December 7, 2023

Washington Wire: Biden Signs CHIPS and Science Act



Biden Signs CHIPS and Science Act
On Tuesday, August 9, 2022, President Biden officially signed the CHIPS and Science Act into law. One Voice lobbied extensively on this significant legislation that directly invests billions of dollars in manufacturing in America at a time when many companies reconsider their previous decision to offshore production. The bill contains tens of billions of dollars for semiconductor manufacturing incentive programs, among other provisions designed to boost U.S. innovation and competition against China.
The package includes $52 billion in support for the semiconductor industry, plus additional provisions such as $13 billion for STEM workforce development, $10 billion for the creation of regional technology hubs to focus on technology development, job creation, and expanding U.S. innovation capacity, $829 million for the creation of new Manufacturing USA institutes, triples spending for MEPs, and several other provisions such as one creating a National Supply Chain Database to assist businesses with supplier scouting and minimizing supply chain disruptions. 
Additionally, the legislation contains an advanced manufacturing investment tax credit (ITC) that provides a 25 percent investment tax credit for investments in semiconductor manufacturing. The credit covers manufacturing equipment, the construction of semiconductor manufacturing facilities, and the manufacturing of equipment required for the production of semiconductors. 
This bill marks one of the most significant investments in domestic manufacturing in a decade, not just to meet current demand but to also develop a longer pipeline for critical industries around the country. 



One Voice Testifies at ITC Hearing on Tariffs
One Voice members, leadership, and coalition partners testified in front of the U.S. International Trade Commission (ITC), an independent federal agency, during a three-day hearing on their ongoing Congressionally-mandated investigation of the economic impacts of the Section 301 and 232 tariffs on U.S. domestic industry. Over the three days in late July, the ITC heard from ten panels of representatives from a broad group of U.S. industries, among other stakeholders who shared how the Section 232 tariffs of 25 percent on steel and 10 percent on aluminum imports as well as the Section 301 tariffs on an estimated $370 billion worth of Chinese goods have impacted their businesses. 
Congress mandated the ITC investigate the economic impacts of the tariffs in the Omnibus Appropriations Act, which was signed into law in March 2022. The ITC must submit its findings to Congress by March 15, 2023, which will include "detailed information on U.S. trade, production, and prices in the industries directly and most affected” by the Sections 232 and 301 tariffs. 
One Voice was able to appear before the ITC Commissioners to inform them of the harmful impacts of the 232 tariffs on steel consumers and our allies along with the disruption they have created in the U.S. market. One Voice continues to voice the importance of the administration acting to reverse the tax on imported steel and aluminum used by NTMA and PMA members. Especially during times of economic uncertainty, artificially inflating the price of raw materials as the 232 tariffs have done reduces cash flow the business could use now. One Voice stressed that China should remain an emphasis and focus of trade enforcement actions and not our national security allies. 



Senate Passes Climate Spending Deal
The Senate has approved a budget reconciliation package with over $300 billion in funding to decarbonize industries across the economy. The chamber approved the bill on August 7, 2022, on a 51-50 vote after a tiebreaking nod from Vice President Kamala Harris. The House is returning to Washington from its summer recess to vote on the bill on Friday, August 12. 
The measure includes the largest climate and energy legislation ever enacted by Congress, with $374 billion for an array of investments some project to enable a roughly 40 percent GHG emissions reduction by 2030, compared to 2005 levels. The bill includes $60 billion in tax credits or other supports for onshoring clean manufacturing including, $2 billion in grants to retool existing auto manufacturing facilities to manufacture clean vehicles and a $10 billion investment tax credit to build clean technology manufacturing facilities, like facilities that make electric vehicles, wind turbines and solar panels. 
The climate language in the Senate-approved bill is mostly identical to a reconciliation text released in late July that reflected an agreement between Schumer and longtime holdout Sen. Joe Manchin (D-WV), however, some portions of the bill, including the tax provisions, had to be changed to win the support of Senator Kyrsten Sinema (D-AZ). 
The original deal between Schumer and Manchin included a tax revenue proposal with a corporate alternative minimum tax (AMT) imposing a 15 percent minimum tax on adjusted financial statement income for corporations with profits above $1 billion and closing of the carried interest loophole used by private equity executives. However, to win the support of Sinema the carried interest provision was removed, and instead, a 1 percent excise tax on stock buybacks was included. Changes also included providing carveouts in the corporate AMT for manufacturers and private equity firms and an extension of the excess business loss limitation rule for pass-throughs. The provision was scheduled to sunset but has been extended through 2028. One Voice continues to highlight that multinationals should not receive incentives to manufacture overseas but domestic tax policy should encourage production here at home including through R&D research tax credits and the use of accelerated depreciation. 



NEPA Phase 2 Rule Coming Soon
The White House Council on Environmental Quality (CEQ) has sent the draft phase 2 regulation to overhaul how agencies implement the National Environmental Policy Act (NEPA) to the White House Office of Information and Regulatory Affairs (OIRA) for review in one of the final steps before it can be officially be published.
The phase 2 rule follows an earlier final rule issued in April in the Biden administration’s plan to reverse the Trump-era rulemaking, which significantly revised the NEPA regulations for the first time since 1978. The phase 1 rule made core changes to the NEPA overall implemented in 2020 during the Trump Administration. The Trump administration’s rewrite of the regulation made a variety of procedural changes to NEPA to accelerate infrastructure projects. 
This phase 1 rule makes three core changes to NEPA. Under the final rule, issued on April 20, 2022, agencies again are required to assess direct, indirect, and cumulative effects. The rule also reverts to the prior definition of a project's "purpose and need" to stress it is not the applicant's prerogative; and states that the CEQ rule is the floor, not the ceiling, for how agencies implement NEPA when they review major federal actions. The White House's phase 1 NEPA rule took effect in May. The phase 2 rule is expected to make broader changes to the 2020 rewrite.
Republicans in Congress are trying to halt the regulation, however, on Capitol Hill. Senator Dan Sullivan (R-AK) has introduced a Congressional Review Act (CRA) resolution, S.J.R. 55 that would overturn the phase 1 rule. The CRA measure, which has the support of all 50 Senate Republicans, can clear the Senate on a simple majority vote and cannot be filibustered. However, it must also clear the Democratic House and be signed by President Joe Biden to take effect absent a successful veto override effort.



ITC Launches UMCA Auto Rules Investigation
As a requirement under the implementation of the U.S-Mexico-Canada (USMCA) agreement, the U.S. International Trade Commission (ITC) is launching an investigation into the economic impact and operation of the automotive rules of origin in the USMCA. 
The investigation will look at the USMCA rules of origin, which sets the regional content threshold for automotive products to qualify for tariff-free treatment as well as requirements specific to steel, aluminum, and labor value content, and focus on “their effects on the U.S. economy, impacts to U.S. competitiveness, and relevancy considering recent technology changes.”
As part of its probe, the ITC will hold a public hearing on November 3, 2022, and will submit a formal report on the investigation to Congress and the Office of the U.S. Trade Representative (USTR) by June 30, 2023. 
The rules of origin are also at the center of a USMCA dispute-settlement panel that just concluded its hearings on the issue. Mexico and Canada have joined together to challenge the United States’ strict interpretation of the automotive rules of origin under the USMCA.
The conflict focuses on differences over how to calculate the percentage of a vehicle that comes collectively from the three countries. Both Mexico and Canada believe the trade deal stipulates that more regionally produced parts should count toward duty-free shipping than the U.S. wants to allow. Mexico has said the U.S. is not recognizing alternate methodologies for calculating regional value content it contends were negotiated under the deal to help automakers meet regional value content requirements, which were raised from those under the North American Free Trade Agreement. The U.S. however believes that “any interpretation of the automotive rules of origin that effectively reduces the effective regional value content of a vehicle produced in North America runs counter to the goals” of the agreement.
The panel will complete its preliminary report by October 12, 2022, and its final report by November 10.