88R10369 RDS-D
By: Creighton S.B. No. 2405
A BILL TO BE ENTITLED
AN ACT
relating to state contracts with Chinese companies and investments
in Chinese companies and certain companies doing business with
China; authorizing a civil penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 2270.0001, Government Code, is amended
by adding Subdivision (1-a) and amending Subdivision (9) to read as
follows:
(1-a) "Chinese company" means a company that is
headquartered in China, regardless of whether:
(A) the company's or its parent company's
securities are publicly traded; or
(B) the company or its parent company is listed
as a Chinese company on a public stock exchange.
(9) "Scrutinized company" means:
(A) a company that:
(i) engages in scrutinized business
operations described by Section 2270.0052; or
(ii) has been complicit in the Darfur
genocide during any preceding 20-month period;
(B) a company that engages in scrutinized
business operations described by Section 2270.0102; [and]
(C) a company that engages in scrutinized
business operations described by Section 2270.0152; and
(D) a company that engages in scrutinized
business operations described by Section 2270.0162 or that is a
Chinese company.
SECTION 2. Subchapter A, Chapter 2270, Government Code, is
amended by adding Section 2270.00015 to read as follows:
Sec. 2270.00015. APPLICABILITY. (a) In this section:
(1) "Institution of higher education" has the meaning
assigned by Section 61.003, Education Code.
(2) "Trust company" means the Texas Treasury
Safekeeping Trust Company.
(b) This subchapter applies to an institution of higher
education and the trust company in the same manner as this
subchapter applies to an investing entity.
(c) Subchapter E, except Section 2270.0205, applies to an
institution of higher education and the trust company in the same
manner that the subchapter applies to an investing entity, but only
to the extent the institution of higher education or trust company
owns direct or indirect holdings of a company described by Section
2270.0001(9)(D).
SECTION 3. Section 2270.0002, Government Code, is amended
to read as follows:
Sec. 2270.0002. EXCEPTION. Notwithstanding any other law,
a company that the United States government affirmatively declares
to be excluded from its federal sanctions regime relating to Sudan,
its federal sanctions regime relating to Iran, [or] any federal
sanctions regime relating to a designated foreign terrorist
organization, or its federal sanctions regime relating to China is
not subject to divestment or investment prohibition under this
chapter.
SECTION 4. Chapter 2270, Government Code, is amended by
adding Subchapter D-1 to read as follows:
SUBCHAPTER D-1. GENERAL PROVISIONS RELATING TO INVESTMENTS IN CHINA
Sec. 2270.0161. DEFINITIONS. In this subchapter:
(1) "Business operations" means engaging in commerce
in any form in China, including by acquiring, developing,
maintaining, owning, selling, possessing, leasing, or operating
equipment, facilities, personnel, products, services, personal
property, real property, or any other apparatus of business or
commerce.
(2) "Military equipment" means weapons, arms,
military supplies, and equipment that readily may be used for
military purposes, including radar systems and military-grade
transport vehicles.
Sec. 2270.0162. SCRUTINIZED BUSINESS OPERATIONS IN CHINA.
A company engages in scrutinized business operations in China if:
(1) the company has business operations that involve
contracts with or providing supplies or services to the government
of China, a company in which the government of China has any direct
or indirect equity share, a consortium or project commissioned by
the government of China, or a company involved in a consortium or
project commissioned by the government of China; or
(2) the company supplies military equipment to China.
SECTION 5. Sections 2270.0201(a) and (b), Government Code,
are amended to read as follows:
(a) The comptroller shall prepare and maintain a list of all
scrutinized companies. The list must be categorized according to:
(1) companies that are scrutinized companies under
Section 2270.0001(9)(A);
(2) companies that are scrutinized companies under
Section 2270.0001(9)(B); [and]
(3) companies that are scrutinized companies under
Section 2270.0001(9)(C); and
(4) companies that are scrutinized companies under
Section 2270.0001(9)(D).
(b) In maintaining the list of scrutinized companies under
Subsection (a), the comptroller may review and rely, as appropriate
in the comptroller's judgment, on publicly available information
regarding companies with business operations in Sudan, in Iran,
[or] with designated foreign terrorist organizations, or in China,
as applicable, including information provided by the state,
nonprofit organizations, research firms, international
organizations, and governmental entities.
SECTION 6. Section 2270.0203, Government Code, is amended
to read as follows:
Sec. 2270.0203. NOTICE TO LISTED COMPANY ENGAGED IN
INACTIVE BUSINESS OPERATIONS. For each listed company identified
under Section 2270.0202 that is engaged in only inactive
scrutinized business operations, the investing entity shall send a
written notice informing the company of this chapter and
encouraging the company to continue to refrain from initiating
active business operations in Sudan, in Iran, [and] with designated
foreign terrorist organizations, and in China until it is able to
avoid being considered a listed company. The investing entity
shall continue the correspondence as the entity considers
necessary, but is not required to initiate correspondence more
often than semiannually.
SECTION 7. Section 2270.0204(b), Government Code, is
amended to read as follows:
(b) The notice shall offer the company the opportunity to
clarify its Sudan-related, Iran-related, [or] designated foreign
terrorist organization-related, or China-related activities, as
applicable, and shall encourage the company, not later than the
90th day after the date the company receives notice under this
section, to either cease all scrutinized business operations as
described by Sections 2270.0052, 2270.0102, [and] 2270.0152, and
2270.0162, or convert such operations to inactive business
operations in order to avoid qualifying for divestment by investing
entities.
SECTION 8. Subtitle F, Title 10, Government Code, is
amended by adding Chapter 2279 to read as follows:
CHAPTER 2279. PROHIBITION ON CONTRACTS WITH CHINESE COMPANIES
Sec. 2279.001. DEFINITIONS. In this chapter:
(1) "Chinese company" means a company that is
headquartered in China, regardless of whether:
(A) the company's or its parent company's
securities are publicly traded; or
(B) the company or its parent company is listed
as a Chinese company on a public stock exchange.
(2) "Company" means a sole proprietorship,
organization, association, corporation, partnership, joint
venture, limited partnership, limited liability partnership, or
limited liability company, including a wholly owned subsidiary,
majority-owned subsidiary, parent company, or affiliate of those
entities or business associations, that exists to make a profit.
(3) "State agency" has the meaning assigned by Section
2151.002.
Sec. 2279.002. PROVISION REQUIRED IN CERTAIN CONTRACTS. A
state agency may not enter into a contract with a vendor for goods
or services unless the contract contains a written verification
from the vendor that it is not a Chinese company.
Sec. 2279.003. FALSE VERIFICATION; PENALTIES. (a) If a
state agency determines that a vendor holding a contract with the
agency was ineligible to have the contract awarded under Section
2279.002 because the vendor's written verification was false, the
state agency shall immediately terminate the contract without
further obligation to the vendor.
(b) A vendor described by Subsection (a):
(1) is barred from responding to a solicitation for or
being awarded a contract for goods or services by any state agency;
and
(2) is liable to this state for a civil penalty of
$10,000.
(c) The attorney general may bring an action to recover a
civil penalty imposed under Subsection (b)(2). The attorney
general may recover reasonable attorney's fees and court costs in
bringing an action under this subsection.
SECTION 9. (a) As soon as practicable after the effective
date of this Act, the comptroller of public accounts shall review
all contracts entered into under the comptroller's purchasing
authority and identify any contracts entered into between this
state and a Chinese company, as defined by Section 2270.0001,
Government Code, as amended by this Act. The comptroller of public
accounts shall prepare a list of all Chinese companies that are a
party to a contract identified under this section.
(b) Not later than September 1, 2024, the comptroller of
public accounts shall provide the list prepared under Subsection
(a) of this section to the governor, the lieutenant governor, the
speaker of the house of representatives, and each member of the
legislature.
SECTION 10. Not later than the 180th day after the effective
date of this Act, the comptroller of public accounts shall include
the companies described by Section 2270.0201(a)(4), Government
Code, as added by this Act, on the list under Section 2270.0201(a),
Government Code.
SECTION 11. Section 2279.002, Government Code, as added by
this Act, applies only to a contract entered into on or after the
effective date of this Act. A contract entered into before that
date is governed by the law in effect on the date the contract was
entered into, and the former law is continued in effect for that
purpose.
SECTION 12. This Act takes effect immediately if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for immediate
effect, this Act takes effect September 1, 2023.