II 

108TH CONGRESS 

1ST SESSION S. 1688

To amend the Internal Revenue Code of 1986 to repeal the exclusion for 

extraterritorial income and provide for a deduction relating to income 

attributable to United States production activities, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 30 (legislative day, SEPTEMBER 29), 2003

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

referred to the Committee on Finance 

A BILL

To amend the Internal Revenue Code of 1986 to repeal 

the exclusion for extraterritorial income and provide for 

a deduction relating to income attributable to United 

States production activities, 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; AMENDMENT OF 1986 CODE. 

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

5 ‘‘Securing American Factory Employment (SAFE) Act’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment 
2

•S 1688 IS 

1 to, or repeal of, a section or other provision, the reference 

2 shall be considered to be made to a section or other provi3 sion of the Internal Revenue Code of 1986.

4 TITLE I—PROVISIONS RELATING 

5 TO REPEAL OF EXCLUSION 

6 FOR EXTRATERRITORIAL IN7 COME 

8 SEC. 101. REPEAL OF EXCLUSION FOR EXTRATERRITORIAL 

9 INCOME. 

10 (a) IN GENERAL.—Section 114 is hereby repealed. 

11 (b) CONFORMING AMENDMENTS.—

12 (1)(A) Subpart E of part III of subchapter N 

13 of chapter 1 (relating to qualifying foreign trade in14 come) is hereby repealed. 

15 (B) The table of subparts for such part III is 

16 amended by striking the item relating to subpart E. 

17 (2) The table of sections for part III of sub18 chapter B of chapter 1 is amended by striking the 

19 item relating to section 114. 

20 (3) The second sentence of section 

21 56(g)(4)(B)(i) is amended by striking ‘‘or under sec22 tion 114’’. 

23 (4) Section 275(a) is amended—

24 (A) by inserting ‘‘or’’ at the end of para25 graph (4)(A), by striking ‘‘or’’ at the end of 
3

•S 1688 IS 

1 paragraph (4)(B) and inserting a period, and 

2 by striking subparagraph (C), and 

3 (B) by striking the last sentence. 

4 (5) Paragraph (3) of section 864(e) is amend5 ed—

6 (A) by striking: 

7 ‘‘(3) TAX-EXEMPT ASSETS NOT TAKEN INTO

8 ACCOUNT.—

9 ‘‘(A) IN GENERAL.—For purposes of’’; and 

10 inserting:

11 ‘‘(3) TAX-EXEMPT ASSETS NOT TAKEN INTO

12 ACCOUNT.—For purposes of’’, and 

13 (B) by striking subparagraph (B). 

14 (6) Section 903 is amended by striking ‘‘114, 

15 164(a),’’ and inserting ‘‘164(a)’’. 

16 (7) Section 999(c)(1) is amended by striking 

17 ‘‘941(a)(5),’’. 

18 (c) EFFECTIVE DATE.—

19 (1) IN GENERAL.—The amendments made by 

20 this section shall apply to transactions occurring 

21 after the date of the enactment of this Act. 

22 (2) BINDING CONTRACTS.—The amendments 

23 made by this section shall not apply to any trans24 action in the ordinary course of a trade or business 

25 which occurs pursuant to a binding contract—
4

•S 1688 IS 

1 (A) which is between the taxpayer and a 

2 person who is not a related person (as defined 

3 in section 943(b)(3) of such Code, as in effect 

4 on the day before the date of the enactment of 

5 this Act), and 

6 (B) which is in effect on September 17, 

7 2003, and at all times thereafter. 

8 (d) REVOCATION OF SECTION 943(e) ELECTIONS.—

9 (1) IN GENERAL.—In the case of a corporation 

10 that elected to be treated as a domestic corporation 

11 under section 943(e) of the Internal Revenue Code 

12 of 1986 (as in effect on the day before the date of 

13 the enactment of this Act)—

14 (A) the corporation may, during the 1-year 

15 period beginning on the date of the enactment 

16 of this Act, revoke such election, effective as of 

17 such date of enactment, and 

18 (B) if the corporation does revoke such 

19 election—

20 (i) such corporation shall be treated 

21 as a domestic corporation transferring (as 

22 of such date of enactment) all of its prop23 erty to a foreign corporation in connection 

24 with an exchange described in section 354 

25 of such Code, and
5

•S 1688 IS 

1 (ii) no gain or loss shall be recognized 

2 on such transfer.

3 (2) EXCEPTION.—Subparagraph (B)(ii) of 

4 paragraph (1) shall not apply to gain on any asset 

5 held by the revoking corporation if—

6 (A) the basis of such asset is determined 

7 in whole or in part by reference to the basis of 

8 such asset in the hands of the person from 

9 whom the revoking corporation acquired such 

10 asset, 

11 (B) the asset was acquired by transfer (not 

12 as a result of the election under section 943(e) 

13 of such Code) occurring on or after the 1st day 

14 on which its election under section 943(e) of 

15 such Code was effective, and 

16 (C) a principal purpose of the acquisition 

17 was the reduction or avoidance of tax (other 

18 than a reduction in tax under section 114 of 

19 such Code, as in effect on the day before the 

20 date of the enactment of this Act). 

21 (e) GENERAL TRANSITION.—

22 (1) IN GENERAL.—In the case of a taxable year 

23 ending after the date of the enactment of this Act 

24 and beginning before January 1, 2007, for purposes 

25 of chapter 1 of such Code, a current FSC/ETI bene-
6

•S 1688 IS 

1 ficiary shall be allowed a deduction equal to the 

2 transition amount determined under this subsection 

3 with respect to such beneficiary for such year. 

4 (2) CURRENT FSC/ETI BENEFICIARY.—The 

5 term ‘‘current FSC/ETI beneficiary’’ means any cor6 poration which entered into one or more transactions 

7 during its taxable year beginning in calendar year 

8 2002 with respect to which FSC/ETI benefits were 

9 allowable. 

10 (3) TRANSITION AMOUNT.—For purposes of 

11 this subsection—

12 (A) IN GENERAL.—The transition amount 

13 applicable to any current FSC/ETI beneficiary 

14 for any taxable year is the phaseout percentage 

15 of the base period amount. 

16 (B) PHASEOUT PERCENTAGE.—

17 (i) IN GENERAL.—In the case of a 

18 taxpayer using the calendar year as its 

19 taxable year, the phaseout percentage shall 

20 be determined under the following table:

The phaseout 

Years: percentage is: 

2004 ......................................................................................... 80

2005 ......................................................................................... 80

2006 ......................................................................................... 60.

21 (ii) SPECIAL RULE FOR 2003.—The 

22 phaseout percentage for 2003 shall be the 

23 amount that bears the same ratio to 100 
7

•S 1688 IS 

1 percent as the number of days after the 

2 date of the enactment of this Act bears to 

3 365. 

4 (iii) SPECIAL RULE FOR FISCAL YEAR

5 TAXPAYERS.—In the case of a taxpayer 

6 not using the calendar year as its taxable 

7 year, the phaseout percentage is the 

8 weighted average of the phaseout percent9 ages determined under the preceding provi10 sions of this paragraph with respect to cal11 endar years any portion of which is in12 cluded in the taxpayer’s taxable year. The 

13 weighted average shall be determined on 

14 the basis of the respective portions of the 

15 taxable year in each calendar year. 

16 (4) BASE PERIOD AMOUNT.—For purposes of 

17 this subsection, the base period amount is the aggre18 gate FSC/ETI benefits for the taxpayer’s taxable 

19 year beginning in calendar year 2002. 

20 (5) FSC/ETI BENEFIT.—For purposes of this 

21 subsection, the term ‘‘FSC/ETI benefit’’ means—

22 (A) amounts excludable from gross income 

23 under section 114 of such Code, and 

24 (B) the exempt foreign trade income of re25 lated foreign sales corporations from property 
8

•S 1688 IS 

1 acquired from the taxpayer (determined without 

2 regard to section 923(a)(5) of such Code (relat3 ing to special rule for military property), as in 

4 effect on the day before the date of the enact5 ment of the FSC Repeal and Extraterritorial 

6 Income Exclusion Act of 2000). 

7 In determining the FSC/ETI benefit there shall be 

8 excluded any amount attributable to a transaction 

9 with respect to which the taxpayer is the lessor un10 less the leased property was manufactured or pro11 duced in whole or in part by the taxpayer. 

12 (6) SPECIAL RULE FOR FARM COOPERATIVES.—

13 Determinations under this subsection with respect to 

14 an organization described in section 943(g)(1) of 

15 such Code, as in effect on the day before the date 

16 of the enactment of this Act, shall be made at the 

17 cooperative level and the purposes of this subsection 

18 shall be carried out in a manner similar to section 

19 250(h) of such Code, as added by this Act. Such de20 terminations shall be in accordance with such re21 quirements and procedures as the Secretary may 

22 prescribe. 

23 (7) CERTAIN RULES TO APPLY.—Rules similar 

24 to the rules of section 41(f) of such Code shall apply 

25 for purposes of this subsection. 
9

•S 1688 IS 

1 (8) COORDINATION WITH BINDING CONTRACT

2 RULE.—The deduction determined under paragraph 

3 (1) for any taxable year shall be reduced by the 

4 phaseout percentage of any FSC/ETI benefit real5 ized for the taxable year by reason of subsection 

6 (c)(2), except that for purposes of this paragraph 

7 the phaseout percentage for 2003 shall be treated as 

8 being equal to 100 percent. 

9 (9) SPECIAL RULE FOR TAXABLE YEAR WHICH

10 INCLUDES DATE OF ENACTMENT.—In the case of a 

11 taxable year which includes the date of the enact12 ment of this Act, the deduction allowed under this 

13 subsection to any current FSC/ETI beneficiary shall 

14 in no event exceed—

15 (A) 100 percent of such beneficiary’s base 

16 period amount for calendar year 2003, reduced 

17 by 

18 (B) the aggregate FSC/ETI benefits of 

19 such beneficiary with respect to transactions oc20 curring during the portion of the taxable year 

21 ending on the date of the enactment of this Act.
10

•S 1688 IS 

1 SEC. 102. DEDUCTION RELATING TO INCOME ATTRIB2 UTABLE TO UNITED STATES PRODUCTION 

3 ACTIVITIES. 

4 (a) IN GENERAL.—Part VI of subchapter B of chap5 ter 1 (relating to itemized deductions for individuals and 

6 corporations) is amended by adding at the end the fol7 lowing new section: 

8 ‘‘SEC. 199. INCOME ATTRIBUTABLE TO DOMESTIC PRODUC9 TION ACTIVITIES. 

10 ‘‘(a) IN GENERAL.—There shall be allowed as a de11 duction an amount equal to 9 percent of the qualified pro12 duction activities income of the taxpayer for the taxable 

13 year. 

14 ‘‘(b) PHASEIN.—In the case of taxable years begin15 ning in 2004, 2005, 2006, 2007, or 2008, subsection (a) 

16 shall be applied by substituting for the ‘9 percent’ the 

17 transition percentage determined under the following 

18 table:

‘‘Taxable years The transition 

beginning in: percentage is:

2004 ......................................................................................... 1

2005 ......................................................................................... 2

2006 ......................................................................................... 3

2007 or 2008 ........................................................................... 6.

19 ‘‘(c) QUALIFIED PRODUCTION ACTIVITIES IN20 COME.—For purposes of this section, the term ‘qualified 

21 production activities income’ means an amount equal to 
11

•S 1688 IS 

1 the portion of the modified taxable income of the taxpayer 

2 which is attributable to domestic production activities. 

3 ‘‘(d) DETERMINATION OF INCOME ATTRIBUTABLE

4 TO DOMESTIC PRODUCTION ACTIVITIES.—For purposes 

5 of this section—

6 ‘‘(1) IN GENERAL.—The portion of the modified 

7 taxable income which is attributable to domestic pro8 duction activities is so much of the modified taxable 

9 income for the taxable year as does not exceed—

10 ‘‘(A) the taxpayer’s domestic production 

11 gross receipts for such taxable year, reduced by 

12 ‘‘(B) the sum of—

13 ‘‘(i) the costs of goods sold that are 

14 allocable to such receipts, 

15 ‘‘(ii) other deductions, expenses, or 

16 losses directly allocable to such receipts, 

17 and 

18 ‘‘(iii) a proper share of other deduc19 tions, expenses, and losses that are not di20 rectly allocable to such receipts or another 

21 class of income. 

22 ‘‘(2) ALLOCATION METHOD.—The Secretary 

23 shall prescribe rules for the proper allocation of 

24 items of income, deduction, expense, and loss for 
12

•S 1688 IS 

1 purposes of determining income attributable to do2 mestic production activities. 

3 ‘‘(3) SPECIAL RULES FOR DETERMINING

4 COSTS.—

5 ‘‘(A) IN GENERAL.—For purposes of deter6 mining costs under clause (i) of paragraph 

7 (1)(B), any item or service brought into the 

8 United States without a transfer price meeting 

9 the requirements of section 482 shall be treated 

10 as acquired by purchase, and its cost shall be 

11 treated as not less than its value when it en12 tered the United States. A similar rule shall 

13 apply in determining the adjusted basis of 

14 leased or rented property where the lease or 

15 rental gives rise to domestic production gross 

16 receipts. 

17 ‘‘(B) EXPORTS FOR FURTHER MANUFAC18 TURE.—In the case of any property described 

19 in subparagraph (A) that had been exported by 

20 the taxpayer for further manufacture, the in21 crease in cost or adjusted basis under subpara22 graph (A) shall not exceed the difference be23 tween the value of the property when exported 

24 and the value of the property when brought 
13

•S 1688 IS 

1 back into the United States after the further 

2 manufacture. 

3 ‘‘(4) MODIFIED TAXABLE INCOME.—The term 

4 ‘modified taxable income’ means taxable income 

5 computed without regard to the deduction allowable 

6 under this section. 

7 ‘‘(e) DOMESTIC PRODUCTION GROSS RECEIPTS.—

8 For purposes of this section, the term ‘domestic produc9 tion gross receipts’ means the gross receipts of the tax10 payer which are derived from—

11 ‘‘(1) any sale, exchange, or other disposition of, 

12 or 

13 ‘‘(2) any lease, rental, or license of, 

14 qualifying production property which was manufactured, 

15 produced, grown, or extracted in whole or in significant 

16 part by the taxpayer within the United States. 

17 ‘‘(f) QUALIFYING PRODUCTION PROPERTY.—For 

18 purposes of this section—

19 ‘‘(1) IN GENERAL.—Except as otherwise pro20 vided in this paragraph, the term ‘qualifying produc21 tion property’ means—

22 ‘‘(A) any tangible personal property, 

23 ‘‘(B) any computer software, and 

24 ‘‘(C) any property described in section 

25 168(f) (3) or (4). 
14

•S 1688 IS 

1 ‘‘(2) EXCLUSIONS FROM QUALIFYING PRODUC2 TION PROPERTY.—The term ‘qualifying production 

3 property’ shall not include—

4 ‘‘(A) consumable property that is sold, 

5 leased, or licensed by the taxpayer as an inte6 gral part of the provision of services, 

7 ‘‘(B) electricity, 

8 ‘‘(C) water supplied by pipeline to the con9 sumer,

10 ‘‘(D) utility services, or 

11 ‘‘(E) any property (not described in para12 graph (1)(B)) which is a film, tape, recording, 

13 book, magazine, newspaper, or similar property 

14 the market for which is primarily topical or oth15 erwise essentially transitory in nature. 

16 ‘‘(g) DEFINITIONS AND SPECIAL RULES.—

17 ‘‘(1) TREATMENT OF PASS-THRU ENTITIES.—

18 The Secretary shall prescribe rules for the proper 

19 application of this section in the case of pass-thru 

20 entities other than cooperatives to which paragraph 

21 (2) applies and subchapter S corporations. 

22 ‘‘(2) EXCLUSION FOR PATRONS OF COOPERA23 TIVES.—
15

•S 1688 IS 

1 ‘‘(A) IN GENERAL.—If any amount de2 scribed in paragraph (1) or (3) of section 1385 

3 (a)—

4 ‘‘(i) is received by a person from an 

5 organization to which part I of subchapter 

6 T applies, and 

7 ‘‘(ii) is allocable to the portion of the 

8 qualified production activities income of 

9 the organization which is deductible under 

10 subsection (a) and designated as such by 

11 the organization in a written notice mailed 

12 to its patrons during the payment period 

13 described in section 1382(a), 

14 then such person shall be allowed an exclusion 

15 from gross income with respect to such amount. 

16 The taxable income of the organization shall 

17 not be reduced under section 1382 by the por18 tion of any such amount with respect to which 

19 an exclusion is allowable to a person by reason 

20 of this paragraph. 

21 ‘‘(B) SPECIAL RULES.—For purposes of 

22 applying subparagraph (A), in determining the 

23 qualified production activities income of the or24 ganization under this section—
16

•S 1688 IS 

1 ‘‘(i) there shall not be taken into ac2 count in computing the organization’s 

3 modified taxable income any deduction al4 lowable under subsection (b) or (c) of sec5 tion 1382 (relating to patronage dividends, 

6 per-unit retain allocations, and nonpatron7 age distributions), and 

8 ‘‘(ii) the organization shall be treated 

9 as having manufactured, produced, grown, 

10 or extracted in whole or significant part 

11 any qualifying production property mar12 keted by the organization which its patrons 

13 have so manufactured, produced, grown, or 

14 extracted. 

15 ‘‘(3) COORDINATION WITH MINIMUM TAX.—The 

16 deduction under this section shall be allowed for 

17 purposes of the tax imposed by section 55; except 

18 that for purposes of section 55, alternative minimum 

19 taxable income shall be taken into account in deter20 mining the deduction under this section.

21 ‘‘(4) ORDERING RULE.—The amount of any 

22 other deduction allowable under this chapter shall be 

23 determined as if this section had not been enacted. 

24 ‘‘(5) COORDINATION WITH TRANSITION

25 RULES.—For purposes of this section—
17

•S 1688 IS 

1 ‘‘(A) domestic production gross receipts 

2 shall not include gross receipts from any trans3 action if the binding contract transition relief of 

4 section 101(c)(2) of the Securing American 

5 Factory Employment (SAFE) Act applies to 

6 such transaction, and 

7 ‘‘(B) any deduction allowed under section 

8 101(e) of such Act shall be disregarded in de9 termining the portion of the taxable income 

10 which is attributable to domestic production 

11 gross receipts.’’. 

12 (b) DEDUCTION ALLOWED TO SHAREHOLDERS OF S 

13 CORPORATIONS.—

14 (1) IN GENERAL.—Section 1363(b) (relating to 

15 computation of S corporation’s taxable income) is 

16 amended by striking ‘‘and’’ at the end of paragraph 

17 (3), by striking the period at the end of paragraph 

18 (4) and inserting ‘‘, and’’, and by adding at the end 

19 the following new paragraph: 

20 ‘‘(5) the deduction under section 199 shall be 

21 allowed to the S corporation.’’

22 (2) INCREASE IN BASIS.—Section 1367(a)(1) 

23 (relating to increases in basis) is amended by strik24 ing ‘‘and’’ at the end of subparagraph (B), by strik25 ing the period at the end of subparagraph (C) and 
18

•S 1688 IS 

1 inserting ‘‘, and’’, and by adding at the end the fol2 lowing new subparagraph: 

3 ‘‘(D) any deduction allowed under section 

4 199.’’

5 (c) MINIMUM TAX.—Section 56(g)(4)(C) (relating to 

6 disallowance of items not deductible in computing earnings 

7 and profits) is amended by adding at the end the following 

8 new clause: 

9 ‘‘(v) DEDUCTION FOR DOMESTIC PRO10 DUCTION.—Clause (i) shall not apply to 

11 any amount allowable as a deduction under 

12 section 199.’’ 

13 (d) CLERICAL AMENDMENT.—The table of sections 

14 for part VI of subchapter B of chapter 1 is amended by 

15 adding at the end the following new item:

‘‘Sec. 199. Income attributable to domestic production activities.’’

16 (e) EFFECTIVE DATE.—

17 (1) IN GENERAL.—The amendments made by 

18 this section shall apply to taxable years ending after 

19 the date of the enactment of this Act. 

20 (2) APPLICATION OF SECTION 15.—Section 15 

21 of the Internal Revenue Code of 1986 shall apply to 

22 the amendments made by this section as if they were 

23 changes in a rate of tax.
19

•S 1688 IS 

1 TITLE II—EMPLOYER-PROVIDED 

2 RETIRED EMPLOYEE HEALTH 

3 CARE TAX CREDIT 

4 SEC. 201. TAX CREDIT FOR 75 PERCENT OF EMPLOYER-PRO5 VIDED RETIRED EMPLOYEE HEALTH PRE6 MIUMS. 

7 (a) IN GENERAL.—Subpart D of part IV of sub8 chapter A of chapter 1 (relating to business-related cred9 its) is amended by adding at the end the following: 

10 ‘‘SEC. 45G. RETIRED EMPLOYEE HEALTH INSURANCE EX11 PENSES. 

12 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

13 in the case of a qualified employer, the retired employee 

14 health insurance expenses credit determined under this 

15 section is an amount equal to 75 percent of the amount 

16 paid by the taxpayer during the taxable year for qualified 

17 retired employee health insurance expenses. 

18 ‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur19 poses of this section—

20 ‘‘(1) QUALIFIED EMPLOYER.—The term ‘quali21 fied employer’ means any employer which is eligible 

22 for the deduction allowable under section 199 for the 

23 taxable year. 

24 ‘‘(2) QUALIFIED RETIRED EMPLOYEE HEALTH

25 INSURANCE EXPENSES.—
20

•S 1688 IS 

1 ‘‘(A) IN GENERAL.—The term ‘qualified 

2 retired employee health insurance expenses’ 

3 means any amount paid by an employer for 

4 health insurance coverage to the extent such 

5 amount is attributable to coverage provided to 

6 any retired employee and such retired employ7 ee’s spouse and dependents. 

8 ‘‘(B) EXCEPTION FOR AMOUNTS PAID

9 UNDER SALARY REDUCTION ARRANGEMENTS.—

10 No amount paid or incurred for health insur11 ance coverage pursuant to a salary reduction 

12 arrangement shall be taken into account under 

13 subparagraph (A). 

14 ‘‘(C) HEALTH INSURANCE COVERAGE.—

15 The term ‘health insurance coverage’ has the 

16 meaning given such term by paragraph (1) of 

17 section 9832(b) (determined by disregarding 

18 the last sentence of paragraph (2) of such sec19 tion). 

20 ‘‘(3) RETIRED EMPLOYEE—The term ‘retired 

21 employee’ means an individual who has met any 

22 years of service or disability requirements under an 

23 employee benefit plan of the employer. 
21

•S 1688 IS 

1 ‘‘(c) CERTAIN RULES MADE APPLICABLE.—For pur2 poses of this section, rules similar to the rules of section 

3 52 shall apply. 

4 ‘‘(d) DENIAL OF DOUBLE BENEFIT.—No deduction 

5 or credit under any other provision of this chapter shall 

6 be allowed with respect to qualified retired employee 

7 health insurance expenses taken into account under sub8 section (a). 

9 ‘‘(e) TERMINATION.—This section shall not apply to 

10 taxable years beginning after December 31, 2003.’’. 

11 (b) CREDIT TO BE PART OF GENERAL BUSINESS

12 CREDIT.—Section 38(b) (relating to current year business 

13 credit) is amended by striking ‘‘plus’’ at the end of para14 graph (14), by striking the period at the end of paragraph 

15 (15) and inserting ‘‘, plus’’, and by adding at the end the 

16 following: 

17 ‘‘(16) the retired employee health insurance ex18 penses credit determined under section 45G.’’.

19 (c) NO CARRYBACKS.—Subsection (d) of section 39 

20 (relating to carryback and carryforward of unused credits) 

21 is amended by adding at the end the following: 

22 ‘‘(11) NO CARRYBACK OF SECTION 45G CREDIT

23 BEFORE EFFECTIVE DATE.—No portion of the un24 used business credit for any taxable year which is 

25 attributable to the retired employee health insurance 
22

•S 1688 IS 

1 expenses credit determined under section 45G may 

2 be carried back to a taxable year ending before the 

3 date of the enactment of section 45G.’’.

4 (d) CLERICAL AMENDMENT.—The table of sections 

5 for subpart D of part IV of subchapter A of chapter 1 

6 is amended by adding at the end the following:

‘‘Sec. 45G. Retired employee health insurance expenses.’’.

7 (e) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to amounts paid or incurred in tax9 able years beginning after December 31, 2003.

10 TITLE III—AMENDMENTS TO 

11 TITLE VII OF THE TARIFF ACT 

12 OF 1930

13 SEC. 301. CAPTIVE PRODUCTION. 

14 Section 771(7)(C)(iv) of the Tariff Act of 1930 (19 

15 U.S.C. 1677(7)(C)(iv)) is amended to read as follows: 

16 ‘‘(iv) CAPTIVE PRODUCTION.—If do17 mestic producers transfer internally, in18 cluding to affiliated persons as defined in 

19 paragraph (33), significant production of 

20 the domestic like product for the produc21 tion of a downstream article and sell sig22 nificant production of the domestic like 

23 product in the merchant market, then the 

24 Commission, in determining market share 

25 and the factors affecting financial perform-
23

•S 1688 IS 

1 ance set forth in clause (iii), shall focus 

2 primarily on the merchant market for the 

3 domestic like product.’’.

4 SEC. 302. PRICE. 

5 Section 771(7)(C)(ii) of the Tariff Act of 1930 (19 

6 U.S.C. 1677(7)(C)(ii)) is amended by adding at the end 

7 the following flush sentence: 

8 ‘‘Imports of the subject merchandise may 

9 have a significant effect on prices irrespec10 tive of whether the magnitude of, or 

11 change in the volume of, imports of the 

12 subject merchandise is significant.’’. 

13 SEC. 303. VULNERABILITY OF INDUSTRY. 

14 Section 771(7)(C)(iii) of the Tariff Act of 1930 (19 

15 U.S.C. 1677(7)(C)(iii)) is amended in the last sentence 

16 by striking the period at the end and inserting ‘‘, including 

17 whether the industry is vulnerable to the effects of imports 

18 of the subject merchandise.’’. 

19 SEC. 304. CAUSAL RELATIONSHIP BETWEEN IMPORTS AND 

20 INJURY. 

21 Section 771(7)(E)(ii) of the Tariff Act of 1930 (19 

22 U.S.C. 1677(7)(E)(ii)) is amended by adding at the end 

23 the following: ‘‘The Commission need not determine the 

24 significance of imports of the subject merchandise relative 

25 to other economic factors.’’.
24

•S 1688 IS 

1 SEC. 305. PREVENTION OF CIRCUMVENTION. 

2 Section 781(c) of the Tariff Act of 1930 (19 U.S.C. 

3 1677j(c)) is amended by adding at the end the following 

4 new paragraph: 

5 ‘‘(3) SPECIAL RULE.—The administering au6 thority shall apply paragraph (1) with respect to al7 tered merchandise excluded from, or not specifically 

8 included in, the merchandise description used in an 

9 outstanding order or finding, if such application is 

10 not inconsistent with the affirmative determination 

11 of the Commission on which the order or finding is 

12 based.’’. 

13 SEC. 306. FULL RECOGNITION OF SUBSIDY CONFERRED 

14 THROUGH PROVISION OF GOODS AND SERV15 ICES AND PURCHASE OF GOODS. 

16 Section 771(5)(E) of the Tariff Act of 1930 (19 

17 U.S.C. 1677(5)(E)) is amended by adding at the end the 

18 following: ‘‘If transactions in the country which is the sub19 ject of the investigation or review do not reflect market 

20 conditions due to government action associated with provi21 sion of the good or service or purchase of the goods, deter22 mination of the adequacy of remuneration shall be through 

23 comparison with the most comparable market price else24 where in the world.’’. 
25

•S 1688 IS 

1 SEC. 307. PROHIBITION ON MASKING REIMBURSEMENT OF 

2 DUTIES. 

3 Section 772(d) of the Tariff Act of 1930 (19 U.S.C. 

4 1677a(d)) is amended—

5 (1) by striking ‘‘and’’ at the end of paragraph 

6 (2); 

7 (2) by striking the period at the end of para8 graph (3) and inserting ‘‘; and’’; and 

9 (3) by adding at the end the following new 

10 paragraphs: 

11 ‘‘(4) if the importer is the producer or exporter, 

12 or the importer and the producer or exporter are af13 filiated persons, an amount equal to the dumping 

14 margin calculated under section 771(35)(A), unless 

15 the producer or exporter is able to demonstrate that 

16 the importer was in no way reimbursed for any anti17 dumping duties paid; and 

18 ‘‘(5) if the importer is the producer or exporter, 

19 or the importer and the producer or exporter are af20 filiated persons, an amount equal to the net 

21 countervailable subsidy calculated under section 

22 771(6), unless the producer or exporter is able to 

23 demonstrate that the importer was in no way reim24 bursed for any countervailing duties paid.’’. 
26

•S 1688 IS 

1 SEC. 308. EXPORT PRICE AND CONSTRUCTED EXPORT 

2 PRICE. 

3 Section 772(c)(2)(A) of the Tariff Act of 1930 (19 

4 U.S.C. 1677a(c)(2)(A)) is amended by inserting ‘‘(includ5 ing countervailing duties imposed under this title)’’ after 

6 ‘‘duties’’. 

7 SEC. 309. APPLICATION TO CANADA AND MEXICO. 

8 Pursuant to article 1902 of the North American Free 

9 Trade Agreement and section 408 of the North American 

10 Free Trade Agreement Implementation Act, the amend11 ments made by this title shall apply with respect to goods 

12 from Canada and Mexico. 

13 SEC. 310. EFFECTIVE DATE. 

14 The amendments made by this title shall apply with 

15 respect to determinations made under title VII of the Tar16 iff Act of 1930 that—

17 (1) are made with respect to investigations ini18 tiated or petitions filed after the date of enactment 

19 of this Act; or 

20 (2) have not become final as of such date of en21 actment.

Æ