Congressional Record, Volume 143 Issue 139 (Wednesday, October 8, 1997)

[Congressional Record Volume 143, Number 139 (Wednesday, October 8, 1997)]
[Senate]
[Pages S10648-S10660]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

CIVIL SERVICE RETIREMENT SYSTEM ANNUITIES CLARIFICATION LEGISLATION

Mr. ROBB. Mr. President, I rise today to introduce legislation to
correct a wrong that has been done to an unknown number of Federal
retirees in computing their annuities.
Through a letter from Mr. L. David Jones, I was informed that the
1986 Civil Service amendments contained in the Consolidated Omnibus
Budget Reconciliation Act were being misapplied to penalize career
Federal civil servants who had some part-time service at the end of
their careers. Mr. Jones, and I'm sure many others, was encouraged to
transition to retirement by working part-time for several years rather
than just retiring after a 30-year career. Imagine Mr. Jones' surprise
when he calculated his annuity after 30 years of full-time service and
five years of part-time service and realized that he would have been
better off if he had just retired after 30 years.
At first I believed this problem was simply a matter of the Office of
Personnel Management misunderstanding the intent of Congress and that
the situation could be corrected through administrative action. The
Office of Personnel Management, however, has firmly stated that they
are carrying out the letter of the law, and any change to the current
annuity calculation will require congressional action.
That is why I am here today. Mr. Jones, and any others who are in a
similar situation, deserve to have an annuity that accurately reflects
their many years of service. This bill will allow those retirees to
have their annuities recalculated to ensure that they are not penalized
for not retiring outright. Realize also, however, that this bill does
not authorize back payments for any lost annuity--the legislation
simply tries to put things right for future payments to retirees
affected by this previous error and to ensure that no future retirees
are similarly penalized.
We must also look ahead and realize that any policy which discourages
part-time service in these situations threatens to lead to a ``brain
drain'' as baby boomers begin to retire. Many agencies have already
expressed concern about their graying workforce and the difficulties
they will face as these experienced workers retire. One option often
mentioned is to encourage part-time service, so that the experience
remains and allows for a transition of responsibilities to younger
workers. As it stands now, a civil servant would be ill-advised to
agree to that part-time transition to retirement.
For both of these reasons, I encourage all of my colleagues to
support this legislation, and I will work with my colleagues on the
Governmental Affairs Committee to see that this bill is considered as
quickly as possible.
______

By Mr. GRAHAM:
S. 1273. A bill to amend title 10, United States Code, to expand the
National Mail Order Pharmacy Program of the Department of Defense to
include covered beneficiaries under the military health care system who
are also entitled to Medicare; to the Committee on Armed Services.

the national mail order pharmacy program expansion act of 1997

Mr. GRAHAM. Mr. President, today, I stand before you to highlight an
injustice which has been done to the men and women who have served this
country with selfless dedication. They have devoted themselves to the
mission of protecting our country while promoting peace and democracy
around the world. For this contribution to our country, we reward their
performance with a retirement package which includes health care.
Unfortunately, through a series of independent laws, we have created a
disjointed health care benefits package which treats retirees
differently depending on their age and where they happen to live.
I am introducing a bill to correct this disjointed health care
policy. There is clearly a double standard affecting our veterans.
Under the current provisions of the law, military retirees are eligible
to receive health care under the CHAMPUS program until they become 65
years old. After that time, their health care is provided by Medicare.
Under the CHAMPUS program, retirees have access to a program known as
the mail-order pharmacy program which allows military members and
retirees to obtain prescription drugs through the mail. Retirees over
the age of 65 years old cannot be supported through the CHAMPUS program
under current legislative restrictions. Medicare has no such pharmacy
benefit. This means that once retirees become 65 years old, they lose
the benefit and convenience of a mail-order pharmacy program. This
comes at a time in their lives when they are more likely to need
prescription drugs.
I commend the Department of Defense on their initiative to develop
the mail-order pharmacy program. This new program was established to
provide better service to the military community and to enable them to
maximize that level of service within their decreasing available
resources.
Military retirees and their dependents are eligible to receive free
medical care from military installations on a space available basis.
However, as the military continues to downsize their medical corps,
``space available'' is becoming more and more elusive for retirees.
Pharmacy services are likewise available to retirees at military
installations on a space available basis. For those retirees who were
receiving their medical care, including prescription services, from a
military installation which was closed by Base Realignment and Closure
[BRAC] decisions, we have made an exception to the law which allows
these retirees to participate in the mail-order pharmacy program. We
have created a conglomeration of rules

[[Page S10649]]

which apply to military retirees depending on their personal
circumstances.
My proposal is very simple. All military retirees, including their
dependents, should have access to the same health care benefits. We
should not differentiate between medical benefits based only on a
retiree's age or where a retiree happens to live. All retirees should
be allowed to use the mail-order pharmacy program.
The General Accounting Office estimates that this proposal will cost
approximately $229 million. While I remain committed to reducing the
budget deficit and maintaining a balanced budget, I feel that the
current legislation has created an inequity in the retirement benefits
provided to our military personnel which must be corrected. It is the
right thing to do.
This Nation owes a debt of gratitude to our military retirees. They
have endured many hardships during their careers, including separation
from their families for extended periods of time and frequent moves to
all corners of the globe. They have also risked their lives in the name
of freedom and democracy.
Military retirees have given tirelessly of themselves throughout
their careers, and this proposal is an opportunity to correct an unjust
situation.
Mr. President, I ask unanimous consent that the text of the bill be
printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:

S. 1273

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

SECTION 1. INCLUSION OF MEDICARE-ELIGIBLE COVERED
BENEFICIARIES IN DEPARTMENT OF DEFENSE NATIONAL
MAIL ORDER PHARMACY PROGRAM.

Section 1086 of title 10, United States Code, is amended by
adding at the end the following new subsection:
``(i) Notwithstanding subsection (d)(1), the Secretary of
Defense shall ensure that any program to make prescription
pharmaceuticals available by mail to covered beneficiaries
does not exclude covered beneficiaries who are entitled to
hospital insurance benefits under part A of title XVIII of
the Social Security Act (42 U.S.C. 1395c et seq.) Such
covered beneficiaries shall be eligible to receive
pharmaceuticals available under the mail order program on the
same terms and conditions as other covered beneficiaries
included in the program.''.
______

By Mr. CAMPBELL:
S. 1274. A bill to amend the Internal Revenue Code of 1986 to
prohibit the Internal Revenue Service from using the threat of audit to
compel agreement with the Tip Reporting Alternative Commitment or the
Tip Rate Determination.

the citizens voluntary compliance partnership act of 1997

Mr. CAMPBELL. Mr. President, last week the Senate passed the Treasury
and general Government appropriations bill for fiscal year 1998.
Included in the final conference report to that bill was language
regarding the Tip Reporting Alternative Commitment Program [TRAC].
TRAC is a voluntary agreement entered into by the Internal Revenue
Service and restaurant employers across the country. Under TRAC,
employers agree to better educate their employees on tip reporting and
also to monitor the tips received by employees. Developed just a few
short years ago, TRAC is seen as a way to combat the instances of
underreporting and nonreporting of tips.
However, it has come to the attention of many in Congress that the
IRS may be using the threat of an audit to compel restaurant owners to
enter into this agreement. While the IRS does have the authority to
perform audits, I do not feel it is appropriate for this agency to be
utilizing this right as a means of intimidation.
The report language pertaining to TRAC, which I ask unanimous consent
be printed in the Record, states that the IRS ``should ensure
compliance with tip reporting by stressing its customer service role
while working with restaurant owners.'' The legislation I am
introducing today would simply put some teeth into this report
language.
All my bill does is prohibit the IRS from using the threat of making
an examination or issuing a summons to compel a restaurant owner to
enter into TRAC. It does not limit the IRS' authority to perform such
functions. It simply prohibits the agency from using these tools as a
means of forcing compliance.
Mr. President, I ask unanimous consent that the text of the bill be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

S. 1274

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

SECTION 1. FINDINGS.

Congress finds that--
(1) the Tip Reporting Alternative Commitment Agreement and
the tip Rate Determination Agreement are voluntary agreements
developed by the Internal Revenue Service and the restaurant
industry as a means of improving the reporting of tip income;
(2) there have been reports that the Internal Revenue
Service may be compelling members of the restaurant industry
to accept such voluntary agreement by using the possibility
of audit to intimidate; and
(3) the Internal Revenue Service has the authority to
perform audits to assure taxpayer compliance with the
internal revenue laws.

SEC. 2. PROHIBITION ON USING THE THREAT OF AUDIT TO COMPEL
AGREEMENT WITH THE TIP REPORTING ALTERNATIVE
COMMITMENT.

Section 7602 of the Internal Revenue Code of 1986 (relating
to examination of books and witnesses) is amended by adding
at the end the following new subsection:
``(d) No Threat of Summons or Examinations to Compel
Agreement With Tip Reporting Alternative Commitment or the
Tip Rate Determination Agreement.--The Secretary shall not
use the threat of making an examination or issuing a summons
under subsection (1) to compel a taxpayer to agree to or sign
the Tip Reporting Alternative Commitment Agreement (TRAC) or
the Tip Rate Determination Agreement (TRDA).''
____

Tip Reporting Alternative Commitment Program

The conferees agree with the House position that the IRS
should work with taxpayers to ensure compliance with the Tip
Reporting Alternative Commitment Agreement (TRAC). In too
many instances, restaurant owners perceive that the IRS may
be overzealous in their pursuit of voluntary agreement with
TRAC by intimating that the business will be audited if there
is no agreement. The conferees agree that IRS should ensure
compliance with tip reporting by stressing its customer
service role while working with the restaurant owners.
______

By Mr. MURKOWSKI (for himself and Mr. Akaka):
S. 1275. A bill to implement further the Act (Public Law 94-241)
approving the Covenant to Establish a Commonwealth of the Northern
Mariana Islands in Political Union with the United States of America,
and for other purposes; to the Committee on Energy and Natural
Resources.

the northern mariana islands convenant implementation act

Mr. MURKOWSKI. Mr. President, I send to the desk, for appropriate
reference, legislation on behalf of myself and Senator Akaka that the
administration has provided me in response to my request for a drafting
service. This legislation represents the language that the
administration believes will implement its recommendations contained in
the most recent report on the Federal-CNMI Initiative on Labor,
Immigration, and Law Enforcement in the Commonwealth of the Northern
Mariana Islands.
In 1994, Congress directed this Initiative in Public Law 103-332 and
provided $7 million for fiscal years 1995 and 1996 with an additional
$3 million for fiscal year 1997. In testimony before the Committee on
Energy and Natural Resources, the administration committed to provide
an annual report on the progress of the Initiative.
Partially in response to concerns that had been raised about
conditions in the Commonwealth, Senator Akaka and I visited Saipan in
February of last year. In addition to extensive briefings and meetings
with Commonwealth officials, we also met with Federal agency personnel
and the U.S. attorney. We also visited a garment factory and talked
with some Bangladesh workers who had not been paid and who were living
in appalling conditions. We were assured that corrective action would
be taken. I want to note that my concerns were not exclusively with the
Commonwealth government, but also went to the willingness of the
administration to commit the needed resources to address the problems
that we saw. I specifically asked the Attorney General for the
appointment of a full-time U.S.

[[Page S10650]]

attorney for the Northern Marianas rather than having the U.S. attorney
for Guam also serve the Northern Marianas. The Attorney General
responded that there wasn't enough work to justify a U.S. attorney.
On June 26 of last year, I chaired a hearing that examined what
progress had been made. In addition to the administration, the acting
Attorney General of the Commonwealth appeared and requested that the
committee delay any action until the Commonwealth could complete a
study on minimum wage and assured me that the study would be completed
by January. I agreed to the delay. My intention was to revisit this
issue in the April-May period after the administration had transmitted
its annual report. While the CNMI study was not finally transmitted
until April, the Administration did not transmit its annual report,
which was due in April, until July. On May 30, 1997, the President
wrote the Governor of the Northern Marianas that he was concerned over
activities in the Commonwealth and had concluded that Federal
immigration, naturalization, and minimum wage laws should apply. That
letter provoked a flurry of statements, letters, articles, stories, and
legislation, most of which generated more heat than light.
It quickly became clear that unless there was some definition as to
exactly what the problem was and what solution was being proposed,
little would happen other than a series of bewildering and increasingly
hostile statements. The atmosphere also made the possibility of a
useful oversight hearing increasingly remote. I must say that I have
not been particularly impressed by either the advocates of Federal
legislation or the opponents. One side responds to concerns over
workers living in barracks, abuse of domestics, prostitution, and other
problems by suggesting that the answer is to raise the minimum wage.
The response to allegations of abuse of workers, especially women, is
not to propose raising the minimum wage. Paying a person more does not
justify abuse. The other side of the argument seems to me to also miss
the point. The last time we heard a justification that economic
advances would be jeopardized if workers were treated properly was
shortly before Appomattox. Whatever economic benefits some may have
realized, that does not justify worker abuse, indentured servants, or
the conditions that I saw those Bangladesh workers living in.

There are certain issues that I believe need a full hearing and
careful review. The minimum wage study that the Commonwealth
commissioned noted at one point that the Marianas has used its control
over immigration and minimum wage to import foreign workers who would
be paid more than they would receive in their home countries, but less
than the Federal minimum wage. These workers would produce garments
that would be subject to quotas if produced in their home country, but
which could be imported duty free into the mainland United States since
the Marianas is outside the customs territory of the U.S. but subject
to preferential treatment under General Note 3(a) of the Tariff
Schedules. That is an issue that the Congress should review.
When we considered the Covenant for the Marianas, we were sensitive
to the fact that the Marianas had been under the minimum wage
provisions of the Trust Territory and that immediate introduction of
the Federal minimum wage might have an adverse effect on a developing
economy that was still heavily dependent on annual Federal grants for
basic Government services. We also recognized the concern expressed by
the negotiators for the Northern Marianas that their small population
could be overrun easily by migration. In response, we permitted the
Marianas to control the timing of minimum wage and to exercise control
over immigration. We also provided restraints on land alienation to
protect the population. We did not consider that entrepreneurs would
discover a loophole that would allow a lower minimum wage and
immigration to create a non-indigenous industry that is Marianas in
name only. Congress should examine whether this is a situation that
should be permitted under the tariff schedules.
There are also legitimate questions concerning minimum wage and
immigration. We should now have sufficient experience to assess whether
the Marianas is capable of providing the pre-clearance for any persons
who attempt to enter the Marianas. The United States routinely does
this in foreign countries as part of our visa process. The situation
that I saw with the Bangladesh workers should never have happened.
Reports of other workers who arrive only to find no jobs should also
never happen. There should be no unemployment among the guest workers.
These are legitimate immigration related issues. They do not
necessarily lead to a Federal takeover, but they are legitimate issues
and it serves no purpose to distort history and pretend that the
current situation was the goal of the Covenant negotiators.
Minimum wage is also a fairly straightforward issue. It does not
appear that any U.S. citizens in the Northern Marianas are paid less
than the current Federal minimum wage. Is there a justification and a
need to pay foreign workers less and to what extent does the ability to
import skilled foreign labor at less than Federal minimum wages
contribute to the unemployment rate in the Marianas? Is there a reason
to pay less than the minimum wage to attract skilled positions? There
are issues that should be reviewed in a hearing.
Given the furor that followed the President's letter, I decided to
ask the administration to provide me with a drafting service of the
language that would implement whatever the recommendations were in
their report. The report was finally submitted in July, and I received
the drafting service on October 6, 1997. On July 16, 1997, I wrote the
Governor of the Commonwealth to inform him that I had made the request
and the schedule that I intended to follow. I want to reiterate my
statement. I am committed to holding hearings on this legislation. I am
not wedded to any particular provision in the legislation, but I am not
happy with the situation in the Commonwealth. I ask unanimous consent
that a copy of my letter be printed in the Record as well as a copy of
the transmittal letter from the administration, the text of the
legislation, and a section-by-section analysis.
Mr. President, I appreciate that elections are only a few weeks away
in the Marianas. I do not think that hearings prior to the elections
would be particularly productive. Our committee has tried to be
nonpartisan in our approach to our responsibilities for the territories
and we have tried to avoid local politics. Given the seriousness of
these issues, I think they should be raised after the elections. I want
to make it clear, however, that whatever the results of the elections
in the Marianas, the Energy and Natural Resources Committee intends to
proceed impartially and expeditiously.
There being no objection, the material was ordered to be printed in
the Record, as follows:

S. 1275

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

SECTION 1. SHORT TITLE AND REFERENCE.

This Act may be cited as the ``Northern Mariana Islands
Covenant Implementation Act''. Public Law 94-241 (90 Stat.
263, 48 U.S.C. 1801), which approved the Covenant to
Establish a Commonwealth of the Northern Mariana Islands in
Political Union with the United States of America, as
amended, hereinafter is referred to as the ``Covenant Act''.

SEC. 2. IMMIGRATION REFORM FOR THE NORTHERN MARIANA ISLANDS.

(a) Covenant Act Amendments.--The Covenant Act is amended
to add the following new section 6 after section 5:

``SEC. 6. TRANSITION PROGRAM FOR IMMIGRATION.

``Pursuant to section 503 of the Covenant to Establish a
Commonwealth of the Northern Mariana Islands in Political
Union with the United States of America (approved in Public
Law 94-241, 90 Stat. 263)--
``(a) Application of the Immigration and Nationality Act
and Establishment of a Transition Program.--Effective on the
first day of the first full month commencing one year after
the date of enactment of this section, the provisions of the
Immigration and Nationality Act, as amended, shall apply to
the Commonwealth of the Northern Mariana Islands, with a
transition period not to exceed ten years thereafter, during
which the Attorney General, in consultation with the
Secretaries of State, Labor, and Interior, shall establish,
administer, and enforce a transition program for immigration
to the Commonwealth of the Northern Mariana Islands (the
``transition program''). The transition program established
pursuant to this section shall provide for the issuance of
nonimmigrant temporary alien worker visas

[[Page S10651]]

pursuant to subsection (b), and, under the circumstances set
forth in subsection (c), for family-sponsored and employment-
based immigrant visas. The transition program shall be
implemented pursuant to regulations to be promulgated as
appropriate by each agency having responsibilities under the
transition program.
``(b) Temporary Alien Workers.--The transition program
shall conform to the following requirements with respect to
temporary alien workers who would otherwise not be eligible
for nonimmigrant classification under the Immigration and
Nationality Act, as amended:
``(1) Aliens admitted under this subsection shall be
treated as aliens seeking classification as nonimmigrants
under section 101(a)(15) of the Immigration and Nationality
Act, as amended, including the right to apply, if otherwise
eligible, for a change of nonimmigrant status under section
248 of the Immigration and Nationality Act, as amended, or
adjustment of status, if eligible therefor, under subsection
(c) of this section and section 245 of the Immigration and
Nationality Act, as amended.
``(2)(A) The Secretary of Labor shall establish,
administer, and enforce a system for allocating and
determining the number, terms, and conditions of permits to
be issued to prospective employers for each temporary alien
worker who would not otherwise be eligible for admission
under the Immigration and Nationality Act, as amended. This
system shall provide for a reduction in the allocation of
permits for such workers on an annual basis, over a period
not to exceed ten years. In no event shall a permit be
valid beyond the expiration of the transition period. This
system may be based on any reasonable method and criteria
determined by the Secretary of Labor to promote the
maximum use of, and to prevent adverse effects on wages
and working conditions of, United States labor and
lawfully admissible freely associated state citizen labor.
``(B) The Secretary of Labor is authorized to establish and
collect appropriate user fees for the purpose of this
section. Amounts collected pursuant to this section shall be
deposited to a special fund of the Treasury. Such amounts
shall be available, to the extent and in the amounts as
provided in advance in appropriations acts, for the purposes
of administering this section. Such amounts are authorized to
be appropriated to remain available until expended.
``(3) The Attorney General shall set the conditions for
admission of nonimmigrant temporary alien workers under the
transition program, and the Secretary of State shall
authorize the issuance of nonimmigrant visas for aliens to
engage in employment only as authorized in this subsection:
Provided, That such visas shall not be valid for admission to
the United States, as defined in section 101(a)(38) of the
Immigration and Nationality Act, as amended, except the
Northern Mariana Islands. An alien admitted to the Northern
Mariana Islands on the basis of such a nonimmigrant visa
shall be permitted to engage in employment only as authorized
pursuant to the transition program. No alien shall be granted
nonimmigrant classification or a visa under this subsection
unless the permit requirements established under paragraph
(2) of this subsection have been met.
``(4) An alien admitted as a nonimmigrant pursuant to this
subsection shall be permitted to transfer between employers
in the Northern Mariana Islands during the period of such
alien's authorized stay therein, provided that such transfer
is authorized by the Attorney General in accordance with
criteria established by the Attorney General and the
Secretary of Labor.
``(c) Immigrants.--With the exception of immediate
relatives, as defined in section 201(b)(2) of the Immigration
and Nationality Act, as amended, and except as provided in
paragraph (1) and (2) of this subsection, no alien shall be
granted initial admission as a lawful permanent resident of
the United States at a port-of-entry in the Northern Mariana
Islands, or at a port-of-entry in Guam for the purpose of
immigrating to the Northern Mariana Islands.
``(1) Family-Sponsored Immigrant Visas.--The Attorney
General, based on a joint recommendation of the Governor and
Legislature of the Commonwealth of the Northern Mariana
Islands, and in consultation with appropriate federal
agencies, may establish a specific number of additional
initial admissions as a family-sponsored immigrant at a port-
of-entry in the Northern Mariana Islands, or at a port-of-
entry in Guam for the purpose of immigrating to the Northern
Mariana Islands, pursuant to section 202 and 203(a) of the
Immigration and Nationality Act, as amended, during the
following fiscal year.
``(2) Employment-Based Immigrant Visas.--
``(A) If the Secretary of Labor, upon receipt of a joint
recommendation of the Governor and Legislature of the
Commonwealth of the Northern Mariana Islands, finds that
exceptional circumstances exist with respect to the inability
of employers in the Northern Mariana Islands to obtain
sufficient work-authorized labor, the Attorney General may
establish a specific number of employment-based immigrant
visas to be made available during the following fiscal year
under section 203(b) of the Immigration and Nationality Act,
as amended.
``(B) Upon notification by the Attorney General that a
number has been established pursuant to subparagraph (A) of
this paragraph, the Secretary of State may allocate up to
that number of visas without regard to the numerical
limitations set forth in sections 202 and 203(b)(3)(B) of the
Immigration and Nationality Act, as amended. Visa numbers
allocated under this subparagraph shall be allocated first
from the number of visas available under section 203(b)(3) of
the Immigration and Nationality Act, as amended, or, if such
visa numbers are not available, from the number of visas
available under section 203(b)(5) of such Act.
``(C) Persons granted employment-based immigrant visas
under the transition program may be admitted initially at a
port-of-entry in the Northern Mariana Islands, or at a port-
of-entry in Guam for the purpose of immigrating to the
Northern Mariana Islands, as lawful permanent residents of
the United States.
``(D) Any immigrant visa issued pursuant to this paragraph
shall be valid only for application for initial admission to
the Northern Mariana Islands. The admission of any alien
pursuant to such an immigrant visa shall be an admission for
lawful permanent residence and employment only in the
Northern Mariana Islands during the first five years after
such admission. Such admission shall not authorize permanent
residence or employment in any other part of the United
States during such five-year period. An alien admitted for
permanent residence pursuant to this paragraph shall be
issued appropriate documentation identifying the person as
having been admitted pursuant to the terms and conditions of
this transition program, and shall be required to comply with
a system for the registration and reporting of aliens
admitted for permanent residence under the transition
program, to be established by the Attorney General, by
regulation, consistent with the Attorney General's authority
under Chapter 7 of Title II of the Immigration and
Nationality Act, as amended.
``(E) Nothing in this paragraph shall preclude an alien who
has obtained lawful permanent resident status pursuant to
this paragraph from applying, if otherwise eligible under
this section and under the Immigration and Nationality Act,
as amended, for an immigrant visa or admission as a lawful
permanent resident under the Immigration and Nationality Act,
as amended.
``(F) Any alien admitted under this subsection, who
violates the provisions of this paragraph, or who is found
removable or inadmissible under section 237(a), or paragraphs
(1), (2), (3), (4)(A), (4)(B), (6), (7), (8), or (9) of
section 212(a), shall be removed from the United States
pursuant to sections 239, 240, and 241 of the Immigration and
Nationality Act, as amended.
``(G) The Attorney General may establish by regulation a
procedure by which an alien who has obtained lawful permanent
resident status pursuant to this paragraph may apply for a
waiver of the limitations on the terms and conditions of such
status. The Attorney General may grant the application for
waiver, in the discretion of the Attorney General, if: (1)
the alien is not in removal proceedings, (2) the alien has
been a person of good moral character for the preceding five
years, (3) the alien has not violated the terms and
conditions of the alien's permanent resident status, and (4)
the alien would suffer exceptional and extremely unusual
hardship were such terms and conditions not waived.
``(H) The limitations on the terms and conditions of an
alien's permanent residence set forth in this paragraph shall
expire at the end of five years after the alien's admission
to the Northern Mariana Islands as a permanent resident and
the alien is thereafter fully subject to the provisions of
the Immigration and Nationality Act, as amended. Following
the expiration of such limitations, the permanent resident
alien may engage in any lawful activity, including
employment, anywhere in the United States. Such an alien, if
otherwise eligible for naturalization, may count the five-
year period in the Northern Mariana Islands towards time in
the United States for purposes of meeting the residence
requirements of Title III of the Immigration and Nationality
Act, as amended.
``(d) Investor Visas.--The following requirements shall
apply to aliens who have been admitted to the Northern
Mariana Islands in long-term investor status under the
immigration laws of the Commonwealth of the Northern Mariana
Islands on or before the effective date of this Act and who
have continuously maintained residence in the Northern
Mariana Islands pursuant to such status:
``(1) Such aliens may apply to the Attorney General or a
consular officer for classification as a nonimmigrant under
the transition program. Any nonimmigrant status granted as a
result of such application shall terminate not later than
December 31, 2008.
``(2) During the six-month period beginning January 1,
2008, and ending June 30, 2008, any alien granted
nonimmigrant status pursuant to paragraph (1) of this
subsection shall be permitted to apply to the Attorney
General for status as a lawful permanent resident of the
United States effective on or after January 1, 2009, and
may be granted such status if otherwise admissible. Upon
granting permanent residence to any such alien, the
Attorney General shall advise the Secretary of State who
shall reduce by one number, during the fiscal year in
which the grant of status becomes effective, the total
number of immigrant visas available to natives of the
country of the alien's chargeability under section 202(b)
of the Immigration and Nationality Act, as amended.

[[Page S10652]]

``(e) Persons Lawfully Admitted Under the Commonwealth of
the Northern Mariana Islands Immigration Law.--Subject to
subsection (d) of this section, persons who would have been
lawfully present in the Northern Mariana Islands pursuant to
the immigration laws of the Commonwealth of the Northern
Mariana Islands on the effective date of this subsection,
shall be permitted to remain in the Northern Mariana Islands
for the completion of the period of admission under such
laws, or for two years, whichever is less.
``(f) Travel Restrictions for Certain Applicants for
Asylum.--Any alien admitted to the Northern Mariana Islands
pursuant to the immigrant laws of the Commonwealth of the
Northern Mariana Islands or pursuant to subsections (b) or
(c) of this section who files an application seeking asylum
in the United States shall be required, pursuant to
regulations established by the Attorney General, to remain in
the Northern Mariana Islands, during the period of time the
application is being adjudicated or during any appeals filed
subsequent to such adjudication. An applicant for asylum who,
during the time his application is being adjudicated or
during any appeals filed subsequent to such adjudication,
leaves the Northern Mariana Islands of his own will without
prior authorization by the Attorney General thereby abandons
the application.
``(g) Effect on Other Laws.--Effective on the first day of
the first full month commencing one year after the date of
enactment of this section, the provisions of this section and
the Immigration and Nationality Act, as amended, shall
supersede and replace all laws, provisions, or programs of
the Commonwealth of the Northern Mariana Islands relating to
the admission of aliens and the removal of aliens from the
Northern Mariana Islands.
``(h) Accrual of Time.--No time of `unlawful presence' in
the Northern Mariana Islands shall accrue for purposes of the
ground of inadmissibility in section 212(a)(9)(B) prior to
the date of enactment of this subsection.''.
(b) Conforming Amendments.--(1) Effective on the first day
of the first full month commencing one year after the date of
enactment of this section, section 101(a) of the Immigration
and Nationality Act, as amended, is amended as follows:
(A) in paragraph (36), by deleting ``and the Virgin Islands
of the United States.'' and substituting ``the Virgin Islands
of the United States, and the Northern Mariana Islands.'',
and;
(B) in paragraph (38), by deleting ``and the Virgin Islands
of the United States'' and substituting ``the Virgin Islands
of the United States, and the Northern Mariana Islands.''.
(2) Effective on the first day of the first full month
commencing on date of enactment of this section, subsection
(l) of section 212 of the Immigration and Nationality Act, as
amended, is amended, as follows:
(A) in paragraph (1)--
(i) strike the words ``stay on Guam'', and insert the words
``stay on Guam and the Northern Mariana Islands'',
(ii) after the word ``exceed'' insert the words ``a total
of'', and,
(iii) strike the words ``after consultation with the
Governor of Guam,'' and insert the words ``after respective
consultation with the Governor of Guam or the Governor of the
Commonwealth of the Northern Mariana Islands,'';
(B) in subparagraph (A) of paragraph (1), strike the words
``on Guam'', and insert the words ``on Guam or the Northern
Mariana Islands, respectively,'';
(C) in subparagraph (A) of paragraph (2), strike the words
``into Guam'', and insert the words ``into Guam or the
Northern Mariana Islands, respectively,'';
(D) in paragraph (3), strike the words ``Government of
Guam'' and insert the words ``Government of Guam or the
Government of the Commonwealth of the Northern Mariana
Islands''.
(c) Technical Assistance Program.--The Secretaries of
Interior and Labor, in consultation with the Commonwealth of
the Northern Mariana Islands, shall develop a program of
technical assistance, including recruitment and training, to
aid employers in securing employees from among United States
labor or lawfully admissible freely associated state citizen
labor.
(d) Department of Justice and Department of Labor
Operations.--The Attorney General and the Department of Labor
are authorized to establish and maintain Immigration and
Naturalization Service, Executive Office of Immigration
Review, and Department of Labor operations in the Northern
Mariana Islands for the purpose of performing their
responsibilities under the Immigration and Naturalization
Act, as amended, and under the transition program. To the
extent practicable and consistent with the satisfactory
performance of their assigned responsibilities under
applicable law, the Departments of Justice and Labor shall
recruit and hire from among qualified applicants resident in
the Northern Mariana Islands for staffing such operations.
(e) Report to the Congress.--The President shall report to
the Senate Committee on Energy and Natural Resources, and the
House Committee on Resources, within six months after the
fifth anniversary of the enactment of this Act, evaluating
the overall effect of the transition program and the
Immigration and Naturalization Act on the Northern Mariana
Islands, and at other times as the President deems
appropriate.
(f) Limitation on Number of Temporary Workers Prior to
Application of the Immigration and Naturalization Act and
Establishment of the Transition Program.--During the period
between enactment of this section and the effective date of
the transition program, the government of the Commonwealth of
the Northern Mariana Islands shall not permit an increase in
the total number of temporary alien workers who were present
in the Northern Mariana Islands on the date of enactment of
this section.
(g) Appropriations.--There are authorized to be
appropriated such sums as may be necessary to carry out the
purposes of this section and of the Immigration and
Naturalization Act, as amended, with respect to the Northern
Mariana Islands.

SEC. 3. MINIMUM WAGE.

The Covenant Act is amended to add the following new
section 7 after section 6:

``SEC. 7. MINIMUM WAGE.

``Pursuant to section 503 of the Covenant to Establish a
Commonwealth of the Northern Mariana Islands in Political
Union with the United States of America (approved in Public
Law 94-241, 90 Stat. 263)--
``(a) Effective thirty days after enactment of this Act,
the minimum wage provisions of section 6 of the Fair Labor
Standards Act of June 25, 1938 (52 Stat. 1062), as amended,
shall apply to the Commonwealth of the Northern Mariana
Islands, except--
``(1) the minimum wage rate applicable to the Commonwealth
of the Northern Mariana Islands shall be $3.35 per hour; and
``(2) effective January 1, 1999, and every January 1
thereafter, the minimum wage rate applicable to the
Commonwealth of the Northern Mariana Islands shall be raised
by thirty cents per hour or the amount necessary to raise the
applicable minimum wage rate to the wage rate set forth in
section 6(a)(1) of the Fair Labor Standards Act, whichever is
less.
``(b) Once the minimum wage rate applicable to the
Commonwealth of the Northern Mariana Islands is equal to the
wage rate set forth in section 6(a)(1) of the Fair Labor
Standards Act, the minimum wage rate applicable to the
Commonwealth of the Northern Mariana Islands shall thereafter
be the wage set forth in section 6(a)(1) of the Fair Labor
Standards Act.''.

SEC. 4. LABELING REQUIREMENTS FOR TEXTILE AND APPAREL
PRODUCTS.

The Covenant Act is amended to add the following new
section 8 after section 7:

``SEC. 8. LABELING OF TEXTILE AND APPAREL PRODUCTS.

``(a) No textile or apparel product that is produced in the
Northern Mariana Islands shall have a stamp, tag, label, or
other means of identification or substitute thereof on or
affixed to the product stating `Made in USA' or otherwise
stating or implying that the product was produced in the
United States unless the product is produced in a factory
certified by the United States Department of Labor, in
accordance with regulations issued by the Secretary of
Labor, to use full-time employee equivalents of labor in
the required percentage of qualified hours.
``(b) A textile or apparel product that does not meet the
requirements of subsection (a), or where the certification by
the United States Department of Labor is based on false or
incomplete information provided to the United States
Department of Labor, shall be deemed to be misbranded for the
purposes of the Textile Fiber Products Identification Act
(Public Law 85-897, 72 Stat. 1717).
``(c) In this section:
``(1) Freely associated state.--The term `freely associated
state' means the Republic of Palau, the Republic of the
Marshall Islands, or the Federated States of Micronesia.
``(2) Qualified hours.--The term `qualified hours' means
the hours of labor performed by a person who is a citizen,
national, or other protected individual as defined in section
274B(a)(3) of the Immigration and Nationality Act, as amended
(without regard to application for naturalization), or who is
a citizen of a freely associated state (as long as section
141 in the respective Compacts of Free Association with the
Republic of the Marshall Islands, the Federated States of
Micronesia or the Republic of Palau (Public Law 99-239 or
Public Law 99-658) or equivalent provisions are in effect).
``(3) Required percentage.--The term `required percentage'
means--
``(A) 20 percent, for the period beginning January 1, 1998,
through December 31, 1998;
``(B) 35 percent, for the period beginning January 1, 1999,
through December 31, 1999; and
``(C) 50 percent, for the period beginning January 1, 2000,
and thereafter.''.

SEC. 5 TARIFFS.

General Note 3(a)(iv) of the Harmonized Tariff Schedules of
the United States is amended to add at the end the following:
``(E) No textile or apparel product that is produced in the
Northern Mariana Islands shall be admitted duty-free into the
customs territory of the United States as the product of an
insular possession, unless the product is produced in a
factory certified by the United States Department of Labor,
in accordance with regulations issued by the Secretary of
Labor, to use full-time employee equivalents of labor in the
required percentage of qualified hours. In this subparagraph:
``(i) Freely associated state.--The term `freely associated
state' means the Republic of Palau, the Republic of the
Marshall Islands, or the Federated States of Micronesia.

[[Page S10653]]

``(ii) Qualified hours.--The term `qualified hours' means
the hours of labor performed by a person who is a citizen,
national, or other protected individual as defined in section
274B(a)(3) of the Immigration and Nationality Act, as amended
(without regard to application for naturalization), or who is
a citizen of a freely associated state (as long as section
141 in the respective Compacts of Free Association with the
Republic of the Marshall Islands, the Federated Stats of
Micronesia or the Republic of Palau (Public Law 99-239 or
Public Law 99-658) or equivalent provisions are in effect).
``(iii) Required percentage--The term `required percentage;
means--
``(A) 20 percent, for the period beginning January 1, 1998,
through December 31, 1998;
``(B) 35 percent, for the period beginning January 1, 1999,
through December 31, 1999; and
``(C) 50 percent, for the period beginning January 1, 2000,
and thereafter.''.
____

Section-by-Section Analysis

Section 1 would provide that this Act may be cited as the
``Northern Mariana Islands Covenant Implementation Act.'' It
further would provide that Public Law 94-241 (90 Stat. 263,
48 U.S.C. 1801) which approved the Covenant to Establish a
Commonwealth of the Northern Mariana Islands in Political
Union with the United States of America would be referred in
the Act as the ``Covenant Act.''
Section 2, entitled ``Immigration Reform for the Northern
Mariana Islands'' contains a subsection (a) that would amend
the Covenant Act by adding a new section 6 at the end of the
Covenant Act with the following preamble and subsections:
Preamble: the immigration provisions in the new section 6
of the Covenant Act would be enacted pursuant to section 503
of the Covenant to Establish a Commonwealth of the Northern
Mariana Islands in Political Union with the United States of
America (approved in Public Law 94-241, 90 Stat. 263), which
provides that the Congress may enact immigration legislation
regarding the Northern Mariana Islands after the termination
of the Trusteeship Agreement with respect to the Northern
Mariana Islands, which occurred on November 3, 1986. (Section
1 of Proclamation No. 5564, dated November 3, 1986. 51 F.R.
40399).
Section 6, subsection (a) would provide that, effective on
the first day of the first full month commencing one year
after the enactment date of section 6, the Immigration and
Nationality Act, as amended (the ``INA''), would apply in
full to the Commonwealth of the Northern Mariana Islands
(CNMI). At the same time, a transition program would become
effective for the orderly phasing out of the CNMI's current
temporary alien worker program. The Attorney General, in
consultation with the Secretaries of State, Labor, and
Interior, will be charged with establishing, administering,
and enforcing this transition program. To implement this
program, each agency having responsibilities under the
program will be required to promulgate appropriate
regulations. The details of this program are set forth in the
subsections below.
Section 6, subsection (b) would set forth the requirements
under the transition program for the admission of temporary
alien workers who would not otherwise be eligible for
nonimmigrant classification under the INA.
Paragraph (1) would provide that aliens who are admitted
under the transition program, like most nonimmigrants
admitted under the INA, will have the right to apply, if they
are otherwise eligible, for a change of status to a
nonimmigrant classification under the INA, or, if otherwise
eligible, for adjustment of status to lawful permanent
residence of the United States.
Paragraph (2)(A) would set out the responsibilities of the
United States Department of Labor under the transition
program. The Secretary of Labor would be charged with
establishing, administering, and enforcing a reasonable
system for the annual allocation of permits to be issued to
prospective employers of temporary alien workers who would
not be eligible for admission under the INA. This system
would provide for a reduction in the allocation of permits
for such workers on an annual basis, over a maximum period of
ten years, with no such permit to be valid beyond the
expiration of the transition period. The system would be
designed to promote the maximum use of, and to prevent
adverse effects on, United States labor and lawfully
admissible freely associated state citizen labor. In carrying
out its responsibilities under the subsection, the Department
of Labor would be authorized to collect appropriate user
fees. Paragraph (2)(B) would authorize the Secretary of Labor
to establish and collect appropriate user fees for the
purposes of this section.
Paragraph (3) would assign the Attorney General the
responsibility of setting the conditions for admission of
temporary alien workers under the transition program. In
addition, this subsection would assign to the Secretary of
State the responsibility for the issuance of nonimmigrant
visas, which would not be valid for admission to other parts
of the United States, to such persons. Aliens admitted to the
NMI as temporary workers under this program would be
permitted to engage in employment only as authorized in this
subsection. Such temporary workers, therefore, would not
engage open market employment in the NMI, but would be
required to work for an employer approved by the Attorney
General and the Secretary of Labor in accordance with this
subsection.
Paragraph (4) would provide for job transfer rights for
otherwise eligible temporary alien workers admitted under the
transition program pursuant to criteria established by the
Attorney General and the Secretary of Labor.
Section 6, subsection (c), would provide that, with the
exception of certain close family relatives, and except as
provided in section (6)(c)(1) and (2) aliens seeking to
immigrate to the NMI under the INA would not be granted
initial admission as a lawful permanent resident of the
United States at a port-of-entry in the NMI, or at a port-of-
entry in Guam for the purpose of immigration to the NMI.
Paragraph (1) would provide that, notwithstanding section
6(c) above, the Attorney General, based on the recommendation
of the CNMI Government, and after consultation with
appropriate federal agencies, may allow a specific number of
additional initial admissions to the NMI (or through Guam to
the NMI) as a family-sponsored immigrant under the INA.
Paragraph (2) would provide the Attorney General with the
authority to admit to the NMI, under exceptional
circumstances, a limited number of employment-based
immigrants, without regard to the normal numerical
limitations under the INA, during the transition program.
Subparagraph (a) would provide that the Secretary of Labor,
upon receipt of a joint recommendation of the Governor and
Legislature of the CNMI, may find that exceptional
circumstances exist which preclude employers in the NMI
from obtaining sufficient work-authorized labor. If the
Secretary of Labor makes such a finding, the Attorney
General may establish a specific number of employment-
based ``third preference'' immigrant visas to be made
available during the following fiscal year under the INA.
Subparagraph (B) would permit the Secretary of State to
allocate up to the number of visas requested by the Attorney
General without regard to the normal per-country or ``other
worker'' employment-based third preference numerical
limitations and visa issuance. These visas would be allocated
first from unused employment-based third preference visa
numbers, and then, if necessary, from unused alien
entrepreneur visa numbers.
Subparagraph (C) would allow persons granted employment-
based immigrant visas under the transition program to be
admitted initially at a port-of-entry in the NMI (or through
a port-of-entry in Guam to the NMI).
Subparagraph (D) would provide that any immigrant visa
issued pursuant to this paragraph shall be valid only for
application for initial admission to the NMI. Further, any
employment-based immigrant visas issued on the basis of the
above finding of ``exceptional circumstances'' would be valid
for admission for lawful permanent residence and employment
only in the NMI during the first five years after initial
admission. Such visas would not authorize permanent residence
or employment in any other part of the United States during
this five-year period. The subsection also would provide for
the issuance of appropriate documentation of such admission,
and, consistent with Chapter 7 of Title II of the INA, would
require an alien to register and report to the Attorney
General during the five-year period.
Subparagraph (E) would provide that an alien who is subject
to the five-year limitation under section 6(c) may, if
otherwise eligible, apply for an immigrant visa or admission
as a lawful permanent resident under the INA.
Subparagraph (F) would provide for the removal from the
United States of any alien subject to the five-year
limitation if the alien violates the provisions of section
6(c), or if the alien is found to be removable or
inadmissible under various provisions of the INA.
Subparagraph (G) would allow certain aliens who have
obtained lawful permanent resident status under the
transition program to apply for a waiver of the terms and
conditions of their status in certain extraordinary
situations where the Attorney General finds that the alien
would suffer exceptional and extremely unusual hardship were
such conditions not waived. An example of such an
extraordinary circumstance would be where the alien is a
labor organizer and can demonstrate that, as a result of the
alien's lawful labor activities, he or she has been
``blacklisted'' by local employers, and is therefore unable
to find employment in the Northern Mariana Islands. The
benefits of this provision would be unavailable to a person
who has violated the terms and conditions of his or her
permanent resident status, such as an alien who has engaged
in the unauthorized employment.
Subparagrah (H) would provide that the limitations on the
terms and conditions of an alien's permanent residence
granted under section 6(c) shall expire at the end of five
years after the alien's admission to the NMI as a permanent
resident. Thereafter, such an alien would be fully subject to
the provisions of the INA, and may engage in any lawful
activity, including employment, anywhere in the United
States. In addition, such an alien, if otherwise eligible for
naturalization, may count the five-year period in the NMI
towards time in the United States for purposes of meeting the
residence requirements of Title III of the INA.

[[Page S10654]]

Section 6, subsection (d), would permit, upon the meeting
certain requirements, that certain aliens who were admitted
to the NMI in long-term investor status under CNMI
immigration law on or before the effective date of this Act
to remain in the NMI after the effective date of the Act. In
order to enjoy the benefits of this subsection, such persons
would be required to have continuously maintained residence
in the NMI pursuant to such long-term investor status.
Paragraph (1) would provide that such long-term investors
may apply to the Attorney General or a consular officer for
nonimmigrant classification, to terminate no later than
December 31, 2008, under the transition program.
Paragraph (2) would provide that an alien granted
nonimmigrant status under this section may apply for
adjustment of status to lawful permanent resident of the
United States during the six-month period beginning January
1, 2008, and ending June 30, 2008. If otherwise admissible,
such an alien would be granted permanent resident status
effective on or after January 1, 2009. Each such adjustment
of status would be subject to the total per-country numerical
limitations on immigrant visa issuance, and therefore would
count against the total number of immigrant visas available
to natives of the country of the alien's chargeability.
Section 6, subsection (e) would permit persons who would
have been lawfully present in the NMI pursuant to local
immigration law as of the effective date of this subsection
to remain in the NMI for the completion of their period of
admission under such local law, as long as such period does
not extend beyond two years after such effective date.
Section 6, subsection (f) would impose travel restrictions
on asylum aliens admitted to the NMI pursuant to the laws of
the CNMI or as temporary workers or employment-based
immigrants under the transition program who apply for
asylum. Such persons will be required to remain the NMI
during the period of time the application is pending or
during any appeal period thereafter. An applicant for
asylum who during such period leaves the CNMI on his own
will without the prior permission of the Attorney General
thereby abandons the application.
Section 6, subsection (g) would provide that, effective on
the first day of the first full month commencing one year
after the enactment date of this section, this section and
the INA would supersede all laws, provisions, or programs of
the CNMI Government relating to the admission of aliens to
and the removal of aliens from the NMI.
Section 6, subsection (h) would provide that no time of
``unlawful presence'' in the NMI would accrue for purposes of
the ground of inadmissibility in section 212(a)(9)(B) prior
to the date of enactment of section 6.
Section 2, subsection (b) would provide for three
``Conforming Amendments.''
Paragraph (1)(A) would amend section 101(a)(36) of the INA,
which defines the term ``state'' for purposes of the INA, to
include the Northern Mariana Islands. This amendment would
become effective on the first day of the first full month
commencing one year after enactment date of section 2 of the
Northern Mariana Islands Covenant Implementation Act.
Paragraph (1)(B) would amend section 101(a)(38) of the INA,
which defines the term ``United States'' for purposes of the
INA, to include the Northern Mariana Islands. This amendment
would become effective on the first day of the first full
month commencing one year after the enactment date of section
2 of the Northern Mariana Islands Covenant Implementation
Act.
Paragraph (2) would amend section 212(l) of the INA to
extend the Guam Visa Waiver Program to the CNMI.
Section 2, subsection (c) would obligate the Secretaries of
Interior and Labor, in consultation with CNMI, to develop a
technical assistance program to aid NMI employers in
recruiting, training, and securing employees from among
United States labor or lawfully admissible freely associated
state citizen labor.
Section 2, subsection (d) would authorize the Attorney
General to establish and maintain Immigration and
Naturalization Service and Executive Office of Immigration
Review operations, and the Secretary of Labor to establish
and maintain operations in the NMI in order to perform their
respective responsibilities under the INA and the transition
program. Subsection (d) further provides for local
recruitment and hiring, where appropriate, by the Departments
of Justice and Labor.
Section 2, subsection (c) would provide that the President
report to the Senate Committee on Energy and Natural
Resources, and the House Committee on Resources, evaluating
the overall effect of the transition program and the INA on
the CNMI.
Section 2, subsection (f) would provide that the CNMI may
not increase the total number of temporary alien workers who
may be present in the NMI during the one year period after
enactment of this section and before the effective date of
the transition program from the number present on the date of
enactment.
Section 2, subsection (g) would authorize the appropriation
of such sums as may be necessary to carry out the purposes of
this section and the INA with respect to the CNMI.
Section 3 would add a new section 7 to the Covenant Act
that would, beginning thirty days after enactment, raise the
minimum wage in the Commonwealth of the Northern Mariana
Islands from the current CNMI rate of $3.05 per hour to the
Federal minimum wage rate (currently $5.15 per hour), in 30-
cent annual increments. This provision would be similar to
the minimum wage increase law enacted by the CNMI
legislature, but later repealed.
Section 4 would add a new section 8 to the Covenant Act
that would require that textile and apparel products produced
in the Northern Mariana Islands, which bear a ``Made in USA''
or similar label, be produced in a factory certified by the
United States Department of Labor to use United States labor
(including citizens, nationals, lawful permanent residents,
refugees, or asylees) or freely associated state citizen
labor in the following qualified hours of full-time employee
equivalents--20 percent for the year beginning January 1,
1998, 35 percent for the year beginning January 1, 1999, and
50 percent beginning January 1, 2000, and thereafter. A
textile or apparel product bearing a ``Made in USA'' label
that is not produced in a certified factory would be deemed
to be misbranded for the purposes of the Textile Fiber
Products Identification Act, and sanctions would apply.
Additionally, a product would be misbranded if certification
by the United States Department of Labor were based on false
or incomplete information provided to the Department of
Labor.
Section 5 would amend General Note 3(a)(iv) of the
Harmonized Tariff Schedules of the United States to prohibit
a textile or apparel product produced in the Commonwealth of
the Northern Mariana Islands from being admitted duty-free
into the customs territory of the United States as a product
of an insular possession unless the product is produced in a
factory certified by the United States Department of Labor to
use United States labor (including citizens, nationals,
lawful permanent residents, refugees, or asylees) or freely
associated state citizen labor in the following qualified
hours of full-time employee equivalents--20 percent for the
year beginning January 1, 1998, 35 percent for the year
beginning January 1, 1999, and 50 percent beginning January
1, 2000, and thereafter.
____

U.S. Senate, Committee on Energy and Natural Resources,
Washington, DC, July 16, 1997.
Hon. Froilan C. Tenorio,
Governor of the Northern Mariana Islands, Saipan, MP.
Dear Governor Tenorio: I am writing to you concerning the
continuing reports of conditions in the Commonwealth of the
Northern Mariana Islands and the various measures that have
been suggested to address those problems. In February of last
year, I had the opportunity to visit the Commonwealth with
Senator Akaka. While our visit was brief, we did see
conditions that simply should not be allowed to exist in any
area under the sovereignty of the United States. In meetings
with your staff, we were assured that your Administration was
committed to prompt and effective law enforcement, and that
we needed to give the joint Federal-CNMI initiative time to
work.
On June 26 of last year, the Committee conducted a hearing
that in part focused on oversight of the situation in the
Northern Marianas. I stated that unless the Commonwealth took
action to remedy the problems that existed, federal action
was all but inevitable. While I support local authority, that
authority must be responsibly exercised. At that hearing,
your representative asked that the Committee delay any action
until the Commonwealth could complete a report on minimum
wage and that the report would be available in January of
this year. I agreed. Although the report was not available
until April, that delay did not appear to be a major problem
since the Department of the Interior was due to submit its
report on the Federal-CNMI Initiative on Labor, Immigration,
and Law Enforcement in April.
Although the Administration's report has still not been
submitted, on May 30, 1997 the President wrote you that he
had concluded that federal immigration, naturalization, and
minimum wage laws should now be applied to the Commonwealth.
To date, although the Administration has not transmitted
legislation to implement the President's conclusion,
legislation extending those laws has been introduced in the
House and I am aware of several Members of the Senate who are
also considering similar measures.
I intend to schedule a hearing to consider what
legislation, if any, should be enacted shortly after the
Administration submits its report, which I understand is now
under final review by the Office of Management and Budget. I
have asked the Secretary of the Interior to draft legislation
to implement the final recommendations of the report. I
intend to introduce that draft in order to focus the
testimony at the hearing. In addition to the measures that
have been discussed, I also want the hearing to consider
whether changes should be made in the application of Headnote
3(A) and what needs to be done to strengthen enforcement of
federal and local laws.
Given the delay in transmittal of the Administration's
report, I do not expect that we will be able to schedule a
hearing prior to September. I want to be certain that you
have had sufficient time to review the Administration's
report and any legislation, but I also want to conduct the
hearing so that there is sufficient time to consider whatever
legislative measures appear warranted during this session of
the Congress.
Sincerely,
Frank H. Murkoswki,
Chairman.

[[Page S10655]]

____
U.S. Department of the Interior, Office of the Secretary,
Washington, DC, October 6, 1997.
Hon. Frank H. Murkowski,
Chairman, Committee on Energy and Natural Resources, U.S.
Senate, Washington, DC.
Dear Mr. Chairman: This is in response to your letter of
July 16, 1997, requesting a drafting service that would
implement the Administration's recommendations for the
Commonwealth of the Northern Mariana Islands (CNMI) contained
in the Administration's July 1997 report on the Federal-CNMI
Initiative on Labor, Immigration, and Law Enforcement.
Pursuant to your request, I have enclosed a legislative
proposal that addresses the recommendations in the
Administration's report. The Administration strongly supports
the enactment of this proposal.
While we are firm in our commitment to the proposals
outlined in the recommendations, the Administration is,
however, willing to consider amendments. A Federal policy
framework is needed to respond to the use of CNMI as a
platform for circumvention of United States' garment duties
and quotas, the CNMI's ineffective immigration control, and
the unhealthy and unsustainable dependence on temporary low-
paid foreign workers in the islands.
President Clinton, in his May 30, 1997 letter to CNMI
Governor Froilan Tenorio, stated that his Administration
would consult with the Governor and other representatives of
the Commonwealth regarding the application of laws to the
CNMI. Following through on the President's commitment, the
Departments of Labor, Justice (INS), State, Commerce, and
Interior sent senior representatives to the CNMI in August to
discuss legislative implementation of the recommendations
contained in the report. While the Governor did not meet with
this Federal delegation, it was able to convey to many local
government and business leaders the long-standing concerns of
the Federal government regarding the CNMI's garment and
foreign labor policies, discuss details of the
Administration's recommendations for addressing these
problems, and hear local concerns regarding the
recommendations. The information gained on the trip was
carefully considered. In closing, let me note that the
Administration looks forward to working with you and the CNMI
to enact legislation that will reconcile Federal
responsibilities with the CNMI's needs.
The Office of Management and Budget advises that there is
no objection to the presentation of this proposal to
Congress, and that its enactment would be in accord with the
Administration's program.
Sincerely,

Allen P. Stayman,

Director,
Office of Insular Affairs.

Mr AKAKA. Mr. President, I am pleased to join Senator Murkowski in
introducing the Commonwealth of the Northern Mariana Islands Covenant
Implementation Act, legislation to curb trade, immigration, wage, and
apparel labeling abuses in the CNMI.
On July 31, 1997, I introduced S. 1100, the CNMI Reform Act, S. 1100
extends the Immigration and Nationality Act to the Commonwealth, limits
use of the ``Made in USA'' label, and applies the U.S. minimum wage to
the CNMI. The measure we are introducing today is similar to S. 1100,
but also imposes duties on CNMI garments unless garment companies
employ a sufficient number of U.S. employees and establishes a
comprehensive regime for CNMI immigration and naturalization.
This is a bipartisan bill, drafted by the Clinton administration at
the request of the Republican chairman of the Senate Energy Committee.
It contains more comprehensive reforms than the measure I introduced
earlier this year. Under the Murkowski-Akaka bill, the CNMI garment
industry will face severe restrictions because of continued abuses.
After a thorough analysis, the Commerce Department recently concluded
that the Commonwealth is an ``outpost for Chinese apparel production.''
The Commerce Department found that apparel manufacturers from the
People's Republic of China have transplanted their operations to the
CNMI, employing bonded and indentured Chinese leaders to sew Chinese
fabric into garments labeled ``Made in USA.'' By using the Commonwealth
as an apparel manufacturing base, Chinese manufacturers avoid tariffs
and escape United States quotas on finished goods.
Despite promises of the American dream if they work in the CNMI,
laborers must sign contracts with the People's Republic of China that
waive rights guaranteed to U.S. workers, forbid participation in
religious and political activities while in the United States, prohibit
workers from marrying, and subject employees to penalties in the PRC.
Working conditions in the CNMI garment industry hardly justify granting
``Made in USA'' status and preferential duties to CNMI garments.
A recent investigative report by King World Productions-``Inside
Edition'' is evidence of the abuses which garment workers suffer.
``Inside Edition'' used hidden cameras to expose the overcrowded and
squalid buildings workers are forced to live in. Employees described
being confined to barracks ringed by barbed wire and being treated more
like prisoners than employees.

immigration concerns

I am sure many Senators will find it hard to believe that the
Immigration and Nationality Act does not apply to all territories in
the United States. As surprising as it may be, the CNMI is exempt from
U.S. immigration law and maintains its own policy on immigration.
After 20 years, CNMI immigration policy is a proven failure. In 1980,
the Commonwealth's population was 16,780. Of these, 12 percent were
alien residents. Today, CNMI's has a population of 59,000, more than
half of whom are aliens.
Rather than preventing an influx of immigrants, the CNMI has
established an aggressive policy of recruiting low-wage, foreign guest
workers to operate an ever-expanding garment and tourism industry.
According to the CNMI representative in Washington, local immigration
policy has ``no limit. It is wide open, unrestricted.''
The U.S. Immigration and Naturalization Service reports that CNMI
authorities have no reliable records of aliens who have entered the
CNMI, how long they remain, and when, if ever, they depart. Ninety-one
percent of the private sector work force are alien guest workers, and
these workers have overwhelmed the CNMI to the point where the
unemployment rate among U.S. citizens living in the Commonwealth is 14
percent. There is no justification for an immigration policy that
admits foreign workers in such overwhelming numbers that it leads to
double-digit unemployment.
Given these circumstances, the application of U.S. immigration law to
the CNMI is long overdue.

``made in usa'' abuse

The evidence that garments sewn in the CNMI directly and unfairly
compete with U.S. apparel manufacturers is very strong. According to
the Commerce Department, 85 percent of CNMI apparel is classified as
import sensitive. This classification means that CNMI garments compete
with segments of the U.S. apparel industry that are experiencing
significant decline due to heavy import penetration.
Apparel manufacturers in the CNMI enjoy benefits that far exceed
those enjoyed by foreign or domestic manufacturers. CNMI garment
factories are not subject to the U.S. minimum wage and pay no duty on
fabrics they import. Furthermore, quotas do not apply to either fabric
imported into the Commonwealth, or to finished garments cut and sewn in
the CNMI using foreign labor. Yet these products are labeled ``Made in
the USA'' and compete unfairly with apparel employment elsewhere in the
United States.

labor abuse

The 1976 covenant exempts the CNMI from the Federal minimum wage.
This exemption was granted with the understanding that as its economy
grew and prospered, the CNMI would raise its minimum wage to the
Federal level. Foreign workers typically enter the CNMI under 1-year
work permits and are paid a minimum wage of $3.05.
According to the July 1997 report by the Department of the Interior,
the lower minimum wage, combined with unlimited access to foreign
labor, creates an incentive for employers to hire foreign labor for all
jobs, including skilled and entry level jobs at or near the minimum
wage. Employment statistics clearly supports the Interior Department's
analysis.
The minimum wage is sometimes a lightning-rod for Republicans.
However, in a labor market where there is an unlimited supply of guest
workers, the low CNMI minimum wage means that low-wage alien laborers
are displacing U.S. workers. Any policy that favors foreign workers
over the interests of employed and unemployed U.S. citizens is
indefensible.

human rights and sexual abuse

The Commonwealth's immigration policy results in serious problems in
other areas. The Justice Department

[[Page S10656]]

has documented numerous cases of women and girls being recruited from
the Philippines, China, and other Asian countries expressly for
criminal sexual activity. These abuses are a direct consequence the
Commonwealth's unrestricted immigration policy.
Typically, these women are told they will work in the CNMI as
waitresses, but are forced into nude dancing and prostitution upon
their arrival. The Justice Department described this situation as the
``systematic trafficking of women and minors for prostitution,'' which
may also involve illegal smuggling, organized crime, immigration
document fraud, and pornography. Cases of sexual servitude have also
been identified.
The U.S. Justice Department also found cases of female guest workers
and aliens living in the CNMI being forced into prostitution through
intimidation or threats of physical harm. In some instances, women who
resist are kidnapped, raped, and tortured.
I thank Senator Murkowski, the chairman of the Senate Energy and
Natural Resources Committee, for his efforts to reform these abuses in
the CNMI. I look toward to working with him on moving this bill through
our committee so that it can be considered on the Senate floor.
______

By Mr. BINGAMAN:
S. 1276. A bill to amend the Federal Power Act, to facilitate the
transition to more competitive and efficient electric power markets,
and for other purposes; to the Committee on Energy and Natural
Resources.

the federal power act amendments of 1997

Mr. BINGAMAN. Madam President, I rise today to introduce the Federal
Power Act Amendments of 1997. This bill streamlines the Federal
regulation of electric power and helps reduce costs for all factories,
businesses, and homeowners. The changes in Federal regulation in this
bill will also yield savings for consumers by providing new
opportunities for competition in the wholesale market for electric
power.
This bill improves the way the Federal Government regulates electric
power to achieve three important goals. First, it will facilitate the
ongoing transition to more competitive and efficient markets. Second,
it will assure the continued reliability of the transmission system
that carries the power in interstate commerce. And third, it will
remove Federal regulatory ambiguities and barriers for those States
that elect to give customers a choice in selecting their energy
provider. Very importantly, my bill leaves for the States the issues
that are best dealt with at that level and provides for Federal
authority only over issues raising a clear national interest.
In the last 9 months the Energy and Natural Resources Committee has
conducted seven workshops that helped bring forward many of the complex
electric power issues facing State and Federal regulators. The debate
today remains centered on whether or not the Federal Government should
require the utilities in every State to implement competition at the
retail level. There are, however, other important issues that underlie
this central debate. These include the possible repeal of the Public
Utilities Regulatory Policy Act, known as PURPA; changes in the Public
Utility Holding Company Act, known to everyone here as PUHCA; and the
treatment of past investments in powerplants that may no longer be
economical, so called stranded costs, to name just a few.
Our electric power industry has a strong regional and local character
with over 3,000 individual utilities, including investor-owned,
municipal, Federal, and rural cooperatives. Several comprehensive bills
have now been introduced in the House and Senate that promise to
deregulate the Nation's electric power industry. Meanwhile, a number of
individual States are moving forward with retail competition.
However, in list of the vast difference in the circumstance of 3,000
individual utility companies, it is going to be difficult to develop a
consensus on comprehensive Federal legislation. If comprehensive
electricity legislation does not move forward, I believe Congress must
still address a number of important issues that can only be dealt with
at the Federal level. I'd like to take a moment to explain what these
issues are and how my bill differs from proposals that require retail
competition for all electric utility customers.
Madam President, our electric power industry is made up of three main
components: Powerplants that generate the power, high-voltage
transmission lines that carry the power over long distances, and the
local distribution systems that bring the power into our homes and
businesses. Most of the other bills would require States to deregulate
their utilities and implement retail competition. Still, for all the
talk about deregulation, I hope everyone realizes they are talking
about deregulating, only the first piece: The powerplants that use
coal, natural gas, or other sources to generate the energy on which we
all depend. The other two components of the industry, the transmission
and local distribution systems, will remain regulated monopolies.

My bill takes a very different approach. It is not a restructuring
bill. It will not overturn the established division between State and
Federal regulation, and it does not require States to implement retail
competition by a date certain. Rather, my bill forges new ground in the
debate by focusing on the middle piece of the electric utility
industry: The interstate transmission grid that is the critical link
between generators and consumers. The transmission system clearly
involves interstate commerce with a distinct national interest that can
only be addressed at the Federal level.
Let me explain why it is important that we streamline the Federal
regulation of interstate transmission and how that can save consumers
money. The Nation's transmission system serves, if you will, like an
interstate highway for electric power. We all know what can happen when
the highway on-ramps or off-ramps are closed or when bottlenecks or
breakdowns occur. The same is true of the electric transmission system.
The smooth flow of electric power depends on having sufficient
transmission capacity and on the system operating reliably and without
disruptions. Problems in the electricity transmission system, like
problems on interstate highways, can impede commerce. If some
businesses are denied access, or if different highways operate under
different rules, competition will suffer.
Madam President, I believe an efficient and reliable electric
transmission system will be one of the most important factors in the
development of robust regional and national markets for electric power.
Over the last 100 years we have developed a complex grid of
transmission lines owned by private, government, and cooperative
utilities. With the Energy Policy Act of 1992, Congress took the first
steps toward providing fair and open access to portions of the
transmission system. Today, Federal and State regulators are continuing
to push for increased competition. These dramatic changes in regulation
are placing new demands on the transmission system. We are asking it to
function increasingly like the interstate highways. However, the system
we have was never planned to function in this more competitive
environment.
Today we have a transmission system with many constraints and
bottlenecks, with no uniform system of regulation, with some portions
of the system closed to users, and without any assurance that all users
of the system will follow the same rules. Clearly, we can't hope to
realize the full benefits of competition if buyers and sellers of power
can't deal equally in an open and fair market. Without fair
competition, the cost of power is higher than it should be. My bill
will help correct this situation.
Currently, the regulation of power sales over the Nation's electric
power grid is split between various State and Federal jurisdictions.
The Federal Energy Regulatory Commission has authority over pricing of
transmission service. The States have authority to license and site new
transmission facilities. A growing portion of power transmission
and sales is taking place on a regional and even a national scale. We
are increasingly dependent on long-distance power transmission;
sometimes from as far away as 1,000 miles. In the West, every single
State from New Mexico to Montana and from California to Washington is
electrically interconnected. All of the Eastern States except parts of
Texas are similarly interconnected. My bill seeks to

[[Page S10657]]

maintain a careful balance of State and national interests that assures
the Nation's transmission system operates efficiently, all players are
treated equitably, and reliability is maintained.

Madam President, I'd like now to describe briefly some of the key
provisions in the bill.

Federal and State Jurisdiction

One of the important goals of this bill is to resolve ambiguities in
Federal and State jurisdiction that have arisen since 1992 with the
implementation of open transmission access. First, this bill removes
once and for all any ambiguity over whether States, indeed, have the
authority to implement retail competition. In addition, we used to have
a clear line between Federal and State jurisdiction. However, now that
some States are electing to implement retail competition, the bright
line is increasingly blurred. If we don't clarify these ambiguities we
could well find ourselves swamped with litigation that frustrates State
and Federal efforts to expand competition.

Transmission Access

Another provision in the bill requires all transmission systems to be
operated under the same regulatory policies. Under current law, FERC's
jurisdiction is primarily limited to transmission systems owned by
investor-owned utilities. Only these utilities are required to provide
open access to anyone who requests it. The goal is to bring all
transmission systems, including those owned by Federal entities,
municipalities, and rural electric co-ops, under the same system of
regulation. My bill also extends fair and open access to transmission
lines that cross the borders with Mexico and Canada. A uniform
regulatory environment will promote the use of the transmission grid
for fair and equitable competition.

Rural and Low-Income Consumers

Will all customers be able to benefit from competition? I have heard
this concern expressed often. My bill makes sure the States that choose
to implement retail competition do not forget about low-income and
retired citizens on fixed incomes, or about rural consumers who might
otherwise be left out because they are not as profitable to serve as
urban consumers.

Reciprocity

A provision of this bill deals with the situation where one State
elects competition and a neighboring State does not. Utilities in the
State without competition could cross the State line and steal
customers without fear of losing their own customers. My bill would
prevent this practice by allowing a State to protect its own utilities
from unfair competition. It also encourages utilities to open up their
systems voluntarily so they can participate in the growing competition.

Reliability

Finally, to assure fair and open competition on the Nation's
interstate transmission system, the bill gives the Federal Energy
Regulatory Commission authority in several new areas. First, to enhance
system reliability, we provide the commission with regulatory authority
to back up the existing voluntary system with rules and regulations
that have the weight of Federal enforcement. The existing system under
the National Electric Reliability Council has worked effectively.
However, competition is bringing many new players to the interstate
transmission grid, and effective enforcement of rules and standards
requires there by some teeth in the system.

transmission siting

The bill provides a Federal role, in partnership with States, to
assure that transmission lines that cross State boundaries are upgraded
and expanded when needed. Any siting decision would be subject to all
applicable State and Federal legislation, including the Environmental
Protection Act. The interstate transmission system is one of the keys
to maintaining system reliability and additional capacity will
stimulate competition by allowing new players into the market.

independent system operators

My bill also provides new authority to the Federal Energy Regulatory
Commission to assure the transmission system is managed and operated in
an open and fair way that does not discriminate against any users. With
this new authority, the commission may require the formation of
independent operators for regional transmission systems. Having an
independent system operator provides greater efficiency in transmission
pricing, makes sure there is fair and open access for all users, and
that the owners of the transmission system do not use it to their own
advantage. In some cases, these independent systems are already
developing voluntary or under state mandates.
Madam President, I'd like to say a few words about an issue known as
``stranded costs.'' Stranded costs are investments in powerplants made
under past regulatory practices that may no longer be economic in the
new competitive environment. Stranded costs are of critical concern to
utility investors and to rural electric cooperatives. As I hope I have
made clear, my bill focuses on the regulation and use of the interstate
transmission system, a national issue that does not compel retail
competition or the resulting stranded costs. I believe the States are
the proper forum to deal with retail competition and to resolve thorny
issues like stranded costs that are not national in nature. We in
Congress are monitoring how the States are handling stranded costs from
retail competition. If in the future it appears that States are not
equitably addressing stranded costs, then I believe Congress should
take a very serious look at the subject.
In putting forward the proposals in this bill I have listened to a
number of suggestions and evaluated a variety of concepts. Not all of
the ideas could be incorporated into the framework of a single bill,
even though many of the approaches clearly have merit. As the debate on
electricity regulation moves forward, I expect to refine and expand on
the proposals I am putting forward today.
In summary, Madam President, this bill will reduce costs for
consumers by encouraging the development of robust competition in the
interstate market for electric power. We do this by streamlining
Federal regulation of the interstate transmission system and by
assuring that all transmissions owners and users play by the same
rules. In addition, the bill will remove Federal regulatory barriers
for those states that allow consumers to choose their source of
electric power. I hope all Senators will consider the important
proposals in this bill.
Mr. President, I ask unanimous consent that additional material be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

S. 1276

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 ``Federal Power Act Amendments
of 1997''.

SEC. 2. CLARIFICATION OF JURISDICTION.

(a) Declaration of Policy.--Section 201(a) of the Federal
Power Act (16 U.S.C. 824(a)) is amended by--
(1) inserting after ``transmission of electric energy in
interstate commerce'' the following: ``, including the
unbundled transmission of electric energy sold at retail,'';
and
(2) striking ``such Federal regulation, however, to extend
only to those matters which are not subject to regulation by
the States.'' and inserting the following: ``such Federal
regulation shall not extend, however, to the bundled retail
sale of electric energy or to unbundled local distribution
service, which are subject to regulation by the States.''.
(b) Application of Part.--Section 201(b) of the Federal
Power Act (16 U.S.C. 824(b)(1)) is amended by--
(1) inserting after ``the transmission of electric energy
in interstate commerce'' the following: ``, including the
unbundled transmission of electric energy sold at retail,'';
and
(2) adding at the end the following:
``(3) The Commission, after consulting with the appropriate
State regulatory authorities, shall determine, by rule or
order, which facilities used for the transmission and
delivery of electric energy are used for transmission in
interstate commerce subject to the jurisdiction of the
Commission under this Part, and which are used for local
distribution subject to State jurisdiction.''.
(c) Definition of Interstate Commerce.--Section 201(c) of
the Federal Power Act (16 U.S.C. 824(c)) is amended by
inserting after ``outside thereof'' the following:
``(including consumption in a foreign country)''.
(d) Definitions of Types of Sales.--Section 201(d) of the
Federal Power Act (16 U.S.C. 824(d)) is amended by--
(1) inserting ``(1) after the subsection designation;
(2) adding at the end the following:
``(2) The term ``bundled retail sale of electric energy''
means the sale of electric energy to an ultimate consumer in
which the generation and transmission service are not sold
separately.

[[Page S10658]]

``(3) The term ``unbundled local distribution service''
means the delivery of electric energy to an ultimate consumer
if--
``(A) the electric energy and the service of delivering it
are sold separately, and
``(B) the delivery uses facilities for local distribution
as determined by the Commission under subsection (b)(3).
``(4) The term ``unbundled transmission of electric energy
sold at retail'' means the transmission of electric energy to
an ultimate consumer if--
``(A) the electric energy and the service of transmitting
it are sold separately, and
``(B) the transmission uses facilities for transmission in
interstate commerce as determined by the Commission under
subsection (b)(3).''.
(e) Definitions of Public Utility.--Section 201 of the
Federal Power Act (16 U.S.C. 824) is amended by striking
subsection (e) and inserting the following:
``(e) The term ``public utility'' when used in this Part or
in the Part next following means--
``(1) any person who owns or operates facilities subject to
the jurisdiction of the Commission under this Part (other
than facilities subject to such jurisdiction solely by reason
of section 210, 211, or 212); or
``(2) any electric utility or Federal power marketing
agency not otherwise subject to the jurisdiction of the
Commission under this Part, including--
``(A) the Tennessee Valley Authority,
``(B) a Federal power marketing agency,
``(C) a State or any political subdivision of a State, or
any agency, authority, or instrumentality of a State or
political subdivision,
``(D) a corporation or association that has ever received a
loan for the purpose of providing electric service from the
Administrator of the Rural Electrification Administration or
the Rural Utilities Service under the Rural Electrification
Act of 1936; or
``(E) any corporation or association which is wholly owned,
directly or indirectly, by any one or more of the foregoing.

but only with respect to determining, fixing, and otherwise
regulating the rates, terms, and conditions for the
transmission of electric energy under this Part (including
sections 217, 218, and 219).''.
(f) Application of Part to Government Utilities.--Section
201(f) of the Federal Power Act (16 U.S.C. 824(f)) is amended
by striking ``No provision'' and inserting ``Except as
provided in subsection (e)(2) and section 3(23), no
provision''.
(g) Definition of Transmitting Utility.--Section 3 of the
Federal Power Act (16 U.S.C. 796) is amended by striking
paragraph (23) and inserting the following:
``(23) Transmitting Utility.--The term ``transmitting
utility'' means any electric utility, qualifying cogeneration
facility, qualifying small power production facility, Federal
power marketing agency, or any public utility, as defined in
section 201(e)(2), that owns or operates electric power
transmission facilities which are used for the sale of
electric energy.''.

SEC. 3. FEDERAL WHEELING AUTHORITY.

(a) Commission Authority To Order Retail Wheeling.--
(1) Section 211(a) of the Federal Power Act (16 U.S.C.
824k(a)) is amended by striking ``for resale''.
(2) Section 212(a) of the Federal Power Act (16 U.S.C.
824k(a) is amended by striking ``wholesale transmission
services'' each place it appears and inserting ``transmission
services''.
(3) Section 212(g) of the Federal Power Act (16 U.S.C.
824k(g)) is repealed.
(b) Limitation on Commission Authority To Order Retail
Wheeling.--Section 212 of the Federal Power Act (16 U.S.C.
824k) is further amended by striking subsection (h) and
inserting the following:
``(h) Limitation on Commission Authority To Order Retail
Wheeling.--No rule or order issued under this Act shall
require or be conditioned upon the transmission of electric
energy:
``(1) directly to an ultimate consumer in connection with a
sale of electric energy to the consumer unless the seller of
such energy is permitted or required under applicable State
law to make such sale to such consumer, or
``(2) to, or for the benefit of, an electric utility if
such electric energy would be sold by such utility directly
to an ultimate consumer, unless the utility is permitted or
required under applicable State law to sell electric energy
to such ultimate consumer.''.
(c) Conforming Amendment.--Section 3 of the Federal Power
Act (16 U.S.C. 796) is amended by striking paragraph (24) and
inserting the following:
``(24) Transmission services.--The term ``transmission
services'' means the transmission of electric energy in
interstate commerce.''.

SEC. 4. STATE AUTHORITY TO ORDER RETAIL ACCESS.

Part II of the Federal Power Act is further amended by
adding at the end the following:

``SEC. 215. STATE AUTHORITY TO ORDER RETAIL ACCESS.

``(a) State Authority.--Neither silence on the part of
Congress nor any Act of Congress shall be construed to
preclude a State or State commission, acting under authority
of state law, from requiring an electric utility subject to
its jurisdiction to provide unbundled local distribution
service to any electric consumer within such State.
``(b) Nondiscriminatory Service.--If a State or State
commission permits or requires an electric utility subject to
its jurisdiction to provide unbundled local distribution
service to any electric consumer within such State, the
electric utility shall provide such service on a not unduly
discriminatory basis. Any law, regulation, or order of a
State or State commission that results in unbundled local
distribution service that is unjust, unreasonable, unduly
discriminatory, or preferential is hereby preempted.
``(c) Reciprocity.--Notwithstanding subsection (b), a State
or State commission may bar an electric utility from selling
electric energy to an ultimate consumer using local
distribution facilities in such State if such utility or any
of its affiliates owns or controls local distribution
facilities and is not itself providing unbundled local
distribution service.
``(d) State Charges.--Nothing in this Act shall prohibit a
State or State regulatory authority from assessing a
nondiscriminatory charge on unbundled local distribution
service within the State, the retail sale of electric energy
within the State, or the generation of electric energy for
consumption by the generator within the State.''.

SEC. 5. UNIVERSAL AND AFFORDABLE SERVICE.

Part II of the Federal Power Act is further amended by
adding at the end the following:

``SEC. 216. UNIVERSAL AND AFFORDABLE SERVICE.

``(a) Sense of the Congress.--It is the sense of the
Congress that--
``(1) every consumer of electric energy should have access
to electric energy at reasonable and affordable rates, and
``(2) the Commission and the States should ensure that
competition in the electric energy business does not result
in the loss of service to rural, residential, or low-income
consumers.
``(b) Consideration and Reports.--Any State or State
commission that requires an electric utility subject to its
jurisdiction to provide unbundled local distribution service
shall--
``(1) consider adopting measures to--
``(A) ensure that every consumer of electric energy within
such State shall have access to electric energy at reasonable
and affordable rates, and
``(B) prevent the loss of service to rural, residential, or
low-income consumers; and
``(2) report to the Commission on any measures adopted
under paragraph (1).''.

SEC. 6. NATIONAL ELECTRIC RELIABILITY STANDARDS.

Part II of the Federal Power Act is further amended by
adding at the end the following:

``SEC. 217. NATIONAL ELECTRIC RELIABILITY STANDARDS.

``(a) Reliability Standards.--The Commission shall
establish and enforce national electric reliability standards
to ensure the reliability of the electric transmission
system.
``(b) Designation of National and Regional Councils.--
``(1) For purposes of establishing and enforcing national
electric reliability standards under subsection (a), the
Commission may designate an appropriate number of regional
electric reliability councils composed of electric utilities
or transmitting utilities, and one national electric
reliability council composed of designated regional electric
reliability councils, whose mission is to promote the
reliability of electric transmission system.
``(2) The Commission shall not designate a regional
electric reliability council unless the Commission determines
that the council--
``(A) permits open access to membership from all entities
engaged in the business of selling, generating, transmitting,
or delivering electric energy within its region;
``(B) provides fair representation of its members in the
selection of its directors and the management of its affairs,
and
``(C) adopts and enforces appropriate standards of
operation designed to promote the reliability of electric
transmission system.
``(c) Incorporation of Council Standards.--The Commission
may incorporate, in whole or in part, the standards of
operation adopted by the regional and national electric
reliability councils in the national electric reliability
standards adopted by the Commission under subsection (a).
``(d) Enforcement.--The Commission may, by rule or order,
require any public utility or transmitting utility to comply
with any standard adopted by the Commission under this
section.

SEC. 7. SITING NEW INTERSTATE TRANSMISSION FACILITIES.

Part II of the Federal Power Act is further amended by
adding at the end the following:

``SEC. 218. SITING NEW INTERSTATE TRANSMISSION FACILITIES.

``(a) Commission Authority.--Whenever the Commission, after
notice and opportunity for hearing, finds such action
necessary or desirable in the public interest, it may order a
transmitting utility to enlarge, extend, or improve its
facilities for the interstate transmission of electric
energy.
``(b) Procedure.--The Commission may commence a proceeding
for the issuance of an order under subsection (a) upon the
application of an electric utility, transmitting utility, or
state regulatory authority, or upon its own motion.
``(c) Compliance With Other Laws.--Commission action under
this section shall be subject to the National Environmental
Policy Act of 1969 (42 U.S.C. 4321 et seq.) and all other
applicable state and federal laws.
``(d) Use of Joint Boards.--Before issuing an order under
subsection (a), the Commission shall refer the matter to
joint board appointed under section 209(a) for advice and

[[Page S10659]]

recommendations on the need for, design of, and location of
the proposed enlargement, extension, or improvement. The
Commission shall consider the advice and recommendations of
the Board before ordering such enlargement, extension, or
improvement.
``(e) Limitation on Authority.--The Commission shall have
no authority to compel a transmitting utility to extend or
improve its transmission facilities if such enlargement,
extension, or improvement would unreasonably impair the
ability of the transmitting utility to render adequate
service to its customers.''.

SEC. 8. REGIONAL INDEPENDENT SYSTEM OPERATORS.

Part II of the Federal Power Act is further amended by
adding at the end the following:

``SEC. 219. REGIONAL INDEPENDENT SYSTEM OPERATORS.

``(a) Regional Transmission Systems.--Whenever the
Commission finds such action necessary or desirable in the
public interest to ensure the fair and non-discriminatory
access to transmission services within a region, the
Commission may order the formation of a regional transmission
system and may order any transmitting utility operating
within such region to participate in the regional
transmission system.
``(b) Oversight Board.--The Commission shall appoint a
regional oversight board to oversee the operation of the
regional transmission system. Such oversight board shall be
composed of a fair representation of all of the transmitting
utilities participating in the regional transmission system,
electric utilities and consumers served by the system, and
State regulatory authorities within the region. The regional
oversight board shall ensure that the independent system
operator formulates policies, operates the system, and
resolves disputes in a fair and non-discriminatory manner.
``(c) Independent System Operator.--The regional oversight
board shall appoint an independent system operator to operate
the regional transmission system. No independent system
operator shall--
``(1) own generating facilities or sell electric energy, or
``(2) be subject to the control of, or have a financial
interest in, any electric utility or transmitting utility
within the region served by the independent system operator.
``(d) Commission Rules.--The Commission shall establish
rules necessary to implement this section.''.

SEC. 9. ENFORCEMENT.

(a) General Penalties.--Section 316(c) of the Federal Power
Act (16 U.S.C. 825o(c)) is amended buy--
(1) striking ``subsection'' and inserting ``section''; and
(2) striking ``or 214'' and inserting: ``214, 217, 218, or
219''.
(b) Civil Penalties.--Section 316A of the Federal Power Act
(16 U.S.C. 825o-1) is amended by striking ``or 214'' each
place it appears and inserting: ``214, 217, 218, or 219''.

SEC. 10. AMENDMENT TO THE PUBLIC UTILITY REGULATORY POLICIES
ACT.

Section 10 of the Public Utility Regulatory Policies Act of
1978 (16 U.S.C. 824a-3) is amended by adding at the end the
following:
``(m) Protection of Existing Wholesale Power Purchase
Contracts.--No State or State regulatory authority may bar a
State regulated electric utility from recovering the cost of
electric energy the utility is required to purchase from a
qualifying cogeneration facility or qualifying small power
production facility under this section.''.
____

The Federal Power Act Amendments of 1997

(Federal Legislation Focused on Federal Regulation of Interstate
Transmission and Wholesale Sales)

section-by-section summary

Section 1. Short Title

This act may be cited as the ``Federal Power Act Amendments
of 1997.'' This bill does not mandate retail competition. The
purpose is to facilitate the transition to more competitive
and efficient markets for bulk power and to foster the
development of state-directed efforts to establish retail
competition.

Section 2. Clarification of Federal and State Jurisdiction

This section resolves ambiguities in federal and state
jurisdiction that have arisen with the implementation of
Title VII of the Energy Policy Act of 1992 and the ensuing
trend to state-implemented retail competition. Unless
clarified, these ambiguities could spawn protracted
litigation and frustrate federal and state efforts to expand
competition. This section also extends FERC's jurisdiction
over the remaining 22% of interstate transmission systems not
currently covered.
(a)(1) Clarifies that transmission of electric energy in
interstate commerce, which is under FERC jurisdiction,
includes the unbundled transmission of electric energy sold
at retail. FERC has proceeded under the assumption it has
authority to order transmission necessary to implement state-
ordered retail competition, and utilities have filed
transmission tariffs required to implement retail
competition. Paragraph (2) reinforces existing state
jurisdiction over the bundled retail sale of electric energy
and the unbundled local distribution of electric energy.
(b) In Order No. 888, FERC took the position that the
transmission component of unbundled sales is subject to FERC
jurisdiction. Paragraph (1) establishes FERC's authority
under Part II of the Federal Power Act over the transmission
in interstate commerce of electric power as part of an
unbundled sale of energy sold at retail. Paragraph (2)
authorizes FERC, in consultation with state regulators, to
draw the line between interstate transmission, which is
subject to FERC authority, and local distribution, which is
subject to state jurisdiction. FERC's jurisdiction over
unbundled transmission necessitates a process for determining
where FERC jurisdiction ends and state jurisdiction over
unbundled distribution begins.
(c) Extends FERC's jurisdiction over transmission of
electric energy in interstate commerce if the energy will be
consumed in a foreign country. The ambiguity in existing law
was raised in FERC's October 4, 1996, order on complaint in
Docket No. EL96-74-000.
(d) Adds definitions to Part II for ``bundled retail sale
of electric energy,'' ``unbundled local distribution
service,'' and ``unbundled transmission of electric energy
sold at retail.''
(e) Redefines ``public utility'' so as to extend FERC's
authority to regulate transmission services (and only
transmission) of non-jurisdictional utilities, including TVA,
Power Marketing agencies, municipal utilities, and rural
electric cooperatives. Currently, FERC's FPA jurisdiction is
limited primarily to investor-owned utilities. Non-
jurisdictional utilities control a significant portion of the
nation's existing transmission capacity. The full benefits of
wholesale competition may not be realized unless all
transmitting utilities are subject to the same regulatory
policies.
(f) Continues exemption of TVA, PMAs, municipal utilities
and rural electric cooperatives from FERC jurisdiction under
Part II, except with respect to regulation of transmission.
This section leaves intact the exemption from FERC
jurisdiction for any wholesale sales of power made by non-
jurisdictional utilities.
(g) Redefines ``transmitting utility'' to cover all
transmission systems, including any electric utility,
qualifying cogeneration facility, qualifying small power
production facility, federal power marketing agency, public
utility (as redefined by subsection (e)) that owns or
operates transmission facilities used for the sale of
electric energy.

Section 3. Limitations on Federal Wheeling Authority

Sections 211 and 212 of the FPA currently prohibit FERC
from ordering retail wheeling. This section clarifies FERC's
authority to order interstate transmission service for
wholesale sales and as part of a retail sale, but the latter
only if authorized by state law.
(a) Clarifies FERC's authority to order transmission access
under sections 211 and 212 for transmission in interstate
commerce for both wholesale sales for resale and unbundled
transmission of electric energy sold at retail.
(b) Limits FERC's authority to order unbundled transmission
of electric energy sold at retail under sections 211 and 212
only if such sales are permitted or required under applicable
state law.
(c) Conforming amendment that broadens the definition of
transmission services to include both wholesale transmission
and unbundled transmission of electric energy sold at retail.

Section 4. State Authority To Order Retail Access

Adds a new section 215 at the end of Part II to clarify and
extend state authority over access to retail customers.
New subsection (a) recognizes state authority to require an
electric utility to provide unbundled local distribution
service to any consumer. The Energy Policy Act of 1992
included in the FPA a savings clause at the end of subsection
212(h) that preserves whatever state authority may exist to
order retail wheeling; however, it does not affirm
conclusively that the states do in fact have such authority.
Because retail wheeling is in interstate commerce, it could
be argued states lack authority to order retail wheeling.
This subsection removes the statutory ambiguity.
New subsection (b) requires states that authorize utilities
to provide unbundled local distribution service to assure the
utilities provide distribution service on a nondiscriminatory
basis. This subsection will help assure that local
distribution companies do not use state-regulated monopolies
to favor, for example, their un-regulated subsidiaries.
New subsection (c) provides for retail reciprocity. States
may bar an electric utility from selling power at retail in
the state unless the utility is itself providing unbundled
local distribution service. Currently, a state may not
condition access to its retail markets without facing a
challenge as an unlawful burden on interstate commerce. This
subsection eliminates the inequity of out-of-state utilities
competing for retail customers in states with open access
without having to provide similar access to their own
customers. This provision may also create an incentive for
utilities to open their markets to retail competition.
New subsection (d) assures state authority to impose a
nondiscriminatory charge on the unbundled local distribution
service, retail sale, or generation for consumption of
electric energy. Such a charge might be used to

[[Page S10660]]

fund, for example, competitive transition costs, universal
and affordable service under section 216, demand side-
management programs, etc.

Section 5. Universal and Affordable Service

Adds a new section 216 at the end of Part II that puts
Congress on record that every consumer should have access to
electric power at reasonable and affordable rates and that
FERC and the states should assure that competition does not
result in the loss of service to rural, residential, or low-
income customers. Requires states that adopt retail
competition to consider adopting measures to assure universal
and affordable service and to report to FERC on the measures
adopted. Funds to cover the cost of such measures may be
assessed under new section 215(d).

Section 6. National Electric Reliability Standards

Adds a new section 217 at the end of Part II to establish
national electric reliability standards under FERC
jurisdiction. Competition is bringing many new players to the
interstate transmission grid. Such competition will place new
and conflicting requirements on NERC's existing voluntary
system, which lacks enforcement powers. There is a clear and
legitimate federal role in ensuring system reliability. This
section is consistent with the draft recommendations of the
Secretary of Energy Advisory Board Task Force on Electric-
System Reliability.
New subsection (a) authorizes FERC to establish and enforce
national electric reliability standards to ensure the
reliability of the electric transmission system.
New subsection (b) authorizes FERC to designate an
appropriate number of regional reliability councils composed
of electric utilities and transmitting utilities, and one
national electric reliability council composed of the
regional councils. The mission of the councils is to promote
the reliability of the electric transmission system. FERC
shall not designate a regional council unless the commission
determines the council permits open access to membership from
all electric utilities (IOUs, NUGs, power marketers,
municipal utilities or TVA) and transmitting utilities in the
region, provides fair representation in the selection of its
directors and management, and adopts and enforces appropriate
standards of operation.
New subsection (c) authorizes FERC to incorporate standards
of operation adopted by the councils into the standards
adopted under subsection (a).
New subsection (d) authorizes FERC, by rule or order, to
require any public utility (electric utility plus the PMAs)
or any transmitting utility to comply with the standards.

Section 7. Siting New Interstate Transmission Facilities

Adds a new section 218 at the end of Part II to authorize
FERC to work with the states on siting new interstate
transmission facilities. An integrated and well planned
national transmission grid is a critical element in the
development of open and fair competition, maintaining system
reliability, reducing market power, and mitigating stranded
costs. This section does not preempt the states' exclusive
authority over siting of transmission lines.
New subsection (a) gives FERC authority, after notice and
opportunity for hearing, to order a transmitting utility
to extend, enlarge or improve its facilities for the
interstate transmission of electric energy.
New subsection (b) defines when FERC may commence a
proceeding under subsection (a).
New subsection (c) requires FERC to comply with the
National Environmental Policy Act of 1969 and all other
applicable state and federal laws.
New subsection (d) requires FERC to refer the matter to a
joint board appointed under subsection (a) of section 209 for
advice on the need for, design of, and location of the
proposed extension or improvement. The Commission shall
consider the advice and recommendations of the board before
ordering such extension or improvement.
New subsection (e) limits FERC's authority to compel a
transmitting utility to extend or improve its interstate
transmission facilities if it would impair the utility's
ability to serve its existing customers.

Section 8. Regional Independent System Operators

Adds a new section 219 at the end of Part II to allow for
the establishment of regional independent system operators.
Formation of ISOs could be a valuable tool in limiting market
power and maintaining reliability. FERC in order 888 strongly
encouraged the formation of ISOs, but did not address the
issue of its authority to compel participation. This section
authorizes FERC to require participation in an ISO to assure
non-discriminatory access to the transmission grid for all
parties. ISOs could also play a role in siting of new
transmission lines under Section 7.
New subsection (a) authorizes the commission to order the
formation of a regional independent transmission system and
to compel utilities in the region to participate. The FERC
may order the formation of an ISO if such action is necessary
or desirable in the public interest to ensure the fair and
non-discriminatory access to transmission services.
New subsection (b) authorizes FERC to appoint a regional
oversight board to oversee the operation of the regional
transmission system. The board shall have fair representation
of all utilities, consumers, and state regulators in the
region.
New subsection (c) authorizes the oversight board to
appoint an independent system operator to operate the
regional transmission system. The operator may not own
generating facilities, sell electric energy, or be subject to
the control, or have a financial interest in, any utility in
the region served by the independent system operator.
New subsection (d) authorizes FERC to establish rules
necessary to implement this section.

Section 9. Enforcement

(a) Extends the exemption from general penalties (section
316) to sections 217, 218, and 219.
(b) Extends the enforcement provisions for violations and
civil penalties in section 316A to sections 217, 218, and
219.

Section 10. Amendment to PURPA

Adds new subsection (m) at the end of section 210 of PURPA
to protect wholesale contracts entered into in accordance
with federal legislation. States may not bar a regulated
utility from recovering the cost of any PURPA contracts. Such
costs may be recovered, for example, through rates, charges
assessed under section 215(d), exit fees, etc.

____________________