Come Monday, Will It Be Alright? How Companies May Be Impacted by Immigration Priorities Under the New Trump Administration
With the inauguration of President-elect Trump on a cold Monday morning next week, there are several things that companies and their staff may want to keep in mind in preparing for possible Executive Orders and policy changes.
1. Continuity of Business Operations
Trump has vowed to crack down on illegal immigration on Day 1. This includes an aggressive push for mass deportations.
At first glance, companies may think this will not affect business since many companies use E-Verify and do not hire undocumented workers. If that’s the case, then the business may have less to worry about—but do not presume this is a worry-free zone. There are questions to ponder:
Does the company utilize the services of contractors? If so, how are the hiring practices of the contracting company? If that company was raided, could that upset the continuity of your business operations?
When did the company enroll in E-Verify? Employers who use E-Verify must begin using E-Verify for all new hires on the date the company signs the memorandum of understanding. If the company could have undocumented workers that were more easily hired prior to the use of E-Verify, and if those employees were picked up or deported, what would happen to the continuity of business operations?
2. Employee Travel – Tax and Monetary Implications
For companies in existence during the first Trump administration, you may remember that travel bans were quickly imposed by Executive Order. Although this point could also fall under the guide of business continuity, it created another unanticipated issue for companies related to taxation and costs.
One can expect based on what we learned during the first administration, any employee who is outside the U.S. and is not a U.S. citizen or permanent resident (green card holder) at the time any potential travel ban is enacted may not be able to return to the U.S. in short order.
If an employee is stuck outside the U.S., will they be in a jurisdiction where they have work authorization?
If yes, are they going to be outside the U.S. for so long that their working remotely from another country would create tax implications for the company?
If no, is the company going to sponsor that employee for work authorization where they are or cover the cost of the employee to setup shop where they are? Is there any risk in doing so?
If there are exceptions to a travel ban, and your company employs foreign workers, will the company financially support efforts to provide immigration advice to the workers on how to fall under an exception and how to make that argument?
3. Specialty Occupation Workers, Intracompany Transferees, and More
For companies that sponsor foreign nationals in various visa categories such as H-1B, L-1, TN, O-1 or others, the company may need to plan for additional resources to support such employees. Questions to ask may include:
Will the government take longer to make decisions on cases? If government processing times slow down, has the company sought to initiate cases or extensions early enough to ensure the employee and the business are protected? Should cases be initiated earlier?
Will employees who travel be subject to extreme vetting at consular appointments? This question goes to whether companies employ counsel or anyone who will prep employees for their visa interviews and whether additional support is needed in that regard. If someone is denied a visa, this rolls back up to the above point. Can the employee work remotely from a different country? What cost, tax, or other implications are there if they are unable to return to work as planned?
Will companies sponsor employees for green cards as soon as possible? With nervousness about travel bans, possible changes in how things are adjudicated or how quickly they are adjudicated, employees may seek to have the employer start the green card process as quickly as possible. Does the company have a green card policy regarding when they will be initiated? Should that be revised? Is the company prepared to pay the costs related to a possible increased number of green card requests?
The above are just a few of the things that companies may want to consider before Monday.
Key Considerations for the Construction Industry in 2025 Under President-Elect Trump
As President-elect Trump prepares to take office on January 20, the construction industry must anticipate shifts in trade policy, particularly concerning tariffs. These changes are expected to have significant implications for various sectors, including energy and clean technology.
The industry’s growing reliance on energy-efficient and clean technology components is driven by sustainability goals and regulatory requirements. For example, the US Department of Energy (DOE) guidelines on “Zero Emissions Building” provide a framework for sustainable practices, offering benchmarks for energy efficiency, zero on-site emissions, and clean energy use. Similarly, New York City’s Local Law 97 (LL97) sets ambitious emissions reduction targets for buildings, focusing on energy efficiency and renewable energy.
However, potential tariffs on imported clean technology materials could lead to increased costs, hindering compliance with regulations that rely on the imports of energy-efficient materials, and posing challenges to the adoption of sustainable building practices.
As these developments unfold, the construction sector must remain vigilant in monitoring policy changes that could affect the availability and cost of clean technology components in 2025.
Key Points to Watch in 2025
1. Evolving Tariff Policies:
The topic of tariffs under Trump’s second Administration has been a source of concern as President-elect Trump has already threatened to impose universal tariffs in addition to other country-specific tariffs.
At this juncture, we can anticipate an increase in tariff measures, but the specific measures are still unknown in part due to the uncertainty surrounding the rate of potential new tariffs, the countries they may affect, and the mechanisms that will be used to impose them, which will impact the timing any tariffs will take effect.
Because the Trump Administration’s trade policies have particularly focused on imports from Mexico, Canada, and China, such targets could significantly impact the import of construction materials, such as steel, aluminum, softwood lumber, concrete, glass, and binding materials.
For example, tariffs could benefit domestic manufacturers by increasing demand for locally produced materials, such as mass timber, but could create vulnerabilities for the construction sector that relies on imports raw materials used for energy efficiency and sustainable buildings that are sourced from Canada, Mexico, or China.
2. Material Cost Fluctuations:
Be prepared for possible increases in material costs due to tariff adjustments. This could lead to higher project expenses and necessitate budget recalibrations.
Contractors may face challenges in predicting material costs and securing project financing due to economic uncertainty and potential price volatility.
3. Supply Chain Adjustments:
Anticipate disruptions in supply chains as suppliers adapt to new trade regulations. This may result in delays and increased lead times for material availability.
Evaluate current supply chain dependencies and explore alternative sourcing options to mitigate risks.
How Can We Help?
As the new administration takes office, the construction industry must remain vigilant and proactive in addressing potential challenges posed by evolving tariff measures. Companies may need to adjust their project plans to account for potential cost increases and supply chain disruptions. Strategies such as seeking alternative suppliers, exploring domestic options, and reevaluating project budgets and timelines will be crucial in navigating these challenges.
Strategic planning and collaboration with trade experts and legal advisors will be crucial in navigating these changes. Here are some strategic ideas to consider:
Diversify Suppliers: Consider expanding your supplier base to reduce reliance on any single source, particularly those affected by tariffs.
Explore Alternative Materials: Investigate the use of alternative materials that may offer cost advantages or are less impacted by tariffs.
Contractual Safeguards: Review and update contracts to address “escalation,” “force majeure,” or other potential political risks, trade restrictions, and cost fluctuations.
Engage in Advocacy: Participate in industry advocacy efforts to influence policy decisions and promote favorable outcomes for the construction sector.
Monitor Trade Policy Developments: Monitor announcements from the new administration regarding free trade agreements (FTAs) and tariff adjustments that could affect material costs. These could include benefits from the United States-Mexico-Canada Agreement (USMCA) and exclusions from tariffs, such as the Section 301 tariffs on products from China.
Industry members seeking detailed analysis and guidance are encouraged to consult with trade experts and legal advisors specializing in construction and trade policy.
IRA Developments to Watch in the EV and Battery Supply Chain for 2025
The incoming Trump Administration’s approach to the Inflation Reduction Act (IRA) and tax policies is generating significant interest within the electric vehicle (EV) sector.
Generally, reports indicate that some Republican politicians, including individuals connected with the Trump Administration, intend to repeal or limit certain IRA tax incentives. US Congress could limit tax incentives by capping a tax credit, for example, or narrowing the activity or outputs eligible for a tax credit.
However, Republican states have invested substantial amounts into projects that benefit from IRA tax incentives. Accordingly, the repeal or limitation of many of the IRA tax incentives could negatively affect Republican constituents, and the Republican-controlled Congress and Trump Administration may seek to avoid such a result.
While exact policy directions are still unfolding, here are some critical areas to follow.
Key Points to Watch in 2025
1. Changes to EV Tax Credits
Reports indicate that Trump’s transition team aims to eliminate the $7,500 consumer tax credit for EV purchases, which was enacted as part of the IRA.
However, other reports suggest that Republicans might leave the IRA largely untouched because Republican states and constituencies have largely benefited from the IRA.
Modifications to the EV tax credits could make EVs more expensive for consumers, potentially slowing adoption and affecting industry growth. The outcome will depend on legislative negotiations and pressures from various constituencies.
2. FEOC Restrictions
Under the IRA, Foreign Enemy of Concern (FEOC) restrictions prevent taxpayers from claiming the $7,500 consumer tax credit if certain critical minerals contained in the EV battery of the purchased EV were extracted, processed, or recycled by an FEOC. Reports indicate that the Trump Administration may extend such FEOC restriction to other IRA tax incentives.
For example, it has been suggested that Congress impose FEOC restrictions on the IRA tax credit available to manufacturers under Section 45X (Advanced Manufacturing Production Credit).
Revisions to the FEOC restrictions under the Trump Administration might impact trade dynamics.
3. FEOC Equity Thresholds
The FEOC restriction limits eligibility for the $7,500 consumer tax credit for EV purchases if certain critical minerals contained in the battery of such EV were extracted, processed, or recycled by a foreign entity that is owned by, controlled by, or subject to the direction of another entity connected with certain foreign governments (generally, China, Russia, Iran, and North Korea). A foreign entity is owned by, controlled by, or subject to the direction of another entity if 25% or more of the entity’s board seats, voting rights, or equity interests are held by the other entity.
The Trump Administration may choose to maintain or adjust the current 25% equity threshold for FEOC entities.
If the Trump Administration opts to make the FEOC rules more stringent or tightens other investment regulations for FEOC entities, the Trump Administration may prevent such FEOC entities from benefitting from certain IRA tax incentives.
Investments by these entities in free trade agreement countries or the United States could face additional scrutiny or restrictions, although the extent of permissible equity stakes in such ventures remains uncertain and could be influenced by broader trade considerations, national security, and economic priorities. The Trump Administration’s stance on China and related economic strategies will significantly influence these policies.
4. National Security and IRA Coverage
Changes to the IRA’s coverage of components and constituents, particularly in the context of battery-related products, could be influenced by national security considerations. The Trump Administration might prioritize restrictions on Chinese-made energy storage systems (ESS) and related components due to their strategic importance in critical infrastructure and grid security.
The new Republican Congressional majority could seek amendments through tax reform aiming to address these concerns, potentially modifying or phasing out certain IRA incentives related to clean energy and battery production.
As discussed above, the Trump Administration may seek to impose FEOC restrictions on certain IRA incentives and may cite to national security concerns as a reason for imposing restrictions at certain points in the supply chain through changes to these incentives. However, specific policy directions will also depend on the Trump Administration’s assessment of risks and priorities at the time of such legislative developments.
Department of the Treasury and the Internal Revenue Service Issue Final Regulations on Section 45V Clean Hydrogen Production Tax Credit
On 3 January 2025, the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) released final regulations (Final Rules) implementing the Section 45V Clean Hydrogen Production Tax Credit (Section 45V tax credit) pursuant to the Inflation Reduction Act of 2022 (IRA). These much-anticipated Final Rules arrive over a year since the holiday-adjacent publication of the proposed regulations on 26 December 2023 (Proposed Rules). Treasury and IRS received approximately 30,000 written comments on the Proposed Rules and conducted a three-day public hearing that included testimony from over 100 participants. Adding to this long saga, the Biden Administration in its waning days has attempted to build upon the Final Rules and promote clean hydrogen production well into the future, announcing a US$1.66 billion loan guarantee by the Department of Energy (DOE) for Plug Power to produce and liquify clean hydrogen fuel. However, these actions come within days of the new Trump Administration and a Republican-controlled Congress, casting some uncertainty over the future of the Final Rules, DOE spending, and, more generally, the Section 45V tax credit.
In the Final Rules, Treasury and IRS made numerous modifications to the Proposed Rules—including notable changes to the controversial “three pillars” (incrementality, deliverability, and temporal matching) of the Energy Attribute Certificate (EAC) framework—largely in an effort to provide flexibility in response to industry concerns without sacrificing the integrity of the credit, while at the same time addressing concerns that substantial indirect emissions would not be taken into account. The Final Rules enable tax credit pathways for hydrogen produced using both electricity and certain methane sources, intending to provide investment certainty while ensuring that clean hydrogen production meets the IRA’s lifecycle emissions standards.
The Final Rules, and primary differences between the Proposed and Final Rules, are discussed below.
EAC Requirements for Electrolytic Hydrogen Production – The Three Pillars
Under both the Proposed and Final Rules, EACs are the established means for documenting and verifying the generation and purchase of electricity to account for the lifecycle greenhouse gas emissions associated with hydrogen production. Under this framework, a taxpayer must acquire and retire qualifying EACs to establish, for purposes of the Section 45V tax credit, that it acquired electricity from a specific electric generation facility (and therefore did not rely on electricity sourced via, e.g., the regional electric grid). Like in the Proposed Rules, the Final Rules require that taxpayers seeking to use EACs attribute electricity use to a specific generator that meets certain criteria for temporal matching, deliverability, and incrementality.
Incrementality
As in the Proposed Rule, the Final Rules define electric generation as “incremental” if the generator begins commercial operations within 36 months of the hydrogen facility being placed in service, or is uprated within that period. Treasury and IRS declined to extend the 36-month time frame for eligibility, but, within that 36-month time frame, Treasury and IRS provided more pathways for eligibility. The expanded pathways are as follows:
Uprates
The Final Rules modify the uprate rules to provide additional flexibility to taxpayers in determining “uprated” production capacity from generation facilities. The Final Rules provide that the term “uprate” means the increase in either an electric generating facility’s nameplate capacity (in nameplate megawatts) or its reported actual productive capacity.
Restarted Electric Generation Facilities
Under the Final Rules, EACs can meet the incrementality requirement with electricity from an electric generation facility that is decommissioned or is in decommissioning and restarts. The Final Rules clarify that these facilities can be considered to have additional capacity from a base of zero if that facility was shut down for at least one year.
Qualifying Nuclear Reactors
The Final Rules allow EACs to meet the incrementality requirement with electricity produced from a qualifying nuclear reactor up to 200 MWh per operating hour per reactor. A qualifying nuclear reactor is a “merchant nuclear reactor” or a single-unit plant that competes in a competitive market and does not receive cost recovery through rate regulation or public ownership.
Qualifying States
The Final Rules allow EACs to meet the incrementality requirement if the electricity represented by the EAC is produced by an electric generating facility physically located in a “qualifying state,” i.e., a state that has stringent clean energy standards (for now, California and Washington), and the hydrogen production facility is also located in the qualifying state.
Carbon Capture and Sequestration (CCS)
As authorized by the Final Rules, the “CCS retrofit rule” allows an EAC to meet the incrementality requirement if the electricity represented by the EAC is produced by an electric generating facility that uses CCS technology and the CCS equipment was placed in service no more than 36 months before the hydrogen production facility.
Temporal Matching
The Final Rules maintain the proposed hourly-matching requirement, which requires that the electricity represented by the EAC be generated in the same hour as the hydrogen facility’s use of electricity to produce hydrogen. The Proposed Rules required hourly matching to go into effect in 2028, but the Final Rules have delayed this requirement until 2030. Annual matching is required through 2029. The Final Rules note that this two-year postponement does not prohibit a hydrogen producer from voluntarily implementing hourly matching prior to 2030. Changes in the Final Rules also provide additional flexibility by allowing hydrogen producers to deviate from the annual aggregation of emissions to an hourly basis so long as the four kg CO2e per kg of hydrogen is met on an aggregate annual basis for the facility. This affords a hydrogen producer the ability to optimize the tax credit amount when it is unable to secure EACs during all hours of operation, without suffering severe penalties in the form of lower credit amounts across the entire year. Additionally, each electrolyzer is considered to be an individual qualified facility, which allows a producer to allocate EACs across electrolyzers and time periods to optimize tax credit values for a site.
Reliance Rule
In the Final Rules, Treasury and IRS declined to include a “reliance rule” (i.e., grandfathering) that would allow facilities that meet certain milestones (such as beginning of construction, being placed in service, or commencing commercial operations) by a certain date to continue to use annual matching instead of hourly matching.
Energy Storage
The Final Rules allow hydrogen producers and their electric suppliers to use energy storage, such as batteries, to shift the temporal profile of EACs based on the period of time in which the corresponding electricity is discharged from the storage device. The storage system must be located in the same region as both the hydrogen production facility and the facility generating the electricity to be stored. Storage systems need not themselves meet the incrementality requirement, but the EACs that represent electricity stored in such storage systems must meet the incrementality requirement based on the attributes of the generator of such electricity. EAC registries must be able to track the attributes of the electricity being stored.
Deliverability
As in the Proposed Rules, the Final Rules provide that an EAC meets the deliverability requirement if the electricity represented by the EAC is generated by a facility that is in the same region as the hydrogen production facility. Also, as in the Proposed Rules, the Final Rules establish that, for the duration of the Section 45V tax credit, “region” for purposes of deliverability will be based on the regions delineated in the DOE’s National Transmission Needs Study. Those regions are based on the balancing authority to which the electric generating source and the hydrogen facility are both electrically connected. The table published in the Final Rules is the authoritative source regarding the geographic regions used to determine satisfaction of the deliverability requirement.
Dynamic Deliverability Regions
Treasury and IRS intend to update the regions in future safe harbor administrative guidance published in the Internal Revenue Bulletin.
Interregional Connections
The Final Rules allow some flexibility on interregional delivery, acknowledging that interregional electric transfers commonly occur. Accordingly, the Final Rules allow an eligible EAC to meet the deliverability requirement in certain instances of actual cross-region delivery where the deliverability of such generation can be tracked and verified. The Final Rules provide specific rules to meet this standard.
Eligibility for Methane-Based Hydrogen Production
The Final Rules also provide pathways for receiving Section 45V tax credits for hydrogen production using biogas, renewable natural gas (RNG), and fugitive sources of methane (collectively, natural gas alternatives). Most notably, the Final Rules dispense with the “first productive use” requirement proposed in the draft regulations, which would have required that the RNG or biogas used to produce hydrogen was not previously used, likening this requirement to the incrementality requirement of the Three Pillars for electrolytic hydrogen. Instead, the Final Rules rely on “alternative fates,” which refer to the assumptions used to estimate emissions from the use or disposal of natural gas alternatives were it not for the natural gas alternative’s new use of producing hydrogen. Under the Final Rules, alternative fates are determined on a categorical basis, rather than adopting a single alternative fate for all natural gas alternatives or adopting alternative fates on an entity-by-entity basis. The alternative fate associated with natural gas alternatives feeds into the “background data” that is entered into the 45VH2-GREET Model. The 45VH2-GREET Model uses that background data to calculate the estimated lifecycle greenhouse gas emissions associated with the specific hydrogen production process.
Alternative Fates, as Applied to Sectors
For landfills, coal mine methane, and wastewater sources, flaring is considered the primary alternative fate. For animal waste, the alternative fate is based on a national average of all animal waste management practices for the sector as a whole. For fugitive methane from fossil fuel activities other than coal mining, the alternative fate is the emissions that would otherwise be generated from productive use.
Venting
The Final Rules reject venting as an alternative fate across all sources of natural gas alternatives because it does not account for the prevalence of flaring and productive use, nor does it address the risk of induced emissions due to the incentives provided by the Section 45V tax credit. In taking this position, Treasury and IRS recognize that venting will likely be increasingly prohibited at local, state, and federal levels.
It is worth noting that Treasury’s failure to issue actual draft regulations for a methane-pathway 45V tax credit could increase the likelihood of a successful legal challenge to the 45V Final Rules. It is unclear at this time whether Treasury’s solicitation of comments in response to the questions the agency posed related to RNG as a viable pathway to secure the 45V credit is sufficient to satisfy proper notice-and-comment requirements under the Administrative Procedure Act. The Biden Administration’s inclusion of Final Rules related to RNG could be part of a strategic effort aimed at minimizing attacks against the Final Rules by bringing RNG developers to the table.
Other Considerations
Determining Lifecycle Greenhouse Gas Emissions Rates
The Final Rules clarify that the annual determination of the tax credit amount is made separately for each hydrogen production process conducted at a hydrogen production facility during the taxable year. The Final Rules clarify that “process” means the operations conducted by a facility to produce hydrogen (for example, electrolysis or steam methane reforming) during a taxable year using one primary feedstock. CCS equipment that is necessary to meet the 45V emissions thresholds is considered part of the facility for purposes of the credit.
Construction Safe Harbor
The Final Rules allow taxpayers to make an irrevocable election to treat the 45VH2-GREET Model available on the date of construction commencement of the hydrogen production facility as the applicable 45VH2-GREET Model.
Third-Party Disclosure Requirement
As in the Proposed Rules, the Final Rules require that an unrelated third party certify the annual verification report submitted as part of the election to treat qualified property as energy property for purposes of the Section 45V tax credit.
Effective Date
The Final Rules become effective immediately upon their publication in the Federal Register.
Outlook
There is still a great deal of political uncertainty surrounding the Section 45V tax credit due to the incoming Trump Administration and Republican-controlled Congress, which could nullify these regulations through the Congressional Review Act or reduce or eliminate the credits by modifying or rolling back the IRA as part of the budget reconciliation process. There is additionally the potential for litigation challenges to the Final Rules under the new Loper Bright standard for judicial review of agencies’ interpretations of statute.1
Regardless, the Final Rules attempt to lay a foundation for hydrogen development for years to come. Barring political disruption, the Final Rules settle many uncertainties that may have acted as an obstacle to investment in the clean hydrogen sector and the progress of planned projects, including the DOE-funded hydrogen hubs. The Final Rules also generate new questions. As noted above, these Final Rules are effective immediately upon publication in the Federal Register. The immediate effectiveness and rollout of the Final Rules could contribute to the momentum needed to keep these rules and relevant IRA provisions in place even as administrations change. Strong industry reliance upon these rules may make it less politically palatable or practical to uproot and discard them entirely.
Footnotes
1 For more information on the U.S. Supreme Court’s decision in Loper Bright Enterprises v. Raimondo and how it impacted administrative law, see the following:
The Post-Chevron Toolkit | HUB | K&L Gates
The End of Chevron Deference: What the Supreme Court’s Ruling in Loper Bright Means for the Regulated Community | HUB | K&L Gates
Navigating Tariff Threats Under the Trump Administration, Challenges Ahead for the EV and Battery Supply Chain
As President-elect Donald Trump prepares to assume office on January 20, numerous tariff proposals have already been put forward that could significantly impact the electric vehicle (EV) and battery supply chain industry. Differentiating between the potential for immediate tariff actions and those requiring more time to implement is critical for companies that are in preparation of such actions.
In general, the imposition of new duties or tariffs typically requires congressional oversight and findings from relevant government agencies, a process that can extend over several months. This includes mechanisms such as the Section 301 tariffs on imports of China-origin products, where tariffs on EVs, battery parts, and critical minerals were recently increased, along with future increases on semiconductors, natural graphite, and permanent magnets that are scheduled for action. Expanding these existing actions would take time for the administration to implement.
However, President-elect Trump may seek to expedite tariff impositions through alternative legal avenues such as the International Emergency Economic Powers Act (IEEPA). While unprecedented, these actions would align with the upcoming administration’s proposals, including potential duty increases on imports from Mexico and Canada, where reports suggest implementation as early as the President-elect’s first day in office.
Such measures could significantly impact the EV supply chain and related industries, necessitating close monitoring of these developments during 2025.
What to Watch in 2025 and Beyond
1. Tariff Increases and Trade Policies: The Trump Administration’s trade policies are expected to focus on increasing tariffs, particularly on imports from China. The continuation or expansion of Section 301 tariffs on EVs, battery parts, and critical minerals could raise costs and disrupt supply chains. The administration may expedite tariff impositions through legal avenues like the IEEPA, potentially impacting imports from a host of US trading partners. Close monitoring of policy developments is the first step. Understanding their transactional impact can mitigate tariff exposure and corporate uncertainty.
2. Global Competitiveness and Supply Chain Dependencies: The administration’s protectionist stance may bolster domestic production but could also increase manufacturing costs and limit vehicle choices. The emphasis on “decoupling” from China suggests a continuation of aggressive tariff strategies, particularly on critical minerals essential for EV batteries. Industry stakeholders seeking to explore a diversified supply chains will need strategic advice prior to launching new production sites or supply partners.
3. USMCA: The United States-Mexico-Canada Agreement (USMCA) is scheduled for a trilateral review and renegotiation during 2026. Key provisions in the pact are particularly important for the EV supply chain into the United States. Some of President-elect Trump’s tariff proposals on Mexico and Canada could be tactics for leverage in the lead-up to these negotiations and provide opportunities for the Trump Administration to negotiate Free Trade Agreements (FTAs) with other countries, potentially affecting the EV and battery supply chain. Industry leaders should take stock of their current use of the USMCA tariff preference opportunities and what potential changes in the minutiae of trade rules could mean for both suppliers and customers. While 2026 is the year of USMCA talks, 2025 will be the year of industry consultations by Ottawa, Washington, and Mexico City.
4. FTAs and Trade Negotiations: The Trump Administration may prioritize renegotiating existing FTAs and pursuing new agreements with countries that align to the administration’s goals for domestic EV and battery production. The direction of such potential FTA developments will likely be impacted by the upcoming USMCA renegotiations. The US-Japan Trade Agreement could also serve as a framework for limited bilateral FTAs with new partners. FTA’s bring tariff preferences but they also require a sophisticated understanding of country-of-origin rules and other trade calculations that are far from intuitive. Stakeholders may wish to seek our advice on particular FTAs with key US trade partners to be best prepared to understand company-specific implications and to work with Washington during the negotiation stages.
5. Legal and Political Challenges in Trade Policy: While the president has some authority to influence trade agreements, unilateral withdrawal from FTAs could face legal and political challenges from Congress. The administration may use national security exceptions to modify duty-free provisions, but such actions would require careful justification. The potential for uncertainty and long-term risk exposure is high for companies involved in the EV manufacturing industry.
Treasury Department and IRS Release Final Regulations for Section 45V Clean Hydrogen Production Tax Credit
On January 3, 2025, the Treasury Department and the Internal Revenue Service issued final regulations under Internal Revenue Code (Code) Section 45V (the Final Regulations) with respect to credits for the production of clean hydrogen (the 45V Credit). The Final Regulations generally retain the requirements set forth in the proposed regulations under Code Section 45V (the Proposed Regulations)[1] with respect to the “three pillars” (incrementality, temporal matching and deliverability) for hydrogen produced using clean power but provide leniency with respect to each pillar. The Final Regulations also provide critical new guidance on hydrogen produced using methane reformation technologies. Taxpayers may rely on the Final Regulations as of January 10, 2025.
Background
Code Section 45V provides a tax credit for the production of clean hydrogen at a qualified clean hydrogen production facility for 10 years beginning on the date the facility is placed in service. The 45V Credit is technology agnostic in that qualification for the credit is not dependent on how the clean hydrogen is produced. The 45V Credit is generally calculated as the product of the kilograms of qualified clean hydrogen produced at a qualified clean hydrogen production facility and the applicable rate. The applicable rate is based on the lifecycle greenhouse gas (GHG) emissions rate of the hydrogen production process. Taxpayers qualify for an increased 45V Credit amount if the construction, alteration and repair of the qualified clean hydrogen production facility complies with the prevailing wage and apprenticeship requirements.
Electricity Used in Hydrogen Production
The Final Regulations generally retain the requirements of the three pillars set forth in the Proposed Regulations regarding the utilization of energy attribute certificates (EACs) to establish a GHG emissions rate. As compared to the Proposed Regulations, the Final Regulations provide leniency with respect to each pillar.
Incrementality. The incrementality requirement is met if the electricity generating facility that produced the electricity has a commercial operation date, or increase in rated nameplate capacity, no more than 36 months before the relevant hydrogen production facility was placed in service. The Final Regulations include three new sources of electricity generation that will be considered incremental regardless of whether the 36-month requirement is satisfied: (i) electricity generated at certain nuclear facilities (with a cap of 200 megawatt-hours per operating hour per reactor); (ii) electricity generated in states with GHG emissions policies meeting certain criteria (such as California and Washington); and (iii) electricity generated at a facility that added carbon capture and sequestration (CCS) equipment within 36 months prior to the date the hydrogen production facility is placed in service.
Temporal Matching. The temporal matching requirement is met if the electricity is generated (i) until 2030, in the same year as, or (ii) beginning in 2030, in the same hour as, the taxpayer’s hydrogen production facility uses electricity to produce hydrogen. The Proposed Regulations provided that hourly matching described in clause (ii) would be required beginning in 2028.
Deliverability. The deliverability requirement is met if the electricity is generated by a facility in the same region as the hydrogen production facility. The Final Regulations provide flexibility for demonstrating certain electricity transfers between regions and allow taxpayers to import clean power from other regions under certain circumstances.
Methane Used in Hydrogen Production
The Final Regulations provide rules for how taxpayers can claim the 45V Credit for hydrogen produced using methane reformation technologies, including those using CCS, renewable natural gas (RNG) and fugitive sources of methane (e.g., from wastewater, animal waste, landfill gas and coal mine operations). The Final Regulations provide rules on how to calculate lifecycle GHG emissions from these sources.
Alternative Fate Standard. The Final Regulations do not include a “first productive use” requirement contemplated by the Proposed Regulations, which would require hydrogen produced using RNG and coal mine methane systems to originate from the first productive use. Instead, the Final Regulations take into account the “alternative fate” of feedstocks.
Gas EACs. The Final Regulations introduce the “gas energy attribute certificate” (Gas EAC), which is defined as a tradeable contractual instrument, issued through a qualified Gas EAC registry or accounting system, that represents the attributes of a specific unit of RNG or coal mine methane. Hydrogen producers using RNG or coal mine methane will be able to acquire and retire Gas EACs as a mechanism for establishing such sources were used in the production of clean hydrogen.
Temporal matching and deliverability requirements similar to those described in the context of hydrogen produced using electricity apply to Gas EACs. The Final Regulations require monthly matching for a Gas EAC to satisfy the temporal matching requirement, and require geographic matching within the contiguous United States to satisfy the deliverability requirement.
Book-and-Claim. The Final Regulations endorse a book-and-claim framework for hydrogen produced using RNG or coal mine methane systems. Book-and-claim systems will enable taxpayers to claim use of RNG or coal mine methane despite the absence of a direct exclusive pipeline connection to a facility that generates RNG or from which fugitive methane is being sourced. Taxpayers will be able to begin using book-and-claim systems no earlier than in 2027, after the Secretary of Treasury determines when a system meets the requirements set forth in the Final Regulations.
GREET Model
The Final Regulations require that lifecycle GHG emissions be measured “well-to-gate” as determined under the most recent Greenhouse gases, Regulated Emissions, and Energy use in Technologies (GREET) model. Well-to-gate emissions are the aggregate lifecycle GHG emissions related to the hydrogen produced at the hydrogen production facility during the taxable year through the point of production. Well-to-gate emissions include emissions associated with feedstock growth, gathering, extraction, processing and delivery to a hydrogen production facility.
The Final Regulations allow hydrogen producers to use the version of the 45VH2-GREET model that was in effect when the hydrogen production facility began construction for the duration of the credit. This provision enhances investment certainty by ensuring that hydrogen producers are not subject to unexpected changes to the 45VH2-GREET model over the credit period.
The Final Regulations provide that upstream methane leakage rates will be based on default national values in the 45VH2-GREET model. Future releases of the 45VH2-GREET model, however, are expected to incorporate facility-specific upstream methane leakage rates based on data provided by the Environmental Protection Agency.
[1] We discussed the Proposed Regulations in a previous client alert.
Record Number of Qui Tam Suits Filed by Whistleblowers in 2024
During the 2024 fiscal year a record 979 qui tam lawsuits were filed by whistleblowers under the False Claims Act and the U.S. government recovered over $2.4 billion in qui tam cases, according to statistics released yesterday by the U.S. Department of Justice (DOJ).
Whistleblowers and the government were party to 558 False Claims Act settlements and judgments in FY 2024, the second highest ever, and total recoveries exceeded $2.9 billion. This means that qui tam whistleblower cases accounted for more than 82% of False Claims Act recoveries during FY 2024.
“Year after year, the DOJ’s False Claims Act statistics reaffirm an undeniable truth: whistleblowing works,” says leading whistleblower attorney Stephen M. Kohn of Kohn, Kohn & Colapinto. “Thanks to their bravery and inside knowledge, whistleblowers recover billions of dollars for taxpayers every year.”
“It is imperative that the DOJ fully supports and empowers whistleblowers,” adds Kohn, who is also Chairman of the Board of National Whistleblower Center (NWC).
Under the False Claims Act, whistleblowers with knowledge of government contracting fraud may file qui tam lawsuits on behalf of the U.S. government. In successful qui tam cases, whistleblowers are eligible to receive between 15 and 30% of the recoveries.
Since the qui tam provisions were modernized in 1986, whistleblowers have allowed the government to recover over $55 billion in taxpayer dollars from fraudsters.
In September, a district court ruled that the False Claims Act’s qui tam provisions are unconstitutional. The U.S. government has urged the U.S. Court of Appeals for the Eleventh Circuit to reverse the district court ruling, noting that “other than the district court here, every court to have addressed the constitutionality of the False Claims Act’s qui tam provisions has upheld them.”
5 Trends to Watch: 2025 Energy Regulation and Development
As a new administration takes office in 2025, several new energy policy trends are expected to emerge, reflecting the inherent tension that often exists between political desires and economic realities. For example, while the incoming Trump administration has expressed a desire to claw back subsidies made available under the Inflation Reduction Act (IRA), Republican states have also been significant beneficiaries under the IRA. In other areas such as import tariffs, bipartisan support could emerge, with each party supporting the same result for entirely different reasons. Five trends that could result are discussed below.
Carbon-Related Tariffs Could Reshape Global Trade and Business Strategy. The convergence of increased bipartisan support for import tariffs, albeit for different reasons, could result in a significant shift in international trade dynamics and potential costs for energy companies. President-elect Donald Trump has frequently expressed support for import tariffs as a tool to boost domestic manufacturing, increase revenues, or to create leverage for international negotiations. Democrats have supported adoption of carbon tariffs and mechanisms like the Carbon Border Price Adjustment Mechanism (CBAM) that is being implemented in the European Union to level the playing field for businesses investing in emissions reduction. Adoption of the European Union’s CBAM has created new operational challenges for companies throughout the world, and similar measures in the United States would add to that already complex legal and business landscape. Companies invested in renewable energy projects or reliant on imported components like solar panels and batteries should ensure transparency and awareness of their supply chains, monitor ongoing developments, and prepare for potential cost increases and supply chain disruptions.
IRA Tax Credit Future Critical for Energy Investment Decisions. While Trump has expressed opposition to the IRA, the established tax credits present a complex economic and political challenge. Republican-controlled states have been significant beneficiaries of investments generated by IRA tax credits, and many traditional energy companies have already made substantial investments based on these incentives, particularly in energy production and carbon sequestration projects. This creates significant economic pressure to maintain existing credits. However, uncertainty looms over funds yet to be distributed by the government, as well as details of future Internal Revenue Service guidance on IRA tax credits. This creates the potential to impact short- and mid-term investment decisions and may create a temporary chilling effect on new investments as stakeholders await additional clarity on implementation guidelines. Companies should closely monitor these developments, particularly those with pending applications or planning future projects dependent on IRA incentives.
Support for Clean Hydrogen Production Tax Credit Requires a Balancing of Interests. The clean hydrogen market has experienced record investment growth, catalyzed by the IRA’s tax credits. Many of these investments are being made by traditional energy companies. However, uncertainty remains over whether and to what extent the IRS will adopt stringent requirements advocated by many environmental organizations. These would require the renewable electricity to be produced from newly constructed generation (additionality), in the same hour as hydrogen is produced (temporal matching), and in the same region as hydrogen is produced (geographic matching). How the IRS resolves these issues could have a material impact on future green hydrogen investments. Here, the Trump administration will again be confronted by tension between its more general desire to claw back IRA incentives and the economic reality of significant investment to date along with support by traditional energy companies for continued future investments and increased financial certainty. This balancing of interests may result in adoption of technology neutral policies that are intended to reduce barriers to entry and increase economic certainty for investors.
Carbon Sequestration Gains Momentum Across Political Spectrum. Carbon sequestration offers traditional energy companies and carbon emitters a rare point of bipartisan consensus in energy policy, offering traditional energy companies a pathway to sustainability while maintaining core operations. With former North Dakota Gov. Doug Burgum, a prominent carbon capture and storage (CCS) advocate, announced as Trump’s nominee to lead the Interior Department, the technology could see expanded support. Carbon sequestration appeals to many environmental advocates seeking emissions reductions and to fossil fuel companies seeking to leverage their existing expertise in pipeline construction and drilling to create new opportunities in a transitioning energy market. This dual benefit of maintaining energy security while reducing carbon footprint positions CCS as a critical component in the energy transition landscape and will continue to attract support from both environmental advocates and traditional energy producers in 2025.
Renewed Support for Conventional Energy Production. A significant transformation in federal energy policy is anticipated in 2025, with renewed support for conventional energy development, including through expanded availability of federal oil leases, reduced regulation, and reconsideration of regulations that have been adopted to increase the cost of fossil fuel energy production. The Bureau of Land Management’s current restrictions on coal mining are expected to be reversed, while federal leasing for oil, uranium, and other mineral resources is likely to accelerate. This shift extends beyond mere leasing policies, however, as the Department of Justice will likely adopt a more industry-friendly stance overall. For example, enforcement of environmental regulations, particularly regarding methane emissions and associated royalty payments, is likely to become less stringent. These changes could substantially reduce operational costs for natural gas producers and other conventional energy operators, potentially stimulating increased domestic energy production.
Mexico Increases Textile Sector Tariffs and Amends IMMEX Decree
On Dec. 19, 2024, the “Decree modifying the tariff on the General Import and Export Tax Law and the Decree for the Promotion of the Manufacturing, Maquila and Export Services Industry” (Decree) published in the Official Gazette of the Federation, through which the Mexican government seeks to establish two measures protecting domestic textile production.
Tariff Increases
Through the Decree, the Mexican government made temporary changes in the tariffs on several items included in the General Import and Export Tax Law, which will be effective until April 23, 2026. Such adjustments, which cover 155 items, correspond to the following chapters:
15% Tariff
–
Chapter 52 (cotton)
–
Chapter 55 (synthetic or artificial staple fibers)
–
Chapter 58 (special woven fabrics, textile fabrics, lace, tapestries, trimmings, and embroidery)
–
Chapter 60 (knitted fabrics)
35% Tariff
–
Chapter 61 (articles of apparel and clothing accessories, knitted or crocheted)
–
Chapter 62 (articles of apparel and clothing accessories, not knitted or crocheted)
–
Chapter 63 (other made-up textile articles, sets, worn clothing, worn textile articles, and rags)
–
Tariff item number 9404.40.01 (footmuffs, quilts, comforters, and blankets)
These tariffs apply only to products originating in countries with which Mexico does not have free trade agreements.
Modifications to the IMMEX Program
The Dec. 19 Decree also changes the IMMEX Decree, adding new restrictions to Annex I, which lists “Goods that cannot be temporarily imported under the IMMEX program.” The IMMEX (Manufacturing, Maquiladora, and Export Services Industry Program) program is designed to promote the development of companies engaged in manufacturing and assembly activities for export purposes in Mexico. The changes to the Annex I affect several items under chapters 61, 62, and 63 of the General Import and Export Tax Law, with some exceptions. The government has also added other subheadings from this law to the restricted list.
Conclusion
The increase in tariffs on specific fractions of the textile industry, along with the addition of more restricted tariff items under the IMMEX program, could impact both importers and companies operating under IMMEX. Importers may face higher costs due to increased duties, which could affect their profit margins and competitiveness in the market. Similarly, IMMEX program participants might experience disruptions in their supply chains and increased operational costs, limiting their ability to efficiently import and export goods. These changes highlight the need for careful consideration of the potential consequences on trade and business operations.
Final Regulations for New Clean Energy Production and Investment Tax Credits
Last week, the Internal Revenue Service (“IRS”) and Department of the Treasury issued the highly anticipated final regulations for the Clean Electricity Production Tax Credit set forth in Section 45Y of the Internal Revenue Code of 1986, as amended (the “Code”) and the Clean Electricity Investment Tax Credit set forth in Section 48E of the Code (the “Final Regulations”), which may be found here. The Final Regulations follow the issuance of proposed regulations (the “Proposed Regulations”) last June. The Final Regulations provide clarification regarding the definition of “qualified facility” and the mechanism for calculating the greenhouse gas (“GHG”) emissions rates for qualified facilities, although a full analysis of the GHG requirements is beyond the scope of this blog post. Further, we note that with the incoming administration, the executive branch could review and, potentially, rescind, these Final Regulations, although at this point the Trump administration has not publicly indicated support or a the lack thereof.
The Final Regulations generally apply to facilities placed in service after December 31, 2024, and during a taxable year ending on or after January 15, 2025. However, certain rules relating to the “One Megawatt Exception” under Section 1.45Y-3 of the Final Regulations and relating to qualified facilities with integrated operations have a delayed applicability date that is 60 days after publication of the Final Regulations.
When Sections 45Y and 48E of the Code were initially enacted, we posted a blog describing the new statutes, which is available here. The following is a brief, high-level, summary of the Section 45Y and Section 48E rules, but does not describe every requirement for credit qualification. The rules under Sections 45Y and 48E of the Code apply to qualified facilities that both begin construction and are placed in service, each for federal income tax purposes, on or after January 1, 2025. As such, qualified facilities that either begin construction or are placed in service before January 1, 2025, should still generally look towards the rules set forth in Section 45 of the Code for the production tax credit (the “PTC”) or in Section 48 of the Code for the investment tax credit (the “ITC”), as applicable.
The credits under Sections 45Y and 48E are available with respect to any qualified facility that is used for the generation of electricity, which is placed in service on or after January 1, 2025, and has an anticipated GHG emissions rate of not more than zero. In the case of Section 48E, a qualifying energy storage facility is also eligible for the credit. Qualified facilities also include any additions of capacity that are placed in service on or after January 1, 2025.
The credit under Section 45Y generally mirrors the PTC in that it is a credit that is based on electricity produced by a qualified facility, and the credit under Section 48E generally mirrors the ITC in that it is a credit that is based on a taxpayer’s tax basis in a qualified facility, with several differences in each case. The credit amount for each is generally calculated in the same manner as the ITC or PTC, as applicable. However, the credit amount is phased out (as set forth in the chart below) based on when construction of a qualifying facility begins after the “applicable year.” Under Sections 45Y and 48E of the Code, the applicable year means the later of (i) the calendar year in which the annual greenhouse gas emissions from the production of electricity in the United States are reduced by 75% from 2022 levels, or (ii) 2032.
Year After Applicable Year in Which Construction Begins
First
Second
Third
Thereafter
Percent of Credit Remaining
100%
75%
50%
0%
The Final Regulations apply many of the historical rules of Sections 45 and 48 of the Code, including rules surrounding the base credit amount—0.3 cents per kWh of electricity (subject to inflation adjustments) under Section 45Y and 6% under Section 48E. These credit rates may be increased in either case by satisfying either the 1 MW (AC) exception or the prevailing wage requirements—up to 1.5 cents per kWh of electricity (subject to inflation adjustments) under Section 45Y and 30% under Section 48E. Energy community and domestic content bonus credits may also increase these credit rates, although there are important differences in how these rules apply.
The below highlights several notable aspects of the Final Regulations.
Notable Rules Under Section 45Y
Under Section 45Y, a facility that initially operates with greater than zero GHG emissions (and, therefore, is not eligible for the credit under Section 45Y) may later be treated as a qualified facility—and, therefore, eligible for the credit under Section 45Y—if it meets the requirements in any taxable year during the 10-year period beginning on the date the facility was originally placed in service. For example, if an otherwise qualified facility has greater than zero GHG emissions for its first three years of operation (2025-2027, for example), but then is updated in such a way that it satisfies the zero GHG emissions requirement, then the Section 45Y credit may be claimed for years 4 through 10 of operations (2028-2034, in this example).
Similar to the PTC, electricity produced at a qualified facility must be sold by the taxpayer to an unrelated person. However, in a departure from the rules under Section 45, the statute and Final Regulations provide that, in the case of a qualified facility equipped with a metering device that is owned and operated by an unrelated person, the credit under Section 45Y of the Code is available for electricity produced at a qualified facility and sold, consumed, or stored by the taxpayer. Although this rule provides some flexibility to taxpayers, the IRS declined to adopt the Section 45 rule from IRS Notice 2008-60, which provides that electricity sales will be treated as made to an unrelated taxpayer if the producer of electricity sells electricity to a related person for resale to a person unrelated to the producer.
Notable Rules Under Section 48E
Under the Final Regulations, “qualified facilities” and “energy storage technology” (“EST”) are defined, and treated, separately. Accordingly, Section 48E does not permit combined solar and storage facilities—each facility must claim the credit under Section 48E separately as a “qualified facility” or an “EST,” as applicable. This rule could have implications for application of the prevailing wage and apprenticeship requirements, domestic content adder eligibility, and energy community adder eligibility.
Similarly, the Final Regulations define “unit of qualified facility” to include all components of functionally interdependent property, and the term “qualified facility” to mean a unit of qualified facility plus integral parts. This is significant because satisfaction of the prevailing wage and apprenticeship requirements, domestic content adder eligibility, and energy community adder eligibility are each determined on a “qualified facility” basis. To take an example, this means in many cases that prevailing wage and apprenticeship, domestic content, and energy community eligibility would be measured for a solar facility at the inverter level, rather than on a project-wide basis as is required for the ITC under Section 48 of the Code. Although this rule was in the Proposed Regulations, many commenters asked the IRS to permit some form of aggregation (similar to the energy project rules under Section 48) for purposes of Section 48E. The IRS declined this request, and the rules in the Final Regulations now will require very careful planning for prevailing wage and apprenticeship, domestic content adder, and energy community adder purposes.
In addition, under the Final Regulations, the cost of qualified interconnection property (which is similarly defined under the final regulations for Section 48) is only ITC-eligible for “qualified facilities.” For EST, the cost of interconnection property is not eligible for the credit under Section 48E. Again, this is different from the application of the ITC for qualified interconnection property for energy storage technology that is eligible for the ITC under Section 48 of the Code.
Notable Rules for both Section 45Y and 48E
The Final Regulations adopt the rule from the Proposed Regulations that the following types or categories of facilities may be treated as having an emissions rate of not greater than zero: wind, solar, hydropower, marine and hydrokinetic, geothermal, nuclear fission, fusion energy, and certain waste energy recovery property. For types or categories of facilities not listed above, taxpayers must rely on the annual table that sets forth the GHG emissions rates in effect as of the date the facility begins construction or, if not set forth on the annual table, the provisional emissions rate determined by the Secretary for the taxpayer’s particular facility.
In addition, for the types or categories of facilities not listed above, the Final Regulations confirm that certain emissions of GHGs are excluded from the requirement that the GHG rate be not greater than zero, including, for example, emissions that occur before commercial operation commences and emissions from routine operational and maintenance activities.
Both Section 45Y and 48E rely on the existing prevailing wage and apprenticeship rules contained in Sections 45(b)(7) and (8) of the Code and Sections 1.45-7, 1.45-8 and 1.45-12 and 1.48-13 of the Treasury Regulations except, as noted above with respect to Section 48E, prevailing wage and apprenticeship is measured as the qualified facility level rather than the energy project level (as it has been for the ITC).
For the 1 MW (AC) exception under both Sections 45Y and 48E, the Final Regulations incorporate similar rules for calculating nameplate capacity as provided in the final regulations under Section 48. However, the Final Regulations also provide that the nameplate capacity of a qualified facility with “integrated operations” with any other qualified facility must be calculated using the aggregate nameplate capacity of each qualified facility. A qualified facility will be treated as having “integrated operations” with any other qualified facility if the qualified facilities are of the same type of technology and (1) are owned by the same or related taxpayers, (2) placed in service in the same taxable year, and (3) transmit electricity generated by the qualified facilities through the same point of interconnection, if grid-connected, or are able to support the same end user, if not grid-connected or if delivering electricity directly to an end user behind the meter. These rules have a delayed applicability date of March 16, 2025.
Both Sections 45Y and 48E adopt the familiar 80/20 rule, which states that a facility may qualify as originally placed in service even if the unit of qualified facility contains some used components of property provided the fair market value of the used components of the unit of qualified facility is not more than 20% of the total value of the unit of qualified facility (which is determined by adding together the cost of the new components of property plus the value of the used components of property included in the qualified facility).
New Antidumping and Countervailing Duty Petitions on Temporary Steel Fencing from China
On January 14, 2025, ZND US Inc (Petitioner or ZND), domestic producer of temporary steel fencing, filed petitions with the U.S. Department of Commerce (DOC) and the U.S. International Trade Commission (ITC) seeking the imposition of antidumping duties (AD) and countervailing duties (CVD) on temporary steel fencing from China. Such structures include fencing for construction sites, security perimeters, events, and animal kennels. The scope does not include permanent steel fencing.
Under U.S. law, a domestic industry may petition the United States government to initiate an AD investigation into the pricing of an imported product to determine whether it is sold in the United States at less than fair normal value prices. For market economies (which China is not), normal value is home market or third-country price, or actual cost plus reasonable profit of the foreign producer/exporter. For deemed non-market economy China, normal value is a constructed cost plus deemed reasonable profit based on surrogate values in a market economy deemed of comparable level of economic development to China.
A domestic industry also may petition for the initiation of an investigation of alleged countervailable subsidies provided by a foreign government to producers and exporters of the subject merchandise. DOC will impose AD and/or CVD duties on subject merchandise if it determines that imports of that product are dumped and/or subsidized, and if the ITC also determines that the domestic industry is materially injured or threatened with such injury by reason of imports of the subject merchandise.
The immediate activity will occur at the ITC. In the preliminary stage, the threshold to find injury from the accused imports is low such that the ITC generally finds sufficient indicia of injury to a U.S. industry from the accused imports to continue the AD/CVD investigations. If the ITC votes to continue, then the investigation moves to DOC.
If the ITC and DOC make preliminary affirmative determinations, U.S. importers will be required to post cash deposits in the amount of the AD and/or CVD duties for all entries of the subject merchandise entered on or after the date of DOC’s preliminary determinations being published in the Federal Register. Note that if there is a surge of imports from the subject countries following the filing of the petitions, DOC can find critical circumstances for a particular subject country (or producer) and instruct U.S. Customs & Border Protection (CBP) to collect cash deposits retroactively to 90 days before the date of publication of the preliminary determination.
Following further factual investigation, verification, and briefing, DOC can change the preliminary AD/CVD rates in its final determinations. AD/CVD Orders will only issue if both the DOC and ITC make affirmative final determinations. The ITC final injury investigation is more rigorous than its preliminary injury investigation, where historically 30% or so of petitions are rejected at that stage.
Scope
Petitioner requests the following product scope for the investigation:
“The merchandise subject to this investigation is temporary steel fencing. Temporary steel fencing consists of temporary steel fence panels and temporary steel fence stands. Temporary steel fence panels, when assembled with temporary steel fence stands or other types of stands outside of the scope, with each other, or with posts, create a free-standing structure. Such structures may include, but are not limited to, fencing for construction sites, security perimeters, and events, as well as animal kennels. Temporary steel fence panels are covered by the scope regardless of whether they attach to a stand or the type of stand to which they connect.
Temporary steel fence panels have a welded frame of steel tubing and an interior consisting of chain link, steel wire mesh, or other steel materials that are not more than ten millimeters in actual diameter or width. The steel tubing may surround all edges of the temporary steel fence panel or only be attached along two parallel sides of the panel. All temporary steel fence panels with at least two framed sides are covered by the scope, regardless of the number of edges framed with steel tubing.
Temporary steel fence panels are typically between 10 and 12 feet long and six to eight feet high, though all temporary steel fence panels are covered by the scope regardless of dimension. Temporary steel fence panels may be square, rectangular, or have rounded edges, and may or may not have gates, doors, wheels, or barbed wire or other features, though all temporary steel fence panels are covered by the scope regardless of shape and other features. Temporary steel fence panels may have one or more horizontal, vertical, or diagonal reinforcement tubes made of steel welded to the inside frame, though all temporary steel fence panels are covered by the scope regardless of the existence, number, or type of reinforcement tubes attached to the panel. Temporary steel fence panels may have extensions, pins, tubes, or holes at the bottom of the panel, but all temporary steel fence panels are covered regardless of the existence of such features.
Steel fence stands are shapes made of steel that stand flat on the ground and have one or two open tubes or solid pins into which temporary steel fence panels are inserted to stand erect. The steel fence stand may be made of welded steel tubing or may be a flat steel plate with one or two tubes or pins welded onto the plate for connecting the panels.
Temporary steel fencing is covered by the scope regardless of coating, painting, or other finish. Both temporary steel fence panels and temporary steel fence stands are covered by the scope, whether imported assembled or unassembled, and whether imported together or separately.
Subject merchandise includes material matching the above description that has been finished, assembled, or packaged in a third country, including by coating, painting, assembling, attaching to, or packaging with another product, or any other finishing, assembly, or packaging operation that would not otherwise remove the merchandise from the scope of the investigation if performed in the country of manufacture of the temporary steel fencing.
Temporary steel fencing is included in the scope of this investigation whether or not imported attached to, or in conjunction with, other parts and accessories such as hooks, rings, brackets, couplers, clips, connectors, handles, brackets, or latches. If temporary steel fencing is imported attached to, or in conjunction with, such non-subject merchandise, only the temporary steel fencing is included in the scope.
Merchandise covered by this investigation is currently classified in the Harmonized Tariff Schedule of the United States (HTSUS) under the subheading 7308.90.9590. The HTSUS subheading set forth above is provided for convenience and U.S. Customs purposes only. The written description of the scope is dispositive.”
Foreign Producers and Exporters of Subject Merchandise
A list of foreign producers and exporters of temporary steel fencing, as identified in the petition, is provided in Attachment 1.
U.S. Importers of Subject Merchandise
A list of U.S. importers of temporary steel fencing, as identified in the petition, is provided in Attachment 2.
Alleged Margins of Dumping/Subsidization
Petitioners allege the following dumping import duty margins:
China: 405.19%
These are only estimates based on data most favorable to Petitioner. DOC generally assigns duties at the highest alleged dumping rate to foreign producers and exporters who fail to cooperate during the investigation as to answering DOC questionnaires to obtain an AD/CVD margin based on their actual situation.
Petitioner does not provide specific subsidy rates in the petition.
Potential Trade Impact
According to official U.S. import statistics, imports of the subject merchandise totaled 38,423 short tons in 2024, representing approximately 85% of all imports of temporary steel fencing into the United States.
Estimated Schedule of Investigations
1/14/2025
Petition filed
2/28/2025
ITC preliminary injury determination
4/9/2025
DOC preliminary CVD determination, if not postponed
6/13/2025
DOC preliminary CVD determination, if fully postponed
6/23/2025
DOC preliminary AD determination, if not postponed
7/12/2025
DOC preliminary AD determination, if fully postponed
12/26/2025
DOC final AD and CVD determinations, if both preliminary and final determinations fully postponed
2/9/2026
ITC final injury determination, if DOC’s determinations fully postponed
2/16/2026
AD/CVD orders published
How Employers Can Aid Employees Impacted by the Los Angeles Wildfires
Over the past two weeks, wildfires have caused substantial loss and damage to homes and communities in Los Angeles, California, and the surrounding areas. In the wake of such devastation, employers may seek opportunities to provide financial assistance to impacted employees. Fortunately, the Internal Revenue Service (IRS) has outlined various ways for employers to provide much-needed assistance to employees impacted by natural disasters like the wildfires, including tax-free qualified disaster relief payments, leave donation programs, and other tax-efficient options.
In Depth
QUALIFIED DISASTER RELIEF PAYMENTS
Generally, payments made by an employer to, or for the benefit of, an employee must be included in the employee’s taxable gross income unless excluded under another provision. One such exclusion is “qualified disaster relief payments” under Section 139 of the Internal Revenue Code. Employers can make “qualified disaster relief payments” to employees who are victims of many disasters, including the Los Angeles wildfires, on a tax-free basis.
Qualified disaster relief payments include both reimbursements and cash advances and are not treated as taxable income/wages subject to payroll taxes (e.g., Federal Insurance Contributions Act and Federal Unemployment Tax Act) for employees. In addition, employers can deduct these payments as ordinary and necessary business expenses.
A payment qualifies as a “qualified disaster relief payment” if the following requirements are satisfied:
There has been a “qualified disaster” (e.g., a federally declared disaster issued by the president of the United States).
The payment is intended to cover reasonable and necessary personal, family, living, or funeral expenses, or reasonable and necessary expenses incurred for repairing or replacing a personal residence or its contents, provided the expenses were incurred as a result of the qualified disaster and are not covered by insurance or other resources.
The payment is not income replacement (i.e., a payment for lost wages, lost business income, or unemployment benefits).
Qualified disaster relief payments do not need to be paid pursuant to a plan document. In fact, a formal written plan document is not required or recommended. Nevertheless, given the benefits of tax-free status for qualified disaster relief payments, employers that choose to provide such payments should consider adopting an administrative process to validate such payments meet the necessary legal requirements. Such a process can include a short application form for assistance that validates the disaster for which relief is sought, contains an affirmative statement from the employee that the requested funds are necessary for expenses associated with the Los Angeles wildfires, and confirms that such expenses are not reimbursable by insurance.
In addition, employees are not required to account for actual expenses in order to qualify for the exclusion, provided that the amount of the payments can be reasonably expected to be commensurate with the expenses incurred. Although substantiation is not required, a simple application/attestation statement from the employee is recommended to provide the employer with assurance regarding its compliance with the legal requirements for offering these payments on a tax-free basis.
LEAVE DONATION PROGRAMS
Since the wildfires have been federally declared a natural disaster, an employer may establish “leave banks” for employees to donate accrued but unused leave to other employees who may be affected by the wildfires. Employees who donate their accrued leave are exempt from taxes on those amounts, but those who receive the leave will incur payroll and income taxes for the time given. Employer-sponsored leave banks programs must be written and must meet certain requirements under IRS Notice 2006-59 to receive favorable tax treatment for both the donor and recipient employee.
RETIREMENT PLAN OPTIONS
An employer-sponsored defined contribution retirement plan can provide additional relief to “qualified individuals” impacted by a qualified disaster. A “qualified individual” is an individual whose principal residence during the incident period of any qualified disaster is in the qualified disaster area and the individual has sustained an economic loss by reason of that qualified disaster. Employer-provided retirement plans can provide the following options:
Distributions up to $22,000 per federally declared disaster, with no early withdrawal penalty. Such distributions must be taken within 180 days of the date the disaster was declared.
Increased maximum loan amounts equal to 100% of a participant’s account balance, up to $100,000.
Extended repayment period of one year for current outstanding loans (as of date such natural disaster was declared). In this case, employers can extend repayment of loans to January 8, 2026.
Employers will need to amend their retirement plans if their plans do not already have such disaster-related provisions. Such amendments must be made by the end of this year for employees to take advantage of these provisions.
SUMMARY
Employers seeking to provide financial assistance to employees should consider the various tax-advantaged programs made available by the IRS. Since the requirements of each program vary, it is important that employers properly structure these programs to comply with the necessary legal requirements.