Sec. 102. Border greenhouse gas adjustments
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Subtitle L of the Internal Revenue Code of 1986, as added by subsection (a), is further amended by adding at the end the following new part: Sec. 9911. Purposes. Sec. 9912. Definitions. Sec. 9913. Notification of foreign countries. Sec. 9914. Border tax adjustment rate. The purposes of this part are— to promote a strong global effort to significantly reduce greenhouse gas emissions, and to prevent carbon leakage. The purposes of this part are additionally— to provide a rebate to exporters in domestic eligible industrial sectors for the greenhouse gas emission costs of the owners and operators incurred under this title, but not for costs associated with other related or unrelated market dynamics, to ensure that imports from other countries, and, in particular, fast-growing developing countries, do not enjoy competitive advantages because of the carbon tax liability of domestic manufacturers, and therefore increase their emissions, to encourage foreign countries to take substantial action with respect to their greenhouse gas emissions, and to ensure that the measures described in this subpart are designed and implemented in a manner consistent with applicable international agreements to which the United States is a party.
In this part: The term carbon leakage means any substantial increase (as determined by the Secretary) in greenhouse gas emissions by entities located in other countries caused by a cost of production increase in the United States resulting from implementation of this title. The term border tax adjustment means the levying of a tax on imported covered goods equivalent to the amount of tax paid pursuant to part 1 of this subtitle in the manufacture of comparable domestic manufactured goods, and the rebating of the tax paid pursuant to part 1 of this subtitle that has been paid on covered goods exported from the United States.
The term border tax adjustment rate means the amount of tax that would be paid on a covered good produced in the United States in the current year. The term Commissioner means the Commissioner of United States Customs and Border Protection. The term covered good means a good that is— entered under a heading or subheading of the Harmonized Tariff Schedule of the United States that corresponds to the NAICS code for an eligible industrial sector, as established in the concordance between NAICS codes and the Harmonized Tariff Schedule of the United States prepared by the United States Census Bureau, or a manufactured item for consumption.
The term eligible industrial sector means an industrial sector determined by the Secretary under section 9913. The term industrial sector means any sector that— is in the manufacturing sector (as defined in NAICS codes 31, 32, and 33), or is part of, or an entire, sector that beneficiates or otherwise processes (including agglomeration) metal ores, including iron and copper ores, soda ash, and phosphate. The term industrial sector does not include any part of a sector that extracts fossil fuels, metal ores, soda ash, or phosphate.
The term manufactured item for consumption means any good— that includes in substantial quantities one or more goods like the goods produced by an eligible industrial sector, and for which the Secretary has determined, with the concurrence of the Commissioner, that the application of the border tax adjustment program pursuant to this part is technically and administratively feasible and appropriate to achieve the purposes of this part, taking into account the greenhouse gas intensity, and where appropriate the trade intensity, of the industrial sector that produces the good, as measured consistent with section 9913 and the ability of the producers to recover cost increases in the marketplace and other appropriate factors.
The term NAICS means the North American Industrial Classification System of 2002. The term output means the total tonnage or other standard unit of production (as determined by the Secretary) produced by an entity in an industrial sector. As soon as practicable after the date of the enactment of the Modernizing America with Rebuilding to Kickstart the Economy of the Twenty-first Century with a Historic Infrastructure-Centered Expansion Act, the President shall notify each foreign country— requesting the foreign country to take appropriate measures to limit the greenhouse gas emissions of the foreign country, and indicating that a border tax adjustment may apply to covered goods imported into and exported from the United States.
Not later than 1 year after the date of the enactment of the Modernizing America with Rebuilding to Kickstart the Economy of the Twenty-first Century with a Historic Infrastructure-Centered Expansion Act, the Secretary shall promulgate a rule designating, based on the criteria under subsection (c)(2), industrial sectors where covered products are liable for the border tax adjustment. The list shall include the amount of the border tax adjustment rate for each covered good in the following calendar year pursuant to section 9914.
Not later than January 31 of each calendar year after the calendar year in which the Modernizing America with Rebuilding to Kickstart the Economy of the Twenty-first Century with a Historic Infrastructure-Centered Expansion Act is enacted, the Secretary shall publish in the Federal Register an updated version of the list published under paragraph (1). Imported covered goods are liable under this part if they are produced in the United States in an industrial sector that is included in a 6-digit classification of the NAICS that meets the criteria in both clauses
(ii)and (iii). Exported covered goods are eligible under this part if they are produced in the United States in an industrial sector that is included in a 6-digit classification of the NAICS that meets the criteria in clauses
(ii)and (iii). As determined by the Secretary, an industrial sector meets the criteria of this clause if the United States industrial sector has a greenhouse gas intensity of at least 5 percent, calculated by dividing— the number of metric tons of carbon dioxide equivalent greenhouse gas emissions (including direct emissions from fuel combustion, process emissions, and indirect emissions from the generation of electricity used to produce the output of the sector) of the sector based on data described in subparagraph (C), multiplied by the applicable rate in section 9901(b)(2), by the value of the shipments of the sector, based on data described in subparagraph (C). As determined by the Secretary, an industrial sector meets the criteria of this clause if the industrial sector has a trade intensity of at least 15 percent, calculated by dividing— the value of the total imports and exports of the sector, by the value of the shipments plus the value of imports of the sector, based on data described in subparagraph (C). For purposes of this section, the Secretary shall— aggregate data for the beneficiation or other processing (including agglomeration) of metal ores, including iron and copper ores, soda ash, or phosphate with subsequent steps in the process of metal and phosphate manufacturing, regardless of the NAICS code under which the activity is classified, and aggregate data for the manufacturing of steel with the manufacturing of steel pipe and tube made from purchased steel in a nonintegrated process. The Secretary shall determine the value of shipments under this subsection from data from the United States Census Annual Survey of Manufacturers. The Secretary shall use the average of data from the most recent 3 years for which the data are available. If data described in subclause
(II)are unavailable, the Secretary shall make a determination based on— data from the most detailed industrial classification level of the Manufacturing Energy Consumption Survey of the Energy Information Administration, and data from the most recent Economic Census of the United States. If data from the Manufacturing Energy Consumption Survey or Economic Census are unavailable for any sector at the 6-digit classification level in the NAICS, the Secretary may use available Manufacturing Energy Consumption Survey or Economic Census data pertaining to a broader industrial category classified in the NAICS. If data relating to the beneficiation or other processing (including agglomeration) of metal ores (including iron and copper ores, soda ash, or phosphate) are not available from the specified data sources, the Secretary— shall use the best available Federal or State government data, and may use, to the extent necessary, representative data submitted by entities that perform the beneficiation or other processing (including agglomeration), in making a determination. The Secretary shall base the value of imports and exports under this subsection on United States International Trade Commission data. The Secretary shall use the average of data from the three most recent years for which the data are available. If data from the United States International Trade Commission are unavailable for any sector at the 6-digit classification level in the NAICS, the Secretary may use United States International Trade Commission data pertaining to a broader industrial category classified in the NAICS. The Secretary shall round the greenhouse gas intensity and trade intensity percentages under subparagraph
(A)to the nearest whole number. When calculating the metric tons of carbon dioxide equivalent greenhouse gas emissions for each sector under subparagraph (A)(ii)(I), the Secretary— shall use the best available data from the three most recent years for which the data are available, and may, to the extent necessary with respect to a sector, use economic and engineering models and the best available information on technology performance levels for the sector. The Secretary shall designate as liable for the border tax adjustment rate on imported products under this part an industrial sector that— met the greenhouse gas intensity criteria in paragraph (1)(A)(ii) as of the date of promulgation of the rule under paragraph (1), and meets the trade intensity criteria established under paragraph (1)(A)(iii), using data sources described in paragraph (1)(C) from any year after the passage of this Act. In addition to designation under subparagraph (A), the owner or operator of an entity or a group of entities that collectively produce not less than 80 percent of the average annual value of shipments from within the sector of the group consistent with subclause (I), that manufacture similar products in an industrial sector may petition the Secretary to designate as eligible industrial sectors under this part an entity or a group of entities that— represent a sector using a standard product classification, and meet the respective import and/or export eligibility criteria in paragraph (1)(A)(i). In making a determination under this subparagraph, the Secretary shall consider— data submitted by the petitioner, data solicited by the Secretary from other entities in the sector, and data specified in paragraph (1)(C). Except as provided in subclause (II), the Secretary shall determine an entity or group of entities to be a subsector of a 6-digit section of the NAICS code based only on the products manufactured and not the industrial process by which the products are manufactured. The Secretary may determine an entity or group of entities that manufacture a product from primarily virgin material to be a separate subsector from another entity or group of entities that manufacture the same product primarily from recycled material. In determining whether to designate a sector or subsector as an eligible industrial sector under this subparagraph, the Secretary shall use the most recent data available from the sources described in paragraph (1)(C), rather than the data from the years specified in paragraph (1)(C), to determine the trade intensity of the sector or subsector, but only for determining the trade intensity. The Secretary shall take final action on a petition described in this subparagraph not later than 180 days after the date the completed petition is received by the Secretary. If, as determined by the Secretary, an industrial sector or a covered good within the sector is no longer liable to be designated under this section, the Commissioner shall cease to apply the border tax adjustment on the relevant covered goods with effect from January 1 of the following year. The Secretary, with the concurrence of the Commissioner, shall, no later than the date that is one year after the date of the enactment of this section, promulgate regulations— establishing the products which are liable for, and requiring payment of, the border tax adjustment rate, establishing a general methodology for calculating the level of the border tax adjustment rate that a domestic importer of any covered good must submit and the rebate that an exporter will receive, establishing an administrative process whereby any determination by the Secretary under this subsection may be appealed, exempting from this section products that originate from— any country that the United Nations has identified as among the least developed of developing countries, or any country that the President has determined to be responsible for less than 0.5 percent of total global greenhouse gas emissions and less than 5 percent of global production in the eligible industrial sector, specifying the procedures that the Commissioner will apply for the declaration and entry of covered goods with respect to the eligible industrial sector into the customs territory of the United States, and establishing procedures that prevent circumvention of the carbon tax liability for covered goods that are manufactured or processed in more than one foreign country. The President may elect not to levy the border tax adjustment for an eligible industrial sector or for specific products within that sector if the President determines and certifies to Congress that the program would not be in the national interest, economic interest, or environmental interest of the United States. . The amendments made by this section shall apply to emissions after the later of December 31, 2023, and the date that is one year after the date regulations are promulgated under section 9914 of the Internal Revenue Code of 1986.