I 113th CONGRESS 2d Session H. R. 5103 IN THE HOUSE OF REPRESENTATIVES July 14, 2014 Mr. Rohrabacher (for himself and Mr. Ryan of Ohio ) introduced the following bill; which was referred to the Committee on Foreign Affairs , and in addition to the Committees on the Judiciary and Financial Services , for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To impose sanctions on Chinese state-owned enterprises and any person who is a member of the board of directors, an executive officer, or a senior official of a Chinese state-owned enterprise for benefitting from cyber and economic espionage against the United States.

1. Short title This Act may be cited as the Chinese Communist Economic Espionage Sanctions Act . 2. Findings Congress finds the following: (1) The Chinese Communist Party (CCP) has made it its policy to engage in economic warfare against the United States. (2) The CCP uses the resources of the People’s Liberation Army (PLA) and the Chinese State to drain the United States of economic might, including by means of economic espionage and cyber espionage, unfair trade practices, unfair labor practices, and currency manipulation. (3) Chinese state-owned enterprises (SOE) and the PLA are the main beneficiary of the CCP’s campaign of theft against the United States. (4) Although many SOEs are listed on stock exchanges or officially privatized, the Chinese government retains at least one-half of equity in those companies. (5) SOEs come under the control of the ministerial-level State-owned Assets Supervision and Administration Commission. (6) Members of the boards of directors and senior management of SOEs are appointed by the State-owned Assets Supervision and Administration Commission in consultation with the Communist Party’s Department of Organization. (7) More than two-thirds of board members and three-quarters of senior executives of SOEs are either Communist Party members or officials. (8) Corruption within the CCP is widespread and endemic. (9) CCP officials use their positions of control and influence within and over SOE’s to enrich themselves and their families. (10) The vast majority of the Chinese people do not benefit from the corruption of the CCP. (11) On May 19, 2014, the United States Department of Justice announced charges against five members of the PLA, accusing them of stealing trade secrets from United States companies and marking the first time the United States has charged foreign government employees with economic espionage. (12) The indictment charged that members of the PLA worked to steal information from United States companies that would be useful to their competitors in China, including state-owned enterprises . (13) Chinese SOEs are reported to have benefitted directly from their actions, including the State Nuclear Power Technology Corporation, the Baosteel Group, and the Aluminum Corporation of China (Chinalco). (14) The chairman of the board and the majority of the boards for the State Nuclear Power Technology Corporation, the Baosteel Group, and the Aluminum Corporation of China (Chinalco) are members of the CCP. (15) On May 21, 2014, Assistant Attorney General John Carlin said that criminal charges can justify economic sanctions. (16) The indictment named members of Unit 61398 which is publicly identified as a Shanghai-based cyber unit of the PLA also known as APT1. (17) Unit 61398 is part of the 2nd Bureau of the PLA, 3rd Department of the General Staff. (18) Unit 61398 was first publically identified in 2013 as APT1 by Mandiant, a United States cyber security firm and leader in cyber incident response industry. (19) Mandiant exposed a timeline of Unit 61398’s economic espionage conducted since 2006 against 141 victims across multiple industries. (20) Mandiant’s conclusions have been supported by CrowdStrike, another cyber security company, which publicly revealed the existence of Unit 61486, a related PLA unit dedicated to cyber espionage. (21) George Kurts, the co-founder of CrowdStrike, stated that If you look at all the groups that we track in China, the indictments are just the very tip of the iceberg. . (22) Units 61398 and 61486 are only two of at least 20 cyber threat groups in Communist China and are considered by multiple experts to have stolen vast amounts of valuable information from the United States. (23) The 2011 annual report to Congress from the Office of the Secretary of Defense, titled Military and Security Developments Involving the People’s Republic of China , states, The PRC also utilizes a large, well-organized network of enterprises, defense factories, affiliated research institutes, and computer network operations to facilitate the collection of sensitive information and export-controlled technology, as well as basic research and science that supports U.S. defense system modernization. . (24) A 2011 report by the Office of the National Counterintelligence Executive found that Chinese actors are the world’s most active and persistent perpetrators of economic espionage. . (25) The 2012 annual report to Congress from the Office of the Secretary of Defense, titled Military and Security Developments Involving the People’s Republic of China , found that Chinese attempts to collect U.S. technological and economic information will continue at a high level and will represent a growing and persistent threat to U.S. economic security. . (26) James Clapper, the Director of National Intelligence, stated, Among significant foreign threats . . . China remain[s] the most capable and persistent intelligence threats and are aggressive practitioners of economic espionage against the United States. . (27) Retired General Michael Hayden, former Director of the Central Intelligence Agency and Director of the National Security Agency, stated, The intensity of Chinese espionage is certainly greater than that what we saw between the U.S. and the Soviets during the Cold War. The problem is China’s view is that industrial espionage by the state against relatively vulnerable private enterprise is a commonly accepted state practice, . (28) The annual report by the congressional United States–China Economic and Security Review Commission stated in 2013, strong evidence emerged that the Chinese government is directing and executing a large-scale cyber espionage campaign against the United States . (29) Retired Lieutenant General Ronald Burgess, Jr., former Director of the Defense Intelligence Agency, stated, China has used its intelligence services to gather information via a significant network of agents and contacts using a variety of methods … In recent years, multiple cases of economic espionage and theft of dual-use and military technology have uncovered pervasive Chinese collection efforts, . (30) Congressman Mike Rogers, Chairman of the Permanent Select Committee on Intelligence of the House of Representatives, stated, China’s economic espionage has reached an intolerable level and I believe that the United States and our allies in Europe and Asia have an obligation to confront Beijing and demand that they put a stop to this piracy. Beijing is waging a massive trade war on us all, and we should band together to pressure them to stop. Combined, the United States and our allies in Europe and Asia have significant diplomatic and economic leverage over China, and we should use this to our advantage to put an end to this scourge, . (31) The threat of Chinese espionage is so large that Senator Sheldon Whitehouse, D–Rhode Island, who chaired the Cyber Task Force of the Select Committee on Intelligence, proclaimed it to be part of the biggest transfer of wealth through theft and piracy in the history of mankind . (32) Massive cyber and economic espionage organized, directed, and carried out by the CCP and the PLA has contributed to creating a $318,000,000,000 United States trade deficit with Communist China in 2013, which equals 1.89 percent of total United States gross domestic product (GDP). 3. Sense of Congress It is the sense of Congress that the Chinese Communist Party and the Government of the People’s Republic of China should be condemned for sponsoring, planning, ordering, conducting, and benefitting from cyber and economic espionage against the United States. 4. Financial Measures (a) Freezing of Assets The President shall exercise all powers granted by the International Emergency Economic Powers Act ( 50 U.S.C. 1701 et seq. ) (except that the requirements of section 202 of such Act ( 50 U.S.C. 1701 ) shall not apply) to the extent necessary to block and prohibit all transactions in all property and interests in property of a covered Chinese state-owned enterprise or a person who is a member of the board of directors, an executive officer, or a senior official of a covered Chinese state-owned enterprise if such property and interests in property are in the United States, come within the United States, or are or come within the possession or control of a United States person. (b) Enforcement (1) Penalties A covered Chinese state-owned enterprise or a person who is a member of the board of directors, an executive officer, or a senior official of a covered Chinese state-owned enterprise shall be subject to the penalties set forth in subsections (b) and (c) of section 206 of the International Emergency Economic Powers Act ( 50 U.S.C. 1705 ) to the same extent as a person that commits an unlawful act described in subsection (a) of such section. (2) Requirements for financial institutions Not later than 120 days after the date of the enactment of this Act, the Secretary of the Treasury shall prescribe or amend regulations as needed to require each financial institution that is a United States person and has within its possession or control assets that are property or interests in property of a covered Chinese state-owned enterprise or a person who is a member of the board of directors, an executive officer, or a senior official of a covered Chinese state-owned enterprise if such property and interests in property are in the United States to certify to the Secretary that, to the best of the knowledge of the financial institution, the financial institution has frozen all assets within the possession or control of the financial institution that are required to be frozen pursuant to subsection (a). (c) Regulatory Authority The Secretary of the Treasury shall issue such regulations, licenses, and orders as are necessary to carry out this section. (d) Definitions In this section: (1) Covered Chinese state-owned enterprise The term covered Chinese state-owned enterprise means an enterprise that— (A) is organized under the laws of the People’s Republic of China, including a foreign branch of such enterprise; and (B) is owned or controlled by the Government of the People’s Republic of China or the Chinese Communist Party. (2) United States person The term United States person means— (A) a United States citizen or an alien lawfully admitted for permanent residence to the United States; or (B) an entity organized under the laws of the United States or any jurisdiction within the United States, including a foreign branch of such an entity. 5. Inadmissibility of certain aliens (a) Ineligibility for visas An alien is ineligible to receive a visa to enter the United States and ineligible to be admitted to the United States if the alien is a person who is a member of the board of directors, an executive officer, or a senior official of a covered Chinese state-owned enterprise. (b) Current visas revoked The Secretary of State shall revoke, in accordance with section 221(i) of the Immigration and Nationality Act ( 8 U.S.C. 1201(i) ), the visa or other documentation of any alien who would be ineligible to receive such a visa or documentation under subsection (a) of this section. (c) Regulatory authority The Secretary of State shall prescribe such regulations as are necessary to carry out this section. 6. Report to Congress (a) In general Not later than 180 days after the date of the enactment of this Act, and annually thereafter, the Secretary of State and the Secretary of the Treasury shall submit to the appropriate congressional committees a report on— (1) the actions taken to carry out this Act, including the number of covered Chinese state-owned enterprises and persons who are members of the board of directors, executive officers, or senior officials of covered Chinese state-owned enterprises sanctioned during the year preceding the report; and (2) efforts by the executive branch to encourage the governments of other countries to impose sanctions that are similar to the sanctions imposed under this Act. (b) Form The report required by subsection (a) shall be submitted in unclassified form, but may contain a classified annex. (c) Definition In this section, the term appropriate congressional committees means— (1) the Committee on Foreign Affairs, the Permanent Select Committee on Intelligence, and the Committee on Ways and Means of the House of Representatives; and (2) the Committee on Foreign Relations, the Select Committee on Intelligence, the Committee on Finance, and the Committee on Banking, Housing, and Urban Affairs of the Senate.