment system or the 

12 completion of restricted transactions using a pay13 ment system is prohibited. 

14 ‘‘(2) PAYMENT SYSTEM.— 

15 ‘‘(A) IN GENERAL.—The term ‘payment 

16 system’ means a system used by a person de17 scribed in subparagraph (B) to effect a credit 

18 transaction, electronic fund transfer, or money 

19 transmitting service that may be used in con20 nection with, or to facilitate, a restricted trans21 action, and includes— 

22 ‘‘(i) a credit card system; 

23 ‘‘(ii) an international, national, re24 gional, or local network used to effect a 

25 credit transaction, an electronic fund 


hmoore on PROD1PC68 with HMBILLS
176 

•S 554 IS

1 transfer, or a money transmitting service; 

2 and 

3 ‘‘(iii) any other system that is cen4 trally managed and is primarily engaged in 

5 the transmission and settlement of credit 

6 transactions, electronic fund transfers, or 

7 money transmitting services. 

8 ‘‘(B) PERSONS DESCRIBED.—A person re9 ferred to in subparagraph (A) is— 

10 ‘‘(i) a creditor; 

11 ‘‘(ii) a credit card issuer; 

12 ‘‘(iii) a financial institution; 

13 ‘‘(iv) an operator of a terminal at 

14 which an electronic fund transfer may be 

15 initiated; 

16 ‘‘(v) a money transmitting business; 

17 or 

18 ‘‘(vi) a participant in an international, 

19 national, regional, or local network used to 

20 effect a credit transaction, electronic fund 

21 transfer, or money transmitting service. 

22 ‘‘(3) RESTRICTED TRANSACTION.—The term 

23 ‘restricted transaction’ means a transaction or trans24 mittal, on behalf of an individual who places an un25 lawful drug importation request to any person enVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00176 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
177 

•S 554 IS

1 gaged in the operation of an unregistered foreign 

2 pharmacy, of— 

3 ‘‘(A) credit, or the proceeds of credit, ex4 tended to or on behalf of the individual for the 

5 purpose of the unlawful drug importation re6 quest (including credit extended through the 

7 use of a credit card); 

8 ‘‘(B) an electronic fund transfer or funds 

9 transmitted by or through a money transmit10 ting business, or the proceeds of an electronic 

11 fund transfer or money transmitting service, 

12 from or on behalf of the individual for the pur13 pose of the unlawful drug importation request; 

14 ‘‘(C) a check, draft, or similar instrument 

15 which is drawn by or on behalf of the individual 

16 for the purpose of the unlawful drug importa17 tion request and is drawn on or payable at or 

18 through any financial institution; or 

19 ‘‘(D) the proceeds of any other form of fi20 nancial transaction (identified by the Board by 

21 regulation) that involves a financial institution 

22 as a payor or financial intermediary on behalf 

23 of or for the benefit of the individual for the 

24 purpose of the unlawful drug importation re25 quest. 


hmoore on PROD1PC68 with HMBILLS
178 

•S 554 IS

1 ‘‘(4) UNLAWFUL DRUG IMPORTATION RE2 QUEST.—The term ‘unlawful drug importation re3 quest’ means the request, or transmittal of a re4 quest, made to an unregistered foreign pharmacy for 

5 a prescription drug by mail (including a private car6 rier), facsimile, phone, or electronic mail, or by a 

7 means that involves the use, in whole or in part, of 

8 the Internet. 

9 ‘‘(5) UNREGISTERED FOREIGN PHARMACY.— 

10 The term ‘unregistered foreign pharmacy’ means a 

11 person in a country other than the United States 

12 that is not a registered exporter under section 804. 

13 ‘‘(6) OTHER DEFINITIONS.— 

14 ‘‘(A) CREDIT; CREDITOR; CREDIT CARD.— 

15 The terms ‘credit’, ‘creditor’, and ‘credit card’ 

16 have the meanings given the terms in section 

17 103 of the Truth in Lending Act (15 U.S.C. 

18 1602). 

19 ‘‘(B) ACCESS DEVICE; ELECTRONIC FUND

20 TRANSFER.—The terms ‘access device’ and 

21 ‘electronic fund transfer’— 

22 ‘‘(i) have the meaning given the term 

23 in section 903 of the Electronic Fund 

24 Transfer Act (15 U.S.C. 1693a); and 


hmoore on PROD1PC68 with HMBILLS
179 

•S 554 IS

1 ‘‘(ii) the term ‘electronic fund trans2 fer’ also includes any fund transfer covered 

3 under Article 4A of the Uniform Commer4 cial Code, as in effect in any State. 

5 ‘‘(C) FINANCIAL INSTITUTION.—The term 

6 ‘financial institution’— 

7 ‘‘(i) has the meaning given the term 

8 in section 903 of the Electronic Transfer 

9 Fund Act (15 U.S.C. 1693a); and 

10 ‘‘(ii) includes a financial institution 

11 (as defined in section 509 of the Gramm12 Leach-Bliley Act (15 U.S.C. 6809)). 

13 ‘‘(D) MONEY TRANSMITTING BUSINESS; 

14 MONEY TRANSMITTING SERVICE.—The terms 

15 ‘money transmitting business’ and ‘money 

16 transmitting service’ have the meaning given 

17 the terms in section 5330(d) of title 31, United 

18 States Code. 

19 ‘‘(E) BOARD.—The term ‘Board’ means 

20 the Board of Governors of the Federal Reserve 

21 System. 

22 ‘‘(7) POLICIES AND PROCEDURES REQUIRED TO

23 PREVENT RESTRICTED TRANSACTIONS.— 

24 ‘‘(A) REGULATIONS.—The Board shall 

25 promulgate regulations requiring— 


hmoore on PROD1PC68 with HMBILLS
180 

•S 554 IS

1 ‘‘(i) an operator of a credit card sys2 tem; 

3 ‘‘(ii) an operator of an international, 

4 national, regional, or local network used to 

5 effect a credit transaction, an electronic 

6 fund transfer, or a money transmitting 

7 service; 

8 ‘‘(iii) an operator of any other pay9 ment system that is centrally managed and 

10 is primarily engaged in the transmission 

11 and settlement of credit transactions, elec12 tronic transfers or money transmitting 

13 services where at least one party to the 

14 transaction or transfer is an individual; 

15 and 

16 ‘‘(iv) any other person described in 

17 paragraph (2)(B) and specified by the 

18 Board in such regulations, 

19 to establish policies and procedures that are 

20 reasonably designed to prevent the introduction 

21 of a restricted transaction into a payment sys22 tem or the completion of a restricted trans23 action using a payment system 


hmoore on PROD1PC68 with HMBILLS
181 

•S 554 IS

1 ‘‘(B) REQUIREMENTS FOR POLICIES AND

2 PROCEDURES.—In promulgating regulations 

3 under subparagraph (A), the Board shall— 

4 ‘‘(i) identify types of policies and pro5 cedures, including nonexclusive examples, 

6 that shall be considered to be reasonably 

7 designed to prevent the introduction of re8 stricted transactions into a payment sys9 tem or the completion of restricted trans10 actions using a payment system; and 

11 ‘‘(ii) to the extent practicable, permit 

12 any payment system, or person described 

13 in paragraph (2)(B), as applicable, to 

14 choose among alternative means of pre15 venting the introduction or completion of 

16 restricted transactions. 

17 ‘‘(C) NO LIABILITY FOR BLOCKING OR RE18 FUSING TO HONOR RESTRICTED TRANS19 ACTION.— 

20 ‘‘(i) IN GENERAL.—A payment sys21 tem, or a person described in paragraph 

22 (2)(B) that is subject to a regulation 

23 issued under this subsection, and any par24 ticipant in such payment system that pre25 vents or otherwise refuses to honor transVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00181 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
182 

•S 554 IS

1 actions in an effort to implement the poli2 cies and procedures required under this 

3 subsection or to otherwise comply with this 

4 subsection shall not be liable to any party 

5 for such action. 

6 ‘‘(ii) COMPLIANCE.—A person de7 scribed in paragraph (2)(B) meets the re8 quirements of this subsection if the person 

9 relies on and complies with the policies and 

10 procedures of a payment system of which 

11 the person is a member or in which the 

12 person is a participant, and such policies 

13 and procedures of the payment system 

14 comply with the requirements of the regu15 lations promulgated under subparagraph 

16 (A). 

17 ‘‘(D) ENFORCEMENT.— 

18 ‘‘(i) IN GENERAL.—This section shall 

19 be enforced by the Federal functional regu20 lators and the Federal Trade Commission 

21 under applicable law in the manner pro22 vided in section 505(a) of the Gramm23 Leach-Bliley Act (15 U.S.C. 6805(a)). 

24 ‘‘(ii) FACTORS TO BE CONSIDERED.— 

25 In considering any enforcement action 


hmoore on PROD1PC68 with HMBILLS
183 

•S 554 IS

1 under this subsection against a payment 

2 system or person described in paragraph 

3 (2)(B), the Federal functional regulators 

4 and the Federal Trade Commission shall 

5 consider the following factors: 

6 ‘‘(I) The extent to which the pay7 ment system or person knowingly per8 mits restricted transactions. 

9 ‘‘(II) The history of the payment 

10 system or person in connection with 

11 permitting restricted transactions. 

12 ‘‘(III) The extent to which the 

13 payment system or person has estab14 lished and is maintaining policies and 

15 procedures in compliance with regula16 tions prescribed under this subsection. 

17 ‘‘(8) TRANSACTIONS PERMITTED.—A payment 

18 system, or a person described in paragraph (2)(B) 

19 that is subject to a regulation issued under this sub20 section, is authorized to engage in transactions with 

21 foreign pharmacies in connection with investigating 

22 violations or potential violations of any rule or re23 quirement adopted by the payment system or person 

24 in connection with complying with paragraph (7). A 

25 payment system, or such a person, and its agents 


hmoore on PROD1PC68 with HMBILLS
184 

•S 554 IS

1 and employees shall not be found to be in violation 

2 of, or liable under, any Federal, State or other law 

3 by virtue of engaging in any such transaction. 

4 ‘‘(9) RELATION TO STATE LAWS.—No require5 ment, prohibition, or liability may be imposed on a 

6 payment system, or a person described in paragraph 

7 (2)(B) that is subject to a regulation issued under 

8 this subsection, under the laws of any state with re9 spect to any payment transaction by an individual 

10 because the payment transaction involves a payment 

11 to a foreign pharmacy. 

12 ‘‘(10) TIMING OF REQUIREMENTS.—A payment 

13 system, or a person described in paragraph (2)(B) 

14 that is subject to a regulation issued under this sub15 section, must adopt policies and procedures reason16 ably designed to comply with any regulations re17 quired under paragraph (7) within 60 days after 

18 such regulations are issued in final form.’’. 

19 (b) EFFECTIVE DATE.—The amendment made by 

20 this section shall take effect on the day that is 90 days 

21 after the date of enactment of this Act. 

22 (c) IMPLEMENTATION.—The Board of Governors of 

23 the Federal Reserve System shall promulgate regulations 

24 as required by subsection (g)(7) of section 303 of the Fed25 eral Food, Drug, and Cosmetic Act (21 U.S.C. 333), as 


hmoore on PROD1PC68 with HMBILLS
185 

•S 554 IS

1 added by subsection (a), not later than 90 days after the 

2 date of enactment of this Act. 

3 SEC. 129. IMPORTATION EXEMPTION UNDER CONTROLLED 

4 SUBSTANCES IMPORT AND EXPORT ACT. 

5 Section 1006(a)(2) of the Controlled Substances Im6 port and Export Act (21 U.S.C. 956(a)(2)) is amended 

7 by striking ‘‘not import the controlled substance into the 

8 United States in an amount that exceeds 50 dosage units 

9 of the controlled substance.’’ and inserting ‘‘import into 

10 the United States not more than 10 dosage units com11 bined of all such controlled substances.’’. 

12 SEC. 130. SEVERABILITY. 

13 If any provision of this subtitle, an amendment by 

14 this subtitle, or the application of such provision or 

15 amendment to any person or circumstance is held to be 

16 unconstitutional, the remainder of this subtitle, the 

17 amendments made by this subtitle, and the application of 

18 the provisions of such to any person or circumstance shall 

19 not affected thereby. 

20 Subtitle D—Royalties Under 

21 Offshore Oil and Gas Leases 

22 SEC. 141. PRICE THRESHOLDS FOR ROYALTY SUSPENSION 

23 PROVISIONS. 

24 (a) IN GENERAL.—The Secretary of the Interior (re25 ferred to in this subtitle as the ‘‘Secretary’’) shall agree 


hmoore on PROD1PC68 with HMBILLS
186 

•S 554 IS

1 to a request by any lessee to amend any lease issued for 

2 any Central and Western Gulf of Mexico tract during the 

3 period of January 1, 1998, through December 31, 1999, 

4 to incorporate price thresholds applicable to royalty sus5 pension provisions, that are equal to or less than the price 

6 thresholds described in clauses (v) through (vii) of section 

7 8(a)(3)(C) of the Outer Continental Shelf Lands Act (43 

8 U.S.C. 1337(a)(3)(C)). 

9 (b) EFFECTIVE DATE.— 

10 (1) IN GENERAL.—Any lease amended under 

11 subsection (a) shall impose the new or revised price 

12 thresholds effective beginning October 1, 2006. 

13 (2) EXISTING PROVISIONS.—Existing lease pro14 visions in a lease amended under subsection (a) shall 

15 apply through September 30, 2006. 

16 SEC. 142. CLARIFICATION OF AUTHORITY TO IMPOSE 

17 PRICE THRESHOLDS FOR CERTAIN LEASE 

18 SALES. 

19 Congress reaffirms the authority of the Secretary 

20 under section 8(a)(1)(H) of the Outer Continental Shelf 

21 Lands Act (43 U.S.C. 1337(a)(1)(H)) to vary, based on 

22 the price of production from a lease, the suspension of 

23 royalties under any lease subject to section 304 of the 

24 Outer Continental Shelf Deep Water Royalty Relief Act 

25 (43 U.S.C. 1337; Public Law 104–58). 


hmoore on PROD1PC68 with HMBILLS
187 

•S 554 IS

1 SEC. 143. ELIGIBILITY FOR NEW LEASES AND THE TRANS2 FER OF LEASES; CONSERVATION OF RE3 SOURCES FEES. 

4 (a) DEFINITIONS.—In this section— 

5 (1) COVERED LEASE.—The term ‘‘covered 

6 lease’’ means a lease for oil or gas production in the 

7 Gulf of Mexico that is— 

8 (A) in existence on the date of enactment 

9 of this Act; 

10 (B) issued by the Department of the Inte11 rior under section 304 of the Outer Continental 

12 Shelf Deep Water Royalty Relief Act (43 

13 U.S.C. 1337 note; Public Law 104–58); and 

14 (C) not subject to limitations on royalty re15 lief based on market price that are equal to or 

16 less than the price thresholds described in 

17 clauses (v) through (vii) of section 8(a)(3)(C) of 

18 the Outer Continental Shelf Lands Act (43 

19 U.S.C. 1337(a)(3)(C)). 

20 (2) LESSEE.—The term ‘‘lessee’’ includes any 

21 person or other entity that controls, is controlled by, 

22 or is in or under common control with, a lessee. 

23 (b) ISSUANCE OF NEW LEASES.— 

24 (1) IN GENERAL.—The Secretary shall not 

25 issue any new lease that authorizes the production 

26 of oil or natural gas in the Gulf of Mexico under the 


hmoore on PROD1PC68 with HMBILLS
188 

•S 554 IS

1 Outer Continental Shelf Lands Act (43 U.S.C. 1331 

2 et seq.) to a person described in paragraph (2) un3 less— 

4 (A) the person has renegotiated each cov5 ered lease with respect to which the person is 

6 a lessee, to modify the payment responsibilities 

7 of the person to include price thresholds that 

8 are equal to or less than the price thresholds 

9 described in clauses (v) through (vii) of section 

10 8(a)(3)(C) of the Outer Continental Shelf 

11 Lands Act (43 U.S.C. 1337(a)(3)(C)); or 

12 (B) the person has— 

13 (i) paid all fees established by the 

14 Secretary under subsection (c) that are 

15 due with respect to each covered lease for 

16 which the person is a lessee; or 

17 (ii) entered into an agreement with 

18 the Secretary under which the person is 

19 obligated to pay the fees. 

20 (2) PERSONS DESCRIBED.—A person referred 

21 to in paragraph (1) is— 

22 (A) a lessee that— 

23 (i) holds a covered lease on the date 

24 on which the Secretary considers the 

25 issuance of the new lease; or 


hmoore on PROD1PC68 with HMBILLS
189 

•S 554 IS

1 (ii) was issued a covered lease before 

2 the date of enactment of this Act, but 

3 transferred the covered lease to another 

4 person or entity (including a subsidiary or 

5 affiliate of the lessee) after the date of en6 actment of this Act; or 

7 (B) any other person or entity who has 

8 any direct or indirect interest in, or who derives 

9 any benefit from, a covered lease. 

10 (3) MULTIPLE LESSEES.— 

11 (A) IN GENERAL.—For purposes of para12 graph (1), if there are multiple lessees that own 

13 a share of a covered lease, the Secretary may 

14 implement separate agreements with any lessee 

15 with a share of the covered lease that modifies 

16 the payment responsibilities with respect to the 

17 share of the lessee to include price thresholds 

18 that are equal to or less than the price thresh19 olds described in clauses (v) through (vii) of 

20 section 8(a)(3)(C) of the Outer Continental 

21 Shelf Lands Act (43 U.S.C. 1337(a)(3)(C)). 

22 (B) TREATMENT OF SHARE AS COVERED

23 LEASE.—Beginning on the effective date of an 

24 agreement under subparagraph (A), any share 

25 subject to the agreement shall not constitute a 


hmoore on PROD1PC68 with HMBILLS
190 

•S 554 IS

1 covered lease with respect to any lessees that 

2 entered into the agreement. 

3 (c) CONSERVATION OF RESOURCES FEES.— 

4 (1) IN GENERAL.—Not later than 60 days after 

5 the date of enactment of this Act, the Secretary 

6 shall establish, by regulation, a conservation of re7 sources fee for producing Federal oil and gas leases 

8 in the Gulf of Mexico. 

9 (2) PRODUCING LEASE FEE TERMS.—The fee 

10 under paragraph (1)— 

11 (A) subject to subparagraph (C), shall 

12 apply to covered leases that are producing 

13 leases; 

14 (B) shall be set at $9 per barrel for oil and 

15 $1.25 per million Btu for gas, respectively, in 

16 2005 dollars; and 

17 (C) shall apply only to production of oil or 

18 gas occurring— 

19 (i) in any calendar year in which the 

20 arithmetic average of the daily closing 

21 prices for light sweet crude oil on the New 

22 York Mercantile Exchange (NYMEX) ex23 ceeds $34.73 per barrel for oil and $4.34 

24 per million Btu for gas in 2005 dollars; 

25 and 


hmoore on PROD1PC68 with HMBILLS
191 

•S 554 IS

1 (ii) on or after October 1, 2006. 

2 (3) TREATMENT OF RECEIPTS.—Amounts re3 ceived by the United States as fees under this sub4 section shall be treated as offsetting receipts. 

5 (d) TRANSFERS.—A lessee or any other person who 

6 has any direct or indirect interest in, or who derives a 

7 benefit from, a lease shall not be eligible to obtain by sale 

8 or other transfer (including through a swap, spinoff, serv9 icing, or other agreement) any covered lease, the economic 

10 benefit of any covered lease, or any other lease for the 

11 production of oil or natural gas in the Gulf of Mexico 

12 under the Outer Continental Shelf Lands Act (43 U.S.C. 

13 1331 et seq.), unless— 

14 (1) the lessee or other person has— 

15 (A) renegotiated all covered leases of the 

16 lessee or other person; and 

17 (B) entered into an agreement with the 

18 Secretary to modify the terms of all covered 

19 leases of the lessee or other person to include 

20 limitations on royalty relief based on market 

21 prices that are equal to or less than the price 

22 thresholds described in clauses (v) through (vii) 

23 of section 8(a)(3)(C) of the Outer Continental 

24 Shelf Lands Act (43 U.S.C. 1337(a)(3)(C)); or 

25 (2) the lessee or other person has— 


hmoore on PROD1PC68 with HMBILLS
192 

•S 554 IS

1 (A) paid all fees established by the Sec2 retary under subsection (c) that are due with 

3 respect to each covered lease for which the per4 son is a lessee; or 

5 (B) entered into an agreement with the 

6 Secretary under which the person is obligated 

7 to pay the fees. 

8 TITLE II—REVENUE 

9 ENHANCEMENTS 

10 SEC. 200. AMENDMENT OF 1986 CODE. 

11 Except as otherwise expressly provided, whenever in 

12 this title an amendment or repeal is expressed in terms 

13 of an amendment to, or repeal of, a section or other provi14 sion, the reference shall be considered to be made to a 

15 section or other provision of the Internal Revenue Code 

16 of 1986. 

17 Subtitle A—Rescission of Various 

18 Tax Cuts for Millionaire Taxpayers 

19 SEC. 201. REPEAL OF TOP INCOME TAX RATE REDUCTION 

20 FOR TAXPAYERS WITH $1,000,000 OR MORE OF 

21 TAXABLE INCOME. 

22 (a) IN GENERAL.—Section 1(i) (relating to rate re23 ductions) is amended by redesignating paragraph (3) as 

24 paragraph (4) and by inserting after paragraph (2) the 

25 following new paragraph: 


hmoore on PROD1PC68 with HMBILLS
193 

•S 554 IS

1 ‘‘(3) EXCEPTION FOR TAXPAYERS WITH TAX2 ABLE INCOME OF $1,000,000, OR MORE.—Notwith3 standing paragraph (2), in the case of taxable years 

4 beginning in a calender year after 2007, the last 

5 item in the fourth column of the table under para6 graph (2) shall be applied by substituting ‘39.6%’ 

7 for ‘35.0%’ with respect to taxable income in excess 

8 of $1,000,000 ($500,000 in the case of taxpayers to 

9 whom subsection (d) applies).’’. 

10 (b) EFFECTIVE DATE.—The amendment made by 

11 this section shall apply to taxable years beginning after 

12 December 31, 2007. 

13 (c) APPLICATION OF EGTRRA SUNSET.—The amend14 ment made by this section shall be subject to title IX of 

15 the Economic Growth and Tax Relief Reconciliation Act 

16 of 2001 to the same extent and in the same manner as 

17 the provision of such Act to which such amendment re18 lates. 

19 SEC. 202. ELIMINATION OF THE SCHEDULED PHASEOUT OF 

20 THE LIMITATIONS ON PERSONAL EXEMP21 TIONS AND ITEMIZED DEDUCTIONS FOR TAX22 PAYERS EARNING IN EXCESS OF $1,000,000. 

23 (a) PERSONAL EXEMPTIONS.—Section 151(d)(3)(E) 

24 is amended by adding at the end the following new clause: 


hmoore on PROD1PC68 with HMBILLS
194 

•S 554 IS

1 ‘‘(iii) EXCEPTION.—This subpara2 graph shall not apply with respect to any 

3 taxpayer whose adjusted gross income for 

4 the taxable year exceeds $1,000,000 

5 ($500,000 in the case of a married indi6 vidual filing a separate return).’’. 

7 (b) ITEMIZED DEDUCTIONS.—Section 68(f) amended 

8 by adding at the end the following new paragraph: 

9 ‘‘(3) EXCEPTION.—This subsection shall not 

10 apply with respect to any taxpayer whose adjusted 

11 gross income for the taxable year exceeds 

12 $1,000,000 ($500,000 in the case of a married indi13 vidual filing a separate return).’’. 

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

15 this section shall apply to taxable years beginning after 

16 December 31, 2007. 

17 (d) APPLICATION OF EGTRRA SUNSET.—The 

18 amendments made by this section shall be subject to title 

19 IX of the Economic Growth and Tax Relief Reconciliation 

20 Act of 2001 to the same extent and in the same manner 

21 as the provision of such Act to which such amendment 

22 relates. 


hmoore on PROD1PC68 with HMBILLS
195 

•S 554 IS

1 SEC. 203. MODIFICATION OF TAX RATES ON CAPITAL GAINS 

2 AND DIVIDENDS FOR TAXPAYERS WITH 

3 $1,000,000 OR MORE OF TAXABLE INCOME. 

4 (a) IN GENERAL.—Section 1(h) is amended by add5 ing at the end the following new paragraph: 

6 ‘‘(12) MODIFIED RATES FOR INDIVIDUALS

7 WITH $1,000,000 OR MORE OF TAXABLE INCOME.—If 

8 a taxpayer has taxable income of $1,000,000 

9 ($500,000 in the case of taxpayers to whom sub10 section (d) applies) or more for any taxable year— 

11 ‘‘(A) paragraph (11) (relating to dividends 

12 taxed as capital gain) shall not apply to any 

13 qualified dividend income of the taxpayer for 

14 the taxable year, and 

15 ‘‘(B) paragraph (1)(C) shall be applied by 

16 substituting ‘20 percent’ for ‘15 percent’ with 

17 respect to the adjusted net capital gain of the 

18 taxpayer for the taxable year, determined by 

19 only taking into account gain or loss properly 

20 allocable to the portion of the taxable year after 

21 December 31, 2007.’’ 

22 (b) APPLICATION TO MINIMUM TAX.—Section 

23 55(b)(3) is amended by adding at the end the following 

24 new sentence: ‘‘In the case of a taxpayer with alternative 

25 minimum taxable income of $1,000,000 ($500,000 in the 

26 case of taxpayers to whom section 1(d) applies) or more 


hmoore on PROD1PC68 with HMBILLS
196 

•S 554 IS

1 for any taxable year, the rules of section 1(h)(12) shall 

2 apply for purposes of this paragraph.’’ 

3 (c) EFFECTIVE DATES.— 

4 (1) CAPITAL GAINS.—Section 1(h)(12)(B) of 

5 the Internal Revenue Code of 1986 (as added by 

6 paragraph (1)) shall apply to taxable years begin7 ning after December 31, 2007. 

8 (2) DIVIDEND RATES.—Section 1(h)(12)(A) of 

9 such Code (as added by paragraph (1)) shall apply 

10 to dividends received after December 31, 2007. 

11 (d) APPLICATION OF JGTRRA SUNSET.—The amend12 ments made by this section shall be subject to section 303 

13 of the Jobs and Growth Tax Relief Reconciliation Act of 

14 2003 to the same extent and in the same manner as the 

15 provision of such Act to which such amendment relates. 

16 Subtitle B—Provisions to Discour17 age Offshore Shelters and Expa18 triation 

19 SEC. 211. TAXATION OF INCOME OF CONTROLLED FOREIGN 

20 CORPORATIONS ATTRIBUTABLE TO IM21 PORTED PROPERTY. 

22 (a) GENERAL RULE.—Subsection (a) of section 954 

23 (defining foreign base company income) is amended by 

24 striking ‘‘and’’ at the end of paragraph (4), by striking 

25 the period at the end of paragraph (5) and inserting ‘‘, 


hmoore on PROD1PC68 with HMBILLS
197 

•S 554 IS

1 and’’, and by adding at the end the following new para2 graph: 

3 ‘‘(6) imported property income for the taxable 

4 year (determined under subsection (j) and reduced 

5 as provided in subsection (b)(5)).’’. 

6 (b) DEFINITION OF IMPORTED PROPERTY IN7 COME.—Section 954 is amended by adding at the end the 

8 following new subsection: 

9 ‘‘(j) IMPORTED PROPERTY INCOME.— 

10 ‘‘(1) IN GENERAL.—For purposes of subsection 

11 (a)(6), the term ‘imported property income’ means 

12 income (whether in the form of profits, commissions, 

13 fees, or otherwise) derived in connection with— 

14 ‘‘(A) manufacturing, producing, growing, 

15 or extracting imported property; 

16 ‘‘(B) the sale, exchange, or other disposi17 tion of imported property; or 

18 ‘‘(C) the lease, rental, or licensing of im19 ported property. 

20 Such term shall not include any foreign oil and gas 

21 extraction income (within the meaning of section 

22 907(c)) or any foreign oil related income (within the 

23 meaning of section 907(c)). 

24 ‘‘(2) IMPORTED PROPERTY.—For purposes of 

25 this subsection— 


hmoore on PROD1PC68 with HMBILLS
198 

•S 554 IS

1 ‘‘(A) IN GENERAL.—Except as otherwise 

2 provided in this paragraph, the term ‘imported 

3 property’ means property which is imported 

4 into the United States by the controlled foreign 

5 corporation or a related person. 

6 ‘‘(B) IMPORTED PROPERTY INCLUDES CER7 TAIN PROPERTY IMPORTED BY UNRELATED

8 PERSONS.—The term ‘imported property’ in9 cludes any property imported into the United 

10 States by an unrelated person if, when such 

11 property was sold to the unrelated person by 

12 the controlled foreign corporation (or a related 

13 person), it was reasonable to expect that— 

14 ‘‘(i) such property would be imported 

15 into the United States; or 

16 ‘‘(ii) such property would be used as 

17 a component in other property which would 

18 be imported into the United States. 

19 ‘‘(C) EXCEPTION FOR PROPERTY SUBSE20 QUENTLY EXPORTED.—The term ‘imported 

21 property’ does not include any property which is 

22 imported into the United States and which— 

23 ‘‘(i) before substantial use in the 

24 United States, is sold, leased, or rented by 

25 the controlled foreign corporation or a reVerDate Aug 31 2005 22:07 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00198 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
199 

•S 554 IS

1 lated person for direct use, consumption, 

2 or disposition outside the United States; or 

3 ‘‘(ii) is used by the controlled foreign 

4 corporation or a related person as a com5 ponent in other property which is so sold, 

6 leased, or rented. 

7 ‘‘(D) EXCEPTION FOR CERTAIN AGRICUL8 TURAL COMMODITIES.—The term ‘imported 

9 property’ does not include any agricultural com10 modity which is not grown in the United States 

11 in commercially marketable quantities. 

12 ‘‘(3) DEFINITIONS AND SPECIAL RULES.— 

13 ‘‘(A) IMPORT.—For purposes of this sub14 section, the term ‘import’ means entering, or 

15 withdrawal from warehouse, for consumption or 

16 use. Such term includes any grant of the right 

17 to use intangible property (as defined in section 

18 936(h)(3)(B)) in the United States. 

19 ‘‘(B) UNITED STATES.—For purposes of 

20 this subsection, the term ‘United States’ in21 cludes the Commonwealth of Puerto Rico, the 

22 Virgin Islands of the United States, Guam, 

23 American Samoa, and the Commonwealth of 

24 the Northern Mariana Islands. 


hmoore on PROD1PC68 with HMBILLS
200 

•S 554 IS

1 ‘‘(C) UNRELATED PERSON.—For purposes 

2 of this subsection, the term ‘unrelated person’ 

3 means any person who is not a related person 

4 with respect to the controlled foreign corpora5 tion. 

6 ‘‘(D) COORDINATION WITH FOREIGN BASE

7 COMPANY SALES INCOME.—For purposes of this 

8 section, the term ‘foreign base company sales 

9 income’ shall not include any imported property 

10 income.’’. 

11 (c) SEPARATE APPLICATION OF LIMITATIONS ON

12 FOREIGN TAX CREDIT FOR IMPORTED PROPERTY IN13 COME.— 

14 (1) IN GENERAL.—Paragraph (1) of section 

15 904(d) (relating to separate application of section 

16 with respect to certain categories of income) is 

17 amended by striking ‘‘and’’ at the end of subpara18 graph (A), by redesignating subparagraph (B) as 

19 subparagraph (C), and by inserting after subpara20 graph (A) the following new subparagraph: 

21 ‘‘(B) imported property income, and’’. 

22 (2) IMPORTED PROPERTY INCOME DEFINED.— 

23 Paragraph (2) of section 904(d) is amended by re24 designating subparagraphs (I) and (J) as subpara25 graphs (J) and (K), respectively, and by inserting 


hmoore on PROD1PC68 with HMBILLS
201 

•S 554 IS

1 after subparagraph (H) the following new subpara2 graph: 

3 ‘‘(I) IMPORTED PROPERTY INCOME.—The 

4 term ‘imported property income’ means any in5 come received or accrued by any person which 

6 is of a kind which would be imported property 

7 income (as defined in section 954(j)).’’. 

8 (3) CONFORMING AMENDMENT.—Clause (ii) of 

9 section 904(d)(2)(A) is amended by inserting ‘‘or 

10 imported property income’’ after ‘‘passive category 

11 income’’. 

12 (d) TECHNICAL AMENDMENTS.— 

13 (1) Clause (iii) of section 952(c)(1)(B) (relating 

14 to certain prior year deficits may be taken into ac15 count) is amended— 

16 (A) by redesignating subclauses (II), (III), 

17 (IV), and (V) as subclauses (III), (IV), (V), and 

18 (VI), and 

19 (B) by inserting after subclause (I) the fol20 lowing new subclause: 

21 ‘‘(II) imported property in22 come,’’. 

23 (2) Paragraph (5) of section 954(b) (relating to 

24 deductions to be taken into account) is amended by 

25 striking ‘‘and the foreign base company oil related 


hmoore on PROD1PC68 with HMBILLS
202 

•S 554 IS

1 income’’ and inserting ‘‘the foreign base company oil 

2 related income, and the imported property income’’. 

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

4 this section shall apply to taxable years of foreign corpora5 tions beginning after the date of the enactment of this 

6 Act, and to taxable years of United States shareholders 

7 within which or with which such taxable years of such for8 eign corporations end. 

9 SEC. 212. TAX TREATMENT OF CONTROLLED FOREIGN COR10 PORATIONS ESTABLISHED IN TAX HAVENS. 

11 (a) IN GENERAL.—Subchapter C of chapter 80 (re12 lating to provisions affecting more than one subtitle) is 

13 amended by adding at the end the following new section: 

14 ‘‘SEC. 7875. CONTROLLED FOREIGN CORPORATIONS IN TAX 

15 HAVENS TREATED AS DOMESTIC CORPORA16 TIONS. 

17 ‘‘(a) GENERAL RULE.—If a controlled foreign cor18 poration is a tax-haven CFC, then, notwithstanding sec19 tion 7701(a)(4), such corporation shall be treated for pur20 poses of this title as a domestic corporation. 

21 ‘‘(b) TAX-HAVEN CFC.—For purposes of this sec22 tion— 

23 ‘‘(1) IN GENERAL.—The term ‘tax-haven CFC’ 

24 means, with respect to any taxable year, a foreign 

25 corporation which— 


hmoore on PROD1PC68 with HMBILLS
203 

•S 554 IS

1 ‘‘(A) was created or organized under the 

2 laws of a tax-haven country, and 

3 ‘‘(B) is a controlled foreign corporation 

4 (determined without regard to this section) for 

5 an uninterrupted period of 30 days or more 

6 during the taxable year. 

7 ‘‘(2) EXCEPTION.—The term ‘tax-haven CFC’ 

8 does not include a foreign corporation for any tax9 able year if substantially all of its income for the 

10 taxable year is derived from the active conduct of 

11 trades or businesses within the country under the 

12 laws of which the corporation was created or orga13 nized. 

14 ‘‘(c) TAX-HAVEN COUNTRY.—For purposes of this 

15 section— 

16 ‘‘(1) IN GENERAL.—The term ‘tax-haven coun17 try’ means any of the following: 

‘‘Andorra Guernsey Panama 

Anguilla Isle of Man Samoa 

Antigua and Barbuda Jersey San Marino 

Aruba Liberia Federation of 

Commonwealth of the Principality of Saint 

Bahamas Liechtenstein Christopher 

Bahrain Republic of the and Nevis 

Barbados Maldives Saint Lucia 

Belize Malta Saint Vincent 

Bermuda Republic of the and the 

British Virgin Islands Marshall Islands Grenadines 

Cayman Islands Mauritius Republic of the 

Cook Islands Principality of Monaco Seychelles 

Cyprus Montserrat Tonga 

Commonwealth of the Republic of Nauru Turks and Caicos 

Dominica Netherlands Republic of 

Gibraltar Antilles Vanuatu 

Grenada Niue 


hmoore on PROD1PC68 with HMBILLS
204 

•S 554 IS

1 ‘‘(2) SECRETARIAL AUTHORITY.—The Secretary 

2 may remove or add a foreign jurisdiction from the 

3 list of tax-haven countries under paragraph (1) if 

4 the Secretary determines such removal or addition is 

5 consistent with the purposes of this section.’’. 

6 (b) CONFORMING AMENDMENT.—The table of sec7 tions for subchapter C of chapter 80 is amended by adding 

8 at the end the following new item: 

‘‘Sec. 7875. Controlled foreign corporations in tax havens treated as domestic 

corporations.’’. 

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

10 this section shall apply to taxable years beginning after 

11 December 31, 2008. 

12 SEC. 213. REVISION OF TAX RULES ON EXPATRIATION OF 

13 INDIVIDUALS. 

14 (a) IN GENERAL.—Subpart A of part II of sub15 chapter N of chapter 1 is amended by inserting after sec16 tion 877 the following new section: 

17 ‘‘SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION. 

18 ‘‘(a) GENERAL RULES.—For purposes of this sub19 title— 

20 ‘‘(1) MARK TO MARKET.—Except as provided in 

21 subsections (d) and (f), all property of a covered ex22 patriate to whom this section applies shall be treated 

23 as sold on the day before the expatriation date for 

24 its fair market value. 


hmoore on PROD1PC68 with HMBILLS
205 

•S 554 IS

1 ‘‘(2) RECOGNITION OF GAIN OR LOSS.—In the 

2 case of any sale under paragraph (1)— 

3 ‘‘(A) notwithstanding any other provision 

4 of this title, any gain arising from such sale 

5 shall be taken into account for the taxable year 

6 of the sale, and 

7 ‘‘(B) any loss arising from such sale shall 

8 be taken into account for the taxable year of 

9 the sale to the extent otherwise provided by this 

10 title, except that section 1091 shall not apply to 

11 any such loss. 

12 Proper adjustment shall be made in the amount of 

13 any gain or loss subsequently realized for gain or 

14 loss taken into account under the preceding sen15 tence. 

16 ‘‘(3) EXCLUSION FOR CERTAIN GAIN.— 

17 ‘‘(A) IN GENERAL.—The amount which, 

18 but for this paragraph, would be includible in 

19 the gross income of any individual by reason of 

20 this section shall be reduced (but not below 

21 zero) by $600,000. For purposes of this para22 graph, allocable expatriation gain taken into ac23 count under subsection (f)(2) shall be treated in 

24 the same manner as an amount required to be 

25 includible in gross income. 


hmoore on PROD1PC68 with HMBILLS
206 

•S 554 IS

1 ‘‘(B) COST-OF-LIVING ADJUSTMENT.— 

2 ‘‘(i) IN GENERAL.—In the case of an 

3 expatriation date occurring in any calendar 

4 year after 2008, the $600,000 amount 

5 under subparagraph (A) shall be increased 

6 by an amount equal to— 

7 ‘‘(I) such dollar amount, multi8 plied by 

9 ‘‘(II) the cost-of-living adjust10 ment determined under section 1(f)(3) 

11 for such calendar year, determined by 

12 substituting ‘calendar year 2007’ for 

13 ‘calendar year 1992’ in subparagraph 

14 (B) thereof. 

15 ‘‘(ii) ROUNDING RULES.—If any 

16 amount after adjustment under clause (i) 

17 is not a multiple of $1,000, such amount 

18 shall be rounded to the next lower multiple 

19 of $1,000. 

20 ‘‘(4) ELECTION TO CONTINUE TO BE TAXED AS

21 UNITED STATES CITIZEN.— 

22 ‘‘(A) IN GENERAL.—If a covered expatriate 

23 elects the application of this paragraph— 


hmoore on PROD1PC68 with HMBILLS
207 

•S 554 IS

1 ‘‘(i) this section (other than this para2 graph and subsection (i)) shall not apply to 

3 the expatriate, but 

4 ‘‘(ii) in the case of property to which 

5 this section would apply but for such elec6 tion, the expatriate shall be subject to tax 

7 under this title in the same manner as if 

8 the individual were a United States citizen. 

9 ‘‘(B) REQUIREMENTS.—Subparagraph (A) 

10 shall not apply to an individual unless the indi11 vidual— 

12 ‘‘(i) provides security for payment of 

13 tax in such form and manner, and in such 

14 amount, as the Secretary may require, 

15 ‘‘(ii) consents to the waiver of any 

16 right of the individual under any treaty of 

17 the United States which would preclude as18 sessment or collection of any tax which 

19 may be imposed by reason of this para20 graph, and 

21 ‘‘(iii) complies with such other re22 quirements as the Secretary may prescribe. 

23 ‘‘(C) ELECTION.—An election under sub24 paragraph (A) shall apply to all property to 

25 which this section would apply but for the elecVerDate Aug 31 2005 03:57 Feb 17, 2007 Jkt 059200 PO 00000 Frm 00207 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
208 

•S 554 IS

1 tion and, once made, shall be irrevocable. Such 

2 election shall also apply to property the basis of 

3 which is determined in whole or in part by ref4 erence to the property with respect to which the 

5 election was made. 

6 ‘‘(b) ELECTION TO DEFER TAX.— 

7 ‘‘(1) IN GENERAL.—If the taxpayer elects the 

8 application of this subsection with respect to any 

9 property treated as sold by reason of subsection (a), 

10 the payment of the additional tax attributable to 

11 such property shall be postponed until the due date 

12 of the return for the taxable year in which such 

13 property is disposed of (or, in the case of property 

14 disposed of in a transaction in which gain is not rec15 ognized in whole or in part, until such other date as 

16 the Secretary may prescribe). 

17 ‘‘(2) DETERMINATION OF TAX WITH RESPECT

18 TO PROPERTY.—For purposes of paragraph (1), the 

19 additional tax attributable to any property is an 

20 amount which bears the same ratio to the additional 

21 tax imposed by this chapter for the taxable year 

22 solely by reason of subsection (a) as the gain taken 

23 into account under subsection (a) with respect to 

24 such property bears to the total gain taken into acVerDate Aug 31 2005 03:57 Feb 17, 2007 Jkt 059200 PO 00000 Frm 00208 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
209 

•S 554 IS

1 count under subsection (a) with respect to all prop2 erty to which subsection (a) applies. 

3 ‘‘(3) TERMINATION OF POSTPONEMENT.—No 

4 tax may be postponed under this subsection later 

5 than the due date for the return of tax imposed by 

6 this chapter for the taxable year which includes the 

7 date of death of the expatriate (or, if earlier, the 

8 time that the security provided with respect to the 

9 property fails to meet the requirements of paragraph 

10 (4), unless the taxpayer corrects such failure within 

11 the time specified by the Secretary). 

12 ‘‘(4) SECURITY.— 

13 ‘‘(A) IN GENERAL.—No election may be 

14 made under paragraph (1) with respect to any 

15 property unless adequate security is provided to 

16 the Secretary with respect to such property. 

17 ‘‘(B) ADEQUATE SECURITY.—For purposes 

18 of subparagraph (A), security with respect to 

19 any property shall be treated as adequate secu20 rity if— 

21 ‘‘(i) it is a bond in an amount equal 

22 to the deferred tax amount under para23 graph (2) for the property, or 


hmoore on PROD1PC68 with HMBILLS
210 

•S 554 IS

1 ‘‘(ii) the taxpayer otherwise estab2 lishes to the satisfaction of the Secretary 

3 that the security is adequate. 

4 ‘‘(5) WAIVER OF CERTAIN RIGHTS.—No elec5 tion may be made under paragraph (1) unless the 

6 taxpayer consents to the waiver of any right under 

7 any treaty of the United States which would pre8 clude assessment or collection of any tax imposed by 

9 reason of this section. 

10 ‘‘(6) ELECTIONS.—An election under paragraph 

11 (1) shall only apply to property described in the elec12 tion and, once made, is irrevocable. An election may 

13 be made under paragraph (1) with respect to an in14 terest in a trust with respect to which gain is re15 quired to be recognized under subsection (f)(1). 

16 ‘‘(7) INTEREST.—For purposes of section 

17 6601— 

18 ‘‘(A) the last date for the payment of tax 

19 shall be determined without regard to the elec20 tion under this subsection, and 

21 ‘‘(B) section 6621(a)(2) shall be applied by 

22 substituting ‘5 percentage points’ for ‘3 per23 centage points’ in subparagraph (B) thereof. 

24 ‘‘(c) COVERED EXPATRIATE.—For purposes of this 

25 section— 


hmoore on PROD1PC68 with HMBILLS
211 

•S 554 IS

1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), the term ‘covered expatriate’ means an 

3 expatriate. 

4 ‘‘(2) EXCEPTIONS.—An individual shall not be 

5 treated as a covered expatriate if— 

6 ‘‘(A) the individual— 

7 ‘‘(i) became at birth a citizen of the 

8 United States and a citizen of another 

9 country and, as of the expatriation date, 

10 continues to be a citizen of, and is taxed 

11 as a resident of, such other country, and 

12 ‘‘(ii) has not been a resident of the 

13 United States (as defined in section 

14 7701(b)(1)(A)(ii)) during the 5 taxable 

15 years ending with the taxable year during 

16 which the expatriation date occurs, or 

17 ‘‘(B)(i) the individual’s relinquishment of 

18 United States citizenship occurs before such individual attains age 181 19 ⁄2, and 

20 ‘‘(ii) the individual has been a resident of 

21 the United States (as so defined) for not more 

22 than 5 taxable years before the date of relin23 quishment. 

24 ‘‘(d) EXEMPT PROPERTY; SPECIAL RULES FOR PEN25 SION PLANS.— 


hmoore on PROD1PC68 with HMBILLS
212 

•S 554 IS

1 ‘‘(1) EXEMPT PROPERTY.—This section shall 

2 not apply to the following: 

3 ‘‘(A) UNITED STATES REAL PROPERTY IN4 TERESTS.—Any United States real property in5 terest (as defined in section 897(c)(1)), other 

6 than stock of a United States real property 

7 holding corporation which does not, on the day 

8 before the expatriation date, meet the require9 ments of section 897(c)(2). 

10 ‘‘(B) SPECIFIED PROPERTY.—Any prop11 erty or interest in property not described in 

12 subparagraph (A) which the Secretary specifies 

13 in regulations. 

14 ‘‘(2) SPECIAL RULES FOR CERTAIN RETIRE15 MENT PLANS.— 

16 ‘‘(A) IN GENERAL.—If a covered expatriate 

17 holds on the day before the expatriation date 

18 any interest in a retirement plan to which this 

19 paragraph applies— 

20 ‘‘(i) such interest shall not be treated 

21 as sold for purposes of subsection (a)(1), 

22 but 

23 ‘‘(ii) an amount equal to the present 

24 value of the expatriate’s nonforfeitable ac25 crued benefit shall be treated as having 


hmoore on PROD1PC68 with HMBILLS
213 

•S 554 IS

1 been received by such individual on such 

2 date as a distribution under the plan. 

3 ‘‘(B) TREATMENT OF SUBSEQUENT DIS4 TRIBUTIONS.—In the case of any distribution 

5 on or after the expatriation date to or on behalf 

6 of the covered expatriate from a plan from 

7 which the expatriate was treated as receiving a 

8 distribution under subparagraph (A), the 

9 amount otherwise includible in gross income by 

10 reason of the subsequent distribution shall be 

11 reduced by the excess of the amount includible 

12 in gross income under subparagraph (A) over 

13 any portion of such amount to which this sub14 paragraph previously applied. 

15 ‘‘(C) TREATMENT OF SUBSEQUENT DIS16 TRIBUTIONS BY PLAN.—For purposes of this 

17 title, a retirement plan to which this paragraph 

18 applies, and any person acting on the plan’s be19 half, shall treat any subsequent distribution de20 scribed in subparagraph (B) in the same man21 ner as such distribution would be treated with22 out regard to this paragraph. 

23 ‘‘(D) APPLICABLE PLANS.—This para24 graph shall apply to— 


hmoore on PROD1PC68 with HMBILLS
214 

•S 554 IS

1 ‘‘(i) any qualified retirement plan (as 

2 defined in section 4974(c)), 

3 ‘‘(ii) an eligible deferred compensation 

4 plan (as defined in section 457(b)) of an 

5 eligible employer described in section 

6 457(e)(1)(A), and 

7 ‘‘(iii) to the extent provided in regula8 tions, any foreign pension plan or similar 

9 retirement arrangements or programs. 

10 ‘‘(e) DEFINITIONS.—For purposes of this section— 

11 ‘‘(1) EXPATRIATE.—The term ‘expatriate’ 

12 means— 

13 ‘‘(A) any United States citizen who relin14 quishes citizenship, and 

15 ‘‘(B) any long-term resident of the United 

16 States who— 

17 ‘‘(i) ceases to be a lawful permanent 

18 resident of the United States (within the 

19 meaning of section 7701(b)(6)), or 

20 ‘‘(ii) commences to be treated as a 

21 resident of a foreign country under the 

22 provisions of a tax treaty between the 

23 United States and the foreign country and 

24 who does not waive the benefits of such 


hmoore on PROD1PC68 with HMBILLS
215 

•S 554 IS

1 treaty applicable to residents of the foreign 

2 country. 

3 ‘‘(2) EXPATRIATION DATE.—The term ‘expa4 triation date’ means— 

5 ‘‘(A) the date an individual relinquishes 

6 United States citizenship, or 

7 ‘‘(B) in the case of a long-term resident of 

8 the United States, the date of the event de9 scribed in clause (i) or (ii) of paragraph (1)(B). 

10 ‘‘(3) RELINQUISHMENT OF CITIZENSHIP.—A 

11 citizen shall be treated as relinquishing United 

12 States citizenship on the earliest of— 

13 ‘‘(A) the date the individual renounces 

14 such individual’s United States nationality be15 fore a diplomatic or consular officer of the 

16 United States pursuant to paragraph (5) of sec17 tion 349(a) of the Immigration and Nationality 

18 Act (8 U.S.C. 1481(a)(5)), 

19 ‘‘(B) the date the individual furnishes to 

20 the United States Department of State a signed 

21 statement of voluntary relinquishment of 

22 United States nationality confirming the per23 formance of an act of expatriation specified in 

24 paragraph (1), (2), (3), or (4) of section 349(a) 


hmoore on PROD1PC68 with HMBILLS
216 

•S 554 IS

1 of the Immigration and Nationality Act (8 

2 U.S.C. 1481(a)(1)–(4)), 

3 ‘‘(C) the date the United States Depart4 ment of State issues to the individual a certifi5 cate of loss of nationality, or 

6 ‘‘(D) the date a court of the United States 

7 cancels a naturalized citizen’s certificate of nat8 uralization. 

9 Subparagraph (A) or (B) shall not apply to any indi10 vidual unless the renunciation or voluntary relin11 quishment is subsequently approved by the issuance 

12 to the individual of a certificate of loss of nationality 

13 by the United States Department of State. 

14 ‘‘(4) LONG-TERM RESIDENT.—The term ‘long15 term resident’ has the meaning given to such term 

16 by section 877(e)(2). 

17 ‘‘(f) SPECIAL RULES APPLICABLE TO BENE18 FICIARIES’ INTERESTS IN TRUST.— 

19 ‘‘(1) IN GENERAL.—Except as provided in para20 graph (2), if an individual is determined under para21 graph (3) to hold an interest in a trust on the day 

22 before the expatriation date— 

23 ‘‘(A) the individual shall not be treated as 

24 having sold such interest, 


hmoore on PROD1PC68 with HMBILLS
217 

•S 554 IS

1 ‘‘(B) such interest shall be treated as a 

2 separate share in the trust, and 

3 ‘‘(C)(i) such separate share shall be treat4 ed as a separate trust consisting of the assets 

5 allocable to such share, 

6 ‘‘(ii) the separate trust shall be treated as 

7 having sold its assets on the day before the ex8 patriation date for their fair market value and 

9 as having distributed all of its assets to the in10 dividual as of such time, and 

11 ‘‘(iii) the individual shall be treated as hav12 ing recontributed the assets to the separate 

13 trust. 

14 Subsection (a)(2) shall apply to any income, gain, or 

15 loss of the individual arising from a distribution de16 scribed in subparagraph (C)(ii). In determining the 

17 amount of such distribution, proper adjustments 

18 shall be made for liabilities of the trust allocable to 

19 an individual’s share in the trust. 

20 ‘‘(2) SPECIAL RULES FOR INTERESTS IN QUALI21 FIED TRUSTS.— 

22 ‘‘(A) IN GENERAL.—If the trust interest 

23 described in paragraph (1) is an interest in a 

24 qualified trust— 


hmoore on PROD1PC68 with HMBILLS
218 

•S 554 IS

1 ‘‘(i) paragraph (1) and subsection (a) 

2 shall not apply, and 

3 ‘‘(ii) in addition to any other tax im4 posed by this title, there is hereby imposed 

5 on each distribution with respect to such 

6 interest a tax in the amount determined 

7 under subparagraph (B). 

8 ‘‘(B) AMOUNT OF TAX.—The amount of 

9 tax under subparagraph (A)(ii) shall be equal to 

10 the lesser of— 

11 ‘‘(i) the highest rate of tax imposed by 

12 section 1(e) for the taxable year which in13 cludes the day before the expatriation date, 

14 multiplied by the amount of the distribu15 tion, or 

16 ‘‘(ii) the balance in the deferred tax 

17 account immediately before the distribution 

18 determined without regard to any increases 

19 under subparagraph (C)(ii) after the 30th 

20 day preceding the distribution. 

21 ‘‘(C) DEFERRED TAX ACCOUNT.—For pur22 poses of subparagraph (B)(ii)— 

23 ‘‘(i) OPENING BALANCE.—The open24 ing balance in a deferred tax account with 

25 respect to any trust interest is an amount 


hmoore on PROD1PC68 with HMBILLS
219 

•S 554 IS

1 equal to the tax which would have been im2 posed on the allocable expatriation gain 

3 with respect to the trust interest if such 

4 gain had been included in gross income 

5 under subsection (a). 

6 ‘‘(ii) INCREASE FOR INTEREST.—The 

7 balance in the deferred tax account shall 

8 be increased by the amount of interest de9 termined (on the balance in the account at 

10 the time the interest accrues), for periods 

11 after the 90th day after the expatriation 

12 date, by using the rates and method appli13 cable under section 6621 for underpay14 ments of tax for such periods, except that 

15 section 6621(a)(2) shall be applied by sub16 stituting ‘5 percentage points’ for ‘3 per17 centage points’ in subparagraph (B) there18 of. 

19 ‘‘(iii) DECREASE FOR TAXES PRE20 VIOUSLY PAID.—The balance in the tax de21 ferred account shall be reduced— 

22 ‘‘(I) by the amount of taxes im23 posed by subparagraph (A) on any 

24 distribution to the person holding the 

25 trust interest, and 


hmoore on PROD1PC68 with HMBILLS
220 

•S 554 IS

1 ‘‘(II) in the case of a person 

2 holding a nonvested interest, to the 

3 extent provided in regulations, by the 

4 amount of taxes imposed by subpara5 graph (A) on distributions from the 

6 trust with respect to nonvested inter7 ests not held by such person. 

8 ‘‘(D) ALLOCABLE EXPATRIATION GAIN.— 

9 For purposes of this paragraph, the allocable 

10 expatriation gain with respect to any bene11 ficiary’s interest in a trust is the amount of 

12 gain which would be allocable to such bene13 ficiary’s vested and nonvested interests in the 

14 trust if the beneficiary held directly all assets 

15 allocable to such interests. 

16 ‘‘(E) TAX DEDUCTED AND WITHHELD.— 

17 ‘‘(i) IN GENERAL.—The tax imposed 

18 by subparagraph (A)(ii) shall be deducted 

19 and withheld by the trustees from the dis20 tribution to which it relates. 

21 ‘‘(ii) EXCEPTION WHERE FAILURE TO

22 WAIVE TREATY RIGHTS.—If an amount 

23 may not be deducted and withheld under 

24 clause (i) by reason of the distributee failVerDate Aug 31 2005 03:57 Feb 17, 2007 Jkt 059200 PO 00000 Frm 00220 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
221 

•S 554 IS

1 ing to waive any treaty right with respect 

2 to such distribution— 

3 ‘‘(I) the tax imposed by subpara4 graph (A)(ii) shall be imposed on the 

5 trust and each trustee shall be person6 ally liable for the amount of such tax, 

7 and 

8 ‘‘(II) any other beneficiary of the 

9 trust shall be entitled to recover from 

10 the distributee the amount of such tax 

11 imposed on the other beneficiary. 

12 ‘‘(F) DISPOSITION.—If a trust ceases to be 

13 a qualified trust at any time, a covered expa14 triate disposes of an interest in a qualified 

15 trust, or a covered expatriate holding an inter16 est in a qualified trust dies, then, in lieu of the 

17 tax imposed by subparagraph (A)(ii), there is 

18 hereby imposed a tax equal to the lesser of— 

19 ‘‘(i) the tax determined under para20 graph (1) as if the day before the expatria21 tion date were the date of such cessation, 

22 disposition, or death, whichever is applica23 ble, or 

24 ‘‘(ii) the balance in the tax deferred 

25 account immediately before such date. 


hmoore on PROD1PC68 with HMBILLS
222 

•S 554 IS

1 Such tax shall be imposed on the trust and 

2 each trustee shall be personally liable for the 

3 amount of such tax and any other beneficiary 

4 of the trust shall be entitled to recover from the 

5 covered expatriate or the estate the amount of 

6 such tax imposed on the other beneficiary. 

7 ‘‘(G) DEFINITIONS AND SPECIAL RULES.— 

8 For purposes of this paragraph— 

9 ‘‘(i) QUALIFIED TRUST.—The term 

10 ‘qualified trust’ means a trust which is de11 scribed in section 7701(a)(30)(E). 

12 ‘‘(ii) VESTED INTEREST.—The term 

13 ‘vested interest’ means any interest which, 

14 as of the day before the expatriation date, 

15 is vested in the beneficiary. 

16 ‘‘(iii) NONVESTED INTEREST.—The 

17 term ‘nonvested interest’ means, with re18 spect to any beneficiary, any interest in a 

19 trust which is not a vested interest. Such 

20 interest shall be determined by assuming 

21 the maximum exercise of discretion in 

22 favor of the beneficiary and the occurrence 

23 of all contingencies in favor of the bene24 ficiary. 


hmoore on PROD1PC68 with HMBILLS
223 

•S 554 IS

1 ‘‘(iv) ADJUSTMENTS.—The Secretary 

2 may provide for such adjustments to the 

3 bases of assets in a trust or a deferred tax 

4 account, and the timing of such adjust5 ments, in order to ensure that gain is 

6 taxed only once. 

7 ‘‘(v) COORDINATION WITH RETIRE8 MENT PLAN RULES.—This subsection shall 

9 not apply to an interest in a trust which 

10 is part of a retirement plan to which sub11 section (d)(2) applies. 

12 ‘‘(3) DETERMINATION OF BENEFICIARIES’ IN13 TEREST IN TRUST.— 

14 ‘‘(A) DETERMINATIONS UNDER PARA15 GRAPH (1).—For purposes of paragraph (1), a 

16 beneficiary’s interest in a trust shall be based 

17 upon all relevant facts and circumstances, in18 cluding the terms of the trust instrument and 

19 any letter of wishes or similar document, histor20 ical patterns of trust distributions, and the ex21 istence of and functions performed by a trust 

22 protector or any similar adviser. 

23 ‘‘(B) OTHER DETERMINATIONS.—For pur24 poses of this section— 


hmoore on PROD1PC68 with HMBILLS
224 

•S 554 IS

1 ‘‘(i) CONSTRUCTIVE OWNERSHIP.—If 

2 a beneficiary of a trust is a corporation, 

3 partnership, trust, or estate, the share4 holders, partners, or beneficiaries shall be 

5 deemed to be the trust beneficiaries for 

6 purposes of this section. 

7 ‘‘(ii) TAXPAYER RETURN POSITION.— 

8 A taxpayer shall clearly indicate on its in9 come tax return— 

10 ‘‘(I) the methodology used to de11 termine that taxpayer’s trust interest 

12 under this section, and 

13 ‘‘(II) if the taxpayer knows (or 

14 has reason to know) that any other 

15 beneficiary of such trust is using a 

16 different methodology to determine 

17 such beneficiary’s trust interest under 

18 this section. 

19 ‘‘(g) TERMINATION OF DEFERRALS, ETC.—In the 

20 case of any covered expatriate, notwithstanding any other 

21 provision of this title— 

22 ‘‘(1) any period during which recognition of in23 come or gain is deferred shall terminate on the day 

24 before the expatriation date, and 


hmoore on PROD1PC68 with HMBILLS
225 

•S 554 IS

1 ‘‘(2) any extension of time for payment of tax 

2 shall cease to apply on the day before the expatria3 tion date and the unpaid portion of such tax shall 

4 be due and payable at the time and in the manner 

5 prescribed by the Secretary. 

6 ‘‘(h) IMPOSITION OF TENTATIVE TAX.— 

7 ‘‘(1) IN GENERAL.—If an individual is required 

8 to include any amount in gross income under sub9 section (a) for any taxable year, there is hereby im10 posed, immediately before the expatriation date, a 

11 tax in an amount equal to the amount of tax which 

12 would be imposed if the taxable year were a short 

13 taxable year ending on the expatriation date. 

14 ‘‘(2) DUE DATE.—The due date for any tax im15 posed by paragraph (1) shall be the 90th day after 

16 the expatriation date. 

17 ‘‘(3) TREATMENT OF TAX.—Any tax paid under 

18 paragraph (1) shall be treated as a payment of the 

19 tax imposed by this chapter for the taxable year to 

20 which subsection (a) applies. 

21 ‘‘(4) DEFERRAL OF TAX.—The provisions of 

22 subsection (b) shall apply to the tax imposed by this 

23 subsection to the extent attributable to gain includ24 ible in gross income by reason of this section. 


hmoore on PROD1PC68 with HMBILLS
226 

•S 554 IS

1 ‘‘(i) SPECIAL LIENS FOR DEFERRED TAX

2 AMOUNTS.— 

3 ‘‘(1) IMPOSITION OF LIEN.— 

4 ‘‘(A) IN GENERAL.—If a covered expatriate 

5 makes an election under subsection (a)(4) or 

6 (b) which results in the deferral of any tax im7 posed by reason of subsection (a), the deferred 

8 amount (including any interest, additional 

9 amount, addition to tax, assessable penalty, and 

10 costs attributable to the deferred amount) shall 

11 be a lien in favor of the United States on all 

12 property of the expatriate located in the United 

13 States (without regard to whether this section 

14 applies to the property). 

15 ‘‘(B) DEFERRED AMOUNT.—For purposes 

16 of this subsection, the deferred amount is the 

17 amount of the increase in the covered expatri18 ate’s income tax which, but for the election 

19 under subsection (a)(4) or (b), would have oc20 curred by reason of this section for the taxable 

21 year including the expatriation date. 

22 ‘‘(2) PERIOD OF LIEN.—The lien imposed by 

23 this subsection shall arise on the expatriation date 

24 and continue until— 


hmoore on PROD1PC68 with HMBILLS
227 

•S 554 IS

1 ‘‘(A) the liability for tax by reason of this 

2 section is satisfied or has become unenforceable 

3 by reason of lapse of time, or 

4 ‘‘(B) it is established to the satisfaction of 

5 the Secretary that no further tax liability may 

6 arise by reason of this section. 

7 ‘‘(3) CERTAIN RULES APPLY.—The rules set 

8 forth in paragraphs (1), (3), and (4) of section 

9 6324A(d) shall apply with respect to the lien im10 posed by this subsection as if it were a lien imposed 

11 by section 6324A. 

12 ‘‘(j) REGULATIONS.—The Secretary shall prescribe 

13 such regulations as may be necessary or appropriate to 

14 carry out the purposes of this section.’’. 

15 (b) INCLUSION IN INCOME OF GIFTS AND BEQUESTS

16 RECEIVED BY UNITED STATES CITIZENS AND RESIDENTS

17 FROM EXPATRIATES.—Section 102 (relating to gifts, etc. 

18 not included in gross income) is amended by adding at 

19 the end the following new subsection: 

20 ‘‘(d) GIFTS AND INHERITANCES FROM COVERED EX21 PATRIATES.— 

22 ‘‘(1) IN GENERAL.—Subsection (a) shall not ex23 clude from gross income the value of any property 

24 acquired by gift, bequest, devise, or inheritance from 

25 a covered expatriate after the expatriation date. For 


hmoore on PROD1PC68 with HMBILLS
228 

•S 554 IS

1 purposes of this subsection, any term used in this 

2 subsection which is also used in section 877A shall 

3 have the same meaning as when used in section 

4 877A. 

5 ‘‘(2) EXCEPTIONS FOR TRANSFERS OTHERWISE

6 SUBJECT TO ESTATE OR GIFT TAX.—Paragraph (1) 

7 shall not apply to any property if either— 

8 ‘‘(A) the gift, bequest, devise, or inherit9 ance is— 

10 ‘‘(i) shown on a timely filed return of 

11 tax imposed by chapter 12 as a taxable gift 

12 by the covered expatriate, or 

13 ‘‘(ii) included in the gross estate of 

14 the covered expatriate for purposes of 

15 chapter 11 and shown on a timely filed re16 turn of tax imposed by chapter 11 of the 

17 estate of the covered expatriate, or 

18 ‘‘(B) no such return was timely filed but 

19 no such return would have been required to be 

20 filed even if the covered expatriate were a cit21 izen or long-term resident of the United 

22 States.’’. 

23 (c) DEFINITION OF TERMINATION OF UNITED

24 STATES CITIZENSHIP.—Section 7701(a) is amended by 

25 adding at the end the following new paragraph: 


hmoore on PROD1PC68 with HMBILLS
229 

•S 554 IS

1 ‘‘(49) TERMINATION OF UNITED STATES CITI2 ZENSHIP.— 

3 ‘‘(A) IN GENERAL.—An individual shall 

4 not cease to be treated as a United States cit5 izen before the date on which the individual’s 

6 citizenship is treated as relinquished under sec7 tion 877A(e)(3). 

8 ‘‘(B) DUAL CITIZENS.—Under regulations 

9 prescribed by the Secretary, subparagraph (A) 

10 shall not apply to an individual who became at 

11 birth a citizen of the United States and a cit12 izen of another country.’’. 

13 (d) INELIGIBILITY FOR VISA OR ADMISSION TO

14 UNITED STATES.— 

15 (1) IN GENERAL.—Section 212(a)(10)(E) of the 

16 Immigration and Nationality Act (8 U.S.C. 

17 1182(a)(10)(E)) is amended to read as follows: 

18 ‘‘(E) FORMER CITIZENS NOT IN COMPLI19 ANCE WITH EXPATRIATION REVENUE PROVI20 SIONS.—Any alien who is a former citizen of 

21 the United States who relinquishes United 

22 States citizenship (within the meaning of sec23 tion 877A(e)(3) of the Internal Revenue Code 

24 of 1986) and who is not in compliance with secVerDate Aug 31 2005 03:57 Feb 17, 2007 Jkt 059200 PO 00000 Frm 00229 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
230 

•S 554 IS

1 tion 877A of such Code (relating to expatria2 tion) is inadmissible.’’. 

3 (2) AVAILABILITY OF INFORMATION.— 

4 (A) IN GENERAL.—Section 6103(l) (relat5 ing to disclosure of returns and return informa6 tion for purposes other than tax administration) 

7 is amended by adding at the end the following 

8 new paragraph: 

9 ‘‘(21) DISCLOSURE TO DENY VISA OR ADMIS10 SION TO CERTAIN EXPATRIATES.—Upon written re11 quest of the Attorney General or the Attorney Gen12 eral’s delegate, the Secretary shall disclose whether 

13 an individual is in compliance with section 877A 

14 (and if not in compliance, any items of noncompli15 ance) to officers and employees of the Federal agen16 cy responsible for administering section 

17 212(a)(10)(E) of the Immigration and Nationality 

18 Act solely for the purpose of, and to the extent nec19 essary in, administering such section 

20 212(a)(10)(E).’’. 

21 (B) SAFEGUARDS.—Section 6103(p)(4) 

22 (relating to safeguards) is amended by striking 

23 ‘‘or (20)’’ each place it appears and inserting 

24 ‘‘(20), or (21)’’. 


hmoore on PROD1PC68 with HMBILLS
231 

•S 554 IS

1 (3) EFFECTIVE DATES.—The amendments 

2 made by this subsection shall apply to individuals 

3 who relinquish United States citizenship on or after 

4 the date of the enactment of this Act. 

5 (e) CONFORMING AMENDMENTS.— 

6 (1) Section 877 is amended by adding at the 

7 end the following new subsection: 

8 ‘‘(h) APPLICATION.—This section shall not apply to 

9 an expatriate (as defined in section 877A(e)) whose expa10 triation date (as so defined) occurs on or after the date 

11 of the enactment of this subsection.’’. 

12 (2) Section 2107 is amended by adding at the 

13 end the following new subsection: 

14 ‘‘(f) APPLICATION.—This section shall not apply to 

15 any expatriate subject to section 877A.’’. 

16 (3) Section 2501(a)(3) is amended by adding at 

17 the end the following new subparagraph: 

18 ‘‘(C) APPLICATION.—This paragraph shall 

19 not apply to any expatriate subject to section 

20 877A.’’. 

21 (4) Section 6039G(a) is amended by inserting 

22 ‘‘or 877A’’ after ‘‘section 877(b)’’. 

23 (5) The second sentence of section 6039G(d) is 

24 amended by inserting ‘‘or who relinquishes United 


hmoore on PROD1PC68 with HMBILLS
232 

•S 554 IS

1 States citizenship (within the meaning of section 

2 877A(e)(3))’’ after ‘‘section 877(a))’’. 

3 (f) CLERICAL AMENDMENT.—The table of sections 

4 for subpart A of part II of subchapter N of chapter 1 

5 is amended by inserting after the item relating to section 

6 877 the following new item: 

‘‘Sec. 877A. Tax responsibilities of expatriation.’’. 

7 (g) EFFECTIVE DATE.— 

8 (1) IN GENERAL.—Except as provided in this 

9 subsection, the amendments made by this section 

10 shall apply to expatriates (within the meaning of 

11 section 877A(e) of the Internal Revenue Code of 

12 1986, as added by this section) whose expatriation 

13 date (as so defined) occurs on or after the date of 

14 the enactment of this Act. 

15 (2) GIFTS AND BEQUESTS.—Section 102(d) of 

16 the Internal Revenue Code of 1986 (as added by 

17 subsection (b)) shall apply to gifts and bequests re18 ceived on or after the date of the enactment of this 

19 Act, from an individual or the estate of an individual 

20 whose expatriation date (as so defined) occurs after 

21 such date. 

22 (3) DUE DATE FOR TENTATIVE TAX.—The due 

23 date under section 877A(h)(2) of the Internal Rev24 enue Code of 1986, as added by this section, shall 


hmoore on PROD1PC68 with HMBILLS
233 

•S 554 IS

1 in no event occur before the 90th day after the date 

2 of the enactment of this Act. 

3 SEC. 214. MODIFICATION OF EFFECTIVE DATE OF LEASING 

4 PROVISIONS OF THE AMERICAN JOBS CRE5 ATION ACT OF 2004. 

6 (a) LEASES TO FOREIGN ENTITIES.—Section 849(b) 

7 of the American Jobs Creation Act of 2004 is amended 

8 by adding at the end the following new paragraph: 

9 ‘‘(5) LEASES TO FOREIGN ENTITIES.—In the 

10 case of tax-exempt use property leased to a tax-ex11 empt entity which is a foreign person or entity, the 

12 amendments made by this part shall apply to taxable 

13 years beginning after December 31, 2006, with re14 spect to leases entered into on or before March 12, 

15 2004.’’. 

16 (b) EFFECTIVE DATE.—The amendment made by 

17 this section shall take effect as if included in the enact18 ment of the American Jobs Creation Act of 2004. 

19 SEC. 215. APPLICATION OF RULES TREATING INVERTED 

20 CORPORATIONS AS DOMESTIC CORPORA21 TIONS TO CERTAIN TRANSACTIONS OCCUR22 RING AFTER MARCH 20, 2002. 

23 (a) IN GENERAL.—Section 7874(b) (relating to in24 verted corporations treated as domestic corporations) is 

25 amended to read as follows: 


hmoore on PROD1PC68 with HMBILLS
234 

•S 554 IS

1 ‘‘(b) INVERTED CORPORATIONS TREATED AS DO2 MESTIC CORPORATIONS.— 

3 ‘‘(1) IN GENERAL.—Notwithstanding section 

4 7701(a)(4), a foreign corporation shall be treated for 

5 purposes of this title as a domestic corporation if 

6 such corporation would be a surrogate foreign cor7 poration if subsection (a)(2) were applied by sub8 stituting ‘80 percent’ for ‘60 percent’. 

9 ‘‘(2) SPECIAL RULE FOR CERTAIN TRANS10 ACTIONS OCCURRING AFTER MARCH 20, 2002.— 

11 ‘‘(A) IN GENERAL.—If— 

12 ‘‘(i) paragraph (1) does not apply to 

13 a foreign corporation, but 

14 ‘‘(ii) paragraph (1) would apply to 

15 such corporation if, in addition to the sub16 stitution under paragraph (1), subsection 

17 (a)(2) were applied by substituting ‘March 

18 20, 2002’ for ‘March 4, 2003’ each place 

19 it appears, 

20 then paragraph (1) shall apply to such corpora21 tion but only with respect to taxable years of 

22 such corporation beginning after December 31, 

23 2006. 

24 ‘‘(B) SPECIAL RULES.—Subject to such 

25 rules as the Secretary may prescribe, in the 


hmoore on PROD1PC68 with HMBILLS
235 

•S 554 IS

1 case of a corporation to which paragraph (1) 

2 applies by reason of this paragraph— 

3 ‘‘(i) the corporation shall be treated, 

4 as of the close of its last taxable year be5 ginning before January 1, 2007, as having 

6 transferred all of its assets, liabilities, and 

7 earnings and profits to a domestic corpora8 tion in a transaction with respect to which 

9 no tax is imposed under this title, 

10 ‘‘(ii) the bases of the assets trans11 ferred in the transaction to the domestic 

12 corporation shall be the same as the bases 

13 of the assets in the hands of the foreign 

14 corporation, subject to any adjustments 

15 under this title for built-in losses, 

16 ‘‘(iii) the basis of the stock of any 

17 shareholder in the domestic corporation 

18 shall be the same as the basis of the stock 

19 of the shareholder in the foreign corpora20 tion for which it is treated as exchanged, 

21 and 

22 ‘‘(iv) the transfer of any earnings and 

23 profits by reason of clause (i) shall be dis24 regarded in determining any deemed divi25 dend or foreign tax creditable to the doVerDate Aug 31 2005 03:57 Feb 17, 2007 Jkt 059200 PO 00000 Frm 00235 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
236 

•S 554 IS

1 mestic corporation with respect to such 

2 transfer. 

3 ‘‘(C) REGULATIONS.—The Secretary may 

4 prescribe such regulations as may be necessary 

5 or appropriate to carry out this paragraph, in6 cluding regulations to prevent the avoidance of 

7 the purposes of this paragraph.’’. 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 this section shall apply to taxable years beginning after 

10 December 31, 2006. 

11 Subtitle C—Economic Substance 

12 Doctrine 

13 SEC. 221. CLARIFICATION OF ECONOMIC SUBSTANCE DOC14 TRINE. 

15 (a) IN GENERAL.—Section 7701 is amended by re16 designating subsection (o) as subsection (p) and by insert17 ing after subsection (n) the following new subsection: 

18 ‘‘(o) CLARIFICATION OF ECONOMIC SUBSTANCE

19 DOCTRINE; ETC.— 

20 ‘‘(1) GENERAL RULES.— 

21 ‘‘(A) IN GENERAL.—In any case in which 

22 a court determines that the economic substance 

23 doctrine is relevant for purposes of this title to 

24 a transaction (or series of transactions), such 

25 transaction (or series of transactions) shall have 


hmoore on PROD1PC68 with HMBILLS
237 

•S 554 IS

1 economic substance only if the requirements of 

2 this paragraph are met. 

3 ‘‘(B) DEFINITION OF ECONOMIC SUB4 STANCE.—For purposes of subparagraph (A)— 

5 ‘‘(i) IN GENERAL.—A transaction has 

6 economic substance only if— 

7 ‘‘(I) the transaction changes in a 

8 meaningful way (apart from Federal 

9 tax effects) the taxpayer’s economic 

10 position, and 

11 ‘‘(II) the taxpayer has a substan12 tial nontax purpose for entering into 

13 such transaction and the transaction 

14 is a reasonable means of accom15 plishing such purpose. 

16 In applying subclause (II), a purpose of 

17 achieving a financial accounting benefit 

18 shall not be taken into account in deter19 mining whether a transaction has a sub20 stantial nontax purpose if the origin of 

21 such financial accounting benefit is a re22 duction of income tax. 

23 ‘‘(ii) SPECIAL RULE WHERE TAX24 PAYER RELIES ON PROFIT POTENTIAL.—A 

25 transaction shall not be treated as having 


hmoore on PROD1PC68 with HMBILLS
238 

•S 554 IS

1 economic substance by reason of having a 

2 potential for profit unless— 

3 ‘‘(I) the present value of the rea4 sonably expected pre-tax profit from 

5 the transaction is substantial in rela6 tion to the present value of the ex7 pected net tax benefits that would be 

8 allowed if the transaction were re9 spected, and 

10 ‘‘(II) the reasonably expected 

11 pre-tax profit from the transaction ex12 ceeds a risk-free rate of return. 

13 ‘‘(C) TREATMENT OF FEES AND FOREIGN

14 TAXES.—Fees and other transaction expenses 

15 and foreign taxes shall be taken into account as 

16 expenses in determining pre-tax profit under 

17 subparagraph (B)(ii). 

18 ‘‘(2) SPECIAL RULES FOR TRANSACTIONS WITH

19 TAX-INDIFFERENT PARTIES.— 

20 ‘‘(A) SPECIAL RULES FOR FINANCING

21 TRANSACTIONS.—The form of a transaction 

22 which is in substance the borrowing of money 

23 or the acquisition of financial capital directly or 

24 indirectly from a tax-indifferent party shall not 

25 be respected if the present value of the deducVerDate Aug 31 2005 03:57 Feb 17, 2007 Jkt 059200 PO 00000 Frm 00238 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
239 

•S 554 IS

1 tions to be claimed with respect to the trans2 action is substantially in excess of the present 

3 value of the anticipated economic returns of the 

4 person lending the money or providing the fi5 nancial capital. A public offering shall be treat6 ed as a borrowing, or an acquisition of financial 

7 capital, from a tax-indifferent party if it is rea8 sonably expected that at least 50 percent of the 

9 offering will be placed with tax-indifferent par10 ties. 

11 ‘‘(B) ARTIFICIAL INCOME SHIFTING AND

12 BASIS ADJUSTMENTS.—The form of a trans13 action with a tax-indifferent party shall not be 

14 respected if— 

15 ‘‘(i) it results in an allocation of in16 come or gain to the tax-indifferent party in 

17 excess of such party’s economic income or 

18 gain, or 

19 ‘‘(ii) it results in a basis adjustment 

20 or shifting of basis on account of over21 stating the income or gain of the tax-indif22 ferent party. 

23 ‘‘(3) DEFINITIONS AND SPECIAL RULES.—For 

24 purposes of this subsection— 


hmoore on PROD1PC68 with HMBILLS
240 

•S 554 IS

1 ‘‘(A) ECONOMIC SUBSTANCE DOCTRINE.— 

2 The term ‘economic substance doctrine’ means 

3 the common law doctrine under which tax bene4 fits under subtitle A with respect to a trans5 action are not allowable if the transaction does 

6 not have economic substance or lacks a business 

7 purpose. 

8 ‘‘(B) TAX-INDIFFERENT PARTY.—The 

9 term ‘tax-indifferent party’ means any person 

10 or entity not subject to tax imposed by subtitle 

11 A. A person shall be treated as a tax-indifferent 

12 party with respect to a transaction if the items 

13 taken into account with respect to the trans14 action have no substantial impact on such per15 son’s liability under subtitle A. 

16 ‘‘(C) EXCEPTION FOR PERSONAL TRANS17 ACTIONS OF INDIVIDUALS.—In the case of an 

18 individual, this subsection shall apply only to 

19 transactions entered into in connection with a 

20 trade or business or an activity engaged in for 

21 the production of income. 

22 ‘‘(D) TREATMENT OF LESSORS.—In apply23 ing paragraph (1)(B)(ii) to the lessor of tan24 gible property subject to a lease— 


hmoore on PROD1PC68 with HMBILLS
241 

•S 554 IS

1 ‘‘(i) the expected net tax benefits with 

2 respect to the leased property shall not in3 clude the benefits of— 

4 ‘‘(I) depreciation, 

5 ‘‘(II) any tax credit, or 

6 ‘‘(III) any other deduction as 

7 provided in guidance by the Secretary, 

8 and 

9 ‘‘(ii) subclause (II) of paragraph 

10 (1)(B)(ii) shall be disregarded in deter11 mining whether any of such benefits are al12 lowable. 

13 ‘‘(4) OTHER COMMON LAW DOCTRINES NOT AF14 FECTED.—Except as specifically provided in this 

15 subsection, the provisions of this subsection shall not 

16 be construed as altering or supplanting any other 

17 rule of law, and the requirements of this subsection 

18 shall be construed as being in addition to any such 

19 other rule of law. 

20 ‘‘(5) REGULATIONS.—The Secretary shall pre21 scribe such regulations as may be necessary or ap22 propriate to carry out the purposes of this sub23 section. Such regulations may include exemptions 

24 from the application of this subsection.’’. 


hmoore on PROD1PC68 with HMBILLS
242 

•S 554 IS

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

2 this section shall apply to transactions entered into after 

3 the date of the enactment of this Act. 

4 SEC. 222. PENALTY FOR UNDERSTATEMENTS ATTRIB5 UTABLE TO TRANSACTIONS LACKING ECO6 NOMIC SUBSTANCE, ETC. 

7 (a) IN GENERAL.—Subchapter A of chapter 68 is 

8 amended by inserting after section 6662A the following 

9 new section: 

10 ‘‘SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIB11 UTABLE TO TRANSACTIONS LACKING ECO12 NOMIC SUBSTANCE, ETC. 

13 ‘‘(a) IMPOSITION OF PENALTY.—If a taxpayer has an 

14 noneconomic substance transaction understatement for 

15 any taxable year, there shall be added to the tax an 

16 amount equal to 40 percent of the amount of such under17 statement. 

18 ‘‘(b) REDUCTION OF PENALTY FOR DISCLOSED

19 TRANSACTIONS.—Subsection (a) shall be applied by sub20 stituting ‘20 percent’ for ‘40 percent’ with respect to the 

21 portion of any noneconomic substance transaction under22 statement with respect to which the relevant facts affect23 ing the tax treatment of the item are adequately disclosed 

24 in the return or a statement attached to the return. 


hmoore on PROD1PC68 with HMBILLS
243 

•S 554 IS

1 ‘‘(c) NONECONOMIC SUBSTANCE TRANSACTION UN2 DERSTATEMENT.—For purposes of this section— 

3 ‘‘(1) IN GENERAL.—The term ‘noneconomic 

4 substance transaction understatement’ means any 

5 amount which would be an understatement under 

6 section 6662A(b)(1) if section 6662A were applied 

7 by taking into account items attributable to non8 economic substance transactions rather than items 

9 to which section 6662A would apply without regard 

10 to this paragraph. 

11 ‘‘(2) NONECONOMIC SUBSTANCE TRANS12 ACTION.—The term ‘noneconomic substance trans13 action’ means any transaction if— 

14 ‘‘(A) there is a lack of economic substance 

15 (within the meaning of section 7701(o)(1)) for 

16 the transaction giving rise to the claimed ben17 efit or the transaction was not respected under 

18 section 7701(o)(2), or 

19 ‘‘(B) the transaction fails to meet the re20 quirements of any similar rule of law. 

21 ‘‘(d) RULES APPLICABLE TO COMPROMISE OF PEN22 ALTY.— 

23 ‘‘(1) IN GENERAL.—If the 1st letter of pro24 posed deficiency which allows the taxpayer an oppor25 tunity for administrative review in the Internal RevVerDate Aug 31 2005 03:57 Feb 17, 2007 Jkt 059200 PO 00000 Frm 00243 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
244 

•S 554 IS

1 enue Service Office of Appeals has been sent with 

2 respect to a penalty to which this section applies, 

3 only the Commissioner of Internal Revenue may 

4 compromise all or any portion of such penalty. 

5 ‘‘(2) APPLICABLE RULES.—The rules of para6 graphs (2) and (3) of section 6707A(d) shall apply 

7 for purposes of paragraph (1). 

8 ‘‘(e) COORDINATION WITH OTHER PENALTIES.—Ex9 cept as otherwise provided in this part, the penalty im10 posed by this section shall be in addition to any other pen11 alty imposed by this title. 

12 ‘‘(f) CROSS REFERENCES.— 

‘‘(1) For coordination of penalty with understatements 

under section 6662 and other special rules, see section 

6662A(e). 

‘‘(2) For reporting of penalty imposed under this section 

to the Securities and Exchange Commission, see section 

6707A(e).’’. 

13 (b) COORDINATION WITH OTHER UNDERSTATE14 MENTS AND PENALTIES.— 

15 (1) The second sentence of section 

16 6662(d)(2)(A) is amended by inserting ‘‘and without 

17 regard to items with respect to which a penalty is 

18 imposed by section 6662B’’ before the period at the 

19 end. 

20 (2) Subsection (e) of section 6662A is amend21 ed— 


hmoore on PROD1PC68 with HMBILLS
245 

•S 554 IS

1 (A) in paragraph (1), by inserting ‘‘and 

2 noneconomic substance transaction understate3 ments’’ after ‘‘reportable transaction under4 statements’’ both places it appears, 

5 (B) in paragraph (2)(A), by inserting ‘‘and 

6 a noneconomic substance transaction under7 statement’’ after ‘‘reportable transaction under8 statement’’, 

9 (C) in paragraph (2)(B), by inserting 

10 ‘‘6662B or’’ before ‘‘6663’’, 

11 (D) in paragraph (2)(C)(i), by inserting 

12 ‘‘or section 6662B’’ before the period at the 

13 end, 

14 (E) in paragraph (2)(C)(ii), by inserting 

15 ‘‘and section 6662B’’ after ‘‘This section’’, 

16 (F) in paragraph (3), by inserting ‘‘or non17 economic substance transaction understate18 ment’’ after ‘‘reportable transaction understate19 ment’’, and 

20 (G) by adding at the end the following new 

21 paragraph: 

22 ‘‘(4) NONECONOMIC SUBSTANCE TRANSACTION

23 UNDERSTATEMENT.—For purposes of this sub24 section, the term ‘noneconomic substance transVerDate Aug 31 2005 03:57 Feb 17, 2007 Jkt 059200 PO 00000 Frm 00245 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
246 

•S 554 IS

1 action understatement’ has the meaning given such 

2 term by section 6662B(c).’’. 

3 (3) Subsection (e) of section 6707A is amend4 ed— 

5 (A) by striking ‘‘or’’ at the end of subpara6 graph (B), and 

7 (B) by striking subparagraph (C) and in8 serting the following new subparagraphs: 

9 ‘‘(C) is required to pay a penalty under 

10 section 6662B with respect to any noneconomic 

11 substance transaction, or 

12 ‘‘(D) is required to pay a penalty under 

13 section 6662(h) with respect to any transaction 

14 and would (but for section 6662A(e)(2)(C)) 

15 have been subject to penalty under section 

16 6662A at a rate prescribed under section 

17 6662A(c) or under section 6662B,’’. 

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

19 for part II of subchapter A of chapter 68 is amended by 

20 inserting after the item relating to section 6662A the fol21 lowing new item: 

‘‘Sec. 6662B. Penalty for understatements attributable to transactions lacking 

economic substance, etc.’’. 

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

23 this section shall apply to transactions entered into after 

24 the date of the enactment of this Act. 


hmoore on PROD1PC68 with HMBILLS
247 

•S 554 IS

1 SEC. 223. DENIAL OF DEDUCTION FOR INTEREST ON UN2 DERPAYMENTS ATTRIBUTABLE TO NON3 ECONOMIC SUBSTANCE TRANSACTIONS. 

4 (a) IN GENERAL.—Section 163(m) (relating to inter5 est on unpaid taxes attributable to nondisclosed reportable 

6 transactions) is amended— 

7 (1) by striking ‘‘attributable’’ and all that fol8 lows and inserting the following: ‘‘attributable to— 

9 ‘‘(1) the portion of any reportable transaction 

10 understatement (as defined in section 6662A(b)) 

11 with respect to which the requirement of section 

12 6664(d)(2)(A) is not met, or 

13 ‘‘(2) any noneconomic substance transaction 

14 understatement (as defined in section 6662B(c)).’’, 

15 and 

16 (2) by inserting ‘‘And Noneconomic Substance 

17 Transactions’’ in the heading thereof after ‘‘Trans18 actions’’. 

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

20 this section shall apply to transactions after the date of 

21 the enactment of this Act in taxable years ending after 

22 such date. 


hmoore on PROD1PC68 with HMBILLS
248 

•S 554 IS

1 Subtitle D—Penalties and Fines 

2 SEC. 231. DENIAL OF DEDUCTION FOR CERTAIN FINES, 

3 PENALTIES, AND OTHER AMOUNTS. 

4 (a) IN GENERAL.—Subsection (f) of section 162 (re5 lating to trade or business expenses) is amended to read 

6 as follows: 

7 ‘‘(f) FINES, PENALTIES, AND OTHER AMOUNTS.— 

8 ‘‘(1) IN GENERAL.—Except as provided in para9 graph (2), no deduction otherwise allowable shall be 

10 allowed under this chapter for any amount paid or 

11 incurred (whether by suit, agreement, or otherwise) 

12 to, or at the direction of, a government or entity de13 scribed in paragraph (4) in relation to the violation 

14 of any law or the investigation or inquiry by such 

15 government or entity into the potential violation of 

16 any law. 

17 ‘‘(2) EXCEPTION FOR AMOUNTS CONSTITUTING

18 RESTITUTION OR PAID TO COME INTO COMPLIANCE

19 WITH LAW.—Paragraph (1) shall not apply to any 

20 amount which— 

21 ‘‘(A) the taxpayer establishes— 

22 ‘‘(i) constitutes restitution (including 

23 remediation of property) for damage or 

24 harm caused by or which may be caused by 


hmoore on PROD1PC68 with HMBILLS
249 

•S 554 IS

1 the violation of any law or the potential 

2 violation of any law, or 

3 ‘‘(ii) is paid to come into compliance 

4 with any law which was violated or in5 volved in the investigation or inquiry, and 

6 ‘‘(B) is identified as restitution or as an 

7 amount paid to come into compliance with the 

8 law, as the case may be, in the court order or 

9 settlement agreement. 

10 Identification pursuant to subparagraph (B) alone 

11 shall not satisfy the requirement under subpara12 graph (A). This paragraph shall not apply to any 

13 amount paid or incurred as reimbursement to the 

14 government or entity for the costs of any investiga15 tion or litigation. 

16 ‘‘(3) EXCEPTION FOR AMOUNTS PAID OR IN17 CURRED AS THE RESULT OF CERTAIN COURT OR18 DERS.—Paragraph (1) shall not apply to any 

19 amount paid or incurred by order of a court in a 

20 suit in which no government or entity described in 

21 paragraph (4) is a party. 

22 ‘‘(4) CERTAIN NONGOVERNMENTAL REGU23 LATORY ENTITIES.—An entity is described in this 

24 paragraph if it is— 


hmoore on PROD1PC68 with HMBILLS
250 

•S 554 IS

1 ‘‘(A) a nongovernmental entity which exer2 cises self-regulatory powers (including imposing 

3 sanctions) in connection with a qualified board 

4 or exchange (as defined in section 1256(g)(7)), 

5 or 

6 ‘‘(B) to the extent provided in regulations, 

7 a nongovernmental entity which exercises self8 regulatory powers (including imposing sanc9 tions) as part of performing an essential gov10 ernmental function. 

11 ‘‘(5) EXCEPTION FOR TAXES DUE.—Paragraph 

12 (1) shall not apply to any amount paid or incurred 

13 as taxes due.’’. 

14 (b) REPORTING OF DEDUCTIBLE AMOUNTS.— 

15 (1) IN GENERAL.—Subpart B of part III of 

16 subchapter A of chapter 61, as amended by this Act, 

17 is amended by adding at the end the following new 

18 section: 

19 ‘‘SEC. 6050V. INFORMATION WITH RESPECT TO CERTAIN 

20 FINES, PENALTIES, AND OTHER AMOUNTS. 

21 ‘‘(a) REQUIREMENT OF REPORTING.— 

22 ‘‘(1) IN GENERAL.—The appropriate official of 

23 any government or entity which is described in sec24 tion 162(f)(4) which is involved in a suit or agree25 ment described in paragraph (2) shall make a return 


hmoore on PROD1PC68 with HMBILLS
251 

•S 554 IS

1 in such form as determined by the Secretary setting 

2 forth— 

3 ‘‘(A) the amount required to be paid as a 

4 result of the suit or agreement to which para5 graph (1) of section 162(f) applies, 

6 ‘‘(B) any amount required to be paid as a 

7 result of the suit or agreement which con8 stitutes restitution or remediation of property, 

9 and 

10 ‘‘(C) any amount required to be paid as a 

11 result of the suit or agreement for the purpose 

12 of coming into compliance with any law which 

13 was violated or involved in the investigation or 

14 inquiry. 

15 ‘‘(2) SUIT OR AGREEMENT DESCRIBED.— 

16 ‘‘(A) IN GENERAL.—A suit or agreement is 

17 described in this paragraph if— 

18 ‘‘(i) it is— 

19 ‘‘(I) a suit with respect to a vio20 lation of any law over which the gov21 ernment or entity has authority and 

22 with respect to which there has been 

23 a court order, or 

24 ‘‘(II) an agreement which is en25 tered into with respect to a violation 


hmoore on PROD1PC68 with HMBILLS
252 

•S 554 IS

1 of any law over which the government 

2 or entity has authority, or with re3 spect to an investigation or inquiry by 

4 the government or entity into the po5 tential violation of any law over which 

6 such government or entity has author7 ity, and 

8 ‘‘(ii) the aggregate amount involved in 

9 all court orders and agreements with re10 spect to the violation, investigation, or in11 quiry is $600 or more. 

12 ‘‘(B) ADJUSTMENT OF REPORTING

13 THRESHOLD.—The Secretary may adjust the 

14 $600 amount in subparagraph (A)(ii) as nec15 essary in order to ensure the efficient adminis16 tration of the internal revenue laws. 

17 ‘‘(3) TIME OF FILING.—The return required 

18 under this subsection shall be filed not later than— 

19 ‘‘(A) 30 days after the date on which a 

20 court order is issued with respect to the suit or 

21 the date the agreement is entered into, as the 

22 case may be, or 

23 ‘‘(B) the date specified Secretary. 

24 ‘‘(b) STATEMENTS TO BE FURNISHED TO INDIVID25 UALS INVOLVED IN THE SETTLEMENT.—Every person reVerDate Aug 31 2005 03:57 Feb 17, 2007 Jkt 059200 PO 00000 Frm 00252 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
253 

•S 554 IS

1 quired to make a return under subsection (a) shall furnish 

2 to each person who is a party to the suit or agreement 

3 a written statement showing— 

4 ‘‘(1) the name of the government or entity, and 

5 ‘‘(2) the information supplied to the Secretary 

6 under subsection (a)(1). 

7 The written statement required under the preceding sen8 tence shall be furnished to the person at the same time 

9 the government or entity provides the Secretary with the 

10 information required under subsection (a). 

11 ‘‘(c) APPROPRIATE OFFICIAL DEFINED.—For pur12 poses of this section, the term ‘appropriate official’ means 

13 the officer or employee having control of the suit, inves14 tigation, or inquiry or the person appropriately designated 

15 for purposes of this section.’’. 

16 (2) CONFORMING AMENDMENT.—The table of 

17 sections for subpart B of part III of subchapter A 

18 of chapter 61, as amended by this Act, is amended 

19 by adding at the end the following new item: 

‘‘Sec. 6050V. Information with respect to certain fines, penalties, and other 

amounts.’’. 

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

21 this section shall apply to amounts paid or incurred on 

22 or after the date of the enactment of this Act, except that 

23 such amendments shall not apply to amounts paid or in24 curred under any binding order or agreement entered into 


hmoore on PROD1PC68 with HMBILLS
254 

•S 554 IS

1 before such date. Such exception shall not apply to an 

2 order or agreement requiring court approval unless the ap3 proval was obtained before such date. 

4 SEC. 232. DENIAL OF DEDUCTION FOR PUNITIVE DAMAGES. 

5 (a) DISALLOWANCE OF DEDUCTION.— 

6 (1) IN GENERAL.—Section 162(g) (relating to 

7 treble damage payments under the antitrust laws) is 

8 amended— 

9 (A) by redesignating paragraphs (1) and 

10 (2) as subparagraphs (A) and (B), respectively, 

11 (B) by striking ‘‘If’’ and inserting: 

12 ‘‘(1) TREBLE DAMAGES.—If’’, and 

13 (C) by adding at the end the following new 

14 paragraph: 

15 ‘‘(2) PUNITIVE DAMAGES.—No deduction shall 

16 be allowed under this chapter for any amount paid 

17 or incurred for punitive damages in connection with 

18 any judgment in, or settlement of, any action. This 

19 paragraph shall not apply to punitive damages de20 scribed in section 104(c).’’. 

21 (2) CONFORMING AMENDMENT.—The heading 

22 for section 162(g) is amended by inserting ‘‘Or Pu23 nitive Damages’’ after ‘‘Laws’’. 

24 (b) INCLUSION IN INCOME OF PUNITIVE DAMAGES

25 PAID BY INSURER OR OTHERWISE.— 


hmoore on PROD1PC68 with HMBILLS
255 

•S 554 IS

1 (1) IN GENERAL.—Part II of subchapter B of 

2 chapter 1 (relating to items specifically included in 

3 gross income) is amended by adding at the end the 

4 following new section: 

5 ‘‘SEC. 91. PUNITIVE DAMAGES COMPENSATED BY INSUR6 ANCE OR OTHERWISE. 

7 ‘‘Gross income shall include any amount paid to or 

8 on behalf of a taxpayer as insurance or otherwise by rea9 son of the taxpayer’s liability (or agreement) to pay puni10 tive damages.’’. 

11 (2) REPORTING REQUIREMENTS.—Section 6041 

12 (relating to information at source) is amended by 

13 adding at the end the following new subsection: 

14 ‘‘(f) SECTION TO APPLY TO PUNITIVE DAMAGES

15 COMPENSATION.—This section shall apply to payments by 

16 a person to or on behalf of another person as insurance 

17 or otherwise by reason of the other person’s liability (or 

18 agreement) to pay punitive damages.’’. 

19 (3) CONFORMING AMENDMENT.—The table of 

20 sections for part II of subchapter B of chapter 1 is 

21 amended by adding at the end the following new 

22 item: 

‘‘Sec. 91. Punitive damages compensated by insurance or otherwise.’’. 

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

24 this section shall apply to damages paid or incurred on 

25 or after the date of the enactment of this Act. 


hmoore on PROD1PC68 with HMBILLS
256 

•S 554 IS

1 Subtitle E—Duty Surcharge 

2 SEC. 241. TEMPORARY EMERGENCY DUTY SURCHARGE. 

3 (a) IN GENERAL.—Notwithstanding any other provi4 sion of law, in addition to any other duty, there is hereby 

5 imposed a duty on the entry of any good during the 2- 

6 year period beginning on the day that is 15 days after 

7 the date of the enactment of this Act. 

8 (b) RATE OF DUTY.—The rate of duty imposed by 

9 subsection (a) is 2 percent ad valorem. 

10 (c) ENTRY.—For purposes of this section, the term 

11 ‘‘entry’’ means entry, or withdrawal from warehouse, for 

12 consumption in the customs territory of the United States. 

13 Subtitle F—Other Provisions 

14 SEC. 251. OFFSHORE OIL AND GAS LEASING IN 181 AREA OF 

15 GULF OF MEXICO. 

16 (a) DEFINITIONS.—In this section: 

17 (1) 181 AREA.—The term ‘‘181 Area’’ means 

18 the area identified in map 15, page 58, of the Pro19 posed Final Outer Continental Shelf Oil and Gas 

20 Leasing Program for 1997–2002 of the Minerals 

21 Management Service. 

22 (2) SECRETARY.—The term ‘‘Secretary’’ means 

23 the Secretary of the Interior, acting through the 

24 Minerals Management Service. 


hmoore on PROD1PC68 with HMBILLS
257 

•S 554 IS

1 (b) LEASE SALE.—Except as otherwise provided in 

2 this section, the Secretary shall offer the 181 Area for oil 

3 and gas leasing pursuant to the Outer Continental Shelf 

4 Lands Act (43 U.S.C. 1331 et seq.) as soon as practicable, 

5 but not later than 1 year, after the date of enactment of 

6 this Act. 

7 (c) LEASING PROGRAM.—The 181 Area shall be of8 fered for lease under this section notwithstanding the 

9 omission of the 181 Area from any outer Continental Shelf 

10 leasing program under section 18 of the Outer Continental 

11 Shelf Lands Act (43 U.S.C. 1344). 

12 SEC. 252. TRANSFER OF SURPLUS FUNDS OF FEDERAL RE13 SERVE BANKS TO TREASURY. 

14 Section 7 of the Federal Reserve Act (12 U.S.C. 789 

15 et seq.) is amended by adding at the end the following: 

16 ‘‘(d) ADDITIONAL TRANSFERS FOR FISCAL YEAR

17 2008.— 

18 ‘‘(1) IN GENERAL.—The Federal reserve banks 

19 shall transfer from the surplus funds of such banks 

20 to the Board for transfer to the Secretary of the 

21 Treasury for deposit in the General Fund of the 

22 Treasury, a total amount of $13,000,000,000 for fis23 cal year 2008. 

24 ‘‘(2) ALLOCATION BY FED.—Of the total 

25 amount required to be paid by the Federal reserve 


hmoore on PROD1PC68 with HMBILLS
258 

•S 554 IS

1 banks under paragraph (1) for fiscal year 2008, the 

2 Board shall determine the amount that each such 

3 bank shall pay in such fiscal year. 

4 ‘‘(3) REPLENISHMENT OF SURPLUS FUND PRO5 HIBITED.—No Federal reserve bank may replenish 

6 the surplus fund of such bank by the amount of any 

7 transfer by such bank under paragraph (1) during 

8 fiscal year 2008.’’. 

9 SEC. 253. PERMANENT EXTENSION OF FCC AUTHORITY TO 

10 AUCTION LICENSES TO USE RADIO SPEC11 TRUM. 

12 Section 309(j)(11) of the Communications Act of 

13 1934 (47 U.S.C. 309(j)(11)) is repealed. 

14 SEC. 254. TRAVEL BETWEEN THE UNITED STATES AND 

15 CUBA. 

16 (a) SHORT TITLE.—This section may be cited as the 

17 ‘‘Freedom to Travel to Cuba Act of 2007’’. 

18 (b) TRAVEL TO CUBA.— 

19 (1) FREEDOM OF TRAVEL FOR UNITED STATES

20 CITIZENS AND LEGAL RESIDENTS.—Notwithstanding 

21 any other provision of law, subject to subsection (c), 

22 the President shall not regulate or prohibit, directly 

23 or indirectly, travel to or from Cuba by a United 

24 States citizen or legal resident, or any of the transVerDate Aug 31 2005 03:57 Feb 17, 2007 Jkt 059200 PO 00000 Frm 00258 Fmt 6652 Sfmt 6201 E:\BILLS\S554.IS S554

hmoore on PROD1PC68 with HMBILLS
259 

•S 554 IS

1 actions incident to such travel that are set forth in 

2 paragraph (2). 

3 (2) TRANSACTIONS INCIDENT TO TRAVEL.— 

4 The transactions referred to in paragraph (1) are— 

5 (A) any transactions ordinarily incident to 

6 travel to or from Cuba, including the importa7 tion into Cuba or the United States of accom8 panied baggage for personal use only; 

9 (B) any transactions ordinarily incident to 

10 travel to or from Cuba, or maintenance within 

11 Cuba, including the payment of living expenses 

12 and the acquisition of goods or services for per13 sonal use; 

14 (C) any transactions ordinarily incident to 

15 the arrangement, promotion, or facilitation of 

16 travel to, from, or within Cuba; 

17 (D) any transactions incident to non18 scheduled air, sea, or land voyages, except that 

19 this paragraph does not authorize the carriage 

20 of articles into Cuba or the United States other 

21 than accompanied baggage; and 

22 (E) normal banking transactions incident 

23 to the activities described in the preceding pro24 visions of this subsection, including the 

25 issuance, clearing, processing, or payment of 


hmoore on PROD1PC68 with HMBILLS
260 

•S 554 IS

1 checks, drafts, traveler’s checks, credit or debit 

2 card instruments, or similar instruments. 

3 (c) EXCEPTIONS.— 

4 (1) SPECIAL CIRCUMSTANCES.—The restrictions 

5 on authority contained in subsection (b) do not 

6 apply in a case in which the United States is at war 

7 with Cuba, armed hostilities between the two coun8 tries are in progress, or there is imminent danger to 

9 the public health or the physical safety of United 

10 States citizens or legal residents traveling to or from 

11 Cuba. 

12 (2) IMPORTATION OF GOODS FOR PERSONAL

13 CONSUMPTION.—Subsection (b) does not authorize 

14 the importation into the United States of any goods 

15 for personal consumption acquired in Cuba. 

16 (d) APPLICABILITY.—This section applies to actions 

17 taken by the President before the date of the enactment 

18 of this Act that are in effect on such date of enactment, 

19 and to actions taken on or after such date. 

20 (e) INAPPLICABILITY OF OTHER PROVISIONS.—This 

21 section applies notwithstanding section 102(h) of the 

22 Cuban Liberty and Democratic Solidarity (LIBERTAD) 

23 Act of 1996 (22 U.S.C. 6032(h)) and section 910(b) of 


hmoore on PROD1PC68 with HMBILLS
261 

•S 554 IS

1 the Trade Sanctions Reform and Export Enhancement 

2 Act of 2000 (22 U.S.C. 7209(b)). 

Æ 


hmoore on PROD1PC68 with HMBILLS