II 

108TH CONGRESS 

2D SESSION S. 2235

To rename the Department of Commerce as the Department of Trade and 

Commerce and transfer the Office of the United States Trade Representative into the Department, to consolidate and enhance statutory authority 

to protect American jobs from unfair international competition, and 

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MARCH 25, 2004

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

referred to the Committee on Finance 

A BILL

To rename the Department of Commerce as the Department 

of Trade and Commerce and transfer the Office of the 

United States Trade Representative into the Department, to consolidate and enhance statutory authority to 

protect American jobs from unfair international competition, and for other purposes.

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Domestic Workforce 

5 Protection Act’’. 
2

•S 2235 IS 

1 SEC. 2. COMMERCE DEPARTMENT RENAMED AS DEPART2 MENT OF TRADE AND COMMERCE. 

3 (a) IN GENERAL.—The Department of Commerce is 

4 hereby redesignated the Department of Trade and Com5 merce, and the Secretary of Commerce or any other offi6 cial of the Department of Commerce is hereby redesig7 nated the Secretary or official, as appropriate, of Trade 

8 and Commerce. 

9 (b) REFERENCE TO DEPARTMENT, SECRETARY, ETC. 

10 OF COMMERCE DEEMED REFERENCE TO DEPARTMENT, 

11 SECRETARY, ETC. OF TRADE AND COMMERCE.—Any ref12 erence to the Department of Commerce, the Secretary of 

13 Commerce, or any other official of the Department of 

14 Commerce in any law, rule, regulation, certificate, direc15 tive, instruction, or other official paper in force on the ef16 fective date of this Act shall be deemed to refer and apply 

17 to the Department of Trade and Commerce or the Sec18 retary of Trade and Commerce, respectively. 

19 SEC. 3. TRANSFER OF THE OFFICE OF THE UNITED STATES 

20 TRADE REPRESENTATIVE TO WITHIN THE DE21 PARTMENT OF COMMERCE AND TRADE. 

22 Section 141(a) of the Trade Act of 1974 (19 U.S.C. 

23 2171(a)) is amended by striking ‘‘Executive Office of the 

24 President’’ and inserting ‘‘Department of Trade and Com25 merce’’. 
3

•S 2235 IS 

1 SEC. 4. TERMINATION OF DEFERRAL TO ELIMINATE TAX 

2 BENEFITS FOR OFFSHORE PRODUCTION. 

3 (a) GENERAL RULE.—Paragraph (1) of section 

4 951(a) of the Internal Revenue Code of 1986 (relating to 

5 amounts included in gross income of United States share6 holders) is amended—

7 (1) by striking ‘‘and’’ after the semicolon in 

8 subparagraph (A)(iii); 

9 (2) by striking ‘‘959(a)(2).’’ in subparagraph 

10 (B) and inserting ‘‘959(a)(2); and’’; and 

11 (3) by adding at the end thereof the following: 

12 ‘‘(C) the amount determined under section 

13 956A with respect to such shareholder for such year 

14 (but only to the extent not excluded from gross in15 come under section 959(a)(3)).’’. 

16 (b) AMOUNT OF INCLUSION.—Subpart F of part III 

17 of subchapter N of chapter 1 of the Internal Revenue Code 

18 of 1986 is amended by inserting after section 956 the fol19 lowing new section: 

20 ‘‘SEC. 956A. EARNINGS OF CONTROLLED FOREIGN COR21 PORATIONS. 

22 ‘‘(a) GENERAL RULE.—In the case of any controlled 

23 foreign corporation, the amount determined under this 

24 section with respect to any United States shareholder for 

25 any taxable year is the lesser of—

26 ‘‘(1) the excess (if any) of—
4

•S 2235 IS 

1 ‘‘(A) such shareholder’s pro rata share of 

2 the amount of the controlled foreign corpora3 tion’s assets for such taxable year, over 

4 ‘‘(B) the amount of earnings and profits 

5 described in section 959(c)(1)(B) with respect 

6 to such shareholder, or 

7 ‘‘(2) such shareholder’s pro rata share of the 

8 applicable earnings of such controlled foreign cor9 poration determined after the application of section 

10 951(a)(1)(B). 

11 ‘‘(b) APPLICABLE EARNINGS.—For purposes of this 

12 section, the term ‘applicable earnings’ means, with respect 

13 to any controlled foreign corporation, the sum of—

14 ‘‘(1) the amount referred to in section 

15 316(a)(1) to the extent such amount was accumu16 lated in taxable years beginning after February 29, 

17 2004, and 

18 ‘‘(2) the amount referred to in section 

19 316(a)(2), 

20 reduced by distributions made during the taxable year and 

21 reduced by the earnings and profits described in section 

22 959(c)(1) to the extent that the earnings and profits so 

23 described were accumulated in taxable years beginning 

24 after February 29, 2004. 
5

•S 2235 IS 

1 ‘‘(c) SPECIAL RULE WHERE CORPORATION CEASES

2 TO BE CONTROLLED FOREIGN CORPORATION DURING

3 TAXABLE YEAR.—If any foreign corporation ceases to be 

4 a controlled foreign corporation during any taxable year—

5 ‘‘(1) the determination of any United States 

6 shareholder’s pro rata share shall be made on the 

7 basis of stock owned (within the meaning of section 

8 958(a)) by such shareholder on the last day during 

9 the taxable year on which the foreign corporation is 

10 a controlled foreign corporation, 

11 ‘‘(2) the amount of such corporation’s assets 

12 for such taxable year shall be determined by only 

13 taking into account quarters ending on or before 

14 such last day, and 

15 ‘‘(3) in determining applicable earnings, the 

16 amount taken into account by reason of being de17 scribed in paragraph (2) of section 316(a) shall be 

18 the portion of the amount so described which is allo19 cable (on a pro rata basis) to the part of such year 

20 during which the corporation is a controlled foreign 

21 corporation. 

22 ‘‘(d) REGULATIONS.—The Secretary shall prescribe 

23 such regulations as may be necessary to carry out the pur24 poses of this section, including regulations to prevent the
6

•S 2235 IS 

1 avoidance of the provisions of this section through reorga2 nizations or otherwise.’’. 

3 (c) PREVIOUSLY TAXED INCOME RULES.— 

4 (1) IN GENERAL.—Subsection (a) of section 

5 959 of the Internal Revenue Code of 1986 (relating 

6 to exclusion from gross income of previously taxed 

7 earnings and profits) is amended by striking ‘‘or’’ at 

8 the end of paragraph (1), by adding ‘‘or’’ at the end 

9 of paragraph (2), and by inserting after paragraph 

10 (2) the following: 

11 ‘‘(3) such amounts would, but for this sub12 section, be included under section 951(a)(1)(C) in 

13 the gross income of,’’. 

14 (2) ALLOCATION RULES.— 

15 (A) Subsection (a) of section 959 of the 

16 Internal Revenue Code of 1986 is amended by 

17 striking ‘‘paragraph (2)’’ in the last sentence 

18 and inserting ‘‘paragraphs (2) and (3)’’. 

19 (B) Section 959(f) of the Internal Revenue 

20 Code of 1986 is amended—

21 (i) by striking paragraph (1) and in22 serting the following: 

23 ‘‘(1) IN GENERAL.—For purposes of this sec24 tion—
7

•S 2235 IS 

1 ‘‘(A) amounts that would be included 

2 under subparagraph (B) of section 951(a)(1) 

3 (determined without regard to this section) 

4 shall be treated as attributable first to earnings 

5 described in subsection (c)(2), and then to earn6 ings described in subsection (c)(3), and 

7 ‘‘(B) amounts that would be included 

8 under subparagraph (C) of section 951(a)(1) 

9 (determined without regard to this section) 

10 shall be treated as attributable first to earnings 

11 described in subsection (c)(2) to the extent the 

12 earnings so described were accumulated in tax13 able years beginning after February 29, 2004, 

14 and then to earnings described in subsection 

15 (c)(3).’’; and 

16 (ii) by striking ‘‘section 951(a)(1)(B)’’ 

17 in paragraph (2) and inserting ‘‘subpara18 graphs (B) and (C) of section 951(a)(1)’’. 

19 (3) CONFORMING AMENDMENT.—Subsection (b) 

20 of section 989 of the Internal Revenue Code of 1986 

21 is amended by striking ‘‘section 951(a)(1)(B)’’ and 

22 inserting ‘‘subparagraph (B) or (C) of section 

23 951(a)(1)’’. 

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

25 this section shall apply to taxable years of foreign corpora-
8

•S 2235 IS 

1 tions beginning after February 29, 2004, and to taxable 

2 years of United States shareholders in which or with which 

3 such taxable years of foreign corporations end. 

4 (e) TECHNICAL AND CONFORMING CHANGES.—The 

5 Secretary of the Treasury shall, within 90 days after the 

6 date of enactment of this Act, submit to the Committee 

7 on Ways and Means of the House of Representatives and 

8 to the Committee on Finance of the Senate, a draft of 

9 any technical and conforming changes in the Internal Rev10 enue Code of 1986 that are necessary to reflect through11 out such Code the changes in the substantive provisions 

12 of law made by this section. 

13 SEC. 5. DISALLOWANCE OF DEDUCTIONS FOR CERTAIN 

14 OFFSHORE ROYALTY PAYMENTS. 

15 (a) IN GENERAL.—Part IX of subchapter B of chap16 ter 1 of the Internal Revenue Code of 1986 is amended 

17 by adding at the end the following: 

18 ‘‘SEC. 280I. CERTAIN OFFSHORE ROYALTY PAYMENTS. 

19 ‘‘(a) IN GENERAL.—In the case of a corporation, no 

20 deduction shall be allowed for the payment of a royalty 

21 to an affiliated entity organized and operated outside the 

22 United States in exchange for the use of rights to a copy23 righted or trademarked product if those rights were trans24 ferred by the corporation or a related party to that entity. 
9

•S 2235 IS 

1 ‘‘(b) EXCEPTION.—Subsection (a) does not apply to 

2 the payment of a royalty if the taxpayer establishes, to 

3 the satisfaction of the Secretary, that—

4 ‘‘(1) the transfer of the rights to the entity was 

5 for a sound business reason (other than the reduc6 tion of liability for tax under this chapter); and 

7 ‘‘(2) the amounts paid or incurred for such roy8 alty payments are reasonable under the cir9 cumstances.’’. 

10 (b) CLERICAL AMENDMENT.—The part analysis for 

11 such part is amended by adding at the end the following:

‘‘280I. Certain offshore royalty payments.’’.

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

13 this section apply to taxable years beginning after Decem14 ber 31, 2003. 

15 SEC. 6. INCREASE IN AUTHORITY OF THE INTERNAL REV16 ENUE SERVICE TO THWART USE OF TAX HA17 VENS BY CORPORATIONS. 

18 (a) IN GENERAL.—Subchapter B of chapter 78 of the 

19 Internal Revenue Code of 1986 is amended by adding at 

20 the end the following: 

21 ‘‘SEC. 7625. AUTHORITY TO FRUSTRATE USE OF COR22 PORATE TAX HAVENS. 

23 ‘‘(a) IN GENERAL.—The Secretary is authorized—

24 ‘‘(1) to deny any otherwise allowable deduction 

25 or credit under chapter 1,
10

•S 2235 IS 

1 ‘‘(2) to recharacterize, reallocate, and resource 

2 income, 

3 ‘‘(3) to recharacterize transactions, and 

4 ‘‘(4) to disregard any transaction, trust, or 

5 other legal entity, 

6 determined by the Secretary to be necessary to prevent 

7 the use by a corporation of a tax haven to avoid liability 

8 for tax under this chapter. 

9 ‘‘(b) TAX HAVEN DEFINED.—In this section, the 

10 term ‘tax haven’ means any country that meets the tax 

11 haven criteria established by the Organization for Eco12 nomic Co-operation and Development.’’. 

13 (b) CONFORMING AMENDMENT.—The subchapter 

14 analysis for subchapter B of chapter 78 of the Internal 

15 Revenue Code of 1986 is amended by adding at the end 

16 the following:

‘‘6725. Authority to frustrate use of corporate tax havens.’’.

17 SEC. 7. ASSISTANT ATTORNEY GENERAL FOR TRADE. 

18 (a) POSITION ESTABLISHED.—The Attorney General 

19 shall appoint an Assistant Attorney General for Trade. 

20 (b) DUTIES.—The Assistant Attorney General for 

21 Trade shall—

22 (1) investigate anticompetitive conduct by for23 eign companies that has an adverse impact on the 

24 economy of the United States (including manufac-
11

•S 2235 IS 

1 turing, agriculture, and employment) or the global 

2 competitiveness of United States companies; 

3 (2) investigate violations of international trade 

4 agreements to which the United States is a party 

5 that have an adverse impact on the economy of the 

6 United States (including manufacturing, agriculture, 

7 and employment) or the global competitiveness of 

8 United States companies and take appropriate ac9 tion to seek redress or punishment for those viola10 tions; and 

11 (3) investigate and initiate appropriate action 

12 against other activities throughout the world that 

13 have an adverse impact on the economy of the 

14 United States (including manufacturing, agriculture, 

15 and employment) or the global competitiveness of 

16 United States companies. 

17 (c) AUTHORITY IS IN ADDITION TO OTHER AU18 THORITIES.—The authority granted to the Assistant At19 torney General for Trade by this section is in addition to, 

20 and not in derogation or in lieu of, any authority provided 

21 by law to any other officer or agency of the United States 

22 charged with enforcement of the trade laws of the United 

23 States or of international agreements to which the United 

24 States is a party. 
12

•S 2235 IS 

1 (d) COMPENSATION.—Section 5315 of title 5, United 

2 States Code, is amended by striking ‘‘(10)’’ in the item 

3 relating to Assistant Attorney General and inserting 

4 ‘‘(11)’’. 

5 SEC. 8. EMPLOYMENT OF ADDITIONAL CUSTOMS INSPEC6 TORS FOR ILLEGAL TRANSSHIPMENTS OF 

7 TEXTILES. 

8 The Secretary of Homeland Security shall hire, train, 

9 and deploy 1,000 customs agents in addition to the num10 ber of customs agents otherwise authorized by law or oth11 erwise employed by the Department of Homeland Security 

12 for the purpose of detecting and preventing illegal trans13 shipments of textiles to avoid textile import quotas and 

14 in violation of trade agreements to which the United 

15 States is a party. 

16 SEC. 9. INCREASED DOMESTIC PRODUCTION OF NATIONAL 

17 DEFENSE CRITICAL GOODS. 

18 (a) IN GENERAL.—The Secretary of Commerce, in 

19 consultation with the Secretary of Defense, the Director 

20 of the Central Intelligence Agency, the Secretary of State, 

21 the Secretary of Homeland Security, and the Adminis22 trator of the Small Business Administration shall develop 

23 a program to encourage and support increased domestic 

24 production of goods and products that are essential or 

25 critical to national security in order to decrease the United 
13

•S 2235 IS 

1 States’ dependence upon imports of such goods and prod2 ucts. 

3 (b) SUPPORT PROGRAM.—The Secretary of Com4 merce shall implement the program developed under sub5 section (a) to the maximum extent feasible through exist6 ing programs, including programs administered by the 

7 Small Business Administration. The Secretary shall trans8 mit to the Congress a report, within 18 months after the 

9 date of enactment of this Act, describing the program and 

10 making such recommendations, including legislative rec11 ommendations, as the Secretary deems necessary for ex12 panding the scope or improving the efficacy of the pro13 gram. The Secretary may submit the report in both classi14 fied and redacted form. 

15 (c) AUTHORIZATION OF APPROPRIATIONS.—There 

16 are authorized to be appropriated to the Secretary of Com17 merce such sums as may be necessary to carry out the 

18 program. 

19 SEC. 10. SENSE OF THE SENATE CONCERNING APPROPRIA20 TIONS FOR CERTAIN PROGRAMS. 

21 It is the sense of the Senate that the Congress should 

22 appropriate the full amount authorized by law to carry out 

23 the Regional Centers for the Transfer of Manufacturing 

24 Technology program under section 25 of the National In25 stitute of Standards and Technology Act (15 U.S.C. 278k) 
14

•S 2235 IS 

1 and the Advanced Technology Program authorized by sec2 tion 28 of that Act (15 U.S.C. 278n). 

3 SEC. 11. TRANSFER OF INTERNATIONAL TRADE COMMIS4 SION FUNCTIONS. 

5 (a) ABOLISHMENT OF ITC.—Effective on the first 

6 day of the seventh month beginning after the date of en7 actment of this Act, the United States International Trade 

8 Commission established by section 330 of the Tariff Act 

9 of 1930 (19 U.S.C. 1330) as in effect on the last day of 

10 the sixth month beginning after the date of enactment of 

11 this Act is abolished. 

12 (b) TRANSFER OF FUNCTIONS.—Except as otherwise 

13 provided in this Act, all functions that on the last day 

14 of the sixth month beginning after the date of enactment 

15 of this Act are authorized to be performed by the United 

16 States International Trade Commission are transferred to 

17 the Department of Commerce effective on the first day 

18 of the seventh month beginning after the date of enact19 ment of this Act and shall be performed by the Assistant 

20 Secretary of Commerce for Import Administration. 

21 (c) DETERMINATION OF CERTAIN FUNCTIONS.—If 

22 necessary, the Office of Management and Budget shall 

23 make any determination of the functions that are trans24 ferred under this section. 
15

•S 2235 IS 

1 SEC. 12. INCIDENTAL TRANSFERS. 

2 The Director of the Office of Management and Budg3 et, in consultation with the Secretary of Commerce, shall 

4 make such determinations as may be necessary with re5 gard to the functions, offices, or portions thereof trans6 ferred by this Act, and make such additional incidental 

7 dispositions of personnel, assets, liabilities, grants, con8 tracts, property, records, and unexpended balances of ap9 propriations, authorizations, allocations, and other funds 

10 held, used, arising from, available to, or to be made avail11 able in connection with such functions, offices, or portions 

12 thereof, as may be necessary to carry out this Act. The 

13 Director shall provide for the termination of the affairs 

14 of all entities terminated by this Act and, in consultation 

15 with the Administrator, for such further measures and 

16 dispositions as may be necessary to effectuate the pur17 poses of this Act.

Æ