Policy and Legal

The sixth ministerial of the United States–European Union Trade and Technology Council, held in Leuven, Belgium, emphasized the deepening cooperation between the U.S. and the EU in navigating global economic pressures and technological advancements.

What’s going on: Secretary of State Antony Blinken, joined by Secretary of Commerce Gina Raimondo and U.S. Trade Representative Katherine Tai, joined European Commission leaders in a discussion that centered on fostering economic security, the importance of AI governance, cooperation on secure supply chains and a transatlantic commitment to reducing reliance on high-risk suppliers.

• This collaboration, Secretary Blinken said in remarks to the press at the council’s outset, proved that there has been “increasing alignment” between the United States and the European Union on these and other issues in recent years.
• “Together, we represent almost half of world GDP, and that means that there’s a certain weight that comes with having a shared position on something,” Secretary Blinken said. “And whether that’s dealing with China or any other challenge, it makes a big difference.”

Growing collaboration in AI: The meeting additionally underscored unwavering support for Ukraine from the U.S. and the EU amid geopolitical challenges, as well as a commitment to driving innovation and security in technology and trade.

• One tangible outcome of the TTC was an update of the “Terminology and Taxonomy for Artificial Intelligence” (i.e., of the definitions of key terms used by the EU and U.S. when discussing AI). This underpins the workstream of the TTC to “ensure the safe, secure and trustworthy development and use of AI,” according to the U.S.–EU joint statement.

Shared concerns about Chinese semiconductors: Competition from heavily subsidized chips produced in China was a key focus at the ministerial, particularly in light of the anticipated ramping up of “legacy chips” manufactured in China over the next few years. The Chinese government’s significant financial subsidization of the chip-producing sector, Secretary Raimondo warned, could lead to considerable market imbalances between China and the U.S. and EU.

• Both the U.S. and EU pledged to continue working together to address destabilizing Chinese exports of semiconductors in the coming years, including to collect and share nonconfidential information and market intelligence about nonmarket policies and practices, to consult each other on planned actions and to potentially develop joint or cooperative measures to address distortionary effects on the global supply chain for legacy semiconductors.

The Environmental Protection Agency’s new heavy-duty tailpipe emissions rule is unrealistic and unfeasible, the NAM said Friday.

What’s going on: “The rule—proposed in April 2023—is part of the ‘Clean Trucks Plan’ unveiled in 2023, which includes light-duty tailpipe and nitrogen oxide rules,” Bloomberg Law (subscription) reports.

• “The[se] ‘Phase 3’ standards build on previous phases of a broader regulatory program to stem greenhouse gas emissions from vehicles such as delivery trucks, long-haulers, and buses.”
• The Phase 1 rule was finalized in 2011, and the Phase 2 rule in 2016.

Why it’s problematic: While the new regulation grants automakers more time for implementation than previous versions did—thanks to input from manufacturers and their advocates, including the NAM—it still “fails to reconcile with the realities of current U.S. infrastructure,” according to an NAM social post.

• “Critical permitting reforms to strengthen transmission systems and a technology-neutral approach for manufacturers are essential to reaching U.S. climate goals,” the NAM wrote.

What should be done: Congress must reform the broken U.S. permitting system so we can build the electric vehicle charging station infrastructure required to implement a rule of this magnitude, the NAM said earlier this month.

The U.S. Occupational Safety and Health Administration’s newly finalized “walkaround rule” is unlawful and will not further the agency’s mission of ensuring safe working conditions, the NAM said after the rule’s release.

What’s going on: The long-awaited final rule, which goes into effect May 31, states that “workers may authorize another employee to serve as their representative or select a non-employee,” according to the Department of Labor.

• The policy broadens the basis upon which a non-employee representative may be deemed “reasonably necessary to the conduct of an effective and thorough inspection.”

Why it’s problematic: In addition to having little to do with making workplaces safer, the new policy violates OSHA’s own mandate—and, quite possibly, manufacturers’ constitutional rights, the NAM said.

• The “rule does nothing to advance OSHA’s mission of ensuring safe working conditions,” said NAM Chief Legal Officer Linda Kelly. “Forcing businesses to accommodate third parties with no safety expertise in their facilities infringes on employers’ property rights, invites new liabilities and introduces elements of chaos and disruption to safety inspections. … [It also] clearly violates OSHA’s statutory mandate to conduct inspections within ‘reasonable limits and in a reasonable manner’ with ‘minimum burden’ on employers, and potentially violates manufacturers’ constitutional rights.”

Next steps: The NAM is weighing legal action to reverse the final rule.​​​​​

Washington, D.C.: Following the release of the Occupational Safety and Health Administration’s recent rulemaking on the Worker Walkaround Representative Designation Process, National Association of Manufacturers Chief Legal Officer Linda Kelly released the following statement:

“Today’s rule does nothing to advance OSHA’s mission of ensuring safe working conditions. Forcing businesses to accommodate third parties with no safety expertise in their facilities infringes on employers’ property rights, invites new liabilities and introduces elements of chaos and disruption to safety inspections.

“By unlawfully expanding third-party access to manufacturers’ worksites, this proposal clearly violates OSHA’s statutory mandate to conduct inspections within ‘reasonable limits and in a reasonable manner’ with ‘minimum burden’ on employers, and potentially violates manufacturers’ constitutional rights. And, for the first time, OSHA would determine who qualifies as an ‘authorized representative’ of employees, which until now has been exclusively recognized as the jurisdiction of the National Labor Relations Board.

“This is another clear example of the federal regulatory onslaught—a proposal that upends settled precedent and ignores the reasoned decision-making required by the Administrative Procedure Act. For these reasons, the NAM will be considering legal action to reverse this incredibly destabilizing decision.”

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.85 trillion to the U.S. economy annually and accounts for 53% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Three of the country’s largest health insurers will soon begin paying for a top weight-loss drug for certain people on Medicare with heart-related conditions, The Wall Street Journal (subscription) reports.

What’s going on: “CVS Health, Elevance Health and Kaiser Permanente said they would cover Novo Nordisk’s Wegovy for the use of reducing the risk of heart attacks and strokes in people who have cardiovascular disease, meet body-weight criteria and are covered by a Medicare drug-benefit plan.”

• The class of weight loss drugs to which Wegovy belongs was previously excluded from Medicare coverage by a U.S. law.

Why it’s important: “The decisions will ease the financial burden” of those who have been paying out of pocket for Wegovy and are likely to spur use of the drug among those who couldn’t afford or did not want to pay the full price.

• Approximately two-thirds of U.S. adults are overweight or obese, according to the recent NAM report, “Manufacturers on the Front Lines of Communities: A Deep Commitment to Health Care.”
• Excess body weight and obesity are associated with higher health-care costs for both employers and their workers. They also “raise the likelihood of other illnesses” and affect “productivity and the ability to complete job functions,” according to the study, which points to weight-loss drugs as part of the solution.

Why it happened: New guidance released last week by the Centers for Medicare and Medicaid Services holds that Medicare Part D plans, administered by private insurance companies, could “cover anti-obesity medications if the drugs receive approval for an additional use that is considered medically accepted.”

• This applies to Wegovy, which the Food and Drug Administration recently approved for reducing the risk of heart attacks and strokes among those with histories of heart disease and body mass indices above a certain threshold.

However … The use of Wegovy “for weight loss alone” will remain excluded from coverage under the CMS guidance.

Earlier this year, the House passed legislation including key NAM tax priorities. Now it’s time for the Senate to do the same.

That’s the message of a new NAM digital ad campaign launched today and set to run over the next several weeks.

What’s going on: The 30-second TV ad—which will stream in Washington, D.C., and in the key states of Idaho, Kentucky, Louisiana, Oklahoma, New York and New Hampshire—asks viewers to urge the Senate to pass the Tax Relief for American Families and Workers Act, which cleared the House by a bipartisan vote in January.

• The legislation restores three key pro-growth tax provisions from the 2017 Tax Cuts and Jobs Act that expired in 2022: immediate expensing for domestic R&D, enhanced interest deductibility and full expensing.

​​​​​​​The background: Earlier this month, Courtney Silver, president and owner of Ketchie and chair of the NAM Small and Medium Manufacturers Group, told the Senate Finance Committee about the impact the three provisions’ expiration has had on her family-owned precision machining company.

• “In the years following the TCJA, I was able to make a higher level of investment because I knew our tax code was going to have a baseline of certainty,” she said. “Today, however, I am unable to make these investments because of the uncertainty that Congress will address the expired TCJA provisions. . . . Because I am unable to realize the full deduction of my investment within the year I purchase it, the investment seems too risky and irresponsible.”

​​​​​​​What’s needed: Senate Majority Leader Chuck Schumer (D-NY) has taken an early procedural step to put the House-passed legislation on the Senate’s calendar. But more needs to happen, and soon, the NAM’s ad tells viewers.

• “Vital tax provisions are expiring, harming our ability to compete globally and invest in new factories and equipment,” the ad says. “The House has done its job and restored these provisions with overwhelming support. The Senate needs to act now.”

The Department of Energy on Monday announced record-setting funding aimed at decarbonizing energy-intensive sectors, POLITICO Pro (subscription) reports.

What’s going on: The nearly $6 billion in “funding from the Democrats’ climate law and the bipartisan infrastructure law for industrial decarbonization will be spread across 33 projects and 20 states,” where it “will apply to some of the highest-emitting industrial manufacturing sectors—often described as ‘hard-to-decarbonize’ industries—including iron and steel, aluminum, cement, concrete, chemicals, food and beverages, and pulp and paper.”

Where it’s coming from: The money will be drawn from funds set aside under the Inflation Reduction Act ($5.47 billion) and the Bipartisan Infrastructure Law ($489 million).

Why it’s important: The many projects to be funded—which include groundbreaking recycling initiatives, hydrogen-use projects, decarbonization of thermal processes and more—will remove approximately 14 million metric tons of emissions every year, the DOE estimates.

• Five of the highest-dollar-value projects, at half a billion dollars each, “are focused on decarbonizing cement, concrete, aluminum, iron and steel.”
• The work will take place in five states—Indiana, Ohio, California, Iowa and Mississippi—and a still-to-be-determined spot on the Mississippi River Basin.
• Many of the projects are spearheaded by NAM members, who have been critical in innovating decarbonization efforts from within the industry.

The NAM’s take: “Manufacturers are innovating and making tremendous investments to decarbonize their processes and products,” said NAM Vice President of Domestic Policy Brandon Farris. “It is great to see the Department of Energy recognize multiple NAM members for their industry-leading initiatives.”

Earlier this year, the House passed the Tax Relief for American Families and Workers Act, and the bill is now with the Senate to consider. NAM Vice President of Domestic Policy Charles Crain discusses what’s included in the bill, why the provisions matter to small and medium-sized manufacturers, other tax policies the NAM is focusing its advocacy efforts on and how SMMs can get involved. 

Q: There is a major tax package moving through Congress. Can you explain what is included in the legislation?

Crain: “The Tax Relief for American Families and Workers Act includes three of the NAM’s top tax priorities: the ability to immediately deduct domestic R&D expenses, enhanced interest deductibility on business loans and the ability to fully deduct the cost of capital investments in the year acquired (full expensing). All three of these provisions were implemented by the 2017 Tax Cuts and Jobs Act.”

Q: What exactly are these provisions and why do they matter to SMMs?

Crain: R&D – “For almost 70 years, the U.S. tax code allowed businesses to fully deduct their R&D expenses in the same year they were incurred. But starting in 2022, businesses were required to deduct those expenses over a period of years, making it more costly to conduct R&D in the U.S.” 

Interest Deductibility – “Many manufacturers need to borrow funds to finance long-term investments in equipment and facilities. The interest that businesses pay on these loans is generally tax deductible, subject to a cap. Prior to 2022, the cap was based on a company’s earnings before interest, tax, depreciation and amortization (EBITDA); now, it’s based on a company’s earnings before interest and tax (EBIT). Lowering the cap limits the amount of interest that companies can deduct—effectively imposing a tax hike on manufacturers that finance job-creating capital projects.”

Full Expensing – “Manufacturing is a capital-intensive industry. The TCJA allowed companies to immediately deduct 100% of the cost of equipment and machinery in the year purchased—called ‘full expensing.’ But full expensing began to phase out in 2023; it’s currently down to 60% and will be completely eliminated by 2027. That significantly increases the after-tax cost of capital equipment purchases.”

Q: Why is it important for Congress to restore these tax provisions for SMMs?

Crain: “These are provisions that manufacturers, especially SMMs, use to grow their businesses and compete globally. The tax code must be fair and consistent. The first step is addressing these crucial issues.”

Q: What other tax policies is the NAM focusing its advocacy efforts on?

Crain: “We are in the middle of a three-part story. If the TCJA was the first part of the trilogy, the second act is the Tax Relief for American Families and Workers Act—and the grand finale will come in 2025, when many other TCJA provisions expire. Changes that will impact SMMs at the end of 2025 include the expiration of the 20% pass-through deduction, increases in individual income tax rates and a reduction of the estate tax exemption threshold. Without congressional action, this would affect the laws in effect for tax year 2026 and beyond. For SMMs organized as corporations, the corporate tax rate could also be at risk. The NAM is already pushing back, and we know manufacturers are ready to pull out all the stops to prevent them from taking effect in 2026.”

Q: Where can SMMs find more information, and how can they get involved?

Crain: “The NAM has created online action centers for R&D, interest deductibility and full expensing with information on why these issues remain important. NAM members are encouraged to check out these action centers for tools and resources they can use to contact lawmakers on these issues. They need to hear from you! You can also reach out directly to NAM Senior Director of Tax Policy Alex Monié.”

Q: What else do SMMs need to know?

Crain: “There is an old saying in D.C.: ‘Tax bills are hard.’ We have gotten the Tax Relief for American Families and Workers Act through the House, but more work needs to be done in the Senate. And the next 20 months will be an all-out sprint to prevent damaging tax increases from taking effect at the end of 2025. The NAM was successful with the TCJA in 2017—and, I believe, will be successful both this year and next—thanks to our members. Your stories are absolutely crucial to showing that manufacturers kept our promises following tax reform’s passage—and illustrating the economic damage that will happen if R&D expensing, interest deductibility and full expensing aren’t revived this year, or if tax increases are allowed to hit SMMs in 2026. Please reach out to your membership adviser, or to Alex, to share any stories, feedback or ideas as we continue to advocate for pro-growth tax policies for manufacturers in America.”

The U.S. will award Intel up to $8.5 billion in grants and as much as $11 billion in loans to expand chipmaking capacity and capabilities in four states, The Wall Street Journal (subscription) reports.

What’s going on: The funds, set aside under the NAM-backed 2022 CHIPS and Science Act to bolster domestic semiconductor production, “will go toward new factories and expansion projects in Arizona, New Mexico, Ohio and Oregon, the Commerce Department said.”

• Spurred by the federal funding, “Intel’s total investment in U.S. projects in the next five years is expected to exceed $100 billion,” according to the Journal, and to create more than 10,000 manufacturing jobs and about 20,000 construction jobs, according to the Commerce Department.

Largest award: The grant to Intel, the largest American chipmaker by revenue, is also the largest CHIPS Act award. It follows a February announcement of a $1.5 billion award to GlobalFoundries Inc.

• The award will support the reshoring of production of leading-edge logic chips, which are “essential to the world’s most advanced technologies like artificial intelligence,” the Commerce Department said.
• President Biden was in Chandler, Arizona, Wednesday to visit Intel’s Ocotillo chip-manufacturing campus.

Why it’s important: “We can’t just design chips; we have to make them in America,” Commerce Secretary Gina Raimondo told reporters on Tuesday, the Journal reports. “It’s an economic security problem. It’s a national security problem. And we’re going to change that.”

How it will work: The funding will be doled out in stages, “according to construction and manufacturing milestones,” the Journal said.

• “In Chandler, Arizona, the money will help to build two new chip plants and modernize an existing one,” CBS News reports. “The funding will establish two advanced plants in New Albany, Ohio, [and] … [t]he company will also turn two of its plants in Rio Rancho, New Mexico, into advanced packaging facilities. And Intel will also modernize facilities in Hillsboro, Oregon.”

The NAM weighs in: Wednesday’s “record, multibillion-dollar award is great news for [Intel] and U.S. manufacturing competitiveness,” the NAM wrote in a social post. “The NAM was a vocal supporter of the CHIPS and Science Act, and we will continue to champion policies that support the expansion of chip production in America.”

Washington, D.C. –  Following the Environmental Protection Agency’s release of new automobile emissions standards, National Association of Manufacturers President and CEO Jay Timmons released the following statement:

“Auto manufacturers in America make enormous investments to both improve the efficiency of their vehicles and provide numerous options for consumers. While it is clear the EPA listened to manufacturers’ concerns about the timeline of this rule, challenges still lie ahead. Successful implementation of this policy will still require congressional action on the permitting reforms needed to build the charging infrastructure to support this transition. That includes the ramping up of electricity production and developing a reliable domestic supply of critical minerals.

“Manufacturers will continue to engage with EPA Administrator Regan and President Biden as a more realistic standard is needed to harmonize this rule with other regulations governing vehicle emissions so that we can grow the sector in the United States.”

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.85 trillion to the U.S. economy annually and accounts for 53% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.