Policy and Legal

Next on our list of misguided, burdensome regulations is a Securities and Exchange Commission misstep: climate rules that would force manufacturers to meet impossible deadlines and disclose sensitive information, without doing anything to protect investors.

The background: Last year, the SEC proposed a new rule that would require companies to disclose a massive amount of information, much of it impractical to collect or immaterial to investors.

• First, the proposed rule requires qualitative descriptions of companies’ climate-related risks and any efforts to respond to those risks, including internal metrics and confidential strategies.
• Second, it mandates quantitative reporting of companies’ greenhouse gas emissions, while compelling companies to conduct quantitative climate impact analyses within their consolidated financial statements.

• The result? An unworkable framework that imposes uniform mandates that do not align with manufacturers’ efforts to respond to climate change—but do impose an enormous burden on manufacturers across the country.

The response: The NAM has laid out a series of necessary changes that the SEC must make to reduce compliance costs and limit liability risks associated with the rule’s requirements. Specifically, the NAM is calling on the SEC to do the following:

• Strike disclosure of Scope 3 emissions, which requires companies to track emissions data from suppliers and customers throughout the supply chain. While some manufacturers are already working to understand these emissions, the data collection, estimation and reporting methodologies are still evolving—and the proposed mandate could have a disproportionate impact on small businesses swept into the reporting regime.
• Rescind accounting changes that would require climate impact analyses of companies’ consolidated financial statements on a line-by-line basis.
• Delay annual GHG emissions reporting, granting manufacturers more time to collect and verify data.
• Adjust the climate-related risk disclosures and Scope 1 and Scope 2 emissions reporting requirements to make the provisions less prescriptive and more aligned with existing company practices.
• Fine-tune the guidelines for reporting on climate-related goals to avoid penalizing companies that set ambitious targets.
• Remove requirements that companies disclose competitively sensitive information about the internal tools they use to understand and plan for climate risks, scenarios and activities.

NAM in action: Since the SEC first unveiled this attempt at regulatory overreach, the NAM has been on the move.

• The NAM led more than 50 other manufacturing associations in a letter calling on Congress to insist that the SEC develop a more workable version of the rule.
• The NAM also urged Congress to exercise stricter oversight of the SEC, push back against the agency’s regulatory onslaught and ensure the SEC’s rules remain within the agency’s statutory authority.
• NAM President and CEO Jay Timmons made revising the climate rule a focal point of the NAM’s corporate finance agenda.
• And last, NAM Managing Vice President of Policy Chris Netram testified about the harms to small manufacturers that would result from the climate rule at a House Financial Services Committee hearing.

The last word: “Manufacturers are leaders in responding to climate change and in informing investors about this critical work, but the SEC’s climate rule is simply unworkable,” said NAM Vice President of Domestic Policy Charles Crain. “Given the complex nature of manufacturing supply chains, the rule’s costly mandates will have a disproportionate impact on our industry—and particularly on small manufacturers. The SEC must rescind, or at a minimum significantly revise, its overreaching and impractical proposal.”  

To ensure that manufacturers in the U.S. can continue to create jobs and compete effectively in the global marketplace, Congress should extend three important tax policies, the NAM, along with more than 1,300 businesses and associations, told congressional leadership today.

What needs to be done: The House and Senate must act swiftly to ensure that the tax code supports innovation, enables businesses to finance growth and incentivizes capital equipment purchases.

• On R&D: Allow businesses to once again fully deduct research and development costs in the same year in which they are incurred.
• On interest deductibility: Reverse a stricter interest deductibility limitation that makes it more expensive to undertake job-creating investments.
• On full expensing: Extend 100% accelerated depreciation, which reduces the after-tax cost of capital equipment purchases.

The background: For nearly 70 years, the tax code allowed businesses to immediately deduct their R&D costs. However, beginning in 2022, the tax code began to require businesses to amortize the costs over a period of years.

• In the same year, a stricter interest limitation—which acts as a tax on investment—went into effect. This stricter limitation disproportionately harms manufacturers given their significant capital-intensive investments.
• Finally, full expensing, a critical pro-growth incentive, began to phase down this year and is scheduled to be eliminated completely by 2027.

NAM in the news: Bloomberg Tax and Semafor (both subscription) covered the NAM-led advocacy to Congress.

The last word: “On behalf of the millions of American workers whose jobs depend on a competitive U.S. economy, we urge all members of Congress to work together by year’s end to seamlessly reinstate immediate R&D expensing, restore a pro-growth interest deductibility standard and extend full expensing,” the NAM-led business community told Congress.

“Doing so will secure the U.S. as a global leader in innovation, incentivize job-creating investments and reinforce America’s competitiveness on the world stage.”

Manufacturers spend years developing and delivering top-of-the-line vehicles for consumers. But as policymakers set new fuel standards and regulations for light vehicles, automakers are finding themselves caught in a tangled mess of policy-making that threatens manufacturers and consumers alike.

Too many regulators: A number of agencies and government bodies, along with the state of California, are each imposing their own fuel-efficiency standards and environmental regulations, forcing automakers to cope with the conflicts and contradictions.

• “Right now, we’re looking at multiple sets of standards,” said NAM Vice President of Domestic Policy Brandon Farris. “That includes the Department of Energy, the Environmental Protection Agency and the National Highway Traffic Safety Administration, as well as separate standards from California. Each has standards for vehicle emissions, and they’re not well-aligned.”

Brief timelines: In addition, all of these regulations come with their own timelines for compliance, which often don’t give manufacturers enough time to innovate, test and produce new vehicles.

• “The timelines are short,” said Farris. “One of the things we’re asking agencies to recognize is the manufacturing lead time that’s needed.”

Product mandates: In some cases, agencies are imposing mandates that will narrow the range of vehicles that automakers can produce. The EPA, for example, is calling for 67% of all new vehicles to be battery electric in 10 years, a requirement that would squeeze out other fuel-efficient models.

• “What that’s going to do is cut down on consumer choice,” said Farris. “There are conventional hybrids, plug-in hybrids, hydrogen fuel cell vehicles, battery electric vehicles and others that could all reduce emissions, but the EPA has cut out all of those and selected one kind of technology.”

NAM in action: The NAM is deeply involved in conversations with policymakers in the administration and Congress, working to give manufacturers the support they need.

• “We’re working with the agencies, we’re submitting regulatory comments, we’re raising this with the White House and Congress, and we’re working on potential legislation that may address this as well,” said Farris.

Our ask: According to Farris, the NAM is calling on policymakers to take four steps.

• Harmonize standards: With so many overlapping standards, manufacturers are left without clear guidance. Giving manufacturers a single standard would make it easier for automakers and consumers alike.
• Set realistic targets: Standards must be achievable to have a real and positive impact.
• Provide reasonable timeframes: From sourcing critical minerals to manufacturing new engines, automakers need the appropriate time to succeed.
• Protect consumer choice: Consumers should be able to choose between different kinds of vehicles to reduce emissions overall.

The bottom line: “We have shifting standards, standards that aren’t aligned and overlapping timelines,” said Farris. “If you’re a manufacturer trying to make a single automotive that consumers want right now, you’re shooting at a moving target.” 

The pharmaceutical manufacturing industry is a critical piece of the U.S. economy, creating well-paying, valuable STEM jobs and contributing large sums in value-added output. However, federal price controls could threaten these benefits, according to a new study from the NAM.

What’s going on: The analysis, “Creating Cures, Saving Lives,” was released Wednesday and analyzes the industry’s contributions to the overall economy, as well as ways in which it could be affected by federal price control policies, such as those in last year’s Inflation Reduction Act.

• In August, the Department of Health and Human Services announced that it had chosen the first 10 drugs for prescription-cost negotiations required by the legislation.
• Last month, all 10 manufacturers “agreed to participate essentially because they had no choice,” according to reporting by The Hill.

Why it’s important: Controls on drug prices jeopardize innovation and competitiveness—which is why the NAM has long opposed them.

• What’s more, pharmaceutical manufacturing is a major contributor to the American economy, and government regulations should help, not hinder, it.
• “Pharmaceutical manufacturers are a major contributor to the U.S. economy, employ[ing] millions of Americans and driv[ing] innovation,” said NAM Chief Economist Chad Moutray. “The industry’s investments in R&D have led to lifesaving treatments and therapies that have improved the quality of life for all Americans. This study explores the negative implications of price control policies on pharmaceutical leadership, putting American jobs and innovation in the health care system at risk.”

Manufacturers spend years developing and delivering top-of-the-line vehicles for consumers. But as policymakers set new fuel standards and regulations for light vehicles, automakers are finding themselves caught in a tangled mess of policy-making that threatens manufacturers and consumers alike.

Too many regulators: A number of agencies and government bodies, along with the state of California, are each imposing their own fuel-efficiency standards and environmental regulations, forcing automakers to cope with the conflicts and contradictions.

• “Right now, we’re looking at multiple sets of standards,” said NAM Vice President of Domestic Policy Brandon Farris. “That includes the Department of Energy, the Environmental Protection Agency and the National Highway Traffic Safety Administration, as well as separate standards from California. Each has standards for vehicle emissions, and they’re not well-aligned.”

Brief timelines: In addition, all of these regulations come with their own timelines for compliance, which often don’t give manufacturers enough time to innovate, test and produce new vehicles.

• “The timelines are short,” said Farris. “One of the things we’re asking agencies to recognize is the manufacturing lead time that’s needed.”

Product mandates: In some cases, agencies are imposing mandates that will narrow the range of vehicles that automakers can produce. The EPA, for example, is calling for 67% of all new vehicles to be battery electric in 10 years, a requirement that would squeeze out other fuel-efficient models.

• “What that’s going to do is cut down on consumer choice,” said Farris. “There are conventional hybrids, plug-in hybrids, hydrogen fuel cell vehicles, battery electric vehicles and others that could all reduce emissions, but the EPA has cut out all of those and selected one kind of technology.”

Read the full story here.

Washington, D.C. – The National Association of Manufacturers released a new study, “Creating Cures, Saving Lives,” which demonstrates the urgency of strengthening U.S. pharmaceutical manufacturing amid policy threats to the sector’s innovative, global leadership.

“Creating Cures, Saving Lives” analyzes the sector’s contributions to the broader economy and its commitment to R&D that drives the development of lifesaving treatments, such as advancements in therapeutics that fight cancer. The study further examines the ways that federal price controls on the sector, such as those contained in the Inflation Reduction Act, could jeopardize these treatments. The study comes at a critical time, as the Centers for Medicare & Medicaid Services recently announced the first tranche of treatments that will be subject to price controls.

“Pharmaceutical manufacturers are a major contributor to the U.S. economy, employ millions of Americans and drive innovation. The industry’s investments in R&D have led to lifesaving treatments and therapies that have improved the quality of life for all Americans,” said NAM Chief Economist Chad Moutray. “This study explores the negative implications of price control policies on pharmaceutical leadership, putting American jobs and innovation in the health care system at risk.”

“Creating Cures, Saving Lives” includes seven key findings on the importance of the pharmaceutical and medical manufacturing industry and the implications of price controls on the sector:

• The pharmaceutical manufacturing industry is a major contributor to the U.S. economy, and its impact is growing.
  • The industry accounted for $355 billion in value-added output to the U.S. economy in 2021. The direct contribution from the industry of $192 billion is up 24% from just two years ago. The pharmaceutical sector was already an economically vital sector before the pandemic, and it has become increasingly more important in its aftermath.
• The pharmaceutical manufacturing industry fuels other sectors of the economy, supporting nearly 1.5 million jobs in America.
  • The industry directly employs an estimated 291,000 workers in the United States, an increase of nearly 9% in the past 24 months. One job in the pharmaceutical manufacturing industry helps support 4.1 other jobs in the overall workforce.
• Industry employees are highly productive.
  • Industry employees produce $1.2 million in output per employee. This is nearly six times more than the U.S. economy’s average output per employee ($208,084).

• A successful pharmaceutical ecosystem requires strong private-sector investment.
  • The pharmaceutical industry invests 16.6% of its sales back into R&D. Indeed, the U.S. pharmaceutical industry invests nearly 3.5 times more in R&D as a percentage of sales than the average U.S. industry.
• The pharmaceutical manufacturing industry pays high wages and benefits to American workers.
  • Annual average labor income per worker in the pharmaceutical manufacturing industry is more than $184,000. This figure is higher than some of the highest-paying industries in the country.
• The industry creates valuable STEM jobs.
  • While roughly 6.6% of the U.S. workforce has a STEM occupation, some 25% of all jobs in pharmaceutical and medicine manufacturing are STEM-related. The pharmaceutical manufacturing sector employs more than four times the percentage of STEM workers employed in the overall workforce.
• Price control policies, like those in the IRA, may hurt U.S. pharmaceutical leadership.
  • Price controls may deter advancements in health care by reducing investments in R&D, negatively impacting the nation’s economic prosperity.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.91 trillion to the U.S. economy annually and accounts for 55% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Washington, D.C. – The National Association of Manufacturers, along with 71 leading business groups representing sectors across the economy, urged White House Chief of Staff Jeff Zients to help ensure that the Environmental Protection Agency maintains existing National Ambient Air Quality Standards for fine particulate matter (PM2.5).

“Manufacturers in America are committed to improving air quality and have been responsible for the development of new processes and technologies that have made our sector more sustainable,” said NAM President and CEO Jay Timmons. “The Biden administration’s proposal to make these standards even more stringent is putting manufacturing investment at risk across vast swaths of the country and will jeopardize nearly 1 million jobs. If the president and his agencies want the Bipartisan Infrastructure Law and the CHIPS and Science Act to succeed—and want to see manufacturing in America continue to grow—they should refrain from further changes to the standard, which is already among the most aggressive in the world.”

As the letter states:

A proposed discretionary revision to this standard, which is under review by the Office of Information and Regulatory Affairs, could put nearly 40% of the U.S. population in areas of nonattainment. Doing so would risk jobs and livelihoods by making it even more difficult to obtain permits for new factories, facilities and infrastructure to power economic growth. This proposal would also threaten successful implementation of the Infrastructure Investment and Jobs Act, the CHIPS and Science Act and the important clean energy provisions of the Inflation Reduction Act.

Our members have innovated and worked with regulators to lower PM2.5 concentrations significantly, and further progress is being made as part of the energy transition investments. The EPA recently reported that PM2.5 concentrations have declined by 42% since 2000, driven by major emissions reductions from both mobile sources and the power sector. As a result, America’s air is cleaner than ever.

A recent analysis conducted by Oxford Economics and commissioned by the National Association of Manufacturers found that the proposed standard would reduce GDP by nearly $200 billion and cost as many as 1 million jobs through 2031.

At 8 ug/m³, the lowest level considered by the EPA, more than 20% of all U.S. counties would be out of attainment and thrown into permitting gridlock.

To view the full letter, click here.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs 13 million men and women, contributes $2.91 trillion to the U.S. economy annually and accounts for 53% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

The NAM secured a critical win Monday when the Securities and Exchange Commission issued an order reversing course on a novel rule interpretation that would have forced private companies to disclose proprietary financial information publicly, Law 360 (subscription) reports.

What’s going on: In 2021, the SEC adopted a novel reinterpretation of SEC Rule 15c2-11, imposing the rule’s public disclosure requirements on private companies that raise capital via corporate bond issuances under SEC Rule 144A—without giving manufacturers the opportunity to provide comment on the damaging impacts of such a consequential change.

• The NAM and the Kentucky Association of Manufacturers pursued multipronged litigation and advocacy efforts arguing to the Commission and to the courts that the SEC’s actions were both procedurally improper and substantively indefensible.
• Rule 15c2-11 requires public disclosures for the protection of everyday investors in publicly traded companies that issue so-called “penny stocks.”
• But in 2020, the SEC expanded the rule to apply to privately held companies issuing corporate bonds to large institutional investors under Rule 144A.
• For decades prior, Rule 144A permitted trades in private companies’ fixed-incomes securities without public disclosure of the issuers’ financial information. Indeed, the SEC’s entire purpose for adopting Rule 144A was to allow companies to access the debt markets without public disclosure of their financial and business-strategy information.

NAM in the news: The SEC took the rare step of reversing its position on Monday, declaring that “it is appropriate in the public interest and consistent with the protection of investors” to exempt Rule 144A fixed-income securities from the requirements of Rule 15c2-11.

• “The order comes after industry groups petitioned the agency to provide relief to certain corporate debt issuers. The National Association of Manufacturers and the Kentucky Association of Manufacturers, which sought such relief in November 2022, also sued the agency in September, arguing that the SEC’s policy was enacted without public input and could harm job-creation efforts, given how many private companies rely on 144A bonds,” Law360 reports.
• Bloomberg Tax (subscription) also covered the news.

Why it’s important: Expansion of Rule 15c2-11 would have meant higher borrowing costs and less liquidity in the market—and resulted in more than 100,000 job losses a year, according to recent EY analysis prepared on behalf of the NAM.

Our take: The SEC’s action not only restores private companies’ ability to access the debt markets, but also exemplifies why the NAM litigates—as a last line of defense, to force an agency’s hand.

• “This order from the SEC is a landmark victory for manufacturers and a powerful affirmation of the NAM Legal Center’s ability to rein in regulatory overreach,” NAM Chief Legal Officer Linda Kelly said Tuesday. “We are thrilled that the Commission has reversed course on this unlawful attempt to impose a novel, onerous and wholly unjustified regulatory mandate on private companies.”
• Added KAM President and CEO Frank Jemley: “We applaud the SEC’s decision to withdraw its ill-conceived proposal. American business and free enterprise are best served when government respects the boundaries of its authority, which the SEC clearly did not do in this matter.”

Washington, D.C. – Following the announcement of the Securities and Exchange Commission’s decision to exempt Rule 144A debt—a type of corporate bond often issued by private companies—from its public disclosure requirements, the National Association of Manufacturers Chief Legal Officer Linda Kelly released the following statement:

“This order from the SEC is a landmark victory for manufacturers and a powerful affirmation of the NAM Legal Center’s ability to rein in regulatory overreach. Our multipronged advocacy and litigation efforts, alongside the Kentucky Association of Manufacturers, forced the SEC to grapple with its complete lack of justification for applying potentially harmful public disclosure requirements on Rule 144A issuers, which would have required private businesses to disclose proprietary financial information publicly. We are thrilled that the Commission has reversed course on this unlawful attempt to impose a novel, onerous and wholly-unjustified regulatory mandate on private companies.”

“We applaud the SEC’s decision to withdraw its ill-conceived proposal and appreciate the partnership with the outstanding team at the NAM to oppose it aggressively,” said Frank Jemley, President and CEO of the Kentucky Association of Manufacturers. “American business and free enterprise are best served when government respects the boundaries of its authority, which the SEC clearly did not do in this matter.”

Background:

The SEC adopted a novel reinterpretation of SEC Rule 15c2-11, imposing the rule’s public disclosure requirements on private companies that raise capital via corporate bond issuances under SEC Rule 144A—without giving manufacturers the opportunity to provide comment on the damaging impacts of such a consequential change.

According to a recent EY economic analysis commissioned by the NAM, the SEC’s expansion of Rule 15c2-11 would have resulted in decreased liquidity and increased borrowing costs in the manufacturing industry and throughout the economy—leading to job losses exceeding 100,000 annually.

The NAM and the KAM filed petitions for rulemaking, calling on the SEC to reverse course by clarifying—either by rule or by exemptive order—that Rule 144A issuers are not required to make public financial disclosures. After the agency temporarily delayed enforcement of its novel interpretation but failed to provide complete relief, the NAM and the KAM went to court—filing a lawsuit in federal district court challenging the Commission’s actions under the Administrative Procedure Act, along with parallel actions in the 6th Circuit seeking review of the agency’s failure to grant complete relief.

-NAM- 

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs 13 million men and women, contributes $2.91 trillion to the U.S. economy annually and accounts for 54% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Washington, D.C. – Today, following the release of President Joe Biden’s Executive Order on Artificial Intelligence, National Association of Manufacturers Managing Vice President of Policy Chris Netram released this statement:

“Artificial intelligence represents a tremendous opportunity for modern manufacturing. AI is already helping manufacturers improve safety and training and empower workers to be even more innovative. It is unlocking incredible opportunities for predictive maintenance and product development, and manufacturers are continuing to develop further applications for AI. Manufacturers look forward to working with the administration following the executive order to ensure that any AI standards adopted at the federal level are developed with strong industry participation, support innovation and R&D, remain scaled based on the guardrails necessary for a particular technology or application, protect companies from unnecessary liability and bolster U.S. competitiveness and leadership in AI. Manufacturers also support strong data privacy and cybersecurity protections as well as robust investments in workforce development and prioritizing workforce needs through reforms to our immigration system.”

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.91 trillion to the U.S. economy annually and accounts for 55% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.