Regulatory and Legal Reform

The U.S. Court of Appeals for the D.C. Circuit should overturn a lower court’s ruling that the Securities and Exchange Commission lacks the authority to regulate proxy advisory firms, the NAM said in a recently filed brief.

What’s going on: The Nov. 15 brief asking the appeals court to overturn a February ruling by the D.C. District Court is the latest in a years-long campaign by the NAM to ensure reasonable regulation of proxy firms. These powerful, unregulated entities often dictate how shareholders vote on proxy ballot proposals that come before public companies.

• “Since the passage of the Securities Exchange Act of 1934 in the wake of the Great Depression, the Securities and Exchange Commission has regulated proxy solicitation, so shareholders can confidently vote based on transparent and reliable information,” according to the NAM brief. “Accordingly, since the proxy voting advice industry emerged four decades ago, those firms have been subject to SEC regulation.”
• Institutional Shareholder Services, the largest and most influential proxy firm, “would rather not be regulated at all”—but “[t]he record overwhelmingly establishes that proxy firms ‘solicit’ proxies under any reasonable definition,” subjecting them to SEC oversight as required by the Exchange Act.

Why it’s important: Proxy firms wield enormous influence over both manufacturers and Main Street investors, the NAM said.

• “ISS and its main competitor, Glass Lewis, control 97% of the proxy advice market and together influence nearly 40% of the U.S. shareholder vote,” the NAM told the court in its brief.
• Further, proxy firms operate with undisclosed conflicts of interest, their reports can contain errors and misleading statements and their “robo-voting” services give them the authority to cast investors’ proxy votes with no review or input by the investors themselves.

NAM on the front lines: In July 2020, after years of NAM advocacy, the SEC finalized a rule instituting critical proxy firm reforms. ISS quickly brought a legal challenge, and the NAM intervened in the case to ensure a robust defense of the rule.

• Following the change in presidential administrations in 2021, in separate lawsuits the NAM successfully challenged the Biden SEC’s refusal to enforce the 2020 rule and its rescission of critical portions of the rule.
• After an unfavorable decision from the D.C. district court in the ISS challenge, the Biden SEC declined to pursue an appeal, effectively disclaiming its authority to regulate proxy firms. The NAM took the lead as intervenor-appellant in the case, so manufacturers are now the sole bulwark against proxy firms’ unchecked power. A victory in the D.C. Circuit for the NAM would make the proxy firms subject to the 2020 rule’s important reforms.

Former SEC officials agree: A group of former SEC commissioners and staff authored an amicus brief in support of the NAM’s position.

• The brief chronicles the commission’s 50-year history of affirming that proxy firms are engaged in solicitation. The officials make clear that “stripping the SEC of its long-standing and Congressionally conferred power to regulate the firms” would “seriously harm the investing public by decreasing fairness and honesty in the markets—exactly the opposite of what Congress was trying to accomplish in the Exchange Act.”

What’s next: ISS’s response to the NAM’s brief is due in the coming weeks, and the court likely will schedule oral argument for early 2025.

The “30C” tax credit has the potential to spur manufacturing investment, but the Internal Revenue Service and Treasury Department must first clarify some of their proposed rules regarding it, the NAM said this week.

What’s going on: In September, the IRS and Treasury Department jointly proposed regulations regarding Section 30C of the U.S. tax code’s Alternative Fuel Vehicle Refueling Property Tax Credit, which was changed and expanded by the Inflation Reduction Act of 2022.

• “A key purpose of the energy provisions of the IRA was to reduce greenhouse gas emissions and spur manufacturing investments in low emissions and renewable energy sectors,” NAM Vice President of Domestic Policy Chris Phalen told the IRS on Monday.
• “Manufacturers make vehicles that use alternative fueling stations, many of our members produce the components … that go into these stations and manufacturers will construct and operate these refueling properties. These companies require certainty and specificity to make final investment decisions.”

What must be done: To that end, the NAM told the agencies the following changes should be made to the proposed regulations for the 30C tax credit:

• Extend the allowed transition period for organizations to update “census tract designations to reflect population data in the years 2016–2020,” as the draft rulemaking mandates that those wishing to take advantage of the 30C credit “must place the property into service within a specific census tract designation.”
• Clarify whether the location of the refueling infrastructure “would need to be made available to the public to qualify for the 30C tax credit.”
• Provide tax credit “eligibility for certain property directly attributable to the operation of alternative fuel vehicle refueling property, such as electrical panels and conduit/wiring, and ask that the agency also consider related construction and other project costs for eligibility.”

With a new administration and Congress on the horizon, the NAM is signaling confidence in its ability to secure wins for manufacturing in the United States, highlighting both recent achievements and policy priorities moving forward.

“The NAM has always focused on what’s best for manufacturing in America, and our track record speaks to that,” said NAM Executive Vice President Erin Streeter. “Our approach is consistent because we know what it takes to get results.”

What we’ve delivered: With post-partisan engagement, the NAM has achieved historic policy wins across both recent administrations, including:

• Tax reform: The NAM’s advocacy helped shape the 2017 tax cuts, driving billions in savings that manufacturers have reinvested in jobs, innovation and facility upgrades.
• Regulatory certainty: The NAM has played a pivotal role in streamlining regulations, reducing compliance costs under the Trump administration and working to slow regulatory expansion during the Biden years.
• United States-Mexico-Canada Agreement: The NAM was a key advocate for USMCA, safeguarding U.S. jobs by ensuring fairer competition and greater access to key markets.
• Energy advances: NAM-backed policies have supported growth in domestic energy production, creating a more stable energy market.
• Infrastructure and CHIPS Act: The NAM was instrumental in securing the historic Bipartisan Infrastructure Law and the CHIPS and Science Act, both critical for modernizing the economy, bolstering national security and ensuring a reliable semiconductor supply.

“These wins demonstrate what we bring to the table,” Streeter said. “By staying focused on manufacturing’s priorities, we can partner effectively with the new administration and Congress to create and protect jobs and strengthen communities.”

Looking ahead: The NAM’s focus on core issues remains critical for keeping the sector competitive and resilient, Streeter continued. These issues include:

• Securing tax reform: The NAM’s “Manufacturing Wins” campaign aims to lock in key 2017 tax provisions that manufacturers rely on for stability and growth. “Tax reform has been a game-changer,” said Streeter. “Protecting that progress means more jobs and manufacturing-led growth across the country.”
• Regulatory certainty: The NAM is advocating for balanced regulations that support competitiveness. “Manufacturers thrive with clear, fair rules,” Streeter noted. “We’re making sure Washington understands the importance of regulatory stability—and the danger of excessive regulation.”
• Energy security: The NAM is working to secure reliable, affordable energy while fostering innovation in sustainability. “Energy security and grid reliability are top of mind for every manufacturer,” Streeter added. “We’re ensuring manufacturers can continue to innovate, grow and drive America forward.”

Bottom line:  The NAM remains focused on advocating for policies that strengthen U.S. manufacturing. “Our success is built on trust and influence,” Streeter said. “Our members know the NAM is a constant force, with the relationships and expertise to deliver, regardless of political changes.”

In related news, President-elect Trump has named campaign manager Susie Wiles as White House chief of staff (Reuters, subscription), a choice NAM President and CEO Jay Timmons called “a powerful move to bring bold, results-driven leadership to the White House from day one.”

Manufacturers agree that the U.S. should address the potential national security and privacy risks associated with connected vehicles—those that use technologies to communicate with each other and other systems. But “[n]ational security, privacy and economic strength can be pursued in conjunction with one another,” the NAM told the Commerce Department this week.
 
What’s going on: In September, the Commerce Department’s Bureau of Industry and Security proposed rules to ban connected vehicles that integrate information and communications technology from China and Russia (POLITICO).

• While manufacturers support safeguarding efforts, “[o]ur competitiveness also requires national security challenges to be addressed through proportionate actions … [that] do not unduly hinder” American manufacturing, NAM Managing Vice President of Policy Chris Netram told BIS on Monday.
• The rule’s software prohibitions would go into effect for vehicles model year 2027, while the hardware regulations would take effect for vehicles model year 2030. The NAM is asking BIS to discuss with stakeholders whether they need more time to comply, given the length of the automotive design and development cycles.

What it could do: If finalized, the rule would require automotive manufacturers using Chinese or Russian technology to find new suppliers.
 
The problem: “Automotive supply chains are highly complex, with [information and communications technology and services] embedded in the products of many sub-suppliers who sell to automotive original equipment manufacturers,” Netram continued.

• What’s more, information and communications technology and services “are foundational technologies across the manufacturing ecosystem and wider economy. As such, the rule in its current form could generate unintended consequences both within the automotive industry and across the broader ICTS supply chain, violating the department’s obligation to engage in reasoned decision making and avoid arbitrary and capricious rulemaking.”   

What should happen: The NAM urged BIS to take several actions, including the following:

• Clearer definitions: Certain wording in the rule should be rephrased for clarity, including “Person Owned by, Controlled by or Subject to the Jurisdiction or Direction of a Foreign Adversary” and “Connected Vehicle.”
• Covered software: “[T]he NAM urges BIS to consider revising the proposed rule to ensure it does not require visibility into and control over the software code provided by an OEM’s tier 3 suppliers and beyond.”
• Specific authorizations: “[T]he NAM recommends that BIS issue clear guidance about what criteria the Office of Information and Communications Technology would use to review and approve the risk assessments and the measures proposed by the applicant to mitigate the risks.”
• Attestations of compliance: Allow companies “to attest to their compliance” rather than “document and demonstrate compliance” to safeguard trade secrets.

The final say: With the NAM’s recommended changes, the BIS’s draft rulemaking “will support national security and privacy while ensuring that a vibrant manufacturing industry can continue to innovate and power growth in America for years to come,” Netram concluded.

Manufacturer sentiment fell in the third quarter of this year, according to the NAM’s Q3 2024 Manufacturers’ Outlook Survey, out Wednesday.

What’s going on: Results of the survey, which was conducted Sept. 5–20, reflect “preelection uncertainty,” NAM President and CEO Jay Timmons said—but also larger economic concerns.

• “The good news is that there is something we can do about it,” said Timmons. “We will work with lawmakers from both parties to halt the looming tax increases in 2025; address the risk of higher tariffs; restore balance to regulations; achieve permitting and energy security; and ease labor shortages and supply chain disruptions.”

Key findings: Notable data points from the survey include the following:

• Some 62.9% of respondents reported feeling either somewhat or very positive about their business’s outlook, a decline from 71.9% in Q2.
• A weaker domestic economy was the top business challenge for those surveyed, with 68.4% of respondents citing it.
• Nearly nine out of 10 manufacturers surveyed agreed that Congress should act before the end of 2025 to prevent scheduled tax increases on manufacturers.
• The overwhelming majority—92.3%—said the corporate tax rate should remain at or below 21%, with more than 71% saying a higher rate would have a negative impact on their businesses.
• More than 72% said they support congressional action to lower health care costs through the reform of pharmacy benefit managers.

The last word: “When policymakers take action to create a more competitive business climate for manufacturers, we can sustain America’s manufacturing resurgence—and strengthen our can-do spirit,” Timmons said.

• “This administration and Congress—and the next administration and Congress—should take this to heart, put aside politics, personality and process and focus on the right policies to strengthen the foundation of the American economy.”

The liquefied natural gas export industry has turned the U.S. into a powerhouse of cleaner energy, benefiting its trading partners around the world. The Biden administration’s ongoing ban on new LNG export licenses, however, is throttling an industry that could produce many more billions in revenue and a startling 900,000 jobs by 2044.

The data: A new study from the NAM and PwC shows that the U.S. LNG revolution could extend its upward climb, as shown on the graph above. Today, the industry is a huge source of jobs and profit:

• U.S. LNG exports support 222,450 jobs, resulting in $23.2 billion in labor income.
• The LNG industry contributes $43.8 billion to U.S. GDP.
• And lastly, federal, state and local governments receive $11.0 billion in tax and royalty revenues, thanks to U.S. LNG exports.

But that pales in comparison to the industry’s potential over the next two decades. The study projects the likely growth of the industry through 2044, showing all that is at stake if the ban remains in place until then:

• Between 515,960 and 901,250 jobs, resulting in $59.0 billion to $103.9 billion in labor income, would be at risk.
• The ban would also stifle between $122.5 billion and $215.7 billion in contributions to U.S. GDP during the same period.
• Between $26.9 billion and $47.7 billion in tax and royalty revenues meant to benefit communities across the United States would also be at risk in 2044.

Public opinion: The American public is squarely behind the LNG export industry, showing overwhelming approval in an NAM poll taken in March.

• Eighty-seven percent of respondents agreed the U.S. should continue to export natural gas.
• Seventy-six percent of respondents agreed with building more energy infrastructure, such as port terminals.

The last word: “With LNG exports, we do not have to choose between what’s good for the economy and good for the planet. Today’s research shows the massive opportunity America has when we unleash our economic and energy potential,” said NAM President and CEO Jay Timmons.

• “Building LNG export facilities and expanding natural gas production are not just good for our industry—they also cut emissions and help power manufacturing around the world.”

In high-level meetings with government, manufacturing and trade group leaders held in Mexico last week, the NAM hammered home a key message: For North American manufacturing to remain globally competitive, Mexico must protect investor holdings in the country.
 
What’s going on: During a jam-packed three-day visit to Mexico City, NAM President and CEO Jay Timmons and an NAM contingent met with top officials in the new Sheinbaum administration, as well as leadership at multiple agencies and associations.

• These included newly appointed Deputy Trade Minister Luis Rosendo Gutiérrez, the Business Coordinating Council (CCE), the Confederation of Industrial Chambers of Mexico (CONCAMIN), the Mexico Business Council (CMN), the National Council of the Export Manufacturing Industry (INDEX) and others.   

What they said: The NAM’s main message at each gathering was the same: Companies investing in Mexico need assurance that their portfolios will be protected regardless of the fate of proposed judicial reforms in the country.

• The NAM also underscored the importance of the U.S.–Mexico–Canada Agreement, which is due for review in 2026, and the necessity of ensuring that the deal is upheld for all three parties.
• If its terms are respected, USMCA could help North American manufacturing outcompete China.

On China: This week, just days after his office’s meeting with the NAM, Gutiérrez announced that the Sheinbaum administration will seek U.S. manufacturers’ help to reshore—mainly from China—the production of some critical technologies (The Wall Street Journal, subscription).

• “We want to focus on supporting our domestic supply chains,” he told the Journal, adding that talks with U.S. companies are still in the informal stage.

​​​​​​​The NAM says:  “Manufacturing is at the heart of the USMCA,” said NAM Vice President of International Policy Andrea Durkin, who was part of the NAM group on the ground in Mexico. “The NAM intends to work to ensure that the agreement strengthens the competitiveness of manufacturers.”
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The EPA’s final rule setting national drinking water standards for PFAS should be vacated in its entirety, the NAM and two allies said in an opening brief filed in federal court Monday.
 
What’s going on: The NAM, the American Chemistry Council and U.S. chemical company Chemours asked the U.S. Court of Appeals for the D.C. Circuit to overturn the EPA’s rule, announced in April, which requires that municipal water systems nationwide remove six types of per- and polyfluoroalkyl substances from drinking water. Trade groups representing the water systems have also sued to overturn the rule.  
 
The grounds: The rule is unlawful and must be set aside for the following reasons:

• ​​​​The EPA used a deeply flawed cost-benefit analysis to justify the rule.
• The EPA conducted a woefully incomplete feasibility analysis that ignores whether the technology and facilities necessary for compliance actually exist.
• Critical parts of the rule exceed the agency’s statutory authority under the Safe Drinking Water Act and flout the act’s express procedural requirements.
• The EPA failed to consider reasonable alternatives or respond meaningfully to public comments that undercut its judgment.
• The agency “lacked sufficient data to regulate” HFPO-DA, one of the PFAS chemicals that falls under the rule.

Why it’s important: PFAS “are substances at the center of modern innovation and sustain many common technologies including semiconductors, telecommunications, defense systems, life-saving therapeutics and renewable energy sources,” according to the brief.

• The NAM and its co-petitioners “support rational regulation of PFAS that allows manufacturers to continue supporting critical industries, while developing new chemistries and minimizing any potential environmental impacts. But that requires a measured and evidence-based approach that the [r]ule lacks.”

What’s next: Briefing in this case will continue through the spring, with oral argument to follow and a decision from the D.C. Circuit expected in late 2025. 

The NAM this week advocated the passage of two pieces of manufacturing-critical legislation, successfully driving the agenda of a Wednesday House Energy and Commerce Committee markup.

What’s going on: The committee—with the NAM’s strong support—approved two bills that address longstanding manufacturing priorities:

• A congressional resolution disapproving of the Environmental Protection Agency’s harmful PM2.5 rule
• A bill instituting important pharmacy benefit manager reforms

Reversing an unworkable PM2.5 standard: The EPA announced a new, more restrictive particulate matter standard in February, reducing allowable levels from 12 micrograms per cubic meter of air to 9 micrograms—despite a standard of 9 being “essentially background levels in some of the country,” as the NAM has pointed out.

• “Manufacturers have sharply reduced particulate matter emissions, or PM2.5; as a result, industry in the United States has some of the cleanest and most efficient operations in the world,” NAM Vice President of Domestic Policy Chris Phalen told the committee.
• “Now, the vast majority of emissions are from sources well outside of our control, with fires, dirt roads and other nonpoint sources accounting for 84% of PM2.5 emissions,” Phalen continued. “[T]he EPA’s rule will make it more difficult for states to issue permits for the construction of new facilities or expansions of existing factories.”
• The committee’s PM2.5 resolution, offered under the Congressional Review Act, seeks to overturn the EPA’s unworkable standard.

Reforming PBMs: PBMs are unregulated middlemen whose business practices drive up health care costs for manufacturers and manufacturing workers.

• “By applying upward pressure to list prices that dictate what patients pay at the pharmacy counter, pocketing manufacturer rebates and failing to provide an appropriate level of transparency about their business practices, PBMs increase health care costs at the expense of all patients in America,” NAM Vice President of Domestic Policy Charles Crain said.
• Provisions in the NAM-supported Telehealth Modernization Act would increase transparency into PBMs’ business practices and delink their compensation from medicines’ list prices.

The last word: “Manufacturers commend the Energy and Commerce Committee for approving these important bills, which will reduce costs and enhance growth at manufacturers across the country—allowing our industry to continue to create jobs here at home and drive U.S. competitiveness on the world stage,” said NAM Managing Vice President of Policy Chris Netram.

A draft Department of Homeland Security rule requiring that certain sectors expedite cyber-incident reporting has several shortcomings that must be addressed before the rule becomes final in the fall of 2025, the NAM told Rep. Andrew Garbarino (R-NY) in a meeting this week.

What’s going on: Rep. Garbarino, chair of the House Homeland Security Subcommittee on Cybersecurity and Infrastructure Protection, met with manufacturers and the NAM Technology Policy Committee Tuesday to talk cybersecurity issues.

• Much of the discussion focused on draft rulemaking published in April by the DHS’s Cybersecurity and Infrastructure Security Agency. It would require “covered entities” in “critical infrastructure sector[s]” to report any major cybersecurity incidents to CISA within 72 hours.
• Under the Cybersecurity Incident Reporting for Critical Infrastructure Act, CISA must finalize the rule by October 2025.

Why it’s a problem: The NAM agrees with the concerns Rep. Garbarino raised with CISA, including:

• The burden associated with imposing onerous reporting mandates on companies recovering from cyberattacks;
• An overbroad scope, which forces into compliance both organizations that are not truly “critical infrastructure” and those that are too small to have the resources needed to complete the required actions;
• An overbroad definition of incidents requiring reporting;
• An excessive amount of required information;
• An unreasonably high cost of compliance and the diversion of resources away from cyber-incident response; and
• The risk that the proposed rule will jeopardize CISA’s role as a trusted partner of industry.

NAM in action: The NAM submitted comments in response to CISA’s proposal earlier this year outlining these concerns, as well as calling for a reduction in both the number of entities required to file incident notifications and the number of incidents they have to report.

The NAM says: “CISA needs to significantly rethink its approach to CIRCIA’s implementation,” said NAM Senior Director of Technology Policy Franck Journoud.

• “The proposed rule requires far too much information about far too many incidents from far too many companies. CISA should not mandate that companies under attack from hackers divert precious security resources to generate mountains of incident data that CISA will not have the means to process or act upon.”

Take precautions: If you are looking to strengthen your company’s cyber protections, check out NAM Cyber Cover, an affordable, broad security program for NAM members that provides proactive monitoring with automated alerts at no extra cost.