[House Report 104-606]
[From the U.S. Government Publishing Office]



104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     104-606
_______________________________________________________________________


                  PROVIDING FOR THE CONSIDERATION OF
 
          H.R. 2754: THE SHIPBUILDING TRADE AGREEMENT ACT

                                _______


June 6, 1996.--Referred to the House Calendar and ordered to be printed

_______________________________________________________________________


    Mr. Dreier, from the Committee on Rules, submitted the following

                              R E P O R T

                       [To accompany H. Res. 448]

    The Committee on Rules, having had under consideration 
House Resolution 448, by a non-record vote, report the same to 
the House with the recommendation that the resolution be 
adopted.

               brief summary of provisions of resolution

    The resolution provides for the consideration of H.R. 2754, 
the ``Shipbuilding Trade Agreement Act'' under a modified 
closed rule. The rule provides one hour of general debate 
divided equally among the chairman and ranking minority members 
of the Committees on Ways and Means and National Security.
    The resolution waives all points of order against 
consideration of the bill.
    The resolution makes in order the amendment in the nature 
of a substitute as recommended by the Committee on Ways and 
Means, as modified by the amendment printed in part 1 of this 
report, as an original bill for purpose of amendment which 
shall be considered as read.
    The resolution waives all points of order against the 
amendment in the nature of a substitute, as modified.
    The resolution further provides for consideration of an 
amendment printed in part 2 of this report and waives all 
points of order against the amendment. The amendment may be 
offered only by a Member designed in the report, shall be 
considered as read, shall be debatable for one hour equally 
divided and controlled by the proponent and an opponent, shall 
not be subject to amendment, and shall not be subject to a 
demand for division of the question in the House or in the 
Committee of the Whole.
    Finally, the rule provides for one motion to recommit, with 
or without instructions.

            brief summaries of part 1 and part 2 amendments

    The part 1 amendment, which is considered as adopted with 
the adoption of the rule, would authorize the president to give 
notice of intention to withdraw from the OECD Agreement under 
Article 14 of that agreement if another signatory country gives 
notice of intention to withdraw. This provision would only 
apply if an OECD Agreement party or parties has delivered 15 
percent or more of the gross tonnage of vessels constructed and 
delivered in the previous year. If the United States withdraws 
from the agreement, this section would reinstate the provisions 
of section 204 as if they had never been repealed. The 
amendment would also add a new definitions section 206 that 
would define terms associated with the OECD Agreement.
    The part 2 amendment, which may be offered by 
Representative Batemen of Virginia or his designee, would amend 
the base text amendment in the nature of a substitute by 
redesignating the existing section 206 as section 209, and 
inserting new sections 206-208.
    A new section 206 would be added to delay the effective 
date of the amendments contained in section 204(7) as they 
relate to the Title XI program. Section 205 would allow the 
Secretary of Transportation to continue to issue loan guarantee 
commitments under the current favorable terms until January 1, 
1999. Vessels to which commitments are issued on or before 
January 1, 1999 would be required to be delivered on or before 
January 1, 2002. This is essentially a three year delay from 
the terms as set forth in the agreement. After the January 1, 
1999 date, loan commitments made would have to be made using 
the less favorable OECD guidelines.
    A section 207 would clarify provisions in the OECD 
Agreement concerning the treatment of the US build requirement. 
This section would clarify, consistent with representations 
made by the United States Trade Representative, that nothing in 
this agreement affects the Jones Act or other cabotage laws.
    A new 208 would clarify that nothing in the Agreement 
should be construed as preventing the United States from taking 
any action which it considers necessary for the protection of 
its essential security interests. This section would allow the 
United States to invoke its sovereign authority to define, for 
the purposes of exclusion from the Agreement the terms 
``military vessel'', military reserve vessel'', or essential 
security interests'' on a case by case basis, as determined by 
the Secretary of Defense.
    A new section 809 of the Tariff Act of 1930 would be added 
to provide a remedy for a U.S. shipbuilder who loses out on a 
sale where the vessel is not sold to a U.S. party. As currently 
drafted, the antidumping provisions only apply to vessels sold 
to U.S. parties. Under section 808, only a government (and not 
private shipbuilding companies) may complain to another 
government concerning cases in which a vessel built in another 
country is sold below cost to a third party. Section 809 would 
essentially modify section 808 to permit a U.S. shipbuilder to 
petition the United States Trade Representative in 
circumstances in which a vessel is sold below cost in another 
country. This section would further require the United States 
Trade Representative, upon receipt of such a petition from a 
shipbuilder, to request the administering authority to 
determine whether there was reasonable cause to believe that 
the subject vessel had been sold at less than fair value and 
whether the United States shipbuilding industry had been 
materially injured by the sale.
    Section 861 of the Tariff Act of 1930 would be amended to 
add a definition for ``military reserve vessel'' to clarify 
that vessels procured and owned by private parties for sealift, 
such as those used by the Marine Corps as prepositioned vessels 
are excluded from the application of this Act or OECD 
agreement. This amendment would further clarify that vessels 
outfitted with national defense features as required by the 
Secretary of Defense are likewise excluded.
    Section 802(I) of the Tariff Act of 1930 is amended to 
grant U.S. shipyards standing to file a petition to initiate an 
injurious pricing proceeding even if the U.S. shipbuilder was 
not invited to tender a bid. The Committee does not believe 
that an invitation to file a bid to build a ship should be a 
precondition for having standing to initiate an injurious 
pricing investigation.

                                 PART 1

    The amendment considered as adopted is as follows:
  Add the following at the end of title II of the bill:

SEC. 205. WITHDRAWAL FROM THE AGREEMENT.

  (a) Withdrawal.--
          (1) Notice.--The President shall give notice, under 
        Article 14 of the Shipbuilding Agreement, of intent of 
        the United States to withdraw from the Shipbuilding 
        Agreement, as soon as is practicable after one or more 
        Shipbuilding Agreement Parties give notice, under such 
        article, of intent to withdraw from the Shipbuilding 
        Agreement, if paragraph (2) applies.
          (2) Tonnage of new construction in withdrawing 
        parties.--This paragraph applies if the combined gross 
        tonnage of new Shipbuilding Agreement vessels 
        constructed in all Shipbuilding Agreement Parties who 
        have given notice to withdraw from the Shipbuilding 
        Agreement, which were delivered in the calendar year 
        preceding the calendar year in which the notice is 
        given, is 15 percent or more of the gross tonnage of 
        new Shipbuilding Agreement vessels that were 
        constructed in all Shipbuilding Agreement Parties and 
        were delivered in the calendar year preceding the 
        calendar year in which the notice is given.
          (3) Termination of withdrawal.--If a Shipbuilding 
        Agreement Party described in paragraph (2) takes action 
        to terminate its withdrawal from the Shipbuilding 
        Agreement, so that paragraph (2) would not apply if 
        that Party had not given the notice to withdraw, the 
        President may take the necessary steps to terminate the 
        notice of withdrawal of the United States from the 
        Shipbuilding Agreement.
  (b) Reinstatement of Laws.--If the United States withdraws 
from the Shipbuilding Agreement, on the date on which such 
withdrawal becomes effective, the amendments made by section 
204 shall be deemed not to have been made, and the provisions 
of law amended by section 204 shall, on and after such date, be 
effective as if this Act had not been enacted.

SEC. 206. DEFINITIONS.

  As used in this title--
          (1) the terms ``Shipbuilding Agreement'', 
        ``Shipbuilding Agreement Party'', and ``Shipbuilding 
        Agreement vessel'' have the meanings given those terms 
        in subsections (h), (i), and (j), respectively, of 
        section 905 of the Merchant Marine Act, 1936, as added 
        by section 204(7) of this Act; and
          (2) the terms ``GATT 1994'' and ``Uruguay Round 
        Agreements'' have the meanings given those terms in 
        section 2 of the Uruguay Round Agreements Act.
                              ----------                              


                                 PART 2

    An amendment to be offered by Representative Bateman of 
Virginia, or his designee, debatable for one hour.
  In section 3 (page 2, line 15), strike ``This'' and insert 
``Except as provided in section 206, this''.
  Redesignate section 206 as section 209, and insert the 
following after section 205:

SEC. 206. APPLICABILITY OF TITLE XI AMENDMENTS.

  (a) Effective Date.--
          (1) In general.--Notwithstanding any provision of the 
        Shipbuilding Agreement or the Export Credit 
        Understanding, the amendments made by paragraph (8) of 
        section 204 shall not apply with respect to any 
        commitment to guarantee made under title XI of the 
        Merchant Marine Act, 1936, before January 1, 1999, with 
        respect to a vessel delivered--
                  (A) before January 1, 2002, or
                  (B) in the case of unusual circumstances to 
                which paragraph (2) applies, as soon after 
                January 1, 2002, as is practicable.
          (2) Unusual circumstances.--This paragraph applies in 
        a case in which unusual circumstances beyond the 
        control of the parties concerned prevent the delivery 
        of a vessel by January 1, 2002. As used in this 
        paragraph, the term ``unusual circumstances'' means 
        acts of God (other than ordinary storms or inclement 
        weather conditions), labor strikes, acts of sabotage, 
        explosions, fires, or vandalism, and similar 
        circumstances.

SEC. 207. OTHER LAWS NOT AFFECTED.

  The Shipbuilding Agreement shall not affect, directly or 
indirectly, the Merchant Marine Act, 1920, the Act of June 19, 
1886 (46 U.S.C. App. 289), or any other provision of law set 
forth in Accompanying Note 2 to Annex II to the Shipbuilding 
Agreement, and shall not provide any mechanism to subject any 
producer of vessels in the United States to financial 
penalties, duties, bid restrictions, unfavorable bid 
preferences, or withdrawal of concessions under the GATT 1994 
or other Uruguay Round Agreements, in the competition for 
international commercial vessel construction or reconstruction 
orders because of construction of vessels by United States 
shipbuilders for operation in the coastwise trade of the United 
States.

SEC. 208. PROTECTION OF UNITED STATES INTERESTS.

  Nothing in the Shipbuilding Agreement shall be construed to 
prevent the United States from taking any action which it 
considers necessary for the protection of essential security 
interests or from invoking its sovereign authority to define, 
for purposes of exclusion from coverage under the Shipbuilding 
Agreement and from any dispute or challenge based on Annex I to 
the Shipbuilding Agreement, ``military vessel'', ``military 
reserve vessel'', or ``essential security interest'' on a case 
by case basis, as determined by the Secretary of Defense.
  In paragraph (1) of section 209 (as redesignated by this 
amendment), strike ``and `Shipbuilding Agreement vessel' have 
the meanings given those terms in subsections (h), (i), and 
(j)'' and insert `` `Shipbuilding Agreement vessel', and 
`Export Credit Understanding' have the meanings given those 
terms in subsections (h), (i), (j), and (k)''
  Page 6, strike line 19 and all that follows through page 7, 
line 2.
  Page 7, line 3, insert ``(I) if'' before ``the petitioner''.
  Page 7, strike lines 9 through 11 and insert the following:
                  ``(II) if the petitioner was not invited to 
                tender a bid, the petition''.
  Page 7, line 19, strike ``(i)(III)'' and insert ``(i)(II)''.
  Page 9, line 10, strike ``(i) or (ii)'' and insert 
``(i)(I)''.
  Page 9, line 18, strike ``(1)(B)(iii)'' and insert 
``(1)(B)(i)(II)''.
  Page 49, add the following after line 24:

``SEC. 809. THIRD COUNTRY SALES.

  ``(a) Filing of Petition.--Any interested party that would be 
eligible to file a petition under section 802(b)(1) with 
respect to a sale if such sale had been to a United States 
buyer may, with respect to a sale of a vessel by a foreign 
producer in a Shipbuilding Agreement Party to a buyer in a 
third country that is a Shipbuilding Agreement Party, file with 
the Trade Representative a petition alleging that--
          ``(1) such vessel has been sold at less than fair 
        value; and
          ``(2) the industry in the United States producing or 
        capable of producing a like vessel is materially 
        injured by reason of such sale.
  ``(b) Determination.--Upon receipt of a petition under 
subsection (a), the Trade Representative shall request the 
following determinations to be made in accordance with 
substantive and procedural requirements specified by the Trade 
Representative, notwithstanding any other provision of this 
title:
          ``(1) The administering authority shall determine 
        whether there is reasonable cause to believe that the 
        subject vessel has been sold at less than fair value.
          ``(2) The Commission shall determine whether there is 
        reasonable cause to believe that the industry in the 
        United States is materially injured by reason of such 
        sale.
  ``(c) Complaint by Trade Representative.--If the 
administering authority makes an affirmative determination 
under paragraph (1) of subsection (b), and the Commission makes 
an affirmative determination under paragraph (2) of subsection 
(b), the Trade Representative shall make application to the 
country of the buyer of the subject vessel for an injurious 
pricing action and relief similar to that available under 
section 808. The Trade Representative shall advise the 
petitioner of the proceedings undertaken by the third country 
in response to such application and shall permit the petitioner 
to participate in such proceedings to the greatest extent 
practicable.''
  Page 102, line 9, strike ``or 808'' and insert ``, 808, or 
809''.
  In the table of contents for chapter 8 of title VII of the 
Tariff Act of 1930 (page 3, after line 9), insert the following 
after the item relating to section 808:

``Sec. 809. Third country sales.''

  Page 100, line 20, strike ``and''; on line 21, strike 
``(iii)'' and insert ``(iv)'', and insert the following after 
line 20:
                          ``(iii) a military reserve vessel, 
                        and''.
  Page 101, insert the following after line 15:
                  ``(E) Military reserve vessel.--A `military 
                reserve vessel' is a vessel that has been 
                constructed with national defense features and 
                characteristics required by the Secretary of 
                Defense for the purpose of supporting the 
                United States Armed Forces in a contingency.

                                
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