I 118th CONGRESS 1st Session H. R. 6528 IN THE HOUSE OF REPRESENTATIVES November 30, 2023 Mr. Johnson of South Dakota (for himself, Mr. Moolenaar , Mr. Wittman , Mrs. Hinson , and Mr. Gimenez ) introduced the following bill; which was referred to the Committee on Financial Services A BILL To encourage State and local governments to prohibit certain investment activities in the People’s Republic of China, and for other purposes.

1. Short title This Act may be cited as the PRC Accountability and Divestment Act of 2023 . 2. Authority of State or local governments to divest from certain entities that invest in China (a) Sense of Congress It is the sense of Congress that the United States should support the decision of any State or local government that for moral, prudential, or reputational reasons divests from, or prohibits the investment of assets of the State or local government in, a person that engages in investment activities in the People’s Republic of China, as described in subsection (c). (b) Authority To divest Notwithstanding any other provision of law, a State or local government may adopt and enforce measures that meet the requirements of subsection (d) to divest the assets of the State or local government from, or prohibit investment of the assets of the State or local government in, any person that the State or local government determines, using credible information available to the public, engages in investment activities in the People’s Republic of China described in subsection (c). (c) Investment activities described A person described in this subsection engages in investment activities in the People’s Republic of China if the person has an investment in any of the following: (1) A Chinese entity— (A) designated by Executive Order 13959 ( 50 U.S.C. 1701 note; relating to addressing the threat from securities investments that finance Communist Chinese military companies); (B) designated by Executive Order 14105 (88 Fed. Reg. 54867; relating to addressing United States investments in certain national security technologies and products in countries of concern); or (C) included in the List of Specially Designated Nationals and Blocked Persons maintained by the Office of Foreign Assets Control. (2) A Chinese entity— (A) included on the Non-SDN Chinese Military-Industrial Complex Companies List (NS–CMIC List) maintained by the Office of Foreign Assets Control of the Department of the Treasury under Executive Order 14032; (B) that is a Chinese military company or a military-civil fusion contributor and included on the list maintained by the Department of Defense in accordance with section 1260H(b) of the National Defense Authorization Act for Fiscal Year 2021 ( 10 U.S.C. 113 note); (C) included on the list required under section 1237 of the National Defense Authorization Act for Fiscal Year 1999 ( 50 U.S.C. 1701 note); (D) included on the Entity List set forth in Supplement No. 4 to part 744 of the Export Administration Regulations; (E) included on the Denied Persons List described in section 764.3(a)(2) of the Export Administration Regulations; (F) included on the Unverified List set forth in Supplement No. 6 to part 744 of the Export Administration Regulations; (G) included on the Military End User List set forth in Supplement No. 7 to part 744 of the Export Administration Regulations; (H) that produces or provides communications equipment or service on the list published by the Federal Communications Commission under section 2(a) of the Secure and Trusted Communications Networks Act of 2019 ( 47 U.S.C. 1601(a) ); (I) included on the on the Uyghur Forced Labor Prevention Act Entity List, maintained by the Department of Homeland Security; (J) included on the Withhold Release Orders and Findings List maintained by the Commissioner of U.S. Customs and Border Protection pursuant to the Uyghur Forced Labor Prevention Act ( Public Law 117–78 ); (K) included on the list of covered issuers (as defined in section 104 of the Sarbanes-Oxley Act of 2002 ( 15 U.S.C. 7214 )) maintained by the Securities and Exchange Commission; or (L) any other list maintained by the United States Government that designates a Chinese entities for a restriction relating to investment, contracting, or procurement. (3) A Chinese entity otherwise subject to the control of a Chinese entity listed in (1) or (2). (4) Any agency or instrumentality of the People’s Republic of China. (d) Requirements Any measure taken by a State or local government under subsection (b) shall meet the following requirements: (1) Notice The State or local government shall provide written notice to each person to which a measure is to be applied. (2) Timing The measure shall apply to a person not earlier than the date that is 90 days after the date on which written notice is provided to the person under paragraph (1). (3) Opportunity for hearing The State or local government shall provide an opportunity to comment in writing to each person to which a measure is to be applied. If the person demonstrates to the State or local government that the person does not engage in investment activities in the People’s Republic of China described in subsection (c), the measure shall not apply to the person. (4) Sense of Congress on avoiding erroneous targeting It is the sense of Congress that a State or local government should not adopt a measure under subsection (b) with respect to a person unless the State or local government has made every effort to avoid erroneously targeting the person and has verified that the person engages in investment activities in the People’s Republic of China described in subsection (c). (e) Notice to Department of Justice Not later than 30 days after adopting a measure pursuant to subsection (b), a State or local government shall submit written notice to the Attorney General describing the measure. (f) Rule of construction A Federal law or regulation, including this Act, shall not preempt any measure of a State or local government authorized under subsection (b). (g) Effective date (1) In general Except as provided in paragraph (2) or subsection (h), this section applies to measures adopted by a State or local government before, on, or after the date of the enactment of this Act. (2) Notice requirements Except as provided in subsection (h), subsections (d) and (e) apply to measures adopted by a State or local government on or after the date of the enactment of this Act. (h) Authorization for prior enacted measures (1) In general Notwithstanding any other provision of this section or any other provision of law, a State or local government may enforce a measure (without regard to the requirements of subsection (d), except as provided in paragraph (2)) adopted by the State or local government before the date of the enactment of this Act that provides for the divestment of assets of the State or local government from, or prohibits the investment of the assets of the State or local government in, any person that the State or local government determines, using credible information available to the public, engages in investment activities in the People’s Republic of China (determined without regard to subsection (c)) or other business activities in the People’s Republic of China that are identified in the measure. (2) Application of notice requirements A measure described in paragraph (1) shall be subject to the requirements of paragraphs (1) and (2) and the first sentence of paragraph (3) of subsection (d) on and after the date that is 2 years after the date of the enactment of this Act. (i) Definitions In this section: (1) Assets (A) In general Except as provided in subparagraph (B), the term assets refers to public monies and includes any pension, retirement, annuity, or endowment fund, or similar instrument, that is controlled by a State or local government. (B) Exception The term assets does not include employee benefit plans covered by title I of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1001 et seq. ). (2) Chinese entity The term Chinese entity means— (A) a person that is incorporated in, has a principal place of business in, or is organized under the laws of the People’s Republic of China; (B) a person whose equity securities are traded in the ordinary course of business on one or more exchanges in the People’s Republic of China; or (C) a person who is controlled by a single entity or individual, that is— (i) a citizen, national, or resident of the People’s Republic of China, other than an individual who is— (I) a citizen or lawful permanent resident of the United States; or (II) domiciled in Taiwan and possesses a valid identification card or number issued by the Government of Taiwan; (ii) an agent or instrumentality of the People’s Republic of China; or (iii) a person described in subparagraph (A) or (B). (3) Control The term control has the meaning given that term in part 800.208 of title 31, Code of Federal Regulations, or any successor regulations. (4) Investment The investment includes— (A) a commitment or contribution of funds or property; (B) a loan or other extension of credit; and (C) the entry into or renewal of a contract for goods or services. (5) Measure The term measure means a law or regulation. (6) People’s Republic of China The term People’s Republic of China includes any and all Special Administrative Regions of China, including Hong Kong and Macau but not including Taiwan. (7) Person The term person means— (A) a natural person, corporation, company, business association, partnership, society, trust, or any other nongovernmental entity, organization, or group; (B) any governmental entity or instrumentality of a government, including a multilateral development institution (as defined in section 1701(c)(3) of the International Financial Institutions Act ( 22 U.S.C. 262r(c)(3) )); and (C) any successor, subunit, parent entity, or subsidiary of, or any entity under common ownership or control with, any entity described in subparagraph (A) or (B). (8) State or local government The term State or local government includes— (A) any State and any agency or instrumentality thereof; (B) any local government within a State, and any agency or instrumentality thereof; (C) any other governmental instrumentality of a State or locality; and (D) any public institution of higher education within the meaning of the Higher Education Act of 1965 ( 20 U.S.C. 1001 et seq. ). (9) State The term State means each of the several States. 3. Safe harbor for changes of investment policies by asset managers (a) In general Section 13(c)(1) of the Investment Company Act of 1940 ( 15 U.S.C. 80a–13(c)(1) ) is amended— (1) in subparagraph (A), by striking or at the end; (2) in subparagraph (B), by striking the period at the end and inserting ; or ; and (3) by adding at the end the following: (C) engage in investment activities in the People’s Republic of China described in section 2(c) of the PRC Accountability and Divestment Act of 2023 . . (b) Regulations Not later than 120 days after the date of the enactment of this Act, the Securities and Exchange Commission shall issue any revisions the Commission determines to be necessary to the regulations requiring disclosure by each registered investment company that divests itself of securities in accordance with section 13(c) of the Investment Company Act of 1940 to include divestments of securities in accordance with paragraph (1)(C) of such section, as added by subsection (a). 4. Sense of Congress regarding certain ERISA plan investments It is the sense of Congress that a fiduciary of an employee benefit plan, as defined in section 3(3) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1002(3) ), may divest plan assets from, or avoid investing plan assets in, any person the fiduciary determines engages in investment activities in the People’s Republic of China described in section 2(c) of this Act, without breaching the responsibilities, obligations, or duties imposed upon the fiduciary by subparagraph (A) or (B) of section 404(a)(1) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1104(a)(1) ), if— (1) the fiduciary makes such determination using credible information that is available to the public; and (2) the fiduciary prudently determines that the result of such divestment or avoidance of investment would not be expected to provide the employee benefit plan with— (A) a lower rate of return than alternative investments with commensurate degrees of risk; or (B) a higher degree of risk than alternative investments with commensurate rates of return.