II 

Calendar No. 656 

109TH CONGRESS 

2D SESSION S. 3992 

To amend the Exchange Rates and International Economic Policy Coordination Act of 1988 to clarify the definition of manipulation with respect 

to currency, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 28, 2006 

Mr. BUNNING introduced the following bill; which was read the first time 

SEPTEMBER 30 (legislative day, SEPTEMBER 29), 2006 

Read the second time and placed on the calendar 

A BILL 

To amend the Exchange Rates and International Economic 

Policy Coordination Act of 1988 to clarify the definition 

of manipulation with respect to currency, 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 ‘‘United States Fair 

5 Currency Practices Act of 2006’’. 


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1 SEC. 2. FINDINGS. 

2 (a) Congress makes the following findings: 

3 (1) Since the Exchange Rates and International 

4 Economic Policy Coordination Act of 1988 (22 

5 U.S.C. 5302(3)) was enacted the global economy has 

6 changed dramatically, with increased capital account 

7 openness, a sharp increase in the flow of funds 

8 internationally, and an ever growing number of 

9 emerging market economies becoming systemically 

10 important to the global flow of goods, services, and 

11 capital. In addition, practices such as the mainte12 nance of multiple currency regimes have become 

13 rare. 

14 (2) Exchange rates among major trading na15 tions are occasionally manipulated or fundamentally 

16 misaligned due to direct or indirect governmental 

17 intervention in the exchange market. 

18 (3) A major focus of national economic policy 

19 should be a market-driven exchange rate for the 

20 United States dollar at a level consistent with a sus21 tainable balance in the United States current ac22 count. 

23 (4) While some degree of surpluses and deficits 

24 in payments balances may be expected, particularly 

25 in response to increasing economic globalization, 

26 large and growing imbalances raise concerns of posVerDate Aug 31 2005 03:47 Oct 01, 2006 Jkt 049200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S3992.PCS S3992

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1 sible disruption to financial markets. In part, such 

2 imbalances often reflect exchange rate policies that 

3 foster fundamental misalignment of currencies. 

4 (5) Currencies in fundamental misalignment 

5 can seriously impair the ability of international mar6 kets to adjust appropriately to global capital and 

7 trade flows, threatening trade flows and causing eco8 nomic harm to the United States. 

9 (6) The effects of a fundamentally misaligned 

10 currency may be so harmful that it is essential to 

11 correct the fundamental misalignment without re12 gard to the purpose of any policy that contributed 

13 to the misalignment. 

14 (7) In the interests of facilitating the exchange 

15 of goods, services, and capital among countries, sus16 taining sound economic growth, and fostering finan17 cial and economic stability, Article IV of the Inter18 national Monetary Fund’s Articles of Agreement ob19 ligates each member of the International Monetary 

20 Fund to avoid manipulating exchange rates in order 

21 to prevent effective balance of payments adjustment 

22 or to gain an unfair competitive advantage over 

23 other members. 

24 (8) The failure of a government to acknowledge 

25 a fundamental misalignment of its currency or to 


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1 take steps to correct such a fundamental misalign2 ment, either through inaction or mere token action, 

3 is a form of exchange rate manipulation and is in4 consistent with that government’s obligations under 

5 Article IV of the International Monetary Fund’s Ar6 ticles of Agreement. 

7 TITLE I—INTERNATIONAL MON8 ETARY AND FINANCIAL POL9 ICY 

10 SEC. 101. AMENDMENTS TO DEFINITIONS. 

11 Section 3006 of the Exchange Rates and Inter12 national Economic Policy Coordination Act of 1988 (22 

13 U.S.C. 5306) is amended by adding at the end the fol14 lowing: 

15 ‘‘(3) FUNDAMENTAL MISALIGNMENT.—The 

16 term ‘fundamental misalignment’ means a material 

17 sustained disparity between the observed levels of an 

18 effective exchange rate for a currency and the cor19 responding levels of an effective exchange rate for 

20 that currency that would be consistent with funda21 mental macroeconomic conditions based on a gen22 erally accepted economic rationale. 

23 ‘‘(4) EFFECTIVE EXCHANGE RATE.—The term 

24 ‘effective exchange rate’ means a weighted average 


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1 of bilateral exchange rates, expressed in either nomi2 nal or real terms. 

3 ‘‘(5) GENERALLY ACCEPTED ECONOMIC RA4 TIONALE.—The term ‘generally accepted economic 

5 rationale’ means an explanation drawn on widely 

6 recognized macroeconomic theory for which there is 

7 a significant degree of empirical support.’’. 

8 SEC. 102. BILATERAL NEGOTIATIONS. 

9 (a) IN GENERAL.—Section 3004(b) of the Exchange 

10 Rates and International Economic Policy Coordination 

11 Act of 1988 (22 U.S.C. 5304(b)) is amended to read as 

12 follows: 

13 ‘‘(b) BILATERAL NEGOTIATIONS.— 

14 ‘‘(1) IN GENERAL.—The Secretary of the 

15 Treasury shall analyze on an annual basis the ex16 change rate policies of foreign countries, in consulta17 tion with the International Monetary Fund, and con18 sider whether countries— 

19 ‘‘(A) manipulate the rate of exchange be20 tween their currency and the United States dol21 lar for purposes of preventing effective balance 

22 of payments adjustments or gaining unfair com23 petitive advantage in international trade; or 

24 ‘‘(B) have a currency that is in funda25 mental misalignment. 


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1 ‘‘(2) AFFIRMATIVE DETERMINATION.—If the 

2 Secretary considers that such manipulation or fun3 damental misalignment is occurring with respect to 

4 countries that— 

5 ‘‘(A) have material global current account 

6 surpluses; or 

7 ‘‘(B) have significant bilateral trade sur8 pluses with the United States, 

9 the Secretary of the Treasury shall take action to 

10 initiate negotiations with such foreign countries on 

11 an expedited basis, in the International Monetary 

12 Fund or bilaterally, for the purpose of ensuring that 

13 such countries regularly and promptly adjust the 

14 rate of exchange between their currencies and the 

15 United States dollar to permit effective balance of 

16 payments adjustments and to eliminate the unfair 

17 advantage. 

18 ‘‘(3) EXCEPTION.—The Secretary shall not be 

19 required to initiate negotiations if the Secretary de20 termines that such negotiations would have a serious 

21 detrimental impact on vital national economic and 

22 security interests. The Secretary shall inform the 

23 chairman and the ranking minority member of the 

24 Committee on Banking, Housing, and Urban Affairs 

25 of the Senate and of the Committee on Financial 


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1 Services of the House of Representatives of the Sec2 retary’s determination.’’. 

3 SEC. 103. REPORTING REQUIREMENTS. 

4 Section 3005 of the Exchange Rates and Inter5 national Economic Policy Coordination Act of 1988 (22 

6 U.S.C. 5305) is amended to read as follows: 

7 ‘‘SEC. 3005. REPORTING REQUIREMENTS. 

8 ‘‘(a) REPORTS REQUIRED.— 

9 ‘‘(1) IN GENERAL.—The Secretary, after con10 sulting with the Chairman of the Board, shall sub11 mit to Congress, on or before October 15 of each 

12 year, a written report on international economic pol13 icy and currency exchange rates. 

14 ‘‘(2) INTERIM REPORT.—The Secretary, after 

15 consulting with the Chairman of the Board, shall 

16 submit to Congress, on or before April 15 of each 

17 year, a written report on interim developments with 

18 respect to international economic policy and cur19 rency exchange rates. 

20 ‘‘(b) CONTENTS OF REPORTS.—Each report sub21 mitted under subsection (a) shall contain— 

22 ‘‘(1) an analysis of currency market develop23 ments and the relationship between the United 

24 States dollar and the currencies of major economies 

25 and United States trading partners; 


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1 ‘‘(2) a review of the economic and financial 

2 policies of major economies and United States trad3 ing partners and an evaluation of the impact that 

4 such policies have on currency exchange rates; 

5 ‘‘(3) a description of any currency intervention 

6 by the United States or other major economies or 

7 United States trading partners, or other actions un8 dertaken to adjust the actual exchange rate of the 

9 dollar; 

10 ‘‘(4) an evaluation of the factors that underlie 

11 conditions in the currency markets, including— 

12 ‘‘(A) monetary and financial conditions; 

13 ‘‘(B) foreign exchange reserve accumula14 tion; 

15 ‘‘(C) macroeconomic trends; 

16 ‘‘(D) trends in current and financial ac17 count balances; 

18 ‘‘(E) the size and composition of, and 

19 changes in, international capital flows; 

20 ‘‘(F) the impact of the external sector on 

21 economic changes; 

22 ‘‘(G) the size and growth of external in23 debtedness; 

24 ‘‘(H) trends in the net level of inter25 national investment; and 


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1 ‘‘(I) capital controls, trade, and exchange 

2 restrictions; 

3 ‘‘(5) a list of currencies of the major economies 

4 or economic areas that are manipulated or in funda5 mental misalignment and a description of any eco6 nomic models or methodologies used to establish the 

7 list; 

8 ‘‘(6) a description of any reason or cir9 cumstance that accounts for why each currency iden10 tified under paragraph (5) is manipulated or in fun11 damental misalignment based on a generally accept12 ed economic rationale; 

13 ‘‘(7) a list of each currency identified under 

14 paragraph (5) for which the manipulation or funda15 mental misalignment causes, or contributes to, a 

16 material adverse impact on the economy of the 

17 United States, including a description of any reason 

18 or circumstance that explains why the manipulation 

19 or fundamental misalignment is not accounted for 

20 under paragraph (6); 

21 ‘‘(8) the results of any prior consultations con22 ducted or other steps taken; and 

23 ‘‘(9)(A) a list of each occasion during the re24 porting period when the issue of exchange-rate mis25 alignment was raised in a countervailing duty proVerDate Aug 31 2005 03:47 Oct 01, 2006 Jkt 049200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S3992.PCS S3992

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1 ceeding under subtitle A of title VII of the Tariff 

2 Act of 1930 or in an investigation under section 421 

3 of the Trade Act of 1974; 

4 ‘‘(B) a summary in each such instance of 

5 whether or not exchange-rate misalignment was 

6 found and the reasoning and data underlying that 

7 finding; and 

8 ‘‘(C) a discussion regarding each affirmative 

9 finding of exchange-rate misalignment to consider 

10 the circumstances underlying that exchange-rate 

11 misalignment and what action appropriately has 

12 been or might be taken by the Secretary apart from 

13 and in addition to import relief to correct the ex14 change-rate misalignment. 

15 ‘‘(c) DEVELOPMENT OF REPORTS.—The Secretary 

16 shall consult with the Chairman of the Board with respect 

17 to the preparation of each report required under sub18 section (a). Any comments provided by the Chairman of 

19 the Board shall be submitted to the Secretary not later 

20 than the date that is 15 days before the date each report 

21 is due under subsection (a). The Secretary shall submit 

22 the report after taking into account all comments re23 ceived.’’. 


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1 SEC. 104. INTERNATIONAL FINANCIAL INSTITUTION GOV2 ERNANCE ARRANGEMENTS. 

3 (a) INITIAL REVIEW.—Notwithstanding any other 

4 provision of law, before the United States approves a pro5 posed change in the governance arrangement of any inter6 national financial institution, as defined in section 

7 1701(c)(2) of the International Financial Institutions Act 

8 (22 U.S.C. 262r(c)(2)), the Secretary of the Treasury 

9 shall determine whether any member of the international 

10 financial institution that would benefit from the proposed 

11 change, in the form of increased voting shares or represen12 tation, has a currency that is manipulated or in funda13 mental misalignment, and if so, whether the manipulation 

14 or fundamental misalignment causes or contributes to a 

15 material adverse impact on the economy of the United 

16 States. The determination shall be reported to Congress. 

17 (b) SUBSEQUENT ACTION.—The United States shall 

18 oppose any proposed change in the governance arrange19 ment of any international financial institution (as defined 

20 in subsection (a)), if the Secretary renders an affirmative 

21 determination pursuant to subsection (a). 

22 (c) FURTHER ACTION.—The United States shall con23 tinue to oppose any proposed change in the governance 

24 arrangement of an international financial institution, pur25 suant to subsection (b), until the Secretary determines 

26 and reports to Congress that the currency of each member 


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1 of the international financial institution that would benefit 

2 from the proposed change, in the form of increased voting 

3 shares or representation, is neither manipulated nor in 

4 fundamental misalignment. 

5 SEC. 105. NONMARKET ECONOMY STATUS. 

6 (a) IN GENERAL.—Paragraph (18)(B)(vi) of section 

7 771 of the Tariff Act of 1930 (19 U.S.C. 1677(18)(B)(vi)) 

8 is amended by inserting before the end period the fol9 lowing: ‘‘, including whether the currency of the foreign 

10 country has been identified pursuant to section 3005(b)(7) 

11 of the Exchange Rates and International Economic Policy 

12 Coordination Act of 1988 (22 U.S.C. 5305(b)(7)) in any 

13 written report required by such section 3005(b)(7) during 

14 the 24-month period immediately preceding the month 

15 during which the administering authority seeks to revoke 

16 a determination that such foreign country is a nonmarket 

17 economy country’’. 

18 (b) TERMINATION.—The amendment made by this 

19 section shall apply during the 10-year period beginning on 

20 the date of the enactment of this Act. 

21 TITLE II—SUBSIDIES AND PROD22 UCT-SPECIFIC SAFEGUARD 

23 MECHANISM 

24 SEC. 201. FINDINGS. 

25 Congress makes the following findings: 


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1 (1) The economy and national security of the 

2 United States are critically dependent upon a vi3 brant manufacturing and agricultural base. 

4 (2) The good health of United States manufac5 turing and agriculture requires, among other things, 

6 unfettered access to open markets abroad and fairly 

7 traded raw materials and products in accord with 

8 the international legal principles and agreements of 

9 the World Trade Organization and the International 

10 Monetary Fund. 

11 (3) The International Monetary Fund, the G– 

12 8, and other international organizations have repeat13 edly noted that exchange-rate misalignment can 

14 cause imbalances in the international trading system 

15 that could ultimately undercut the stability of the 

16 system, but have taken no action to address such 

17 misalignments and imbalances. 

18 (4) Since 1994, the People’s Republic of China 

19 and other countries have aggressively intervened in 

20 currency markets and taken measures that have sig21 nificantly misaligned the values of their currencies 

22 against the United States dollar and other cur23 rencies. 

24 (5) This policy by the People’s Republic of 

25 China, for example, has resulted in substantial 


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1 undervaluation of the renminbi, by up to 40 percent 

2 or more. 

3 (6) Evidence of this undervaluation can be 

4 found in the large and growing annual trade sur5 pluses of the People’s Republic of China; substan6 tially expanding foreign direct investment in China; 

7 and the rapidly increasing aggregate amount of for8 eign currency reserves that are held by the People’s 

9 Republic of China. 

10 (7) Undervaluation by the People’s Republic of 

11 China and by other countries acts as both a subsidy 

12 for their exports and as a nontariff barrier against 

13 imports into their territories, to the serious det14 riment of United States manufacturing and agri15 culture. 

16 (8)(A) As members of both the World Trade 

17 Organization and the International Monetary Fund, 

18 the People’s Republic of China and other countries 

19 have assumed a series of international legal obliga20 tions to eliminate all subsidies for exports and to fa21 cilitate international trade by fostering a monetary 

22 system that does not tend to produce erratic disrup23 tions, that does not prevent effective balance-of-pay24 ments adjustment, and that does not gain unfair 

25 competitive advantage. 


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1 (B) These obligations are most prominently set 

2 forth in Articles VI, XV, and XVI of the GATT 

3 1994 (as defined in section 2(1)(B) of the Uruguay 

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

5 the Agreement on Subsidies and Countervailing 

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

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

8 3511(d)(12)), and in Articles IV and VIII of the 

9 International Monetary Fund’s Articles of Agree10 ment. 

11 (9) Under the foregoing circumstances, it is 

12 consistent with the international legal obligations of 

13 the People’s Republic of China and similarly situ14 ated countries and with the corresponding inter15 national legal rights of the United States to amend 

16 relevant United States trade laws to make explicit 

17 that exchange-rate misalignment is actionable as a 

18 countervailable export subsidy. 

19 SEC. 202. CLARIFICATION TO INCLUDE EXCHANGE-RATE 

20 MISALIGNMENT AS A COUNTERVAILABLE 

21 SUBSIDY UNDER TITLE VII OF THE TARIFF 

22 ACT OF 1930. 

23 (a) AMENDMENTS TO DEFINITION OF

24 COUNTERVAILABLE SUBSIDY.— 


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1 (1) FINANCIAL CONTRIBUTION.—Section 

2 771(5)(D) of the Tariff Act of 1930 (19 U.S.C. 

3 1677(5)(D)) is amended— 

4 (A) by redesignating clauses (i) through 

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

6 (B) by striking ‘‘The term’’ and inserting 

7 ‘‘(i) The term’’; and 

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

9 ‘‘(ii) Exchange-rate misalignment (as 

10 defined in paragraph (5C)) constitutes a 

11 financial contribution within the meaning 

12 of subclauses I and III of clause (i).’’. 

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

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

15 amended— 

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

17 inserting a comma; 

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

19 the end and inserting ‘‘, and’’; and 

20 (C) by adding at the end the following new 

21 clause: 

22 ‘‘(v) in the case of exchange-rate mis23 alignment (as defined in paragraph (5C)), 

24 if the price of exported goods in United 

25 States dollars is less than what the price 


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1 of such goods would be without the ex2 change-rate misalignment.’’. 

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

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

5 amended by adding at the end before the period the 

6 following: ‘‘, such as exchange-rate misalignment (as 

7 defined in paragraph (5C))’’. 

8 (b) DEFINITION OF EXCHANGE-RATE MISALIGN9 MENT.—Section 771 of the Tariff Act of 1930 (19 U.S.C. 

10 1677) is amended by inserting after paragraph (5B) the 

11 following new paragraph: 

12 ‘‘(5C) EXCHANGE-RATE MISALIGNMENT.— 

13 ‘‘(A) IN GENERAL.—For purposes of para14 graphs (5) and (5A), the term ‘exchange-rate 

15 misalignment’ means a significant undervalu16 ation of a foreign currency as a result of pro17 tracted large-scale intervention by or at the di18 rection of a governmental authority in exchange 

19 markets. Such undervaluation shall be found 

20 when the observed exchange rate for a foreign 

21 currency is significantly below the exchange 

22 rate that could reasonably be expected for that 

23 foreign currency absent the intervention. 

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

25 exchange-rate misalignment is occurring and a 


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1 benefit thereby is conferred, the administering 

2 authority in each case— 

3 ‘‘(i) shall consider the exporting coun4 try’s— 

5 ‘‘(I) bilateral balance-of-trade 

6 surplus or deficit with the United 

7 States; 

8 ‘‘(II) balance-of-trade surplus or 

9 deficit with its other trading partners 

10 individually and in the aggregate; 

11 ‘‘(III) foreign direct investment 

12 in its territory; 

13 ‘‘(IV) currency-specific and ag14 gregate amounts of foreign currency 

15 reserves; and 

16 ‘‘(V) mechanisms employed to 

17 maintain its currency at an under18 valued exchange rate relative to an19 other currency and, particularly, the 

20 nature, duration, and monetary ex21 penditures of those mechanisms; 

22 ‘‘(ii) may consider such other eco23 nomic factors as are relevant; and 

24 ‘‘(iii) shall measure the trade sur25 pluses or deficits described in subclauses 


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

2 the trade data reported by the United 

3 States and the other trading partners of 

4 the exporting country, unless such trade 

5 data are not available or are demonstrably 

6 inaccurate, in which case the exporting 

7 country’s trade data may be relied upon if 

8 shown to be sufficiently accurate and 

9 trustworthy. 

10 ‘‘(C) COMPUTATION.—In calculating the 

11 extent of exchange-rate misalignment, the ad12 ministering authority shall, in consultation with 

13 the Treasury Department and the Federal Re14 serve, develop and apply an objective method15 ology that is consistent with widely recognized 

16 macroeconomic theory and shall rely upon gov17 ernmentally published and other publicly avail18 able data. 

19 ‘‘(D) TYPE OF ECONOMY.—An authority 

20 found to be engaged in exchange-rate misalign21 ment may have either a market economy or a 

22 nonmarket economy or a combination thereof.’’. 

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

24 this section apply with respect to a countervailing duty 

25 proceeding initiated under subtitle A of title VII of the 


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1 Tariff Act of 1930 before, on, or after the date of enact2 ment of this Act. 

3 SEC. 203. CLARIFICATION TO INCLUDE EXCHANGE-RATE 

4 MISALIGNMENT BY THE PEOPLE’S REPUBLIC 

5 OF CHINA AS A CONDITION TO BE CONSID6 ERED WITH RESPECT TO MARKET DISRUP7 TION UNDER CHAPTER 2 OF TITLE IV OF THE 

8 TRADE ACT OF 1974. 

9 (a) MARKET DISRUPTION.— 

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

11 Act of 1974 (19 U.S.C. 2451(c)) is amended by add12 ing at the end the following new paragraphs: 

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

14 such conditions’ includes exchange-rate misalignment (as 

15 defined in paragraph (4)).’’. 

16 ‘‘(4)(A) For purposes of this section, the term ‘ex17 change-rate misalignment’ means a significant undervalu18 ation of the renminbi as a result of protracted large-scale 

19 intervention by or at the direction of the Government of 

20 the People’s Republic of China in exchange markets. Such 

21 undervaluation shall be found when the observed exchange 

22 rate for the renminbi is significantly below the exchange 

23 rate that could reasonably be expected for the renminbi 

24 absent the intervention. 


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1 ‘‘(B) In determining whether exchange-rate misalign2 ment is occurring, the Commission in each case— 

3 ‘‘(i) shall consider the People’s Republic of Chi4 na’s— 

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

6 deficit with the United States; 

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

8 with its other trading partners individually and 

9 in the aggregate; 

10 ‘‘(III) foreign-direct investment in its terri11 tory; 

12 ‘‘(IV) currency-specific and aggregate 

13 amounts of foreign currency reserves; and 

14 ‘‘(V) mechanisms employed to maintain its 

15 currency at an undervalued exchange rate rel16 ative to another currency and, particularly, the 

17 nature, duration, and monetary expenditures of 

18 those mechanisms; 

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

20 as are relevant; and 

21 ‘‘(iii) shall measure the trade surpluses or defi22 cits described in subclauses (I) and (II) of clause (i) 

23 with reference to the trade data reported by the 

24 United States and the other trading partners of the 

25 People’s Republic of China, unless such trade data 


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1 are not available or are demonstrably inaccurate, in 

2 which case the trade data of the People’s Republic 

3 of China may be relied upon if shown to be suffi4 ciently accurate and trustworthy. 

5 ‘‘(C) In calculating the extent of exchange-rate mis6 alignment, the Commission shall, in consultation with the 

7 Treasury Department and the Federal Reserve, develop 

8 and apply an objective methodology that is consistent with 

9 widely recognized macroeconomic theory and shall rely 

10 upon governmentally published and other publicly avail11 able data.’’. 

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

13 the Trade Act of 1974 (19 U.S.C. 2451(i)(1)) is amend14 ed— 

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

16 the end; 

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

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

19 (3) by inserting after subparagraph (B) the fol20 lowing new subparagraph: 

21 ‘‘(C) if the petition alleges and reasonably 

22 documents that exchange-rate misalignment is 

23 occurring, such exchange-rate misalignment 

24 shall be considered as a factor weighing in favor 


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1 of affirmative findings in subparagraphs (A) 

2 and (B).’’. 

3 (c) STANDARD FOR PRESIDENTIAL ACTION.—Section 

4 421(k)(2) of the Trade Act of 1974 (19 U.S.C. 

5 2451(k)(2)) is amended by adding at the end the following 

6 new sentence: ‘‘If the Commission makes an affirmative 

7 determination that exchange-rate misalignment is occur8 ring, the President shall consider such exchange-rate mis9 alignment as a factor weighing in favor of providing im10 port relief in accordance with subsection (a).’’. 

11 (d) MODIFICATIONS OF RELIEF.—Section 421(n)(2) 

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

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

14 ‘‘If the Commission affirmatively determines that ex15 change-rate misalignment is occurring, the Commission 

16 and the President shall consider such exchange-rate mis17 alignment as a factor weighing in favor of finding that 

18 continuation of relief is necessary to prevent or remedy 

19 the market disruption at issue.’’. 

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

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

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

23 following new sentence: ‘‘If the Commission makes 

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1 sider such exchange-rate misalignment as a factor 

2 weighing in favor of finding that an extension of the 

3 period of relief is necessary to prevent or remedy the 

4 market disruption at issue.’’; and 

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

6 following new sentence: ‘‘If the Commission makes 

7 an affirmative determination that exchange-rate mis8 alignment is occurring, the President shall consider 

9 such exchange-rate misalignment as a factor weigh10 ing in favor of finding that an extension of the pe11 riod of relief is necessary to prevent or remedy the 

12 market disruption at issue.’’. 

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

14 this section apply with respect to an investigation initiated 

15 under chapter 2 of title IV of the Trade Act of 1974 be16 fore, on, or after the date of the enactment of this Act. 

17 SEC. 204. PROHIBITION ON PROCUREMENT BY THE DE18 PARTMENT OF DEFENSE OF CERTAIN DE19 FENSE ARTICLES IMPORTED FROM THE PEO20 PLE’S REPUBLIC OF CHINA. 

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

22 TO BE TRANSMITTED TO THE SECRETARY OF DE23 FENSE.—Section 421(b)(4) of the Trade Act of 1974 (19 

24 U.S.C. 2451(b)(4)) is amended by inserting ‘‘, the Sec25 retary of Defense’’ after ‘‘, the Trade Representative’’. 


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1 (b) DETERMINATION OF SECRETARY OF DEFENSE.— 

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

3 2451(b)) is amended by adding at the end the following 

4 new paragraph: 

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

6 an investigation is initiated under this subsection, the Sec7 retary of Defense shall submit to the Commission a report 

8 in writing which contains the determination of the Sec9 retary as to whether or not the articles of the People’s 

10 Republic of China that are the subject of the investigation 

11 are like or directly competitive with articles produced by 

12 a domestic industry that are critical to the defense indus13 trial base of the United States.’’. 

14 (c) PROHIBITION ON PROCUREMENT BY THE DE15 PARTMENT OF DEFENSE OF CERTAIN DEFENSE ARTI16 CLES.— 

17 (1) PROHIBITION.—If the United States Inter18 national Trade Commission makes an affirmative 

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

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

21 which the President or the United States Trade 

22 Representative may consider as affirmative under 

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

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

25 that the Secretary of Defense has determined are 


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26 

•S 3992 PCS

1 like or directly competitive with articles produced by 

2 a domestic industry that are critical to the defense 

3 industrial base of the United States, the Secretary 

4 of Defense may not procure, directly or indirectly, 

5 such articles of the People’s Republic of China. 

6 (2) WAIVER.—The President may waive the ap7 plication of the prohibition contained in paragraph 

8 (1) on a case-by-case basis if the President deter9 mines and certifies to Congress that it is in the na10 tional security interests of the United States to do 

11 so. 

12 SEC. 205. APPLICATION TO GOODS FROM CANADA AND 

13 MEXICO. 

14 Pursuant to article 1902 of the North American Free 

15 Trade Agreement and section 408 of the North American 

16 Free Trade Agreement Implementation Act of 1993 (19 

17 U.S.C. 3438), the amendments made by sections 105 and 

18 202 of this Act shall apply to goods from Canada and 

19 Mexico. 


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Calendar No. 656 

109TH CONGRESS 

2D SESSION S. 3992 

A BILL 

To amend the Exchange Rates and International 

to currency, and for other purposes. clarify the definition of manipulation with respect Economic Policy Coordination Act of 1988 to 

SEPTEMBER 30 (legislative day, SEPTEMBER 29), 2006 

Read the second time and placed on the calendar 


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