Metalcasters' Message to Congress
Last month, leaders from foundries of various sizes, processes, and specialties, gathered in Washington, D.C. to give their united voice to advocate for the support of important legislation and sensible regulations that will help bolster the metalcasting industry. (See sidebar for more information on the AFS Government Affairs Fly-In.) Following are the main issues AFS members are advocating for—both on the Hill last month and throughout the year from their home base.
Addressing Regulations Impacting U.S. Metalcasters
Metalcasters continue to make critical investments to effectively reduce air emissions. Today’s processes are cleaner and greener than at any other time in history. Yet, new proposed regulations from the federal government will work against these efforts instead of bolstering them—stymying progress and destabilizing economic growth at a time when both are more important than ever.
The U.S. Environmental Protection Agency (EPA) has proposed a new rule that would impose stricter air standards for fine particulate matter, known as PM2.5 National Ambient Air Quality Standard (NAAQS), on U.S. businesses. Specifically, EPA proposes to lower the current standard from 12.0 ug/m3 to a range of 9.0 ug/m3 to 10.0 ug/m3. EPA has also solicited comment on revising the standard to as low as 8.0 µg/m3.
These new standards are at or below background levels of PM2.5 in many areas, leaving facilities with little or no room for compliance with the new standards. In addition, even with the removal of all PM2.5 emissions from stationary sources like metalcasting operations, the new PM2.5 standards could not be attained in many areas due to PM2.5 emissions from naturally occurring sources such as wildfire, unpaved roads, and bare agricultural soils.
A new PM2.5 rule could be economically devastating for all industry sectors, including metalcasters. If the standard is set at 9 µg/m3 or below, approximately 50% of counties nationwide could be designated as nonattainment areas for PM2.5 and subject to stringent regulatory requirements.
Facilities located in nonattainment areas could face further restrictions on production, bans on new facilities or expansions of existing facilities, stringent new emission limits for PM2.5, and increased regulatory oversight on facility operations, as well as air permits. These restrictions would impose significant burdens on facilities located in nonattainment areas and do little or nothing to achieve attainment due to the uncontrolled nonpoint sources of PM2.5.
A lower PM2.5 standard will also:
- Make permitting more challenging. Manufacturers will be required to demonstrate further reductions of PM2.5 emissions for air permit renewals, revisions for plant expansions and permits for new manufacturing facilities—even those reductions will do little to attain the new PM2.5 standards.
- Make it more difficult to build and site new power generation assets, especially in urban areas that have a larger power demand. Grid reliability may be impacted as fossil fuel-fired units retire and it becomes more difficult and time-consuming to permit and build new power generation facilities.
- Hinder onshoring. The proposal will result in encouraging manufacturing abroad—which is less clean than manufacturing in the U.S.
A final decision by EPA on where to set the limit is expected by this fall.
At the June AFS Fly-in, metalcasters requested their Congressional representatives to urge EPA to reconsider its proposal and to oppose new PM2.5 regulations. Their main points included:
- Protecting metalcasters’ ability to grow and invest in innovative, modern technologies that address air quality and reduce emissions, while also protecting U.S. manufacturing jobs and growing the economy, should be a top priority.
- As an industry vital to the nation’s national security and industrial base, creating more onerous standards and additional permitting challenges is the wrong way to go.
- EPA’s proposal undercuts U.S. competitiveness and will not further the goal of global emissions reduction
Strengthen U.S. Trade Laws and End Offshoring Loopholes
As Congress debates legislation to strengthen U.S. trade laws, it is critical to consider ways to effectively address the growing challenge posed by foreign producers and U.S. importers that circumvent laws to the detriment of American workers and industries.
American manufacturers devote extensive time and resources to obtain remedies under various trade laws designed to level the playing field in the marketplace. However, the offending parties frequently begin unlawful efforts to evade those orders almost immediately after the entry of an order.
Although the Trade Facilitation and Trade Enforcement Act of 2015 granted U.S. Customs and Border Protection (CBP) new tools to combat such evasion, such as Enforce and Protect Act (EAPA) investigations, those tools have proven inadequate in the face of determined evasion efforts. CBP may only pursue EAPA investigations against the importer of record, not its affiliates, related persons, or successors.
Bad actors have become increasingly adept at forming multiple shell companies with no assets to serve as the importers of record, often with the same principals and affiliates. This sets up a continuing game of “whack-a-mole” that CBP and the Department of Justice, with their limited resources, are inadequately equipped to play.
Bipartisan legislation, the Fighting Trade Cheats Act, was recently introduced in both chambers, to hold accountable bad actors that engage in customs fraud. It increases the penalties for repeat offenders and supplements Customs’ resources dedicated to the number and frequency of evasion efforts.
Furthermore, it allows U.S. manufacturers to sue foreign producers for customs fraud.
In addition, the Federal Highway Administration’s (FHWA) continued use of a 1983 general applicability waiver of manufactured products (which includes nonferrous metal castings) under its Buy America waiver authorities has exempted products from Buy America restrictions (except for iron and steel components) for over 40 years.
Despite explicit statutory language in Section 165 of the 1982 Surface Transportation Assistance Act (STAA) and again in the 2021 Bipartisan Infrastructure Law (BIL) directing the agency to apply a domestic content preference to manufactured products, FHWA has continued to use this offshoring loophole. In recent comments to the agency, we urged FHWA to discontinue immediately its general waiver of Buy America for manufactured products. The continued existence of this waiver discourages capital investments in U.S. manufacturing and represents a missed opportunity to create more resilient domestic supply chains.
At the Fly-In, attendees urged lawmakers to co-sponsor and support passage of the Fighting Trade Cheats Act (H.R. 2667/ S. 805). This bipartisan bill aims to strengthen trade remedy laws by holding China and other bad actors accountable for unfair trade practices by:
- Increasing penalties for bad actors engaging in customs fraud and gross negligence.
- Providing a new five-year prohibition on importing products from known violators.
- Improving enforcement regarding customs fraud.
- Allowing private companies to sue foreign producers that have been injured by customs fraud
Metalcasters are also urging for the U.S. Department of Transportation’s Federal Highway Administration (FHWA) discontinued use of its 1983 general waiver for manufactured products and require that all manufactured products used in FHWA projects be “produced in the United States,” in accordance with the new Build America, Buy America (BABA) provisions of the Bipartisan Infrastructure Law.
Support Tax Policies That Promote Investment, Development, and Expansion
A competitive tax system is critical to growth of the U.S. manufacturing base. Higher income taxes reduce a company’s cash flow, thereby shrinking the amount of money available to expand, purchase equipment, hire more workers, and reduce debt. The passage of the 2017 Tax Cuts and Jobs Act (TCJA) has allowed manufacturers and U.S. metalcasters to make significant investments in their plants and employees. However, significant tax law changes embedded in the TCJA are already leaving many metalcasters and their suppliers with higher federal income tax bills.
As several key provisions of the 2017 tax reform legislation are set to expire at the end of 2025, action to ensure the competitiveness of our nation’s tax system is critical to providing the stability U.S. metalcasters, small and large, need to continue to invest, innovate, and grow. Rolling back these key pro-growth provisions costs jobs, slows the economy, favors our competitors abroad, and discourages investment in the United States.
Congress can provide much-needed relief and certainty for metalcasters by working to improve and make permanent the following pro-growth provisions in the tax code that are set to expire.
- Ensure that key incentives for capital equipment purchases remain in the tax code.
- Fix provisions of the tax law that make research more expensive.
- Make permanent and expand the 20% deduction for business income earned through a pass-through entity.
- Permanently repeal the federal estate tax.
- Preserve business interest deductibility.
If Congress does not reverse course, these changes will lead to significantly higher tax burdens—particularly for small and medium-sized metalcasters. That means fewer jobs and opportunities for manufacturing workers and their families.
AFS is urging lawmakers to co-sponsor and support passage of the following pro-growth tax bills to boost U.S. manufacturing competitiveness and innovation:
- Accelerate Long-Term Investment Growth Now (ALIGN) Act (H.R. 2406 / S. 1117) that makes permanent the 100% bonus depreciation provision of the 2017 TCJA that allowed businesses to immediately and fully deduct costs associated with the purchase of capital assets, including manufacturing equipment. Beginning this year, businesses are able to deduct only 80% of their capital investments, which will fall to 60% in 2024, and then 40% in 2025, before reverting to pre-reform depreciation rules in 2026. As a capital-intensive industry, limiting this critical deduction for capital investment will reduce investments, resulting in fewer jobs, lower wages, and slower economic growth.
Main Street Tax Certainty Act
- (S. 1706) that makes the Section 199A Deduction for Pass-Through Businesses Permanent. Metalcasters organized as S-Corporations have benefited from this 20% pass-through business tax deduction, using the funds to invest in employees, benefits, and their plants. Unfortunately, this deduction implemented in the TCJA will expire at the end of 2025 and would result in a massive tax hike for metalcasters that are structured as pass-through entities and would face a competitive disadvantage to companies organized as C-Corporations.
- American Innovation and R&D Competitiveness Act (H.R. 2673) & American Innovation and Jobs Act (S. 866) that restores the immediate deductibility of R&D expenses. As of January 2022, manufacturers can no longer deduct the full value of R&D investments made in the first year, and instead use a five-year depreciation schedule, making R&D significantly more costly to conduct in the U.S. The U.S. is one of just two developed nations that requires the amortization of R&D expenses and given that China actually provides a 200% super-deduction for R&D investments, it simply makes no sense to impose this limitation on manufacturers here at home. Failing to reverse this change will cost well-paying jobs and reduce future innovation-directed R&D.
- Death Tax Repeal Act (S. 1108) that permanently repeals the federal estate tax and ends this purely punitive tax. The TCJA increased the estate tax exemption from $5 million to $10 million, but that tax relief will expire in 2025, without congressional action. This increases uncertainty and planning costs for family-owned businesses. While AFS supports making this important estate tax relief permanent, a better outcome would be full repeal. The value of family-owned foundries is usually tied to illiquid assets such as land, buildings, and equipment. When estate taxes on a family business exceed cash and other liquid assets, surviving family partners often are forced to sell buildings or equipment needed to keep their businesses running.
Fix the Broken Permitting Process
Some of the biggest obstacles preventing U.S. manufacturers and metalcasters—and therefore the entire American economy—from reaching their full potential are the permitting delays, red tape, and complicated bureaucracy that have plagued the country for decades. Today, though, as the U.S. works to modernize its infrastructure and shore up supply chains, the need for reform is more urgent than ever. Manufacturers rely on roads, rails, airports, and ports for everything from employees’ access to facilities to getting raw materials to shop floors and finished products to customers.
Streamlining the nation’s permitting process is one of the key actions that Congress and the administration can take this year to bolster the economy, American workers, and manufacturers. According to government data, it now takes an average of 4.5 years for a project to obtain a federal permit. For roads or bridges, the story is even worse—those projects take an average of 7.4 years. Public transit? 5.3 years.
As part of an energy-intensive industry, metalcasters remain concerned that even projects to connect renewable energy to the grid by building electricity transmission infrastructure are subject to delays, with some projects taking a decade or more. Renewable and other emerging energy technologies face similar, steep permitting challenges.
An important first step in permitting reform were provisions included in the debt ceiling legislation signed into law on June 3. It does contain the first meaningful updates to the National Environmental Policy Act (NEPA) in more than 40 years, paving the way to get some shovels in the ground faster to rebuild America’s infrastructure.
While the legislation in the debt ceiling bill sets two-year time limits for environmental impact statements, and one year for more modest “environmental assessments,” there is a catch: agencies need only “consult” with permit applicants in the event those deadlines will be missed. What form such consultations will take is unknown, but it creates a significant opportunity for agencies to slow-walk the process. The debt deal includes pages of limits on NEPA documents, but they do not apply to appendices or speak to whether the analysis of a potential impact is sufficient.
Critical permitting reform provisions were left out of the debt ceiling deal that need to be enacted, including, among others:
Predictability—Project developers and financers must have an appropriate level of certainty regarding the scope and timeline for project reviews, including
any related judicial review.
- Litigation Reform—It is critically important to limit judicial review vulnerabilities under NEPA. This could be everything from limiting the statute of limitations from the current six years to 150 days, restricting court shopping, and limiting who can litigate if not substantively involved in commenting/public engagement on draft environmental documents.
- Resource Development—Metalcasters strongly believe that permitting, leasing, exploration, and development of the nation’s resources must be done in an environmentally sound and responsible manner. But unnecessarily restricting access to America’s abundant natural resources hinders the ability to strengthen domestic supply chains. It also makes manufacturers more reliant on raw material imports. Demand for critical minerals is also at an all-time high. Critical minerals are used in everything from cell phone batteries and appliances to wind turbines.
Unfortunately, 80% of these materials are produced, refined, and processed by China, raising serious questions about the stability and dependability of the supply chain. Recent attempts by other countries to catch up with China have met mixed results. Canada and Australia, however, seem to understand the problem, and a mining permit in those nations averages about two years. But in the U.S., those same permits—if possible to secure at all—can take seven to ten years, placing this country at a massive disadvantage.
Over the past year, Congress and the Biden Administration have signaled support for further development of stable mineral supply chains on which national security, economy, and energy future rely, through tax incentives, loan programs, and grants. But if a mine can’t get permitted, the money is irrelevant.
Out-of-date permitting laws and procedures are holding back progress and restricting the country’s ability to compete globally. Metalcasters depend on access to reliable and affordable energy to expand, which is why AFS supports reforms that would foster transparent, streamlined, and timely federal regulatory processes for the siting, permitting, and licensing of energy delivery infrastructure of all types. Basic infrastructure must be developed before ground can ever be broken on a major facility. Yet, obtaining permit approvals for these projects often takes years, especially when reviews are piecemeal and duplicative.
Members of AFS are urging House lawmakers to reform the nation’s broken permitting and environmental review processes this year, which are currently delaying key energy, infrastructure, and transportation projects across America. At the Fly-in, AFS asked senators to support passage of permitting reform in 2023, including the key provisions contained in the following bills:
- Spur Permitting of Underdeveloped Resources (SPUR) Act (S. 1456), which increases domestic energy and mineral development and ensures federal lands remain open to productive uses. It also streamlines permitting of energy infrastructure and directs the U.S. Geological Survey to consider projected declines in U.S. production of a mineral when evaluating whether a mineral should be considered a “critical mineral.” The act also requires an environmental impact statement under NEPA to be completed within two years and an environmental assessment to be completed within one year for mineral projects and requires lawsuits against permits and licenses for mining projects to be filed within 60 days.
- Revitalizing the Economy by Simplifying Timelines and Assuring Regulatory Transparency (RESTART) Act (S. 1449), which establishes time limits to prevent endless legal battles, requiring courts to process NEPA challenges and issue a final judgment within 180 days. The bill also enacts a stricter statute of limitations for filing court challenges to NEPA documents and instructs courts to set deadlines for agency action. It allows projects to advance if an agency misses a deadline without threat of judicial review and shortens timelines for consultations under the Endangered Species Act (ESA), making the process more efficient and allowing states to take over administration of consultations. RESTART also applies the Clean Air Act policy review process to legislation, not projects or regulations.