On January 25, House Speaker Nancy Pelosi (D-CA) and the Chairs of several House Committees introduced the America Creating Opportunities for Manufacturing Pre-Eminence in Technology and Economic Strength (America COMPETES) Act of 2022. This comprehensive legislation is a response to the Senate’s U.S. Innovation and Competition Act (USICA), which passed the Senate with bipartisan support in June. Both packages are designed to increase American competitiveness in critical technologies, like semiconductors; build long-term incentive mechanisms to increase innovation; strengthen supply chains; and re-orient diplomatic posture to address China’s rise, with a significant focus on multilateral and bilateral engagement.
The America COMPETES Act is a combination of several House Committee priorities – many of which have already passed the House or enjoy bipartisan support on their own. Notably, USICA, which Sen. Todd Young (R-IN) and Majority Leader Chuck Schumer (D-NY) led through the Senate, passed by a vote of 68-32.
The America COMPETES Act has 12 divisions: Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Fund; Research and Innovation; Energy and Commerce; Foreign Affairs; Oversight and Reform; Homeland Security; Financial Services; Natural Resources; Judiciary; Education and Labor; Matters Relating to Trade; and Transportation and Infrastructure.
One of the more contentious private sector-related provisions in the America COMPETES Act is a so-called reverse-CFIUS, creating a whole-of-government screening process for outbound investments and the offshoring of critical capacities and supply chains to ensure the United States can quickly detect supply chain vulnerabilities, with a mechanism to compel divestment if a determination is made about risks to national security, economic interests, and crisis preparedness. The legislation provides $52 billion in funding for incentives for domestic manufacturing of semiconductors and requires several reports on Chinese market activity in critical sectors, including in semiconductor manufacturing. It also requires periodic reports from Commerce’s Bureau of Industry and Security to Congress on licenses issued for exports by U.S. firms to Chinese companies on the Commerce Entity List.
There are also still several differences that need to be addressed between USICA and America COMPETES, including regarding programs at the National Science Foundation (NSF) and provisions restricting collaborations on research. In these cases, the Senate prefers spending more on NSF and stricter regulations on research cooperation. Additionally, the House version contains a significant focus on climate change, which Republicans in both the House and Senate are likely to oppose.
While President Biden released a statement supporting the legislation, Republicans in the House, including Minority Leader Kevin McCarthy (R-CA), House Foreign Affairs Ranking Member Michael McCaul (R-CA), and the Republican Study Committee, have all opposed the bill. This will make it challenging for the House to conference its largely partisan bill with the Senate’s bipartisan package, all in the midst of increasing partisanship in Congress leading into the 2022 midterm elections. This lack of House Republican support could slow down the conference process between the House and Senate versions of the bill.
DIVISION A – Creating Helpful Incentives to Produce Semiconductors (CHIPS) For America Fund
The CHIPS For America Fund sets aside $50 billion to incentivize investments in facilities in the U.S. for fabrication, assembly, testing, or advanced packaging of semiconductors and to support semiconductor research and development (R&D); $2 billion for the Defense Department for specific investments in the industry; and $500 million for international information and communications technology security and semiconductor supply chain activities, including to support the development and adoption of secure and trusted telecommunications technologies, semiconductors, semiconductors supply chains, and other emerging technologies. It expands eligibility for incentives to upstream equipment and material suppliers.
As semiconductor supply chain challenges have persisted throughout the pandemic and given the leverage China has over base materials in the supply chain, the U.S. has prioritized expanding domestic semiconductor manufacturing to allay both competitiveness and security concerns. The CHIPS For America Fund fully funds the CHIPS Act, passed in December 2020, which is designed to help rebuild U.S. semiconductor manufacturing capacity and advance U.S. semiconductor research and innovation, through new partnerships among industry, Federal science agencies, national labs, and academia.
DIVISION B – Research and Innovation
This division sets aside significant resources to the Department of Energy (DOE), the National Institute of Standards and Technology (NIST), and the National Science Foundation (NSF), all for modernization and innovation. Specifically, this division emphasizes support and resources for DOE’s Office of Science, with significant investments in addressing climate change and using DOE to support research to advance the next generation of energy storage, solar, hydrogen, critical materials, fusion energy, manufacturing, carbon removal, and bioenergy technologies, among other areas. It also marshals DOE support for nanoscience centers and for research in emerging areas, like quantum information science and AI.
It also supports NIST efforts to enhance industries of the future, including quantum, AI, cybersecurity, privacy, bioengineering, advanced communications, and semiconductors. It authorizes an increase in funding for the Hollings Manufacturing Extension Partnership program, including to address the resilience of domestic supply chains, and authorizes two competitively awarded Manufacturing USA Institutes.
This division also creates a new directorate within the NSF: the Directorate for Science and Engineering Solutions (SES), designed to accelerate R&D to address climate change, environmental sustainability, global competitiveness, cybersecurity, and other societal challenges. It increases overall funding for the NSF and directs investment in critical research infrastructure.
Other provisions of this division increase STEM education opportunities; establish a National Engineering Biology Research and Development Initiative; enable easier partnerships between DOE and academic institutions to share research; and establish a regional technology and innovation hub program at Commerce – incentivizing collaborative partnerships between local governments, colleges, and universities; private industry; non-profits; and community organizations.
DIVISION C – Energy and Commerce
This division works to strengthen supply chains, invests in solar manufacturing and enhancing grid resilience, improves medical product supply chains and strengthens strategic stockpile, and invests in innovations for the wireless supply chain and network security. It establishes a new office, the Supply Chain Resiliency and Crisis Response Office, within Commerce, designed to lead the government-wide effort to strengthen supply chains. It is charged with monitoring supply chains, supporting the availability of critical goods, preparing for and responding to supply chain shocks, reducing reliance on critical goods from countries of concern, supporting job creation, and promoting economic health and competitiveness. The bill provides $500 million for the office for supply chain mapping and monitoring and $500 million to coordinate with stakeholders and incorporate industry expertise to identify approaches.
The division also authorizes $45 billion for grants, loans, and loan guarantees to support supply chain resilience and manufacturing of critical goods, industrial equipment, and manufacturing technology. These funds can be used to support acquisitions or manufacturing of critical goods and technology, construction of critical infrastructure, relocation from a country of concern, and establishment of diverse and secure sources and locations for the production of critical goods.
Additionally, this division establishes a $1.5 billion supply chain manufacturing pilot to enhance medical supply chain elasticity and maintain domestic reserves of critical medical supplies and a $10.5 billion pilot that awards grants to states to expand or maintain a strategic stockpile of commercially available drugs, medical equipment, PPE, and other essential products in the event of a public health emergency.
This division also appropriates $1.5 billion for the Public Wireless Supply Chain Innovation Fund to deploy Open Radio Access Network (Open RAN/O-RAN). It establishes an advisory council for the FCC to increase security, reliability, and interoperability of communications networks; identifies and develops solutions for potential emerging issues with 6G networks; promotes U.S. wireless leadership abroad; and works to ensure next-generation mobile wireless networks and technologies are safe and secure from foreign adversaries by funding the deployment of cutting-edge technology, enhancing the competitiveness of trusted suppliers of information and communication technology, and supporting U.S. thought leadership.
DIVISION D – Foreign Affairs
This division is very similar to HFAC Chair Greg Meeks’s (D-NY) Ensuring American Global Leadership and Engagement Act. It is designed to reposition U.S. diplomatic posture towards the Indo-Pacific, emphasizing multilateral engagement to address China. It invests in U.S. competitiveness, alliances and partnerships, international security, and promoting U.S. values, economic statecraft, and a sustainable future.
This division authorizes $90 million over six years for a State Department program that allows for U.S. Embassies to hire contracts to assist interested U.S. persons and businesses with supply chain management issues related to China. It authorizes $375 million for the Infrastructure Transaction and Assistance Network and authorizes the Secretary of State to coordinate with USAID to advance the development of sustainable, transparent, and high-quality infrastructure and to help boost the capacity of partner countries.
It devotes several provisions to signal U.S. support for Taiwan, including recognizing Taiwan as a vital part of the U.S. approach to the Indo-Pacific, reaffirming U.S. policy of deterring military or other coercive acts against Taiwan, and amending the TAIPEI Act of 2019 by adding that UN recognition of the PRC did not address the issue of Taiwan’s representation at the UN or any related organizations nor take a position on the relationship between the PRC and Taiwan or Taiwan’s sovereignty.
It authorizes $2 billion under the Foreign Assistance Act for the Indo-Pacific region and $1.25 billion for diplomatic engagement to increase resources and funding of activities in the Indo-Pacific. It authorizes $500 million for the U.S. Agency for Global Media to combat PRC disinformation and to invest in technology that subverts censorship. It establishes the Liu Xiaobo Fund for Study of the Chinese Language to counter PRC-backed Confucius Institutes and requires reports on the origins of the COVID-19 pandemic and efforts to address fentanyl trafficking.
The bill authorizes $225 million over five years for international military education and training assistance, re-asserts U.S. policy with respect to Chinese territorial claims in the South China sea, and recommends the Secretary of State expand measures under the U.S. Conventional Arms Transfer Policy to provide capabilities to allies and partners in the Indo-Pacific region.
It works to counter PRC influence in multilateral organizations through increasing resources to encourage Americans to participate and by advocating for increases in opportunities for employment of Americans.
The bill contains regional strategies to bolster U.S. power, including: working to counter Chinese influence and promote good governance, human rights, and the rule of law in Latin America; enhancing transatlantic cooperation to foster private sector-led development and provide market-based alternatives to the PRC’s state-directed financing in emerging markets; requires reports and strategies to increase U.S. competitiveness in Africa, the Middle East, and North Africa; requires consideration of climate disruptions in national security planning and directs the development of a strategy for protecting national interests in the Arctic; increases engagement with Oceania; and requires efforts to build capacity for law enforcement, security, emergency response, health care, and climate resilience in the Pacific Islands.
This division also focuses the most on ideological differences the U.S. has with China. It criticizes the National Security Law in Hong Kong, authorizes $10 million for State’s Bureau of Democracy, Human Rights, and Labor to promote democracy in Hong Kong, provides temporary protective status and easier means of immigration for residents of Hong Kong to migrate to the U.S., condemns the ongoing atrocities in Xinjiang, increases ease for residents of Xinjiang to be granted special refugee status, recommends sharing information and sanctions-related decision making with like-minded governments, and imposes sanctions based on systematic rape, coercive abortion, forced sterilization, or involuntary contraceptive implantation policies and practices in Xinjiang. Additionally, it requires Commerce to periodically review export control lists for items with critical capabilities to enable human rights abuses.
It establishes an Anti-Corruption Action Fund at the Treasury Department, funded by penalties under the Foreign Corrupt Practices Act. It recommends exposing detrimental aspects of the PRC’s nonmarket policies, providing options for those affected by unreasonable and discriminatory industrial policies, ensuring that PRC companies face costs and consequences for anticompetitive behavior, and strengthening the protection of critical technology and sensitive data.
Finally, this division works to balance accountability and cooperation with China to mitigate greenhouse gas emissions, develop and deploy clean energy generation technologies, and integrate sustainable adaptation solutions, while working with allies to hold China accountable for failing to meet these obligations. It authorizes relevant agency heads to co-finance infrastructure, resilience, and environmental adaptation projects that advance the development objectives of the United States overseas and provide viable alternatives to projects that would otherwise be included within China’s Belt and Road Initiative. It requires each mission to have a climate diplomacy strategy and creates Climate Change Officer positions within the Foreign Service responsible for convening stakeholders and supporting U.S. engagement on climate change. It also authorizes $4 billion for FY22 and FY23 each for the Green Climate Fund.
DIVISION E – Oversight and Reform
This division includes the Artificial Intelligence in Counterterrorism Oversight Enhancement Act, which is designed to increase oversight and strengthen governance related to the use of AI by giving the Privacy and Civil Liberties Oversight Board access to AI-enabled programs used by federal agencies. It also includes the Federal Rotational Cyber Workforce Program, which is intended to improve the ability to respond to cyberattacks by creating a workforce of cybersecurity professionals at federal agencies and creating valuable career development opportunities to increase recruiting and retention efforts.
DIVISION F – Homeland Security
This division works to increase Homeland Security supply chain security, increase requirements for U.S. manufacturing for contractors, and enhances opportunities for small businesses to compete in the Federal marketplace.
To strengthen supply chains in unmanned aerial security, this division prohibits DHS from operating, procuring, or providing financial assistance for an unmanned aircraft system that is manufactured in a covered foreign country; uses devices manufactured in a foreign country; uses a ground control system or operating software developed in a foreign covered country; or uses network connectivity or data storage located in a covered foreign country or by a company domiciled in a covered foreign country. It also imposes criteria on procurement of uniforms and other clothing and protective equipment, ensuring at least a third of funds go to goods manufactured or supplied by U.S. small businesses and that each contractor is in compliance with quality control standards.
Additionally, this division bolsters cybersecurity within DHS by issuing guidance for contractors providing new information and communications technology or services contracts for DHS and requiring contractors to certify that each item on a submitted bill of materials (software and hardware) is free from all known cyber vulnerabilities and defects affecting the security of the end product or service supplied to DHS.
Finally, this division creates a program where a large contractor or “mentor firm” enters into an agreement with a protégé firm for the purpose of assisting them in competing for prime contracts and subcontracts with the intention of increasing small business participation in Federal contracting opportunities.
DIVISION G – Financial Services
This division pushes back on Chinese anti-competitive and unfair actions in international financial systems and strengthens protections for investors and U.S. markets. It provides authorities to increase domestic vaccine production and streamline engagement between the federal government, private sector, and state, local, and tribal governments to ensure all Americans have access to PPE and other medical supplies.
As established by the Holding Foreign Companies Accountable Act (HFCAA) and the SEC, Chinese companies in violation of Public Company Accounting Oversight Board (PCAOB) audit reporting requirements for three consecutive years would be delisted from U.S. exchanges. This division shortens that grace period of compliance from three to two years, which would impact the nearly 250 Chinese companies listed on U.S. exchanges that do not permit PCAOB audits. Notably, USICA did not include this change.
Additionally, this division works to counter World Bank and Asian Development Bank assistance to the PRC until it is certified that the PRC participates in debt relief initiatives on terms comparable to other G-20 governments. It also works to combat ransomware attacks by modernizing the Treasury Department’s Financial Crimes Enforcement Network authority by adding a measure that allows it to pursue bad actors, like those laundering the proceeds of Chinese ransomware, or are declared a Primary Money Laundering Concern for sanctions evasion.
This division would require congressional briefings on Chinese economic, commercial, and financial connections to Afghanistan, including illicit financial networks involved in narcotics trafficking, official corruption, natural resource exploitation, and terrorist networks.
This division would require the U.S. to vote against any project that includes co-financing from the Asian Infrastructure Investment Bank until it provides grants and assistance on terms similar to those provided by the World Bank’s International Development Association. It would require a report on risks to U.S. financial stability and the global economy from the PRC and direct Treasury to work with U.S. representatives at the IMF and World Bank to ease unsustainable debt burdens of developing countries.
DIVISION H – Natural Resources
The division prioritizes environmental and labor standards – protecting oceans, wildlife, workers, and consumers – which is crucial to the U.S. role as a global leader in international trade and competitiveness. It takes steps to combat illegal fishing and forced labor by authorizing $20 million per year through FY 2026 to combat human trafficking through seafood import monitoring and strengthening international fisheries management; auditing imports of countries identified as having trafficking; and revoking U.S. port privileges for illegal or unreported fishing. It directs analysis, planning, and cooperation to expand Arctic mammal rescue and response capabilities and creates a data platform for the deaths of marine mammals.
The division reauthorizes and amends the Coral Reef Conservation Act to better address climate change, ecosystem loss, disease outbreaks, and other threats to corals, and it establishes new programs and opportunities for coral research, conservation, and restoration. It authorizes grants for promoting the consumption of local or domestic, climate-friendly seafood products. It adds an assessment of ocean and coastal mapping, and it expands the U.S. Fish and Wildlife Service law enforcement attaché program to 50 attachés with $150 million authorized for FY2022 through FY2030. Additionally, the division addresses threats from wildlife disease and invasive species, prohibits the transportation of injurious species across state lines, and prohibits the domestic sale of shark fins.
DIVISION I – Judiciary
This division creates a new classification of “W” nonimmigrants: W-1 – Entrepreneurs with an ownership interest in a start-up entity; W-2 – Essential employees of a start-up entity; and W-3 – Spouses and children of W-1 or W-2 nonimmigrants. It directs the DHS Secretary to classify an individual as a W-1 nonimmigrant for a three-year period if the individual owns interest of 10% or more of a start-up entity; will play a central and active role in the management or operations of the start-up entity; possesses knowledge, skills, or experience to substantially assist the start-up with growth and success of the business; and the start-up entity received at least $250,000 in qualifying investments from one or more qualified investors or at least $100,000 in qualifying government awards or grants. This division directs the DHS Secretary to establish procedures for aliens with ownership interest in a start-up to self-petition for lawful permanent resident status as an immigrant entrepreneur. Additionally, this division would use application fees for W-1 nonimmigrant and immigrant entrepreneur status to fund STEM scholarships for low-income U.S. students.
Beyond these start-up visas, this division requires the Director of the Patent and Trademark Office to collect on a voluntary basis information on gender, race, military or veteran status, and any other demographic category. This information is confidential and separate from patent information and must be reported annually broken down by demographics, technology class of the invention, and country and state, with an anonymized version being publicly released.
This division would amend the Trademark Act of 1946 to provide for contributory liability for e-commerce platforms for sales of counterfeit products, unless certain best practices are followed by the platform. It also increases filing fees on mergers valued over $1 billion and reduces filing fees for mergers valued under $500,000, with filing fees linked to the Consumer Price Index to prevent static fees. Additionally, this division appropriates $252 million for the antitrust division in DOJ and $418 million for the FTC for FY22.
DIVISION J – Education and Labor
This division requires a review of Confucius Institutes to ensure they protect academic freedom and for institutions to post agreements with Confucius Institutes publicly. Institutions that fail to comply would lose access to federal grants provided under the Higher Education Act. Additionally, it updates requirements for reporting of foreign gifts and contracts, including a new reporting requirement for faculty and staff that receive gifts or enter into a contract with a foreign entity of which the value is $50,000 or more.
This division authorizes the Improving Minority Participation and Careers Telecommunications Act (IMPACT), a telecom workforce training program, and authorizes $100 million over 6 years for HBCUs, Tribal colleges and universities, and minority serving institutions to develop job training programs in partnership with labor organizations, industry, and registered apprenticeships. It authorizes a new grant program to improve U.S. global competitiveness by increasing equitable access to computer science education and computational thinking skills for students in elementary and secondary schools and authorizes a new grant program to support equitable access to postsecondary STEM pathways that expose students to high-quality STEM coursework, reduce college costs, and improve postsecondary credit transfers.
DIVISION K – Trade
This division consists of several bills: the Trade Adjustment Assistance Modernization Act of 2021; the Generalized System of Preferences and Miscellaneous Tariff Bill Act of 2021; the Import Security and Fairness Act; the National Critical Capabilities Defense Act; and the Level the Playing Field Act 2.0.
Notably, the National Critical Capabilities Defense Act is contentious within the private sector, as it would create a so-called “reverse-CFIUS” – a body to screen outbound investments and the offshoring of critical capacities and supply chains and provide authorities for the President to prevent these transactions.
The Trade Adjustment Assistance (TAA) Modernization Act enhances all TAA programs. In TAA for Workers, it increases funding to $1 billion a year, increases allowances for job search and relocations to $2,000 and establishes a new $2,000 childcare allowance, extends income support for up to 6 months for workers who complete training during periods of heightened unemployment, and requires new outreach to historically underserved communities. This bill also establishes the TAA for Communities Program with a separate pool of funding within Commerce’s Economic Development Administration for trade-affected communities, which assists communities in developing a plan for applying to a suite of existing grants and other funding opportunities. It provides $9 billion over seven years for TAA for Community Colleges. TAA for Firms expands eligibility and tightens deadlines related to the certification process, improves outreach to underserved communities, and reauthorizes the program for seven years, providing $50 billion per year. Finally, TAA for Farmers increases support amounts for short-term and long-term business plans and improves USDA outreach to small and historically disadvantaged farmers.
The Generalized System of Preferences (GSP) and Miscellaneous Tariff Bill Act modernizes the GSP by adding environmental criteria, updating labor criteria, and adding criteria on human rights, rule of law, anti-corruption, and equitable economic development. It adds an annual country eligibility review and transparency requirement. The Miscellaneous Tariff Bill (MTB) eliminates or reduces duties on certain eligible U.S. imports through December 31, 2023, retroactive for 4 months, to support domestic manufacturers. It also reauthorizes the American Manufacturing Competitiveness Act of 2016 for an additional two MTB cycles.
The Import Security and Fairness Act works to close a loophole that allows imports valued under $800 to come into the United States without paying duties, taxes, or fees – called the de minimis threshold. This division would prohibit goods from countries that are both non-market economies and on the U.S. Trade Representative’s Priority Watch List from benefiting from this threshold. This division also would require U.S. Customs and Border Protection to collect more information on de minimis shipments and prohibit importers that have been suspended or debarred from being able to use de minimis.
The Level the Playing Field Act 2.0 works to strengthen U.S. trade remedy laws to address China’s anti-free market trade practices, which can distort global markets. This division creates a new successive Anti-Dumping/Countervailing Duty investigation to combat repeat offenders by making it easier for petitioners to bring new cases when production moves to another country. It authorizes Commerce to apply countervailing duties to subsidies provided by a government to a company operating in a different country and imposes statutory requirements for anti-circumvention inquiries to clarify the process and timeline.
DIVISION L – Transportation and Infrastructure
This division establishes the Rebuilding Economies and Creating Opportunities for More People to Excel (RECOMPETE) Pilot Program and authorizes $4 billion to run the program through the Economic Development Agency. This pilot program will provide predevelopment and planning grants and 10-year place-based economic development grants to persistently distressed local labor markets, local communities, and Tribes for use in developing and implementing economic development strategies and supporting long-term economic growth.