[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4881 Introduced in House (IH)]







109th CONGRESS
  2d Session
                                H. R. 4881

 To promote the national defense by establishing requirements for the 
ownership, management, and operation of critical infrastructure in the 
                 United States, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 7, 2006

    Mr. Hunter (for himself, Mr. Saxton, Mr. Skelton, Mr. Davis of 
 Kentucky, Mrs. Jo Ann Davis of Virginia, Mr. Jones of North Carolina, 
Mr. LoBiondo, Mr. Miller of Florida, Mr. Smith of New Jersey, Mr. Poe, 
Mr. Bachus, Mr. Hefley, Mr. Ney, Mr. Turner, and Mr. Duncan) introduced 
 the following bill; which was referred to the Committee on Financial 
 Services, and in addition to the Committees on Armed Services, Energy 
  and Commerce, International Relations, and Homeland Security, 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 promote the national defense by establishing requirements for the 
ownership, management, and operation of critical infrastructure in the 
                 United States, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``National Defense Critical 
Infrastructure Protection Act of 2006''.

SEC. 2. CITIZENSHIP AND OTHER REQUIREMENTS FOR OWNERSHIP, MANAGEMENT, 
              AND OPERATION OF UNITED STATES CRITICAL INFRASTRUCTURE.

    (a) Limitation on Corporate Ownership and Management and 
Operation.--A corporation may not own, or be authorized (by contract or 
otherwise) to manage or operate, any system or asset that is included 
on the national defense critical infrastructure list unless the 
corporation meets the critical infrastructure national security 
management requirements.
    (b) Critical Infrastructure National Security Management 
Requirements.--A corporation meets the critical infrastructure national 
security management requirements for purposes of subsection (a) only if 
each of the following applies to the corporation:
            (1) The corporation is organized under the laws of the 
        United States.
            (2) The corporation has a board of directors the majority 
        of whom are citizens of the United States.
            (3) The corporation has a chief executive officer and 
        chairman of the board of directors who are citizens of the 
        United States.
            (4) A majority of the voting shares of the corporation, and 
        a majority of nonvoting shares of the corporation, are owned by 
        citizens of the United States.
            (5) More than 50 percent of the members of the board of 
        directors of the corporation have been approved by the 
        Secretary of Defense, in consultation with the Secretary of 
        Homeland Security, for membership on the board.
            (6) Not less than 20 percent of the members of the board of 
        directors are independent directors.
            (7) All of the independent directors have been approved by 
        the Secretary of Defense, in consultation with the Secretary of 
        Homeland Security, for membership on the board.
            (8) The board of directors has a government security 
        committee, all of whose members are approved by the Secretary 
        of Defense, in consultation with the Secretary of Homeland 
        Security, for membership on the committee.
            (9) The board of directors has a compensation committee 
        that--
                    (A) is comprised of citizens of the United States; 
                and
                    (B) includes the independent directors approved 
                under paragraph (7).
            (10) The corporation has agreed to allow, and has 
        instituted procedures to authorize, the Secretary of Defense, 
        in consultation with the Secretary of Homeland Security, to 
        annually inspect the procedures of the corporation for handling 
        classified information and, based on such an annual inspection, 
        the procedures of the corporation for handling classified 
        information have been approved by the Secretary of Defense.
In the case of a corporation that as of the effective date of 
subsection (a) owns, or is authorized by contract (or otherwise) to 
manage or operate, a system or asset that is included on the national 
defense critical infrastructure list, the provisions of paragraph (4) 
of this subsection take effect with respect to that corporation as of 
the date that is five years after the date of the enactment of this 
Act.
    (c) Notification Requirements.--Any corporation that has met the 
requirements of subsection (b) and that owns, or manages or operates, a 
system or asset on the national defense critical infrastructure list 
shall promptly submit notice to the Secretary in the event any of the 
following occurs:
            (1) Acquisition of ownership or beneficial ownership, 
        direct or indirect, of five percent or more of the 
        corporation's voting securities by a foreign person.
            (2) Acquisition of ownership or beneficial ownership, 
        direct or indirect, of 25 percent or more of any class of the 
        corporation's nonvoting securities by a foreign person.
            (3) Authority or ability of a foreign person to have power, 
        direct or indirect, to control the election, appointment, or 
        tenure of directors, officers, or executive personnel of the 
        corporation and the power to control other decisions or 
        activities of the corporation.
            (4) Total revenues or net income in excess of five percent 
        from a single foreign person or in excess of 30 percent from 
        foreign persons in the aggregate in any fiscal year of the 
        corporation.
            (5) Ten percent or more of any class of the corporation's 
        voting securities held in ``nominee shares'', ``street names'', 
        or in some other method that does not disclose the beneficial 
        owner of equitable title.
            (6) Interlocking directors with foreign persons and any 
        officer or management official of the applicant company who is 
        also employed by a foreign person.
            (7) Any other factor that indicates or demonstrates a 
        capability on the part of foreign persons to control or 
        influence the operations or management of the corporation.
            (8) Acquisition by the corporation of ownership of 10 
        percent or more of any foreign interest.
    (d) National Defense Critical Infrastructure List.--
            (1) In general.--For purposes of this section, the 
        Secretary of Defense, in consultation with the Secretary of 
        Homeland Security, shall prepare and maintain a list, to be 
        known as the ``national defense critical infrastructure list'', 
        of critical infrastructure in the United States. The list shall 
        include both military installations and non-military 
        installations.
            (2) Submission to congressional committees.--Whenever the 
        national defense critical infrastructure list is revised, the 
        Secretary of Defense shall, not later than 15 days after the 
        date of the revision, submit notice of the revision in writing 
        to the following:
                    (A) The Committee on Armed Services of the Senate.
                    (B) The Committee on Armed Services of the House of 
                Representatives.
            (3) Critical infrastructure defined.--In this section, the 
        term ``critical infrastructure'' means any system or asset, 
        whether physical or virtual, that is so vital to the United 
        States that the incapacity or destruction of such system or 
        asset would have a debilitating effect on national security, on 
        national economic security, on national public health or 
        safety, or on any combination of those matters.
    (e) Citizen of the United States Defined.--In this section:
            (1) Citizen of the united states.--The term ``citizen of 
        the United States'' includes--
                    (A) a person that is a citizen of the United States 
                under section 2 of the Shipping Act, 1916 (46 U.S.C. 
                App. 802); and
                    (B) a United States citizen trust.
            (2) United states citizen trust.--
                    (A) Subject to subparagraph (C), the term ``United 
                States citizen trust'' means a trust that is qualified 
                under this paragraph.
                    (B) A trust is qualified under this paragraph with 
                respect to critical infrastructure only if--
                            (i) each of the trustees is a citizen of 
                        the United States; and
                            (ii) the trust submits to the Secretary of 
                        Defense an affidavit of each trustee stating 
                        that the trustee is not aware of any reason 
                        involving a beneficiary of the trust that is 
                        not a citizen of the United States, or 
                        involving any other person that is not a 
                        citizen of the United States, as a result of 
                        which the beneficiary or other person would 
                        hold more than 25 percent of the aggregate 
                        power to influence or limit the exercise of the 
                        authority of the trustee with respect to 
                        matters involving any ownership or operation of 
                        the critical infrastructure that may adversely 
                        affect the interests of the United States.
                    (C) If any person that is not a citizen of the 
                United States has authority to direct or participate in 
                directing a trustee for a trust in matters involving 
                any ownership or operation of the critical 
                infrastructure that may adversely affect the interests 
                of the United States or in removing a trustee for a 
                trust without cause, either directly or indirectly 
                through the control of another person, the trust is not 
                qualified under this paragraph unless the trust 
                instrument provides that persons who are not citizens 
                of the United States may not hold more than 25 percent 
                of the aggregate authority to so direct or remove a 
                trustee.
                    (D) This paragraph shall not be considered to 
                prohibit a person who is not a citizen of the United 
                States from holding more than 25 percent of the 
                beneficial interest in a trust.
    (f) Effective Dates.--
            (1) In general.--Subsection (a) shall take effect on the 
        date on which the national defense critical infrastructure list 
        is submitted to Congress pursuant to paragraph (2) and shall 
        apply to any corporation covered by that subsection as of that 
        date or thereafter.
            (2) National defense critical infrastructure list.--The 
        national defense critical infrastructure list required by 
        subsection (c) shall be established, and the initial list under 
        that subsection shall be submitted in writing to the Congress, 
        not later than three months after the date of the enactment of 
        this Act.
    (g) Special Rule for Certain Port Terminals.--
            (1) Special rule.--The port terminals specified in 
        paragraph (2) are deemed to be on the national defense critical 
        infrastructure list, and the provisions of subsection (a) apply 
        with respect to those terminals effective as of February 28, 
        2006.
            (2) Specified port terminals.--The port terminals specified 
        in this paragraph are the following:
                    (A) The terminals that as of February 28, 2006, 
                were operated by the United Kingdom company, Peninsular 
                and Oriental Steam Navigation Company (P & O), at the 
                following United States ports:
                            (i) Baltimore, Maryland.
                            (ii) Philadelphia, Pennsylvania.
                            (iii) Miami, Florida.
                            (iv) New Orleans, Louisiana.
                            (v) Houston, Texas.
                            (vi) Newark and Elizabeth, New Jersey.
                    (B) Any terminal at a port in the United States 
                other than a port listed in subparagraph (A) that as of 
                February 28, 2006, was operated in part, or with the 
                contribution of, the company named in subparagraph (A).

SEC. 3. ENHANCED AUTHORITY TO REVIEW CERTAIN FOREIGN MERGERS, 
              ACQUISITIONS, AND TAKEOVERS.

    (a) Confidentiality of Information.--Subsection (c) of section 721 
of the Defense Production Act of 1950 (50 U.S.C. App. 2170(c)) is 
amended--
            (1) by inserting ``during the process of investigation'' 
        after ``prevent disclosure''; and
            (2) by inserting ``of any information considered during the 
        process of investigation'' before the period at the end.
    (b) Findings of the President.--Subsection (e) of such section (50 
U.S.C. App. 2170(e)) is amended--
            (1) in the matter preceding paragraph (1)--
                    (A) by striking ``may'' and inserting ``shall'';
                    (B) by striking ``subsection (c)'' and inserting 
                ``subsection (d)''; and
                    (C) by striking ``only''; and
            (2) by striking paragraph (1) and inserting the following:
            ``(1) there is either--
                    ``(A) credible evidence that leads the President to 
                believe that the foreign interest exercising control 
                might take action that threatens to impair the national 
                security; or
                    ``(B) a reasonable expectation that the foreign 
                interest exercising control would use such control--
                            ``(i) to adversely affect the ability of 
                        domestic industries to meet existing production 
                        requirements for defense or homeland security;
                            ``(ii) to acquire advanced technology 
                        illicitly; or
                            ``(iii) to increase its ability to affect 
                        United States critical infrastructure; and''.
    (c) Factors to Be Considered.--Subsection (f) of such section (50 
U.S.C. App. 2170(f)) is amended--
            (1) in the matter preceding paragraph (1)--
                    (A) by striking ``may'' and inserting ``shall''; 
                and
                    (B) by striking ``factors--'' and inserting 
                ``factors the following:'';
            (2) by capitalizing the first letter of the first word of 
        paragraphs (1), (2), (3), (4), and (5);
            (3) at the end of paragraphs (1), (2), and (3), by striking 
        the comma and inserting a period;
            (4) at the end of paragraph (4), by striking ``; and'' and 
        inserting a period;
            (5) by redesignating paragraph (5) as paragraph (8); and
            (6) by inserting after paragraph (4) the following new 
        paragraphs:
            ``(5) Domestic production needed to meet the needs of 
        homeland security.
            ``(6) The potential effects of the proposed or pending 
        transaction on control of critical infrastructure, such as 
        energy, telecommunications, transportation, or information.
            ``(7) The potential effects of the proposed or pending 
        transaction on secure United States access to strategic natural 
        resources, including energy supplies and critical minerals.''.
    (d) Notification to Government.--
            (1) Required notice of proposed or pending transactions.--
        Such section is further amended--
                    (A) by redesignating subsections (g), (h), (i), 
                (j), and (k) as subsections (h), (i), (j), (k), and 
                (l), respectively; and
                    (B) by inserting after subsection (f) the following 
                new subsection:
    ``(g) Notification to Government.--
            ``(1) Required notice.--The President shall provide for the 
        regulations issued pursuant to this section to require that, in 
        any case in which there is a proposed or pending merger, 
        acquisition, or takeover that is or may be subject to an 
        investigation under subsection (a), the President or the 
        President's designee shall be provided written notification of 
        the proposed or pending merger, acquisition, or takeover, as 
        referred to in the second sentence of subsection (a), and that 
        such written notification shall be provided in sufficient time 
        for the review process under this section to be completed 
        before the proposed or pending merger, acquisition, or takeover 
        is finalized.
            ``(2) Publication in federal register.--Any notification 
        pursuant to paragraph (1) shall be published in the Federal 
        Register within five days of such notification.''.
            (2) Interim rules.--The President or the President's 
        designee may prescribe interim rules necessary to carry out the 
        responsibilities under subsection (g) of section 721 of the 
        Defense Production Act of 1950 as added by paragraph (1)(B). 
        Any otherwise applicable notice-and-comment requirement of 
        section 553 of title 5, United States Code, shall not apply to 
        such interim rules. Interim rules prescribed under the 
        authority of this subsection that are not earlier superceded by 
        final rules shall expire as specified in such interim rules, 
        but not later than the end of the one-year period beginning on 
        the the date of the enactment of this Act.
    (e) Annual Report.--Subsection (l) of such section, as redesignated 
by subsection (d)(1), is amended--
            (1) in the subsection heading, by striking ``Quadrennial 
        Report.--'' and inserting ``Annual Report.--''; and
            (2) in paragraph (1), by striking ``not later than 1 year'' 
        and all that follows through ``every 4 years thereafter'' and 
        inserting ``not later than November 1 each year''.
    (f) Technical Amendments.--Such section is further amended--
            (1) in subsections (a) and (d), by striking ``the date of 
        enactment of this section'' and inserting ``August 23, 1988'';
            (2) in subsection (d), by striking ``subsection (d)'' and 
        inserting ``subsection (e)''; and
            (3) in the last sentence of subsection (h), as redesignated 
        by subsection (d)(1), by striking ``of this Act''.
    (g) Effective Dates.--
            (1) Applicability to new investigations.--The amendments 
        made by this section shall apply with respect to any 
        investigation under section 721 of the Defense Production Act 
        of 1950 (50 U.S.C. App. 2170) that is commenced after the date 
        of the enactment of this Act.
            (2) Time limit for required new regulations.--Regulations 
        required by subsection (g) of such section, as added by the 
        amendment made by subsection (d)(1)(B), shall be prescribed not 
        later than the end of the one-year period beginning on the date 
        of the enactment of this Act.

SEC. 4. MANDATORY INSPECTION OF CARGO.

    (a) Mandatory Inspections.--No cargo transported by a commercial 
motor vehicle may enter the United States from Canada or Mexico, and no 
cargo transported by vessel may be unloaded in the United States, 
unless an appropriate officer or employee of the Directorate of Border 
and Transportation Security or other appropriate officer or employee of 
the United States has inspected the cargo to ensure that it complies 
with the laws of the United States.
    (b) Definitions.--In this section:
            (1) Cargo.--The term ``cargo'' means property, or mail, or 
        both.
            (2) Commercial motor vehicle.--The term ``commercial motor 
        vehicle'' means a commercial motor vehicle as defined in 
        section 31101(1) of title 49, United States Code, that is used 
        principally to transport cargo.
            (3) United states; vessel.--The terms ``United States'' and 
        ``vessel'' have the meanings given those terms in section 401 
        of the Tariff Act of 1930 (19 U.S.C. 1401).
    (c) Effective Date.--This section shall take effect 6 months after 
the date of the enactment of this Act.
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