II 

115TH CONGRESS 

2D SESSION S. 2826 

To safeguard certain technology and intellectual property in the United States 

from export to or influence by the People’s Republic of China and 

to protect United States industry from unfair competition by the People’s 

Republic of China, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MAY 10, 2018 

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

to the Committee on Finance 

A BILL 

To safeguard certain technology and intellectual property 

in the United States from export to or influence by 

the People’s Republic of China and to protect United 

States industry from unfair competition by the People’s 

Republic of China, 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 ‘‘Fair Trade with China Enforcement Act’’. 

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

7 this Act is as follows: 


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Sec. 1. Short title; table of contents. 

Sec. 2. Sense of Congress. 

Sec. 3. Statement of policy. 

TITLE I—SAFEGUARDS AGAINST FOREIGN INFLUENCE IN 

UNITED STATES NATIONAL AND ECONOMIC SECURITY BY THE 

PEOPLE’S REPUBLIC OF CHINA 

Sec. 101. Establishment of list of certain products receiving support from Government of People’s Republic of China pursuant to Made in 

China 2025 policy. 

Sec. 102. Prohibition on export to People’s Republic of China of national security sensitive technology and intellectual property. 

Sec. 103. Imposition of shareholder cap on Chinese investors in United States 

corporations. 

Sec. 104. Prohibition on use of certain telecommunications services or equipment. 

TITLE II—FAIR TRADE ENFORCEMENT ACTIONS WITH RESPECT 

TO THE PEOPLE’S REPUBLIC OF CHINA 

Sec. 201. Countervailing duties with respect to certain industries in the People’s Republic of China. 

Sec. 202. Repeal of reduced withholding rates for residents of China. 

Sec. 203. Taxation of obligations of the United States held by the Government 

of the People’s Republic of China. 

Sec. 204. Surtax on certain income derived from China. 

1 SEC. 2. SENSE OF CONGRESS. 

2 It is the Sense of Congress that— 

3 (1) since joining the World Trade Organization 

4 in 2001, the People’s Republic of China has offered 

5 the United States a contradictory bargain, which 

6 promised openness in the global trade order, but 

7 through state mercantilism delivered a severely im8 balanced trading relationship; 

9 (2) it was erroneous for the United States Gov10 ernment to have ignored the contradictions and risks 

11 of free trade with the People’s Republic of China on 

12 the assumption that the People’s Republic of China 

13 would liberalize economically and politically; 


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1 (3) benefiting enormously from a more open 

2 global economy to drive its own industries, the Gov3 ernment of the People’s Republic of China and the 

4 Communist Party of the People’s Republic of China 

5 have only tightened their grip on power, brutally 

6 suppressing dissent at home and pursuing policies 

7 abroad that are a far cry from being a responsible 

8 global stakeholder; 

9 (4) malevolent economic behavior by persons in 

10 the People’s Republic of China is made clear by the 

11 theft of intellectual property from the United States, 

12 as Chinese theft of United States intellectual prop13 erty alone costs the United States nearly 

14 $600,000,000,000 annually, according to the United 

15 States Trade Representative; 

16 (5) stealing United States intellectual property 

17 advances the ‘‘Made in China 2025’’ initiative of the 

18 Government of the People’s Republic of China to 

19 eventually dominate global exports in 10 critical sec20 tors, namely artificial intelligence and next-genera21 tion information technology, robotics, new-energy ve22 hicles, biotechnology, energy and power generation, 

23 aerospace, high-tech shipping, advanced railway, new 

24 materials, and agricultural machinery, among oth25 ers; 


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1 (6) the targets of the Made in China 2025 ini2 tiative reveal the goal of the People’s Republic of 

3 China for the near-total displacement of advanced 

4 manufacturing in the United States; and 

5 (7) the United States Government should act to 

6 strengthen the position of the United States in its 

7 policy toward the People’s Republic of China in 

8 order to create a more balanced economic relation9 ship by safeguarding strategic assets from Chinese 

10 influence, reducing Chinese involvement in the 

11 United States economy, and encouraging United 

12 States companies to produce domestically, instead of 

13 in the People’s Republic of China. 

14 SEC. 3. STATEMENT OF POLICY. 

15 It is the policy of the United States— 

16 (1) to impose restrictions on Chinese invest17 ment in the United States in strategic industries 

18 targeted by the Made in China 2025 initiative set 

19 forth by the Government of the People’s Republic of 

20 China; 

21 (2) to tax Chinese investment in the United 

22 States due to its negative effect on the United 

23 States trade deficit and wages of workers in the 

24 United States; 


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1 (3) to increase the cost of transnational produc2 tion operations in the People’s Republic of China in 

3 a manner consistent with the economic cost of the 

4 risk of loss of unique access by the United States to 

5 intellectual property, technology, and industrial base; 

6 and 

7 (4) to support democratization in and the 

8 human rights of the people of Hong Kong, including 

9 the findings and declarations set forth under section 

10 2 of the United States-Hong Kong Policy Act of 

11 1992 (22 U.S.C. 5701). 

12 TITLE I—SAFEGUARDS AGAINST 

13 FOREIGN INFLUENCE IN 

14 UNITED STATES NATIONAL 

15 AND ECONOMIC SECURITY BY 

16 THE PEOPLE’S REPUBLIC OF 

17 CHINA 

18 SEC. 101. ESTABLISHMENT OF LIST OF CERTAIN PRODUCTS 

19 RECEIVING SUPPORT FROM GOVERNMENT 

20 OF PEOPLE’S REPUBLIC OF CHINA PURSU21 ANT TO MADE IN CHINA 2025 POLICY. 

22 (a) IN GENERAL.—Chapter 8 of title I of the Trade 

23 Act of 1974 (19 U.S.C. 2241 et seq.) is amended by add24 ing at the end the following: 


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1 ‘‘SEC. 183. LIST OF CERTAIN PRODUCTS RECEIVING SUP2 PORT FROM GOVERNMENT OF PEOPLE’S RE3 PUBLIC OF CHINA. 

4 ‘‘(a) IN GENERAL.—Not later than 120 days after 

5 the date of the enactment of the Fair Trade with China 

6 Enforcement Act, and every year thereafter, the United 

7 States Trade Representative shall set forth a list of prod8 ucts manufactured or produced in, or exported from, the 

9 People’s Republic of China that are determined by the 

10 Trade Representative to receive support from the Govern11 ment of the People’s Republic of China pursuant to the 

12 Made in China 2025 industrial policy of that Government. 

13 ‘‘(b) CRITERIA FOR LIST.— 

14 ‘‘(1) IN GENERAL.—The Trade Representative 

15 shall include in the list required by subsection (a) 

16 the following products: 

17 ‘‘(A) Any product specified in the following 

18 documents set forth by the Government of the 

19 People’s Republic of China: 

20 ‘‘(i) Notice on Issuing Made in China 

21 2025. 

22 ‘‘(ii) China Manufacturing 2025. 

23 ‘‘(iii) Notice on Issuing the 13th Five24 Year National Strategic Emerging Indus25 tries Development Plan. 


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1 ‘‘(iv) Guiding Opinion on Promoting 

2 International Industrial Capacity and 

3 Equipment Manufacturing Cooperation. 

4 ‘‘(v) Any other document that ex5 presses a national strategy or stated goal 

6 in connection with the Made in China 2025 

7 industrial policy set forth by the Govern8 ment of the People’s Republic of China, 

9 the Communist Party of China, or another 

10 entity or individual capable of impacting 

11 the national strategy of the People’s Re12 public of China. 

13 ‘‘(B) Any product receiving support from 

14 the Government of the People’s Republic of 

15 China that has or will in the future displace net 

16 exports of like products by the United States, 

17 as determined by the Trade Representative. 

18 ‘‘(2) INCLUDED PRODUCTS.—In addition to 

19 such products as the Trade Representative shall in20 clude pursuant to paragraph (1) in the list required 

21 by subsection (a), the Trade Representative shall in22 clude products in the following industries: 

23 ‘‘(A) Civil aircraft. 

24 ‘‘(B) Motor car and vehicle. 

25 ‘‘(C) Advanced medical equipment. 


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1 ‘‘(D) Advanced construction equipment. 

2 ‘‘(E) Agricultural machinery. 

3 ‘‘(F) Railway equipment. 

4 ‘‘(G) Diesel locomotive. 

5 ‘‘(H) Moving freight. 

6 ‘‘(I) Semiconductor. 

7 ‘‘(J) Lithium battery manufacturing. 

8 ‘‘(K) Artificial intelligence. 

9 ‘‘(L) High-capacity computing. 

10 ‘‘(M) Quantum computing. 

11 ‘‘(N) Robotics. 

12 ‘‘(O) Biotechnology.’’. 

13 (b) CLERICAL AMENDMENT.—The table of contents 

14 for the Trade Act of 1974 is amended by inserting after 

15 the item relating to section 182 the following: 

‘‘Sec. 183. List of certain products receiving support from Government of People’s Republic of China.’’. 

16 SEC. 102. PROHIBITION ON EXPORT TO PEOPLE’S REPUB17 LIC OF CHINA OF NATIONAL SECURITY SEN18 SITIVE TECHNOLOGY AND INTELLECTUAL 

19 PROPERTY. 

20 (a) IN GENERAL.—The Secretary of Commerce shall 

21 prohibit the export to the People’s Republic of China of 

22 any national security sensitive technology or intellectual 

23 property subject to the jurisdiction of the United States 


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1 or exported by any person subject to the jurisdiction of 

2 the United States. 

3 (b) DEFINITIONS.—In this section: 

4 (1) INTELLECTUAL PROPERTY.—The term ‘‘in5 tellectual property’’ includes patents, copyrights, 

6 trademarks, or trade secrets. 

7 (2) NATIONAL SECURITY SENSITIVE TECH8 NOLOGY OR INTELLECTUAL PROPERTY.—The term 

9 ‘‘national security sensitive technology or intellectual 

10 property’’ includes the following: 

11 (A) Technology or intellectual property 

12 that would make a significant contribution to 

13 the military potential of the People’s Republic 

14 of China that would prove detrimental to the 

15 national security of the United States. 

16 (B) Technology or intellectual property 

17 necessary to protect the economy of the United 

18 States from the excessive drain of scarce mate19 rials and to reduce the serious inflationary im20 pact of demand from the People’s Republic of 

21 China. 

22 (C) Technology or intellectual property 

23 that is a component of the production of prod24 ucts included in the most recent list required 

25 under section 183 of the Trade Act of 1974, as 


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1 added by section 101(a), determined in con2 sultation with the United States Trade Rep3 resentative. 

4 (3) TECHNOLOGY.—The term ‘‘technology’’ in5 cludes goods or services relating to information sys6 tems, Internet-based services, production-enhancing 

7 logistics, robotics, artificial intelligence, biotechnolo8 gy, or computing. 

9 SEC. 103. IMPOSITION OF SHAREHOLDER CAP ON CHINESE 

10 INVESTORS IN UNITED STATES CORPORA11 TIONS. 

12 Section 13(d) of the Securities Exchange Act of 1934 

13 (15 U.S.C. 78m(d)) is amended by adding at the end the 

14 following: 

15 ‘‘(7)(A) In this paragraph, the term ‘covered issuer’ 

16 means any issuer that produces components that may be 

17 used in the production of goods manufactured or produced 

18 in, or exported from, the People’s Republic of China and 

19 included in the most recent list required under section 183 

20 of the Trade Act of 1974, determined in consultation with 

21 the United States Trade Representative. 

22 ‘‘(B) No covered issuer that is incorporated under the 

23 laws of a State, or whose principal place of business is 

24 within a State, may be majority-owned by a person whose 


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1 principal place of business is in the People’s Republic of 

2 China. 

3 ‘‘(C) The prohibition in subparagraph (B) shall apply 

4 to any acquisition on or after the date of enactment of 

5 this paragraph.’’. 

6 SEC. 104. PROHIBITION ON USE OF CERTAIN TELE7 COMMUNICATIONS SERVICES OR EQUIP8 MENT. 

9 (a) FINDINGS.—Congress makes the following find10 ings: 

11 (1) In its 2011 ‘‘Annual Report to Congress on 

12 Military and Security Developments Involving the 

13 People’s Republic of China’’, the Department of De14 fense stated, ‘‘China’s defense industry has benefited 

15 from integration with a rapidly expanding civilian 

16 economy and science and technology sector, particu17 larly elements that have access to foreign technology. 

18 Progress within individual defense sectors appears 

19 linked to the relative integration of each, through 

20 China’s civilian economy, into the global production 

21 and R&D chain . . . Information technology compa22 nies in particular, including Huawei, Datang, and 

23 Zhongxing, maintain close ties to the PLA.’’. 

24 (2) In a 2011 report titled ‘‘The National Secu25 rity Implications of Investments and Products from 


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1 the People’s Republic of China in the Telecommuni2 cations Sector’’, the United States China Economic 

3 and Security Review Commission stated that 

4 ‘‘[n]ational security concerns have accompanied the 

5 dramatic growth of China’s telecom sector. . . . Ad6 ditionally, large Chinese companies—particularly 

7 those ‘national champions’ prominent in China’s 

8 ‘going out’ strategy of overseas expansion—are di9 rectly subject to direction by the Chinese Communist 

10 Party, to include support for PRC state policies and 

11 goals.’’. 

12 (3) The Commission further stated in its report 

13 that ‘‘[f]rom this point of view, the clear economic 

14 benefits of foreign investment in the U.S. must be 

15 weighed against the potential security concerns re16 lated to infrastructure components coming under the 

17 control of foreign entities. This seems particularly 

18 applicable in the telecommunications industry, as 

19 Chinese companies continue systematically to ac20 quire significant holdings in prominent global and 

21 U.S. telecommunications and information technology 

22 companies.’’. 

23 (4) In its 2011 Annual Report to Congress, the 

24 United States China Economic and Security Review 

25 Commission stated that ‘‘[t]he extent of the state’s 


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1 control of the Chinese economy is difficult to quan2 tify . . . There is also a category of companies that, 

3 though claiming to be private, are subject to state 

4 influence. Such companies are often in new markets 

5 with no established SOE leaders and enjoy favorable 

6 government policies that support their development 

7 while posing obstacles to foreign competition. Exam8 ples include Chinese telecoms giant Huawei and 

9 such automotive companies as battery maker BYD 

10 and vehicle manufacturers Geely and Chery.’’. 

11 (5) In the bipartisan ‘‘Investigative Report on 

12 the United States National Security Issues Posed by 

13 Chinese Telecommunication Companies Huawei and 

14 ZTE’’ released in 2012 by the Permanent Select 

15 Committee on Intelligence of the House of Rep16 resentatives, it was recommended that ‘‘U.S. govern17 ment systems, particularly sensitive systems, should 

18 not include Huawei or ZTE equipment, including in 

19 component parts. Similarly, government contrac20 tors—particularly those working on contracts for 

21 sensitive U.S. programs—should exclude ZTE or 

22 Huawei equipment in their systems.’’. 

23 (6) General Michael Hayden, who served as Di24 rector of the Central Intelligence Agency and Direc25 tor of the National Security Agency, stated in July 


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1 2013 that Huawei had ‘‘shared with the Chinese 

2 state intimate and extensive knowledge of foreign 

3 telecommunications systems it is involved with’’. 

4 (7) The Federal Bureau of Investigation, in a 

5 February 2015 Counterintelligence Strategy Part6 nership Intelligence Note stated that, ‘‘[w]ith the ex7 panded use of Huawei Technologies Inc. equipment 

8 and services in U.S. telecommunications service pro9 vider networks, the Chinese Government’s potential 

10 access to U.S. business communications is dramati11 cally increasing. Chinese Government-supported tele12 communications equipment on U.S. networks may be 

13 exploited through Chinese cyber activity, with Chi14 na’s intelligence services operating as an advanced 

15 persistent threat to U.S. networks.’’. 

16 (8) The Federal Bureau of Investigation fur17 ther stated in its February 2015 counterintelligence 

18 note that ‘‘China makes no secret that its cyber war19 fare strategy is predicated on controlling global com20 munications network infrastructure’’. 

21 (9) At a hearing before the Committee on 

22 Armed Services of the House of Representatives on 

23 September 30, 2015, Deputy Secretary of Defense 

24 Robert Work, responding to a question about the 

25 use of Huawei telecommunications equipment, statVerDate Sep 11 2014 02:11 May 17, 2018 Jkt 079200 PO 00000 Frm 00014 Fmt 6652 Sfmt 6201 E:\BILLS\S2826.IS S2826

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1 ed, ‘‘In the Office of the Secretary of Defense, abso2 lutely not. And I know of no other—I don’t believe 

3 we operate in the Pentagon, any [Huawei] systems 

4 in the Pentagon.’’. 

5 (10) At that hearing, the Commander of the 

6 United States Cyber Command, Admiral Mike Rog7 ers, responding to a question about why such 

8 Huawei telecommunications equipment is not used, 

9 stated, ‘‘As we look at supply chain and we look at 

10 potential vulnerabilities within the system, that it is 

11 a risk we felt was unacceptable.’’. 

12 (11) In March 2017, ZTE Corporation pled 

13 guilty to conspiring to violate the International 

14 Emergency Economic Powers Act by illegally ship15 ping United States-origin items to Iran, paying the 

16 United States Government a penalty of 

17 $892,360,064 for activity between January 2010 

18 and January 2016. 

19 (12) The Office of Foreign Assets Control of 

20 the Department of the Treasury issued a subpoena 

21 to Huawei as part of a Federal investigation of al22 leged violations of trade restrictions on Cuba, Iran, 

23 and Sudan. 

24 (b) PROHIBITION ON AGENCY USE OR PROCURE25 MENT.—The head of an agency may not procure or obtain, 


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1 may not extend or renew a contract to procure or obtain, 

2 and may not enter into a contract (or extend or renew 

3 a contract) with an entity that uses, or contracts with any 

4 other entity that uses, any equipment, system, or service 

5 that uses covered telecommunications equipment or serv6 ices as a substantial or essential component of any system, 

7 or as critical technology as part of any system. 

8 (c) REPORT.—Not later than one year after the date 

9 of the enactment of this Act, and annually thereafter, the 

10 Secretary of Commerce, in consultation with the Secretary 

11 of Defense and the United States Trade Representative, 

12 shall submit to Congress a report on sales by the Govern13 ment of the People’s Republic of China of covered tele14 communications equipment or services through partial 

15 ownership or any other methods. 

16 (d) DEFINITIONS.—In this section: 

17 (1) AGENCY.—The term ‘‘agency’’ has the 

18 meaning given that term in section 551 of title 5, 

19 United States Code. 

20 (2) COVERED TELECOMMUNICATIONS EQUIP21 MENT OR SERVICES.—The term ‘‘covered tele22 communications equipment or services’’ means any 

23 of the following: 

24 (A) Telecommunications equipment pro25 duced by Huawei Technologies Company, ZTE 


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1 Corporation, or any other Chinese telecom enti2 ty identified by the Director of National Intel3 ligence, the Secretary of Defense, or the Direc4 tor of the Federal Bureau of Investigation as a 

5 security concern (or any subsidiary or affiliate 

6 of any such entity). 

7 (B) Telecommunications services provided 

8 by such entities or using such equipment. 

9 (C) Telecommunications equipment or 

10 services produced or provided by an entity that 

11 the head of the relevant agency reasonably be12 lieves to be an entity owned or controlled by, or 

13 otherwise connected to, the Government of the 

14 People’s Republic of China. 

15 TITLE II—FAIR TRADE EN16 FORCEMENT ACTIONS WITH 

17 RESPECT TO THE PEOPLE’S 

18 REPUBLIC OF CHINA 

19 SEC. 201. COUNTERVAILING DUTIES WITH RESPECT TO 

20 CERTAIN INDUSTRIES IN THE PEOPLE’S RE21 PUBLIC OF CHINA. 

22 (a) POLICY.—It is the policy of the United States— 

23 (1) to reduce the import of finished goods from 

24 the People’s Republic of China relating to the Made 


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1 in China 2025 plan set forth by the Government of 

2 the People’s Republic of China; and 

3 (2) to encourage allies of the United States to 

4 reduce the import of finished goods from the Peo5 ple’s Republic of China relating to the Made in 

6 China 2025 plan. 

7 (b) INCLUSION OF MADE IN CHINA 2025 PRODUCTS

8 IN DEFINITION OF COUNTERVAILABLE SUBSIDY.—Para9 graph (5) of section 771 of the Tariff Act of 1930 (19 

10 U.S.C. 1677) is amended by adding at the end the fol11 lowing: 

12 ‘‘(G) TREATMENT OF CERTAIN CHINESE

13 MERCHANDISE.—Notwithstanding any other 

14 provision of this title, if a person presents evi15 dence in a petition filed under section 702(b) 

16 that merchandise covered by the petition is 

17 manufactured or produced in, or exported from, 

18 the People’s Republic of China and included in 

19 the most recent list required under section 183 

20 of the Trade Act of 1974, determined in con21 sultation with the United States Trade Rep22 resentative, the administrating authority shall 

23 determine that a countervailable subsidy is 

24 being provided with respect to that merchan25 dise.’’. 


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1 (c) INCLUSION OF MADE IN CHINA 2025 PRODUCTS

2 IN DEFINITION OF MATERIAL INJURY.—Paragraph 

3 (7)(F) of such section is amended by adding at the end 

4 the following: 

5 ‘‘(iv) TREATMENT OF CERTAIN CHI6 NESE MERCHANDISE.—Notwithstanding 

7 any other provision of this title, if a peti8 tion filed under section 702(b) alleges that 

9 an industry in the United States is materi10 ally injured or threatened with material in11 jury or that the establishment of an indus12 try in the United States is materially re13 tarded by reason of imports of merchan14 dise manufactured or produced in, or ex15 ported from, the People’s Republic of 

16 China and included in the most recent list 

17 required under section 183 of the Trade 

18 Act of 1974, determined in consultation 

19 with the United States Trade Representa20 tive, the Commission shall determine that 

21 material injury or such a threat exists.’’. 

22 SEC. 202. REPEAL OF REDUCED WITHHOLDING RATES FOR 

23 RESIDENTS OF CHINA. 

24 (a) IN GENERAL.—Section 894 of the Internal Rev25 enue Code of 1986 is amended— 


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1 (1) by striking ‘‘The provisions of’’ in sub2 section (a) and inserting ‘‘Except as otherwise pro3 vided in this section, the provisions of’’, and 

4 (2) by adding at the end the following new sub5 section: 

6 ‘‘(d) EXCEPTION FOR PEOPLE’S REPUBLIC OF

7 CHINA.— 

8 ‘‘(1) IN GENERAL.—The rates of tax imposed 

9 under sections 871 and 881, and the rates of with10 holding tax imposed under chapter 3, with respect to 

11 any resident of the People’s Republic of China shall 

12 be determined without regard to any provision of the 

13 Agreement between the Government of the United 

14 States of America and the Government of the Peo15 ple’s Republic of China for the Avoidance of Double 

16 Taxation and the Prevention of Tax Evasion with 

17 Respect to Taxes on Income, signed at Beijing on 

18 April 30, 1984. 

19 ‘‘(2) REGULATIONS.—The Secretary shall pro20 mulgate regulations to prevent the avoidance of the 

21 purposes of this subsection through the use of for22 eign entities.’’. 

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

24 this section shall apply to income received after the date 

25 of the enactment of this Act. 


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1 SEC. 203. TAXATION OF OBLIGATIONS OF THE UNITED 

2 STATES HELD BY THE GOVERNMENT OF THE 

3 PEOPLE’S REPUBLIC OF CHINA. 

4 (a) IN GENERAL.—Section 892 of the Internal Rev5 enue Code of 1986 is amended by redesignating subsection 

6 (c) as subsection (d) and by inserting after subsection (b) 

7 the following new subsection: 

8 ‘‘(c) EXCEPTION.—This section shall not apply to the 

9 Government of the People’s Republic of China.’’. 

10 (b) CENTRAL BANK.—Section 895 of the Internal 

11 Revenue Code of 1986 is amended— 

12 (1) by striking ‘‘Income’’ and inserting the fol13 lowing: 

14 ‘‘(a) IN GENERAL.—Income’’, and 

15 (2) by adding at the end the following new sub16 section: 

17 ‘‘(b) EXCEPTION.—This section shall not apply to the 

18 any central bank of the People’s Republic of China.’’. 

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

20 this section shall apply to income received or derived after 

21 the date of the enactment of this Act. 

22 SEC. 204. SURTAX ON CERTAIN INCOME DERIVED FROM 

23 CHINA. 

24 (a) IN GENERAL.—Subpart D of part II of sub25 chapter N of the Internal Revenue Code of 1986 is amend26 ed by adding at the end the following new section: 


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1 ‘‘SEC. 899. IMPOSITION OF SURTAX ON CERTAIN INCOME 

2 FROM CHINA. 

3 ‘‘(a) IN GENERAL.—In addition to other taxes, there 

4 is imposed on the China source income of any applicable 

5 United States person a tax equal to 2 percent of such in6 come. 

7 ‘‘(b) APPLICABLE UNITED STATES PERSON.—For 

8 purposes of this subsection, the term ‘applicable United 

9 States person’ means any United States person who— 

10 ‘‘(1) holds an investment through a partnership 

11 with a resident of the People’s Republic of China, or 

12 ‘‘(2) participates in a joint shareholding venture 

13 with a resident of the People’s Republic of China. 

14 ‘‘(c) CHINA SOURCE INCOME.—For purposes of this 

15 section, the term ‘China source income’ means any 

16 amount received from sources within the People’s Republic 

17 of China which is attributable to an investment described 

18 in subsection (b)(1) or a venture described in subsection 

19 (b)(2). Such amount shall be reduced so as to take into 

20 account deductions (including taxes) properly allocable to 

21 such income under rules similar to the rules of section 

22 954(b)(5).’’. 

23 (b) TAX NOT TREATED AS PART OF REGULAR TAX

24 LIABILITY.—Section 26(b)(2) of such Code is amended by 

25 striking ‘‘and’’ at the end of subparagraph (X), by striking 

26 the period at the end of subparagraph (Y) and inserting 


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1 ‘‘, and’’, and by adding at the end the following new sub2 paragraph: 

3 ‘‘(Z) section 899 (relating to surtax on cer4 tain income from China).’’. 

5 (c) CLERICAL AMENDMENT.—The table of sections 

6 for subpart D of of part II of subchapter N of such Code 

7 is amended by adding at the end the following new item: 

‘‘Sec. 899. Imposition of surtax on certain income from China.’’. 

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

9 this section shall apply to income received after the date 

10 of the enactment of this Act. 

Æ 


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