[Senate Report 104-270]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 404
104th Congress                                                   Report
                                 SENATE

 2d Session                                                     104-270
_______________________________________________________________________


 
EXTENSION OF FREE TRADE BENEFITS TO THE WEST BANK AND GAZA STRIP; OECD 
  SHIPBUILDING AGREEMENT ACT; AND REAUTHORIZATION OF THE GENERALIZED 
                     SYSTEM OF PREFERENCES PROGRAM

                                _______


                  May 13, 1996.--Ordered to be printed

_______________________________________________________________________


    Mr. Roth, from the Committee on Finance, submitted the following

                              R E P O R T

                        [To accompany H.R. 3074]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Finance, to which was referred the bill 
(H.R. 3074) to amend the United States-Israel Free Trade Area 
Implementation Act of 1985 to provide the President with 
additional proclamation authority with respect to articles of 
the West Bank or Gaza Strip or a qualifying industrial zone, 
having considered the same, reports favorably thereon with an 
amendment in the nature of a substitute and recommends that the 
bill, as amended, do pass.

                  I. Summary of H.R. 3074, as Amended

    H.R. 3074, as amended, contains four titles. Title I 
includes the original House bill language to amend the United 
States-Israel Free Trade Area Implementation Act of 1985 to 
provide the President with additional proclamation authority 
with respect to articles of the West Bank or Gaza Strip or a 
qualifying industrial zone, encompassing portions of the 
territory of Israel and Jordan or Israel and Egypt. Title II 
approves and implements the Agreement Respecting Normal 
Competitive Conditions in the Commercial Shipbuilding and 
Repair Industry, resulting from negotiations conducted under 
the auspices of the Organization for Economic Cooperation and 
Development, which was signed on December 21, 1994. Title III 
reauthorizes the Generalized System of Preferences program for 
a period of one year, nine months, and 12 days, retroactive to 
August 1, 1995, with an effective date for the renewal of 
October 1, 1996. Finally, title IV contains revenue offsets for 
the bill, which include provisions relating to the tax 
treatment of foreign trusts and the imposition of penalties for 
failure to meet foreign shipping income tax reporting 
requirements. H.R. 3074, as amended, modifies the title of the 
original House bill to reflect these changes.

       II. Title I--Extension of Free Trade to West Bank and Gaza

                             a. background

    Section 3 of the United States-Israel Free Trade Area 
Implementation Act approved a free trade area between the 
United States and Israel. Products of the West Bank and the 
Gaza Strip that were marked as products of Israel were accorded 
preferential tariff treatment as provided for under the United 
States-Israel Free Trade Area Implementation Act. Following 
implementation of the 1994 Declaration of Principles by Israel 
and the Palestine Liberation Organization (PLO), on behalf of 
the Palestinian people, products of the West Bank and the Gaza 
Strip were marked as such and no longer qualified for 
preferential tariff treatment as products of Israel. Instead, 
such products currently enter the United States under normal 
most-favored-nation (MFN) tariff rates.
    In connection with the Blair House Communique of February 
12, 1995, the United States proposed to extend duty free 
treatment to products from the West Bank, the Gaza Strip, and 
industrial zones along the border of Israel and Egypt and 
Israel and Jordan. In a letter of October 17, 1995, the 
Palestinian Authority agreed to accord U.S. products duty free 
access to the West Bank and the Gaza Strip, to prevent illegal 
transshipment of goods not qualifying for duty free access, and 
to support all efforts to end the Arab economic boycott of 
Israel.

                         b. summary of title i

    Title I, section 1 of H.R. 3074, as amended, would amend 
the United States-Israel Free Trade Area Implementation Act 
(the ``Act'') by adding a new section 9 to the Act. This new 
section would provide the President authority to proclaim the 
modification or elimination of any existing duty on articles 
that are produced in and imported from the West Bank, the Gaza 
Strip, or a qualifying industrial zone. The new section 9 of 
the Act also applies the same rule of origin requirements to 
products from the West Bank, the Gaza Strip, and qualifying 
industrial zones as are already applicable to products from 
Israel.
    Finally, the new section 9 of the Act defines ``qualifying 
industrial zone'' as any area designated as such by the 
President, which encompasses portions of the territory of 
Israel and Jordan or Israel and Egypt and which local 
authorities designate as an enclave where merchandise may enter 
without payment of duty or excise tax.

                         c. general explanation

1. Congressional Action

    On December 12, 1995, Senators Brown and Feinstein 
introduced S. 1469, which was referred to the Committee on 
Finance. This bill would give the President authority to 
provide imports from the West Bank, the Gaza Strip, and 
qualifying industrial zones (encompassing portions of the 
territory of Israel and Jordan or Israel and Egypt) the same 
tariff treatment as articles from Israel under the U.S.-Israel 
Free Trade Agreement (U.S.-Israel FTA). On April 16, 1996, the 
House of Representatives passed H.R. 3074, which is 
substantially similar legislation to S. 1469. H.R. 3074 was 
referred to the Committee on Finance on April 17, 1996.

2. Trade with the West Bank and Gaza Strip

    There is a lack of reliable data on the volume and value of 
trade between the United States and the West Bank/Gaza Strip, 
in part, because exports to and imports from the West Bank and 
Gaza Strip are transshipped through Israel. Nonetheless, it is 
clear that the amount of trade is comparatively insignificant 
in terms of total U.S. trade with the Middle East. According to 
U.S. Department of Commerce data, leading U.S. exports to the 
West Bank and Gaza Strip include machinery, mechanical 
appliances, and rice. Principal imports from the West Bank and 
Gaza Strip include textiles and vegetable products.

3. Committee Views

    It is the view of the Committee that products from the West 
Bank and the Gaza Strip should not be subjected to less 
favorable treatment now than those products received before the 
signing of the Declaration of Principles by the Government of 
Israel and the PLO. Accordingly, title I of H.R. 3074 is 
intended to offer to products from the West Bank, the Gaza 
Strip, and qualifying industrial zones (located between Israel 
and Jordan or Israel and Egypt) the same tariff treatment as is 
currently offered to products from Israel under the U.S.-Israel 
FTA. The legislation also applies the same rule of origin 
requirements to products from the West Bank, the Gaza Strip, 
and qualifying industrial zones, as are already applicable to 
products from Israel.
    It is the Committee's understanding that the Administration 
intends to apply the proclamation authority granted under this 
legislation to all eligible products from these areas. The 
President may, however, terminate the grant of duty free 
treatment if changed circumstances should warrant such action 
in the future.
    The Committee believes that providing duty free treatment 
to imports from the West Bank, the Gaza Strip, and qualifying 
industrial zones is important to promoting the peace process in 
the Middle East, increasing employment and stimulating the 
region's economy, and ending the Arab economic boycott of 
Israel.
    Therefore, the Committee strongly supports the extension of 
duty free tariff treatment to products from the West Bank, the 
Gaza Strip, and qualifying industrial zones.

    III. Approval and Implementation of OECD Shipbuilding Agreement

                             a. background

    On June 8, 1989, the Shipbuilders Council of America (SCA), 
representing the U.S. shipbuilding industry, filed a petition 
under section 301 of the Trade Act of 1974, which alleged that 
foreign government subsidies to the shipbuilding industry 
constituted an unjustifiable, unreasonable, or discriminatory 
trade practice that burdens or restricts U.S. commerce. The SCA 
withdrew the petition on July 21, 1989, following a commitment 
by the U.S. Government to initiate negotiations on an agreement 
to discipline government support to the shipbuilding and repair 
industry within the framework of the Working Party on 
Shipbuilding of the Council of the Organization for Economic 
Cooperation and Development (``OECD''). These negotiations 
commenced on October 24, 1989, when the United States notified 
the Executive Committee of the OECD of its intention to 
negotiate such an agreement.
    After more than five years of negotiation, the Agreement 
Respecting the Normal Competitive Conditions in the Commercial 
Shipbuilding and Repair Industry (the ``Shipbuilding 
Agreement'') was signed on December 21, 1994, by the Commission 
of the European Communities, and the Governments of Finland, 
Japan, the Republic of Korea, Norway, Sweden, and the United 
States. Together, the signatories account for approximately 80 
percent of global shipbuilding capacity.
    The Shipbuilding Agreement applies only to the construction 
and repair of self-propelled, seagoing commercial vessels of 
100 gross tons and above (including certain specialized 
vessels) and tugs of 365 kilowatts or more. It does not cover 
the construction of naval vessels or the outfit and repair of 
vessels for military purposes.
    The Shipbuilding Agreement has four general sections. 
First, with some limited exceptions, the Shipbuilding Agreement 
requires the elimination of virtually all subsidies to the 
shipbuilding industry granted either directly to shipbuilders 
or indirectly through ship operators or other entities. Second, 
to avoid trade-distorting financing programs, the Shipbuilding 
Agreement also establishes common rules to discipline 
government financing for export and domestic ship sales. Third, 
the Shipbuilding Agreement includes an ``injurious-pricing 
code,'' modeled on the antidumping rules of the World Trade 
Organization (WTO), which would allow signatories to assess an 
offsetting injurious-pricing charge against foreign 
shipbuilders who sell ships at unfairly low (i.e., dumped 
prices) that injure domestic shipbuilders. The injurious-
pricing code also permits signatories to impose specified 
countermeasures against a foreign shipbuilder that is subject 
to an affirmative injurious-pricing determination, if the 
shipbuilder does not pay the injurious-pricing charge. Finally, 
the Shipbuilding Agreement includes binding rules for dispute 
settlement in the OECD, which are patterned after the WTO's 
dispute-settlement regime.
    The Shipbuilding Agreement is scheduled to enter into force 
30 days after all signatories deposit instruments of 
ratification, acceptance, or approval with the OECD 
Secretariat. In order for the United States to complete its 
ratification, legislation must be enacted by Congress to bring 
U.S. law into compliance with the Shipbuilding Agreement.
    The Shipbuilding Agreement had an initial target date for 
entry into force of January 1, 1996. At the meeting of the OECD 
Council Working Party on Shipbuilding on December 11, 1995, 
representatives of Korea, Norway, and the European Union (which 
now includes Finland and Sweden) deposited their respective 
instruments of ratification with the OECD Secretariat. At the 
same time, participants acknowledged that it would not be 
possible for either the United States or Japan to complete 
their ratification procedures in time to meet the original 
target effective date of January 1, 1996. Accordingly, 
representatives of the signatories agreed to extend the 
deadline and set a new target date of June 15, 1996, for 
depositing instruments of ratification, thereby permitting the 
Shipbuilding Agreement to enter into force by July 15, 1996.

                         b. summary of title ii

    The Shipbuilding Agreement establishes a mechanism for the 
determination of injurious pricing in the construction and sale 
of seagoing vessels, in a manner analogous to the provisions in 
the Agreement on Implementation of Article VI of the General 
Agreement on Tariffs and Trade 1994 (``WTO Antidumping 
Agreement''). In addition, the Shipbuilding Agreement provides 
for the assessment of an injurious-pricing charge and 
countermeasures where appropriate--remedies that are different 
from the antidumping provisions under Title VII of the Tariff 
Act of 1930, as amended (``Title VII''), which implements the 
WTO Antidumping Agreement into U.S. law. Because ocean-going 
vessels engaged in international trade are technically not 
imported or entered for consumption in the United States, it is 
virtually impossible to use the antidumping remedies of Title 
VII to cover the sale of vessels at less than fair value. 
Accordingly, separate statutory authority is required to 
implement the Shipbuilding Agreement.

1. Injurious Pricing and Countermeasures

    Section 203 of Title II, would establish a new Title VIII 
of the Tariff Act of 1930, as amended, in order to create an 
injurious-pricing mechanism applicable to shipbuilding. This 
mechanism would permit the collection of an injurious-pricing 
charge against ocean-going vessels sold to U.S. buyers at a 
price below normal value when that sale injures a U.S. 
shipbuilding industry. This mechanism also allows for the 
imposition of countermeasures against a shipyard that fails to 
pay the injurious-pricing charge.
    The new Title VIII would be analogous to the current 
antidumping provisions of Title VII, which sets forth 
procedures under U.S. law for assessment of antidumping duties. 
The specific injurious-pricing provisions differ from the 
antidumping provisions in Title VII only where necessary to 
take into account differences between the Shipbuilding 
Agreement and the WTO Antidumping Agreement due to the unique 
characteristics of the construction and sale of ocean-going 
vessels.
    The new Title VIII would also provide for judicial review 
of injurious pricing and countermeasures determinations in the 
U.S. Court of International Trade, with subsequent appellate 
review in the U.S. Court of Appeals for the Federal Circuit.

2. Other Provisions

    Title II also includes the following changes or additions 
to current law:
          Repairs made in a signatory to the Shipbuilding 
        Agreement on U.S.-flagged vessels of a type covered by 
        the Shipbuilding Agreement would be exempt from the 50 
        percent duty imposed under section 466 of the Tariff 
        Act of 1930 on the cost of repairs made outside the 
        United States on a U.S.-flagged vessel.
          The requirements of certain tax and subsidy programs 
        available under the Merchant Marine Act of 1936 to 
        vessels constructed in the United States as well as 
        government guarantees available under Title XI of the 
        Merchant Marine Act for financing the construction, 
        reconstruction or reconditioning of U.S. built vessels, 
        are changed to conform to the requirements of the 
        Shipbuilding Agreement and the related OECD 
        Understanding on Export Credits for Ships.
          Private persons other than the U.S. Government are 
        prohibited from asserting any cause of action or 
        defense under the Shipbuilding Agreement in U.S. 
        courts.

                   C. General Description of Title II

1. Subtitle A--General Provisions.

                              Short Title

                             (Section 201)

    Section 201 provides that the title may be cited as the 
``OECD Shipbuilding Agreement Act.''

                 Approval of the Shipbuilding Agreement

                             (Section 202)

    Section 202 provides that the Congress approves the 
Shipbuilding Agreement, which resulted from negotiations 
conducted under the auspices of the OECD and which was entered 
into on December 21, 1994.

     Injurious Pricing and Countermeasures Relating to Shipbuilding

                             (Section 203)

    Section 203 adds a new Title VIII to the Tariff Act of 
1930. Title VIII contains four subtitles, described section-by-
section below. Because Title VIII is modeled on the antidumping 
statute in Title VII, this description outlines only those 
differences between the two titles.

        SUBTITLE A--INJURIOUS PRICING CHARGE AND COUNTERMEASURES

Section 801: Injurious Pricing Charge

    Section 801 would require the imposition of a one-time 
injurious-pricing charge against a foreign shipbuilder if the 
Department of Commerce (Commerce) determines that a vessel 
produced by that shipbuilder has been sold directly or 
indirectly to a U.S. buyer at less than its fair value and the 
International Trade Commission (ITC) determines that an 
industry in the United States is or has been materially injured 
or threatened with material injury, or the establishment of an 
industry in the United States is or has been materially 
retarded by reason of the sale of that vessel. The amount of 
the injurious-pricing charge would be the amount by which 
normal value exceeds the export price. The injurious-pricing 
charge would be assessed once for the sale in question. After 
the charge is paid, there would be no continuing liability on 
future sales or scrutiny of sales of other vessels produced by 
the foreign shipbuilder unless a separate investigation is 
conducted with respect to each of those sales.
    Section 801 is modeled on and analogous to section 731 of 
Title VII. However, Title VIII contains several changes, which 
are required to take into account the unique characteristics of 
the shipbuilding industry and the requirements of the 
Shipbuilding Agreement. Specifically, because ocean-going 
vessels engaged in international trade are technically not 
imported or entered for consumption in the United States, the 
Shipbuilding Agreement and Title VIII would permit 
investigations to be commenced when a vessel is sold directly 
or indirectly to a U.S. buyer, regardless of whether the vessel 
is imported or entered for consumption in the United States.
    Thus, the traditional antidumping mechanism of imposing an 
antidumping duty on future entries of imported merchandise 
would not provide a domestic shipbuilding industry with 
effective relief. Accordingly, the Shipbuilding Agreement and 
Title VIII would establish a one-time charge to be assessed 
against the shipyard producing the injuriously-priced vessel.
    Finally, the Shipbuilding Agreement provides that there 
must be a demonstration that there is or has been material 
injury by reason of the sale of the vessel or vessels in 
question. In contrast, the WTO Antidumping Agreement provides 
that there must be a demonstration that there is material 
injury by reason of imports. Accordingly, section 801 reflects 
the difference by requiring the ITC to determine whether there 
is or has been material injury by reason of the sale of the 
injuriously-priced vessel.
    Accordingly, the Committee intends that the material injury 
standards of Title VII and Title VIII be interpreted 
differently consistent with the particular nature of the 
material-injury inquiry under the two titles.

Section 802: Procedures For Instituting An Injurious-Pricing 
        Investigation

    Section 802 sets forth the procedures for conducting an 
injurious-pricing investigation. Section 802(a) describes 
procedures for initiation by Commerce and provides that an 
investigation may be self-initiated only within six months 
after the time that Commerce first knew or should have known of 
the sale of the vessel. Section 802(b) describes the procedures 
for initiation by petition. These procedures require that a 
petition be filed within either six or nine months (depending 
upon the circumstances) from the time the petitioner knew or 
should have known of the sale of the vessel, but no later than 
six months after the delivery of the vessel. If these deadlines 
are not met, an investigation may not be commenced.
    Section 802(b)(1)(B)(iii) provides that if a petitioner is 
a producer, it must show that it had the capability to produce 
the subject vessel. In addition, if the sale of the subject 
vessel was made through a bidding process that was either a 
broad multiple bid or on which the producer was invited to bid, 
the petitioner must show that it made a timely effort to obtain 
the sale through a proposal that met bid specifications. If the 
sale was not made through a broad multiple bid and the 
petitioner was not invited to bid, but knew or should have 
known of the proposed purchase of the vessel in question, the 
petitioner must show it made timely efforts to conclude a sale 
consistent with the buyer's requirements.
    Section 802(d)(1) provides a 45-day deadline, with no 
extension, for initiating an investigation after the filing of 
a petition, assuming that the petition meets the requirements 
set forth. Among these requirements, section 802(d)(4) sets 
forth certain requirements for petitioners, including the 
requirement that a petitioner must file ``on behalf of'' a 
domestic industry. Under this requirement, there must be 
sufficient industry support for the petition. Support is deemed 
to be sufficient when the following criteria are met:
          domestic producers or workers who support the 
        petition must account for at least 25 percent of the 
        total capacity of domestic producers capable of 
        producing the like vessel; and
          domestic producers or workers who support the 
        petition must account for more than 50 percent of the 
        total capacity to produce the like vessel of that 
        portion of the industry expressing a view on the 
        petition.
    Section 802(d)(6) provides that Commerce may not initiate 
an injurious-pricing investigation if a third country that is a 
WTO member, but not a party to the Shipbuilding Agreement, has 
initiated an antidumping proceeding against the same vessel 
that has been pending for not more than a year, or that has 
been completed and resulted in the imposition of antidumping 
measures or a negative determination.
    The procedures for initiating an injurious-pricing 
investigation under Title VIII differ in a number of respects 
from procedures to initiate an antidumping investigation under 
Title VII. Because most injurious-pricing investigations will 
involve only one ship, it was deemed appropriate to establish 
deadlines in the Shipbuilding Agreement for the filing of 
petitions and for self-initiation of an investigation with 
respect to that ship. Such deadlines are not needed in an 
antidumping investigation under Title VII, in which all entries 
of the subject imports during the period recent to the 
investigation are examined.
    In addition, because vessels are generally unique and often 
made to individual specifications, a domestic producer may not 
have produced a vessel actually identical to the subject 
vessel. Nonetheless, the domestic producer could still be 
injured as a result of the sale because that producer was 
capable of producing the subject vessel. By contrast, Title VII 
investigations require that the petitioner, if a producer, 
actually produce or manufacture the like product (except in the 
context of a determination whether the establishment of a 
domestic industry is materially retarded by reason of dumped 
imports). Moreover, the petitioner under Title VII is not 
required to show that it made an effort to sell like 
merchandise to the purchaser.
    Title VIII provides for a 45-day period for determining 
whether to initiate an injurious-pricing investigation, as 
opposed to 20 days with a possible extension to 40 days in an 
antidumping case under section 732(c)(1) of Title VII, because 
of the Administration's concern that the new representation 
requirements and deadlines for filing petitions under Title 
VIII may create additional complexities requiring more time to 
determine the sufficiency of the petition.
    Finally, Title VII does not provide for the delay or 
termination of an antidumping investigation if another WTO 
member undertakes antidumping or other measures against like 
merchandise from the subject country. Under Title VIII, 
however, a U.S. producer could seek to bring an injurious-
pricing action against a vessel that is also subject to an 
antidumping action in a WTO member country that is not a party 
to the Shipbuilding Agreement. In this situation, the 
Shipbuilding Agreement and Title VIII would require that the 
injurious-pricing action not be initiated in certain 
circumstances.

Section 803: Preliminary Investigations

    Section 803(a) would require the ITC to make its 
preliminary determination within 90 days after the filing of 
the injurious-pricing petition.
    Section 803(b) states that Commerce is to make its 
preliminary determination within 160 days after initiating its 
investigation or 160 days after the date of delivery of the 
vessel in a cost or constructed-value investigation. An 
extension is permitted in extraordinarily complicated cases or 
for good cause until not later than 190 days after initiation 
or date of delivery, as the case may be.
    These time periods for preliminary determinations in Title 
VIII cases are generally longer than in antidumping 
investigations under Title VII. This difference is related to 
the different nature of the investigations under the two 
titles. Due to the unique nature of the construction of 
vessels, a Title VIII cost investigation must be delayed until 
construction is completed to allow Commerce to obtain actual 
cost information. Tying Commerce's investigation to the date of 
the vessel's delivery may result in a delay of the 
investigation for several years due to the length of time 
necessary to construct a vessel.
    Because the remedies established under Title VII and Title 
VIII are completely different, the effect of a preliminary 
affirmative Commerce determination would be different as well. 
Title VII provides for provisional relief in the form of the 
posting of a bond or cash deposit by the importer in the amount 
of the preliminary dumping margin and the collection of duties 
on entries of the subject merchandise after an affirmative 
preliminary determination has been rendered. Under Title VIII, 
however, no provisional relief after the preliminary 
investigation is necessary because the remedy consists entirely 
of a one-time charge, imposed on the shipbuilder after a final 
determination has been made.

Section 804: Termination or Suspension of Investigation

    Section 804(d) provides for the suspension of an injurious-
pricing investigation if a third country that is a WTO member, 
but not a party to the Shipbuilding Agreement, initiates an 
antidumping proceeding with respect to the same vessel. The 
investigation would be terminated if the third country 
proceeding results in the imposition of antidumping measures or 
a negative determination. If the third-country proceeding ends 
without the imposition of antidumping measures or a negative 
determination, or if it is not concluded within one year 
(unless antidumping measures are subsequently imposed), the 
suspension would end and the Title VIII investigation would 
proceed.
    This rule under 804(d) contrasts with Title VII, which does 
not allow for the suspension or termination of an investigation 
based on action by a third country. However, the Shipbuilding 
Agreement contemplates the situation where, for example, a U.S. 
producer seeks to bring a Title VIII action against a vessel 
that has been sold to a buyer in the United States and is also 
subject to an antidumping investigation by a WTO Member country 
that is not a party to the Shipbuilding Agreement. The rule in 
the Shipbuilding Agreement and Title VIII would require that 
the injurious-pricing investigation be terminated or suspended 
in such situations to avoid multiple investigations of the 
subject vessel.

Section 805: Final Determinations

    Section 805(a) provides that Commerce would be required to 
make its final determination in an injurious-pricing 
investigation under Title VIII not later than 75 days after its 
preliminary determination. This period may be extended under 
certain circumstances to 290 days after initiation of the 
investigation in ordinary cases or after delivery of the vessel 
in cost or constructed-value investigations.
    Section 805(b) provides that the ITC would be required to 
make its final determination before the later of the l20th day 
on which Commerce makes an affirmative preliminary 
determination or the 45th day after the day on which Commerce 
makes an affirmative final determination.
    The extension for completion of Commerce's injurious-
pricing investigation is longer under Title VIII than is 
provided for under Title VII, section 735 in an antidumping 
investigation. This difference between the two titles is 
related to the different nature of the investigations and the 
substantial delays that may be caused by use of actual cost 
data with respect to the construction of ships.

Section 806: Imposition And Collection Of Injurious Pricing Charge

    In the event of final affirmative determinations by 
Commerce and the ITC under Title VIII, Commerce would be 
required to publish an order imposing a one-time injurious-
pricing charge on the foreign shipbuilder in an amount equal to 
the injurious pricing margin for the vessel subject to 
investigation. The shipbuilder must pay the charge within 180 
days. However, the payment period may be extended under 
extraordinary circumstances, subject to interest charges. Once 
the injurious-pricing charge is paid, the shipbuilder would not 
be subject to any continuing liability on future sales or 
scrutiny of sales of other vessels constructed by that 
shipbuilder unless a new investigation under Title VIII is 
conducted with respect to each of those sales.
    This injurious-pricing remedy under the Shipbuilding 
Agreement and Title VIII is different than the antidumping 
remedy under Title VII because of the differences between the 
sale of imported merchandise and the nature of sales 
transactions involving ships. Because vessels engaged in 
international trade do not enter the United States for 
consumption, the traditional antidumping mechanism of imposing 
an antidumping duty on future entries would not provide the 
domestic industry with effective relief. Accordingly, the 
Shipbuilding Agreement and Title VIII would establish a one-
time charge to be assessed against the shipyard producing the 
injuriously-priced vessel. Because the remedy would be a one-
time charge, there is no need for an administrative or sunset 
review of the order as provided for under section 751 with 
respect to antidumping orders under Title VII.

Section 807: Imposition of Countermeasures

    Section 807 provides that failure to pay the injurious-
pricing charge imposed against a foreign shipbuilder subjects 
that shipbuilder to the imposition of countermeasures. The 
countermeasures would take the form of a temporary denial (for 
a period of up to four years after delivery of the vessel 
subject to countermeasures) of privileges to load or unload 
cargo or passengers in the United States to vessels contracted 
to be built by the offending shipbuilder within a period of up 
to four years after the effective date of the countermeasures.
    Sections 807 (b) and (c) set forth the procedures for 
establishing countermeasures. Specifically, section 807(b) 
would require Commerce to publish a notice of an intent to 
impose countermeasures not later than 30 days before the 
expiration of the time for payment of the injurious-pricing 
charge. Under section 807(c), Commerce would be required to 
issue a determination and order imposing countermeasures within 
90 days after the notice of intent is published. In issuing 
this order, Commerce would be required to determine whether an 
interested party has demonstrated that the scope or duration of 
the countermeasures should be narrower or shorter than that set 
forth in the notice of intent.
    Section 807(d) provides that if countermeasures are 
imposed, they may be reviewed annually as to scope and 
duration.
    Section 807(e) provides that countermeasures may be 
extended in scope and duration beyond four years only if a 
panel established under the Shipbuilding Agreement agrees that 
such extension is appropriate.
    Finally, section 807(f) would require Commerce to publish 
each year a list of all vessels subject to countermeasures and 
to provide notice of the imposition of countermeasures to 
certain interested parties.
    The countermeasures procedure under Title VIII is 
essentially an enforcement mechanism. Neither Title VII nor the 
WTO Antidumping Agreement provide for the imposition of 
countermeasures. However, an injurious-pricing order under 
Title VIII would not apply to future vessels delivered by the 
shipyard in question. Therefore, the United States would have 
no recourse in enforcing the order if the shipyard refused to 
pay the injurious-pricing charge. Accordingly, it is necessary 
to establish a mechanism to ensure that a shipyard is unable to 
avoid the remedial effect of an order simply by not paying the 
injurious-pricing charge, and Title VIII and the Shipbuilding 
Agreement establish the countermeasures procedure as the 
enforcement mechanism.
    The Committee notes that under section 861(17)(G) of Title 
VIII, purchasers of vessels potentially subject to 
countermeasures have standing to participate fully in 
proceedings concerning the imposition of countermeasures. The 
Committee expects that the interests of such purchasers, as 
well as other entities such as domestic producers and 
respondents, be taken into account in making countermeasure 
determinations.
    The Committee also notes that the countermeasures would 
apply to vessels contracted to be built by the offending 
foreign producer after the date of the order imposing 
countermeasures. Specifically, a vessel would be covered if the 
material terms of sale for that vessel are established within a 
period of four consecutive years beginning 30 days after the 
notice of intent is published. The Committee expects that 
purchasers will be given ample notice as to vessels that may be 
potentially covered by the countermeasure order and wishes to 
avoid situations in which purchasers would not have sufficient 
notice that changes in contract terms could subject the vessel 
to countermeasures.
    Accordingly, the Committee intends that only significant 
changes in the material terms of a legitimate contract entered 
into before the effective date of the countermeasures order 
should push the sale into the period covered by countermeasures 
if those changes were made after the order's effective date. 
Such significant changes amount to more than, for example, 
merely changing the delivery date because of construction 
delays, changing vessel specifications in a manner that does 
not affect the overall nature of the vessel subject to the 
contract, or other minor changes in price or terms. Of course, 
the Committee also intends that a vessel would be included in 
the countermeasure order if a sham contract were established 
covering the vessel before the effective countermeasure date 
simply to avoid imposition of countermeasures.

Section 808: Injurious Pricing Petitions By Third Countries

    Section 808 provides that the government of a party to the 
Shipbuilding Agreement may file a petition with the U.S. Trade 
Representative (USTR) that requests an investigation to 
determine whether a vessel from another Shipbuilding Agreement 
party has been sold directly or indirectly to one or more U.S. 
buyers at less than its normal value and that an industry in 
the petitioning country is materially injured by reason of the 
sale. After consulting with Commerce and the ITC, USTR would be 
required to determine whether to initiate an investigation. 
However, USTR would be able to proceed to initiate the 
investigation only after obtaining the approval of the Parties 
Group under the Shipbuilding Agreement.
    The procedure in section 808 to allow third countries to 
file injurious-pricing petitions is in accordance with the 
requirements of the Shipbuilding Agreement and is intended to 
provide an opportunity to conduct an investigation to determine 
whether injury by reason of an injuriously-priced sale is 
experienced in another Shipbuilding Agreement party. Section 
808 is comparable to the procedure under Title VII, section 
783, which allows the government of a WTO party to file a 
petition with USTR requesting the initiation of an antidumping 
investigation to determine whether there is material injury to 
an industry in the petitioning country by reason of dumped 
imports entered for consumption in the United States.

                       SUBTITLE B--SPECIAL RULES

Section 821: Export Price

    Section 821 sets forth the rules for determining the export 
price to be used in injurious-pricing investigations. ``Export 
price'' is defined as the price at which the subject vessel is 
first sold (or agreed to be sold) by or for the account of the 
foreign producer of the subject vessel to an unaffiliated U.S. 
buyer. Such a sale would include any transfer in ownership 
interest, including by lease or long-term bareboat charter, in 
conjunction with the original transfer from the producer, 
either directly or indirectly, to a U.S. buyer. Section 821(b) 
sets forth the adjustments to be made to export price.
    The definition of export price under section 821 is similar 
to the definition in Title VII (section 772). However, Title 
VII also contains a definition of the concept ``constructed 
export price.'' Because of the unique manner in which vessels 
are sold, there is no need for a constructed export price 
concept in the context of an injurious-pricing determination 
under Title VIII.

Section 822: Normal Value

    Section 822(a)(1) provides that the normal value of the 
subject vessel is the price of a like vessel in the home 
market, as adjusted, if sold at a time reasonably corresponding 
to the time of the sale under investigation. Section 
822(a)(1)(D) defines such contemporaneous sales as being within 
three months before or after the sale of the subject vessel or, 
in the absence of such sales, such longer period as Commerce 
determines would be appropriate. If home-market sales are not 
available, Commerce would be required to determine normal value 
based on the price of a like vessel in third-country sales. 
Only if such sales are inappropriate could Commerce use 
constructed value to determine normal value.
    Section 822(e) provides that in constructed-value 
situations, normal value would be derived on the basis of a 
statutory formula, which is the sum of the costs of production, 
plus the actual amount of profit and selling, administrative, 
and general expenses (where actual data are available). If 
constructed value is used, section 803(b)(1)(C) provides that 
the investigation may be delayed until the construction of the 
ship in question has been completed, even though the petition 
was filed at the time of contract.
    Section 822(b) states that if Commerce determines that a 
home-market sale was made at less than the cost of production 
and was at a price that does not permit recovery of all costs 
within five years, that sale may be disregarded in determining 
normal value. If a sale is disregarded, normal value would be 
based on another sale of a foreign like vessel in the ordinary 
course of trade. If no such sale is available, then Commerce 
must use constructed value to determine the normal value of the 
subject vessel.
    Section 822(f)(1)(C) provides for adjusting costs if they 
have been affected by startup operations. Section 822(f)(1)(D) 
would require that costs due to ``extraordinary circumstances'' 
such as labor disputes, fire, and natural disaster, be 
excluded.
    The rules applicable to normal value in Title VIII are 
similar to those of Title VII (section 773), altered only where 
necessary to account for the lengthy periods required to 
construct ships and the fact that, due to the unique nature of 
the shipbuilding industry, there often are few, if any, vessels 
constructed by the foreign shipbuilder that may be used as an 
appropriate comparison. Title VII contains no special provision 
for adjusting costs due to ``extraordinary circumstances'' such 
as labor disputes, fire, or natural disaster.
    The Committee understands that Commerce expects to use 
constructed value in most investigations because of lack of 
actual comparable sales. Nonetheless, the Committee expects 
that Commerce will make every effort to base normal value on 
home market or third-country sales when available within a 
reasonably coincident period.

Section 823: Currency Conversion

    Under section 823(a), Commerce would be required to convert 
foreign currencies into U.S. dollars using the exchange rate in 
effect on the date of sale of the subject vessel, except that 
if it is established that a currency transaction on forward 
markets is directly linked to a sale under consideration, the 
rate specified in the forward-sale agreement shall be used.
    Section 823(b) would define the date of sale as the date of 
the contract of sale. If the material terms of sale are 
significantly changed after that date, the date of sale would 
be the date of the change, and Commerce would be required to 
adjust for any unreasonable effect on the injurious-pricing 
margin due only to fluctuations in the exchange rate between 
the original and the new date of sale.
    The provisions of section 823 are essentially the same as 
under Title VII, section 773A. Unlike the WTO Antidumping 
Agreement, however, the Shipbuilding Agreement does not require 
that, in converting currencies, fluctuations in exchange rates 
are to be ignored. This difference between the two agreements, 
which is reflected in Title VIII, accounts for differences in 
the respective investigations under the two titles, as well as 
the particular characteristics of the shipbuilding industry. In 
an antidumping investigation under Title VII, Commerce 
generally investigates multiple transactions during the 12 
months prior to the filing of the petition. During that period 
of time, the exchange rate may fluctuate or change. 
Accordingly, under Title VII, Commerce is required to allow 
exporters time to adjust their export prices in response to 
sustained changes in the exchange rate. However, most Title 
VIII injurious-pricing investigations would involve only a 
single sales transaction.
    Furthermore, two years or more may elapse between the time 
a ship contract is signed and ship construction is completed. 
Because of the long lead-time, during which numerous contract 
modifications may occur that could change the date of sale, 
there is much greater potential for movements in exchange rates 
to unreasonably distort the margin calculation for that sale. 
Therefore, section 823 requires adjustments to eliminate such 
distortions.

                         SUBTITLE C--PROCEDURES

Sections 841 Through 845: Procedures

    Sections 841 through 845 set forth procedural requirements 
concerning the injurious-pricing mechanism. Specifically, 
section 841 provides that, upon request, Commerce and the ITC 
are each to hold hearings during their investigations.
    Section 842 provides for determinations on the basis of the 
facts available. As in section 776 of Title VII, the option to 
use adverse inferences would be limited to those cases in which 
the agency finds that an interested party has failed to 
cooperate by not acting to the best of its ability to comply 
with a request for information. Moreover, whenever the agency 
relies on secondary information rather than information 
obtained during the course of the investigation, the agency, to 
the extent practicable, would be required to corroborate that 
information from independent sources that are reasonably at its 
disposal.
    Section 843 sets forth the requirements for making 
information concerning the investigation available to the 
public, treating information as proprietary, disclosing 
proprietary information under protective order, serving 
submissions on other parties, handling violations of protective 
orders and sanctions, providing opportunity for comment by 
vessel buyers, and publishing determinations.
    Section 844 sets forth procedures for conducting 
investigations, including certification of submissions, the 
manner for handling difficulties by the parties in meeting 
requirements of the investigation, treatment of deficient 
submissions, use of information submitted by the parties, non-
acceptance of submissions, public comment on information, and 
verification of information submitted. The provision would 
require that the agencies not decline to consider information 
submitted by an interested party that is necessary to the 
determination but does not meet all of the requirements of the 
agency, if the information is submitted by the established 
deadline, it can be verified (where appropriate), it is not so 
incomplete that it cannot serve as a reliable basis for 
reaching a determination, the interested party has demonstrated 
that it has acted to the best of its ability to provide the 
information and meet the requirements, and that the information 
can be used without undue difficulty.
    All of these procedural requirements under Title VIII are 
the same as the procedures set up under Title VII in sections 
774, 776, 777, and 782 with respect to antidumping 
investigations. In addition, because the Shipbuilding Agreement 
provides that injurious-pricing determinations are subject to 
dispute resolution before the OECD, section 845 sets forth 
requirements for administrative action following OECD panel 
reports issued under the dispute-settlement rules of the 
Shipbuilding Agreement, which are virtually identical to the 
requirements in section 129 of the Uruguay Round Agreements Act 
with respect to administrative action following WTO dispute-
settlement panel reports on antidumping and injury 
determinations.
    The Committee intends that the procedural requirements of 
current law with respect to antidumping apply to shipbuilding 
investigations as well. Accordingly, antidumping procedural 
requirements under Title VII have been repeated in Title VIII, 
making only those changes necessitated by the differences 
between the WTO Antidumping Code and the Shipbuilding 
Agreement.

                        SUBTITLE D--DEFINITIONS

Section 861: Definitions

Industry; Producer

    Section 861(4) defines ``industry'' as the producers as a 
whole of a domestic like vessel, or those producers whose 
collective capability to produce a domestic like vessel 
constitutes a major proportion of the total domestic capability 
to produce a like vessel. A ``producer'' is defined as 
including an entity that is producing the domestic like vessel 
and an entity with the capability to produce the domestic like 
vessel. ``Capability to produce'' is further defined as the 
capability of a producer to produce a domestic like vessel with 
its present facilities or ability to adapt its facilities in a 
timely manner.
    By contrast, under Title VII, section 771(4) defines 
``industry'' as the producers as a whole of a domestic like 
product, or those producers whose collective output of a 
domestic like product constitutes a major proportion of the 
total domestic production of the product.
    As discussed above with respect to section 802 of Title 
VIII, vessels are generally unique and made to individual 
specifications. Therefore, a domestic producer may not have 
produced a vessel like the subject vessel but could, 
nonetheless, still be injured by the sale because that producer 
was capable of producing such a vessel. Accordingly, the 
definition of ``industry'' and ``producer'' in Title VIII would 
not require that the party actually produce a like vessel in 
order to be considered a producer or part of the industry. This 
definition under Title VIII differs from Title VII, which 
requires that the petitioner, if a producer, actually produce 
or manufacture the like product (except in the context of a 
determination whether the establishment of a domestic industry 
is materially retarded by reason of dumped imports).

Buyer; United States buyer

    Section 801(a)(1) requires that a vessel be sold directly 
or indirectly to a U.S. buyer in order for an injurious-pricing 
investigation under Title VIII to be commenced. Section 861(5) 
defines a ``buyer'' as any person who acquires an ownership 
interest in a vessel, including by lease or long-term bareboat 
charter, in conjunction with the original transfer from the 
producer, either directly or indirectly.
    Section 861(6) defines ``United States buyer'' as a buyer 
that is a U.S. citizen, a juridical entity organized under the 
laws of the United States (or a political subdivision thereof), 
or another juridical entity owned or controlled by such a 
juridical entity or U.S. citizen. The term ``own'' is defined 
as having more than a 50 percent interest. The term ``control'' 
is defined as the actual ability to have substantial influence 
on corporate behavior, which is presumed to exist where there 
is at least a 25 percent interest.
    Title VII does not contain a definition of buyer or 
purchaser because Title VII does not require that a sale of the 
subject merchandise be made to a U.S. entity for an antidumping 
investigation to be commenced. Instead, Title VII requires that 
the subject merchandise enter the United States for 
consumption.
    Because ocean-going vessels are technically not imported or 
entered for consumption in the United States, however, the 
Shipbuilding Agreement and Title VIII would permit 
investigations to be commenced only when a vessel is sold 
directly or indirectly to a U.S. buyer.

Ownership interest

    With respect to the definition of a ``buyer'' in section 
861(5), section 861(7) defines the term ``ownership interest'' 
as including any contractual or proprietary interest allowing 
the beneficiary to take advantage of the operation of a vessel 
in a manner substantially comparable to an owner. Section 
861(5) automatically includes leases or bareboat charters as 
being ownership interests.
    In an antidumping investigation under Title VII, Commerce 
may determine that a lease is equivalent to a sale under 
section 771(19) after considering the terms of the lease, 
commercial practice within the industry, the circumstances of 
the transaction, whether the product subject to the lease is 
integrated into the operations of the lessee or importer, 
whether in practice there is a likelihood that the lease will 
be continued or renewed for a significant period of time, and 
other relevant factors, including whether the lease transaction 
would permit avoidance of antidumping or countervailing duties.

Vessel; Respondents subject to investigation

    Section 861(8) defines ``vessel'' as a self-propelled 
seagoing vessel of 100 gross tons or more used for 
transportation of goods or persons or for performance of a 
specialized service (including icebreakers and dredgers) and a 
tug of 365 kilowatts or more, as long as it is produced in a 
Shipbuilding Agreement Party or in a country that is neither a 
Shipbuilding Agreement Party nor a member of the WTO. 
Accordingly, respondents in injurious-pricing investigations 
must be from countries that are parties to the Shipbuilding 
Agreement or from countries that are neither parties to the 
Shipbuilding Agreement nor members of the WTO. Thus, if a 
producer is from a country that is a member of the WTO but is 
not a party to the Shipbuilding Agreement, the Title VIII 
remedy may not be utilized.
    By contrast, Title VII (section 771(16)) provides that a 
respondent may be from any country, even if it is not a member 
of the WTO, as long as the product is imported or sold for 
importation into the United States. This distinction between 
Title VII and Title VIII arises out of concern that an 
injurious-pricing action against a WTO member that agreed to be 
bound only by the rules of the WTO but not the provisions of 
the Shipbuilding Agreement may be subject to challenge as being 
inconsistent with United States' obligations under the WTO.

Like vessel

    Section 861(9) defines a ``like vessel'' as a vessel of the 
same type, purpose, and approximate size as the subject vessel 
and possessing characteristics closely resembling those of the 
subject vessel. This definition of ``like vessel'' in Title 
VIII is analogous to the definition of ``like product'' in 
Title VII.
    Under Title VII, section 771(10) defines a ``domestic like 
product'' as a product which is like, or in the absence of 
like, most similar in characteristics and uses with, the 
article subject to investigation.
    The Committee recognizes that ocean-going vessels are 
frequently built to unique specifications. Accordingly, the 
Committee intends that, under the appropriate circumstances, 
there may be some minor variation in size and equipment between 
like vessels.

 Material injury

    Section 861(16) defines ``material injury'' as harm that is 
not inconsequential, immaterial, or unimportant. In making its 
determination whether an industry in the United States is or 
has been materially injured by reason of the sale of the 
subject vessel, section 861(16)(B) would require the ITC to 
consider the sale of the subject vessel, the effect of the sale 
of the subject vessel on prices in the United States for a 
domestic like vessel, and the impact of the sale of the subject 
vessel on domestic producers of a domestic like vessel, but 
only in the context of production operations in the United 
States. In addition, the ITC may consider such other economic 
factors as are relevant to the material-injury determination.
    In considering the sale of the subject vessel for purposes 
of determining material injury, section 861(16)(C)(i) would 
require the ITC to ascertain whether the sale, either in 
absolute terms or relative to production or demand in the 
United States, in terms of either volume or value, is or has 
been significant.
    In evaluating the effect of the sale of the subject vessel 
on prices, section 861(16)(C)(ii) specifies that the ITC 
consider whether there has been significant underselling of the 
subject vessel as compared with the price of a domestic like 
vessel and whether the effect of the sale otherwise depresses 
or has depressed prices to a significant degree or prevents or 
has prevented price increases, which otherwise would have 
occurred, to a significant degree.
    Finally, in evaluating the impact on the domestic industry, 
section 861(16)(C)(iii) requires evaluation of all relevant 
economic factors having a bearing on the state of the U.S. 
industry, including actual and potential decline in output, 
sales (or offers for sale), market share, profits, 
productivity, return on investments, and utilization of 
capacity; factors affecting domestic prices; actual and 
potential negative effects on cash flow, employment, wages, 
growth, ability to raise capital, and investment; actual and 
potential negative effects on the existing development and 
production efforts of the domestic industry; and the magnitude 
of the injurious-pricing margin. All factors are to be 
evaluated within the context of the business cycle and 
conditions of competition that are distinctive to the domestic 
industry.
    Section 771(7)(B) of Title VII requires the ITC to consider 
the volume of subject imports in determining whether a domestic 
industry is materially injured by reason of such imports. The 
definitions of ``material injury'' and the requirements for 
determining material injury under Title VIII are analogous. 
Differences between the two titles are merely intended to 
account for the particular characteristics of the shipbuilding 
industry and the requirements of the Shipbuilding Agreement.
    Nonetheless, with respect to the consideration of volume in 
determining material injury under Title VIII, the Committee 
recognizes that, unlike antidumping cases, injurious-pricing 
proceedings will normally involve the sale of only one vessel. 
Therefore, it is the Committee's view that, depending upon the 
circumstances of a particular investigation, the sale of one 
vessel at an injurious price may be sufficient to satisfy the 
volume criterion under Title VIII, whereas, it would be an 
unusual case in which a single sale would be considered a 
significant volume under Title VII. In addition, the Committee 
intends consideration of the ``sale'' under Title VIII to 
include the number of sales, tonnage, and value represented by 
that sale or sales, as appropriate.
    Moreover, as discussed above concerning section 801, Title 
VIII provides that there must be a demonstration that there is 
or has been material injury by reason of the sale of the vessel 
or vessels in question. Accordingly, the material-injury 
provision under Title VIII is drafted to permit consideration 
of whether the sale of the subject vessel has caused price 
depression or suppression.

Threat

    Section 861(16)(E) specifies that in determining whether a 
U.S. industry is threatened with material injury by reason of 
the sale of the subject vessel, the ITC is to consider, among 
other relevant economic factors, any existing unused production 
capacity or imminent, substantial increase in production 
capacity in the exporting country indicating the likelihood of 
substantially increased sales of a foreign like vessel to U.S. 
buyers, taking into account the availability of other export 
markets to absorb any additional exports; whether the sale of a 
foreign like vessel or other factors indicate the likelihood of 
significant additional sales to U.S. buyers; whether the sale 
of the subject vessel or sale of a foreign like vessel by the 
foreign producer are at prices that are likely to have a 
significant depressing or suppressing effect on domestic 
prices, and are likely to increase demand for further sales; 
the potential for product shifting; the actual and potential 
negative effects on the existing development and production 
efforts of the domestic industry; and any other demonstrable 
adverse trends that indicate the probability that there is 
likely to be material injury by reason of the sale of the 
subject vessel.
    These criteria under Title VIII for determining threat of 
material injury in an injurious-pricing investigation are 
analogous to the criteria under section 771(7)(F) in Title VII 
that the ITC is to consider in determining threat of material 
injury by reason of dumped imports. The only differences in the 
threat criteria between the two titles are intended to account 
for the particular characteristics of the shipbuilding industry 
and the requirements of the Shipbuilding Agreement. Therefore, 
except when necessary to account for these differences, the ITC 
should apply the threat criteria in Title VIII in the same 
manner as under Title VII.
    The Committee notes, however, that although both Title VII 
and Title VIII make reference to ``substantially increased 
sales'' in the threat section, the increase in sales of a 
foreign like vessel or the increase in production capacity may, 
in appropriate circumstances, satisfy the Title VIII criterion 
even though such increase may not be sufficient in most cases 
in the context of a threat determination under Title VII. The 
ITC's consideration of ``sale'' in determining threat of 
material injury under Title VIII includes the number of sales, 
tonnage, and value represented by that sale or sales. Because 
there may be no more than one sale in most instances, the ITC 
need not focus on evidence of increased past sales in 
determining the likelihood of future sales.

Cumulation

    Under section 861(16)(F), the ITC would be required, 
subject to certain exceptions, to assess cumulatively the 
effects of sales of foreign like vessels from all foreign 
producers. Section 861(16)(F) provides that the ITC must 
conduct a cumulative analysis with respect to petitions filed 
on the same day, investigations self-initiated on the same day, 
or petitions filed and investigations self-initiated on the 
same day, if the foreign producers of the subject vessels 
compete with each other and with producers of a domestic like 
vessel in the U.S. market.
    These requirements regarding cumulative analysis by the ITC 
under Title VIII are analogous to the provisions in section 
771(7)(G) of Title VII with respect to a cumulative assessment 
by the ITC of the volume and effects of imports of subject 
merchandise from all foreign countries. Therefore, the rules 
regarding the types of investigations that must be cumulated 
under Title VII and Title VIII are intended to be the same.
    The only difference between the two titles in final 
determinations in which the ITC performs a cumulative analysis, 
concerns the use of the record compiled in the first 
investigation in which the ITC makes a final determination. In 
antidumping cases under Title VII, the ITC is generally 
required to use such a record. However, in injurious-pricing 
investigations under Title VIII, the ITC may, but would not be 
required to use this record. The reason for the difference is 
that some Title VIII investigations may be delayed for long 
periods of time in order to obtain cost-of-production 
information, and use of the record in the first investigation 
may, therefore, not be appropriate for purposes of conducting a 
cumulative analysis.

Interested party

    Section 861(17) defines ``interested party'' as the foreign 
producer, seller (other than the foreign producer), and the 
U.S. buyer of the subject vessel, or a trade or business 
association a majority of whose members are the foreign 
producer, seller, or U.S. buyer of the subject vessel; the 
government of the country in which the subject vessel is 
produced or manufactured; a producer that is a member of an 
industry; a certified union or recognized union or group of 
workers which is representative of an industry; a trade or 
business association a majority of whose members are producers 
in an industry; and an association a majority of whose members 
is composed of interested parties listed above.
    Except to account for the particular characteristics of the 
shipbuilding industry, these definitions of ``interested 
party'' are analogous to the definitions of ``interested 
party'' under section 771(9) in Title VII. However, 861(17)(G) 
would also permit a purchaser to be an interested party in 
countermeasure proceedings if, after the effective date of an 
order imposing countermeasures under section 807, the purchaser 
entered into a contract of sale with the foreign producer that 
is subject to the order. Giving such parties interested party 
status would permit them to participate in proceedings before 
Commerce to determine the scope and duration of 
countermeasures.

                     Enforcement of Countermeasures

                             (Section 204)

    Section 204 would amend Part II of Title IV of the Tariff 
Act of 1930 to provide the U.S. Customs Service with the 
authority to deny any request for a permit to lade or unlade 
passengers, merchandise, or baggage from or onto vessels listed 
by Commerce as being subject to countermeasures. Section 204(b) 
provides for certain limited exceptions to this rule.
    Unlike the WTO Antidumping Agreement, the Shipbuilding 
Agreement, as reflected in section 204, specifically provides 
for the imposition of countermeasures if the foreign shipyard 
in question does not pay the injurious-pricing charge assessed 
against it. Because the antidumping law permits the assessment 
of an antidumping duty on future entries of merchandise subject 
to an antidumping order, U.S. law does not permit the 
imposition of countermeasures in the dumping context.

  Judicial Review in Injurious Pricing and Countermeasure Proceedings

                             (Section 205)

    Section 205 amends the Tariff Act of 1930 to add section 
516B, which provides that interested parties may challenge 
Commerce and ITC final determinations before the Court of 
International Trade, with subsequent appeal to the U.S. Court 
of Appeals for the Federal Circuit. In such cases, the 
applicable standard of review is whether the determination is 
``unsupported by substantial evidence on the record, or 
otherwise not in accordance with law.'' In addition, certain 
preliminary determinations and countermeasure determinations 
may be challenged. In these cases, the standard of review is 
whether determination is ``arbitrary, capricious, an abuse of 
discretion, or otherwise not in accordance with law.''
    Section 516B is analogous to the judicial review procedures 
and standards of review provided for in section 516A of the 
Tariff Act of 1930 in antidumping and countervailing duty 
investigations under Title VII. Therefore, the Committee 
intends that section 516B provide essentially analogous 
opportunities for judicial review as under section 516A. The 
differences are intended to take into account the differences 
in the two types of investigations, especially the imposition 
of countermeasures and the absence of comparable administrative 
reviews and sunset reviews under Title VIII.

2. Subtitle B--Other Provisions

                    Equipment and Repair of Vessels

                             (Section 211)

    Section 211 amends section 466 of the Tariff Act of 1930, 
by adding a new subsection (i). The new subsection provides 
that the equipment and repair made in a signatory to the 
Shipbuilding Agreement on U.S.-flagged vessels of a type 
covered under the Shipbuilding Agreement are not subject to the 
50 percent ad valorem duty imposed under subsection 466(a) of 
the Tariff Act of 1930 on the cost of such equipment and repair 
made in a foreign country on a U.S.-flagged vessel.
    Section 211 implements the provision in the Shipbuilding 
Agreement that prohibits the collection of duties on vessel 
repairs made in a signatory to the Shipbuilding Agreement. 
Accordingly, U.S. law must be changed to eliminate the duty if 
the repairs to a U.S.-flagged vessel are made in a Shipbuilding 
Agreement signatory. However, the duty would remain in place if 
the repairs are made in a country that is not a signatory to 
the Shipbuilding Agreement.

          Effect of Agreement with Respect to Private Remedies

                             (Section 212)

    Section 212 clarifies that no person other than the United 
States may assert any cause of action or defense under the 
Shipbuilding Agreement, or may challenge any action or inaction 
by the United States, the District of Columbia, any State, U.S. 
territory, or U.S. possession on the grounds that it is 
inconsistent with the Agreement. The implementing legislation 
of other trade agreements, such as section 102(c) of the 
Uruguay Round Agreements Act (Public Law 103-465) and section 
102(c) of the North American Free Trade Agreement 
Implementation Act (Public Law 103-182), have essentially 
identical provisions to limit private remedies under those 
trade agreements. The Committee intends that section 212 
provide the same limitations with respect to private remedies, 
as in the Uruguay Round Agreements Act and the North American 
Free Trade Agreement Implementation Act.

                        Implementing Regulations

                             (Section 213)

    Section 213 authorizes relevant agencies to issue 
regulations, as may be necessary to ensure that the amendments 
made by the OECD Shipbuilding Agreement Act are appropriately 
implemented on the date that the Shipbuilding Agreement enters 
into force with respect to the United States.
    The Committee intends that the relevant agencies take steps 
to ensure through regulation that the amendments made by the 
OECD Shipbuilding Act are appropriately implemented upon entry 
into force. With respect to injurious pricing, the Committee 
expects that regulations would be modeled after regulations 
implementing Title VII of the Tariff Act of 1930 wherever 
possible, making only those changes necessitated by the 
differences between existing law and the amendments made by the 
OECD Shipbuilding Agreement Act.

              Amendments to the Merchant Marine Act, 1936

                             (Section 214)

    Section 214 makes several changes to the Merchant Marine 
Act, 1936. The Merchant Marine Act contains tax and subsidy 
programs that provide benefits limited to vessels constructed 
in the United States. These programs are: (1) construction 
reserve funds (CRF); (2) operating differential subsidies 
(ODS); and (3) capital construction funds (CCF). In addition, 
under the Merchant Marine Act, vessels built or rebuilt outside 
the United States must wait three years after being flagged as 
a U.S. vessel before being permitted to carry government-
impelled cargoes under the government cargo preference 
provisions.
    In addition, Title XI of the Merchant Marine Act authorizes 
the Secretary of Transportation to provide a U.S. Government 
guarantee for certain types of financing for the construction, 
reconstruction, or reconditioning of U.S.-built vessels. 
Guarantees with respect to vessels intended for domestic use 
may apply to financing of up to 87\1/2\ percent of the vessel 
cost (over 25 years), at an interest rate determined by the 
Secretary to be reasonable. The Secretary is authorized to 
accord more favorable terms for exported vessels than is 
accorded to vessels for domestic use.
    Section 214 amends the Merchant Marine Act to provide the 
same treatment as is currently accorded U.S.-built vessels to 
vessels covered by the Shipbuilding Agreement that are 
constructed (and, where applicable, reconstructed) in a 
Shipbuilding Agreement signatory and flagged as a U.S. vessel. 
The changes to the CRF and the CCF would apply only with 
respect to monies deposited on or after the date on which the 
Shipbuilding Agreement enters into force with respect to the 
United States.
    Section 214 also provides that, with respect to vessels 
covered by the Shipbuilding Agreement and the related OECD 
Understanding on Export Credits for Ships (the 
``Understanding''), the Secretary of Transportation shall 
extend guarantees on terms consistent with the Agreement and 
the Understanding. Among other things, the Agreement and the 
Understanding limit guaranteed financing to 80 percent of the 
vessel's cost (over twelve years) and provide, with certain 
exceptions in the first two years, that the interest rate not 
be lower than the Commercial Interest Reference Rate (CIRR) of 
the currency of credit.

3. Subtitle C--Effective Date.

                             (Section 221)

    Section 221 provides that the amendments made by the OECD 
Shipbuilding Act take effect on the date that the Shipbuilding 
Agreement enters into force with respect to the United States.

                        D. Congressional Action

    On October 23, 1995, Senator Breaux introduced legislation 
(S. 1354) to implement the Shipbuilding Agreement. On December 
11, 1995, similar legislation (H.R. 2754) was introduced in the 
House.
    The Committee on Finance held a hearing on the Shipbuilding 
Agreement on December 5, 1995. During this hearing, the 
Committee heard testimony from the Administration in support of 
the Shipbuilding Agreement and other testimony from supporters 
and opponents of the Shipbuilding Agreement.

         PART III: TITLE III--GENERALIZED SYSTEM OF PREFERENCES

                             I. Background

    A. U.S. Generalized System of Preferences (GSP) Basic Authority

    Statutory authority for the GSP program is set forth in 
Title V of the Trade Act of 1974, as amended. Authority to 
grant GSP duty-free treatment on eligible articles from 
beneficiary developing countries (BDCs) became effective under 
that Act on January 3, 1975, for a 10-year period expiring on 
January 3, 1985. The program was actually implemented on 
January 1, 1976 under Executive Order 11888. Relatively minor 
amendments to the statute were made under section 1802 of the 
Tax Reform Act of 1976 and section 1111 of the Trade Agreements 
Act of 1979. Title V of the Trade and Tariff Act of 1984 
renewed the GSP program for 8\1/2\ years until January 4, 1993, 
with significant amendments effective on January 4, 1985, 
particularly with respect to the criteria for designating 
beneficiary countries and limitations on duty-free treatment.
    The GSP program was extended without amendment for 15 
months, until September 30, 1994, by section 13802 of the 
Omnibus Budget Reconciliation Act of 1993. The program was 
again extended without amendment for 10 months, until July 31, 
1995, by section 601 of the Uruguay Round Agreements Act. 
Authority for the GSP program expired on July 31, 1995.
    The GSP program provides unilateral, nonreciprocal duty-
free treatment to approximately 4,500 articles from 148 
beneficiary developing countries and territories to promote 
their economic development and increase diversification of 
their economies through preferential market access. Title V 
specifies criteria for determining GSP country and product 
eligibility and limitations on the extension of GSP treatment. 
In 1994, the program provided duty-free treatment on imports 
valued at approximately $18.4 billion from BDCs.

               B. GSP in the International Trading System

    The concept of the GSP program was first proposed in 1964 
at the United Nations Conference on Trade and Development 
(UNCTAD). At the conference, developing countries maintained 
that one of the major obstacles to their economic growth and 
development was their inability to compete on an equal basis 
with developed countries in the international trading system.
    Through tariff preferences in developed country markets, 
developing countries claimed they could increase exports and 
foreign exchange earnings needed to diversify their economies 
and reduce dependence on foreign aid. In 1968, the United 
States joined other industrialized countries in supporting the 
concept of GSP and, as noted above, authorized a GSP program in 
1974. In the early 1970s, 19 other members of the Organization 
for Economic Cooperation and Development (OECD) also instituted 
and have since renewed GSP programs.
    Because GSP is a unilateral grant of duty-free treatment, 
developing countries are not required to extend reciprocal 
tariff reductions. The statute implementing the U.S. GSP 
program, however, does set forth certain conditions for 
designation of beneficiary status.
    The preferential and unilateral aspects of GSP are an 
exception to the most-favored-nation (MFN) and 
nondiscrimination principles of the General Agreement on 
Tariffs and Trade (GATT) and the World Trade Organization 
(WTO). To implement their GSP programs, the developed countries 
had to obtain a waiver of these trade principles. The GATT 
contracting parties granted a 10-year MFN waiver in June 1971 
which provided that GSP schemes must be generalized, 
nondiscriminatory and nonreciprocal. This waiver was extended 
on a permanent basis in the 1979 GATT Tokyo Round Agreements.

                            C. Senate Action

    On August 1, 1995, the Finance Committee's Subcommittee on 
International Trade held a public hearing on the GSP program. 
The Subcommittee received testimony in support of extending GSP 
from the Administration, AFL-CIO, and from U.S. companies. A 
proposal to reauthorize the GSP program was included as 
Subtitle L of the Revenue Title (Title XI) in the Balanced 
Budget Act of 1995 (H.R. 2491), which passed the Congress on 
November 20, 1995 but was vetoed by the President on December 
6, 1995.

                        II. Summary of the Bill

              Title I--Reauthorization of the GSP Program

    The Committee bill would reauthorize the GSP program 
through May 12, 1997. The effective date of the extension of 
the GSP program is October 1, 1996. So that there will be no 
gap in duty-free treatment provided under the GSP program, the 
bill would provide for refunds upon request of any duty paid 
between July 31, 1995, and the effective date of the Committee 
bill. Although importers would be able to request such refunds 
after the date of enactment of this bill, reimbursement of 
duties would occur only after the beginning of fiscal year 1997 
(October 1, 1996).
    In general, the Committee bill would make modest reforms 
and technical changes to Title V of the Trade Act of 1974, 
which are intended to simplify and improve the administration 
of the GSP program. For example, the bill would codify a 
``three-year rule'' that would prohibit consideration of a 
specific article for designation of GSP eligibility for three 
years following formal consideration and denial of that 
article. The Committee bill also would exclude ``high-income'' 
countries (as designated by the World Bank) from the GSP 
program. This change would have the effect of reducing the per 
capita Gross National Product (GNP) threshold for graduation of 
a BDC from the GSP program from $11,800 (in 1994) to $8,600. 
BDCs that exceed the per capita GNP limit must be removed from 
the GSP program.
    The Committee bill would clarify that the President has the 
authority to designate any article from a least developed 
developing country (LDDC) as an eligible article under the GSP 
program, if the President determines that the article is not 
import-sensitive in the context of imports from LDDCs. This 
authority does not apply to certain statutorily exempt 
articles, namely textiles, footwear, and watches.
    The Committee bill would reduce the annual competitive need 
limit (CNL) in the expired law from approximately $122 million 
(in 1995) to $75 million, beginning January 1, 1996. The bill 
substitutes an annual increase in the CNL of $5 million for the 
indexing formula in current law, but would retain the 
competitive need waiver authority. It would also retain the de 
minimis import provision, but substitutes a de minimis 
threshold of $13 million in 1996 and a standard annual increase 
of $500,000, beginning January 1, 1997 for the indexing formula 
in current law.
    In addition to the foregoing modifications of the GSP 
program, the Committee bill also contains several technical 
amendments which harmonize the text of the GSP statute with 
recent developments in world trade and politics. For example, 
the bill would amend the GSP so that it refers to the WTO 
instead of the GATT. Similarly, the Committee bill changes the 
GSP statute to reflect the fact that Austria, Sweden, and 
Finland recently have joined the European Union (EU).
    The Committee believes that reauthorization of the GSP 
program, with the modest reforms provided for in the Committee 
bill, will further three policy goals: (1) foster economic 
development in developing countries through increased trade 
rather than foreign aid; (2) promote U.S. trade interests by 
encouraging beneficiaries to open their markets and comply more 
fully with international trading rules; and (3) help maintain 
U.S. international competitiveness by lowering costs for U.S. 
business, as well as lowering prices for American consumers.

                  III. General Description of the Bill

                              Short Title

                             (Section ----)

    Explanation of provision.--Section ------ of the Committee 
bill provides that the bill may be cited as the ``Generalized 
System of Preferences Renewal Act of 1996.''

                   Generalized System of Preferences

                             (Section ----)

                   A. Authority to Extend Preferences

Present law

    Section 501 of the Trade Act of 1974 authorizes the 
President to proclaim duty-free treatment for any eligible 
articles from any beneficiary country in accordance with the 
provisions of Title V.

Explanation of provision

    The Committee bill makes no change to this section of Title 
V.

                         B. Designation of BDCs

1. Definition of Country

Present law

    Section 502 of the Trade Act of 1974 currently sets forth 
both the procedures for designating countries as BDCs and the 
conditions for such designation. It establishes conditions for 
designation which are mandatory and others which are 
discretionary. With regard to the mandatory conditions, the 
President is prohibited from designating any country for GSP 
benefits which is a developed country listed in section 502(b). 
Further, the term ``country'' is defined as any foreign 
country, any overseas dependent territory or possession of a 
foreign country, or the Trust Territory of the Pacific Islands.

 Explanation of provision

    The Committee bill amends the definition of ``country'' to 
include any territory.

Reason for change

    This change makes clear that the President has the 
authority to designate territories such as the territory of the 
West Bank and the Gaza Strip as eligible for GSP benefits.

2. Ineligible Countries

Present law

    Under section 502(b), the President is prohibited from 
designating specific developed countries as BDCs: Australia, 
Austria, Canada, EU member states, Finland, Iceland, Japan, 
Monaco, New Zealand, Norway, Sweden, and Switzerland.

Explanation of provision

    The Committee bill would delete the reference to Austria, 
Finland, and Sweden.

Reason for change

    Austria, Finland, and Sweden are now EU member states as a 
result of enlargement of the EU on January 1, 1995.

3. Mandatory Conditions

Present law

    Under section 502(c) the President is prohibited from 
designating as a BDC a country which:
          (a) is a Communist country, unless (i) its products 
        receive nondiscriminatory (MFN) treatment; (ii) it is a 
        GATT contracting party and a member of the 
        International Monetary Fund (IMF); and (iii) it is not 
        dominated or controlled by international communism;
          (b) is an OPEC member, or a party to another 
        arrangement and participates in action the effect of 
        which is to withhold supplies of vital commodity 
        resources from international trade or raise their price 
        to an unreasonable level and to cause disruption of the 
        world economy, subject to trade agreement exemptions 
        consistent with objectives under the Trade Act of 1974;
          (c) affords reverse preferences having or likely to 
        have a significant adverse effect on U.S. commerce, 
        unless the President receives satisfactory assurances 
        of elimination before January 1, 1976;
          (d) has nationalized or expropriated U.S. property, 
        or taken similar actions, unless compensation is made, 
        being negotiated, or in arbitration;
          (e) fails to recognize as binding or to enforce 
        arbitral awards in favor of U.S. citizens;
          (f) aids or abets, by granting sanctuary from 
        prosecution to, any individual or group which has 
        committed an act of international terrorism; and
          (g) has not taken or is not taking steps to afford 
        internationally recognized worker rights to its 
        workers.

Explanation of provision

    The Committee bill retains present law, except, with 
respect to mandatory conditions:
          In (a)(ii), replaces ``is a GATT contracting party'' 
        with ``is a member of the World Trade Organization'';
          In (b), deletes the reference to OPEC member and the 
        exemption authority; and
          In (c), deletes the satisfactory assurances exemption 
        for reverse preferences.

Reason for change

    These changes revise the statute to reflect the 
establishment of the WTO and to delete an unnecessary reference 
to OPEC and an outdated reference to January 1, 1976 regarding 
reverse preferences.

4. Discretionary Criteria

Present law

    Under section 502(c) the President must take into account a 
list of factors in determining whether to designate a country 
as a BDC, including whether or not other major developed 
countries are granting GSP to the country, whether or not the 
country has taken or is taking steps to afford its workers 
internationally recognized worker rights, and the extent to 
which the country is providing adequate and effective 
intellectual property protection.

Explanation of provision

    The Committee bill makes no substantive changes to this 
provision, but makes a technical change to the intellectual 
property rights criterion.

Reason for change

    The change simplifies the reference to the intellectual 
property rights criterion.

5. Graduation of BDCs

Present law

    Countries are graduated from GSP eligibility if the per 
capita GNP of any BDC for any year exceeds a dollar limit 
($11,800 in 1994) indexed annually under a formula starting 
with the base figure of $8,500 in 1984. When the BDC's income 
level reaches this amount, such country is subject to a 25, 
rather than 50, percent competitive need import share limit on 
all eligible articles for the following two years. After that 
time, the country is no longer treated as a BDC.

Explanation of provision

    The Committee bill substitutes ``high income'' country as 
designated by the World Bank in any calendar year ($8,600 per 
capita GNP in 1994), for the per capita GNP indexing formula in 
current law. Thus, if the President determines that a BDC has 
become a ``high income'' country as designated by the World 
Bank, the President would be required to remove the country 
from eligibility under the program. Although the bill would 
retain a transition period of up to two years for country 
graduation from the GSP program, it would eliminate application 
of the 25 percent CNL during this period.

Reason for change

    In 1994, the top 10 BDCs accounted for over 80 percent of 
U.S. GSP imports. In light of the Committee's concern that a 
large share of GSP imports come from a small number of the more 
advanced developing countries, the Committee believes it is 
advisable to lower the per capita income threshold from 
approximately $11,800 to $8,600. Although statistics indicate 
that few countries would be affected immediately by this 
change, in the longer term the result will be to graduate 
countries earlier from GSP than would be the case under current 
law. Using a readily available definition of high income 
country also will make the administration of the program more 
transparent and predictable for users of the GSP program.
    Although the President retains discretionary authority to 
impose a lower CNL for countries that have reached the per 
capita GNP limit, the Committee bill simplifies the law by 
eliminating this as a statutory requirement.

                  C. Designation of Eligible Articles

1. Exempted Products

Present law

    Under section 503, the President may not designate any 
article as GSP eligible within the following categories of 
import-sensitive articles:
      (a) textile and apparel articles which are subject to 
textile agreements;
      (b) watches, except watches entered after June 30, 1989, 
that the President determines will not cause material injury to 
watch or watch band, strap, or bracelet manufacturing and 
assembly operations in the United States or U.S. insular 
possessions;
      (c) import-sensitive electronic articles;
      (d) import-sensitive steel articles;
      (e) footwear, handbags, luggage, flat goods, work gloves, 
and leather wearing apparel which were not GSP eligible 
articles on April 1, 1984;
      (f) import-sensitive semi-manufactured and manufactured 
glass products; and
      (g) any other articles the President determines to be 
import sensitive in the context of GSP.

Explanation of provision

    The Committee bill retains all provisions of present law, 
except, with respect to statutory exemptions:
      In (a), replaces the present provision with exemption of 
textile and apparel articles which were not GSP eligible on 
January 1, 1994; and
      In (e), applies exemption to footwear and related 
articles which were not GSP eligible on January 1, 1995.

Reason for change

    These changes update the statutory exemptions and ensure 
that all products which are currently excluded from GSP 
eligibility remain excluded.

2. Three-Year Rule

Present law

    Each year the U.S. Trade Representative (USTR) conducts an 
interagency review process in which products can be added to or 
removed from the GSP program, or in which a country's 
compliance with eligibility requirements can be reviewed. The 
reviews are normally based on petitions filed by interested 
parties, but may also be self-initiated by the USTR.

Explanation of provision

    The Committee bill would prohibit reconsideration of an 
article for designation of eligibility for three years 
following formal consideration and denial of that article.

Reason for change

    The Committee wants to ensure that the reviews of petitions 
and the self-initiation of investigations to add the same item 
to the list of eligible articles occur no more than once every 
three years. However, petitions to remove products from the 
list of eligible articles shall continue to be entertained 
annually. This statutory provision will prevent a situation 
whereby a U.S. industry is faced with the burden of responding 
annually to a petition to add the same item to the list of 
eligible articles, even though such petitions may have little 
merit.

3. Least Developed Developing Countries (LDDCs)

Present law

    No provision.

Explanation of provision

    The Committee's bill clarifies that the President has the 
authority to designate any article that is the growth, product, 
or manufacture of an LDDC as an eligible article with respect 
to imports from LDDCs, if, after receiving advice from the 
International Trade Commission (ITC), the President determines 
such article is not import-sensitive in the context of imports 
from LDDCs. This authority does not apply to certain 
statutorily exempt articles--textiles, footwear, and watches. 
The President shall notify Congress at least 60 days in advance 
of LDDC designations. LDDC designations will be based on 
overall economic and discretionary criteria for country 
designation under the GSP program.

Reason for change

    The Committee believes that clarification of this authority 
will promote the goal of expanding the share of GSP benefits 
that can be granted to the poorest countries in the world. A 
product may be import-sensitive in the context of all GSP 
imports. If imports from only LDDCs are considered, however, 
import sensitivity may not be a problem. This authority should 
provide LDDCs with an additional competitive opportunity and 
thereby increase the share of GSP imports from LDDCs.

4. Limits on Preferential Treatment

            a. General Authority

Present law

    Under section 504, the President may withdraw, suspend, or 
limit GSP duty-free treatment with respect to any article or 
any country, except that no rate of duty may be established 
other than the rate which would otherwise apply (the MFN rate), 
after considering both the policy objectives and the 
discretionary BDC designation factors of the GSP program. The 
President shall withdraw or suspend the BDC designation of any 
country if he determines that, as a result of changed 
circumstances, the country would be barred from designation.

Explanation of provision

    The Committee bill retains present law.
            b. Reporting Requirement

Present law

    The President shall, as necessary, advise the Congress, and 
by no later than January 4, 1988, submit to the Congress a 
report on the application of the overall GSP and discretionary 
country designation factors, and the actions the President has 
taken to withdraw, suspend, or limit the GSP treatment with 
respect to any country which has failed to adequately meet the 
discretionary designation factors.

Explanation of provision

    The Committee bill deletes this reporting requirement.

Reason for change

    The statutory reporting requirement has been satisfied.
            c. Competitive Need Limits

Present law

    Whenever the President determines that annual exports by 
any BDC to the United States of a GSP eligible article during 
any year:
          (i) Exceed a dollar limit ($122 million in 1995) 
        based on $25 million adjusted annually relative to 
        changes in the U.S. GNP since 1974; or
          (ii) Equal or exceed a 50-percent share of the total 
        value of U.S. imports of the article, then, not later 
        than July 1 of the next year, the country is not 
        treated as a BDC with respect to such article.

Explanation of provision

    The Committee bill reduces the basic CNL to $75 million for 
any year beginning January 1, 1996, and substitutes a standard 
annual increase of $5 million for the indexing formula in 
current law. The bill preserves the 50 percent import share 
CNL.

Reason for change

    Reducing the basic CNL will have the effect of increasing 
the opportunities for BDCs other than the top beneficiaries to 
obtain a larger share of GSP benefits. The standard annual 
increase of $5 million a year is a simplification of current 
law that will make the implementation of CNLs more predictable 
for users of the GSP program.
            d. General Review

Present law

    Not later than January 4, 1987, and periodically 
thereafter, the President must conduct a general review of 
eligible articles and, if he determines that a BDC has 
demonstrated a sufficient degree of competitiveness relative to 
other BDCs on any eligible article, then a lower competitive 
need dollar limit ($41.9 million in 1993, indexed annually from 
a 1984 base) and 25 percent total import share limit shall 
apply.

Explanation of provision

    The Committee bill deletes the general review requirement 
and the lower CNLs.

Reason for change

    Although the Administration would retain authority to 
conduct reviews of the program it considers appropriate, the 
Committee believes this should be a matter left to the judgment 
of the Administration.
    The Committee believes that resources used to conduct a 
general review of all products on GSP may be better used 
elsewhere in administration of the program. Deleting the lower 
CNLs is another change which simplifies the administration of 
the program.

                          D. Waiver Authority

1. General Authority

Present law

    The President may waive the dollar and import share CNLs on 
any eligible article of any BDC if he (1) receives advice from 
the ITC on whether any U.S. industry is likely to be adversely 
affected by the waiver; (2) determines, based on the overall 
GSP and discretionary country designation considerations and 
the ITC advice, that the waiver is in the U.S. national 
economic interest; and (3) publishes the determination in the 
Federal Register.

Explanation of provision

    The Committee bill retains the present waiver authority.

2. Historical Preferences

Present law

    Except where sufficient competitiveness has been 
demonstrated, the President may waive CNLs if: (1) there has 
been a historical preferential trade relationship between the 
United States and the country; (2) there is a treaty or trade 
agreement in force covering such bilateral economic relations; 
and (3) the country does not maintain unfair trade barriers on 
U.S. commerce.

Explanation of provision

    The Committee bill retains present law.

3. No Domestic Production

Present law

    The import share CNL does not apply to an eligible article 
if a like or directly competitive article is not produced in 
the United States as of January 3, 1985.

Explanation of provision

    Under the Committee bill, the import share CNL does not 
apply if the article is not produced in the United States as of 
January 1, 1995.

Reason for change

    This change updates the provision.

4. De Minimis Imports

Present law

    The import share CNL may be disregarded if total U.S. 
imports of the eligible article during the preceding year do 
not exceed a de minimis amount of $5 million adjusted annually 
($13.4 million in 1994) according to changes in U.S. GNP since 
1979.

Explanation of provision

    The Committee bill retains the de minimis import provision, 
but substitutes $13 million in 1996 and a standard annual 
increase of $500,000 beginning January 1, 1997 for the indexing 
formula in current law.

Reason for change

    This change is intended to simplify and make more 
predictable the calculation of the level of imports deemed to 
be de minimis.

5. Waiver Trade Limits

Present law

    The President may not exercise the waiver authority in any 
year on imports of eligible articles exceeding: (1) 30 percent 
of total GSP duty-free imports during the preceding year, or 
(2) 15 percent of total GSP duty-free imports during the 
preceding year from BDCs which had (a) a per capita GNP of 
$5,000 or more, or (b) exported to the United States more than 
10 percent of total GSP duty-free imports during that year.

Explanation of provision

    The Committee bill retains the waiver trade limits.

 E. Provisions Regarding Termination, Reports, and Agriculture Exports

1. Termination

Present law

    No duty-free treatment shall remain in effect after July 
31, 1995.

Explanation of provision

    The Committee bill would reauthorize the program for one 
year, nine months, and twelve days, to terminate on May 12, 
1997. The effective date of the extension of the GSP program is 
October 1, 1996. However, the Committee bill also provides 
that, notwithstanding section 514 of the Tariff Act of 1930 or 
any other provision of law, the entry (1) of any article to 
which duty-free treatment under Title V of the Trade Act of 
1974 would have applied if the entry had been made on July 31, 
1995, and (2) that was made after July 31, 1995, and before 
January 1, 1996, shall be liquidated or reliquidated as free of 
duty and the Secretary of the Treasury shall refund any duty 
paid, upon proper request filed with the appropriate customs 
officer, within 180 days after the date of enactment. Further, 
the Committee bill provides that notwithstanding section 514 of 
the Tariff Act of 1930 or any other provision of law, the entry 
(1) of any article to which duty-free treatment under Title V 
of the Trade Act of 1974 (as amended by this Title) would have 
applied if the entry had been made on or after October 1, 1996, 
and (2) that was made after December 31, 1995, and before 
October 1, 1996, shall be liquidated or reliquidated as free of 
duty and the Secretary of the Treasury shall refund any duty 
paid, upon proper request filed with the appropriate customs 
officer, within 180 days after the date of enactment. Although 
importers would be entitled to request such refunds after the 
date of enactment of the Committee bill, reimbursement of 
duties would occur only after the beginning of fiscal year 1997 
(October 1, 1996).

Reason for change

    The Committee believes that recent short-term extensions of 
the program have been highly disruptive to U.S. companies which 
rely on the GSP program, and to the economic development of 
BDCs. The budgetary effects of the program, however, continue 
to preclude an extension of the program beyond May 12, 1997. So 
that there will be no gap in duty-free treatment of eligible 
articles under the program, the Committee bill provides for a 
retroactive extension of the program.

2. Report on Workers Rights

Present law

    The President must submit an annual report to the Congress 
on the status of internationally recognized workers' rights 
within each BDC.

Explanation of provision

    The Committee bill retains present law.

3. Agriculture Exports

Present law

    Section 506 requires that appropriate U.S. agencies assist 
BDCs in developing and implementing measures designed to ensure 
that the production of agricultural sectors of their economies 
is not directed to export markets, to the detriment of the 
foodstuff production for their citizens.

Explanation of provision

    The Committee bill retains present law.

                   PART IV: TITLE IV--REVENUE OFFSETS

                               I. Summary

                     A. Treatment of Foreign Trusts

    The bill modifies the tax treatment of trusts in several 
respects. First, the grantor trust rules generally apply only 
to the extent that they result, directly or indirectly, in 
income or other amounts (if any) being currently taken into 
account in computing the income of a U.S. person. Second, 
beginning on January 1, 1996, the interest rate applicable to 
accumulation distributions from foreign nongrantor trusts is 
the rate imposed on underpayments of tax under section 
6621(a)(2), with compounding. The full amount of certain loans 
of cash or marketable securities by a foreign nongrantor trust 
to a U.S. grantor or a U.S. beneficiary (or a U.S. person 
related to such a grantor or beneficiary) generally is treated 
as a distribution to the grantor or beneficiary. Third, a 
nonresident alien who transfers property to a foreign trust and 
then becomes a U.S. resident within 5 years after the transfer 
is treated as making a transfer to the foreign trust on his 
residency starting date. In determining whether a foreign trust 
paid fair market value to the transferor for property 
transferred to the trust, certain obligations issued by the 
trust, by any grantor or beneficiary of the trust, or by any 
person related to any grantor or beneficiary generally are not 
taken into account. Fourth, a two-part objective test is 
established for determining whether a trust is foreign or 
domestic for tax purposes. Further, the bill expands the 
reporting requirements with respect to foreign trusts if there 
is a U.S. grantor of the foreign trust or a distribution from 
the foreign trust to a U.S. person. A failure to comply with 
the reporting requirements results in increased monetary 
penalties. Special sanctions apply unless a U.S. owner of any 
portion of a foreign trust appoints a limited agent to accept 
service of process with respect to requests and summons by the 
Treasury Department in connection with the tax treatment of 
items relating to the trust. In addition, any U.S. person 
(other than certain tax-exempt organizations) that receives 
purported gifts or bequests from foreign sources totaling more 
than $10,000 during the year is required to report the gift to 
the Treasury Department. Monetary penalties and other sanctions 
apply to a failure to comply with the reporting requirement.

  B. Penalty for Failure to File Disclosure of Exemption for Shipping 
                       Income of Foreign Persons

    The bill imposes penalties for a failure to satisfy the 
filing requirements for claiming the exemption from U.S. tax 
that is available to certain foreign persons with respect to 
income from the international operation of ships.

                        II. General Explanation

 A. Modify Treatment of Foreign Trusts (secs. 401-407 of the bill and 
   secs. 643, 665, 668(a), 672, 679, 1491, 1494, 6038, 6039G, 6677, 
                    7701(a) and 7872(f) of the Code)

                              Present Law

a. Inbound grantor trusts with foreign grantors.

    Under the grantor trust rules (secs. 671-679), a grantor 
that retains certain rights or powers generally is treated as 
the owner of the trust's assets without regard to whether the 
grantor is a domestic or foreign person. Under these rules, 
U.S. trust beneficiaries are not subject to U.S. tax on 
distributions from a trust where a foreign grantor is treated 
as owner of the trust, even though no tax may be imposed on the 
trust income by any jurisdiction. In addition, a special rule 
provides that if a U.S. beneficiary of an inbound grantor trust 
transfers property to the foreign grantor by gift, that U.S. 
beneficiary is treated as the grantor of the trust to the 
extent of the transfer.

b. Foreign trusts that are not grantor trusts.

    Under the accumulation distribution rules (which generally 
apply to distributions from a trust in excess of the trust's 
distributable net income for the taxable year), a distribution 
by a foreign nongrantor trust of previously accumulated income 
generally is taxed at the U.S. beneficiary's average marginal 
rate for the prior 5 years, plus interest (secs. 666 and 667). 
Interest is computed at a fixed annual rate of 6 percent, with 
no compounding (sec. 668). If adequate records of the trust are 
not available to determine the proper application of the rules 
relating to accumulation distributions to any distribution from 
a trust, the distribution is treated as an accumulation 
distribution out of income earned during the first year of the 
trust (sec. 666(d)).
    If a foreign nongrantor trust makes a loan to one of its 
beneficiaries, the principal of such a loan generally is not 
taxable as income to the beneficiary.

c. Outbound foreign grantor trusts with U.S. grantors.

    Under the grantor trust rules, a U.S. person that transfers 
property to a foreign trust generally is treated as the owner 
of the portion of the trust comprising that property for any 
taxable year in which there is a U.S. beneficiary of any 
portion of the trust (sec. 679(a)). This treatment generally 
does not apply, however, to transfers by reason of death, to 
transfers made before the transferor became a U.S. person, or 
to transfers that represent sales or exchanges of property at 
fair market value where gain is recognized to the transferor.

d. Residence of trusts.

    A trust is treated as foreign if it is not subject to U.S. 
income taxation on its income that is neither derived from U.S. 
sources nor effectively connected with the conduct of a U.S. 
trade or business. Thus, if a trust is taxed in a manner 
similar to a nonresident alien individual, it is considered to 
be a foreign trust. Any other trust is treated as domestic.
    Section 1491 generally imposes a 35-percent excise tax on a 
U.S. person that transfers appreciated property to certain 
foreign entities, including a foreign trust. In the case of a 
domestic trust that changes its situs and becomes a foreign 
trust, it is unclear whether property has been transferred from 
a U.S. person to a foreign entity and, thus, whether the 
transfer is subject to the excise tax.

e. Information reporting and penalties related to foreign trusts.

    Any U.S. person that creates a foreign trust or transfers 
money or property to a foreign trust is required to report that 
event to the Treasury Department without regard to whether the 
trust is a grantor trust or a nongrantor trust. Similarly, any 
U.S. person that transfers property to a foreign trust that has 
one or more U.S. beneficiaries is required to report annually 
to the Treasury Department. In addition, any U.S. person that 
makes a transfer described in section 1491 is required to 
report the transfer to the Treasury Department.
    Any person that fails to file a required report with 
respect to the creation of, or a transfer to, a foreign trust 
may be subject to a penalty of 5 percent of the amount 
transferred to the foreign trust. Similarly, any person that 
fails to file a required annual report with respect to a 
foreign trust with U.S. beneficiaries may be subject to a 
penalty of 5 percent of the value of the corpus of the trust at 
the close of the taxable year. The maximum amount of the 
penalty imposed under either case may not exceed $1,000. A 
reasonable cause exception is available.

f. Reporting of foreign gifts.

    There is no requirement to report gifts or bequests from 
foreign sources.

                           Reasons for Change

a. Grantor trust rules.--

(i) Inbound grantor trusts.

    The Committee has learned that the U.S. grantor trust 
provisions are being used as a vehicle to avoid U.S. tax. If a 
trust is treated as a grantor trust, only the owner of the 
trust is taxable on the trust's income and not the trust's 
beneficiaries. Thus, if a foreign person creates a trust with 
U.S. beneficiaries that is treated as a grantor trust for U.S. 
tax purposes and if the foreign person's home country does not 
tax the income, the income of the trust would not be subject to 
tax by either the United States or the foreign country. The 
Committee believes that the income derived through these types 
of arrangements should be subject to tax by at least one 
jurisdiction.

(ii) Outbound grantor trusts.

    The Committee understands that taxpayers have avoided the 
application of the outbound grantor trust rules of section 679. 
For example, a transfer of property to a foreign trust may be 
structured as a sale in exchange for a note issued by the trust 
or a person related to the trust where the note will not be 
repaid. The Committee believes that it is appropriate to 
disregard notes that do not reflect arm's-length terms in 
determining whether the transferor received fair market value 
for the property transferred.

b. Foreign nongrantor trust rules.

    The 6-percent simple interest charge applicable to 
accumulation distributions has not been updated since 1976. The 
Committee believes that it is appropriate to charge a current 
rate of interest on accumulation distributions, with 
compounding. In light of the change in the interest rate, the 
Committee also believes that it is appropriate, in computing 
this interest charge, to allocate the accumulation distribution 
proportionately to prior trust years in which the trust has 
undistributed net income, rather than to the earliest of such 
years.
    Under current law, a U.S. beneficiary of a foreign trust 
may avoid U.S. tax on the income accumulated through the trust 
by obtaining a ``loan'' of cash or marketable securities from 
the trust in lieu of an actual distribution. The Committee 
believes that it is appropriate to treat loans that do not 
reflect arm's-length terms as distributions to the borrower.

c. Residence of trusts.

    Because the U.S. tax treatment of a trust (and the 
beneficiaries of a trust) depends on the residence of the 
trust, the Committee believes that it is appropriate to provide 
objective criteria for determining the residence of trusts.

d. Information reporting requirements and associated penalties.

    The Committee has learned that certain U.S. settlors have 
established foreign trusts, including grantor trusts, in tax 
haven jurisdictions. Income from such foreign grantor trusts is 
taxable currently to the U.S. grantor, but the Committee 
understands that there is noncompliance in this regard. The 
Committee is concerned that the present-law civil penalties for 
failure to comply with the reporting requirements applicable to 
foreign trusts established by U.S. persons have proven to be 
ineffective. In order to deter noncompliance, the Committee 
believes that it is appropriate to expand the reporting 
requirements relating to activities of foreign trusts with U.S. 
grantors or U.S. beneficiaries and to increase the civil 
penalties applicable to a failure to comply with such reporting 
requirements.
    The Committee understands that some of the jurisdictions in 
which U.S. settlors have established foreign trusts have strict 
secrecy laws. The Committee is concerned that the secrecy laws 
may effectively preclude the Treasury Department from obtaining 
information necessary to determine the tax liabilities of the 
U.S. grantors or U.S. beneficiaries with respect to items 
related to such foreign trusts. The Committee believes that it 
is useful in the case of a foreign trust with a U.S. grantor, 
to provide an incentive for the trust to have a limited U.S. 
agent to accept service of process in order to improve the 
administrability of the tax law applicable to taxation of 
income derived from foreign trusts.

                       Explanation of Provisions

Overview

    The bill modifies the tax treatment of trusts as follows:
          The grantor trust rules generally apply only to the 
        extent that they result, directly or indirectly, in 
        income or other amounts (if any) being currently taken 
        into account in computing the income of a U.S. person.
          Beginning on January 1, 1996, the interest rate 
        applicable to accumulation distributions from foreign 
        nongrantor trusts is the rate imposed on underpayment 
        of tax under section 6621(a)(2), with compounding. The 
        accumulation distribution generally is allocated 
        proportionately to prior trust years in which the trust 
        had undistributed net income. The full amount of a loan 
        of cash or marketable securities by a foreign 
        nongrantor trust to a U.S. grantor or a U.S. 
        beneficiary (or a U.S. person related to such a grantor 
        or beneficiary) generally is treated as a distribution 
        to the grantor or beneficiary.
          A nonresident alien who transfers property to a 
        foreign trust and then becomes a U.S. resident within 5 
        years after the transfer is treated as making a 
        transfer to the foreign trust on his residency starting 
        date. In determining whether a foreign trust paid fair 
        market value to the transferor for property transferred 
        to the trust, obligations issued by the trust, by any 
        grantor or beneficiary of the trust, or by any person 
        related to any grantor or beneficiary generally are not 
        taken into account.
          The bill authorizes the Secretary of the Treasury to 
        issue regulations to prevent abusive transactions to 
        avoid the purposes of these rules.
          A two-part objective test is established for 
        determining whether a trust is foreign or domestic for 
        tax purposes.
          The bill expands the reporting requirements with 
        respect to foreign trusts if there is a U.S. grantor of 
        the foreign trust or a distribution from the foreign 
        trust to a U.S. person. The bill requires the 
        responsible parties to file information returns with 
        the Treasury Department upon the occurrence of certain 
        events. A failure to comply with the reporting 
        requirements results in increased monetary penalties. 
        Special sanctions apply unless a U.S. owner of any 
        portion of a foreign trust appoints a limited agent to 
        accept service of process with respect to requests and 
        summons by the Treasury Department in connection with 
        the tax treatment of items relating to the trust.
          Any U.S. person (other than certain tax-exempt 
        organizations) that receives purported gifts or 
        bequests from foreign sources totaling more than 
        $10,000 during the year is required to report the gift 
        to the Treasury Department. Monetary penalties and 
        other sanctions apply to a failure to comply with the 
        reporting requirement.
    The provisions are described in more detail below.

a. Inbound grantor trusts with foreign grantors

(i) Foreign grantors not treated as owners.

    Under the bill, the grantor trust rules generally apply 
only to the extent that they result, directly or indirectly, in 
income or other amounts (if any) being currently taken into 
account in computing the income of a U.S. citizen or resident 
or a domestic corporation. Thus, the grantor trust rules 
generally do not apply to any portion of a trust where their 
effect is to treat a foreign person as owner of that portion.
    The bill provides certain exceptions to the rule described 
above. Under one exception, the grantor trust rules continue to 
apply to the portion of a trust where that portion of the trust 
is revocable by the grantor either without approval of another 
person or with the consent of a related or subordinate party 
who is subservient to the grantor (as defined in sec. 672(c)). 
Under another exception, the grantor trust rules continue to 
apply to the portion of a trust where the only amounts 
distributable from that portion during the lifetime of the 
grantor are to the grantor or the grantor's spouse. The general 
rule denying grantor trust status does not apply to trusts 
established to pay compensation, and certain trusts in 
existence as of September 19, 1995, provided that such trust is 
treated as owned by the grantor under section 676 or 677 (other 
than sec. 677(a)(3)). 1 In addition, the grantor trust 
rules generally apply where the grantor is a controlled foreign 
corporation (as defined in sec. 957). Finally, the grantor 
trust rules continue to apply in determining whether a foreign 
corporation is characterized as a passive foreign investment 
company (``PFIC''). Thus, a foreign corporation cannot avoid 
PFIC status by transferring its assets to a grantor trust.
---------------------------------------------------------------------------
    \1\ The exception does not apply to the portion of any such trust 
attributable to any transfers made after September 19, 1995.
---------------------------------------------------------------------------
    If a U.S. beneficiary, or a family member of such a 
beneficiary, 2 of an inbound grantor trust transfers 
property to the foreign grantor, such beneficiary generally is 
treated as a grantor of a portion of the trust to the extent of 
the transfer. This rule applies without regard to whether the 
foreign grantor is otherwise treated as the owner of any 
portion of such trust. However, this rule does not apply if the 
transfer is a sale of the property for full and adequate 
consideration or if the transfer is a gift that qualifies for 
the annual exclusion described in section 2503(b).
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    \2\ For this purpose, a family member is generally defined as a 
brother, sister, spouse, ancestor or lineal descendant.
---------------------------------------------------------------------------
    The bill provides a special rule that allows the Secretary 
of the Treasury to recharacterize a transfer, directly or 
indirectly, from a partnership or foreign corporation which the 
transferee treats as a gift or bequest, to prevent the 
avoidance of the purpose of section 672(f). 3
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    \3\ See discussion below for reporting requirements under the bill 
with respect to certain foreign gifts and bequests received by a U.S. 
person.
---------------------------------------------------------------------------
    In a case where a foreign person (that would be treated as 
the owner of a trust but for the above rule) actually pays tax 
on the income of the trust to a foreign country, the Committee 
anticipates that Treasury regulations will provide that, for 
foreign tax credit purposes, U.S. beneficiaries that are 
subject to U.S. income tax on the same income will be treated 
as having paid the foreign taxes which are paid by the foreign 
grantor. Any resulting foreign tax credits would be subject to 
applicable foreign tax credit limitations.
    The bill provides a transition rule for any domestic trust 
that has a foreign grantor that is treated as the owner of the 
trust under present law, but becomes a nongrantor trust under 
the bill. If such a trust becomes a foreign trust before 
January 1, 1997, or if the assets of such a trust are 
transferred to a foreign trust before that date, such trust is 
exempt from the excise tax on transfers to a foreign trust 
otherwise imposed by section 1491. However, the bill's new 
reporting requirements and penalties are applicable to such a 
trust and its beneficiaries. In addition, the assets of such a 
trust will be treated as if they were recontributed to a 
nongrantor trust by the foreign grantor, with no recognition of 
gain or loss, on the date the trust ceases to be treated as a 
grantor trust. The nongrantor trust will have the same basis in 
such assets as did the grantor on the date the trust ceases to 
be treated as a grantor trust.

(ii) Distributions by foreign trusts through nominees

    The bill generally treats any amount paid to a U.S. person, 
where the amount was derived (directly or indirectly) from a 
foreign trust, as if paid by the foreign trust directly to the 
U.S. person. This rule disregards the role of an intermediary 
or nominee that may be interposed between a foreign trust and a 
U.S. beneficiary. Unlike present law, however, the rule applies 
whether or not the trust was created by a U.S. person. The rule 
does not apply to a withdrawal from a foreign trust by its 
grantor, with a subsequent gift or other payment to a U.S. 
person.

(iii) Effective date

    The provisions discussed in this part are effective on the 
date of enactment.

b. Foreign trusts that are not grantor trusts

(i) Interest charge on accumulation distributions

    The bill changes the interest rate applicable to 
accumulation distributions from foreign trusts from simple 
interest at a fixed rate of 6 percent to compound interest 
determined in the same manner as interest imposed on 
underpayments of tax under section 6621(a)(2). Simple interest 
is accrued at the rate of 6 percent through 1995. Beginning on 
January 1, 1996, however, compound interest based on the 
underpayment rate is imposed not only on tax amounts determined 
under the accumulation distribution rules but also on the total 
simple interest for pre-1996 periods, if any. For purposes of 
computing the interest charge, the accumulation distribution is 
allocated proportionately to prior trust years in which the 
trust has undistributed net income (and the beneficiary 
receiving the distribution was a U.S. citizen or resident), 
rather than to the earliest of such years. An accumulation 
distribution is treated as reducing proportionately the 
undistributed net income from prior years.
    The bill includes a formula to determine the period for 
which interest is charged using the underpayment rates under 
section 6621(a)(2). Under the formula, for example, if a 
foreign nongrantor trust had $100 of undistributed net income 
each year in years 1 through 3 and the trust distributes $100 
of accumulated income to its U.S. beneficiary in year 4, the 
taxpayer has to pay interest using the section 6621(a)(2) 
interest rates as if the income accrued for 2 years. 4 In 
addition, the $100 accumulation distribution reduces the 
trust's undistributed net income by $33 each year for years 1 
through 3. 5
---------------------------------------------------------------------------
    \4\ The number of years is determined as a weighted average as 
follows:
    ($1003 years)+($1002 years)+($1001 
year)/$300=2
    \5\ That is, one-third of the $100 of distribution reduces the $100 
of undistributed net income for each of years 1, 2 and 3.
---------------------------------------------------------------------------

(ii) Loans to grantors or beneficiaries

    In the case of a loan of cash or marketable securities by 
the foreign trust to a U.S. grantor or a U.S. beneficiary (or a 
U.S. person related to such grantor or beneficiary 6), 
except to the extent provided by Treasury regulations, the bill 
treats the full amount of the loan as distributed to the 
grantor or beneficiary. The Committee expects that the Treasury 
regulations will provide an exception from this treatment for 
loans with arm's-length terms. In applying this exception, the 
Committee further expects consideration to be given to whether 
there is a reasonable expectation that a loan will be repaid. 
In addition, any subsequent transaction between the trust and 
the original borrower regarding the principal of the loan 
(e.g., repayment) is disregarded for all purposes of the Code. 
This provision does not apply to loans made to persons that are 
exempt from U.S. income tax.
---------------------------------------------------------------------------
    \6\ For this purpose, a person generally would be treated as 
related to the grantor or beneficiary if the relationship between such 
person and the grantor or beneficiary would result in a disallowance of 
losses under section 267 or 707(b), except that in applying section 
267(c)(4) an individual's family includes the spouses of the members of 
the family.
---------------------------------------------------------------------------

(iii) Effective date

    The provision to modify the interest charge on accumulation 
distributions applies to distributions after the date of 
enactment. The provision with respect to loans to U.S. 
grantors, U.S. beneficiaries or a related U.S. person related 
to such a grantor or beneficiary applies to loans made after 
September 19, 1995.

c. Outbound foreign grantor trusts with U.S. grantors

    The bill makes several modifications to the general rule of 
section 679(a)(1) under which a U.S. person who transfers 
property to a foreign trust generally is treated as the owner 
of the portion of the trust comprising that property for any 
taxable year in which there is a U.S. beneficiary of the trust. 
The bill also contains an amendment to conform the definition 
of certain foreign corporations the income of which is deemed 
to be accumulated for the benefit of a U.S. beneficiary to the 
definition of controlled foreign corporations (as defined in 
sec. 957(a)).

(i) Sale or exchange at market value

    Present law contains several exceptions to grantor trust 
treatment under section 679(a)(1) described above. Under one of 
the exceptions, grantor trust treatment does not result from a 
transfer of property by a U.S. person to a foreign trust in the 
form of a sale or exchange at fair market value where gain is 
recognized to the transferor. In determining whether the trust 
paid fair market value to the transferor, the bill provides 
that obligations issued (or, to the extent provided by 
regulations, guaranteed) by the trust, by any grantor or 
beneficiary of the trust, or by any person related to any 
grantor or beneficiary 7 (referred to as ``trust 
obligations'') generally are not taken into account except as 
provided in Treasury regulations. The Committee expects that 
the Treasury regulations will provide an exception from this 
treatment for loans with arm's-length terms. In applying this 
exception, the Committee further expects consideration to be 
given to whether there is a reasonable expectation that a loan 
will be repaid. Principal payments by the trust on any such 
trust obligations generally will reduce the portion of the 
trust attributable to the property transferred (i.e., the 
portion of which the transferor is treated as the grantor).
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    \7\ For this purpose, a person is treated as related to the grantor 
or beneficiary if the relationship between such person and the grantor 
or beneficiary would result in a disallowance of losses under section 
267 or 707(b), except that in applying section 267(c)(4) an 
individual's family includes the spouses of the members of the family.
---------------------------------------------------------------------------

(ii) Other transfers

    The bill adds a new exception to the general rule of 
section 679(a)(1) described above. Under the bill, a transfer 
of property to certain charitable trusts is exempt from the 
application of the rules treating foreign trusts with U.S. 
grantors and U.S. beneficiaries as grantor trusts.

(iii) Transferors or beneficiaries who become U.S. persons

    The bill applies the rule of section 679(a)(1) to certain 
foreign persons who transfer property to a foreign trust and 
subsequently become U.S. persons. A nonresident alien 
individual who transfers property, directly or indirectly, to a 
foreign trust and then becomes a resident of the United States 
within 5 years after the transfer generally is treated as 
making a transfer to the foreign trust on the individual's U.S. 
residency starting date (as defined in sec. 7701(b)(2)(A)). The 
amount of the deemed transfer is the portion of the trust 
(including undistributed earnings) attributable to the property 
previously transferred. Consequently, the individual generally 
is treated under section 679(a)(1) as the owner of that portion 
of the trust in any taxable year in which the trust has U.S. 
beneficiaries. The bill's reporting requirements and penalties 
(discussed below) also are applicable.
    Under the bill, a beneficiary is not treated as a U.S. 
person for purposes of determining whether the transferor of 
property to a foreign trust is taxed as a grantor with respect 
to any portion of a foreign trust if such beneficiary first 
became a U.S. person more than 5 years after the transfer.

(iv) Outbound trust migrations

    The bill applies the rules of section 679(a)(1) to a U.S. 
person that transferred property to a domestic trust if the 
trust subsequently becomes a foreign trust while the transferor 
is still alive. Such a person is deemed to make a transfer to 
the foreign trust on the date of the migration. The amount of 
the deemed transfer is the portion of the trust (including 
undistributed earnings) attributable to the property previously 
transferred. Consequently, the individual generally is treated 
under the rules of section 679(a)(1) as the owner of that 
portion of the trust in any taxable year in which the trust has 
U.S. beneficiaries. The bill's reporting requirements and 
penalties (discussed below) also are applicable.

(v) Effective date

    The provisions to amend section 679 apply to transfers of 
property after February 6, 1995.

d. Anti-abuse regulatory authority

(i) In general

    The bill includes an anti-abuse rule which authorizes the 
Secretary of the Treasury to issue regulations, on or after the 
date of enactment, that may be necessary or appropriate to 
carry out the purposes of the rules applicable to estates, 
trusts and beneficiaries, including regulations to prevent the 
avoidance of those purposes.

(ii) Effective date

    The provision is effective on the date of enactment.

e. Residence of trusts

(i) Treatment as U.S. person

    The bill establishes a two-part objective test for 
determining for tax purposes whether a trust is foreign or 
domestic. If both parts of the test are satisfied, the trust is 
treated as domestic.
    Under the first part of the proposed test, in order for a 
trust to be treated as domestic, a U.S. court (i.e., Federal, 
State, or local) must be able to exercise primary supervision 
over the administration of the trust. The Committee expects 
that this test generally will be satisfied by any trust 
instrument that specifies that the trust is to be governed by 
the laws of any State.
    Under the second part of the proposed test, in order for a 
trust to be treated as domestic, one or more U.S. fiduciaries 
must have the authority to control all substantial decisions of 
the trust. The Committee expects that this test will be 
satisfied in any case where fiduciaries that are U.S. persons 
hold a majority of the fiduciary power (whether by vote or 
otherwise), and where no foreign fiduciary, such as a ``trust 
protector'' or other trust advisor, has the power to veto 
important decisions of the U.S. fiduciaries. The Committee 
further expects that, in applying this test, a reasonable 
period of time will be allowed for a trust to replace a U.S. 
fiduciary that resigns or dies before the trust is treated as 
foreign.
    Under the bill, a foreign trust is defined as a trust other 
than a trust that is determined to be domestic under both the 
court-supervision test and the U.S. fiduciary test.

(ii) Outbound migration of domestic trusts

    Under the bill, if a domestic trust changes its situs and 
becomes a foreign trust, the trust is treated as having made a 
transfer of its assets to a foreign trust and is subject to the 
35-percent excise tax imposed by present-law section 1491 
unless one of the exceptions to this excise tax is applicable. 
The U.S. grantor also is required to report the transfer under 
the reporting requirements described below. Failure to report 
such a transfer would result in penalties (discussed below).

(iii) Effective date

    The provision to modify the treatment of a trust as a U.S. 
person applies to taxable years beginning after December 31, 
1996. In addition, if the trustee of a trust so elects, the 
provision would apply to taxable years ending after the date of 
enactment. The amendment to section 1491 is effective on the 
date of enactment.

f. Information reporting and penalties relating to foreign trusts

    The bill expands the reporting requirements with respect to 
foreign trusts if there is a U.S. grantor of the foreign trust 
or a distribution from the foreign trust to a U.S. person. The 
bill requires the responsible parties to file information 
returns with the Treasury Department upon the occurrence of 
certain events. A failure to comply with the reporting 
requirements will result in increased monetary penalties.

(i) Information reporting requirements

    First, the bill requires the grantor, transferor or 
executor (i.e., the ``responsible party'') to notify the 
Treasury Department upon the occurrence of certain reportable 
events. The term ``reportable event'' means the creation of any 
foreign trust by a U.S. person, the direct and indirect 
transfer of any money or property to a foreign trust, including 
a transfer by reason of death, and the death of a U.S. citizen 
or resident if any portion of a foreign trust was included in 
the gross estate of the decedent. A reportable event does not 
include any transfer of property to a foreign trust in exchange 
for consideration of at least the fair market value of the 
property.8 Also excluded are transfers to certain pension 
trusts, nonexempt employees' trusts described in section 
402(b), and charitable trusts. The required return provides 
information regarding the amount of money or other property 
transferred to the trust, the identities of the trustee and 
beneficiaries of the foreign trust, and other items as 
prescribed by the Secretary of the Treasury.
---------------------------------------------------------------------------
    \8\ For this purpose, consideration other than cash is taken into 
account at its fair market value and the rules of section 679(a)(3), as 
modified by the bill, apply (see discussion above).
---------------------------------------------------------------------------
    Second, a U.S. person that is treated as the owner of any 
portion of a foreign trust is required to ensure that the trust 
files an annual return to provide full accounting of all the 
trust activities for the taxable year, the name of the U.S. 
agent for the trust, and other information as prescribed by the 
Secretary of the Treasury.9 In addition, unless a U.S. 
person is authorized to accept service of process as the 
trust's limited agent with respect to any request by the 
Treasury Department to examine records or to take testimony, 
and any summons for such records or testimony, in connection 
with the tax treatment of any items related to the trust, the 
Secretary is entitled to determine the tax consequences of 
amounts to be taken into account under the grantor trust rules 
(secs. 671 through 679). This limited agency relationship does 
not constitute an agency relationship for any other purpose 
under Federal or State law. The Committee intends that the 
Secretary's exercise of its authority to make such a 
determination will be subject to judicial review under an 
arbitrary or capricious standard, which provides a high degree 
of deference to such determination. For this purpose, rules 
similar to the rules of sections 6038A(e)(2) and (4) with 
respect to enforcement of requests for certain records apply.
---------------------------------------------------------------------------
    \9\ The Committee intends that the Treasury regulations would 
require the trust to furnish information to U.S. grantors and 
beneficiaries concerning income reportable by such persons in a manner 
similar to that used to report the items on schedule K-1 of Form 1041.
---------------------------------------------------------------------------
    Third, any U.S. person that receives (directly or 
indirectly) any distribution from a foreign trust is required 
to file a return to report the name of the trust, the aggregate 
amount of the distributions received, and other information 
that the Secretary of the Treasury may prescribe. In cases 
where adequate records are not provided to the Secretary to 
determine the proper treatment of any distributions from a 
foreign trust, the distribution is includible in the gross 
income of the U.S. distributee and is treated as an 
accumulation distribution from the middle year of a foreign 
trust (i.e., computed by taking the number of years that the 
trust has been in existence divided by 2) for purposes of 
computing the interest charge applicable to such distribution, 
unless the foreign trust elects to have a U.S. agent for the 
limited purpose of accepting service of process (as described 
above).

(ii) Monetary penalties for failure to report

    Under the bill, a person that fails to provide the required 
notice or return in cases involving the transfer of property to 
a new or existing foreign trust, or a distribution by a foreign 
trust to a U.S. person, is subject to an initial penalty equal 
to 35 percent of the gross reportable amount. A failure to 
provide an annual reporting of trust activities will result in 
an initial penalty equal to 5 percent of the gross reportable 
amount.
    In cases involving a transfer of property to a foreign 
trust, the gross reportable amount is the gross value of the 
property transferred. In cases involving the death of a U.S. 
citizen or resident whose estate includes any portion of a 
foreign trust, the gross amount is the greater of: (a) the 
amount the decedent is treated as owning under the grantor 
trust rules or (b) the value of the property includible in the 
gross estate of the decedent. In cases where annual reporting 
of trust activities is required, the gross reportable amount is 
the gross value of the portion of the foreign trust's assets 
treated as owned by the U.S. grantor at the close of the year, 
and in cases involving a distribution to a U.S. beneficiary of 
a foreign trust, the gross reportable amount is the amount of 
the distribution to the beneficiary. An additional $10,000 
penalty is imposed for continued failure for each 30-day period 
(or fraction thereof) beginning 90 days after the Treasury 
Department notifies the responsible party of such failure. The 
same penalties are applicable to a failure to report (as 
required by present law) certain transfers to other foreign 
entities. Such penalties are subject to a reasonable cause 
exception. The Committee intends that the reasonable cause 
standard will be satisfied upon the showing of reasonable 
efforts to comply with the reporting requirements. In no event 
will the total amount of penalties exceed the gross reportable 
amount.

(iii) Effective date

    The reporting requirements and applicable penalties 
generally apply to reportable events occurring or distributions 
received after the date of enactment. The annual reporting 
requirement and penalties applicable to U.S. grantors apply to 
taxable years of such persons beginning after December 31, 
1995.

g. Reporting of foreign gifts

    The bill generally requires any U.S. person (other than 
certain tax-exempt organizations) that receives purported gifts 
or bequests from foreign sources total more than $10,000 during 
the taxable year to report them to the Treasury Department. The 
threshold for this reporting requirement is indexed for 
inflation. The definition of a gift to a U.S. person for this 
purpose excludes amounts that are qualified tuition or medical 
payments made on behalf of the U.S. person, as defined for gift 
tax purposes (sec. 2503(e)(2)), and amounts that are 
distributions to a U.S. beneficiary of a foreign trust if such 
amounts are properly disclosed under the reporting requirements 
of the bill. If the U.S. person fails, without reasonable 
cause, to report foreign gifts as required, the Secretary of 
the Treasury is authorized to determine the tax treatment of 
the unreported gifts. The Committee intends that the 
Secretary's exercise of its authority to make such a 
determination will be subject to judicial review under an 
arbitrary or capricious standard, which provides a high degree 
of deference to such determination. In addition, the U.S. 
person is subject to a penalty equal to 5 percent of the amount 
of the gift for each month that the failure continues, with the 
total penalty not to exceed 25 percent of such amount.

Effective date

    The provision applies to amounts received after the date of 
enactment.

  B. Penalty for Failure to File Disclosure of Exemption for Shipping 
 Income of Foreign Persons (sec. 411 of the bill and secs. 872 and 883 
                              of the Code)

                              Present Law

    The United States imposes a 4-percent tax on the U.S.-
source gross transportation income of foreign persons \10\ 
(sec. 887). This tax does not apply to income that is 
effectively connected with the foreign person's conduct of a 
U.S. trade or business. Foreign persons are subject to U.S. tax 
at regular graduated rates on net income that is effectively 
connected with a U.S. trade or business (secs. 871(b) and 882). 
The U.S. taxation of a foreign person may be altered by the 
provisions of an applicable tax treaty.
---------------------------------------------------------------------------
    \10\ For this purpose, foreign persons refers to nonresident alien 
individuals and foreign corporations.
---------------------------------------------------------------------------
    Transportation income is any income derived from, or in 
connection with, the use (or hiring or leasing for use) of a 
vessel or aircraft (or a container used in connection 
therewith) or the performance of services directly related to 
such use (sec. 863(c)(3)). Transportation income attributable 
to transportation that begins and ends in the United States is 
treated as derived from sources in the United States (sec. 
863(c)(1)). In the case of transportation income attributable 
to transportation that begins in, and ends outside, the United 
States or that begins outside, and ends in, the United States, 
generally 50 percent is treated as U.S. source and 50 percent 
is treated as foreign source (sec. 863(c)(2)). U.S.-source 
transportation income is treated as effectively connected with 
a foreign person's conduct of a U.S. trade or business only if 
the foreign person has a fixed place of business in the United 
States that is involved in the earning of such income and 
substantially all of such income of the foreign person is 
attributable to regularly scheduled transportation (sec. 
887(b)(4)).
    An exemption from U.S. tax is provided for gross income 
derived by a nonresident alien individual from the 
international operation of a ship, provided that the foreign 
country in which such individual is resident grants an 
equivalent exemption to individual residents of the United 
States (sec. 872(b)(1)). A similar exemption from U.S. tax is 
provided for gross income derived by a foreign corporation from 
the international operation of a ship, provided that the 
foreign country in which the corporation is organized grants an 
equivalent exemption to corporations organized in the United 
States (sec. 883(a)(1)).
    Pursuant to guidance published by the Internal Revenue 
Service, a foreign person that is entitled to an exemption from 
U.S. tax for its income from the international operation of a 
ship must file a U.S. income tax return and must attach to such 
return a statement claiming the exemption (Rev. Proc. 91-12, 
1991-1 C.B. 473). If the foreign person is claiming an 
exemption based on an applicable income tax treaty, the foreign 
person must disclose that fact as required by the Secretary of 
the Treasury (sec. 6114). The penalty for failure to make 
disclosure of a treaty-based position as required under section 
6114 is $1,000 for an individual and $10,000 for a corporation 
(sec. 6712).
    At the time the 4-percent tax on U.S.-source gross 
transportation income was enacted, concern was expressed about 
whether compliance with the tax, which is collected by return, 
would be adequate. It was intended that the tax-writing 
committees of Congress and the Secretary of the Treasury would 
study the issue of compliance and that the Secretary would make 
recommendations if compliance did not prove adequate. Joint 
Committee on Taxation, General Explanation of the Tax Reform 
Act of 1986 (JCS-10-87), May 4, 1987, at 930.

                           Reasons for Change

    The Committee understands that there is a very high level 
of noncompliance by foreign persons that have U.S.-source 
shipping income. The Committee believes that, in order to 
address this noncompliance problem, it is appropriate to impose 
significant penalties for a failure to satisfy the filing 
requirements for claiming the exemption from U.S. tax that is 
available to certain foreign persons with respect to income 
from the international operation of ships.

                        Explanation of Provision

    Under the provision, a foreign person that claims exemption 
from U.S. tax for income from the international operation of 
ships and otherwise qualifies for such exemption, but does not 
satisfy the filing requirements for claiming such exemption, is 
subject to the penalty of the denial of such exemption and any 
deductions or credits otherwise allowable in determining the 
U.S. tax liability with respect to such income. In addition, 
under the provision, if a foreign person that has a fixed place 
of business in the United States fails to satisfy the filing 
requirements for claiming an exemption from U.S. tax for its 
income from the international operation of ships, such person 
is subject to the additional penalty that foreign source income 
from the international operation of ships is treated as 
effectively connected with the conduct of a U.S. trade or 
business, but only to the extent that such income is 
attributable to such fixed place of business in the United 
States. Income so treated as effectively connected with a U.S. 
business is subject to U.S. tax at graduated rates (and is 
subject to the disallowance of deductions and credits described 
above). The Secretary of the Treasury may waive all or part of 
these penalties upon a showing by the foreign person that there 
was reasonable cause for the failure and the person acted in 
good faith. In particular, the Committee intends that the 
Secretary of the Treasury liberally construe the reasonable 
cause exception such that the latter penalty will be applied 
only in egregious cases (e.g., intentional disregard of these 
rules). The provision does not apply to the extent the 
application would be contrary to any treaty obligation of the 
United States.
    Under the provision, the U.S. Customs Service will provide 
to the Secretary of the Treasury the information specified by 
the Secretary to enable the Secretary to identify foreign-flag 
ships engaged in shipping to or from the United States.

                             Effective Date

    The provision is effective for taxable years beginning 
after the later of the date the Shipbuilding Agreement takes 
effect or December 31, 1996.

                       VI. Votes of the Committee

                             A. Amendments

    An amendment offered by Mr. Graham regarding a change in 
section 202 of the Trade Act of 1974 to clarify the definitions 
of domestic industry and like articles in certain 
investigations involving perishable agricultural products, was 
defeated in a roll-call vote (9 yeas and 11 nays). The roll-
call vote on the amendment was as follows:
        YEAS                          NAYS
Mr. Baucus                          Mr. Breaux
Mr. Bradley                         Mr. Chafee
Mr. Conrad                          Mr. Gramm
Mr. Dole                            Mr. Grassley
Mr. D'Amato                         Ms. Moseley-Braun
Mr. Graham                          Mr. Moynihan
Mr. Hatch                           Mr. Murkowski
Mr. Pryor                           Mr. Nickles
Mr. Rockefeller                     Mr. Pressler
                                    Mr. Roth
                                    Mr. Simpson

    An amendment offered by Mr. Conrad, as modified by Mr. 
Roth, to remove the proposal to repeal advance refunds of the 
diesel fuel tax for diesel automobiles, vans, and light trucks, 
which was in the revenue offset provisions of the Committee 
substitute, and to shorten the extension of the Generalized 
System of Preferences program so that its termination date will 
be May 12, 1997, was approved by voice vote.

                      B. Motion to Report the Bill

    In compliance with section 133 of the Legislative 
Reorganization Act of 1946, the Committee states that H.R. 
3074, as amended, was ordered favorably reported unanimously by 
voice vote on May 8, 1996.

                         VII. Budgetary Impact

    In compliance with sections 308 and 403 of the 
Congressional Budget Act of 1974, and paragraph 11(a) of Rule 
XXVI of the Standing Rules of the Senate, the following letter 
has been received from the Congressional Budget Office on the 
budgetary impact of the legislation:

                                     U.S. Congress,
                               Congressional Budget Office,
                                       Washington, DC, May 9, 1996.
Hon. William V. Roth, Jr.,
Chairman, Committee on Finance, U.S. Senate,
Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
reviewed H.R. 3074, as amended and ordered reported by the 
Senate Committee on Finance, on May 8, 1996. CBO and JCT 
estimate that the bill would increase governmental receipts by 
$50 million in fiscal year 1996, by $1 million over fiscal 
years 1996-2000, and by $1.111 billion over fiscal years 1996-
2005, net of payroll and income tax offsets. Because enacting 
H.R. 3074 would affect receipts, pay-as-you-go procedures would 
apply to the bill.

                              Bill Purpose

    H.R. 3074 includes a number of provisions that would affect 
governmental receipts. The trade and tax provisions of the bill 
would:
          Provide the President with the authority to eliminate 
        or modify the existing duty on articles imported from 
        the West Bank, Gaza Strip, and qualifying industrial 
        zones (designated territory of Israel and Jordan or 
        Israel and Egypt).
          Implement the OECD Shipbuilding Trade Agreement which 
        was signed on December 21, 1994, by the following 
        countries: The Commission of the European Communities, 
        Japan, South Korea, Norway, and the United States. As 
        mandated by the OECD agreement, the proposed 
        legislation would exempt repairs to U.S. flag vessels 
        done in OECD signatory countries from the existing 50 
        percent ad valorem vessel repair duty.
          Renew the Generalized System of Preferences (GSP), 
        which affords nonreciprocal tariff preferences to 
        approximately 145 developing countries to aid their 
        economic development and to diversify and expand their 
        production and exports.
          Modify certain aspects of the tax treatment of 
        foreign trusts.
          Expand penalties for the failure to satisfy the 
        filing requirements for claiming the exemption from 
        U.S. tax that is available to certain foreign persons 
        with respect to income from international operation of 
        ships. Under the proposal, foreign source income from 
        the international operation of ships that is 
        attributable to a fixed place of business would be 
        subject to U.S. tax at graduated rates.

               Estimated Effect on Governmental Receipts

    The revenue effects of H.R. 3074 are summarized in the 
table below. Please refer to the attached table for a more 
detailed estimate of the bill.

                                          REVENUE EFFECTS OF H.R. 3074                                          
                                    [By fiscal year, in billions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                        1996         1997         1998         1999         2000      2001-2005 
----------------------------------------------------------------------------------------------------------------
Projected revenues: Under current                                                                               
 law \1\..........................    1,417.583    1,475.172    1,546.085    1,617.979    1,697.166    9,914.671
Proposed changes..................        0.050       -0.598        0.165        0.185        0.199        1.110
Projected revenues: Under H.R.                                                                                  
 3074.............................    1,417.633    1,474.574    1,546.250    1,618.164    1,697.365   9,915.781 
----------------------------------------------------------------------------------------------------------------
\1\ Includes the revenue effects of P.L. 104-7 (H.R. 831), P.L. 104-117 (H.R. 2778), P.L. 104-121 (H.R. 3136),  
  P.L. 104-132 (S. 735), and P.L. 104-134 (H.R. 3019).                                                          

                         Basis of the Estimate

    West Bank and Gaza Strip.--CBO believes that the 
Administration intends to utilize the proclamation authority 
established in the bill to extend the U.S.-Israel free trade 
agreement to the Palestinian territories without further 
legislation. Currently, the U.S. Customs Service collects less 
than $1,000 annually from the West Bank, Gaza Strip, and the 
qualified industrial zones. Therefore, the elimination or 
modification of such duties by Presidential proclamation would 
lead to a negligible reduction in revenues.
    OECD Shipbuilding Trade Agreement.--CBO estimates that the 
vessel repair provisions of the bill would decrease 
governmental receipts by $2 million in fiscal year 1996 and by 
$74 million over the fiscal years 1996-2005, net of income and 
payroll tax offsets. Aside from this provision, the 
implementation of the agreement would have no significant 
budgetary effects.-
    The estimate of revenue loss is based on historical 
collections of the vessel repair duty. Over the past several 
years, collections have been between $15 million and $25 
million annually. According to the US Maritime Administration 
(MARAD), in December 1995 there were 141 vessels in the US flag 
fleet. However, MARAD predicts a steady decline in the size of 
the US fleet due to the impending expiration and expected 
termination of the operating-differential subsidy program, 
through which payments are made to US vessels on specified 
trade routes. This estimate assumes that future collections of 
the vessel repair duty would decline as a result of this 
reduction in the size of the fleet. CBO also assumes that 
additional US vessel repairs would be diverted to ports in OECD 
countries to take advantage of the duty-free repair treatment. 
This estimate assumes that the bill will be effective on July 
15, 1996. The revenue effects of the provision are detailed in 
the table below.
    Extend GSP through 5/12/97.--CBO estimates that the 
proposal to renew GSP would reduce revenues by $734 million in 
fiscal year 1997, net of income and payroll tax offsets.
    The United States GSP expired on July 31, 1995. The 
proposed legislation would retroactively apply GSP from July 
31, 1995, and extend the program through May 12, 1997. The 
estimate of revenue loss is based on 1993 trade data and 
accounts for the graduation of Malaysia from GSP on January 1, 
1997, as recommended by the USTR on August 15, 1995. Malaysia 
has been a top beneficiary of GSP accounting for about a 
quarter of total GSP imports. Because the proposal would not 
permit the Customs Service to refund eligible duties until 
October 1, 1996, the entire revenue loss would occur in fiscal 
year 1997.
    Modify Treatment of foreign trusts.--JCT estimates that 
this proposal would increase governmental receipts by $52 
million in fiscal year 1996, and by $1.819 billion over fiscal 
years 1996-2005, net of income and payroll tax offsets. CBO 
concurs with this estimate.
    Reporting requirement for shippers claiming exemption 
(includes force-of-attraction rule).--JCT estimates that this 
proposal would raise governmental receipts by $3 million in 
1997, and by $101 million over fiscal years 1996-2005, net of 
income and payroll tax offsets. CBO concurs with this estimate.

                      Pay-As-You-Go Considerations

    Section 252 of the Balanced Budget and Emergency Deficit 
Control Act of 1985 sets up pay-as-you-go procedures for 
legislation affecting receipts or direct spending through 1998. 
Because this bill would affect receipts, pay-as-you-go 
procedures would apply. These effects are summarized in the 
table below.

                      PAY-AS-YOU-GO CONSIDERATIONS                      
                [By fiscal year, in millions of dollars]                
------------------------------------------------------------------------
                                            1996       1997       1998  
------------------------------------------------------------------------
Changes in receipts....................         50       -598        165
Changes in outlays.....................      (\1\)      (\1\)      (\1\)
------------------------------------------------------------------------
\1\ Not applicable.                                                     

             intergovernmental and private sector mandates

    H.R. 3074 contains no intergovernmental mandates as defined 
in Public Law 104-4 and would impose no direct costs on state, 
local, or tribal governments.
    JCT has determined that one revenue provision of the bill, 
the provision to modify foreign trusts, would contain Federal 
private sector mandates above the threshold as defined by 
Public Law 104-4. The aggregate amounts that the private sector 
will be required to spend to comply with the Federal private 
sector mandates are estimated to be no greater than the amounts 
reflected in the table below. CBO concurs with this estimate.

                                         FEDERAL PRIVATE SECTOR MANDATES                                        
                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                                       1996     1997     1998     1999     2000 
----------------------------------------------------------------------------------------------------------------
Modify treatment of foreign trusts.................................       52      143      171      180      188
----------------------------------------------------------------------------------------------------------------

    If you would like further details, please feel free to 
contact me or your staff may wish to contact Stephanie Weiner.
            Sincerely,
                                              James L. Blum
                                   (For June E. O'Neill, Director).

                                      ESTIMATED BUDGET EFFECTS OF H.R. 3074 AS PASSED BY THE SENATE FINANCE COMMITTEE ON MAY 8, 1996; FISCAL YEAR 1996-2005                                     
                                                                                    [In millions of dollars]                                                                                    
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                          Provision                            Effective    1996      1997      1998      1999      2000      2001      2002      2003      2004      2005     1996-00   1996-05
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1. Tariff treatment of imports from the West Bank and the                                                                                                                                       
 Gaza Strip (\1\)...........................................  ..........                                                                                                                        
(11) Negligible Loss                                                                                                                                                                            
2. The OECD Shipbuilding Agreement (\1\)....................      (\2\)         -2       -10       -12        -7        -4        -9        -6        -7       -11        -7       -35       -75
3. Extend GSP through 5/12/97 (\1\) (\3\)...................  ..........  ........      -734  ........  ........  ........  ........  ........  ........  ........  ........      -734      -734
4. Modify treatment of foreign trusts.......................      (\4\)         52       143       171       180       188       197       206       214       223       245       737     1,819
5. Shipping income reporting, with potential exemption                                                                                                                                          
 denial and resourcing......................................      (\5\)   ........         3         6        12        15        15        14        13        12        11        36       101
vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv                                                                                                                                   
      Net totals............................................  ..........        50      -598       165       185       199       203       214       220       224       249         1     1,111
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimate provided by the Congressional Budget Office.                                                                                                                                       
\2\ Assumed to be effective 7/15/96.                                                                                                                                                            
\3\ Amounts are payable after 9/30/96.                                                                                                                                                          
\4\ Various effective dates depending on provisions.                                                                                                                                            
\5\ Effective beginning after the later of the date H.R. 2754 takes effect or 12/31/96.                                                                                                         
Note: Details may not add to totals due to rounding.                                                                                                                                            

               VIII. Regulatory Impact and Other Matters

                          a. regulatory impact

1. Titles I through III

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee states that the 
legislation will not significantly regulate any individuals or 
businesses, will not impact on the personal privacy of 
individuals, and will result in no significant additional 
paperwork.

2. Title IV

a. Impact on Individuals and Businesses

    Title IV of the bill as reported provides two revenue-
offset provisions to pay for the other provisions of the bill: 
(1) modification of the tax treatment of foreign trusts, and 
(2) penalty for failure to file disclosure of exemption for 
shipping income of foreign persons.
    The foreign trust provisions will increase the tax 
liabilities of certain taxpayers and will also impose costs on 
affected taxpayers related to the new recordkeeping and 
reporting requirements. These rules are designed to limit the 
avoidance of U.S. taxes through the use of trusts.
    The penalty provision imposes penalties on certain foreign 
persons that do not satisfy the filing requirements for 
claiming an available exemption from U.S. tax for income from 
the international operation of ships.

b. Impact on Personal Privacy and Paperwork

    Title IV of the bill will have little impact on personal 
privacy of taxpayers. Title IV will result in increased 
recordkeeping and reporting requirements for taxpayers involved 
with foreign trusts.

              b. information relating to unfunded mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Act of 1995 (P.L. 104-4).
    The Committee has determined that one revenue provision of 
the bill contains Federal mandates on the private sector; this 
is the provision to modify the treatment of foreign trusts. The 
provision changes the tax treatment applicable to trusts and 
modifies the information reporting requirements and penalties 
applicable to foreign trusts. This provision will increase the 
Federal tax liabilities of certain taxpayers and will also 
impose costs related to the new recordkeeping and reporting 
requirements imposed by the bill.
    The cost required to comply with the Federal private sector 
mandate generally is no greater than the revenue estimate for 
the provision. Benefits from the provision include improved 
administration of the Federal income tax laws and a more 
accurate measurement of gross income for Federal income tax 
purposes. The Committee believes the benefits of the bill are 
greater than the costs required to comply with the Federal 
private sector mandates contained in the bill.
    The provisions contain Federal private sector mandates to 
the extent the provisions impose new reporting requirements and 
recharacterize the income of trusts to ensure that U.S. Federal 
income tax is paid. In general, these rules are designed to 
limit the avoidance of U.S. taxes through the use of trusts.
    The revenue provisions of the bill do not contain any 
intergovernmental mandates.
    The revenue provisions of the bill affect activities that 
are only engaged in by the private sector and, thus, do not 
affect the competitive balance between State, local, or tribal 
governments and the private sector.

                      IX. Changes in Existing Law

    In compliance with paragraph 12 of Rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the legislation are shown as follows (new matter is printed in 
italics):

                     INTERNAL REVENUE CODE OF 1986

                        Subtitle A--Income Taxes

          * * * * * * *

                  CHAPTER 1--NORMAL TAXES AND SURTAXES

          * * * * * * *

      Subchapter J--Estates, Trusts, Beneficiaries, and Decedents

               PART I--ESTATES, TRUSTS, AND BENEFICIARIES

      Subpart A--General Rules for Taxation of Estates and Trusts

          * * * * * * *

SEC. 643. DEFINITIONS APPLICABLE TO SUBPARTS A, B, C, AND D.

    (a) Distributable net income.--For purposes of this part, 
the term ``distributable net income'' means, with respect to 
any taxable year, the taxable income of the estate or trust 
computed with the following modifications--
          * * * * * * *
          (7) Abusive transactions.--The Secretary shall 
        prescribe such regulations as may be necessary or 
        appropriate to carry out the purposes of this part, 
        including regulations to prevent avoidance of such 
        purposes.
          * * * * * * *
    (h) Distributions by Certain Foreign Trusts Through 
Nominees.--For purposes of this part, any amount paid to a 
United States person which is derived directly or indirectly 
from a foreign trust of which the payor is not the grantor 
shall be deemed in the year of payment to have been directly 
paid by the foreign trust to such United States person.
  (i) Loans From Foreign Trusts.--For purposes of subparts B, 
C, and D--
          (1) General rule.--Except as provided in regulations, 
        if a foreign trust makes a loan of cash or marketable 
        securities directly or indirectly to--
                  (A) any grantor or beneficiary of such trust 
                who is a United States person, or
                  (B) any United States person not described in 
                subparagraph (A) who is related to such grantor 
                or beneficiary,
        the amount of such loan shall be treated as a 
        distribution by such trust to such grantor or 
        beneficiary (as the case may be).
          (2) Definitions and special rules.--For purposes of 
        this subsection--
                  (A) Cash.--The term ``cash'' includes foreign 
                currencies and cash equivalents.
                  (B) Related person.--
                          (i) In general.--A person is related 
                        to another person if the relationship 
                        between such persons would result in a 
                        disallowance of losses under section 
                        267 or 707(b). In applying section 267 
                        for purposes of the preceding sentence, 
                        section 267(c)(4) shall be applied as 
                        if the family of an individual includes 
                        the spouses of the members of the 
                        family.
                          (ii) Allocation.--If any person 
                        described in paragraph (1)(B) is 
                        related to more than one person, the 
                        grantor or beneficiary to whom the 
                        treatment under this subsection applies 
                        shall be determined under regulations 
                        prescribed by the Secretary.
                  (C) Exclusion of tax-exempts.--The term 
                ``United States person'' does not include any 
                entity exempt from tax under this chapter.
                  (D) Trust not treated as simple trust.--Any 
                trust which is treated under this subsection as 
                making a distribution shall be treated as not 
                described in section 651.
          (3) Subsequent transactions regarding loan 
        principal.--If any loan is taken into account under 
        paragraph (1), any subsequent transaction between the 
        trust and the original borrower regarding the principal 
        of the loan (by way of complete or partial repayment, 
        satisfaction, cancellation, discharge, or otherwise) 
        shall be disregarded for purposes of this title.
          * * * * * * *

         Subpart D--Treatment of excess distribution by trusts

SEC. 665. DEFINITIONS APPLICABLE TO SUBPART D.

          * * * * * * *
    [(c) Special Rule Applicable to Distributions by Certain 
Foreign Trusts.--
    [For purposes of this subpart, any amount paid to a United 
States person which is from a payor who is not a United States 
person and which is derived directly or indirectly from a 
foreign trust created by a United States person shall be deemed 
in the year of payment to have been directly paid by the 
foreign trust.]
    (d) Taxes Imposed on the Trust.--
    For purposes of this subpart--
          (1) In general.--The term ``taxes imposed on the 
        trust'' means the amount of the taxes which are imposed 
        for any taxable year of the trust under this chapter 
        (without regard to this subpart or part IV of 
        subchapter A) and which, under regulations prescribed 
        by the Secretary, are properly allocable to the 
        undistributed portions of distributable net income and 
        gains in excess of losses from sales or exchanges of 
        capital assets. The amount determined in the preceding 
        sentence shall be reduced by any amount of such taxes 
        deemed distributed under section 666(b) and (c) or 
        669(d) and (e) to any beneficiary.
          (2) Foreign trusts.--In the case of any foreign 
        trust, the term ``taxes imposed on the trust'' includes 
        the amount, reduced as provided in the last sentence of 
        paragraph (1), of any income, war profits, and excess 
        profits taxes imposed by any foreign country or 
        possession of the United States on such foreign trust 
        which, as determined under paragraph (1), are so 
        properly allocable. Under rules or regulations 
        prescribed by the Secretary, in the case of any foreign 
        trust of which the settlor or another person could be 
        treated as owner of any portion of the trust under 
        subpart E but for section 672(f), the term ``taxes 
        imposed on the trust'' includes the allocable amount of 
        any income, war profits, and excess profits taxes 
        imposed by any foreign country or possession of the 
        United States on the settlor or such other person in 
        respect of trust income.
          * * * * * * *

SEC. 668. INTEREST CHARGE ON ACCUMULATION DISTRIBUTIONS FROM FOREIGN 
                    TRUSTS.

    [(a) General Rule.--For purposes of the tax determined 
under section 667(a), the interest charge is an amount equal to 
6 percent of the partial tax computed under section 667(b) 
multiplied by a fraction--
          [(1) the numerator of which is the sum of the number 
        of taxable years between each taxable year to which the 
        distribution is allocated under section 666(a) and the 
        taxable year of the distribution (counting in each case 
        the taxable year to which the distribution is allocated 
        but not counting the taxable year of the distribution), 
        and
          [(2) the denominator of which is the number of 
        taxable years to which the distribution is allocated 
        under section 666(a).]
    (a) General Rule.--For purposes of the tax determined under 
section 667(a)--
          (1) Interest determined using underpayment rates.--
        The interest charge determined under this section with 
        respect to any distribution is the amount of interest 
        which would be determined on the partial tax computed 
        under section 667(b) for the period described in 
        paragraph (2) using the rates and the method under 
        section 6621 applicable to underpayments of tax.
          (2) Period.--For purposes of paragraph (1), the 
        period described in this paragraph is the period which 
        begins on the date which is the applicable number of 
        years before the date of the distribution and which 
        ends on the date of the distribution.
          (3) Applicable number of years.--For purposes of 
        paragraph (2)--
                  (A) In general.--The applicable number of 
                years with respect to a distribution is the 
                number determined by dividing--
                          (i) the sum of the products described 
                        in subparagraph (B) with respect to 
                        each undistributed income year, by
                          (ii) the aggregate undistributed net 
                        income.
                The quotient determined under the preceding 
                sentence shall be rounded under procedures 
                prescribed by the Secretary.
                  (B) Product described.--For purposes of 
                subparagraph (A), the product described in this 
                subparagraph with respect to any undistributed 
                income year is the product of--
                          (i) the undistributed net income for 
                        such year, and
                          (ii) the sum of the number of taxable 
                        years between such year and the taxable 
                        year of the distribution (counting in 
                        each case the undistributed income year 
                        but not counting the taxable year of 
                        the distribution).
          (4) Undistributed income year.--For purposes of this 
        subsection, the term `undistributed income year' means 
        any prior taxable year of the trust for which there is 
        undistributed net income, other than a taxable year 
        during all of which the beneficiary receiving the 
        distribution was not a citizen or resident of the 
        United States.
          (5) Determination of undistributed net income.--
        Notwithstanding section 666, for purposes of this 
        subsection, an accumulation distribution from the trust 
        shall be treated as reducing proportionately the 
        undistributed net income for undistributed income 
        years.
          (6) Periods before 1996.--Interest for the portion of 
        the period described in paragraph (2) which occurs 
        before January 1, 1996, shall be determined--
                  (A) by using an interest rate of 6 percent, 
                and
                  (B) without compounding until January 1, 
                1996.
    (b) Limitation.--The total amount of the interest charge 
shall not, when added to the total partial tax computed under 
section 667(b), exceed the amount of the accumulation 
distribution (other than the amount of tax deemed distributed 
by section 666 (b) or (c)) in respect of which such partial tax 
was determined.
    (c) Interest Charge Not Deductible.--The interest charge 
determined under this section shall not be allowed as a 
deduction for purposes of any tax imposed by this title.
          * * * * * * *

      SUBPART E--GRANTORS AND OTHERS TREATED AS SUBSTANTIAL OWNERS

          * * * * * * *

SEC. 672. DEFINITIONS AND RULES.

          * * * * * * *
    (c) Related or Subordinate Party.--For purposes of this 
subpart, the term ``related or subordinate party'' means any 
nonadverse party who is--
          (1) the grantor's spouse if living with the grantor;
          (2) any one of the following: The grantor's father, 
        mother, issue, brother or sister, an employee of the 
        grantor, a corporation or any employee of a corporation 
        in which the stock holdings of the grantor and the 
        trust are significant from the viewpoint of voting 
        control; a subordinate employee of a corporation in 
        which the grantor is an executive.
For purposes of subsection (f) and sections 674 and 675, a 
realted or subordinate party shall be presumed to be 
subservient to the grantor in respect of the exercise or 
nonexercise of the powers conferred on him unless such party is 
shown not to be subservient by a preponderance of the evidence.
          * * * * * * *
    [(f) Special Rule Where Grantor Is Foreign Person.--
          [(1) In general.--If--
                  [(A) but for this subsection, a foreign 
                person would be treated as the owner of any 
                portion of a trust, and
                  [(B) such trust has a beneficiary who is a 
                United States person.
        [such beneficiary shall be treated as the grantor of 
        such portion to the extent such beneficiary has made 
        transfers of property by gift (directly or indirectly) 
        to such foreign person. For purposes of the preceding 
        sentence, any gift shall not be taken into account to 
        the extent such gift would be excluded from taxable 
        gifts under section 2503(b).
          [(2) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to carry out the 
        purposes of this subsection.]
    (f) Subpart Not To Result in Foreign Ownership.--
          (1) In general.--Notwithstanding any other provision 
        of this subpart, this subpart shall apply only to the 
        extent such application results in an amount (if any) 
        being currently taken into account (directly or through 
        1 or more entities) under this chapter in computing the 
        income of a citizen or resident of the United States or 
        a domestic corporation.
          (2) Exceptions.--
                  (A) Certain revocable and irrevocable 
                trusts.--Paragraph (1) shall not apply to any 
                portion of a trust if--
                          (i) the power to revest absolutely in 
                        the grantor title to the trust property 
                        to which such portion is attributable 
                        is exercisable solely by the grantor 
                        without the approval or consent of any 
                        other person or with the consent of a 
                        related or subordinate party who is 
                        subservient to the grantor, or
                          (ii) the only amounts distributable 
                        from such portion (whether income or 
                        corpus) during the lifetime of the 
                        grantor are amounts distributable to 
                        the grantor or the spouse of the 
                        grantor.
                  (B) Compensatory trusts.--Except as provided 
                in regulations, paragraph (1) shall not apply 
                to any portion of a trust distributions from 
                which are taxable as compensation for services 
                rendered.
          (3) Special rules.--Except as otherwise provided in 
        regulations prescribed by the Secretary--
                  (A) a controlled foreign corporation (as 
                defined in section 957) shall be treated as a 
                domestic corporation for purposes of paragraph 
                (1), and
                  (B) paragraph (1) shall not apply for 
                purposes of applying section 1296.
          (4) Recharacterization of purported gifts.--In the 
        case of any transfer directly or indirectly from a 
        partnership or foreign corporation which the transferee 
        treats as a gift or bequest, the Secretary may 
        recharacterize such transfer in such circumstances as 
        the Secretary determines to be appropriate to prevent 
        the avoidance of the purposes of this subsection.
          (5) Special rule where grantor is foreign person.--
        If--
                  (A) but for this subsection, a foreign person 
                would be treated as the owner of any portion of 
                a trust, and
                  (B) such trust has a beneficiary who is a 
                United States person,
        such beneficiary shall be treated as the grantor of 
        such portion to the extent such beneficiary or any 
        member of such beneficiary's family (within the meaning 
        of section 267(c)(4)) has made (directly or indirectly) 
        transfers of property (other than in a sale for full 
        and adequate consideration) to such foreign person. For 
        purposes of the preceding sentence, any gift shall not 
        be taken into account to the extent such gift would be 
        excluded from taxable gifts under section 2503(b).
          (6) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry 
        out the purposes of this subsection, including 
        regulations providing that paragraph (1) shall not 
        apply in appropriate cases.
          * * * * * * *

SEC. 679. FOREIGN TRUSTS HAVING ONE OR MORE UNITED STATES 
                    BENEFICIARIES.

    (a) Transferor Treated as Owner.--
          (1) In general.--A United States person who directly 
        or indirectly transfers property to a foreign trust 
        (other than a trust described in [section 404(a)(4) or 
        section 404A] section 6048(a)(3)(B)(ii) shall be 
        treated as the owner for his taxable year of the 
        portion of such trust attributable to such property if 
        for such year there is a United States beneficiary of 
        any portion of such trust.
          (2) Exceptions. Paragraph (1) shall not apply--
                  (A) Transfers by reason of death. To any 
                transfer by reason of death of the transferror.
                  [(B) Transfers where gain is recognized to 
                transferor. To any sale or exchange of the 
                property at its fair market value in a 
                transaction in which all of the gain to the 
                transferor is realized at the time of the 
                transfer and is recognized either at such time 
                or is returned as provided in section 453.]
                  (B) Transfers at fair market value.--To any 
                transfer of property to a trust in exchange for 
                consideration of at least the fair market value 
                of the transferred property. For purposes of 
                the preceding sentence, consideration other 
                than cash shall be taken into account at its 
                fair market value.
          (3) Certain obligations not taken into account under 
        fair market value exception.--
                  (A) In general.--In determining whether 
                paragraph (2)(B) applies to any transfer by a 
                person described in clause (ii) or (iii) of 
                subparagraph (C), there shall not be taken into 
                account--
                          (i) except as provided in 
                        regulations, any obligation of a person 
                        described in subparagraph (C), and
                          (ii) to the extent provided in 
                        regulations, any obligation which is 
                        guaranteed by a person described in 
                        subparagraph (C).
                  (B) Treatment of principal payments on 
                obligation.--Principal payments by the trust on 
                any obligation referred to in subparagraph (A) 
                shall be taken into account on and after the 
                date of the payment in determining the portion 
                of the trust attributable to the property 
                transferred.
                  (C) Persons described.--The persons described 
                in this subparagraph are--
                          (i) the trust,
                          (ii) any grantor or beneficiary of 
                        the trust, and
                          (iii) any person who is related 
                        (within the meaning of section 
                        643(i)(2)(B)) to any grantor or 
                        beneficiary of the trust.
          (4) Special rules applicable to foreign grantor who 
        later becomes a united states person.--
                  (A) In general.--If a nonresident alien 
                individual has a residency starting date within 
                5 years after directly or indirectly 
                transferring property to a foreign trust, this 
                section and section 6048 shall be applied as if 
                such individual transferred to such trust on 
                the residency starting date an amount equal to 
                the portion of such trust attributable to the 
                property transferred by such individual to such 
                trust in such transfer.
                  (B) Treatment of undistributed income.--For 
                purposes of this section, undistributed net 
                income for periods before such individual's 
                residency starting date shall be taken into 
                account in determining the portion of the trust 
                which is attributable to property transferred 
                by such individual to such trust but shall not 
                otherwise be taken into account.
                  (C) Residency starting date.--For purposes of 
                this paragraph, an individual's residency 
                starting date is the residency starting date 
                determined under section 7701(b)(2)(A).
          (5) Outbound trust migrations.--If--
                  (A) an individual who is a citizen or 
                resident of the United States transferred 
                property to a trust which was not a foreign 
                trust, and
                  (B) such trust becomes a foreign trust while 
                such individual is alive,
        then this section and section 6048 shall be applied as 
        if such individual transferred to such trust on the 
        date such trust becomes a foreign trust an amount equal 
        to the portion of such trust attributable to the 
        property previously transferred by such individual to 
        such trust. A rule similar to the rule of paragraph 
        (4)(B) shall apply for purposes of this paragraph.
    (b) Trusts Acquiring United States Beneficiaries.--If--
          (1) subsection (a) applies to a trust for the 
        transferor's taxable year, and
          (2) subsection (a) would have applied to the trust 
        for his immediately preceding taxable year but for the 
        fact that for such preceding taxable year there was no 
        United States beneficiary for any portion of the trust,
        then, for purposes of this subtitle, the transferor 
        shall be treated as having income for the taxable year 
        (in addition to his other income for such year) equal 
        to the undistributed net income (at the close of such 
        immediately preceding taxable year) attributable to the 
        portion of the trust referred to in subsection (a).
    (c) Trusts Treated as Having a United States Beneficiary.--
          (1) In general. For purposes of this section, a trust 
        shall be treated as having a United States beneficiary 
        for the taxable year unless--
                  (A) under the terms of the trust, no part of 
                the income or corpus of the trust may be paid 
                or accumulated during the taxable year to or 
                for the benefit of a United States person, and
                  (B) if the trust were terminated at any time 
                during the taxable year, no part of the income 
                or corpus of such trust could be paid to or for 
                the benefit of a United States person.
          (2) Attribution of ownership.--For purposes of 
        paragraph (1), an amount shall be treated as paid or 
        accumulated to or for the benefit of a United States 
        person if such amount is paid to or accumulated for a 
        foreign corporation, foreign partnership, or foreign 
        trust or estate, and--
                  [(A) in the case of a foreign corporation, 
                more than 50 percent of the total combined 
                voting power of all classes of stock entitled 
                to vote of such corporation is owned (within 
                the meaning of section 958(a)) or is considered 
                to be owned (within the meaning of section 
                958(b)) by United States shareholders (as 
                defined in section 951(b)),]
                  (A) in the case of a foreign corporation, 
                such corporation is a controlled foreign 
                corporation (as defined in section 957(a)),
                  (B) in the case of foreign partnership, a 
                United States person is a partner of such 
                partnership, or
                  (C) in the case of a foreign trust or estate, 
                such trust or estate has a United States 
                beneficiary (within the meaning of paragraph 
                (1)).
          (3) Certain united states beneficiaries 
        disregarded.--A beneficiary shall not be treated as a 
        United States person in applying this section with 
        respect to any transfer of property to foreign trust if 
        such beneficiary first became a United States person 
        more than 5 years after the date of such transfer.
      (d) Regulations.--The Secretary shall prescribe such 
regulations as may be necessary or appropriate to carry out the 
purposes of this section.
          * * * * * * *

 Subchapter N--Tax Based on Income From Sources Within or Without the 
                             United States

          * * * * * * *

          PART II--NONRESIDENT ALIENS AND FOREIGN CORPORATION

                Subpart A--Nonresident alien individuals

SEC. 871. TAX ON NONRESIDENT ALIEN INDIVIDUALS.

    (a) * * *
          * * * * * * *
    (f) Certain Annuities Received Under Qualified Plans.
          * * * * * * *
          (2) Exclusion.--Income received during the taxable 
        year which would be excluded from gross income under 
        this subsection but for the requirement of paragraph 
        (1)(B) shall not be included in gross income if--
                  (A) the recipient's country of residence 
                grants a substantially equivalent exclusion to 
                residents and citizens of the United States; or
                  (B) the recipient's country of residence is a 
                beneficiary developing country [within the 
                meaning of section 502] of the Trade Act of 
                1974 (19 U.S.C. 2462).
          * * * * * * *

SEC. 872. GROSS INCOME.

    (a) General Rule.--In the case of a nonresident alien 
individual, except where the context clearly indicates 
otherwise gross income includes only--
          (1) gross income which is derived from sources within 
        the United States and which is not effectively 
        connected with the conduct of a trade or business 
        within the United States, and
          (2) gross income which is effectively connected with 
        the conduct of a trade or business within the United 
        States.
    (b) Exclusions.--The following items shall not be included 
in gross income of a nonresident alien individual, and shall be 
exempt from taxation under this subtitle:
          (1) Ships operated by certain nonresidents. [Gross 
        income] Except as provided in section 883(d), gross 
        income derived by an individual resident of a foreign 
        country from the international operation of a ship or 
        ships if such foreign country grants an equivalent 
        exemption to individual residents of the United States.
          * * * * * * *

                    SUBPART B--FOREIGN CORPORATIONS

          * * * * * * *

SEC. 883. EXCLUSIONS FROM GROSS INCOME.

    (a) Income of Foreign Corporations From Ships and 
Aircraft.--The following items shall not be included in gross 
income of a foreign corporation, and shall be exempt from 
taxation under this subtitle:
          (1) Ships operated by certain foreign corporations. 
        [Gross income] Except as provided in subsection (d), 
        gross income derived by a corporation organized in a 
        foreign country from the international operation of a 
        ship or ships if such foreign country grants an 
        equivalent exemption to corporations organized in the 
        United States.
          * * * * * * *
  (d) Penalties for Failure To Disclose Position That Certain 
International Shipping Income Is Not Includible in Gross 
Income.--
          (1) In general.--A taxpayer who, with respect to any 
        tax imposed by this title, takes the position that any 
        of its gross income derived from the international 
        operation of a ship or ships is not includible in gross 
        income by reason of subsection (a)(1) or section 
        872(b)(1) (or by reason of any applicable treaty) shall 
        be entitled to such treatment only if such position is 
        disclosed (in such manner as the Secretary may 
        prescribe) on the return of tax for such tax (or any 
        statement attached to such return).
          (2) Additional penalties for failing to disclose 
        position.--If a taxpayer fails to meet the requirement 
        of paragraph (1) with respect to any taxable year--
                  (A) the amount of the income from the 
                international operation of a ship or ships--
                          (i) which is from sources without the 
                        United States, and
                          (ii) which is attributable to a fixed 
                        place of business in the United States,
                shall be treated for purposes of this title as 
                effectively connected with the conduct of a 
                trade or business within the United States, and
                  (B) no deductions or credits shall be allowed 
                which are attributable to income from the 
                international operation of a ship or ships.
          (3) Reasonable cause exception.--This subsection 
        shall not apply to a failure to disclose a position if 
        it is shown that such failure is due to reasonable 
        cause and not due to willful neglect.
          * * * * * * *

        PART III--INCOME FROM SOURCES WITHOUT THE UNITED STATES

                     Subpart A--Foreign Tax Credit

SEC. 901. TAXES OF FOREIGN COUNTRIES AND OF POSSESSIONS OF UNITED 
                    STATES.

    (a) Allowance of credit.--If the taxpayer chooses to have 
the benefits of this subpart, the tax imposed by this chapter 
shall, subject to limitation of section 904, be credited with 
the amounts provided in the applicable paragraph of subsection 
(b) plus, in the case of a corporation, the taxes deemed to 
have been paid under sections 902 and 960. Such choice for any 
taxable year may be made or changed at any time before the 
expiration of the period prescribed for making a claim for 
credit or refund of the tax imposed by this chapter for such 
taxable year. The credit shall not be allowed against any tax 
treated as a tax not imposed by this chapter under section 
26(b).
    (b) Amount Allowed.--Subject to the limitation of section 
904, the following amounts shall be allowed as the credit under 
subsection (a): Under rules or regulations prescribed by the 
Secretary, in the case of any foreign trust of which the 
settlor or another person would be treated as owner of any 
portion of the trust under subpart E but for section 672(f), 
the allocable amount of any income, war profits, and excess 
profits taxes imposed by any foreign country or possession of 
the United States on the settlor or such other person in 
respect of trust income.
          * * * * * * *

            CHAPTER 5--TAX ON TRANSFERS TO AVOID INCOME TAX

SEC. 1491. IMPOSITION OF TAX.

    There is hereby imposed on the transfer of property by a 
citizen or resident of the United States, or by a domestic 
corporation or partnership, or by an estate or trust which is 
not a foreign estate or trust, to a foreign corporation as paid 
in surplus or as a contribution to capital, or to a foreign 
estate or trust, or to a foreign partnership, an excise tax 
equal to 35 percent of the excess of--
          (1) the fair market value of the property so 
        transferred, over
          (2) the sum of--
                  (A) the adjusted basis (for determining gain) 
                of such property in the hands of the 
                transferor, plus
                  (B) the amount of the gain recognized to the 
                transferor at the time of the transfer.
If a trust which is not a foreign trust becomes a foreign 
trust, such trust shall be treated for purposes of this section 
as having transferred, immediately before becoming a foreign 
trust, all of its assets to a foreign trust.
          * * * * * * *

SEC. 1494. PAYMENT AND COLLECTION.

    (a) Time for Payment.--The tax imposed by section 1491 
shall, without assessment or notice and demand, be due and 
payable by the transferor at the time of the transfer, and 
shall be assessed, collected, and paid under regulations 
prescribed by the Secretary.
    (b) Abatement or Refund.--Under regulations prescribed by 
the Secetary, the tax may be abated, remitted, or refunded if 
the taxpayer, after the transfer, elects the application of 
principles similar to the principles of section 367.
    (c) Penalty.--In the case of any failure to file a return 
required by the Secretary with respect to any transfer 
described in section 1491, the person required to file such 
return shall be liable for the penalties provided in section 
6677 in the same manner as if such failure were a failure to 
file a notice under section 6048(a).
          * * * * * * *

                Subtitle F--Procedure and Administration

                  CHAPTER 61--INFORMATION AND RETURNS

                   Subchapter A--Returns and Records

          * * * * * * *

                     PART III--INFORMATION RETURNS

Subpart A--Information Concerning Persons Subject to Special Provisions

          * * * * * * *

SEC. 6031. RETURN OF PARTNERSHIP INCOME.

          * * * * * * *

SEC. 6039F. NOTICE OF LARGE GIFTS RECEIVED FROM FOREIGN PERSONS.

  (a) In General.--If the value of the aggregate foreign gifts 
received by a United States person (other than an organization 
described in section 501(c) and exempt from tax under section 
501(a)) during any taxable year exceeds $10,000, such United 
States person shall furnish (at such time and in such manner as 
the Secretary shall prescribe) such information as the 
Secretary may prescribe regarding each foreign gift received 
during such year.
  (b) Foreign Gift.--For purposes of this section, the term 
``foreign gift'' means any amount received from a person other 
than a United States person which the recipient treats as a 
gift or bequest. Such term shall not include any qualified 
transfer (within the meaning of section 2503(e)(2)) or any 
distribution properly disclosed in a return under section 
6048(c).
  (c) Penalty for Failure To File Information.--
          (1) In general.--If a United States person fails to 
        furnish the information required by subsection (a) with 
        respect to any foreign gift within the time prescribed 
        therefor (including extensions)--
                  (A) the tax consequences of the receipt of 
                such gift shall be determined by the Secretary, 
                and
                  (B) such United States person shall pay (upon 
                notice and demand by the Secretary and in the 
                same manner as tax) an amount equal to 5 
                percent of the amount of such foreign gift for 
                each month for which the failure continues (not 
                to exceed 25 percent of such amount in the 
                aggregate).
          * * * * * * *
          (2) Reasonable cause exception.--Paragraph (1) shall 
        not apply to any failure to report a foreign gift if 
        the United States person shows that the failure is due 
        to reasonable cause and not due to willful neglect.
  (d) Cost-of-Living Adjustment.--In the case of any taxable 
year beginning after December 31, 1996, the $10,000 amount 
under subsection (a) shall be increased by an amount equal to 
the product of such amount and the cost-of-living adjustment 
for such taxable year under section 1(f)(3), except that 
subparagraph (B) thereof shall be applied by substituting 
``1995'' for ``1992''.
  (e) Regulations.--The Secretary shall prescribe such 
regulations as may be necessary or appropriate to carry out the 
purposes of this section.

   Subpart B--Information Concerning Transactions With Other Persons

          * * * * * * *

SEC. 6041. INFORMATION AT SOURCE.

          * * * * * * *

[SEC. 6048. RETURNS AS TO CERTAIN FOREIGN TRUSTS.]

SEC. 6048. INFORMATION WITH RESPECT TO CERTAIN FOREIGN TRUSTS.

          * * * * * * *
    [(a) General Rule.--On or before the 90th day (or on or 
before such later day as the Secretary may by regulations 
prescribe) after--
          [(1) the creation of any foreign trust by a United 
        States person, or
          [(2) the transfer of any money or property to a 
        foreign trust by a United States person,
        [the grantor in the case of an inter vivos trust, the 
        fiduciary of an estate in the case of a testamentary 
        trust, or the transferor, as the case may be, shall 
        make a return in compliance with the provisions of 
        subsection (b).
    [(b) Form and Contents of Returns.--The returns required by 
subsection (a) shall be in such form and shall set forth, in 
respect of the foreign trust, such information as the Secretary 
prescribes by regulation as necessary for carrying out the 
provisions of the income tax laws.
    [(c) Annual Returns for foreign Trusts Having One or More 
United States Beneficiaries.--Each taxpayer subject to tax 
under section 679 (relating to foreign trusts having one or 
more United States beneficaries) for his taxable year with 
respect to any trust shall make a return with respect to such 
trust for such year at such time and in such manner, and 
setting forth such information, as the Secretary may by 
regulations prescribed.
    [(d) Cross Reference.--For provisions relating to penalties 
for violation of this section, see sections 6677 and 7203.]
  (a) Notice of Certain Events.--
          (1) General rule.--On or before the 90th day (or such 
        later day as the Secretary may prescribe) after any 
        reportable event, the responsible party shall provide 
        written notice of such event to the Secretary in 
        accordance with paragraph (2).
          (2) Contents of notice.--The notice required by 
        paragraph (1) shall contain such information as the 
        Secretary may prescribe, including--
                  (A) the amount of money or other property (if 
                any) transferred to the trust in connection 
                with the reportable event, and
                  (B) the identity of the trust and of each 
                trustee and beneficiary (or class of 
                beneficiaries) of the trust.
          (3) Reportable event.--For purposes of this 
        subsection--
                  (A) In general.--The term `reportable event' 
                means--
                          (i) the creation of any foreign trust 
                        by a United States person,
                          (ii) the transfer of any money or 
                        property (directly or indirectly) to a 
                        foreign trust by a United States 
                        person, including a transfer by reason 
                        of death, and
                          (iii) the death of a citizen or 
                        resident of the United States if--
                                  (I) the decedent was treated 
                                as the owner of any portion of 
                                a foreign trust under the rules 
                                of subpart E of part I of 
                                subchapter J of chapter 1, or
                                  (II) any portion of a foreign 
                                trust was included in the gross 
                                estate of the decedent.
                  (B) Exceptions.--
                          (i) Fair market value sales.--
                        Subparagraph (A)(ii) shall not apply to 
                        any transfer of property to a trust in 
                        exchange for consideration of at least 
                        the fair market value of the 
                        transferred property. For purposes of 
                        the preceding sentence, consideration 
                        other than cash shall be taken into 
                        account at its fair market value and 
                        the rules of section 679(a)(3) shall 
                        apply.
                          (ii) Deferred compensation and 
                        charitable trusts.--Subparagraph (A) 
                        shall not apply with respect to a trust 
                        which is--
                                  (I) described in section 
                                402(b), 404(a)(4), or 404A, or
                                  (II) determined by the 
                                Secretary to be described in 
                                section 501(c)(3).
          (4) Responsible party.--For purposes of this 
        subsection, the term ``responsible party'' means--
                  (A) the grantor in the case of the creation 
                of an inter vivos trust,
                  (B) the transferor in the case of a 
                reportable event described in paragraph 
                (3)(A)(ii) other than a transfer by reason of 
                death, and
                  (C) the executor of the decedent's estate in 
                any other case.
  (b) United States Grantor of Foreign Trust.--
          (1) In general.--If, at any time during any taxable 
        year of a United States person, such person is treated 
        as the owner of any portion of a foreign trust under 
        the rules of subpart E of part I of subchapter J of 
        chapter 1, such person shall be responsible to ensure 
        that--
                  (A) such trust makes a return for such year 
                which sets forth a full and complete accounting 
                of all trust activities and operations for the 
                year, the name of the United States agent for 
                such trust, and such other information as the 
                Secretary may prescribe, and
                  (B) such trust furnishes such information as 
                the Secretary may prescribe to each United 
                States person (i) who is treated as the owner 
                of any portion of such trust or (ii) who 
                receives (directly or indirectly) any 
                distribution from the trust.
          (2) Trusts not having united states agent.--
                  (A) In general.--If the rules of this 
                paragraph apply to any foreign trust, the 
                determination of amounts required to be taken 
                into account with respect to such trust by a 
                United States person under the rules of subpart 
                E of part I of subchapter J of chapter 1 shall 
                be determined by the Secretary.
                  (B) United states agent required.--The rules 
                of this paragraph shall apply to any foreign 
                trust to which paragraph (1) applies unless 
                such trust agrees (in such manner, subject to 
                such conditions, and at such time as the 
                Secretary shall prescribe) to authorize a 
                United States person to act as such trust's 
                limited agent solely for purposes of applying 
                sections 7602, 7603, and 7604 with respect to--
                          (i) any request by the Secretary to 
                        examine records or produce testimony 
                        related to the proper treatment of 
                        amounts required to be taken into 
                        account under the rules referred to in 
                        subparagraph (A), or
                          (ii) any summons by the Secretary for 
                        such records or testimony.
                The appearance of persons or production of 
                records by reason of a United States person 
                being such an agent shall not subject such 
                persons or records to legal process for any 
                purpose other than determining the correct 
                treatment under this title of the amounts 
                required to be taken into account under the 
                rules referred to in subparagraph (A). A 
                foreign trust which appoints an agent described 
                in this subparagraph shall not be considered to 
                have an office or a permanent establishment in 
                the United States, or to be engaged in a trade 
                or business in the United States, solely 
                because of the activities of such agent 
                pursuant to this subsection.
                  (C) Other rules to apply.--Rules similar to 
                the rules of paragraphs (2) and (4) of section 
                6038A(e) shall apply for purposes of this 
                paragraph.
  (c) Reporting by United States Beneficiaries of Foreign 
Trusts.--
          (1) In general.--If any United States person receives 
        (directly or indirectly) during any taxable year of 
        such person any distribution from a foreign trust, such 
        person shall make a return with respect to such trust 
        for such year which includes--
                  (A) the name of such trust,
                  (B) the aggregate amount of the distributions 
                so received from such trust during such taxable 
                year, and
                  (C) such other information as the Secretary 
                may prescribe.
          (2) Inclusion in income if records not provided.--
                  (A) In general.--If adequate records are not 
                provided to the Secretary to determine the 
                proper treatment of any distribution from a 
                foreign trust, such distribution shall be 
                treated as an accumulation distribution 
                includible in the gross income of the 
                distributee under chapter 1. To the extent 
                provided in regulations, the preceding sentence 
                shall not apply if the foreign trust elects to 
                be subject to rules similar to the rules of 
                subsection (b)(2)(B).
                  (B) Application of accumulation distribution 
                rules.--For purposes of applying section 668 in 
                a case to which subparagraph (A) applies, the 
                applicable number of years for purposes of 
                section 668(a) shall be \1/2\ of the number of 
                years the trust has been in existence.
  (d) Special Rules.--
          (1) Determination of whether united states person 
        makes transfer or receives distribution.--For purposes 
        of this section, in determining whether a United States 
        person makes a transfer to, or receives a distribution 
        from, a foreign trust, the fact that a portion of such 
        trust is treated as owned by another person under the 
        rules of subpart E of part I of subchapter J of chapter 
        1 shall be disregarded.
          (2) Domestic trusts with foreign activities.--To the 
        extent provided in regulations, a trust which is a 
        United States person shall be treated as a foreign 
        trust for purposes of this section and section 6677 if 
        such trust has substantial activities, or holds 
        substantial property, outside the United States.
          (3) Time and manner of filing information.--Any 
        notice or return required under this section shall be 
        made at such time and in such manner as the Secretary 
        shall prescribe.
          (4) Modification of return requirements.--The 
        Secretary is authorized to suspend or modify any 
        requirement of this section if the Secretary determines 
        that the United States has no significant tax interest 
        in obtaining the required information.
          * * * * * * *

 CHAPTER 68--ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE 
                               PENALTIES

          * * * * * * *

                   Subchapter B--Assessable Penalties

                       PART I--GENERAL PROVISIONS

          * * * * * * *

SEC. 6671. RULES FOR APPLICATION OF ASSESSABLE PENALTIES.

          * * * * * * *

[SEC. 6677. FAILURE TO FILE INFORMATION RETURNS WITH RESPECT TO CERTAIN 
                    FOREIGN TRUSTS.]

SEC. 6677. FAILURE TO FILE INFORMATION WITH RESPECT TO CERTAIN FOREIGN 
                    TRUSTS.

          * * * * * * *

[SEC. 6677. FAILURE TO FILE INFORMATION RETURNS WITH RESPECT TO CERTAIN 
                    FOREIGN TRUSTS.

    [(a) Civil Penalty.--In addition to any criminal penalty 
provided by law, any person required to file a return under 
section 6048 who fails to file such return at the time provided 
in such section, or who files a return which does not show the 
information required pursuant to such section, shall pay a 
penalty equal to 5 percent of the amount transferred to a trust 
(or, in the case of a failure with respect to section 6048(c), 
equal to 5 percent of the value of the corpus of the trust at 
the close of the taxable year), but not more than $1,000, 
unless it is shown that such failure is due to reasonable 
cause.
    [(b) Deficiency Procedures Not To Apply.--Subchapter B of 
chapter 63 (relating to deficiency procedures for income, 
estate, gift, and certain excise taxes) shall not apply in 
respect of the assessment or collection of any penalty imposed 
by subsection (a).]

SEC. 6677. FAILURE TO FILE INFORMATION WITH RESPECT TO CERTAIN FOREIGN 
                    TRUSTS.

  (a) Civil Penalty.--In addition to any criminal penalty 
provided by law, if any notice or return required to be filed 
by section 6048--
          (1) is not filed on or before the time provided in 
        such section, or
          (2) does not include all the information required 
        pursuant to such section or includes incorrect 
        information,
the person required to file such notice or return shall pay a 
penalty equal to 35 percent of the gross reportable amount. If 
any failure described in the preceding sentence continues for 
more than 90 days after the day on which the Secretary mails 
notice of such failure to the person required to pay such 
penalty, such person shall pay a penalty (in addition to the 
amount determined under the preceding sentence) of $10,000 for 
each 30-day period (or fraction thereof) during which such 
failure continues after the expiration of such 90-day period. 
In no event shall the penalty under this subsection with 
respect to any failure exceed the gross reportable amount.
  (b) Special Rules for Returns Under Section 6048(b).--In the 
case of a return required under section 6048(b)--
          (1) the United States person referred to in such 
        section shall be liable for the penalty imposed by 
        subsection (a), and
          (2) subsection (a) shall be applied by substituting 
        ``5 percent'' for ``35 percent''.
  (c) Gross Reportable Amount.--For purposes of subsection (a), 
the term ``gross reportable amount'' means--
          (1) the gross value of the property involved in the 
        event (determined as of the date of the event) in the 
        case of a failure relating to section 6048(a),
          (2) the gross value of the portion of the trust's 
        assets at the close of the year treated as owned by the 
        United States person in the case of a failure relating 
        to section 6048(b)(1), and
          (3) the gross amount of the distributions in the case 
        of a failure relating to section 6048(c).
  (d) Reasonable Cause Exception.--No penalty shall be imposed 
by this section on any failure which is shown to be due to 
reasonable cause and not due to willful neglect. The fact that 
a foreign jurisdiction would impose a civil or criminal penalty 
on the taxpayer (or any other person) for disclosing the 
required information is not reasonable cause.
  (e) Deficiency Procedures Not To Apply.--Subchapter B of 
chapter 63 (relating to deficiency procedures for income, 
estate, gift, and certain excise taxes) shall not apply in 
respect of the assessment or collection of any penalty imposed 
by subsection (a).
          * * * * * * *

   PART II--FAILURE TO FILE CERTAIN INFORMATION RETURNS OF STATEMENTS

          * * * * * * *

SEC. 6724. WAIVER; DEFINITIONS AND SPECIAL RULES.

          * * * * * * *
    (d) Definitions.--For purposes of this part--
          * * * * * * *
          (2) Payee statement.--The term ``payee statement'' 
        means any statement required to be furnished under--
          * * * * * * *
                  (S) section 6053(b) or (c) (relating to 
                reports of tips), [or]
                  (T) section 4093(c)(4)(B) (relating to 
                certain purchasers of diesel and aviation 
                fuels)[.] , or
                  (U) section 6048(b)(1)(B) (relating to 
                foreign trust reporting requirements).
          * * * * * * *

                SUBTITLE F--PROCEDURE AND ADMINISTRATION

                        CHAPTER 79--DEFINITIONS

SEC. 7701. DEFINITIONS.

    (a) When used in this title, where not otherwise distinctly 
expressed or manifestly incompatible with the intent thereof--
          * * * * * * *
          (30) United states person.--The term ``United States 
        person'' means--
                  (A) a citizen or resident of the United 
                States,
                  (B) a domestic partnership,
                  (C) a domestic corporation, [and]
                  [(D) any estate or trust (other than a 
                foreign estate or foreign trust, within the 
                meaning of section 7701(a)(31)).]
                  (D) any estate (other than a foreign estate, 
                within the meaning of paragraph (31)), and
                  (E) any trust if--
                          (i) a court within the United States 
                        is able to exercise primary supervision 
                        over the administration of the trust, 
                        and
                          (ii) one or more United States 
                        fiduciaries have the authority to 
                        control all substantial decisions of 
                        the trust.
          [(31) Foreign estate or trust.--The terms ``foreign 
        estate'' and ``foreign trust'' mean an estate or trust, 
        as the case may be, the income of which, from sources 
        without the United States which is not effectively 
        connected with the conduct of a trade or business 
        within the United States, is not includible in gross 
        income under subtitle A.]
          (31) Foreign estate or trust.--
                  (A) Foreign estate.--The term ``foreign 
                estate'' means an estate the income of which, 
                from sources without the United States which is 
                not effectively connected with the conduct of a 
                trade or business within the United States, is 
                not includible in gross income under subtitle 
                A.
                  (B) Foreign trust.--The term ``foreign 
                trust'' means any trust other than a trust 
                described in subparagraph (E) of paragraph 
                (30).
          * * * * * * *

                       CHAPTER 80--GENERAL RULES

          * * * * * * *

       Subchapter C--Provisions Affecting More Than One Subtitle

SEC. 7872. TREATMENT OF LOANS WITH BELOW-MARKET INTEREST RATES.

          * * * * * * *
    (f) Other Definitions and Special Rules.--For purposes of 
this section--
          * * * * * * *
          (8) Loans to which section 483, 643(i), or 1274 
        applies. This section shall not apply to any loan to 
        which section 483, 643(i), or 1274 applies.
          * * * * * * *

                           TARIFF ACT OF 1930

          * * * * * * *

                  TITLE IV--ADMINISTRATIVE PROVISIONS

          * * * * * * *

      PART II--REPORT, ENTRY, AND UNLADING OF VESSELS AND VEHICLES

          * * * * * * *

SEC. 466. EQUIPMENT AND REPAIRS OF VESSELS.

          * * * * * * *
  (i) The duty imposed by subsection (a) shall not apply with 
respect to activities occurring in a Shipbuilding Agreement 
Party, as defined in section 861(22), with respect to--
          (1) self-propelled seagoing vessels of 100 gross tons 
        or more that are used for transportation of goods or 
        persons or for performance of a specialized service 
        (including, but not limited to, ice breakers and 
        dredges), and
          (2) tugs of 365 kilowatts or more.
A vessel shall be considered ``self-propelled seagoing'' if its 
permanent propulsion and steering provide it all the 
characteristics of self-navigability in the high seas.
          * * * * * * *

SEC. 468. SHIPBUILDING AGREEMENT COUNTERMEASURES.

  (a) In General.--Notwithstanding any other provision of law, 
upon receiving from the Secretary of Commerce a list of vessels 
subject to countermeasures under section 807, the Customs 
Service shall deny any request for a permit to lade or unlade 
passengers, merchandise, or baggage from or onto those vessels 
so listed.
  (b) Exceptions.--Subsection (a) shall not be applied to deny 
a permit for the following:
          (1) To unlade any United States citizen or permanent 
        legal resident alien from a vessel included in the list 
        described in subsection (a), or to unlade any refugee 
        or any alien who would otherwise be eligible to apply 
        for asylum and withholding of deportation under the 
        Immigration and Nationality Act.
          (2) To lade or unlade any crewmember of such vessel.
          (3) To lade or unlade coal and other fuel supplies 
        (for the operation of the listed vessel), ships' 
        stores, sea stores, and the legitimate equipment of 
        such vessel.
          (4) To lade or unlade supplies for the use or sale on 
        such vessel.
          (5) To lade or unlade such other merchandise, 
        baggage, or passenger as the Customs Service shall 
        determine necessary to protect the immediate health, 
        safety, or welfare of a human being.
  (c) Correction of Ministerial or Clerical Errors.--
          (1) Petition for correction.--If the master of any 
        vessel whose application for a permit to lade or unlade 
        has been denied under this section believes that such 
        denial resulted from a ministerial or clerical error, 
        not amounting to a mistake of law, committed by any 
        Customs officer, the master may petition the Customs 
        Service for correction of such error, as provided by 
        regulation.
          (2) Inapplicability of sections 514 and 520.--
        Notwithstanding paragraph (1), imposition of 
        countermeasures under this section shall not be deemed 
        an exclusion or other protestable decision under 
        section 514, and shall not be subject to correction 
        under section 520.
          (3) Petitions seeking administrative review.--Any 
        petition seeking administrative review of any matter 
        regarding the Secretary of Commerce's decision to list 
        a vessel under section 807 must be brought under that 
        section.
  (d) Penalties.--In addition to any other provision of law, 
the Customs Service may impose a civil penalty of not to exceed 
$10,000 against the master of any vessel--
          (1) who submits false information in requesting any 
        permit to lade or unlade; or
          (2) who attempts to, or actually does, lade or unlade 
        in violation of any denial of such permit under this 
        section.
          * * * * * * *

      PART III--ASCERTAINMENT, COLLECTION, AND RECOVERY OF DUTIES

          * * * * * * *

SEC. 516A. JUDICIAL REVIEW IN COUNTERVAILING DUTY AND ANTIDUMPING DUTY 
                    PROCEEDINGS.

          * * * * * * *

SEC. 516B. JUDICIAL REVIEW IN INJURIOUS PRICING AND COUNTERMEASURE 
                    PROCEEDINGS.

  (a) Review of Determination.--
          (1) In general.--Within 30 days after the date of 
        publication in the Federal Register of--
                  (A)(i) a determination by the administering 
                authority under section 802(c) not to initiate 
                an investigation,
                  (ii) a negative determination by the 
                Commission under section 803(a) as to whether 
                there is or has been reasonable indication of 
                material injury, threat of material injury, or 
                material retardation,
                  (iii) a determination by the administering 
                authority to suspend or revoke an injurious 
                pricing order under section 806 (d) or (e),
                  (iv) a determination by the administering 
                authority under section 807(c),
                  (v) a determination by the administering 
                authority in a review under section 807(d),
                  (vi) a determination by the administering 
                authority concerning whether to extend the 
                scope or duration of a countermeasure order 
                under section 807(e)(3)(B)(ii),
                  (vii) a determination by the administering 
                authority to amend a countermeasure order under 
                section 807(e)(6),
                  (viii) a determination by the administering 
                authority in a review under section 807(g),
                  (ix) a determination by the administering 
                authority under section 807(i) to terminate 
                proceedings, or to amend or revoke a 
                countermeasure order,
                  (x) a determination by the administering 
                authority under section 845(b), with respect to 
                a matter described in paragraph (1)(D) of that 
                section, or
                  (B)(i) an injurious pricing order based on a 
                determination described in subparagraph (A) of 
                paragraph (2),
                  (ii) notice of a determination described in 
                subparagraph (B) of paragraph (2),
                  (iii) notice of implementation of a 
                determination described in subparagraph (C) of 
                paragraph (2), or
                  (iv) notice of revocation of an injurious 
                pricing order based on a determination 
                described in subparagraph (D) of paragraph (2),
        an interested party who is a party to the proceeding in 
        connection with which the matter arises may commence an 
        action in the United States Court of International 
        Trade by filing concurrently a summons and complaint, 
        each with the content and in the form, manner, and 
        style prescribed by the rules of that court, contesting 
        any factual findings or legal conclusions upon which 
        the determination is based.
          (2) Reviewable determinations.--The determinations 
        referred to in paragraph (1)(B) are--
                  (A) a final affirmative determination by the 
                administering authority or by the Commission 
                under section 805, including any negative part 
                of such a determination (other than a part 
                referred to in subparagraph (B)),
                  (B) a final negative determination by the 
                administering authority or the Commission under 
                section 805,
                  (C) a determination by the administering 
                authority under section 845(b), with respect to 
                a matter described in paragraph (1)(A) of that 
                section, and
                  (D) a determination by the Commission under 
                section 845(a) that results in the revocation 
                of an injurious pricing order.
          (3) Exception.--Notwithstanding the 30-day limitation 
        imposed by paragraph (1) with regard to an order 
        described in paragraph (1)(B)(i), a final affirmative 
        determination by the administering authority under 
        section 805 may be contested by commencing an action, 
        in accordance with the provisions of paragraph (1), 
        within 30 days after the date of publication in the 
        Federal Register of a final negative determination by 
        the Commission under section 805.
          (4) Procedures and fees.--The procedures and fees set 
        forth in chapter 169 of title 28, United States Code, 
        apply to an action under this section.
  (b) Standards of Review.--
          (1) Remedy.--The court shall hold unlawful any 
        determination, finding, or conclusion found--
                  (A) in an action brought under subparagraph 
                (A) of subsection (a)(1), to be arbitrary, 
                capricious, an abuse of discretion, or 
                otherwise not in accordance with law, or
                  (B) in an action brought under subparagraph 
                (B) of subsection (a)(1), to be unsupported by 
                substantial evidence on the record, or 
                otherwise not in accordance with law.
          (2) Record for review.--
                  (A) In general.--For purposes of this 
                subsection, the record, unless otherwise 
                stipulated by the parties, shall consist of--
                          (i) a copy of all information 
                        presented to or obtained by the 
                        administering authority or the 
                        Commission during the course of the 
                        administrative proceeding, including 
                        all governmental memoranda pertaining 
                        to the case and the record of ex parte 
                        meetings required to be kept by section 
                        843(a)(2); and
                          (ii) a copy of the determination, all 
                        transcripts or records of conferences 
                        or hearings, and all notices published 
                        in the Federal Register.
                  (B) Confidential or privileged material.--The 
                confidential or privileged status accorded to 
                any documents, comments, or information shall 
                be preserved in any action under this section. 
                Notwithstanding the preceding sentence, the 
                court may examine, in camera, the confidential 
                or privileged material, and may disclose such 
                material under such terms and conditions as it 
                may order.
  (c) Standing.--Any interested party who was a party to the 
proceeding under title VIII shall have the right to appear and 
be heard as a party in interest before the United States Court 
of International Trade in an action under this section. The 
party filing the action shall notify all such interested 
parties of the filing of an action under this section, in the 
form, manner, and within the time prescribed by rules of the 
court.
  (d) Definitions.--For purposes of this section:
          (1) Administering authority.--The term 
        ``administering authority'' has the meaning given that 
        term in section 861(1).
          (2) Commission.--The term ``Commission'' means the 
        United States International Trade Commission.
          (3) Interested party.--The term ``interested party'' 
        means any person described in section 861(17).
          * * * * * * *

     TITLE VIII--INJURIOUS PRICING AND COUNTERMEASURES RELATING TO 
                              SHIPBUILDING

 Subtitle A--Imposition of Injurious Pricing Charge and Countermeasures

Sec. 801. Injurious pricing charge.
Sec. 802. Procedures for initiating an injurious pricing investigation.
Sec. 803. Preliminary determinations.
Sec. 804. Termination or suspension of investigation.
Sec. 805. Final determinations.
Sec. 806. Imposition and collection of injurious pricing charge.
Sec. 807. Imposition of countermeasures.
Sec. 808. Injurious pricing petitions by third countries.

                        Subtitle B--Special Rules

Sec. 821. Export price.
Sec. 822. Normal value.
Sec. 823. Currency conversion.

                         Subtitle C--Procedures

Sec. 841. Hearings.
Sec. 842. Determinations on the basis of the facts available.
Sec. 843. Access to information.
Sec. 844. Conduct of investigations.
Sec. 845. Administrative action following shipbuilding agreement panel 
          reports.

                         Subtitle D--Definitions

Sec. 861. Definitions.

 Subtitle A--Imposition of Injurious Pricing Charge and Countermeasures

SEC. 801. INJURIOUS PRICING CHARGE.

  (a) Basis for Charge.--If--
          (1) the administering authority determines that a 
        foreign vessel has been sold directly or indirectly to 
        one or more United States buyers at less than its fair 
        value, and
          (2) the Commission determines that--
                  (A) an industry in the United States--
                          (i) is or has been materially 
                        injured, or
                          (ii) is threatened with material 
                        injury, or
                  (B) the establishment of an industry in the 
                United States is or has been materially 
                retarded,
        by reason of the sale of such vessel, then there shall 
        be imposed upon the foreign producer of the subject 
        vessel an injurious pricing charge, in an amount equal 
        to the amount by which the normal value exceeds the 
        export price for the vessel. For purposes of this 
        subsection and section 805(b)(1), a reference to the 
        sale of a foreign vessel includes the creation or 
        transfer of an ownership interest in the vessel, except 
        for an ownership interest created or acquired solely 
        for the purpose of providing security for a normal 
        commercial loan.
  (b) Foreign Vessels Not Merchandise.--No foreign vessel may 
be considered to be, or to be part of, a class or kind of 
merchandise for purposes of subtitle B of title VII.

SEC. 802. PROCEDURES FOR INITIATING AN INJURIOUS PRICING INVESTIGATION.

  (a) Initiation by Administering Authority.--
          (1) General rule.--Except in the case in which 
        subsection (d)(6) applies, an injurious pricing 
        investigation shall be initiated whenever the 
        administering authority determines, from information 
        available to it, that a formal investigation is 
        warranted into the question of whether the elements 
        necessary for the imposition of a charge under section 
        801(a) exist, and whether a producer described in 
        section 861(17)(C) would meet the criteria of 
        subsection (b)(1)(B) for a petitioner.
          (2) Time for initiation by administering authority.--
        An investigation may only be initiated under paragraph 
        (1) within 6 months after the time the administering 
        authority first knew or should have known of the sale 
        of the vessel. Any period during which an investigation 
        is initiated and pending as described in subsection 
        (d)(6)(A) shall not be included in calculating that 6-
        month period.
  (b) Initiation by Petition.--
          (1) Petition requirements.--
                  (A) In general.--Except in a case in which 
                subsection (d)(6) applies, an injurious pricing 
                proceeding shall be initiated whenever an 
                interested party, as defined in subparagraph 
                (C), (D), (E), or (F) of section 861(17), files 
                a petition with the administering authority, on 
                behalf of an industry, which alleges the 
                elements necessary for the imposition of an 
                injurious pricing charge under section 801(a) 
                and the elements required under subparagraph 
                (B), (C), (D), or (E) of this paragraph, and 
                which is accompanied by information reasonably 
                available to the petitioner supporting those 
                allegations and identifying the transaction 
                concerned.
                  (B) Petitioners described in section 
                861(17)(c).--
                          (i) In general.--If the petitioner is 
                        a producer described in section 
                        861(17)(C), and--
                                  (I) if the vessel was sold 
                                through a broad multiple bid, 
                                the petition shall include 
                                information indicating that the 
                                petitioner was invited to 
                                tender a bid on the contract at 
                                issue, the petitioner actually 
                                did so, and the bid of the 
                                petitioner substantially met 
                                the delivery date and technical 
                                requirements of the bid,
                                  (II) if the vessel was sold 
                                through any bidding process 
                                other than a broad multiple bid 
                                and the petitioner was invited 
                                to tender a bid on the contract 
                                at issue, the petition shall 
                                include information indicating 
                                that the petitioner actually 
                                did so and the bid of the 
                                petitioner substantially met 
                                the delivery date and technical 
                                requirements of the bid, or
                                  (III) except in a case in 
                                which the vessel was sold 
                                through a broad multiple bid, 
                                if there is no invitation to 
                                tender a bid, the petition 
                                shall include information 
                                indicating that the petitioner 
                                was capable of building the 
                                vessel concerned and, if the 
                                petitioner knew or should have 
                                known of the proposed purchase, 
                                it made demonstrable efforts to 
                                conclude a sale with the United 
                                States buyer consistent with 
                                the delivery date and technical 
                                requirements of the buyer.
                          (ii) Rebuttable presumption regarding 
                        knowledge of proposed purchase.--For 
                        purposes of clause (i)(III), there is a 
                        rebuttable presumption that the 
                        petitioner knew or should have known of 
                        the proposed purchase if it is 
                        demonstrated that--
                                  (I) the majority of the 
                                producers in the industry have 
                                made efforts with the United 
                                States buyer to conclude a sale 
                                of the subject vessel, or
                                  (II) general information on 
                                the sale was available from 
                                brokers, financiers, 
                                classification societies, 
                                charterers, trade associations, 
                                or other entities normally 
                                involved in shipbuilding 
                                transactions with whom the 
                                petitioner had regular contacts 
                                or dealings.
                  (C) Petitioners described in section 
                861(17)(d).--If the petitioner is an interested 
                party described in section 861(17)(D), the 
                petition shall include information indicating 
                that members of the union or group of workers 
                described in that section are employed by a 
                producer that meets the requirements of 
                subparagraph (B) of this paragraph.
                  (D) Petitioners described in section 
                861(17)(e).--If the petitioner is an interested 
                party described in section 861(17)(E), the 
                petition shall include information indicating 
                that a member of the association described in 
                that section is a producer that meets the 
                requirements of subparagraph (B) of this 
                paragraph.
                  (E) Petitioners described in section 
                861(17)(f).--If the petitioner is an interested 
                party described in section 861(17)(F), the 
                petition shall include information indicating 
                that a member of the association described in 
                that section meets the requirements of 
                subparagraph (C) or (D) of this paragraph.
                  (F) Amendments.--The petition may be amended 
                at such time, and upon such conditions, as the 
                administering authority and the Commission may 
                permit.
          (2) Simultaneous filing with commission.--The 
        petitioner shall file a copy of the petition with the 
        Commission on the same day as it is filed with the 
        administering authority.
          (3) Deadline for filing petition.--
                  (A) Deadline.--(i) A petitioner to which 
                paragraph (1)(B) (i) (I) or (II) applies shall 
                file the petition no later than the earlier 
                of--
                          (I) 6 months after the time that the 
                        petitioner first knew or should have 
                        known of the sale of the subject 
                        vessel, or
                          (II) 6 months after delivery of the 
                        subject vessel.
                  (ii) A petitioner to which paragraph 
                (1)(B)(i)(III) applies shall--
                          (I) file the petition no later than 
                        the earlier of 9 months after the time 
                        that the petitioner first knew or 
                        should have known of the sale of the 
                        subject vessel, or 6 months after 
                        delivery of the subject vessel, and
                          (II) submit to the administering 
                        authority a notice of intent to file a 
                        petition no later than 6 months after 
                        the time that the petitioner first knew 
                        or should have known of the sale 
                        (unless the petition itself is filed 
                        within that 6-month period).
                  (B) Presumption of knowledge.--For purposes 
                of this paragraph, if the existence of the 
                sale, together with general information 
                concerning the vessel, is published in the 
                international trade press, there is a 
                rebuttable presumption that the petitioner knew 
                or should have known of the sale of the vessel 
                from the date of that publication.
  (c) Actions Before Initiating Investigations.--
          (1) Notification of governments.--Before initiating 
        an investigation under either subsection (a) or (b), 
        the administering authority shall notify the government 
        of the exporting country of the investigation. In the 
        case of the initiation of an investigation under 
        subsection (b), such notification shall include a 
        public version of the petition.
          (2) Acceptance of communications.--The administering 
        authority shall not accept any unsolicited oral or 
        written communication from any person other than an 
        interested party described in section 861(17) (C), (D), 
        (E), or (F) before the administering authority makes 
        its decision whether to initiate an investigation 
        pursuant to a petition, except for inquiries regarding 
        the status of the administering authority's 
        consideration of the petition or a request for 
        consultation by the government of the exporting 
        country.
          (3) Nondisclosure of certain information.--The 
        administering authority and the Commission shall not 
        disclose information with regard to any draft petition 
        submitted for review and comment before it is filed 
        under subsection (b)(1).
  (d) Petition Determination.--
           (1) Time for initial determination.--
                  (A) In general.--Within 45 days after the 
                date on which a petition is filed under 
                subsection (b), the administering authority 
                shall, after examining, on the basis of sources 
                readily available to the administering 
                authority, the accuracy and adequacy of the 
                evidence provided in the petition, determine 
                whether the petition--
                          (i) alleges the elements necessary 
                        for the imposition of an injurious 
                        pricing charge under section 801(a) and 
                        the elements required under subsection 
                        (b)(1)(B), (C), (D), or (E), and 
                        contains information reasonably 
                        available to the petitioner supporting 
                        the allegations; and
                          (ii) determine if the petition has 
                        been filed by or on behalf of the 
                        industry.
                  (B) Calculation of 45-day period.--Any period 
                in which paragraph (6)(A) applies shall not be 
                included in calculating the 45-day period 
                described in subparagraph (A).
          (2) Affirmative determinations.--If the 
        determinations under clauses (i) and (ii) of paragraph 
        (1)(A) are affirmative, the administering authority 
        shall initiate an investigation to determine whether 
        the vessel was sold at less than fair value, unless 
        paragraph (6) applies.
          (3) Negative determinations.--If--
                  (A) the determination under clause (i) or 
                (ii) of paragraph (1)(A) is negative, or
                  (B) paragraph (6)(B) applies,
        the administering authority shall dismiss the petition, 
        terminate the proceeding, and notify the petitioner in 
        writing of the reasons for the determination.
          (4) Determination of industry support.--
                  (A) General rule.--For purposes of this 
                subsection, the administering authority shall 
                determine that the petition has been filed by 
                or on behalf of the domestic industry, if--
                          (i) the domestic producers or workers 
                        who support the petition collectively 
                        account for at least 25 percent of the 
                        total capacity of domestic producers 
                        capable of producing a like vessel, and
                          (ii) the domestic producers or 
                        workers who support the petition 
                        collectively account for more than 50 
                        percent of the total capacity to 
                        produce a like vessel of that portion 
                        of the domestic industry expressing 
                        support for or opposition to the 
                        petition.
                  (B) Certain positions disregarded.--In 
                determining industry support under subparagraph 
                (A), the administering authority shall 
                disregard the position of domestic producers 
                who oppose the petition, if such producers are 
                related to the foreign producer or United 
                States buyer of the subject vessel, or the 
                domestic producer is itself the United States 
                buyer, unless such domestic producers 
                demonstrate that their interests as domestic 
                producers would be adversely affected by the 
                imposition of an injurious pricing charge.
                  (C) Polling the industry.--If the petition 
                does not establish support of domestic 
                producers or workers accounting for more than 
                50 percent of the total capacity to produce a 
                like vessel--
                          (i) the administering authority shall 
                        poll the industry or rely on other 
                        information in order to determine if 
                        there is support for the petition as 
                        required by subparagraph (A), or
                          (ii) if there is a large number of 
                        producers in the industry, the 
                        administering authority may determine 
                        industry support for the petition by 
                        using any statistically valid sampling 
                        method to poll the industry.
                  (D) Comments by interested parties.--Before 
                the administering authority makes a 
                determination with respect to initiating an 
                investigation, any person who would qualify as 
                an interested party under section 861(17) if an 
                investigation were initiated, may submit 
                comments or information on the issue of 
                industry support. After the administering 
                authority makes a determination with respect to 
                initiating an investigation, the determination 
                regarding industry support shall not be 
                reconsidered.
          (5) Definition of domestic producers or workers.--For 
        purposes of this subsection, the term `domestic 
        producers or workers' means interested parties as 
        defined in section 861(17)(C), (D), (E), or (F).
          (6) Proceedings by wto members.--The administering 
        authority shall not initiate an investigation under 
        this section if, with respect to the vessel sale at 
        issue, an antidumping proceeding conducted by a WTO 
        member who is not a Shipbuilding Agreement Party--
                  (A) has been initiated and has been pending 
                for not more than one year, or
                  (B) has been completed and resulted in the 
                imposition of antidumping measures or a 
                negative determination with respect to whether 
                the sale was at less than fair value or with 
                respect to injury.
  (e) Notification to Commission of Determination.--The 
administering authority shall--
          (1) notify the Commission immediately of any 
        determination it makes under subsection (a) or (d), and
          (2) if the determination is affirmative, make 
        available to the Commission such information as it may 
        have relating to the matter under investigation, under 
        such procedures as the administering authority and the 
        Commission may establish to prevent disclosure, other 
        than with the consent of the party providing it or 
        under protective order, of any information to which 
        confidential treatment has been given by the 
        administering authority.

SEC. 803. PRELIMINARY DETERMINATIONS.

  (a) Determination by Commission of Reasonable Indication of 
Injury.--
          (1) General rule.--Except in the case of a petition 
        dismissed by the administering authority under section 
        802(d)(3), the Commission, within the time specified in 
        paragraph (2), shall determine, based on the 
        information available to it at the time of the 
        determination, whether there is a reasonable indication 
        that--
                  (A) an industry in the United States--
                          (i) is or has been materially 
                        injured, or
                          (ii) is threatened with material 
                        injury, or
                  (B) the establishment of an industry in the 
                United States is or has been materially 
                retarded,
        by reason of the sale of the subject vessel. If the 
        Commission makes a negative determination under this 
        paragraph, the investigation shall be terminated.
          (2) Time for commission determination.--The 
        Commission shall make the determination described in 
        paragraph (1) within 90 days after the date on which 
        the petition is filed or, in the case of an 
        investigation initiated under section 802(a), within 90 
        days after the date on which the Commission receives 
        notice from the administering authority that the 
        investigation has been initiated under such section.
  (b) Preliminary Determination by Administering Authority.--
          (1) Period of injurious pricing investigation.--
                  (A) In general.--The administering authority 
                shall make a determination, based upon the 
                information available to it at the time of the 
                determination, of whether there is a reasonable 
                basis to believe or suspect that the subject 
                vessel was sold at less than fair value.
                  (B) Cost data used for normal value.--If cost 
                data is required to determine normal value on 
                the basis of a sale of a foreign like vessel 
                that has not been delivered on or before the 
                date on which the administering authority 
                initiates the investigation, the administering 
                authority shall make its determination within 
                160 days after the date of delivery of the 
                foreign like vessel.
                  (C) Normal value based on constructed 
                value.--If normal value is to be determined on 
                the basis of constructed value, the 
                administering authority shall make its 
                determination within 160 days after the date of 
                delivery of the subject vessel.
                  (D) Other cases.--In cases in which 
                subparagraph (B) or (C) does not apply, the 
                administering authority shall make its 
                determination within 160 days after the date on 
                which the administering authority initiates the 
                investigation under section 802.
                  (E) Affirmative determination by commission 
                required.--In no event shall the administering 
                authority make its determination before an 
                affirmative determination is made by the 
                Commission under subsection (a).
          (2) De minimis injurious pricing margin.--In making a 
        determination under this subsection, the administering 
        authority shall disregard any injurious pricing margin 
        that is de minimis. For purposes of the preceding 
        sentence, an injurious pricing margin is de minimis if 
        the administering authority determines that the 
        injurious pricing margin is less than 2 percent of the 
        export price.
  (c) Extension of Period in Extraordinarily Complicated Cases 
or for Good Cause.--
          (1) In general.--If--
                  (A) the administering authority concludes 
                that the parties concerned are cooperating and 
                determines that--
                          (i) the case is extraordinarily 
                        complicated by reason of--
                                  (I) the novelty of the issues 
                                presented, or
                                  (II) the nature and extent of 
                                the information required, and
                          (ii) additional time is necessary to 
                        make the preliminary determination, or
                  (B) a party to the investigation requests an 
                extension and demonstrates good cause for the 
                extension,
        then the administering authority may postpone the time 
        for making its preliminary determination.
          (2) Length of postponement.--The preliminary 
        determination may be postponed under paragraph (1)(A) 
        or (B) until not later than the 190th day after--
                  (A) the date of delivery of the foreign like 
                vessel, if subsection (b)(1)(B) applies,
                  (B) the date of delivery of the subject 
                vessel, if subsection (b)(1)(C) applies, or
                  (C) the date on which the administering 
                authority initiates an investigation under 
                section 802, in a case in which subsection 
                (b)(1)(D) applies.
          (3) Notice of postponement.--The administering 
        authority shall notify the parties to the 
        investigation, not later than 20 days before the date 
        on which the preliminary determination would otherwise 
        be required under subsection (b)(1), if it intends to 
        postpone making the preliminary determination under 
        paragraph (1). The notification shall include an 
        explanation of the reasons for the postponement, and 
        notice of the postponement shall be published in the 
        Federal Register.
  (d) Effect of Determination by the Administering Authority.--
If the preliminary determination of the administering authority 
under subsection (b) is affirmative, the administering 
authority shall--
          (1) determine an estimated injurious pricing margin, 
        and
          (2) make available to the Commission all information 
        upon which its determination was based and which the 
        Commission considers relevant to its injury 
        determination, under such procedures as the 
        administering authority and the Commission may 
        establish to prevent disclosure, other than with the 
        consent of the party providing it or under protective 
        order, of any information to which confidential 
        treatment has been given by the administering 
        authority.
  (e) Notice of Determination.--Whenever the Commission or the 
administering authority makes a determination under this 
section, the Commission or the administering authority, as the 
case may be, shall notify the petitioner, and other parties to 
the investigation, and the Commission or the administering 
authority (whichever is appropriate) of its determination. The 
administering authority shall include with such notification 
the facts and conclusions on which its determination is based. 
Not later than 5 days after the date on which the determination 
is required to be made under subsection (a)(2), the Commission 
shall transmit to the administering authority the facts and 
conclusions on which its determination is based.

SEC. 804. TERMINATION OR SUSPENSION OF INVESTIGATION.

  (a) Termination of Investigation Upon Withdrawal of 
Petition.--
          (1) In general.--Except as provided in paragraph (2), 
        an investigation under this subtitle may be terminated 
        by either the administering authority or the 
        Commission, after notice to all parties to the 
        investigation, upon withdrawal of the petition by the 
        petitioner.
          (2) Limitation on termination by commission.--The 
        Commission may not terminate an investigation under 
        paragraph (1) before a preliminary determination is 
        made by the administering authority under section 
        803(b).
  (b) Termination of Investigations Initiated by Administering 
Authority.--The administering authority may terminate any 
investigation initiated by the administering authority under 
section 802(a) after providing notice of such termination to 
all parties to the investigation.
  (c) Alternate Equivalent Remedy.--The criteria set forth in 
subparagraphs (A) through (D) of section 806(e)(1) shall apply 
to any agreement that forms the basis for termination of an 
investigation under subsection (a) or (b).
  (d) Proceedings by WTO Members.--
          (1) Suspension of investigation.--The administering 
        authority and the Commission shall suspend an 
        investigation under this section if a WTO member that 
        is not a Shipbuilding Agreement Party initiates an 
        antidumping proceeding described in section 861(30)(A) 
        with respect to the sale of the subject vessel.
          (2) Termination of investigation.--If an antidumping 
        proceeding described in paragraph (1) is concluded by--
                  (A) the imposition of antidumping measures, 
                or
                  (B) a negative determination with respect to 
                whether the sale is at less than fair value or 
                with respect to injury,
        the administering authority and the Commission shall 
        terminate the investigation under this section.
          (3) Continuation of investigation.--(A) If such a 
        proceeding--
                  (i) is concluded by a result other than a 
                result described in paragraph (2), or
                  (ii) is not concluded within one year from 
                the date of the initiation of the proceeding,
        then the administering authority and the Commission 
        shall terminate the suspension and continue the 
        investigation. The period in which the investigation 
        was suspended shall not be included in calculating 
        deadlines applicable with respect to the investigation.
          (B) Notwithstanding subparagraph (A)(ii), if the 
        proceeding is concluded by a result described in 
        paragraph (2)(A), the administering authority and the 
        Commission shall terminate the investigation under this 
        section.

SEC. 805. FINAL DETERMINATIONS.

  (a) Determinations by Administering Authority.--
          (1) In general.--Within 75 days after the date of its 
        preliminary determination under section 803(b), the 
        administering authority shall make a final 
        determination of whether the vessel which is the 
        subject of the investigation has been sold in the 
        United States at less than its fair value.
          (2) Extension of period for determination.--
                  (A) General rule.--The administering 
                authority may postpone making the final 
                determination under paragraph (1) until not 
                later than 290 days after--
                          (i) the date of delivery of the 
                        foreign like vessel, in an 
                        investigation to which section 
                        803(b)(1)(B) applies,
                          (ii) the date of delivery of the 
                        subject vessel, in an investigation to 
                        which section 803(b)(1)(C) applies, or
                          (iii) the date on which the 
                        administering authority initiates the 
                        investigation under section 802, in an 
                        investigation to which section 
                        803(b)(1)(D) applies.
                  (B) Request required.--The administering 
                authority may apply subparagraph (A) if a 
                request in writing is made by--
                          (i) the producer of the subject 
                        vessel, in a proceeding in which the 
                        preliminary determination by the 
                        administering authority under section 
                        803(b) was affirmative, or
                          (ii) the petitioner, in a proceeding 
                        in which the preliminary determination 
                        by the administering authority under 
                        section 803(b) was negative.
          (3) De minimis injurious pricing margin.--In making a 
        determination under this subsection, the administering 
        authority shall disregard any injurious pricing margin 
        that is de minimis as defined in section 803(b)(2).
  (b) Final Determination by Commission.--
          (1) In general.--The Commission shall make a final 
        determination of whether--
                  (A) an industry in the United States--
                          (i) is or has been materially 
                        injured, or
                          (ii) is threatened with material 
                        injury, or
                  (B) the establishment of an industry in the 
                United States is or has been materially 
                retarded,
        by reason of the sale of the vessel with respect to 
        which the administering authority has made an 
        affirmative determination under subsection (a)(1).
          (2) Period for injury determination following 
        affirmative preliminary determination by administering 
        authority.--If the preliminary determination by the 
        administering authority under section 803(b) is 
        affirmative, then the Commission shall make the 
        determination required by paragraph (1) before the 
        later of--
                  (A) the 120th day after the day on which the 
                administering authority makes its affirmative 
                preliminary determination under section 803(b), 
                or
                  (B) the 45th day after the day on which the 
                administering authority makes its affirmative 
                final determination under subsection (a).
          (3) Period for injury determination following 
        negative preliminary determination by administering 
        authority.--If the preliminary determination by the 
        administering authority under section 803(b) is 
        negative, and its final determination under subsection 
        (a) is affirmative, then the final determination by the 
        Commission under this subsection shall be made within 
        75 days after the date of that affirmative final 
        determination.
  (c) Effect of Final Determinations.--
          (1) Effect of affirmative determination by the 
        administering authority.--If the determination of the 
        administering authority under subsection (a) is 
        affirmative, then the administering authority shall--
                  (A) make available to the Commission all 
                information upon which such determination was 
                based and which the Commission considers 
                relevant to its determination, under such 
                procedures as the administering authority and 
                the Commission may establish to prevent 
                disclosure, other than with the consent of the 
                party providing it or under protective order, 
                of any information as to which confidential 
                treatment has been given by the administering 
                authority, and
                  (B) calculate an injurious pricing charge in 
                an amount equal to the amount by which the 
                normal value exceeds the export price of the 
                subject vessel.
          (2) Issuance of order; effect of negative 
        determination.--If the determinations of the 
        administering authority and the Commission under 
        subsections (a)(1) and (b)(1) are affirmative, then the 
        administering authority shall issue an injurious 
        pricing order under section 806. If either of such 
        determinations is negative, the investigation shall be 
        terminated upon the publication of notice of that 
        negative determination.
  (d) Publication of Notice of Determinations.--Whenever the 
administering authority or the Commission makes a determination 
under this section, it shall notify the petitioner, other 
parties to the investigation, and the other agency of its 
determination and of the facts and conclusions of law upon 
which the determination is based, and it shall publish notice 
of its determination in the Federal Register.
  (e) Correction of Ministerial Errors.--The administering 
authority shall establish procedures for the correction of 
ministerial errors in final determinations within a reasonable 
time after the determinations are issued under this section. 
Such procedures shall ensure opportunity for interested parties 
to present their views regarding any such errors. As used in 
this subsection, the term ``ministerial error'' includes errors 
in addition, subtraction, or other arithmetic function, 
clerical errors resulting from inaccurate copying, duplication, 
or the like, and any other type of unintentional error which 
the administering authority considers ministerial.

SEC. 806. IMPOSITION AND COLLECTION OF INJURIOUS PRICING CHARGE.

  (a) In General.--Within 7 days after being notified by the 
Commission of an affirmative determination under section 
805(b), the administering authority shall publish an order 
imposing an injurious pricing charge on the foreign producer of 
the subject vessel which--
          (1) directs the foreign producer of the subject 
        vessel to pay to the Secretary of the Treasury, or the 
        designee of the Secretary, within 180 days from the 
        date of publication of the order, an injurious pricing 
        charge in an amount equal to the amount by which the 
        normal value exceeds the export price of the subject 
        vessel,
          (2) includes the identity and location of the foreign 
        producer and a description of the subject vessel, in 
        such detail as the administering authority deems 
        necessary, and
          (3) informs the foreign producer that--
                  (A) failure to pay the injurious pricing 
                charge in a timely fashion may result in the 
                imposition of countermeasures with respect to 
                that producer under section 807,
                  (B) payment made after the deadline described 
                in paragraph (1) shall be subject to interest 
                charges at the Commercial Interest Reference 
                Rate (CIRR), and
                  (C) the foreign producer may request an 
                extension of the due date for payment under 
                subsection (b).
  (b) Extension of Due Date for Payment in Extraordinary 
Circumstances.--
          (1) Extension.--Upon request, the administering 
        authority may amend the order under subsection (a) to 
        set a due date for payment or payments later than the 
        date that is 180 days from the date of publication of 
        the order, if the administering authority determines 
        that full payment in 180 days would render the producer 
        insolvent or would be incompatible with a judicially 
        supervised reorganization. When an extended payment 
        schedule provides for a series of partial payments, the 
        administering authority shall specify the circumstances 
        under which default on one or more payments will result 
        in the imposition of countermeasures.
          (2) Interest charges.--If a request is granted under 
        paragraph (1), payments made after the date that is 180 
        days from the publication of the order shall be subject 
        to interest charges at the CIRR.
  (c) Notification of Order.--The administering authority shall 
deliver a copy of the order requesting payment to the foreign 
producer of the subject vessel and to an appropriate 
representative of the government of the exporting country.
  (d) Revocation of Order.--The administering authority--
          (1) may revoke an injurious pricing order if the 
        administering authority determines that producers 
        accounting for substantially all of the capacity to 
        produce a domestic like vessel have expressed a lack of 
        interest in the order, and
          (2) shall revoke an injurious pricing order--
                  (A) if the sale of the vessel that was the 
                subject of the injurious pricing determination 
                is voided,
                  (B) if the injurious pricing charge is paid 
                in full, including any interest accrued for 
                late payment,
                  (C) upon full implementation of an 
                alternative equivalent remedy described in 
                subsection (e), or
                  (D) if, with respect to the vessel sale that 
                was at issue in the investigation that resulted 
                in the injurious pricing order, an antidumping 
                proceeding conducted by a WTO member who is not 
                a Shipbuilding Agreement Party has been 
                completed and resulted in the imposition of 
                antidumping measures.
  (e) Alternative Equivalent Remedy.--
          (1) Agreement for alternate remedy.--The 
        administering authority may suspend an injurious 
        pricing order if the administering authority enters 
        into an agreement with the foreign producer subject to 
        the order on an alternative equivalent remedy, that the 
        administering authority determines--
                  (A) is at least as effective a remedy as the 
                injurious pricing charge,
                  (B) is in the public interest,
                  (C) can be effectively monitored and 
                enforced, and
                  (D) is otherwise consistent with the domestic 
                law and international obligations of the United 
                States.
          (2) Prior consultations and submission of comments.--
        Before entering into an agreement under paragraph (1), 
        the administering authority shall consult with the 
        industry, and provide for the submission of comments by 
        interested parties, with respect to the agreement.
          (3) Material violations of agreement.--If the 
        injurious pricing order has been suspended under 
        paragraph (1), and the administering authority 
        determines that the foreign producer concerned has 
        materially violated the terms of the agreement under 
        paragraph (1), the administering authority shall 
        terminate the suspension.

SEC. 807. IMPOSITION OF COUNTERMEASURES.

  (a) General Rule.--
          (1) Issuance of order imposing countermeasures.--
        Unless an injurious pricing order is revoked or 
        suspended under section 806 (d) or (e), the 
        administering authority shall issue an order imposing 
        countermeasures.
          (2) Contents of order.--The countermeasure order 
        shall--
                  (A) state that, as provided in section 468, a 
                permit to lade or unlade passengers or 
                merchandise may not be issued with respect to 
                vessels contracted to be built by the foreign 
                producer of the vessel with respect to which an 
                injurious pricing order was issued under 
                section 806, and
                  (B) specify the scope and duration of the 
                prohibition on the issuance of a permit to lade 
                or unlade passengers or merchandise.
  (b) Notice of Intent To Impose Countermeasures.--
          (1) General rule.--The administering authority shall 
        issue a notice of intent to impose countermeasures not 
        later than 30 days before the expiration of the time 
        for payment specified in the injurious pricing order 
        (or extended payment provided for under section 
        806(b)), and shall publish the notice in the Federal 
        Register within 7 days after issuing the notice.
          (2) Elements of the notice of intent.--The notice of 
        intent shall contain at least the following elements:
                  (A) Scope.--A permit to lade or unlade 
                passengers or merchandise may not be issued 
                with respect to any vessel--
                          (i) built by the foreign producer 
                        subject to the proposed 
                        countermeasures, and
                          (ii) with respect to which the 
                        material terms of sale are established 
                        within a period of 4 consecutive years 
                        beginning on the date that is 30 days 
                        after publication in the Federal 
                        Register of the notice of intent 
                        described in paragraph (1).
                  (B) Duration.--For each vessel described in 
                subparagraph (A), a permit to lade or unlade 
                passengers or merchandise may not be issued for 
                a period of 4 years after the date of delivery 
                of the vessel.
  (c) Determination To Impose Countermeasures; Order.--
          (1) General rule.--The administering authority shall, 
        within the time specified in paragraph (2), issue a 
        determination and order imposing countermeasures.
          (2) Time for determination.--The determination shall 
        be issued within 90 days after the date on which the 
        notice of intent to impose countermeasures under 
        subsection (b) is published in the Federal Register. 
        The administering authority shall publish the 
        determination, and the order described in paragraph 
        (4), in the Federal Register within 7 days after 
        issuing the final determination, and shall provide a 
        copy of the determination and order to the Customs 
        Service.
          (3) Content of the determination.--In the 
        determination imposing countermeasures, the 
        administering authority shall determine whether, in 
        light of all of the circumstances, an interested party 
        has demonstrated that the scope or duration of the 
        countermeasures described in subsection (b)(2) should 
        be narrower or shorter than the scope or duration set 
        forth in the notice of intent to impose 
        countermeasures.
          (4) Order.--At the same time it issues its 
        determination, the administering authority shall issue 
        an order imposing countermeasures, consistent with its 
        determination under paragraph (1).
  (d) Administrative Review of Determination To Impose 
Countermeasures.--
          (1) Request for review.--Each year, in the 
        anniversary month of the issuance of the order imposing 
        countermeasures under subsection (c), the administering 
        authority shall publish in the Federal Register a 
        notice providing that interested parties may request--
                  (A) a review of the scope or duration of the 
                countermeasures determined under subsection 
                (c)(3), and
                  (B) a hearing in connection with such a 
                review.
          (2) Review.--If a proper request has been received 
        under paragraph (1), the administering authority 
        shall--
                  (A) publish notice of initiation of a review 
                in the Federal Register not later than 15 days 
                after the end of the anniversary month of the 
                issuance of the order imposing countermeasures, 
                and
                  (B) review and determine whether the 
                requesting party has demonstrated that the 
                scope or duration of the countermeasures is 
                excessive in light of all of the circumstances.
          (3) Time for review.--The administering authority 
        shall make its determination under paragraph (2)(B) 
        within 90 days after the date on which the notice of 
        initiation of the review is published. If the 
        determination under paragraph (2)(B) is affirmative, 
        the administering authority shall amend the order 
        accordingly. The administering authority shall promptly 
        publish the determination and any amendment to the 
        order in the Federal Register, and shall provide a copy 
        of any amended order to the Customs Service. In 
        extraordinary circumstances, the administering 
        authority may extend the time for its determination 
        under paragraph (2)(B) to not later than 150 days after 
        the date on which the notice of initiation of the 
        review is published.
  (e) Extension of Countermeasures.--
          (1) Request for extension.--Within the time described 
        in paragraph (2), an interested party may file with the 
        administering authority a request that the scope or 
        duration of countermeasures be extended.
          (2) Deadline for request for extension.--
                  (A) Request for extension beyond 4 years.--If 
                the request seeks an extension that would cause 
                the scope or duration of countermeasures to 
                exceed 4 years, including any prior extensions, 
                the request for extension under paragraph (1) 
                shall be filed not earlier than the date that 
                is 15 months, and not later than the date that 
                is 12 months, before the date that marks the 
                end of the period that specifies the vessels 
                that fall within the scope of the order by 
                virtue of the establishment of material terms 
                of sale within that period.
                  (B) Other requests.--If the request seeks an 
                extension under paragraph (1) other than one 
                described in subparagraph (A), the request 
                shall be filed not earlier than the date that 
                is 6 months, and not later than a date that is 
                3 months, before the date that marks the end of 
                the period referred to in subparagraph (A).
          (3) Determination.--
                  (A) Notice of request for extension.--If a 
                proper request has been received under 
                paragraph (1), the administering authority 
                shall publish notice of initiation of an 
                extension proceeding in the Federal Register 
                not later than 15 days after the applicable 
                deadline in paragraph (2) for requesting the 
                extension.
                  (B) Procedures.--
                          (i) Requests for extension beyond 4 
                        years.--If paragraph (2)(A) applies to 
                        the request, the administering 
                        authority shall consult with the Trade 
                        Representative under paragraph (4).
                          (ii) Other requests.--If paragraph 
                        (2)(B) applies to the request, the 
                        administering authority shall 
                        determine, within 90 days after the 
                        date on which the notice of initiation 
                        of the proceeding is published, whether 
                        the requesting party has demonstrated 
                        that the scope or duration of the 
                        countermeasures is inadequate in light 
                        of all of the circumstances. If the 
                        administering authority determines that 
                        an extension is warranted, it shall 
                        amend the countermeasure order 
                        accordingly. The administering 
                        authority shall promptly publish the 
                        determination and any amendment to the 
                        order in the Federal Register, and 
                        shall provide a copy of any amended 
                        order to the Customs Service.
          (4) Consultation with trade representative.--If 
        paragraph (3)(B)(i) applies, the administering 
        authority shall consult with the Trade Representative 
        concerning whether it would be appropriate to request 
        establishment of a dispute settlement panel under the 
        Shipbuilding Agreement for the purpose of seeking 
        authorization to extend the scope or duration of 
        countermeasures for a period in excess of 4 years.
          (5) Decision not to request panel.--If, based on 
        consultations under paragraph (4), the Trade 
        Representative decides not to request establishment of 
        a panel, the Trade Representative shall inform the 
        party requesting the extension of the countermeasures 
        of the reasons for its decision in writing. The 
        decision shall not be subject to judicial review.
          (6) Panel proceedings.--If, based on consultations 
        under paragraph (4), the Trade Representative requests 
        the establishment of a panel under the Shipbuilding 
        Agreement to authorize an extension of the period of 
        countermeasures, and the panel authorizes such an 
        extension, the administering authority shall promptly 
        amend the countermeasure order. The administering 
        authority shall publish notice of the amendment in the 
        Federal Register.
  (f) List of Vessels Subject to Countermeasures.--
          (1) General rule.--At least once during each 12-month 
        period beginning on the anniversary date of a 
        determination to impose countermeasures under this 
        section, the administering authority shall publish in 
        the Federal Register a list of all delivered vessels 
        subject to countermeasures under the determination.
          (2) Content of list.--The list under paragraph (1) 
        shall include the following information for each 
        vessel, to the extent the information is available:
                  (A) The name and general description of the 
                vessel.
                  (B) The vessel identification number.
                  (C) The shipyard where the vessel was 
                constructed.
                  (D) The last-known registry of the vessel.
                  (E) The name and address of the last-known 
                owner of the vessel.
                  (F) The delivery date of the vessel.
                  (G) The remaining duration of countermeasures 
                on the vessel.
                  (H) Any other identifying information 
                available.
          (3) Amendment of list.---The administering authority 
        may amend the list from time to time to reflect new 
        information that comes to its attention and shall 
        publish any amendments in the Federal Register.
          (4) Service of list and amendments.--
                  (A) Service of list.--The administering 
                authority shall serve a copy of the list 
                described in paragraph (1) on--
                          (i) the petitioner under section 
                        802(b),
                          (ii) the United States Customs 
                        Service,
                          (iii) the Secretariat of the 
                        Organization for Economic Cooperation 
                        and Development,
                          (iv) the owners of vessels on the 
                        list,
                          (v) the shipyards on the list, and
                          (vi) the government of the country in 
                        which a shipyard on the list is 
                        located.
                  (B) Service of amendments.--The administering 
                authority shall serve a copy of any amendments 
                to the list under paragraph (3) or subsection 
                (g)(3) on--
                          (i) the parties listed in clauses 
                        (i), (ii), and (iii) of subparagraph 
                        (A), and
                          (ii) if the amendment affects their 
                        interests, the parties listed in 
                        clauses (iv), (v), and (vi) of 
                        subparagraph (A).
  (g) Administrative Review of List of Vessels Subject to 
Countermeasures.--
          (1) Request for review.--
                  (A) In general.--An interested party may 
                request in writing a review of the list 
                described in subsection (f)(1), including any 
                amendments thereto, to determine whether--
                          (i) a vessel included in the list 
                        does not fall within the scope of the 
                        applicable countermeasure order and 
                        should be deleted, or
                          (ii) a vessel not included in the 
                        list falls within the scope of the 
                        applicable countermeasure order and 
                        should be added.
                  (B) Time for making request.--Any request 
                seeking a determination described in 
                subparagraph (A)(i) shall be made within 90 
                days after the date of publication of the 
                applicable list.
          (2) Review.--If a proper request for review has been 
        received, the administering authority shall--
                  (A) publish notice of initiation of a review 
                in the Federal Register--
                          (i) not later than 15 days after the 
                        request is received, or
                          (ii) if the request seeks a 
                        determination described in paragraph 
                        (1)(A)(i), not later than 15 days after 
                        the deadline described in paragraph 
                        (1)(B), and
                  (B) review and determine whether the 
                requesting party has demonstrated that--
                          (i) a vessel included in the list 
                        does not qualify for such inclusion, or
                          (ii) a vessel not included in the 
                        list qualifies for inclusion.
          (3) Time for determination.--The administering 
        authority shall make its determination under paragraph 
        (2)(B) within 90 days after the date on which the 
        notice of initiation of such review is published. If 
        the administering authority determines that a vessel 
        should be added or deleted from the list, the 
        administering authority shall amend the list 
        accordingly. The administering authority shall promptly 
        publish in the Federal Register the determination and 
        any such amendment to the list.
  (h) Expiration of Countermeasures.--Upon expiration of a 
countermeasure order imposed under this section, the 
administering authority shall promptly publish a notice of the 
expiration in the Federal Register.
  (i) Suspension or Termination of Proceedings or 
Countermeasures; Temporary Reduction of Countermeasures.--
          (1) If injurious pricing order revoked or 
        suspended.--If an injurious pricing order has been 
        revoked or suspended under section 806(d) or (e), the 
        administering authority shall, as appropriate, suspend 
        or terminate proceedings under this section with 
        respect to that order, or suspend or revoke a 
        countermeasure order issued with respect to that 
        injurious pricing order.
          (2) If payment date amended.--
                  (A) Suspension or modification of deadline.--
                Subject to subparagraph (C), if the payment 
                date under an injurious pricing order is 
                amended under section 845, the administering 
                authority shall, as appropriate, suspend 
                proceedings or modify deadlines under this 
                section, or suspend or amend a countermeasure 
                order issued with respect to that injurious 
                pricing order.
                  (B) Date for application of countermeasure.--
                In taking action under subparagraph (A), the 
                administering authority shall ensure that 
                countermeasures are not applied before the date 
                that is 30 days after publication in the 
                Federal Register of the amended payment date.
                  (C) Reinstitution of proceedings.--If--
                          (i) a countermeasure order is issued 
                        under subsection (c) before an 
                        amendment is made under section 845 to 
                        the payment date of the injurious 
                        pricing order to which the 
                        countermeasure order applies, and
                          (ii) the administering authority 
                        determines that the period of time 
                        between the original payment date and 
                        the amended payment date is significant 
                        for purposes of determining the 
                        appropriate scope or duration of 
                        countermeasures,
                the administering authority may, in lieu of 
                acting under subparagraph (A), reinstitute 
                proceedings under subsection (c) for purposes 
                of issuing a new determination under that 
                subsection.
  (j) Comment and Hearing.--In the course of any proceeding 
under subsection (c), (d), (e), or (g), the administering 
authority--
          (1) shall solicit comments from interested parties, 
        and
          (2)(A) in a proceeding under subsection (c), (d), or 
        (e), upon the request of an interested party, shall 
        hold a hearing in accordance with section 841(b) in 
        connection with that proceeding, or
          (B) in a proceeding under subsection (g), upon the 
        request of an interested party, may hold a hearing in 
        accordance with section 841(b) in connection with that 
        proceeding.

SEC. 808. INJURIOUS PRICING PETITIONS BY THIRD COUNTRIES.

  (a) Filing of Petition.--The government of a Shipbuilding 
Agreement Party may file with the Trade Representative a 
petition requesting that an investigation be conducted to 
determine if--
          (1) a vessel from another Shipbuilding Agreement 
        Party has been sold directly or indirectly to one or 
        more United States buyers at less than fair value, and
          (2) an industry, in the petitioning country, 
        producing or capable of producing a like vessel is 
        materially injured by reason of such sale.
  (b) Initiation.--The Trade Representative, after consultation 
with the administering authority and the Commission and 
obtaining the approval of the Parties Group under the 
Shipbuilding Agreement, shall determine whether to initiate an 
investigation described in subsection (a).
  (c) Determinations.--Upon initiation of an investigation 
under subsection (a), the Trade Representative shall request 
the following determinations be made in accordance with 
substantive and procedural requirements specified by the Trade 
Representative, notwithstanding any other provision of this 
title:
          (1) Sale at less than fair value.--The administering 
        authority shall determine whether the subject vessel 
        has been sold at less than fair value.
          (2) Injury to industry.--The Commission shall 
        determine whether an industry in the petitioning 
        country is or has been materially injured by reason of 
        the sale of the subject vessel in the United States.
  (d) Public Comment.--An opportunity for public comment shall 
be provided, as appropriate--
          (1) by the Trade Representative, in making the 
        determinations required by subsection (b), and
          (2) by the administering authority and the 
        Commission, in making the determinations required by 
        subsection (c).
  (e) Issuance of Order.--If the administering authority makes 
an affirmative determination under paragraph (1) of subsection 
(c), and the Commission makes an affirmative determination 
under paragraph (2) of subsection (c), the administering 
authority shall--
          (1) order an injurious pricing charge in accordance 
        with section 806, and
          (2) make such determinations and take such other 
        actions as are required by sections 806 and 807, as if 
        affirmative determinations had been made under 
        subsections (a) and (b) of section 805.
  (f) Reviews of Determinations.--For purposes of review under 
section 516B, if an order is issued under subsection (e)--
          (1) the final determinations of the administering 
        authority and the Commission under subsection (c) shall 
        be treated as final determinations made under section 
        805, and
          (2) determinations of the administering authority 
        under subsection (e)(2) shall be treated as 
        determinations made under section 806 or 807, as the 
        case may be.
  (g) Access to Information.--Section 843 shall apply to 
investigations under this section, to the extent specified by 
the Trade Representative, after consultation with the 
administering authority and the Commission.

                       Subtitle B--Special Rules

SEC. 821. EXPORT PRICE.

  (a) Export Price.--For purposes of this title, the term 
``export price'' means the price at which the subject vessel is 
first sold (or agreed to be sold) by or for the account of the 
foreign producer of the subject vessel to an unaffiliated 
United States buyer. The term ``sold (or agreed to be sold) by 
or for the account of the foreign producer'' includes any 
transfer of an ownership interest, including by way of lease or 
long-term bareboat charter, in conjunction with the original 
transfer from the producer, either directly or indirectly, to a 
United States buyer.
  (b) Adjustments to Export Price.--The price used to establish 
export price shall be--
          (1) increased by the amount of any import duties 
        imposed by the country of exportation which have been 
        rebated, or which have not been collected, by reason of 
        the exportation of the subject vessel, and
          (2) reduced by--
                  (A) the amount, if any, included in such 
                price, attributable to any additional costs, 
                charges, or expenses which are incident to 
                bringing the subject vessel from the shipyard 
                in the exporting country to the place of 
                delivery,
                  (B) the amount, if included in such price, of 
                any export tax, duty, or other charge imposed 
                by the exporting country on the exportation of 
                the subject vessel, and
                  (C) all other expenses incidental to placing 
                the vessel in condition for delivery to the 
                buyer.

SEC. 822. NORMAL VALUE.

  (a) Determination.--In determining under this title whether a 
subject vessel has been sold at less than fair value, a fair 
comparison shall be made between the export price and normal 
value of the subject vessel. In order to achieve a fair 
comparison with the export price, normal value shall be 
determined as follows:
          (1) Determination of normal value.--
                  (A) In general.--The normal value of the 
                subject vessel shall be the price described in 
                subparagraph (B), at a time reasonably 
                corresponding to the time of the sale used to 
                determine the export price under section 
                821(a).
                  (B) Price.--The price referred to in 
                subparagraph (A) is--
                          (i) the price at which a foreign like 
                        vessel is first sold in the exporting 
                        country, in the ordinary course of 
                        trade and, to the extent practicable, 
                        at the same level of trade, or
                          (ii) in a case to which subparagraph 
                        (C) applies, the price at which a 
                        foreign like vessel is so sold for 
                        consumption in a country other than the 
                        exporting country or the United States, 
                        if--
                                  (I) such price is 
                                representative, and
                                  (II) the administering 
                                authority does not determine 
                                that the particular market 
                                situation in such other country 
                                prevents a proper comparison 
                                with the export price.
                  (C) Third country sales.--This subparagraph 
                applies when--
                          (i) a foreign like vessel is not sold 
                        in the exporting country as described 
                        in subparagraph (B)(i), or
                          (ii) the particular market situation 
                        in the exporting country does not 
                        permit a proper comparison with the 
                        export price.
                  (D) Contemporaneous sale.--For purposes of 
                subparagraph (A), `a time reasonably 
                corresponding to the time of the sale' means 
                within 3 months before or after the sale of the 
                subject vessel or, in the absence of such 
                sales, such longer period as the administering 
                authority determines would be appropriate.
          (2) Fictitious markets.--No pretended sale, and no 
        sale intended to establish a fictitious market, shall 
        be taken into account in determining normal value.
          (3) Use of constructed value.--If the administering 
        authority determines that the normal value of the 
        subject vessel cannot be determined under paragraph 
        (1)(B) or (1)(C), then the normal value of the subject 
        vessel shall be the constructed value of that vessel, 
        as determined under subsection (e).
          (4) Indirect sales.--If a foreign like vessel is sold 
        through an affiliated party, the price at which the 
        foreign like vessel is sold by such affiliated party 
        may be used in determining normal value.
          (5) Adjustments.--The price described in paragraph 
        (1)(B) shall be--
                  (A) reduced by--
                          (i) the amount, if any, included in 
                        the price described in paragraph 
                        (1)(B), attributable to any costs, 
                        charges, and expenses incident to 
                        bringing the foreign like vessel from 
                        the shipyard to the place of delivery 
                        to the purchaser,
                          (ii) the amount of any taxes imposed 
                        directly upon the foreign like vessel 
                        or components thereof which have been 
                        rebated, or which have not been 
                        collected, on the subject vessel, but 
                        only to the extent that such taxes are 
                        added to or included in the price of 
                        the foreign like vessel, and
                          (iii) the amount of all other 
                        expenses incidental to placing the 
                        foreign like vessel in condition for 
                        delivery to the buyer, and
                  (B) increased or decreased by the amount of 
                any difference (or lack thereof) between the 
                export price and the price described in 
                paragraph (1)(B) (other than a difference for 
                which allowance is otherwise provided under 
                this section) that is established to the 
                satisfaction of the administering authority to 
                be wholly or partly due to--
                          (i) physical differences between the 
                        subject vessel and the vessel used in 
                        determining normal value, or
                          (ii) other differences in the 
                        circumstances of sale.
          (6) Adjustments for level of trade.--The price 
        described in paragraph (1)(B) shall also be increased 
        or decreased to make due allowance for any difference 
        (or lack thereof) between the export price and the 
        price described in paragraph (1)(B) (other than a 
        difference for which allowance is otherwise made under 
        this section) that is shown to be wholly or partly due 
        to a difference in level of trade between the export 
        price and normal value, if the difference in level of 
        trade--
                  (A) involves the performance of different 
                selling activities, and
                  (B) is demonstrated to affect price 
                comparability, based on a pattern of consistent 
                price differences between sales at different 
                levels of trade in the country in which normal 
                value is determined.
        In a case described in the preceding sentence, the 
        amount of the adjustment shall be based on the price 
        differences between the two levels of trade in the 
        country in which normal value is determined.
          (7) Adjustments to constructed value.--Constructed 
        value as determined under subsection (e) may be 
        adjusted, as appropriate, pursuant to this subsection.
  (b) Sales at Less Than Cost of Production.--
          (1) Determination; sales disregarded.--Whenever the 
        administering authority has reasonable grounds to 
        believe or suspect that the sale of the foreign like 
        vessel under consideration for the determination of 
        normal value has been made at a price which represents 
        less than the cost of production of the foreign like 
        vessel, the administering authority shall determine 
        whether, in fact, such sale was made at less than the 
        cost of production. If the administering authority 
        determines that the sale was made at less than the cost 
        of production and was not at a price which permits 
        recovery of all costs within 5 years, such sale may be 
        disregarded in the determination of normal value. 
        Whenever such a sale is disregarded, normal value shall 
        be based on another sale of a foreign like vessel in 
        the ordinary course of trade. If no sales made in the 
        ordinary course of trade remain, the normal value shall 
        be based on the constructed value of the subject 
        vessel.
          (2) Definitions and special rules.--For purposes of 
        this subsection:
                  (A) Reasonable grounds to believe or 
                suspect.--There are reasonable grounds to 
                believe or suspect that the sale of a foreign 
                like vessel was made at a price that is less 
                than the cost of production of the vessel, if 
                an interested party described in subparagraph 
                (C), (D), (E), or (F) of section 861(17) 
                provides information, based upon observed 
                prices or constructed prices or costs, that the 
                sale of the foreign like vessel under 
                consideration for the determination of normal 
                value has been made at a price which represents 
                less than the cost of production of the vessel.
                  (B) Recovery of costs.--If the price is below 
                the cost of production at the time of sale but 
                is above the weighted average cost of 
                production for the period of investigation, 
                such price shall be considered to provide for 
                recovery of costs within 5 years.
          (3) Calculation of cost of production.--For purposes 
        of this section, the cost of production shall be an 
        amount equal to the sum of--
                  (A) the cost of materials and of fabrication 
                or other processing of any kind employed in 
                producing the foreign like vessel, during a 
                period which would ordinarily permit the 
                production of that vessel in the ordinary 
                course of business, and
                  (B) an amount for selling, general, and 
                administrative expenses based on actual data 
                pertaining to the production and sale of the 
                foreign like vessel by the producer in 
                question.
        For purposes of subparagraph (A), if the normal value 
        is based on the price of the foreign like vessel sold 
        in a country other than the exporting country, the cost 
        of materials shall be determined without regard to any 
        internal tax in the exporting country imposed on such 
        materials or on their disposition which are remitted or 
        refunded upon exportation.
  (c) Nonmarket Economy Countries.--
          (1) In general.--If--
                  (A) the subject vessel is produced in a 
                nonmarket economy country, and
                  (B) the administering authority finds that 
                available information does not permit the 
                normal value of the subject vessel to be 
                determined under subsection (a),
        the administering authority shall determine the normal 
        value of the subject vessel on the basis of the value 
        of the factors of production utilized in producing the 
        vessel and to which shall be added an amount for 
        general expenses and profit plus the cost of expenses 
        incidental to placing the vessel in a condition for 
        delivery to the buyer. Except as provided in paragraph 
        (2), the valuation of the factors of production shall 
        be based on the best available information regarding 
        the values of such factors in a market economy country 
        or countries considered to be appropriate by the 
        administering authority.
          (2) Exception.--If the administering authority finds 
        that the available information is inadequate for 
        purposes of determining the normal value of the subject 
        vessel under paragraph (1), the administering authority 
        shall determine the normal value on the basis of the 
        price at which a vessel that is--
                  (A) comparable to the subject vessel, and
                  (B) produced in one or more market economy 
                countries that are at a level of economic 
                development comparable to that of the nonmarket 
                economy country,
        is sold in other countries, including the United 
        States.
          (3) Factors of production.--For purposes of paragraph 
        (1), the factors of production utilized in producing 
        the vessel include, but are not limited to--
                  (A) hours of labor required,
                  (B) quantities of raw materials employed,
                  (C) amounts of energy and other utilities 
                consumed, and
                  (D) representative capital cost, including 
                depreciation.
          (4) Valuation of factors of production.--The 
        administering authority, in valuing factors of 
        production under paragraph (1), shall utilize, to the 
        extent possible, the prices or costs of factors of 
        production in one or more market economy countries that 
        are--
                  (A) at a level of economic development 
                comparable to that of the nonmarket economy 
                country, and
                  (B) significant producers of comparable 
                vessels.
  (d) Special Rule for Certain Multinational Corporations.--
Whenever, in the course of an investigation under this title, 
the administering authority determines that--
          (1) the subject vessel was produced in facilities 
        which are owned or controlled, directly or indirectly, 
        by a person, firm, or corporation which also owns or 
        controls, directly or indirectly, other facilities for 
        the production of a foreign like vessel which are 
        located in another country or countries,
          (2) subsection (a)(1)(C) applies, and
          (3) the normal value of a foreign like vessel 
        produced in one or more of the facilities outside the 
        exporting country is higher than the normal value of 
        the foreign like vessel produced in the facilities 
        located in the exporting country,
the administering authority shall determine the normal value of 
the subject vessel by reference to the normal value at which a 
foreign like vessel is sold from one or more facilities outside 
the exporting country. The administering authority, in making 
any determination under this subsection, shall make adjustments 
for the difference between the costs of production (including 
taxes, labor, materials, and overhead) of the foreign like 
vessel produced in facilities outside the exporting country and 
costs of production of the foreign like vessel produced in 
facilities in the exporting country, if such differences are 
demonstrated to its satisfaction.
  (e) Constructed Value.--
          (1) In general.--For purposes of this title, the 
        constructed value of a subject vessel shall be an 
        amount equal to the sum of--
                  (A) the cost of materials and fabrication or 
                other processing of any kind employed in 
                producing the subject vessel, during a period 
                which would ordinarily permit the production of 
                the vessel in the ordinary course of business, 
                and
                  (B)(i) the actual amounts incurred and 
                realized by the foreign producer of the subject 
                vessel for selling, general, and administrative 
                expenses, and for profits, in connection with 
                the production and sale of a foreign like 
                vessel, in the ordinary course of trade, in the 
                domestic market of the country of origin of the 
                subject vessel, or
                  (ii) if actual data are not available with 
                respect to the amounts described in clause (i), 
                then--
                          (I) the actual amounts incurred and 
                        realized by the foreign producer of the 
                        subject vessel for selling, general, 
                        and administrative expenses, and for 
                        profits, in connection with the 
                        production and sale of the same general 
                        category of vessel in the domestic 
                        market of the country of origin of the 
                        subject vessel,
                          (II) the weighted average of the 
                        actual amounts incurred and realized by 
                        producers in the country of origin of 
                        the subject vessel (other than the 
                        producer of the subject vessel) for 
                        selling, general, and administrative 
                        expenses, and for profits, in 
                        connection with the production and sale 
                        of a foreign like vessel, in the 
                        ordinary course of trade, in the 
                        domestic market, or
                          (III) if data are not available under 
                        subclause (I) or (II), the amounts 
                        incurred and realized for selling, 
                        general, and administrative expenses, 
                        and for profits, based on any other 
                        reasonable method, except that the 
                        amount allowed for profit may not 
                        exceed the amount normally realized by 
                        foreign producers (other than the 
                        producer of the subject vessel) in 
                        connection with the sale of vessels in 
                        the same general category of vessel as 
                        the subject vessel in the domestic 
                        market of the country of origin of the 
                        subject vessel.
        For purposes of this paragraph, the profit shall be 
        based on the average profit realized over a reasonable 
        period of time before and after the sale of the subject 
        vessel and shall reflect a reasonable profit at the 
        time of such sale. For purposes of the preceding 
        sentence, a ``reasonable period of time'' shall not, 
        except where otherwise appropriate, exceed 6 months 
        before, or 6 months after, the sale of the subject 
        vessel. In calculating profit under this paragraph, any 
        distortion which would result in other than a profit 
        which is reasonable at the time of the sale shall be 
        eliminated.
          (2) Costs and profits based on other reasonable 
        methods.--When costs and profits are determined under 
        paragraph (1)(B)(ii)(III), such determination shall, 
        except where otherwise appropriate, be based on 
        appropriate export sales by the producer of the subject 
        vessel or, absent such sales, to export sales by other 
        producers of a foreign like vessel or the same general 
        category of vessel as the subject vessel in the country 
        of origin of the subject vessel.
          (3) Costs of materials.--For purposes of paragraph 
        (1)(A), the cost of materials shall be determined 
        without regard to any internal tax in the exporting 
        country imposed on such materials or their disposition 
        which are remitted or refunded upon exportation of the 
        subject vessel produced from such materials.
  (f) Special Rules for Calculation of Cost of Production and 
for Calculation of Constructed Value.--For purposes of 
subsections (b) and (e)--
          (1) Costs.--
                  (A) In general.--Costs shall normally be 
                calculated based on the records of the foreign 
                producer of the subject vessel, if such records 
                are kept in accordance with the generally 
                accepted accounting principles of the exporting 
                country and reasonably reflect the costs 
                associated with the production and sale of the 
                vessel. The administering authority shall 
                consider all available evidence on the proper 
                allocation of costs, including that which is 
                made available by the foreign producer on a 
                timely basis, if such allocations have been 
                historically used by the foreign producer, in 
                particular for establishing appropriate 
                amortization and depreciation periods, and 
                allowances for capital expenditures and other 
                development costs.
                  (B) Nonrecurring costs.--Costs shall be 
                adjusted appropriately for those nonrecurring 
                costs that benefit current or future 
                production, or both.
                  (C) Startup costs.--
                          (i) In general.--Costs shall be 
                        adjusted appropriately for 
                        circumstances in which costs incurred 
                        during the time period covered by the 
                        investigation are affected by startup 
                        operations.
                          (ii) Startup operations.--Adjustments 
                        shall be made for startup operations 
                        only where--
                                  (I) a producer is using new 
                                production facilities or 
                                producing a new type of vessel 
                                that requires substantial 
                                additional investment, and
                                  (II) production levels are 
                                limited by technical factors 
                                associated with the initial 
                                phase of commercial production.
                        For purposes of subclause (II), the 
                        initial phase of commercial production 
                        ends at the end of the startup period. 
                        In determining whether commercial 
                        production levels have been achieved, 
                        the administering authority shall 
                        consider factors unrelated to startup 
                        operations that might affect the volume 
                        of production processed, such as 
                        demand, seasonality, or business 
                        cycles.
                          (iii) Adjustment for startup 
                        operations.--The adjustment for startup 
                        operations shall be made by 
                        substituting the unit production costs 
                        incurred with respect to the vessel at 
                        the end of the startup period for the 
                        unit production costs incurred during 
                        the startup period. If the startup 
                        period extends beyond the period of the 
                        investigation under this title, the 
                        administering authority shall use the 
                        most recent cost of production data 
                        that it reasonably can obtain, analyze, 
                        and verify without delaying the timely 
                        completion of the investigation.
                For purposes of this subparagraph, the startup 
                period ends at the point at which the level of 
                commercial production that is characteristic of 
                the vessel, the producer, or the industry is 
                achieved.
                  (D) Costs due to extraordinary circumstances 
                not included.--Costs shall not include actual 
                costs which are due to extraordinary 
                circumstances (including, but not limited to, 
                labor disputes, fire, and natural disasters) 
                and which are significantly over the cost 
                increase which the shipbuilder could have 
                reasonably anticipated and taken into account 
                at the time of sale.
          (2) Transactions disregarded.--A transaction directly 
        or indirectly between affiliated persons may be 
        disregarded if, in the case of any element of value 
        required to be considered, the amount representing that 
        element does not fairly reflect the amount usually 
        reflected in sales of a like vessel in the market under 
        consideration. If a transaction is disregarded under 
        the preceding sentence and no other transactions are 
        available for consideration, the determination of the 
        amount shall be based on the information available as 
        to what the amount would have been if the transaction 
        had occurred between persons who are not affiliated.
          (3) Major input rule.--If, in the case of a 
        transaction between affiliated persons involving the 
        production by one of such persons of a major input to 
        the subject vessel, the administering authority has 
        reasonable grounds to believe or suspect that an amount 
        represented as the value of such input is less than the 
        cost of production of such input, then the 
        administering authority may determine the value of the 
        major input on the basis of the information available 
        regarding such cost of production, if such cost is 
        greater than the amount that would be determined for 
        such input under paragraph (2).

SEC. 823. CURRENCY CONVERSION.

  (a) In General.--In an injurious pricing proceeding under 
this title, the administering authority shall convert foreign 
currencies into United States dollars using the exchange rate 
in effect on the date of sale of the subject vessel, except 
that if it is established that a currency transaction on 
forward markets is directly linked to a sale under 
consideration, the exchange rate specified with respect to such 
foreign currency in the forward sale agreement shall be used to 
convert the foreign currency.
  (b) Date of Sale.--For purposes of this section, `date of 
sale' means the date of the contract of sale or, where 
appropriate, the date on which the material terms of sale are 
otherwise established. If the material terms of sale are 
significantly changed after such date, the date of sale is the 
date of such change. In the case of such a change in the date 
of sale, the administering authority shall make appropriate 
adjustments to take into account any unreasonable effect on the 
injurious pricing margin due only to fluctuations in the 
exchange rate between the original date of sale and the new 
date of sale.

                         Subtitle C--Procedures

SEC. 841. HEARINGS.

  (a) Upon Request.--The administering authority and the 
Commission shall each hold a hearing in the course of an 
investigation under this title, upon the request of any party 
to the investigation, before making a final determination under 
section 805.
  (b) Procedures.--Any hearing required or permitted under this 
title shall be conducted after notice published in the Federal 
Register, and a transcript of the hearing shall be prepared and 
made available to the public. The hearing shall not be subject 
to the provisions of subchapter II of chapter 5 of title 5, 
United States Code, or to section 702 of such title.

SEC. 842. DETERMINATIONS ON THE BASIS OF THE FACTS AVAILABLE.

  (a) In General.--If--
          (1) necessary information is not available on the 
        record, or
          (2) an interested party or any other person--
                  (A) withholds information that has been 
                requested by the administering authority or the 
                Commission under this title,
                  (B) fails to provide such information by the 
                deadlines for the submission of the information 
                or in the form and manner requested, subject to 
                subsections (b)(1) and (d) of section 844,
                  (C) significantly impedes a proceeding under 
                this title, or
                  (D) provides such information but the 
                information cannot be verified as provided in 
                section 844(g),
        the administering authority and the Commission shall, 
        subject to section 844(c), use the facts otherwise 
        available in reaching the applicable determination 
        under this title.
  (b) Adverse Inferences.--If the administering authority or 
the Commission (as the case may be) finds that an interested 
party has failed to cooperate by not acting to the best of its 
ability to comply with a request for information from the 
administering authority or the Commission, the administering 
authority or the Commission (as the case may be), in reaching 
the applicable determination under this title, may use an 
inference that is adverse to the interests of that party in 
selecting from among the facts otherwise available. Such 
adverse inference may include reliance on information derived 
from--
          (1) the petition, or
          (2) any other information placed on the record.
  (c) Corroboration of Secondary Information.--When the 
administering authority or the Commission relies on secondary 
information rather than on information obtained in the course 
of an investigation under this title, the administering 
authority and the Commission, as the case may be, shall, to the 
extent practicable, corroborate that information from 
independent sources that are reasonably at their disposal.

SEC. 843. ACCESS TO INFORMATION.

  (a) Information Generally Made Available.--
          (1) Progress of investigation reports.--The 
        administering authority and the Commission shall, from 
        time to time upon request, inform the parties to an 
        investigation under this title of the progress of that 
        investigation.
          (2) Ex parte meetings.--The administering authority 
        and the Commission shall maintain a record of any ex 
        parte meeting between--
                  (A) interested parties or other persons 
                providing factual information in connection 
                with a proceeding under this title, and
                  (B) the person charged with making the 
                determination, or any person charged with 
                making a final recommendation to that person, 
                in connection with that proceeding,
        if information relating to that proceeding was 
        presented or discussed at such meeting. The record of 
        such an ex parte meeting shall include the identity of 
        the persons present at the meeting, the date, time, and 
        place of the meeting, and a summary of the matters 
        discussed or submitted. The record of the ex parte 
        meeting shall be included in the record of the 
        proceeding.
          (3) Summaries; non-proprietary submissions.--The 
        administering authority and the Commission shall 
        disclose--
                  (A) any proprietary information received in 
                the course of a proceeding under this title if 
                it is disclosed in a form which cannot be 
                associated with, or otherwise be used to 
                identify, operations of a particular person, 
                and
                  (B) any information submitted in connection 
                with a proceeding which is not designated as 
                proprietary by the person submitting it.
          (4) Maintenance of public record.--The administering 
        authority and the Commission shall maintain and make 
        available for public inspection and copying a record of 
        all information which is obtained by the administering 
        authority or the Commission, as the case may be, in a 
        proceeding under this title to the extent that public 
        disclosure of the information is not prohibited under 
        this chapter or exempt from disclosure under section 
        552 of title 5, United States Code.
  (b) Proprietary Information.--
          (1) Proprietary status maintained.--
                  (A) In general.--Except as provided in 
                subsection (a)(4) and subsection (c), 
                information submitted to the administering 
                authority or the Commission which is designated 
                as proprietary by the person submitting the 
                information shall not be disclosed to any 
                person without the consent of the person 
                submitting the information, other than--
                          (i) to an officer or employee of the 
                        administering authority or the 
                        Commission who is directly concerned 
                        with carrying out the investigation in 
                        connection with which the information 
                        is submitted or any other proceeding 
                        under this title covering the same 
                        subject vessel, or
                          (ii) to an officer or employee of the 
                        United States Customs Service who is 
                        directly involved in conducting an 
                        investigation regarding fraud under 
                        this title.
                  (B) Additional requirements.--The 
                administering authority and the Commission 
                shall require that information for which 
                proprietary treatment is requested be 
                accompanied by--
                          (i) either--
                                  (I) a nonproprietary summary 
                                in sufficient detail to permit 
                                a reasonable understanding of 
                                the substance of the 
                                information submitted in 
                                confidence, or
                                  (II) a statement that the 
                                information is not susceptible 
                                to summary, accompanied by a 
                                statement of the reasons in 
                                support of the contention, and
                          (ii) either--
                                  (I) a statement which permits 
                                the administering authority or 
                                the Commission to release under 
                                administrative protective 
                                order, in accordance with 
                                subsection (c), the information 
                                submitted in confidence, or
                                  (II) a statement to the 
                                administering authority or the 
                                Commission that the business 
                                proprietary information is of a 
                                type that should not be 
                                released under administrative 
                                protective order.
          (2) Unwarranted designation.--If the administering 
        authority or the Commission determines, on the basis of 
        the nature and extent of the information or its 
        availability from public sources, that designation of 
        any information as proprietary is unwarranted, then it 
        shall notify the person who submitted it and ask for an 
        explanation of the reasons for the designation. Unless 
        that person persuades the administering authority or 
        the Commission that the designation is warranted, or 
        withdraws the designation, the administering authority 
        or the Commission, as the case may be, shall return it 
        to the party submitting it. In a case in which the 
        administering authority or the Commission returns the 
        information to the person submitting it, the person may 
        thereafter submit other material concerning the subject 
        matter of the returned information if the submission is 
        made within the time otherwise provided for submitting 
        such material.
  (c) Limited Disclosure of Certain Proprietary Information 
Under Protective Order.--
          (1) Disclosure by administering authority or 
        commission.--
                  (A) In general.--Upon receipt of an 
                application (before or after receipt of the 
                information requested) which describes in 
                general terms the information requested and 
                sets forth the reasons for the request, the 
                administering authority or the Commission shall 
                make all business proprietary information 
                presented to, or obtained by it, during a 
                proceeding under this title (except privileged 
                information, classified information, and 
                specific information of a type for which there 
                is a clear and compelling need to withhold from 
                disclosure) available to all interested parties 
                who are parties to the proceeding under a 
                protective order described in subparagraph (B), 
                regardless of when the information is submitted 
                during the proceeding. Customer names (other 
                than the name of the United States buyer of the 
                subject vessel) obtained during any 
                investigation which requires a determination 
                under section 805(b) may not be disclosed by 
                the administering authority under protective 
                order until either an order is published under 
                section 806(a) as a result of the investigation 
                or the investigation is suspended or 
                terminated. The Commission may delay disclosure 
                of customer names (other than the name of the 
                United States buyer of the subject vessel) 
                under protective order during any such 
                investigation until a reasonable time before 
                any hearing provided under section 841 is held.
                  (B) Protective order.--The protective order 
                under which information is made available shall 
                contain such requirements as the administering 
                authority or the Commission may determine by 
                regulation to be appropriate. The administering 
                authority and the Commission shall provide by 
                regulation for such sanctions as the 
                administering authority and the Commission 
                determine to be appropriate, including 
                disbarment from practice before the agency.
                  (C) Time limitations on determinations.--The 
                administering authority or the Commission, as 
                the case may be, shall determine whether to 
                make information available under this 
                paragraph--
                          (i) not later than 14 days (7 days if 
                        the submission pertains to a proceeding 
                        under section 803(a)) after the date on 
                        which the information is submitted, or
                          (ii) if--
                                  (I) the person that submitted 
                                the information raises 
                                objection to its release, or
                                  (II) the information is 
                                unusually voluminous or 
                                complex,
                        not later than 30 days (10 days if the 
                        submission pertains to a proceeding 
                        under section 803(a)) after the date on 
                        which the information is submitted.
                  (D) Availability after determination.--If the 
                determination under subparagraph (C) is 
                affirmative, then--
                          (i) the business proprietary 
                        information submitted to the 
                        administering authority or the 
                        Commission on or before the date of the 
                        determination shall be made available, 
                        subject to the terms and conditions of 
                        the protective order, on such date, and
                          (ii) the business proprietary 
                        information submitted to the 
                        administering authority or the 
                        Commission after the date of the 
                        determination shall be served as 
                        required by subsection (d).
                  (E) Failure to disclose.--If a person 
                submitting information to the administering 
                authority refuses to disclose business 
                proprietary information which the administering 
                authority determines should be released under a 
                protective order described in subparagraph (B), 
                the administering authority shall return the 
                information, and any nonconfidential summary 
                thereof, to the person submitting the 
                information and summary and shall not consider 
                either.
          (2) Disclosure under court order.--If the 
        administering authority or the Commission denies a 
        request for information under paragraph (1), then 
        application may be made to the United States Court of 
        International Trade for an order directing the 
        administering authority or the Commission, as the case 
        may be, to make the information available. After 
        notification of all parties to the investigation and 
        after an opportunity for a hearing on the record, the 
        court may issue an order, under such conditions as the 
        court deems appropriate, which shall not have the 
        effect of stopping or suspending the investigation, 
        directing the administering authority or the Commission 
        to make all or a portion of the requested information 
        described in the preceding sentence available under a 
        protective order and setting forth sanctions for 
        violation of such order if the court finds that, under 
        the standards applicable in proceedings of the court, 
        such an order is warranted, and that--
                  (A) the administering authority or the 
                Commission has denied access to the information 
                under subsection (b)(1),
                  (B) the person on whose behalf the 
                information is requested is an interested party 
                who is a party to the investigation in 
                connection with which the information was 
                obtained or developed, and
                  (C) the party which submitted the information 
                to which the request relates has been notified, 
                in advance of the hearing, of the request made 
                under this section and of its right to appear 
                and be heard.
  (d) Service.--Any party submitting written information, 
including business proprietary information, to the 
administering authority or the Commission during a proceeding 
shall, at the same time, serve the information upon all 
interested parties who are parties to the proceeding, if the 
information is covered by a protective order. The administering 
authority or the Commission shall not accept any such 
information that is not accompanied by a certificate of service 
and a copy of the protective order version of the document 
containing the information. Business proprietary information 
shall only be served upon interested parties who are parties to 
the proceeding that are subject to protective order, except 
that a nonconfidential summary thereof shall be served upon all 
other interested parties who are parties to the proceeding.
  (e) Information Relating to Violations of Protective Orders 
and Sanctions.--The administering authority and the Commission 
may withhold from disclosure any correspondence, private 
letters of reprimand, settlement agreements, and documents and 
files compiled in relation to investigations and actions 
involving a violation or possible violation of a protective 
order issued under subsection (c), and such information shall 
be treated as information described in section 552(b)(3) of 
title 5, United States Code.
  (f) Opportunity for Comment by Vessel Buyers.--The 
administering authority and the Commission shall provide an 
opportunity for buyers of subject vessels to submit relevant 
information to the administering authority concerning a sale at 
less than fair value or countermeasures, and to the Commission 
concerning material injury by reason of the sale of a vessel at 
less than fair value.
  (g) Publication of Determinations; Requirements for Final 
Determinations.--
          (1) In general.--Whenever the administering authority 
        makes a determination under section 802 whether to 
        initiate an investigation, or the administering 
        authority or the Commission makes a preliminary 
        determination under section 803, a final determination 
        under section 805, a determination under subsection 
        (b), (c), (d), (e)(3)(B)(ii), (g), or (i) of section 
        807, or a determination to suspend an investigation 
        under this title, the administering authority or the 
        Commission, as the case may be, shall publish the facts 
        and conclusions supporting that determination, and 
        shall publish notice of that determination in the 
        Federal Register.
          (2) Contents of notice or determination.--The notice 
        or determination published under paragraph (1) shall 
        include, to the extent applicable--
                  (A) in the case of a determination of the 
                administering authority--
                          (i) the names of the United States 
                        buyer and the foreign producer, and the 
                        country of origin of the subject 
                        vessel,
                          (ii) a description sufficient to 
                        identify the subject vessel (including 
                        type, purpose, and size),
                          (iii) with respect to an injurious 
                        pricing charge, the injurious pricing 
                        margin established and a full 
                        explanation of the methodology used in 
                        establishing such margin,
                          (iv) with respect to countermeasures, 
                        the scope and duration of 
                        countermeasures and, if applicable, any 
                        changes thereto, and
                          (v) the primary reasons for the 
                        determination, and
                  (B) in the case of a determination of the 
                Commission--
                          (i) considerations relevant to the 
                        determination of injury, and
                          (ii) the primary reasons for the 
                        determination.
          (3) Additional requirements for final 
        determinations.--In addition to the requirements set 
        forth in paragraph (2)--
                  (A) the administering authority shall include 
                in a final determination under section 805 or 
                807(c) an explanation of the basis for its 
                determination that addresses relevant 
                arguments, made by interested parties who are 
                parties to the investigation, concerning the 
                establishment of the injurious pricing charge 
                with respect to which the determination is 
                made, and
                  (B) the Commission shall include in a final 
                determination of injury an explanation of the 
                basis for its determination that addresses 
                relevant arguments that are made by interested 
                parties who are parties to the investigation 
                concerning the effects and impact on the 
                industry of the sale of the subject vessel.

SEC. 844. CONDUCT OF INVESTIGATIONS.

  (a) Certification of Submissions.--Any person providing 
factual information to the administering authority or the 
Commission in connection with a proceeding under this title on 
behalf of the petitioner or any other interested party shall 
certify that such information is accurate and complete to the 
best of that person's knowledge.
  (b) Difficulties in Meeting Requirements.--
          (1) Notification by interested party.--If an 
        interested party, promptly after receiving a request 
        from the administering authority or the Commission for 
        information, notifies the administering authority or 
        the Commission (as the case may be) that such party is 
        unable to submit the information requested in the 
        requested form and manner, together with a full 
        explanation and suggested alternative forms in which 
        such party is able to submit the information, the 
        administering authority or the Commission (as the case 
        may be) shall consider the ability of the interested 
        party to submit the information in the requested form 
        and manner and may modify such requirements to the 
        extent necessary to avoid imposing an unreasonable 
        burden on that party.
          (2) Assistance to interested parties.--The 
        administering authority and the Commission shall take 
        into account any difficulties experienced by interested 
        parties, particularly small companies, in supplying 
        information requested by the administering authority or 
        the Commission in connection with investigations under 
        this title, and shall provide to such interested 
        parties any assistance that is practicable in supplying 
        such information.
  (c) Deficient Submissions.--If the administering authority or 
the Commission determines that a response to a request for 
information under this title does not comply with the request, 
the administering authority or the Commission (as the case may 
be) shall promptly inform the person submitting the response of 
the nature of the deficiency and shall, to the extent 
practicable, provide that person with an opportunity to remedy 
or explain the deficiency in light of the time limits 
established for the completion of investigations or reviews 
under this title. If that person submits further information in 
response to such deficiency and either--
          (1) the administering authority or the Commission (as 
        the case may be) finds that such response is not 
        satisfactory, or
          (2) such response is not submitted within the 
        applicable time limits,
then the administering authority or the Commission (as the case 
may be) may, subject to subsection (d), disregard all or part 
of the original and subsequent responses.
  (d) Use of Certain Information.--In reaching a determination 
under section 803, 805, or 807, the administering authority and 
the Commission shall not decline to consider information that 
is submitted by an interested party and is necessary to the 
determination but does not meet all the applicable requirements 
established by the administering authority or the Commission 
if--
          (1) the information is submitted by the deadline 
        established for its submission,
          (2) the information can be verified,
          (3) the information is not so incomplete that it 
        cannot serve as a reliable basis for reaching the 
        applicable determination,
          (4) the interested party has demonstrated that it 
        acted to the best of its ability in providing the 
        information and meeting the requirements established by 
        the administering authority or the Commission with 
        respect to the information, and
          (5) the information can be used without undue 
        difficulties.
  (e) Nonacceptance of Submissions.--If the administering 
authority or the Commission declines to accept into the record 
any information submitted in an investigation under this title, 
it shall, to the extent practicable, provide to the person 
submitting the information a written explanation of the reasons 
for not accepting the information.
  (f) Public Comment on Information.--Information that is 
submitted on a timely basis to the administering authority or 
the Commission during the course of a proceeding under this 
title shall be subject to comment by other parties to the 
proceeding within such reasonable time as the administering 
authority or the Commission shall provide. The administering 
authority and the Commission, before making a final 
determination under section 805 or 807, shall cease collecting 
information and shall provide the parties with a final 
opportunity to comment on the information obtained by the 
administering authority or the Commission (as the case may be) 
upon which the parties have not previously had an opportunity 
to comment. Comments containing new factual information shall 
be disregarded.
  (g) Verification.--The administering authority shall verify 
all information relied upon in making a final determination 
under section 805.

SEC. 845. ADMINISTRATIVE ACTION FOLLOWING SHIPBUILDING AGREEMENT PANEL 
                    REPORTS.

  (a) Action by United States International Trade Commission.--
           (1) Advisory report.--If a dispute settlement panel 
        under the Shipbuilding Agreement finds in a report that 
        an action by the Commission in connection with a 
        particular proceeding under this title is not in 
        conformity with the obligations of the United States 
        under the Shipbuilding Agreement, the Trade 
        Representative may request the Commission to issue an 
        advisory report on whether this title permits the 
        Commission to take steps in connection with the 
        particular proceeding that would render its action not 
        inconsistent with the findings of the panel concerning 
        those obligations. The Trade Representative shall 
        notify the Committee on Ways and Means of the House of 
        Representatives and the Committee on Finance of the 
        Senate of such request.
          (2) Time limits for report.--The Commission shall 
        transmit its report under paragraph (1) to the Trade 
        Representative within 30 calendar days after the Trade 
        Representative requests the report.
          (3) Consultations on request for commission 
        determination.--If a majority of the Commissioners 
        issues an affirmative report under paragraph (1), the 
        Trade Representatives shall consult with the 
        congressional committees listed in paragraph (1) 
        concerning the matter.
          (4) Commission determination.--Notwithstanding any 
        other provision of this title, if a majority of the 
        Commissioners issues an affirmative report under 
        paragraph (1), the Commission, upon the written request 
        of the Trade Representative, shall issue a 
        determination in connection with the particular 
        proceeding that would render the Commission's action 
        described in paragraph (1) not inconsistent with the 
        findings of the panel. The Commission shall issue its 
        determination not later than 120 calendar days after 
        the request from the Trade Representative is made.
          (5) Consultations on implementation of commission 
        determination.--The Trade Representative shall consult 
        with the congressional committees listed in paragraph 
        (1) before the Commission's determination under 
        paragraph (4) is implemented.
          (6) Revocation of order.--If, by virtue of the 
        Commission's determination under paragraph (4), an 
        injurious pricing order is no longer supported by an 
        affirmative Commission determination under this title, 
        the Trade Representative may, after consulting with the 
        congressional committees under paragraph (5), direct 
        the administering authority to revoke the injurious 
        pricing order.
  (b) Action by Administering Authority.--
          (1) Consultations with administering authority and 
        congressional committees.--Promptly after a report or 
        other determination by a dispute settlement panel under 
        the Shipbuilding Agreement is issued that contains 
        findings that--
                  (A) an action by the administering authority 
                in a proceeding under this title is not in 
                conformity with the obligations of the United 
                States under the Shipbuilding Agreement,
                  (B) the due date for payment of an injurious 
                pricing charge contained in an order issued 
                under section 806 should be amended,
                  (C) countermeasures provided for in an order 
                issued under section 807 should be 
                provisionally suspended or reduced pending the 
                final decision of the panel, or
                  (D) the scope or duration of countermeasures 
                imposed under section 807 should be narrowed or 
                shortened,
        the Trade Representative shall consult with the 
        administering authority and the congressional 
        committees listed in subsection (a)(1) on the matter.
          (2) Determination by administering authority.--
        Notwithstanding any other provision of this title, the 
        administering authority shall, in response to a written 
        request from the Trade Representative, issue a 
        determination, or an amendment to or suspension of an 
        injurious pricing or countermeasure order, as the case 
        may be, in connection with the particular proceeding 
        that would render the administering authority's action 
        described in paragraph (1) not inconsistent with the 
        findings of the panel.
          (3) Time limits for determinations.--The 
        administering authority shall issue its determination, 
        amendment, or suspension under paragraph (2)--
                  (A) with respect to a matter described in 
                subparagraph (A) of paragraph (1), within 180 
                calendar days after the request from the Trade 
                Representative is made, and
                  (B) with respect to a matter described in 
                subparagraph (B), (C), or (D) of paragraph (1), 
                within 15 calendar days after the request from 
                the Trade Representative is made.
          (4) Consultations before implementation.--Before the 
        administering authority implements any determination, 
        amendment, or suspension under paragraph (2), the Trade 
        Representative shall consult with the administering 
        authority and the congressional committees listed in 
        subsection (a)(1) with respect to such determination, 
        amendment, or suspension.
          (5) Implementation of determination.--The Trade 
        Representative may, after consulting with the 
        administering authority and the congressional 
        committees under paragraph (4), direct the 
        administering authority to implement, in whole or in 
        part, the determination, amendment, or suspension made 
        under paragraph (2). The administering authority shall 
        publish notice of such implementation in the Federal 
        Register.
  (c) Opportunity for Comment by Interested Parties.--Before 
issuing a determination, amendment, or suspension, the 
administering authority, in a matter described in subsection 
(b)(1)(A), or the Commission, in a matter described in 
subsection (a)(1), as the case may be, shall provide interested 
parties with an opportunity to submit written comments and, in 
appropriate cases, may hold a hearing, with respect to the 
determination.

                        Subtitle D--Definitions

SEC. 861. DEFINITIONS.

  For purposes of this title:
          (1) Administering authority.--The term 
        ``administering authority'' means the Secretary of 
        Commerce, or any other officer of the United States to 
        whom the responsibility for carrying out the duties of 
        the administering authority under this title are 
        transferred by law.
          (2) Commission.--The term ``Commission'' means the 
        United States International Trade Commission.
          (3) Country.--The term ``country'' means a foreign 
        country, a political subdivision, dependent territory, 
        or possession of a foreign country and, except as 
        provided in paragraph (16)(E)(iii), may not include an 
        association of 2 or more foreign countries, political 
        subdivisions, dependent territories, or possessions of 
        countries into a customs union outside the United 
        States.
          (4) Industry.--
                  (A) In general.--Except as used in section 
                808, the term ``industry'' means the producers 
                as a whole of a domestic like vessel, or those 
                producers whose collective capability to 
                produce a domestic like vessel constitutes a 
                major proportion of the total domestic 
                capability to produce a domestic like vessel.
                  (B) Producer.--A ``producer'' of a domestic 
                like vessel includes an entity that is 
                producing the domestic like vessel and an 
                entity with the capability to produce the 
                domestic like vessel.
                  (C) Capability to produce a domestic like 
                vessel.--A producer has the ``capability to 
                produce a domestic like vessel'' if it is 
                capable of producing a domestic like vessel 
                with its present facilities or could adapt its 
                facilities in a timely manner to produce a 
                domestic like vessel.
                  (D) Related parties.--(i) In an investigation 
                under this title, if a producer of a domestic 
                like vessel and the foreign producer, seller 
                (other than the foreign producer), or United 
                States buyer of the subject vessel are related 
                parties, or if a producer of a domestic like 
                vessel is also a United States buyer of the 
                subject vessel, the domestic producer may, in 
                appropriate circumstances, be excluded from the 
                industry.
                  (ii) For purposes of clause (i), a domestic 
                producer and the foreign producer, seller, or 
                United States buyer shall be considered to be 
                related parties, if--
                          (I) the domestic producer directly or 
                        indirectly controls the foreign 
                        producer, seller or United States 
                        buyer,
                          (II) the foreign producer, seller, or 
                        United States buyer directly or 
                        indirectly controls the domestic 
                        producer,
                          (III) a third party directly or 
                        indirectly controls the domestic 
                        producer and the foreign producer, 
                        seller, or United States buyer, or
                          (IV) the domestic producer and the 
                        foreign producer, seller, or United 
                        States buyer directly or indirectly 
                        control a third party and there is 
                        reason to believe that the relationship 
                        causes the domestic producer to act 
                        differently than a nonrelated producer.
                For purposes of this subparagraph, a party 
                shall be considered to directly or indirectly 
                control another party if the party is legally 
                or operationally in a position to exercise 
                restraint or direction over the other party.
                  (E) Product lines.--In an investigation under 
                this title, the effect of the sale of the 
                subject vessel shall be assessed in relation to 
                the United States production (or production 
                capability) of a domestic like vessel if 
                available data permit the separate 
                identification of production (or production 
                capability) in terms of such criteria as the 
                production process or the producer's profits. 
                If the domestic production (or production 
                capability) of a domestic like vessel has no 
                separate identity in terms of such criteria, 
                then the effect of the sale of the subject 
                vessel shall be assessed by the examination of 
                the production (or production capability) of 
                the narrowest group or range of vessels, which 
                includes a domestic like vessel, for which the 
                necessary information can be provided.
          (5) Buyer.--The term ``buyer'' means any person who 
        acquires an ownership interest in a vessel, including 
        by way of lease or long-term bareboat charter, in 
        conjunction with the original transfer from the 
        producer, either directly or indirectly, including an 
        individual or company which owns or controls a buyer. 
        There may be more than one buyer of any one vessel.
          (6) United states buyer.--The term ``United States 
        buyer'' means a buyer that is any of the following:
                  (A) A United States citizen.
                  (B) A juridical entity, including any 
                corporation, company, association, or other 
                organization, that is legally constituted under 
                the laws and regulations of the United States 
                or a political subdivision thereof, regardless 
                of whether the entity is organized for 
                pecuniary gain, privately or government owned, 
                or organized with limited or unlimited 
                liability.
                  (C) A juridical entity that is owned or 
                controlled by nationals or entities described 
                in subparagraphs (A) and (B). For the purposes 
                of this subparagraph--
                          (i) the term ``own'' means having 
                        more than a 50 percent interest, and
                          (ii) the term ``control'' means the 
                        actual ability to have substantial 
                        influence on corporate behavior, and 
                        control is presumed to exist where 
                        there is at least a 25 percent 
                        interest.
                If ownership of a company is established under 
                clause (i), other control is presumed not to 
                exist unless it is otherwise established.
          (7) Ownership interest.--An ``ownership interest'' in 
        a vessel includes any contractual or proprietary 
        interest which allows the beneficiary or beneficiaries 
        of such interest to take advantage of the operation of 
        the vessel in a manner substantially comparable to the 
        way in which an owner may benefit from the operation of 
        the vessel. In determining whether such substantial 
        comparability exists, the administering authority shall 
        consider--
                  (A) the terms and circumstances of the 
                transaction which conveys the interest,
                  (B) commercial practice within the industry,
                  (C) whether the vessel subject to the 
                transaction is integrated into the operations 
                of the beneficiary or beneficiaries, and
                  (D) whether in practice there is a likelihood 
                that the beneficiary or beneficiaries of such 
                interests will take advantage of and the risk 
                for the operation of the vessel for a 
                significant part of the life-time of the 
                vessel.
          (8) Vessel.--
                  (A) In general.--Except as otherwise 
                specifically provided under international 
                agreements, the term ``vessel'' means--
                          (i) a self-propelled seagoing vessel 
                        of 100 gross tons or more used for 
                        transportation of goods or persons or 
                        for performance of a specialized 
                        service (including, but not limited to, 
                        ice breakers and dredgers), and
                          (ii) a tug of 365 kilowatts or more,
                that is produced in a Shipbuilding Agreement 
                Party or a country that is not a Shipbuilding 
                Agreement Party and not a WTO member.
                  (B) Exclusions.--The term ``vessel'' does not 
                include--
                          (i) any fishing vessel destined for 
                        the fishing fleet of the country in 
                        which the vessel is built,
                          (ii) any military vessel, and
                          (iii) any vessel sold before the date 
                        that the Shipbuilding Agreement enters 
                        into force with respect to the United 
                        States, except that any vessel sold 
                        after December 21, 1994, for delivery 
                        more than 5 years after the date of the 
                        contract of sale shall be a ``vessel'' 
                        for purposes of this title unless the 
                        shipbuilder demonstrates to the 
                        administering authority that the 
                        extended delivery date was for normal 
                        commercial reasons and not to avoid 
                        applicability of this title.
                  (C) Self-propelled seagoing vessel.--A vessel 
                is ``self-propelled seagoing'' if its permanent 
                propulsion and steering provide it all the 
                characteristics of self-navigability in the 
                high seas.
                  (D) Military vessel.--A ``military vessel'' 
                is a vessel which, according to its basic 
                structural characteristics and ability, is 
                intended to be used exclusively for military 
                purposes.
          (9) Like vessel.--The term ``like vessel'' means a 
        vessel of the same type, same purpose, and approximate 
        size as the subject vessel and possessing 
        characteristics closely resembling those of the subject 
        vessel.
          (10) Domestic like vessel.--The term ``domestic like 
        vessel'' means a like vessel produced in the United 
        States.
          (11) Foreign like vessel.--Except as used in section 
        822(e)(1)(B)(ii)(II), the term ``foreign like vessel'' 
        means a like vessel produced by the foreign producer of 
        the subject vessel for sale in the producer's domestic 
        market or in a third country.
          (12) Same general category of vessel.--The term 
        ``same general category of vessel'' means a vessel of 
        the same type and purpose as the subject vessel, but of 
        a significantly different size.
          (13) Subject vessel.--The term ``subject vessel'' 
        means a vessel subject to investigation under section 
        801 or 808.
          (14) Foreign producer.--The term ``foreign producer'' 
        means the producer or producers of the subject vessel.
          (15) Exporting country.--The term ``exporting 
        country'' means the country in which the subject vessel 
        was built.
          (16) Material injury.--
                  (A) In general.--The term ``material injury'' 
                means harm which is not inconsequential, 
                immaterial, or unimportant.
                  (B) Sale and consequent impact.--In making 
                determinations under sections 803(a) and 
                805(b), the Commission in each case--
                          (i) shall consider--
                                  (I) the sale of the subject 
                                vessel,
                                  (II) the effect of the sale 
                                of the subject vessel on prices 
                                in the United States for a 
                                domestic like vessel, and
                                  (III) the impact of the sale 
                                of the subject vessel on 
                                domestic producers of a 
                                domestic like vessel, but only 
                                in the context of production 
                                operations within the United 
                                States, and
                          (ii) may consider such other economic 
                        factors as are relevant to the 
                        determination regarding whether there 
                        is or has been material injury by 
                        reason of the sale of the subject 
                        vessel.
                In the notification required under section 
                805(d), the Commission shall explain its 
                analysis of each factor considered under clause 
                (i), and identify each factor considered under 
                clause (ii) and explain in full its relevance 
                to the determination.
                  (C) Evaluation of relevant factors.--For 
                purposes of subparagraph (B)--
                          (i) Sale of the subject vessel.--In 
                        evaluating the sale of the subject 
                        vessel, the Commission shall consider 
                        whether the sale, either in absolute 
                        terms or relative to production or 
                        demand in the United States, in terms 
                        of either volume or value, is or has 
                        been significant.
                          (ii) Price.--In evaluating the effect 
                        of the sale of the subject vessel on 
                        prices, the Commission shall consider 
                        whether--
                                  (I) there has been 
                                significant price underselling 
                                of the subject vessel as 
                                compared with the price of a 
                                domestic like vessel, and
                                  (II) the effect of the sale 
                                of the subject vessel otherwise 
                                depresses or has depressed 
                                prices to a significant degree 
                                or prevents or has prevented 
                                price increases, which 
                                otherwise would have occurred, 
                                to a significant degree.
                          (iii) Impact on affected domestic 
                        industry.--In examining the impact 
                        required to be considered under 
                        subparagraph (B)(i)(III), the 
                        Commission shall evaluate all relevant 
                        economic factors which have a bearing 
                        on the state of the industry in the 
                        United States, including, but not 
                        limited to--
                                  (I) actual and potential 
                                decline in output, sales, 
                                market share, profits, 
                                productivity, return on 
                                investments, and utilization of 
                                capacity,
                                  (II) factors affecting 
                                domestic prices, including with 
                                regard to sales,
                                  (III) actual and potential 
                                negative effects on cash flow, 
                                employment, wages, growth, 
                                ability to raise capital, and 
                                investment,
                                  (IV) actual and potential 
                                negative effects on the 
                                existing development and 
                                production efforts of the 
                                domestic industry, including 
                                efforts to develop a derivative 
                                or more advanced version of a 
                                domestic like vessel, and
                                  (V) the magnitude of the 
                                injurious pricing margin.
                        The Commission shall evaluate all 
                        relevant economic factors described in 
                        this clause within the context of the 
                        business cycle and conditions of 
                        competition that are distinctive to the 
                        affected industry.
                  (D) Standard for determination.--The presence 
                or absence of any factor which the Commission 
                is required to evaluate under subparagraph (C) 
                shall not necessarily give decisive guidance 
                with respect to the determination by the 
                Commission of material injury.
                  (E) Threat of material injury.--
                          (i) In general.--In determining 
                        whether an industry in the United 
                        States is threatened with material 
                        injury by reason of the sale of the 
                        subject vessel, the Commission shall 
                        consider, among other relevant economic 
                        factors--
                                  (I) any existing unused 
                                production capacity or 
                                imminent, substantial increase 
                                in production capacity in the 
                                exporting country indicating 
                                the likelihood of substantially 
                                increased sales of a foreign 
                                like vessel to United States 
                                buyers, taking into account the 
                                availability of other export 
                                markets to absorb any 
                                additional exports,
                                  (II) whether the sale of a 
                                foreign like vessel or other 
                                factors indicate the likelihood 
                                of significant additional sales 
                                to United States buyers,
                                  (III) whether sale of the 
                                subject vessel or sale of a 
                                foreign like vessel by the 
                                foreign producer are at prices 
                                that are likely to have a 
                                significant depressing or 
                                suppressing effect on domestic 
                                prices, and are likely to 
                                increase demand for further 
                                sales,
                                  (IV) the potential for 
                                product-shifting if production 
                                facilities in the exporting 
                                country, which can presently be 
                                used to produce a foreign like 
                                vessel or could be adapted in a 
                                timely manner to produce a 
                                foreign like vessel, are 
                                currently being used to produce 
                                other types of vessels,
                                  (V) the actual and potential 
                                negative effects on the 
                                existing development and 
                                production efforts of the 
                                domestic industry, including 
                                efforts to develop a derivative 
                                or more advanced version of a 
                                domestic like vessel, and
                                  (VI) any other demonstrable 
                                adverse trends that indicate 
                                the probability that there is 
                                likely to be material injury by 
                                reason of the sale of the 
                                subject vessel.
                          (ii) Basis for determination.--The 
                        Commission shall consider the factors 
                        set forth in clause (i) as a whole. The 
                        presence or absence of any factor which 
                        the Commission is required to consider 
                        under clause (i) shall not necessarily 
                        give decisive guidance with respect to 
                        the determination. Such a determination 
                        may not be made on the basis of mere 
                        conjecture or supposition.
                          (iii) Effect of injurious pricing in 
                        third-country markets.--
                                  (I) In general.--The 
                                Commission shall consider 
                                whether injurious pricing in 
                                the markets of foreign 
                                countries (as evidenced by 
                                injurious pricing findings or 
                                injurious pricing remedies of 
                                other Shipbuilding Agreement 
                                Parties, or antidumping 
                                determinations of, or measures 
                                imposed by, other countries, 
                                against a like vessel produced 
                                by the producer under 
                                investigation) suggests a 
                                threat of material injury to 
                                the domestic industry. In the 
                                course of its investigation, 
                                the Commission shall request 
                                information from the foreign 
                                producer or United States buyer 
                                concerning this issue.
                                  (II) European communities.--
                                For purposes of this clause, 
                                the European Communities as a 
                                whole shall be treated as a 
                                single foreign country.
                  (F) Cumulation for determining material 
                injury.--
                          (i) In general.--For purposes of 
                        clauses (i) and (ii) of subparagraph 
                        (C), and subject to clause (ii) of this 
                        subparagraph, the Commission shall 
                        cumulatively assess the effects of 
                        sales of foreign like vessels from all 
                        foreign producers with respect to 
                        which--
                                  (I) petitions were filed 
                                under section 802(b) on the 
                                same day,
                                  (II) investigations were 
                                initiated under section 802(a) 
                                on the same day, or
                                  (III) petitions were filed 
                                under section 802(b) and 
                                investigations were initiated 
                                under section 802(a) on the 
                                same day,
                        if, with respect to such vessels, the 
                        foreign producers compete with each 
                        other and with producers of a domestic 
                        like vessel in the United States 
                        market.
                          (ii) Exceptions.--The Commission 
                        shall not cumulatively assess the 
                        effects of sales under clause (i)--
                                  (I) with respect to which the 
                                administering authority has 
                                made a preliminary negative 
                                determination, unless the 
                                administering authority 
                                subsequently made a final 
                                affirmative determination with 
                                respect to those sales before 
                                the Commission's final 
                                determination is made, or
                                  (II) from any producer with 
                                respect to which the 
                                investigation has been 
                                terminated.
                          (iii) Records in final 
                        investigations.--In each final 
                        determination in which it cumulatively 
                        assesses the effects of sales under 
                        clause (i), the Commission may make its 
                        determinations based on the record 
                        compiled in the first investigation in 
                        which it makes a final determination, 
                        except that when the administering 
                        authority issues its final 
                        determination in a subsequently 
                        completed investigation, the Commission 
                        shall permit the parties in the 
                        subsequent investigation to submit 
                        comments concerning the significance of 
                        the administering authority's final 
                        determination, and shall include such 
                        comments and the administering 
                        authority's final determination in the 
                        record for the subsequent 
                        investigation.
                  (G) Cumulation for determining threat of 
                material injury.--To the extent practicable and 
                subject to subparagraph (F)(ii), for purposes 
                of clause (i) (II) and (III) of subparagraph 
                (E), the Commission may cumulatively assess the 
                effects of sales of like vessels from all 
                countries with respect to which--
                          (i) petitions were filed under 
                        section 802(b) on the same day,
                          (ii) investigations were initiated 
                        under section 802(a) on the same day, 
                        or
                          (iii) petitions were filed under 
                        section 802(b) and investigations were 
                        initiated under section 802(a) on the 
                        same day,
                if, with respect to such vessels, the foreign 
                producers compete with each other and with 
                producers of a domestic like vessel in the 
                United States market.
          (17) Interested party.--The term ``interested party'' 
        means, in a proceeding under this title--
                  (A)(i) the foreign producer, seller (other 
                than the foreign producer), and the United 
                States buyer of the subject vessel, or
                  (ii) a trade or business association a 
                majority of the members of which are the 
                foreign producer, seller, or United States 
                buyer of the subject vessel,
                  (B) the government of the country in which 
                the subject vessel is produced or manufactured,
                  (C) a producer that is a member of an 
                industry,
                  (D) a certified union or recognized union or 
                group of workers which is representative of an 
                industry,
                  (E) a trade or business association a 
                majority of whose members are producers in an 
                industry,
                  (F) an association, a majority of whose 
                members is composed of interested parties 
                described in subparagraph (C), (D), or (E), and
                  (G) for purposes of section 807, a purchaser 
                who, after the effective date of an order 
                issued under that section, entered into a 
                contract of sale with the foreign producer that 
                is subject to the order.
          (18) Affirmative determinations by divided 
        commission.--If the Commissioners voting on a 
        determination by the Commission are evenly divided as 
        to whether the determination should be affirmative or 
        negative, the Commission shall be deemed to have made 
        an affirmative determination. For the purpose of 
        applying this paragraph when the issue before the 
        Commission is to determine whether there is or has 
        been--
                  (A) material injury to an industry in the 
                United States,
                  (B) threat of material injury to such an 
                industry, or
                  (C) material retardation of the establishment 
                of an industry in the United States,
        by reason of the sale of the subject vessel, an 
        affirmative vote on any of the issues shall be treated 
        as a vote that the determination should be affirmative.
          (19) Ordinary course of trade.--The term `ordinary 
        course of trade' means the conditions and practices 
        which, for a reasonable time before the sale of the 
        subject vessel, have been normal in the shipbuilding 
        industry with respect to a like vessel. The 
        administering authority shall consider the following 
        sales and transactions, among others, to be outside the 
        ordinary course of trade:
                  (A) Sales disregarded under section 
                822(b)(1).
                  (B) Transactions disregarded under section 
                822(f)(2).
          (20) Nonmarket economy country.--
                  (A) In general.--The term ``nonmarket economy 
                country'' means any foreign country that the 
                administering authority determines does not 
                operate on market principles of cost or pricing 
                structures, so that sales of vessels in such 
                country do not reflect the fair value of the 
                vessels.
                  (B) Factors to be considered.--In making 
                determinations under subparagraph (A) the 
                administering authority shall take into 
                account--
                          (i) the extent to which the currency 
                        of the foreign country is convertible 
                        into the currency of other countries,
                          (ii) the extent to which wage rates 
                        in the foreign country are determined 
                        by free bargaining between labor and 
                        management,
                          (iii) the extent to which joint 
                        ventures or other investments by firms 
                        of other foreign countries are 
                        permitted in the foreign country,
                          (iv) the extent of government 
                        ownership or control of the means of 
                        production,
                          (v) the extent of government control 
                        over the allocation of resources and 
                        over the price and output decisions of 
                        enterprises, and
                          (vi) such other factors as the 
                        administering authority considers 
                        appropriate.
                  (C) Determination in effect.--
                          (i) Any determination that a foreign 
                        country is a nonmarket economy country 
                        shall remain in effect until revoked by 
                        the administering authority.
                          (ii) The administering authority may 
                        make a determination under subparagraph 
                        (A) with respect to any foreign country 
                        at any time.
                  (D) Determinations not in issue.--
                Notwithstanding any other provision of law, any 
                determination made by the administering 
                authority under subparagraph (A) shall not be 
                subject to judicial review in any investigation 
                conducted under subtitle A.
          (21) Shipbuilding agreement.--The term ``Shipbuilding 
        Agreement'' means The Agreement Respecting Normal 
        Competitive Conditions in the Commercial Shipbuilding 
        and Repair Industry, resulting from negotiations under 
        the auspices of the Organization for Economic 
        Cooperation and Development, and entered into on 
        December 21, 1994.
          (22) Shipbuilding agreement party.--The term 
        ``Shipbuilding Agreement Party'' means a state or 
        separate customs territory that is a Party to the 
        Shipbuilding Agreement, and with respect to which the 
        United States applies the Shipbuilding Agreement.
          (23) WTO agreement.--The term ``WTO Agreement'' means 
        the Agreement defined in section 2(9) of the Uruguay 
        Round Agreements Act.
          (24) WTO member.--The term ``WTO member'' means a 
        state, or separate customs territory (within the 
        meaning of Article XII of the WTO Agreement), with 
        respect to which the United States applies the WTO 
        Agreement.
          (25) Trade representative.--The term `Trade 
        Representative' means the United States Trade 
        Representative.
          (26) Affiliated persons.--The following persons shall 
        be considered to be ``affiliated'' or ``affiliated 
        persons'':
                  (A) Members of a family, including brothers 
                and sisters (whether by the whole or half 
                blood), spouse, ancestors, and lineal 
                descendants.
                  (B) Any officer or director of an 
                organization and such organization.
                  (C) Partners.
                  (D) Employer and employee.
                  (E) Any person directly or indirectly owning, 
                controlling, or holding with power to vote, 5 
                percent or more of the outstanding voting stock 
                or shares of any organization, and such 
                organization.
                  (F) Two or more persons directly or 
                indirectly controlling, controlled by, or under 
                common control with, any person.
                  (G) Any person who controls any other person, 
                and such other person.
        For purposes of this paragraph, a person shall be 
        considered to control another person if the person is 
        legally or operationally in a position to exercise 
        restraint or direction over the other person.
          (27) Injurious pricing.--The term ``injurious 
        pricing'' refers to the sale of a vessel at less than 
        fair value.
          (28) Injurious pricing margin.--
                  (A) In general.--The term ``injurious pricing 
                margin'' means the amount by which the normal 
                value exceeds the export price of the subject 
                vessel.
                  (B) Magnitude of the injurious pricing 
                margin.--The magnitude of the injurious pricing 
                margin used by the Commission shall be--
                          (i) in making a preliminary 
                        determination under section 803(a) in 
                        an investigation (including any 
                        investigation in which the Commission 
                        cumulatively assesses the effect of 
                        sales under paragraph (16)(F)(i)), the 
                        injurious pricing margin or margins 
                        published by the administering 
                        authority in its notice of initiation 
                        of the investigation; and
                          (ii) in making a final determination 
                        under section 805(b), the injurious 
                        pricing margin or margins most recently 
                        published by the administering 
                        authority before the closing of the 
                        Commission's administrative record.
          (29) Commercial interest reference rate.--The term 
        ``Commercial Interest Reference Rate'' or ``CIRR'' 
        means an interest rate that the administering authority 
        determines to be consistent with Annex III, and 
        appendices and notes thereto, of the Understanding on 
        Export Credits for Ships, resulting from negotiations 
        under the auspices of the Organization for Economic 
        Cooperation, and entered into on December 21, 1994.
          (30) Antidumping.--
                  (A) WTO members.--In the case of a WTO 
                member, the term ``antidumping'' refers to 
                action taken pursuant to the Agreement on 
                Implementation of Article VI of the General 
                Agreement on Tariffs and Trade 1994.
                  (B) Other cases.--In the case of any country 
                that is not a WTO member, the term 
                ``antidumping'' refers to action taken by the 
                country against the sale of a vessel at less 
                than fair value that is comparable to action 
                described in subparagraph (A).
          (31) Broad multiple bid.--The term ``broad multiple 
        bid'' means a bid in which the proposed buyer extends 
        an invitation to bid to at least all the producers in 
        the industry known by the buyer to be capable of 
        building the subject vessel.

                           TRADE ACT OF 1974

          * * * * * * *

               [TITLE V--GENERALIZED SYSTEM OF PREFERENCES

[Sec. 501.  Authority to extend preferences.
[Sec. 502.  Beneficiary developing country.
[Sec. 503.  Eligible articles.
[Sec. 504.  Limitations on preferential treatment.
[Sec. 505.  Termination of duty-free treatment and reports.
[Sec. 506.  Agricultural exports of beneficiary developing countries.]

               TITLE V--GENERALIZED SYSTEM OF PREFERENCES

Sec. 501.  Authority to extend preferences.
Sec. 502.  Designation of beneficiary developing countries.
Sec. 503.  Designation of eligible articles.
Sec. 504.  Review and report to Congress.
Sec. 505.  Date of termination.
Sec. 506.  Agricultural exports of beneficiary developing countries.
Sec. 507.  Definitions.
          * * * * * * *

              [TITLE V--GENERALIZED SYSTEM OF PREFERENCES

[SEC. 501. AUTHORITY TO EXTEND PREFERENCE.

  [The President may provide duty-free treatment for any 
eligible article from any beneficiary developing country in 
accordance with the provisions of this title. In taking any 
such action, the President shall have due regard for--
          [(1) the effect such action will have on furthering 
        the economic development of developing countries 
        through the expansion of their exports;
          [(2) the extent to which other major developed 
        countries are undertaking a comparable effort to assist 
        developing countries by granting generalized 
        preferences with respect to imports of products of such 
        countries;
          [(3) the anticipated impact of such action on United 
        States producers of like or directly competitive 
        products; and
          [(4) the extent of the beneficiary developing 
        country's competitiveness with respect to eligible 
        articles.

[SEC. 502. BENEFICIARY DEVELOPING COUNTRY.

  [(a)(1) For purposes of this title, the term ``beneficiary 
developing country'' means any country with respect to which 
there is in effect an Executive order or Presidential 
proclamation by the President of the United States designating 
such country as a beneficiary developing country for purposes 
of this title. Before the President designates any country as a 
beneficiary developing country for purposes of this title, he 
shall notify the House of Representatives and the Senate of his 
intention to make such designation, together with the 
considerations entering into such decision.
  [(2) If the President has designated any country as a 
beneficiary developing country for purposes of this title, he 
shall not terminate such designation (either by issuing an 
Executive order or Presidential proclamation for that purpose 
or by issuing an Executive order or Presidential proclamation 
which has the effect of terminating such designation) unless, 
at least 60 days before such termination, he has notified the 
House of Representatives and the Senate and has notified such 
country of his intention to terminate such designation, 
together with the consideration entering into such decision.
  [(3) For purposes of this title, the term ``country'' means 
any foreign country, any overseas dependent territory or 
possession of a foreign country, or the Trust Territory of the 
Pacific Islands. In the case of an association of countries 
which is a free trade area or customs union, or which is 
contributing to comprehensive regional economic integration 
among its members through appropriate means, including, but not 
limited to, the reduction of duties, the President may by 
Executive order or Presidential proclamation provide that all 
members of such association other than members which are barred 
from designation under subsection (b) shall be treated as one 
country for purposes of this title.
  [(4) For purposes of this title, the term ``internationally 
recognized worker rights'' includes--
          [(A) the right of association;
          [(B) the right to organize and bargain collectively;
          [(C) a prohibition on the use of any form of forced 
        or compulsory labor;
          [(D) a minimum age for the employment of children; 
        and
          [(E) acceptable conditions of work with respect to 
        minimum wages, hours of work, and occupational safety 
        and health.
  [(b) No designation shall be made under this section with 
respect to any of the following:

  [Australia
  [Austria
  [Canada
  [European Economic Community member states
  [Finland
  [Iceland
  [Japan
  [Monaco
  [New Zealand
  [Norway
  [Sweden
  [Switzerland

[In addition, the President shall not designate any country a 
beneficiary developing country under this section--
          [(1) if such country is a Communist country, unless 
        (A) the products of such country receive 
        nondiscriminatory treatment, (B) such country is a 
        contracting party to the General Agreement on Tariffs 
        and Trade and a member of the International Monetary 
        Fund, and (C) such country is not dominated or 
        controlled by international communism;
          [(2) if such country is a member of the Organization 
        of Petroleum Exporting Countries, or a party to any 
        other arrangement of foreign countries, and such 
        country participates in any action pursuant to such 
        arrangement the effect of which is to withhold supplies 
        of vital commodity resources from international trade 
        or to raise the price of such commodities to an 
        unreasonable level and to cause serious disruption of 
        the world economy;
          [(3) if such country affords preferential treatment 
        to the products of a developed country, other than the 
        United States, which has, or is likely to have, a 
        significant adverse effect on United States commerce, 
        unless the President has received assurances 
        satisfactory to him that such preferential treatment 
        will be eliminated before January 1, 1976, or that 
        action will be taken before January 1, 1976, to assure 
        that there will be no such significant adverse effect, 
        and he reports those assurances to the Congress;
          [(4) if such country--
                  [(A) has nationalized, expropriated, or 
                otherwise seized ownership or control of 
                property, including patents, trademarks, or 
                copyrights owned by a United States citizen or 
                by a corporation, partnership, or association 
                which is 50 percent or more beneficially owned 
                by United States citizens,
                  [(B) has taken steps to repudiate or nullify 
                an existing contract or agreement with a United 
                States citizen or a corporation, partnership, 
                or association which is 50 percent or more 
                beneficially owned by United States citizens, 
                the effect of which is to nationalize, 
                expropriate, or otherwise seize ownership or 
                control of property, including patents, 
                trademarks, or copyrights, so owned, or
                  [(C) has imposed or enforced taxes or other 
                exactions, restrictive maintenance or 
                operational conditions, or other measures with 
                respect to property, including patents, 
                trademarks, or copyrights, so owned, the effect 
                of which is to nationalize, expropriate, or 
                otherwise seize ownership or control of such 
                property,
                  [(D) the President determines that--
                          [(i) prompt, adequate, and effective 
                        compensation has been or is being made 
                        to such citizen, corporation, 
                        partnership, or association,
                          [(ii) good faith negotiations to 
                        provide prompt, adequate, and effective 
                        compensation under the applicable 
                        provisions of international law are in 
                        progress, or such country is otherwise 
                        taking steps to discharge its 
                        obligations under international law 
                        with respect to such citizen, 
                        corporation, partnership, or 
                        association, or
                          [(iii) a dispute involving such 
                        citizen, corporation, partnership, or 
                        association over compensation for such 
                        a seizure has been submitted to 
                        arbitration under the provisions of the 
                        Convention for the Settlement of 
                        Investment Disputes, or in another 
                        mutually agreed upon forum, and
        promptly furnishes a copy of such determination to the 
        Senate and House of Representatives;
          [(5) if such country fails to act in good faith in 
        recognizing as binding or in enforcing arbitral awards 
        in favor of United States citizens or a corporation, 
        partnership, or association which is 50 percent or more 
        beneficially owned by United States citizens, which 
        have been made by arbitrators appointed for each case 
        or by permanent arbitral bodies to which the parties 
        involved have submitted their dispute;
          [(6) if such country aids or abets, by granting 
        sanctuary from prosecution to, any individual or group 
        which has committed an act of international terrorism; 
        and
          [(7) if such country has not taken or is not taking 
        steps to afford internationally recognized worker 
        rights to workers in the country (including any 
        designated zone in that country).
  [Paragraphs (4), (6), (7), and (8) shall not prevent the 
designation of any country as a beneficiary developing country 
under this section if the President determines that such 
designation will be in the national economic interest of the 
United States and reports such determination to the Congress 
with his reasons therefor.
  [(c) In determining whether to designate any country a 
beneficiary developing country under this section, the 
President shall take into account--
          [(1) an expression by such country of its desire to 
        be so designated;
          [(2) the level of economic development of such 
        country, including its per capita gross national 
        product, the living standards of its inhabitants, and 
        any other economic factors which he deems appropriate;
          [(3) whether or not the other major developed 
        countries are extending generalized preferential tariff 
        treatment to such country;
          [(4) the extent to which such country has assured the 
        United States it will provide equitable and reasonable 
        access to the markets and basic commodity resources of 
        such country and the extent to which such country has 
        assured the United States that it will refrain from 
        engaging in unreasonable export practices;
          [(5) the extent to which such country is providing 
        adequate and effective means under its laws for foreign 
        nationals to secure, to exercise, and to enforce 
        exclusive rights in intellectual property, including 
        patents, trademarks, and copyrights;
          [(6) the extent to which such country has taken 
        action to--
                  [(A) reduce trade distorting investment 
                practices and policies (including export 
                performance requirements); and
                  [(B) reduce or eliminate barriers to trade in 
                services; and
          [(7) whether or not such country has taken or is 
        taking steps to afford to workers in that country 
        (including any designated zone in that country) 
        internationally recognized worker rights.
    [(d) Amendment of general headnote 3(a) to the Tariff 
Schedules of the United States relating to products of insular 
possessions.]
  [(e)(1) The President may exempt from the application of 
paragraph (2) of subsection (b) any country during the period 
during which such country (A) is a party to a bilateral or 
multilateral trade agreement to which the United States is also 
a party if such agreement fulfills the negotiating objectives 
set forth in section 108 of assuring the United States fair and 
equitable access at reasonable prices to supplies of articles 
of commerce important to the economic requirements of the 
United States and (B) is not in violation of such agreement by 
action denying the United States such fair and equitable 
access.
  [(2) The President may exempt from the application of 
paragraph (2) of subsection (b) any country that enters into a 
bilateral product-specific trade agreement with the United 
States under section 101 or 102 of the Trade Act of 1974 before 
January 3, 1980. The President shall terminate the exemption 
granted to any country under the preceding sentence if that 
country interrupts or terminates the delivery of supplies of 
petroleum and petroleum products to the United States.

    [(19 U.S.C. 2462)

[SEC. 503. ELIGIBLE ARTICLES.

  [(a) The President shall, from time to time, publish and 
furnish the International Trade Commission with lists of 
articles which may be considered for designation as eligible 
articles for purposes of this title. Before any such list is 
furnished to the Commission, there shall be in effect an 
Executive order or Presidential proclamation under section 502 
designating beneficiary developing countries. The provisions of 
sections 131, 132, 133, and 134 of this Act shall be complied 
with as though action under section 501 were action under 
section 101 of this Act to carry out a trade agreement entered 
into under section 101. After receiving the advice of the 
Commission with respect to the listed articles, the President 
shall designate those articles he considers appropriate to be 
eligible articles for purposes of this title by Executive order 
or Presidential proclamation.
  [(b)(1) The duty free treatment provided under section 501 
shall apply to any eligible article which is the growth, 
product, or manufacture of a beneficiary developing country 
if--
          [(A) that article is imported directly from a 
        beneficiary developing country into the customs 
        territory of the United States;
          [(B) the sum of (i) the cost or value of the 
        materials produced in the beneficiary developing 
        country or any 2 or more countries which are members of 
        the same association of countries which is treated as 
        one country under section 502(a)(3), plus (ii) the 
        direct costs of processing operations performed in such 
        beneficiary developing country or such member countries 
        is not less than 35 percent of the appraised value of 
        such article at the time of its entry into the customs 
        territory of the United States.
  [(2) The Secretary of the Treasury, after consulting with the 
United States Trade Representative, shall prescribe such 
regulations as may be necessary to carry out this subsection, 
including, but not limited to, regulations providing that, in 
order to be eligible for duty-free treatment under this title, 
an article must be wholly the growth, product, or manufacture 
of a beneficiary developing country, or must be a new or 
different article of commerce which has been grown, produced, 
or manufactured in the beneficiary developing country; but no 
article or material of a beneficiary developing country shall 
be eligible for such treatment by virtue of having merely 
undergone--
          [(A) simple combining of packaging operations, or
          [(B) mere dilution with water or mere dilution with 
        another substance that does not materially alter the 
        characteristics of the article.
  [(c)(1) The President may not designate any article as an 
eligible article under subsection (a) if such article is within 
one of the following categories of import-sensitive articles--
          [(A) textile and apparel articles which are subject 
        to textile agreements,
          [(B) watches, except those watches entered after June 
        30, 1989, that the President specifically determines, 
        after public notice and comment, will not cause 
        material injury to watch or watch band, strap, or 
        bracelet manufacturing and assembly operations in the 
        United States or the United States insular possessions,
          [(C) import-sensitive electronic articles,
          [(D) import-sensitive steel articles,
          [(E) footwear, handbags, luggage, flat goods, work 
        gloves, and leather wearing apparel which were not 
        eligible articles for purposes of this article on April 
        1, 1984,
          [(F) import-sensitive semimanufactured and 
        manufactured glass products, and
          [(G) any other articles which the President 
        determines to be import-sensitive in the context of the 
        Generalized System of Preferences.
  [(2) No article shall be an eligible article for purposes of 
this title for any period during which such article is the 
subject of any action proclaimed pursuant to section 203 of 
this Act or section 232 or 351 of the Trade Expansion Act of 
1962.
  [(d) Tariff-Rate Quotas.--No quantity of an agricultural 
product subject to a tariff-rate quota that exceeds the in-
quota quantity shall be eligible for duty-free treatment under 
this title.

    [(19 U.S.C. 2463)

[SEC. 504. LIMITATIONS ON PREFERENTIAL TREATMENT.

  [(a)(1) The President may withdraw, suspend, or limit the 
application of the duty-free treatment accorded under section 
501 with respect to any article or with respect to any country; 
except that no rate of duty may be established in respect of 
any article pursuant to this section other than the rate which 
would apply but for this title. In taking any action under this 
subsection, the President shall consider the factors set forth 
in sections 501 and 502(c).
  [(2) The President shall, as necessary, advise the Congress 
and, by no later than January 4, 1988, submit to the Congress a 
report on the application of sections 502 and 502(c), and the 
actions the President has taken to withdraw, to suspend, or to 
limit the application of duty-free treatment with respect to 
any country which has failed to adequately take the actions 
described in section 502(c).
  [(b) The President shall, after complying with the 
requirements of section 502(a)(2), withdraw or suspend the 
designation of any country as a beneficiary developing country 
if, after such designation, he determines that as the result of 
changed circumstances such country would be barred from 
designation as a beneficiary developing country under section 
502(b). Such country shall cease to be a beneficiary developing 
country on the day on which the President issues an Executive 
order or Presidential proclamation revoking his designation of 
such country under section 502.
  [(c)(1) Subject to paragraphs (2) through (7) and subsection 
(d), whenever the President determines that any country--
          [(A) has exported (directly or indirectly) to the 
        United States during a calendar year a quantity of an 
        eligible article having an appraised value in excess of 
        an amount which bears the same ratio to $25,000,000 as 
        the gross national product of the United States for the 
        preceding calendar year (as determined by the 
        Department of Commerce) bears to the gross national 
        product of the United States for calendar year 1974; or
          [(B) has exported (either directly or indirectly) to 
        the United States a quantity of any eligible article 
        equal to or exceeding 50 percent of the appraised value 
        of the total imports of such article into the United 
        States during any calendar year;
then, not later than July 1 of the next calendar year, such 
country shall not be treated as a beneficiary developing 
country with respect to such article.
  [(2)(A) Not later than January 1, 1987, and periodically 
thereafter, the President shall conduct a general review of 
eligible articles based on the considerations described in 
section 501 or 502(c).
  [(B) If, after any review under subparagraph (A), the 
President determines that this subparagraph should apply 
because a beneficiary developing country has demonstrated a 
sufficient degree of competitiveness (relative to other 
beneficiary developing countries) with respect to any eligible 
article, then paragraph (1) shall be applied to such country 
with respect to such article by substituting--
          [(i) ``1984'' for ``1974'' in subparagraph (A), and
          [(ii) ``25 percent'' for ``50 percent'' in 
        subparagraph (B).
  [(3)(A) Not earlier than January 4, 1987, the President may 
waive the application of this subsection with respect to any 
eligible article of any beneficiary developing country if, 
before July 1 of the calendar year beginning after the calendar 
year for which a determination described in paragraph (1) was 
made with respect to such eligible article, the President--
          [(i) receives the advice of the International Trade 
        Commission on whether any industry in the United States 
        is likely to be adversely affected by such waiver,
          [(ii) determines, based on the considerations 
        described in sections 501 and 502(c) and the advice 
        described in clause (i), that such waiver is in the 
        national economic interest of the United States, and
          [(iii) publishes the determination described in 
        clause (ii) in the Federal Register.
  [(B) In making any determination under subparagraph (A), the 
President shall give great weight to--
          [(i) the extent to which the beneficiary developing 
        country has assured the United States that such country 
        will provide equitable and reasonable access to the 
        markets and basic commodity resources of such country, 
        and
          [(ii) the extent to which such country provides 
        adequate and effective means under its law for foreign 
        nationals to secure, to exercise, and to enforce 
        exclusive rights in intellectual property, including 
        patent, trademark, and copyright rights.
  [(C) Any waiver granted pursuant to this paragraph shall 
remain in effect until the President determines that such 
waiver is no longer warranted due to changed circumstances.
  [(D)(i) The President may not exercise the waiver authority 
provided under subparagraph (A) with respect to a quantity of 
eligible articles entered in any calendar year which exceeds an 
aggregate value equal to 30 percent of the total value of all 
articles which entered duty-free under this title during the 
preceding calendar year.
  [(ii) The President may not exercise the waiver authority 
provided under subparagraph (A) with respect to a quantity of 
eligible articles entered during any calendar year beginning 
after 1986 the aggregate value of which exceeds 15 percent of 
the total value of all articles that have entered duty-free 
under this title during the preceding calendar year from those 
beneficiary developing countries which for the preceding 
calendar year--
          [(I) had a per capita gross national product 
        (calculated on the basis of the best available 
        information, including that of the World Bank) of 
        $5,000 or more; or
          [(II) had exported (either directly or indirectly) to 
        the United States a quantity of articles that was duty-
        free under this title that had an appraised value of 
        more than 10 percent of the total imports of all 
        articles that entered duty-free under this title during 
        that year.
  [(iii) There shall be counted against the limitations imposed 
under clauses (i) and (ii) for any calendar year only that 
quantity of any eligible article of any country that--
          [(I) entered duty-free under this title during such 
        calendar year; and
          [(II) is in excess of the quantity of that article 
        that would have been so entered during such calendar 
        year if the 1974 limitation applied under paragraph 
        (1)(A) and the 50 percent limitation applied under 
        paragraph (1)(B).
  [(4) Except in any case to which paragraph (2)(B) applies, 
the President may waive the application of this subsection if, 
before July 1 of the calendar year beginning after the calendar 
year for which a determination described in paragraph (1) was 
made, the President determines and publishes in the Federal 
Register that, with respect to such country--
          [(A) there has been a historical preferential trade 
        relationship between the United States and such 
        country,
          [(B) there is a treaty or trade agreement in force 
        covering economic relations between such country and 
        the United States, and
          [(C) such country does not discriminate against, or 
        impose unjustifiable or unreasonable barriers to, 
        United States commerce.
  [(5) A country which is no longer treated as a beneficiary 
developing country with respect to an eligible article by 
reason of this subsection may be redesignated a beneficiary 
developing country with respect to such article, subject to the 
provisions of sections 501 and 502, if imports of such article 
from such country did not exceed the limitations in paragraph 
(1) (after application of paragraph (2)) during the preceding 
calendar year.
  [(6)(A) This subsection shall not apply to any beneficiary 
developing country which the President determines, based on the 
considerations described in sections 501 and 502(c), to be a 
least-developed beneficiary developing country.
  [(B) The President shall--
          [(i) make a determination under subparagraph (A) with 
        respect to each beneficiary developing country before 
        July 4, 1985, and periodically thereafter, and
          [(ii) notify the Congress at least 60 days before any 
        such determination becomes final.
  [(7) For purposes of this subsection, the term ``country'' 
does not include an association of countries which is treated 
as one country under section 502(a)(3), but does include a 
country which is a member of any such association.
  [(d)(1) Subsection (c)(1)(B) (after application of subsection 
(c)(2)) shall not apply with respect to any eligible article if 
a like or directly competitive article is not produced in the 
United States on January 3, 1985.
  [(2) The President may disregard subsection (c)(1)(B) with 
respect to any eligible article if the appraised value of the 
total imports of such article into the United States during the 
preceding calendar year is not in excess of an amount which 
bears the same ratio to $5,000,000 as the gross national 
product of the United States for that calendar year (as 
determined by the Department of Commerce) bears to the gross 
national product of the United States for calendar year 1979.
  [(e) No action pursuant to section 501 may affect any tariff 
duty imposed by the Legislature of Puerto Rico pursuant to 
section 319 of the Tariff Act of 1930 (19 U.S.C. sec. 1319) on 
coffee imported into Puerto Rico.
  [(f)(1) If the President determines that the per capita gross 
national product (calculated on the basis of the best available 
information, including that of the World Bank) of any 
beneficiary developing country for any calendar year (hereafter 
in this subsection referred to as the ``determination year'') 
after 1984, exceeds the applicable limit for the determination 
year--
          [(A) subsection (c)(1)(B) shall be applied for the 2-
        year period beginning on July 1 of the calendar year 
        succeeding the determination year by substituting ``25 
        percent'' or ``50 percent'', and
          [(B) such country shall not be treated as a 
        beneficiary developing country under this title after 
        the close of such 2-year period.
  [(2)(A) For purposes of this subsection, the term 
``applicable limit'' means a sum of--
          [(i) $8,500, plus
          [(ii) 50 percent of the amount determined under 
        subparagraph (B) for the determination year.
  [(B) The amount determined under this subparagraph for the 
determination year is an amount equal to--
          [(i) $8,500, multiplied by
          [(ii) the percentage determined by dividing--
                  [(I) the excess, if any, of the gross 
                national product of the United States (as 
                determined by the Secretary of Commerce) for 
                the determination year over the gross national 
                product of the United States for 1984, by
                  [(II) the gross national product for 1984.

    [(19 U.S.C. 2464)

[SEC. 505. TERMINATION OF DUTY-FREE TREATMENT AND REPORTS.

  [(a) No duty-free treatment provided under this title shall 
remain in effect after July 31, 1995.
  [(b) On or before January 4, 1990, the President shall submit 
to the Congress a full and complete report regarding the 
operation of this title.
  [(c) The President shall submit an annual report to the 
Congress on the status of internationally recognized worker 
rights within each beneficiary developing country.

    [(19 U.S.C. 2465)

[SEC. 506. AGRICULTURAL EXPORTS OF BENEFICIARY DEVELOPING COUNTRIES.

  [The appropriate agencies of the United States shall assist 
beneficiary developing countries to develop and implement 
measures designed to assure that the agricultural sectors of 
their economies are not directed to export markets to the 
detriment of the production of foodstuffs for their citizenry.

    [(19 U.S.C. 2466)]

               TITLE V--GENERALIZED SYSTEM OF PREFERENCES

SEC. 501. AUTHORITY TO EXTEND PREFERENCES.

    The President may provide duty-free treatment for any 
eligible article from any beneficiary developing country in 
accordance with the provisions of this title. In taking any 
such action, the President shall have due regard for--
          (1) the effect such action will have on furthering 
        the economic development of developing countries 
        through the expansion of their exports;
          (2) the extent to which other major developed 
        countries are undertaking a comparable effort to assist 
        developing countries by granting generalized 
        preferences with respect to imports of products of such 
        countries;
          (3) the anticipated impact of such action on United 
        States producers of like or directly competitive 
        products; and
          (4) the extent of the beneficiary developing 
        country's competitiveness with respect to eligible 
        articles.

SEC. 502. DESIGNATION OF BENEFICIARY DEVELOPING COUNTRIES.

    (a) Authority To Designate Countries.--
          (1) Beneficiary developing countries.--The President 
        is authorized to designate countries as beneficiary 
        developing countries for purposes of this title.
          (2) Least-developed beneficiary developing 
        countries.--The President is authorized to designate 
        any beneficiary developing country as a least-developed 
        beneficiary developing country for purposes of this 
        title, based on the considerations in section 501 and 
        subsection (c) of this section.
    (b) Countries Ineligible for Designation.--
          (1) Specific countries.--The following countries may 
        not be designated as beneficiary developing countries 
        for purposes of this title:
                  (A) Australia.
                  (B) Canada.
                  (C) European Union member states.
                  (D) Iceland.
                  (E) Japan.
                  (F) Monaco.
                  (G) New Zealand.
                  (H) Norway.
                  (I) Switzerland.
          (2) Other bases for ineligibility.--The President 
        shall not designate any country a beneficiary 
        developing country under this title if any of the 
        following applies:
                  (A) Such country is a Communist country, 
                unless--
                          (i) the products of such country 
                        receive nondiscriminatory treatment,
                          (ii) such country is a WTO Member (as 
                        such term is defined in section 2(10) 
                        of the Uruguay Round Agreements Act) 
                        (19 U.S.C. 3501(10)) and a member of 
                        the International Monetary Fund, and
                          (iii) such country is not dominated 
                        or controlled by international 
                        communism.
                  (B) Such country is a party to an arrangement 
                of countries and participates in any action 
                pursuant to such arrangement, the effect of 
                which is--
                          (i) to withhold supplies of vital 
                        commodity resources from international 
                        trade or to raise the price of such 
                        commodities to an unreasonable level, 
                        and
                          (ii) to cause serious disruption of 
                        the world economy.
                  (C) Such country affords preferential 
                treatment to the products of a developed 
                country, other than the United States, which 
                has, or is likely to have, a significant 
                adverse effect on United States commerce.
                  (D)(i) Such country--
                          (I) has nationalized, expropriated, 
                        or otherwise seized ownership or 
                        control of property, including patents, 
                        trademarks, or copyrights, owned by a 
                        United States citizen or by a 
                        corporation, partnership, or 
                        association which is 50 percent or more 
                        beneficially owned by United States 
                        citizens,
                          (II) has taken steps to repudiate or 
                        nullify an existing contract or 
                        agreement with a United States citizen 
                        or a corporation, partnership, or 
                        association which is 50 percent or more 
                        beneficially owned by United States 
                        citizens, the effect of which is to 
                        nationalize, expropriate, or otherwise 
                        seize ownership or control of property, 
                        including patents, trademarks, or 
                        copyrights, so owned, or
                          (III) has imposed or enforced taxes 
                        or other exactions, restrictive 
                        maintenance or operational conditions, 
                        or other measures with respect to 
                        property, including patents, 
                        trademarks, or copyrights, so owned, 
                        the effect of which is to nationalize, 
                        expropriate, or otherwise seize 
                        ownership or control of such property,
                unless clause (ii) applies.
                  (ii) This clause applies if the President 
                determines that--
                          (I) prompt, adequate, and effective 
                        compensation has been or is being made 
                        to the citizen, corporation, 
                        partnership, or association referred to 
                        in clause (i),
                          (II) good faith negotiations to 
                        provide prompt, adequate, and effective 
                        compensation under the applicable 
                        provisions of international law are in 
                        progress, or the country described in 
                        clause (i) is otherwise taking steps to 
                        discharge its obligations under 
                        international law with respect to such 
                        citizen, corporation, partnership, or 
                        association, or
                          (III) a dispute involving such 
                        citizen, corporation, partnership, or 
                        association over compensation for such 
                        a seizure has been submitted to 
                        arbitration under the provisions of the 
                        Convention for the Settlement of 
                        Investment Disputes, or in another 
                        mutually agreed upon forum,
                and the President promptly furnishes a copy of 
                such determination to the Senate and House of 
                Representatives.
                  (E) Such country fails to act in good faith 
                in recognizing as binding or in enforcing 
                arbitral awards in favor of United States 
                citizens or a corporation, partnership, or 
                association which is 50 percent or more 
                beneficially owned by United States citizens, 
                which have been made by arbitrators appointed 
                for each case or by permanent arbitral bodies 
                to which the parties involved have submitted 
                their dispute.
                  (F) Such country aids or abets, by granting 
                sanctuary from prosecution to, any individual 
                or group which has committed an act of 
                international terrorism.
                  (G) Such country has not taken or is not 
                taking steps to afford internationally 
                recognized worker rights to workers in the 
                country (including any designated zone in that 
                country).
        Subparagraphs (D), (E), (F), and (G) shall not prevent 
        the designation of any country as a beneficiary 
        developing country under this title if the President 
        determines that such designation will be in the 
        national economic interest of the United States and 
        reports such determination to the Congress with the 
        reasons therefor.
  (c) Factors Affecting Country Designation.--In determining 
whether to designate any country as a beneficiary developing 
country under this title, the President shall take into 
account--
          (1) an expression by such country of its desire to be 
        so designated;
          (2) the level of economic development of such 
        country, including its per capita gross national 
        product, the living standards of its inhabitants, and 
        any other economic factors which the President deems 
        appropriate;
          (3) whether or not other major developed countries 
        are extending generalized preferential tariff treatment 
        to such country;
          (4) the extent to which such country has assured the 
        United States that it will provide equitable and 
        reasonable access to the markets and basic commodity 
        resources of such country and the extent to which such 
        country has assured the United States that it will 
        refrain from engaging in unreasonable export practices;
          (5) the extent to which such country is providing 
        adequate and effective protection of intellectual 
        property rights;
          (6) the extent to which such country has taken action 
        to--
                  (A) reduce trade distorting investment 
                practices and policies (including export 
                performance requirements); and
                  (B) reduce or eliminate barriers to trade in 
                services; and
          (7) whether or not such country has taken or is 
        taking steps to afford to workers in that country 
        (including any designated zone in that country) 
        internationally recognized worker rights.
  (d) Withdrawal, Suspension, or Limitation of Country 
Designation.--
          (1) In general.--The President may withdraw, suspend, 
        or limit the application of the duty-free treatment 
        accorded under this title with respect to any country. 
        In taking any action under this subsection, the 
        President shall consider the factors set forth in 
        section 501 and subsection (c) of this section.
          (2) Changed circumstances.--The President shall, 
        after complying with the requirements of subsection 
        (f)(2), withdraw or suspend the designation of any 
        country as a beneficiary developing country if, after 
        such designation, the President determines that as the 
        result of changed circumstances such country would be 
        barred from designation as a beneficiary developing 
        country under subsection (b)(2). Such country shall 
        cease to be a beneficiary developing country on the day 
        on which the President issues an Executive order or 
        Presidential proclamation revoking the designation of 
        such country under this title.
          (3) Advice to congress.--The President shall, as 
        necessary, advise the Congress on the application of 
        section 501 and subsection (c) of this section, and the 
        actions the President has taken to withdraw, to 
        suspend, or to limit the application of duty-free 
        treatment with respect to any country which has failed 
        to adequately take the actions described in subsection 
        (c).
  (e) Mandatory Graduation of Beneficiary Developing 
Countries.--If the President determines that a beneficiary 
developing country has become a `high income' country, as 
defined by the official statistics of the International Bank 
for Reconstruction and Development, then the President shall 
terminate the designation of such country as a beneficiary 
developing country for purposes of this title, effective on 
January 1 of the second year following the year in which such 
determination is made.
    (f) Congressional Notification.--
          (1) Notification of designation.--
                  (A) In general.--Before the President 
                designates any country as a beneficiary 
                developing country under this title, the 
                President shall notify the Congress of the 
                President's intention to make such designation, 
                together with the considerations entering into 
                such decision.
                  (B) Designation as least-developed 
                beneficiary developing country.--At least 60 
                days before the President designates any 
                country as a least-developed beneficiary 
                developing country, the President shall notify 
                the Congress of the President's intention to 
                make such designation.
          (2) Notification of termination.--If the President 
        has designated any country as a beneficiary developing 
        country under this title, the President shall not 
        terminate such designation unless, at least 60 days 
        before such termination, the President has notified the 
        Congress and has notified such country of the 
        President's intention to terminate such designation, 
        together with the considerations entering into such 
        decision.

SEC. 503. DESIGNATION OF ELIGIBLE ARTICLES.

  (a) Eligible Articles.--
          (1) Designation.--
                  (A) In general.--Except as provided in 
                subsection (b), the President is authorized to 
                designate articles as eligible articles from 
                all beneficiary developing countries for 
                purposes of this title by Executive order or 
                Presidential proclamation after receiving the 
                advice of the International Trade Commission in 
                accordance with subsection (e).
                  (B) Least-developed beneficiary developing 
                countries.--Except for articles described in 
                subparagraphs (A), (B), and (E) of subsection 
                (b)(1) and articles described in paragraphs (2) 
                and (3) of subsection (b), the President may, 
                in carrying out section 502(d)(1) and 
                subsection (c)(1) of this section, designate 
                articles as eligible articles only for 
                countries designated as least-developed 
                beneficiary developing countries under section 
                502(a)(2) if, after receiving the advice of the 
                International Trade Commission in accordance 
                with subsection (e) of this section, the 
                President determines that such articles are not 
                import-sensitive in the context of imports from 
                least-developed beneficiary developing 
                countries.
                  (C) Three-year rule.--If, after receiving the 
                advice of the International Trade Commission 
                under subsection (e), an article has been 
                formally considered for designation as an 
                eligible article under this title and denied 
                such designation, such article may not be 
                reconsidered for such designation for a period 
                of 3 years after such denial.
          (2) Rule of origin.--
                  (A) General rule.--The duty-free treatment 
                provided under this title shall apply to any 
                eligible article which is the growth, product, 
                or manufacture of a beneficiary developing 
                country if--
                          (i) that article is imported directly 
                        from a beneficiary developing country 
                        into the customs territory of the 
                        United States; and
                          (ii) the sum of--
                                  (I) the cost or value of the 
                                materials produced in the 
                                beneficiary developing country 
                                or any two or more such 
                                countries that are members of 
                                the same association of 
                                countries and are treated as 
                                one country under section 
                                507(2), plus
                                  (II) the direct costs of 
                                processing operations performed 
                                in such beneficiary developing 
                                country or such member 
                                countries,
                        is not less than 35 percent of the 
                        appraised value of such article at the 
                        time it is entered.
                  (B) Exclusions.--An article shall not be 
                treated as the growth, product, or manufacture 
                of a beneficiary developing country by virtue 
                of having merely undergone--
                          (i) simple combining or packaging 
                        operations, or
                          (ii) mere dilution with water or mere 
                        dilution with another substance that 
                        does not materially alter the 
                        characteristics of the article.
          (3) Regulations.--The Secretary of the Treasury, 
        after consulting with the United States Trade 
        Representative, shall prescribe such regulations as may 
        be necessary to carry out paragraph (2), including, but 
        not limited to, regulations providing that, in order to 
        be eligible for duty-free treatment under this title, 
        an article--
                  (A) must be wholly the growth, product, or 
                manufacture of a beneficiary developing 
                country, or
                  (B) must be a new or different article of 
                commerce which has been grown, produced, or 
                manufactured in the beneficiary developing 
                country.
  (b) Articles That May Not Be Designated As Eligible 
Articles.--
          (1) Import sensitive articles.--The President may not 
        designate any article as an eligible article under 
        subsection (a) if such article is within one of the 
        following categories of import-sensitive articles:
                  (A) Textile and apparel articles which were 
                not eligible articles for purposes of this 
                title on January 1, 1994, as this title was in 
                effect on such date.
                  (B) Watches, except those watches entered 
                after June 30, 1989, that the President 
                specifically determines, after public notice 
                and comment, will not cause material injury to 
                watch or watch band, strap, or bracelet 
                manufacturing and assembly operations in the 
                United States or the United States insular 
                possessions.
                  (C) Import-sensitive electronic articles.
                  (D) Import-sensitive steel articles.
                  (E) Footwear, handbags, luggage, flat goods, 
                work gloves, and leather wearing apparel which 
                were not eligible articles for purposes of this 
                title on January 1, 1995, as this title was in 
                effect on such date.
                  (F) Import-sensitive semimanufactured and 
                manufactured glass products.
                  (G) Any other articles which the President 
                determines to be import-sensitive in the 
                context of the Generalized System of 
                Preferences.
          (2) Articles against which other actions taken.--An 
        article shall not be an eligible article for purposes 
        of this title for any period during which such article 
        is the subject of any action proclaimed pursuant to 
        section 203 of this Act (19 U.S.C. 2253) or section 232 
        or 351 of the Trade Expansion Act of 1962 (19 U.S.C. 
        1862, 1981).
          (3) Agricultural products.--No quantity of an 
        agricultural product subject to a tariff-rate quota 
        that exceeds the in-quota quantity shall be eligible 
        for duty-free treatment under this title.
  (c) Withdrawal, Suspension, or Limitation of Duty-Free 
Treatment; Competitive Need Limitation.--
          (1) In general.--The President may withdraw, suspend, 
        or limit the application of the duty-free treatment 
        accorded under this title with respect to any article, 
        except that no rate of duty may be established with 
        respect to any article pursuant to this subsection 
        other than the rate which would apply but for this 
        title. In taking any action under this subsection, the 
        President shall consider the factors set forth in 
        sections 501 and 502(c).
          (2) Competitive need limitation.--
                  (A) Basis for withdrawal of duty-free 
                treatment.--
                          (i) In general.--Except as provided 
                        in clause (ii) and subject to 
                        subsection (d), whenever the President 
                        determines that a beneficiary 
                        developing country has exported 
                        (directly or indirectly) to the United 
                        States during any calendar year 
                        beginning after December 31, 1995--
                                  (I) a quantity of an eligible 
                                article having an appraised 
                                value in excess of the 
                                applicable amount for the 
                                calendar year, or
                                  (II) a quantity of an 
                                eligible article equal to or 
                                exceeding 50 percent of the 
                                appraised value of the total 
                                imports of that article into 
                                the United States during any 
                                calendar year,
                        the President shall, not later than 
                        July 1 of the next calendar year, 
                        terminate the duty-free treatment for 
                        that article from that beneficiary 
                        developing country.
                          (ii) Annual adjustment of applicable 
                        amount.--For purposes of applying 
                        clause (i), the applicable amount is--
                                  (I) for 1996, $75,000,000, 
                                and
                                  (II) for each calendar year 
                                thereafter, an amount equal to 
                                the applicable amount in effect 
                                for the preceding calendar year 
                                plus $5,000,000.
                  (B) Country defined.--For purposes of this 
                paragraph, the term ``country'' does not 
                include an association of countries which is 
                treated as one country under section 507(2), 
                but does include a country which is a member of 
                any such association.
                  (C) Redesignations.--A country which is no 
                longer treated as a beneficiary developing 
                country with respect to an eligible article by 
                reason of subparagraph (A) may, subject to the 
                considerations set forth in sections 501 and 
                502, be redesignated a beneficiary developing 
                country with respect to such article if imports 
                of such article from such country did not 
                exceed the limitations in subparagraph (A) 
                during the preceding calendar year.
                  (D) Least-developed beneficiary developing 
                countries.--Subparagraph (A) shall not apply to 
                any least-developed beneficiary developing 
                country.
                  (E) Articles not produced in the united 
                states excluded.--Subparagraph (A)(i)(II) shall 
                not apply with respect to any eligible article 
                if a like or directly competitive article was 
                not produced in the United States on January 1, 
                1995.
                  (F) De minimis waivers.--
                          (i) In general.--The President may 
                        disregard subparagraph (A)(i)(II) with 
                        respect to any eligible article from 
                        any beneficiary developing country if 
                        the aggregate appraised value of the 
                        imports of such article into the United 
                        States during the preceding calendar 
                        year does not exceed the applicable 
                        amount for such preceding calendar 
                        year.
                          (ii) Applicable amount.--For purposes 
                        of applying clause (i), the applicable 
                        amount is--
                                  (I) for calendar year 1996, 
                                $13,000,000, and
                                  (II) for each calendar year 
                                thereafter, an amount equal to 
                                the applicable amount in effect 
                                for the preceding calendar year 
                                plus $500,000.
  (d) Waiver of Competitive Need Limitation.--
          (1) In general.--The President may waive the 
        application of subsection (c)(2) with respect to any 
        eligible article of any beneficiary developing country 
        if, before July 1 of the calendar year beginning after 
        the calendar year for which a determination described 
        in subsection (c)(2)(A) was made with respect to such 
        eligible article, the President--
                  (A) receives the advice of the International 
                Trade Commission under section 332 of the 
                Tariff Act of 1930 on whether any industry in 
                the United States is likely to be adversely 
                affected by such waiver,
                  (B) determines, based on the considerations 
                described in sections 501 and 502(c) and the 
                advice described in subparagraph (A), that such 
                waiver is in the national economic interest of 
                the United States, and
                  (C) publishes the determination described in 
                subparagraph (B) in the Federal Register.
          (2) Considerations by the president.--In making any 
        determination under paragraph (1), the President shall 
        give great weight to--
                  (A) the extent to which the beneficiary 
                developing country has assured the United 
                States that such country will provide equitable 
                and reasonable access to the markets and basic 
                commodity resources of such country, and
                  (B) the extent to which such country provides 
                adequate and effective protection of 
                intellectual property rights.
          (3) Other bases for waiver.--The President may waive 
        the application of subsection (c)(2) if, before July 1 
        of the calendar year beginning after the calendar year 
        for which a determination described in subsection 
        (c)(2) was made with respect to a beneficiary 
        developing country, the President determines that--
                  (A) there has been a historical preferential 
                trade relationship between the United States 
                and such country,
                  (B) there is a treaty or trade agreement in 
                force covering economic relations between such 
                country and the United States, and
                  (C) such country does not discriminate 
                against, or impose unjustifiable or 
                unreasonable barriers to, United States 
                commerce,
        and the President publishes that determination in the 
        Federal Register.
          (4) Limitations on waivers.--
                  (A) In general.--The President may not 
                exercise the waiver authority under this 
                subsection with respect to a quantity of an 
                eligible article entered during any calendar 
                year beginning after 1995, the aggregate 
                appraised value of which equals or exceeds 30 
                percent of the aggregate appraised value of all 
                articles that entered duty-free under this 
                title during the preceding calendar year.
                  (B) Other waiver limits.--The President may 
                not exercise the waiver authority provided 
                under this subsection with respect to a 
                quantity of an eligible article entered during 
                any calendar year beginning after 1995, the 
                aggregate appraised value of which exceeds 15 
                percent of the aggregate appraised value of all 
                articles that have entered duty-free under this 
                title during the preceding calendar year from 
                those beneficiary developing countries which 
                for the preceding calendar year--
                          (i) had a per capita gross national 
                        product (calculated on the basis of the 
                        best available information, including 
                        that of the International Bank for 
                        Reconstruction and Development) of 
                        $5,000 or more; or
                          (ii) had exported (either directly or 
                        indirectly) to the United States a 
                        quantity of articles that was duty-free 
                        under this title that had an aggregate 
                        appraised value of more than 10 percent 
                        of the aggregate appraised value of all 
                        articles that entered duty-free under 
                        this title during that year.
                  (C) Calculation of limitations.--There shall 
                be counted against the limitations imposed 
                under subparagraphs (A) and (B) for any 
                calendar year only that value of any eligible 
                article of any country that--
                          (i) entered duty-free under this 
                        title during such calendar year; and
                          (ii) is in excess of the value of 
                        that article that would have been so 
                        entered during such calendar year if 
                        the limitations under subsection 
                        (c)(2)(A) applied.
          (5) Effective period of waiver.--Any waiver granted 
        under this subsection shall remain in effect until the 
        President determines that such waiver is no longer 
        warranted due to changed circumstances.
  (e) International Trade Commission Advice.--Before 
designating articles as eligible articles under subsection 
(a)(1), the President shall publish and furnish the 
International Trade Commission with lists of articles which may 
be considered for designation as eligible articles for purposes 
of this title. The provisions of sections 131, 132, 133, and 
134 shall be complied with as though action under section 501 
and this section were action under section 123 to carry out a 
trade agreement entered into under section 123.
  (f) Special Rule Concerning Puerto Rico.--No action under 
this title may affect any tariff duty imposed by the 
Legislature of Puerto Rico pursuant to section 319 of the 
Tariff Act of 1930 on coffee imported into Puerto Rico.

SEC. 504. REVIEW AND REPORT TO CONGRESS.

  The President shall submit an annual report to the Congress 
on the status of internationally recognized worker rights 
within each beneficiary developing country.

SEC. 505. DATE OF TERMINATION.

  No duty-free treatment provided under this title shall remain 
in effect after May 12, 1997.

SEC. 506. AGRICULTURAL EXPORTS OF BENEFICIARY DEVELOPING COUNTRIES.

  The appropriate agencies of the United States shall assist 
beneficiary developing countries to develop and implement 
measures designed to assure that the agricultural sectors of 
their economies are not directed to export markets to the 
detriment of the production of foodstuffs for their citizenry.

SEC. 507. DEFINITIONS.

  For purposes of this title:
          (1) Beneficiary developing country.--The term 
        ``beneficiary developing country'' means any country 
        with respect to which there is in effect an Executive 
        order or Presidential proclamation by the President 
        designating such country as a beneficiary developing 
        country for purposes of this title.
          (2) Country.--The term ``country'' means any foreign 
        country or territory, including any overseas dependent 
        territory or possession of a foreign country, or the 
        Trust Territory of the Pacific Islands. In the case of 
        an association of countries which is a free trade area 
        or customs union, or which is contributing to 
        comprehensive regional economic integration among its 
        members through appropriate means, including, but not 
        limited to, the reduction of duties, the President may 
        by Executive order or Presidential proclamation provide 
        that all members of such association other than members 
        which are barred from designation under section 502(b) 
        shall be treated as one country for purposes of this 
        title.
          (3) Entered.--The term ``entered'' means entered, or 
        withdrawn from warehouse for consumption, in the 
        customs territory of the United States.
          (4) Internationally recognized worker rights.--The 
        term ``internationally recognized worker rights'' 
        includes--
                  (A) the right of association;
                  (B) the right to organize and bargain 
                collectively;
                  (C) a prohibition on the use of any form of 
                forced or compulsory labor;
                  (D) a minimum age for the employment of 
                children; and
                  (E) acceptable conditions of work with 
                respect to minimum wages, hours of work, and 
                occupational safety and health.
          (5) Least-developed beneficiary developing country.--
        The term ``least-developed beneficiary developing 
        country'' means a beneficiary developing country that 
        is designated as a least-developed beneficiary 
        developing country under section 502(a)(2).

                     FOREIGN ASSISTANCE ACT OF 1961

          * * * * * * *

SEC. 231A. ADDITIONAL REQUIREMENTS.

    (a) Worker Rights.--
          (1) Limitation on OPIC activities.--The Corporation 
        may insure, reinsure, guarantee, or finance a project 
        only if the country in which the project is to be 
        undertaken is taking steps to adopt and implement laws 
        that extend internationally recognized worker rights, 
        as defined in section [502(a)(4) of the Trade Act of 
        1974 (19 U.S.C. 2462(a)(4))] 507(4) of the Trade Act of 
        1974, to workers in that country (including any 
        designated zone in that country).
          (2) Use of annual reports on workers rights.--The 
        Corporation shall, in making its determinations under 
        paragraph (1), use the reports submitted to the 
        Congress pursuant to section [505(c) of the Trade Act 
        of 1974 (19 U.S.C. 2465(c))] 504 of the Trade Act of 
        1974. The restriction set forth in paragraph (1) shall 
        not apply until the first such report is submitted to 
        the Congress.
          * * * * * * *
          (4) Operations of opic in the people's republic of 
        china.--In making a determination under this section 
        for the People's Republic of China, the Corporation 
        shall discuss fully and completely the justification 
        for making such determination with respect to each item 
        set forth in subparagraphs (A) through (E) of section 
        [502(a)(4)] 507(4).
          * * * * * * *

                      TITLE 28, UNITED STATES CODE

           * * * * * * *

               PART IV--JUDICIARY AND JUDICIAL PROCEDURE

           * * * * * * *

                CHAPTER 95--COURT OF INTERNATIONAL TRADE

           * * * * * * *

SEC. 1581. CIVIL ACTIONS AGAINST THE UNITED STATES AND AGENCIES AND 
                    OFFICERS THEREOF.

    (a) The Court of International Trade shall have exclusive 
jurisdiction of any civil action commenced to contest the 
denial of a protest, in whole or in part, under section 515 of 
the Tariff Act of 1930.
    (b) The Court of International Trade shall have exclusive 
jurisdiction of any civil action commenced under section 516 of 
the Tariff Act of 1930.
    (c) The Court of International Trade shall have exclusive 
jurisdiction of any civil action commenced under section 516A 
or 516B of the Tariff Act of 1930.
           * * * * * * *

                    PART VI--PARTICULAR PROCEEDINGS

           * * * * * * *

          CHAPTER 169--COURT OF INTERNATIONAL TRADE PROCEDURE

           * * * * * * *

SEC. 2643. RELIEF.

           * * * * * * *
    (c)(1) Except as provided in paragraphs (2), (3), (4), [and 
(5)] (5), and (6) of this subsection, the Court of 
International Trade may, in addition to the orders specified in 
subsections (1) and (b) of this section, order any other form 
of relief that is appropriate in a civil action, including, but 
not limited to, declaratory judgments, orders of remand, 
injunctions, and writs of mandamus and prohibition.
           * * * * * * *
    (6) In any civil action under section 516B of the Tariff 
act of 1930, the Court of International Trade may not issue 
injunctions or any other form of equitable relief, except with 
regard to implementation of a countermeasure order under 
section 468 of that Act, upon a proper showing that such relief 
is warranted.

    UNITED STATES-ISRAEL FREE TRADE AREA IMPLEMENTATION ACT OF 1985

           * * * * * * *

SEC. 9. ADDITIONAL PROCLAMATION AUTHORITY.

  (a) Elimination or Modifications of Duties.--The President is 
authorized to proclaim elimination or modification of any 
existing duty as the President determines is necessary to 
exempt any article from duty if--
          (1) that article is wholly the growth, product, or 
        manufacture of the West Bank, the Gaza Strip, or a 
        qualifying industrial zone or is a new or different 
        article of commerce that has been grown, produced, or 
        manufactured in the West Bank, the Gaza Strip, or a 
        qualifying industrial zone;
          (2) that article is imported directly from the West 
        Bank, the Gaza Strip, Israel, or a qualifying 
        industrial zone; and
          (3) the sum of--
                  (A) the cost or value of the materials 
                produced in the West Bank, the Gaza Strip, 
                Israel, or a qualifying industrial zone, plus
                  (B) the direct costs of processing operations 
                performed in the West Bank, the Gaza Strip, 
                Israel, or a qualifying industrial zone,
        is not less than 35 percent of the appraised value of 
        the product at the time it is entered into the United 
        States.
For purposes of determining the 35 percent content requirement 
contained in paragraph (3), the cost or value of materials 
which are used in the production of an article in the West 
Bank, the Gaza Strip, or a qualifying industrial zone, and are 
the products of the United States, may be counted in an amount 
up to 15 percent of the appraised value of the article.
  (b) Applicability of Certain Provisions of the Agreement.--
          (1) Nonqualifying operations.--No article shall be 
        considered a new or different article of commerce under 
        this section, and no material shall be included for 
        purposes of determining the 35 percent requirement of 
        subsection (a)(3), by virtue of having merely 
        undergone--
                  (A) simple combining or packaging operations, 
                or
                  (B) mere dilution with water or with another 
                substance that does not materially alter the 
                characteristics of the article or material.
          (2) Requirements for new or different article of 
        commerce.--For purposes of subsection (a)(1), an 
        article is a `new or different article of commerce' if 
        it is substantially transformed into an article having 
        a new name, character, or use.
          (3) Cost or value of materials.--(A) For purposes of 
        this section, the cost or value of materials produced 
        in the West Bank, the Gaza Strip, or a qualifying 
        industrial zone includes--
                  (i) the manufacturer's actual cost for the 
                materials;
                  (ii) when not included in the manufacturer's 
                actual cost for the materials, the freight, 
                insurance, packing, and all other costs 
                incurred in transporting the materials to the 
                manufacturer's plant;
                  (iii) the actual cost of waste or spoilage, 
                less the value of recoverable scrap; and
                  (iv) taxes or duties imposed on the materials 
                by the West Bank, the Gaza Strip, or a 
                qualifying industrial zone, if such taxes or 
                duties are not remitted on exportation.
          (B) If a material is provided to the manufacturer 
        without charge, or at less than fair market value, its 
        cost or value shall be determined by computing the sum 
        of--
                  (i) all expenses incurred in the growth, 
                production, or manufacture of the material, 
                including general expenses;
                  (ii) an amount for profit; and
                  (iii) freight, insurance, packing, and all 
                other costs incurred in transporting the 
                material to the manufacturer's plant.
        If the information necessary to compute the cost or 
        value of a material is not available, the Customs 
        Service may ascertain or estimate the value thereof 
        using all reasonable methods.
          (4) Direct costs of processing operations.--(A) For 
        purposes of this section, the ``direct costs of 
        processing operations performed in the West Bank, Gaza 
        Strip, or a qualifying industrial zone'' with respect 
        to an article are those costs either directly incurred 
        in, or which can be reasonably allocated to, the 
        growth, production, manufacture, or assembly, of that 
        article. Such costs include, but are not limited to, 
        the following to the extent that they are includible in 
        the appraised value of articles imported into the 
        United States:
                  (i) All actual labor costs involved in the 
                growth, production, manufacture, or assembly of 
                the article, including fringe benefits, on-the-
                job training, and costs of engineering, 
                supervisory, quality control, and similar 
                personnel.
                  (ii) Dies, molds, tooling, and depreciation 
                on machinery and equipment which are allocable 
                to the article.
                  (iii) Research, development, design, 
                engineering, and blueprint costs insofar as 
                they are allocable to the article.
                  (iv) Costs of inspecting and testing the 
                article.
          (B) Those items that are not included as direct costs 
        of processing operations with respect to an article are 
        those which are not directly attributable to the 
        article or are not costs of manufacturing the article. 
        Such items include, but are not limited to--
                  (i) profit; and
                  (ii) general expenses of doing business which 
                are either not allocable to the article or are 
                not related to the growth, production, 
                manufacture, or assembly of the article, such 
                as administrative salaries, casualty and 
                liability insurance, advertising, and 
                salesmen's salaries, commissions, or expenses.
          (5) Imported directly.--For purposes of this 
        section--
                  (A) articles are ``imported directly'' if--
                          (i) the articles are shipped directly 
                        from the West Bank, the Gaza Strip, a 
                        qualifying industrial zone, or Israel 
                        into the United States without passing 
                        through the territory of any 
                        intermediate country; or
                          (ii) if shipment is through the 
                        territory of an intermediate country, 
                        the articles in the shipment do not 
                        enter into the commerce of any 
                        intermediate country and the invoices, 
                        bills of lading, and other shipping 
                        documents specify the United States as 
                        the final destination; or
                  (B) if articles are shipped through an 
                intermediate country and the invoices and other 
                documents do not specify the United States as 
                the final destination, then the articles in the 
                shipment, upon arrival in the United States, 
                are imported directly only if they--
                          (i) remain under the control of the 
                        customs authority in an intermediate 
                        country;
                          (ii) do not enter into the commerce 
                        of an intermediate country except for 
                        the purpose of a sale other than at 
                        retail, but only if the articles are 
                        imported as a result of the original 
                        commercial transactions between the 
                        importer and the producer or the 
                        producer's sales agent; and
                          (iii) have not been subjected to 
                        operations other than loading, 
                        unloading, or other activities 
                        necessary to preserve the article in 
                        good condition.
          (6) Documentation required.--An article is eligible 
        for the duty exemption under this section only if--
                  (A) the importer certifies that the article 
                meets the conditions for the duty exemption; 
                and
                  (B) when requested by the Customs Service, 
                the importer, manufacturer, or exporter submits 
                a declaration setting forth all pertinent 
                information with respect to the article, 
                including the following:
                          (i) A description of the article, 
                        quantity, numbers, and marks of 
                        packages, invoice numbers, and bills of 
                        lading.
                          (ii) A description of the operations 
                        performed in the production of the 
                        article in the West Bank, the Gaza 
                        Strip, a qualifying industrial zone, or 
                        Israel and identification of the direct 
                        costs of processing operations.
                          (iii) A description of any materials 
                        used in production of the article which 
                        are wholly the growth, product, or 
                        manufacture of the West Bank, the Gaza 
                        Strip, a qualifying industrial zone, 
                        Israel or United States, and a 
                        statement as to the cost or value of 
                        such materials.
                          (iv) A description of the operations 
                        performed on, and a statement as to the 
                        origin and cost or value of, any 
                        foreign materials used in the article 
                        which are claimed to have been 
                        sufficiently processed in the West 
                        Bank, the Gaza Strip, a qualifying 
                        industrial zone, or Israel so as to be 
                        materials produced in the West Bank, 
                        the Gaza Strip, a qualifying industrial 
                        zone, or Israel.
                          (v) A description of the origin and 
                        cost or value of any foreign materials 
                        used in the article which have not been 
                        substantially transformed in the West 
                        Bank, the Gaza Strip, or a qualifying 
                        industrial zone.
  (c) Shipment of Articles of Israel Through West Bank or Gaza 
Strip.--The President is authorized to proclaim that articles 
of Israel may be treated as though they were articles directly 
shipped from Israel for the purposes of the Agreement even if 
shipped to the United States from the West Bank, the Gaza 
Strip, or a qualifying industrial zone, if the articles 
otherwise meet the requirements of the Agreement.
  (d) Treatment of Cost or Value of Materials.--The President 
is authorized to proclaim that the cost or value of materials 
produced in the West Bank, the Gaza Strip, or a qualifying 
industrial zone may be included in the cost or value of 
materials produced in Israel under section 1(c)(i) of Annex 3 
of the Agreement, and the direct costs of processing operations 
performed in the West Bank, the Gaza Strip, or a qualifying 
industrial zone may be included in the direct costs of 
processing operations performed in Israel under section 
1(c)(ii) of Annex 3 of the Agreement.
  (e) Qualifying Industrial Zone Defined.--For purposes of this 
section, a ``qualifying industrial zone'' means any area that--
          (1) encompasses portions of the territory of Israel 
        and Jordan or Israel and Egypt;
          (2) has been designated by local authorities as an 
        enclave where merchandise may enter without payment of 
        duty or excise taxes; and
          (3) has been specified by the President as a 
        qualifying industrial zone.

                      MERCHANT MARINE ACT OF 1936

          * * * * * * *

               TITLE V--CONSTRUCTION-DIFFERENTIAL SUBSIDY

          * * * * * * *

SEC. 511. RESERVE FUNDS FOR CONSTRUCTION OR ACQUISITION OF VESSELS; 
                    TAXATION (46 APP. U.S.C. 1161 (1994)).

    (a) ``New Vessel'' Defined.--When used in this section the 
term ``new vessel'' means any vessel (1) documented or agreed 
with the Secretary of Transportation to be documented under the 
laws of the United States; (2) construction in the United 
States after December 31, 1939 or, if the vessel is a 
Shipbuilding Agreement vessel, constructed in a Shipbuilding 
Agreement Party, but only with regard to moneys deposited, on 
or after the date on which the Shipbuilding Trade Agreement Act 
takes effect, into a construction reserve fund established 
under subsection (b), or the construction of which has been 
financed under Titles V or VII of this Act, as amended, or the 
construction of which has been aided by a mortgage insured 
under Title XI of this Act as amended; and (3) either (A) of 
such type, size, and speed as the Secretary of Transportation 
shall determine to be suitable for use on the high seas or 
Great Lakes in carrying out the purposes of this Act, but not 
of less than two thousand gross tons or of less speed than 
twelve knots, unless the Secretary of Transportation shall 
determine and certify in each case that a vessel of a specified 
lesser tonnage or speed is desirable for use by the United 
States in case of war or national emergency, or (B) constructed 
to replace a vessel or vessels requisitioned or purchased by 
the United States.
          * * * * * * *

                TITLE VI--OPERATING-DIFFERENTIAL SUBSIDY

SEC. 601. SUBSIDY AUTHORIZED FOR OPERATION OF VESSELS IN FOREIGN TRADE 
                    OR IN OFF-SEASON CRUISES (46 APP. U.S.C. 1171 
                    (1994)).

    (a) Application for Subsidy; Conditions Precedent to 
Granting.--The Secretary of Transportation is authorized and 
directed to consider the application of any citizen of the 
United States for financial aid in the operation of a vessel or 
vessels, which are to be used in an essential service in the 
foreign commerce of the United States or in such service and in 
cruises authorized under section 613 of this title. In this 
title VI the term ``essential service'' means the operation of 
a vessel on a service, route, or line described in section 
211(a) or in bulk cargo carrying service described in section 
211(b). No such application shall be approved by the Secretary 
of Transportation unless he determines that (1) the operation 
of such vessel or vessels in an essential service is required 
to meet foreign-flag competition and to promote the foreign 
commerce of the United States except to the extent such vessels 
are to be operated on cruises authorized under section 613 of 
this title[, and that such vessel or vessels were built in the 
United States, or have been documented under the laws of the 
United States not later than February 1, 1928, or actually 
ordered and under construction for the account of citizens of 
the United States prior to such date;] and that such vessel or 
vessels were built in the United States, or, if the vessel or 
vessels are Shipbuilding Agreement vessels, in a Shipbuilding 
Agreement Party; (2) the applicant owns or leases, or can and 
will build or purchase or lease, a vessel or vessels of the 
size, type, speed, and number, and with the proper equipment 
required to enable him to operate in an essential service, in 
such manner as may be necessary to meet competitive conditions, 
and to promote foreign commerce; (3) the applicant possesses 
the ability, experience, financial resources, and other 
qualifications necessary to enable him to conduct the proposed 
operations of the vessel or vessels as to meet competitive 
conditions and promote foreign commerce; (4) the granting of 
the aid applied for is necessary to place the proposed 
operations of the vessel or vessels on a parity with those of 
foreign competitors, and is reasonably calculated to carry out 
effectively the purposes and policy of this Act. To the extent 
the application covers cruises, as authorized under section 613 
of this title, the Secretary of Transportation may make the 
portion of this last determination relating to parity on the 
basis that any foreign flag cruise from the United States 
competes with any American flag cruise from the United States.
          * * * * * * *

SEC. 606. READJUSTMENTS; CHANGE IN SERVICE; WITHDRAWAL FROM SERVICE; 
                    PAYMENT OF EXCESS PROFITS; WAGES, ETC.; AMERICAN 
                    MATERIALS (46 APP. U.S.C. 1176 (1994)).

    Every contract for an operating-differential subsidy under 
this title shall provide (1) that the amount of the future 
payments to the contractor shall be subject to review and 
readjustment from time to time, but not more frequently than 
once a year, at the instance of the Secretary of Transportation 
or of the contractor. If any such readjustment cannot be 
reached by mutual agreement, the Secretary of Transportation, 
on his own motion or on the application of the contractor, 
shall, after a proper hearing, determine the facts and make 
such readjustment in the amount of such future payments as he 
may determine to be fair and reasonable and in the public 
interest. The testimony in every such proceeding shall be 
reduced to writing and filed in the office of the Secretary of 
Transportation. His decision shall be based upon and governed 
by the changes which may have occurred since the date of the 
said contract, with respect to the items theretofore considered 
and on which such contract was based, and other conditions 
affecting shipping, and shall be promulgated in a formal order, 
which shall be accompanied by a report in writing in which the 
Secretary of Transportation shall state his findings of fact; 
(2) that the compensation to be paid under it shall be reduced, 
under such terms and in such amounts as the Secretary of 
Transportation shall determine, for any periods in which the 
vessel or vessels are laid up; (3) that if the Secretary of 
Transportation shall determine that a change in an essential 
service, which is receiving an operating-differential subsidy 
under this title, is necessary in the accomplishment of the 
purposes of this Act, he may make such change upon such 
readjustment of payments to the contractor as shall be arrived 
at by the method prescribed in clause (1) of these conditions; 
(4) that if at any time the contractor receiving an operating-
differential subsidy claims that he cannot maintain and operate 
his vessels in such an essential service, with a reasonable 
profit upon his investment, and applies to the Secretary of 
Transportation for a modification or rescission of his contract 
to maintain such essential service, and the Secretary of 
Transportation determines that such claim is proved, the 
Secretary of Transportation shall modify or rescind such 
contract and permit the contractor to withdraw such vessels 
from such essential service, upon a date fixed by the Secretary 
of Transportation, and upon the date of such withdrawal the 
further payment of the operating-differential subsidy shall 
cease and the contractor be discharged from any further 
obligation under such contract; (5) that the contractor shall 
conduct his operations with respect to essential service, and 
any services authorized under section 613 of this title, 
covered by his contract in an economical and efficient manner; 
and (6) that whenever practicable, and operator who receives 
subsidy with respect to subsistence of officers and crews shall 
use as such subsistence items only articles, materials, and 
supplies of the growth, production, and manufacture of the 
United States, as defined in section 505 herein, except when it 
is necessary to purchase supplies outside the United States to 
enable such vessel to continue and complete here voyage, and an 
operator who receives subsidy with respect to repairs shall 
perform such repairs within any of the United States or the 
Commonwealth of Puerto Rico, or, if the vessel is a 
Shipbuilding Agreement vessel, in a Shipbuilding Agreement 
Party or in the United State except in an emergency.
          * * * * * * *

SEC. 607.7 CAPITAL CONSTRUCTION FUND (46 APP. U.S.C. 1177 (1994)).

    (a) Agreement Rules; Persons Eligible; Replacement, 
Additional, or Reconstructed Vessels for Prescribed Trade and 
Fishery Operations; Amount of Deposits, Annual Limitation; 
Conditions and Requirements for Deposits and Withdrawals.--Any 
citizen of the United States owning or leasing one or more 
eligible vessels (as defined in subsection (k)(1)) may enter 
into an agreement with the Secretary under, and as provided in, 
this section to establish a capital construction fund 
(hereinafter in this section referred to as the ``fund'') with 
respect to any or all of such vessels. Any agreement entered 
into under this section shall be for the purpose of providing 
replacement vessels, additional vessels, or reconstructed 
vessels, built in the United States or, if the vessel is a 
Shipbuilding Agreement vessel, in a Shipbuilding Agreement 
Party, and documented under the laws of the United States for 
operation in the United States foreign, Great Lakes, or 
noncontiguous domestic trade or in the fisheries of the United 
States and shall provide for the deposit in the fund of the 
amounts agreed upon as necessary or appropriate to provide for 
qualified withdrawals under subsection (f). The deposits in the 
fund, and all withdrawals from the fund, whether qualified or 
nonqualified, shall be subject to such conditions and 
requirements as the Secretary may by regulations prescribe or 
are set forth in such agreement; except that the Secretary may 
not require any person to deposit in the fund for any taxable 
year more than 50 percent of that portion of such person's 
taxable income for such year (computed in the manner provided 
in subsection (b)(1)(A)) which is attributable to the operation 
of the agreement vessels.
          * * * * * * *
    (k) Definitions.--For the purposes of this section--
           (1) The term ``eligible vessel'' means any vessel--
                   [(A) constructed in the United States and, 
                if reconstructed, reconstructed in the United 
                States,]
                  (A)(i) constructed in the United States and, 
                if reconstructed, reconstructed in the United 
                States or in a Shipbuilding Agreement Party, or
                  (ii) that is a Shipbuilding Agreement vessel 
                and is constructed in a Shipbuilding Agreement 
                Party and, if reconstructed, is reconstructed 
                in a Shipbuilding Agreement Party or in the 
                United States,
          * * * * * * *
          (2) The term ``qualified vessel'' means any vessel--
                  [(A) constructed in the United States and, if 
                reconstructed, reconstructed in the United 
                States,]
                  (A)(i) constructed in the United States and, 
                if reconstructed, reconstructed in the United 
                States or in a Shipbuilding Agreement Party, or
                  (ii) that is a Shipbuilding Agreement vessel 
                and is constructed in a Shipbuilding Agreement 
                Party and, if reconstructed, is reconstructed 
                in a Shipbuilding Agreement Party or in the 
                United States, but only with regard to moneys 
                deposited into the fund on or after the date on 
                which the Shipbuilding Trade Agreement Act 
                takes effect.
          * * * * * * *

SEC. 610. VESSELS ELIGIBLE TO SUBSIDY (46 APP. U.S.C. 1180 (1994)).

    An operating-differential subsidy shall not be paid under 
authority of this title on account of the operation of any 
vessel which does not meet the following requirements: (1) The 
vessel shall be of steel or other acceptable metal, shall be 
propelled by steam or motor, shall be as nearly fireproof as 
practicable, [shall be built in a domestic yard or shall have 
been documented under the laws of the United States not later 
than February 1, 1928, or actually ordered and under 
construction for the account of citizens of the United States 
prior to such date,] shall be built in the United States or, if 
the vessel is a Shipbuilding Agreement vessel, in a 
Shipbuilding Agreement Party,  and shall be documented under 
the laws of the United States, during the entire life of the 
subsidy contract; and (2) if the vessel shall be constructed 
after the passage of this act it shall be either a vessel 
constructed according to plans and specifications approved by 
the Secretary of Transportation and the Secretary of the Navy, 
with particular reference to economic conversion into an 
auxiliary naval vessel, or a vessel approved by the Secretary 
of Transportation and the Navy Department as otherwise useful 
to the United States in time of national emergency.
          * * * * * * *

                   TITLE IX--MISCELLANEOUS PROVISIONS

SEC. 901. TRANSPORTATION IN AMERICAN VESSELS OF GOVERNMENT PERSONNEL 
                    AND CERTAIN CARGOES (46 APP. U.S.C. 1241 (1994)).

          * * * * * * *
    (b) Cargoes Procured, Furnished or Financed by United 
States; Waiver in Emergencies; Exceptions; Definition.--
          (1) Whenever the United States shall procure, 
        contract for, or otherwise obtain for its own account, 
        or shall furnish to or for the account of any foreign 
        nation without provision for reimbursement, any 
        equipment, materials, or commodities, within or without 
        the United States, or shall advance funds or credits or 
        guarantee the convertibility of foreign currencies in 
        connection with the furnishing of such equipment, 
        materials, or commodities, the appropriate agency or 
        agencies shall take such steps as may be necessary and 
        practicable to assure that at least 50 per centum of 
        the gross tonnage of such equipment, materials, or 
        commodities (computed separately for dry bulk carriers, 
        dry cargo liners, and tankers), which may be 
        transported on ocean vessels shall be transported on 
        privately owned United States-flag commercial vessels, 
        to the extent such vessels are available at fair and 
        reasonable rates for United States-flag commercial 
        vessels, in such manner as will insure a fair and 
        reasonable participation of United States-flag 
        commercial vessels in such cargoes by geographic areas: 
        Provided, That the provisions of this subsection may be 
        waived whenever the Congress by concurrent resolution 
        or otherwise, or the President of the United States or 
        the Secretary of Defense declares that an emergency 
        exists justifying a temporary waiver of the provisions 
        of section 901(b)(1) and so notifies the appropriate 
        agency or agencies: Provided further, That the 
        provisions of this subsection shall not apply to 
        cargoes carried in the vessels of the Panama Canal 
        Company. Nothing herein shall repeal or otherwise 
        modify the provisions of Public Resolution Numbered 17, 
        Seventy-third Congress (48 Stat. 500), as amended. [For 
        purposes of this section, the term ``privately owned 
        United States-flag commercial vessels'' shall not be 
        deemed to include any vessel which, subsequent to the 
        date of enactment of this amendment, shall have been 
        either (a) built outside the United States, (b) rebuilt 
        outside the United States, or (c) documented under any 
        foreign registry, until such vessel shall have been 
        documented under the laws of the United States for a 
        period of three years: Provided, however, That the 
        provisions of this amendment shall not apply where, (1) 
        prior to the enactment of this amendment, the owner of 
        a vessel, or contractor for the purchases of a vessel, 
        originally constructed in the United States and rebuilt 
        abroad or contracted to be rebuilt abroad, has notified 
        the Maritime Administration in writing of its intent to 
        document such vessel under United States registry, and 
        such vessel is so documented on its first arrival at a 
        United States port not later than one year subsequent 
        to the date of the enactment of this amendment, or (2) 
        where prior to the enactment of this amendment, the 
        owner of a vessel under United States registry has made 
        a contract for the rebuilding abroad of such vessel and 
        has notified the Maritime Administration of such 
        contract, and such rebuilding is completed and such 
        vessel is thereafter documented under United States 
        registry on its first arrival at a United States port 
        not later than one year subsequent to the date of the 
        enactment of this amendment.]
    For purposes of this section, the term ``privately owned 
United States-flag commercial vessels'' shall be deemed to 
include--
          (A) any privately owned United States-flag commercial 
        vessel constructed in the United States, and if 
        rebuilt, rebuilt in the United States or in a 
        Shipbuilding Agreement Party on or after the date on 
        which the Shipbuilding Trade Agreement Act takes 
        effect, and
          (B) any privately owned vessel constructed in a 
        Shipbuilding Agreement Party on or after the date on 
        which the Shipbuilding Trade Agreement Act takes 
        effect, and if rebuilt, rebuilt in a Shipbuilding 
        Agreement Party or in the United States, that is 
        documented pursuant to chapter 121 of title 46, United 
        States Code.
The term ``privately owned United States-flag commercial 
vessels'' shall also be deemed to include any cargo vessel that 
so qualified pursuant to section 615 of this Act or this 
paragraph before the date on which the Shipbuilding Trade 
Agreement Act takes effect. The term ``privately owned United 
States-flag commercial vessels'' shall not be deemed to include 
any liquid bulk cargo vessel that does not meet the 
requirements of section 3703a of title 46, United States Code.
          * * * * * * *

SEC. 905. DEFINITIONS (46 APP. U.S.C. 1244 (1994)).

          * * * * * * *
    (h) The term ``Shipbuilding Agreement'' means the Agreement 
Respecting Normal Competitive Conditions in the Commercial 
Shipbuilding and Repair Industry, which resulted from 
negotiations under the auspices of the Organization for 
Economic Cooperation and Development, and was entered into on 
December 21, 1994.
    (i) The term ``Shipbuilding Agreement Party'' means a state 
or separate customs territory that is a Party to the 
Shipbuilding Agreement, and with respect to which the United 
States applies the Shipbuilding Agreement.
    (j) The term ``Shipbuilding Agreement vessel'' means a 
vessel to which the Secretary determines Article 2.1 of the 
Shipbuilding Agreement applies.
    (k) The term ``Export Credit Understanding'' means the 
Understanding on Export Credits for Ships which resulted from 
negotiations under the auspices of the Organization for 
Economic Cooperation and Development and was entered into on 
December 21, 1994.
    (l) The term ``Export Credit Understanding vessel'' means a 
vessel to which the Secretary determines the Export Credit 
Understanding applies.
          * * * * * * *

               TITLE XI--FEDERAL SHIP MORTGAGE INSURANCE

          * * * * * * *

SEC. 1104A. ELIGIBILITY FOR GUARANTEE (46 APP. U.S.C. 1274 (1994)).

           * * * * * * *
    (b) Contents of Obligations.--Obligations guaranteed under 
this title--
           * * * * * * *
          [(5) shall bear interest (exclusive of charges for 
        the guarantee and service charges, if any) at rates not 
        to exceed such per centum per annum on the unpaid 
        principal as the Secretary determines to be reasonable, 
        taking into account the range of interest rates 
        prevailing in the private market for similar loans and 
        the risks assumed by the Secretary;]
          (5) shall bear interest (exclusive of charges for the 
        guarantee and service charges, if any) at rates not to 
        exceed such percent per annum on the unpaid principal 
        as the Secretary determines to be reasonable, taking 
        into account the range of interest rates prevailing in 
        the private market for similar loans and the risks 
        assumed by the Secretary, except that, with respect to 
        Export Credit Understanding vessels, and Shipbuilding 
        Agreement vessels, the obligations shall bear interest 
        at a rate the Secretary determines to be consistent 
        with obligations of the United States under the Export 
        Credit Understanding or the Shipbuilding Agreement, as 
        the case may be;
          * * * * * * *
    [(i) Limitation on Establishment of Percentage.--The 
Secretary may not with respect to--
          (1) the general 75 percent or less limitation in 
        subsection (b)(2);
          (2) the 87\1/2\ percent or less limitation in the 
        1st, 2nd, 4th, or 5th proviso to subsection (b)(2) or 
        section 1112(b); or
          (3) the 80 percent or less limitation in the 3rd 
        proviso to such subsection;
establish by rule, regulation, or procedure any percentage 
within any such limitation that is, or is intended to be, 
applied uniformly to all guarantees or commitments to guarantee 
made under this section that are subject to the limitation.]
    (i)(1) Except as provided in paragraph (2), the Secretary 
may not, with respect to--
          (A) the general 75 percent or less limitation 
        contained in subsection (b)(2),
          (B) the 87\1/2\ percent or less limitation contained 
        in the 1st, 2nd, 4th, or 5th proviso to subsection 
        (b)(2) or in section 1121(b), or
          (C) the 80 percent or less limitation in the 3rd 
        proviso to such subsection,
establish by rule, regulation, or procedure any percentage 
within any such limitation that is, or is intended to be, 
applied uniformly to all guarantees or commitments to guarantee 
made under this section that are subject to the limitation.
    (2) With respect to Export Credit Understanding vessels and 
Shipbuilding Agreement vessels, the Secretary may establish by 
rule, regulation, or procedure a uniform percentage that the 
Secretary determines to be consistent with obligations of the 
United States under the Export Credit Understanding or the 
Shipbuilding Agreement, as the case may be.
          * * * * * * *

SEC. 1104B. FINANCING CONTRACT FOR CONSTRUCTION OR RECONSTRUCTION OF 
                    COMMERCIAL VESSEL; VESSEL REPLACEMENT GUARANTEE 
                    FUND (46 APP. U.S.C. 1274a (1994)).

           * * * * * * *
    (b) For the purposes of this section--
          (1) the maximum term for obligations guaranteed under 
        this program may not exceed 25 years;
          (2) obligations guaranteed may not exceed 87\1/2\ 
        percent of the actual cost or depreciated actual cost 
        to the applicant for the construction or reconstruction 
        of the vessel; and
          (3) reconstruction cost obligations may not be 
        guaranteed unless the vessel after reconstruction will 
        have a useful life of at least 15 years[.], except 
        that, with respect to Export Credit Understanding 
        vessels and Shipbuilding Agreement vessels, the 
        Secretary may establish by rule, regulation, or 
        procedure a uniform percentage that the Secretary 
        determines to be consistent with obligations of the 
        United States under the Export Credit Understanding or 
        the Shipbuilding Agreement, as the case may be.

                 CARIBBEAN BASIN ECONOMIC RECOVERY ACT

          * * * * * * *

                    Subtitle A--Duty-Free Treatment

           * * * * * * *

SEC. 212. BENEFICIARY COUNTRY.

           * * * * * * *
    (b) In designating countries as ``beneficiary countries'' 
under this title the President shall consider only the 
following countries and territories or successor political 
entities:
           * * * * * * *
          (7) if such country has not or is not taking steps to 
        afford internationally recognized worker rights (as 
        defined in section [502(a)(4)] 507(4) of the Trade Act 
        of 1974) to workers in the country (including any 
        designated zone in that country).
Paragraphs (1), (2), (3), (5), and (7) shall not prevent the 
designation of any country as a beneficiary country under this 
Act if the President determines that such designation will be 
in the national economic or security interest of the United 
States and reports such determination to the Congress with his 
reasons therefor.
           * * * * * * *

                     EXPORT ENHANCEMENT ACT OF 1988

          * * * * * * *

                   Subchapter II--General Provisions

SEC. 2202. COUNTRY REPORTS ON ECONOMIC POLICY AND TRADE PRACTICES.

          * * * * * * *
          (8) the country's laws, enforcement of those laws, 
        and practices with respect to internationally 
        recognized worker rights (as defined in section 
        [502(a)(4)] 507(4)) the conditions of worker rights in 
        any sector which produces goods in which United States 
        capital is invested, and the extent of such investment.
          * * * * * * *

                        AGRICULTURAL ACT OF 1949

          * * * * * * *

SEC. 103B. LOANS, PAYMENTS, AND ACREAGE REDUCTION PROGRAMS FOR THE 1991 
                    THROUGH 1997 CROPS OF UPLAND COTTON.

    (a) Loans.--
          (1) In general.--* * *
          * * * * * * *
          (5) Marketing loan provisions.--
                 (A) In general.--* * *
          * * * * * * *
                  (F) Special import quota.--
                          (i) Establishment.--* * *
          * * * * * * *
                          (v) Preferential tariff treatment.--
                        The quantity under a special import 
                        quota shall be considered to be an in-
                        quota quantity for purposes of section 
                        213(d) of the Caribbean Basin Economic 
                        Recovery Act (19 U.S.C. 2703(d)), 
                        section 204 of the Andean Trade 
                        Preference Act (19 U.S.C. 3203), 
                        section [503(d) of the Trade Act of 
                        1974 (19 U.S.C. 2463(d))] 503(b)(3) of 
                        the Trade Act of 1974, and General Note 
                        3(a)(iv) to the HTS.
          * * * * * * *
    (n) Limited Global Import Quota.--
          (1) In general.--* * *
          * * * * * * *
                  (A) Quantity.--* * *
          * * * * * * *
                  (C) Preferential Tariff Treatment.--The 
                quantity under a limited global import quota 
                shall be considered to be an in-quota quantity 
                for purposes of section 213(d) of the Caribbean 
                Basin Economic Recovery Act (19 U.S.C. 
                2703(d)), section 204 of the Andean Trade 
                Preference Act (19 U.S.C. 3203), section 
                [503(d) of the Trade Act of 1974 (19 U.S.C. 
                2463(d))] 503 (b)(3) of the Trade Act of 1974, 
                and General Note 3(a)(iv) to the HTS.
          * * * * * * *

                      ANDEAN TRADE PREFERENCE ACT

          * * * * * * *

            TITLE II--TRADE PREFERENCE FOR THE ANDEAN REGION

          * * * * * * *

SEC. 203. BENEFICIARY COUNTRY.

    (a) Definitions.--* * *
          * * * * * * *
    (c) Limitations on Designation.--The President shall not 
designate any country a beneficiary country under this title--
          * * * * * * *
          (7) if such country has not or is not taking steps to 
        afford internationally recognized worker rights (as 
        defined in section [502(a)(4)] 507(4) of the Trade Act 
        of 1974) to workers in the country (including any 
        designated zone in that country).
          * * * * * * *

            HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES

          * * * * * * *

                             GENERAL NOTES

          * * * * * * *
    3. Rates of Duty.--The rates of duty in the ``Rates of 
Duty'' columns designated 1 (``General'' and ``Special'') and 2 
of the tariff schedule apply to goods imported into the customs 
territory of the United Sates as hereinafter provided in this 
note:
          (a) Rate of Duty Column 1.
          * * * * * * *
                  (iv) Products of Insular Possessions.
                          (A) * * *
          * * * * * * *
                          (C) Subject to the limitations 
                        imposed under [sections 503(b) and 
                        504(c)] subsections (a), (c), and (d) 
                        of section 503 of the Trade Act of 
                        1974, goods designated as eligible 
                        under section 503 of such Act which are 
                        imported from an insular possession of 
                        the United States shall receive duty 
                        treatment no less favorable than the 
                        treatment afforded such goods imported 
                        from a beneficiary developing country 
                        under title V of such Act.
          * * * * * * *

         NORTH AMERICAN FREE TRADE AGREEMENT IMPLEMENTATION ACT

          * * * * * * *

                      TITLE II--CUSTOMS PROVISIONS

SEC. 201. TARIFF MODIFICATIONS.

    (a) Tariff Modifications Provided for in the Agreement.--
          (1) Proclamation authority.--The President may 
        proclaim--
                  (A) such modifications or continuation of any 
                duty,
                  (B) such continuation of duty-free or excise 
                treatment, or
                  (C) such additional duties,
        as the President determines to be necessary or 
        appropriate to carry out or apply articles 302, 305, 
        307, 308, and 703 and Annexes 302.2, 307.1, 308.1, 
        308.2, 300-B, 703.2, and 703.3 of the Agreement.
          (2) Effect on mexican gsp status.--Notwithstanding 
        section [502(a)(2) of the Trade Act of 1974 (19 U.S.C. 
        2462(a)(2))] 502(f)(2) of the Trade Act of 1974, the 
        President shall terminate the designation of Mexico as 
        a beneficiary developing country for purposes of title 
        V of the Trade Act of 1974 on the date of entry into 
        force of the Agreement between the United States and 
        Mexico.
          * * * * * * *

             OMNIBUS TRADE AND COMPETITIVENESS ACT OF 1988

                TITLE I--TRADE, CUSTOMS, AND TARIFF LAWS

           * * * * * * *

      Subtitle B--Implementation of the Harmonized Tariff Schedule

           * * * * * * *

SEC. 1211. TRANSITION TO THE HARMONIZED TARIFF SCHEDULE.

           * * * * * * *
    (b) Generalized System of Preferences Conversion.--
          (1) The review of the proposed conversion of the 
        Generalized System of Preferences program to the 
        Convention tariff nomenclature, initiated by the Office 
        of the United States Trade Representative by notice 
        published in the Federal Register on December 8, 1986 
        (at page 44,163 of volume 51 thereof), shall be treated 
        as satisfying the requirements of sections 503(a) and 
        504(c)(3) of the Trade Act of 1974 [(19 U.S.C. 2463(a), 
        2464(c)(3))] (as in effect on July 31, 1995).
          (2) In applying section 504(c)(1) of the Trade Act of 
        1974 [(19 U.S.C. 2464(c)(1))] (as in effect on July 31, 
        1995) for calendar year 1989, the reference in such 
        section to July 1, shall be treated as a reference to 
        September 1.
           * * * * * * *

                      URUGUAY ROUND AGREEMENTS ACT

           * * * * * * *

                     Subtitle D--Related Provisions

SEC. 131. WORKING PARTY ON WORKER RIGHTS.

    (a) In General.--The President shall seek the establishment 
in the GATT 1947, and, upon entry into force of the WTO 
Agreement with respect to the United States, in the WTO, of a 
working party to examine the relationship of internationally 
recognized worker rights, as defined in section [502(a)(4)] 
507(4) of the Trade Act of 1974, to the articles, objectives, 
and related instruments of the GATT 1947 and of the WTO, 
respectively.
    (b) Objectives of Working Party.--The objectives of the 
United States for the working party described in subsection (a) 
are to--
          (1) explore the linkage between international trade 
        and internationally recognized worker rights, as 
        defined in section [502(a)4)] 507(4) of the Trade Act 
        of 1974, taking into account differences in the level 
        of development among countries;
          (2) examine the effects on international trade of the 
        systematic denial of such rights;
          (3) consider ways to address such effects; and
          (4) develop methods to coordinate the work program of 
        the working party with the International Labor 
        Organization.
           * * * * * * *

                INTERNATIONAL FINANCIAL INSTITUTIONS ACT

           * * * * * * *

SEC. 1621. ENCOURAGEMENT OF FAIR LABOR PRACTICES.

    (a) Adoption of Policies and Procedures.-- The Secretary of 
the Treasury shall direct the United States Executive directors 
of the international financial institutions (as defined in 
section 262r(c)(2) of this title) to use the voice and vote of 
the United States to urge the respective institution--
          (1) to adopt policies to encourage borrowing 
        countries to guarantee internationally recognized 
        worker rights (within the meaning of section 
        [502(a)(4)] 507(4) and to include the status of such 
        rights as an integral part of the institution's policy 
        dialogue with each borrowing country;
           * * * * * * *