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America COMPETES Act passes 222-210; includes funding for semiconductors, science & research, supply chains, trade provisions, telecom, climate resilience

By a largely party-line vote of 222-210, the House today (Friday, February 4) passed the $350 billion America Creating Opportunities for Manufacturing Preeminence in Technology and Economic Stability Act (the COMPETES Act, HR 4521), which is intended to strengthen domestic supply chains and boost scientific research in a bid to make the U.S. more competitive with China and other countries. The Senate passed its version of the sweeping bill, the U.S. Innovation and Competitiveness Act, (or USICA, S. 1260) in June 2021 with support from 18 Republican senators. Both bills include more than $50 billion in funding to boost U.S. production of semiconductor chips (the CHIPS Act). Pursuant to an agreement worked out between the House and Senate Democratic leadership last year, the House and Senate will now move to a bicameral conference process to negotiate a version of the legislation that could pass both chambers. The White House is a strong supporter of the effort, with Commerce Secretary Gina Raimondo and other officials lobbying urgently for supply chain legislation for months.

Rep. Adam Kinzinger (R-IL) was the only Republican to support the bill. Stephanie Murphy (D-FL) was the only Democrat to vote against the bill.

Attached with this Alert please find PDFs of a 20-page summary of HR 4521 and a more detailed section-by-section staff summary of HR 4521 (109 pages). The 2,900-page legislative text (as introduced January 25) of HR 4521 is available here.

Conference Prospects. House Majority Leader Steny Hoyer (D-MD) said February 2 that he hoped the House and Senate could reach agreement on a conference report "within a 30-day period." On February 3, House Foreign Affairs Committee Ranking Member Michael McCaul (R-TX) told reporters, "We're gonna get [the conference] done. There's too much support on both sides of the aisle and in both House and Senate and the top of leadership and the White House itself … If we can't get this one done, we can't get anything done." While the House added a number of provisions to its bill that are not in the Senate version, Sen. John Cornyn (R-TX), one of the cosponsors of USICA in the Senate, on Thursday predicted the conference would ultimately produce a report that resembles the Senate bill, telling Bloomberg, "I don't think you'll see a bill pass that doesn't look a whole lot like the Senate bill."

Amendments passed on the House floor this week included a proposal to revamp U.S. international ocean-shipping laws, which passed 367-59. The House had already passed the bipartisan shipping legislation, the Ocean Shipping Reform Act (HR 4996), in December. The language would address a shortage of shipping containers and help the Federal Maritime Commission crack down on unfair practices by ocean carriers.

Among many other provisions, HR 4521, which was introduced January 25, includes these items related to microchips, trade policy, science & research, supply chains, telecommunications, medical stockpiles and climate change, with any correlates in S. 1260 noted.

CHIPS Act (Semiconductor Funding)

HR 4521 includes language nearly identical to the semiconductor provisions in USICA (S. 1260). Both bills would provide $52 billion over five years for the CHIPS for America Act (which was included in the fiscal 2021 national defense authorization, but no funds were outlaid). Of that total, $50.2 billion would create a CHIPS for America Fund. Within that fund, $39 billion over five years is allocated to CHIPS Incentive Programs, which would create incentives to invest in facilities for semiconductor manufacturing and research & development, under this schedule: $24 billion in fiscal 2022; $7 billion in fiscal 2023; $6.3 billion for fiscal 2024; $6.1 billion for fiscal 2025; and $6.8 billion for fiscal 2026.

According to the bill text, the Commerce Department must prioritize assistance to entities that "1) will manufacture semiconductors necessary to address gaps and vulnerabilities in the domestic supply chain across a diverse range of technology and process nodes; and 2) provide a secure supply of semiconductors necessary for [U.S.] national security, manufacturing, critical infrastructure and technology leadership … " The bills would also expand program eligibility to include semiconductor equipment producers and materials suppliers.

Both bills also include an expansion of the Manufacturing USA Program and language establishing a National Semiconductor Technology Center and an advanced packaging R&D program. The bills provide $2 billion for a CHIPS Defense Fund that would be transferred to the Pentagon for the research and workforce development needs of defense and intelligence agencies. The bills also provide $500 million over five years for a new International Technology Security and Innovation Fund. Both bills also authorize $2 billion specifically for "mature technology nodes," the legacy chips used in automobiles, consumer electronics, aircraft and military hardware.

Trade Provisions

The bill includes Trade Adjustment Assistance (TAA) for workers experiencing job loss resulting from increased foreign competition and a tax provision to make permanent the Health Care Tax Credit for health insurance costs of those eligible for TAA, both of which are also in the BBBA. The inclusion of a tax provision has prompted speculation over whether other tax provisions could be added down the line.

There are dozens of country-specific provisions, some of which are nonbinding "sense of Congress" items, plus a long list of duty suspensions and reductions. The bill also includes a section on trade law remedies with provisions on issues like addressing cross-border subsidies in countervailing duty investigations, as well as modification and extension of the Generalized System of Preferences. It would provide for reauthorization of the American Manufacturing Competitiveness Act of 2016.

National Science Foundation

HR 4521 includes the National Science Foundation (NSF) for the Future Act, which establishes a new Directorate for Science and Engineering Solutions responsible for accelerating R&D to advance solutions related to cybersecurity, climate change and STEM education. The bill also increases NSF funding overall and includes funding for investments in research-enabling infrastructure. This part of the bill also provides funding for STEM education from pre-K to graduate students.

The Senate's USICA bill (S. 1260) also includes a number of NSF provisions. It would provide $30 billion over five years to establish a new Directorate of Technology and Innovation at the NSF for research and technological development in key areas like artificial intelligence (AI) and quantum science. USICA also would authorize $52 billion over five years for existing NSF activities such as precision agriculture, rural STEM education and critical minerals, among other areas.

Department of Energy / NIST

HR 4521 includes the Department of Energy Science for the Future Act, which authorizes five years of funding for the Energy Department's R&D programs in the Office of Science, including specific areas such as: developing "hard X-ray" capabilities; high-energy physics research; advanced scientific computing research; fusion energy research; setting up as many as six bioenergy research centers; and nuclear physics research. HR 4521 also would authorize funding over five years for the National Institute of Standards and Technology (NIST), including funding for the Hollings Manufacturing Extension Partnership (MEP) program. It would expand several of NIST's cybersecurity vulnerability research initiatives.

HR 4521's Energy Department provisions include a number related to technology transfer, such as authorizing a competitive grant program for incubators to accelerate the commercialization of clean energy technologies. DOE would also support coordinating technology transfer programs that advance the commercialization of clean energy technologies nationally. The DOE would delegate authority to the National Labs to allow employees to take a leave of absence for as long as three years to advance the commercialization of energy and related technologies, with streamlined procedures for licensing technology for participating employees.

The Senate's USICA bill (S. 1260) authorizes $17 billion over five years for DOE R&D in key technology areas and provides NIST with cybersecurity assistance for universities. Under USICA, the NSF and the Energy Department would coordinate with the interagency working group to annually review and update the key technology focus areas, considering input from relevant industries. The two agencies could modify the list of areas based on U.S. national needs and security threats.

Supply Chains

Both the House and Senate bills establish a Critical Supply Chain Resilience Program within the Commerce Department and provide similar levels of funding ($1.5 billion) for the Public Wireless Supply Chain Innovation Fund. HR 4521 would establish several additional programs and agencies at Commerce to manage and monitor supply chains, such as a Supply Chain Resiliency and Crisis Response Office. HR 4521 also requires Commerce to develop a strategy to support the resilience, diversity, security and strength of supply chains; expands the Manufacturing Extension Partnership (MEP) program to fund activities including promoting supply chain resiliency; establishes a national supply chain database at MEP to track disruptions in U.S. supply chains; and creates a fund to carry out and secure semiconductor supply chain activities.

Under USICA's (S. 1260) version of the Critical Supply Chain Resiliency Program, the Commerce Department could set up a coordinating group, including private-sector entities, to coordinate federal planning to respond to supply chain shocks. The program also would include a semiconductor incentive program (established by the fiscal 2021 NDAA law) that would give priority to manufacturers that make chips necessary to address gaps in U.S. supply chains. USICA also includes the Safeguarding American Innovation Act, which requires regular National Risk Assessments and the creation of a Cyber Response and Recovery Fund. It would also create incentives for "re-shoring" of the full supply chain for personal protective equipment (PPE) (see below).

Telecommunications

HR 4521 directs the Commerce Department to provide technical assistance to small communications network providers to raise awareness of Open Radio Access Network (RAN) networks and architectures, an alternative to Chinese telecom technology. Commerce would also have to increase awareness about the Wireless Supply Chain innovation Grant Program, which awards grants for the deployment and use of Open RAN. S. 1260 (USICA) provides $500 million for an innovation fund that would coordinate with allies to support international information and communications technology security. USICA also directs Commerce to establish 1) an applied research Open RAN architecture testbed, and 2) a grant program to encourage private-sector entities to participate in international standards-setting bodies.

HR 4521 also directs Federal Communications Commission (FCC) to establish a 6G Task Force that would submit recommendations to Congress on 6G wireless technology, including the status of industry-led standards-setting bodies in 6G and the potential benefits and challenges to 6G. The Senate bill (USICA) directs a Commerce Department division to explore how the U.S. could improve its participation in telecommunications standardization activities.

Health Provisions (Medical Products)

• Strategic Stockpiles. HR 4521 would provide, through fiscal 2024, $3.5 billion for a pilot grant program for states to expand or maintain strategic stockpiles of certain drugs, medical devices and personal protective equipment necessary for public health emergencies. The bill would spend $500 million to increase the Strategic National Stockpile's stock of medical supplies, diversify domestic production, enter into cooperative agreements for domestic manufacturing, and manage domestic reserves. HR 4521 would also allow HHS to transfer drugs, vaccines and other medical products from the Strategic National Stockpile to other federal agencies for reimbursement until September 30, 2024.
• Drug Safety. HR 4521 would authorize the FDA to order drug manufacturers to stop distribution and recall any products that could cause serious harm. Manufacturers would also have to report on their foreign drug manufacturing sites and report quarterly on the amount of drugs they make. The bill imposes large civil monetary penalties for destroying or providing false information required for FDA drug approval applications.
• Defense Production Act. HR 4521 would permit Covid-19 tests, PPE, drugs and other medical supplies to be designated as scarce and critical materials under the Defense Production Act (DPA), allowing the president to compel companies to prioritize federal contracts to procure them. The president could prioritize materials ordered by state and local governments if they're scheduled to be delivered to those governments within 15 days of a federal order or allocation. HR 4521 also would clarify the president's authority to use the DPA to bolster the supply chain for critical medical supplies, including through payments to domestic companies that produce critical components or raw materials, and clarifies that the president may invoke the DPA to secure the domestic supply chain of vaccines.

S. 1260 (USICA) includes language stipulating that any procurement contract for PPE entered into the departments of Health and Human Services, Homeland Security (DHS) and Veterans Affairs would have to be issued for at least two years and requiring the PPE to be produced in the U.S. HHS, in coordination with DHS, could sell drugs, vaccines and other supplies in the Strategic National Stockpile to a federal agency or state, city, tribal, private or nonprofit entity for immediate use, if the items are within one year of their expiration date or HHS determines they're no longer needed in the stockpile.

Climate Provisions

HR 4521 includes provisions addressing "climate diplomacy" to better serve national security and economic interests. A Global Climate Change Resilience Strategy would authorize the president to promote resilience among communities facing harmful impacts from climate change and reduce the vulnerability of people affected by climate change, as well as create and fund a Coordinator of Climate Change Resilience at the State Department. The bill also includes new "authorities for bilateral and regional international development assistance" and leveraging of private resources, in support of climate change initiatives by nations at risk of substantial adverse effects of climate change that have limited capacity to respond. There are also provisions intended to reduce deforestation and control the export of electronic waste to protect U.S. supply chains, as well as solar component manufacturing supply chain assistance by way of $600 million annually for the Energy Department to establish a grant and direct loan program. The climate language does not have any parallel in the Senate bill, S. 1260 (USICA).

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ATTACHMENTS

HR 4521 summary

HR 4521 section-by-section summary