Industrials Regulatory News and Trends - January 5, 2024

Welcome to Industrials Regulatory News and Trends. In this regular bulletin, DLA Piper lawyers provide concise updates on key developments in the industrials sector to help you navigate the ever-changing business, legal, and regulatory landscape.

Biden Administration may raise tariffs on some Chinese goods, such as EVs. The Wall Street Journal reported December 21 that the Biden Administration is discussing raising tariffs on some Chinese goods, including electric vehicles, as part of an attempt to support the US clean-energy industry against less expensive Chinese imports. To date, Trump-era tariffs remain in place on roughly $300 billion worth of Chinese goods. Officials at the White House and other agencies are reportedly debating these tariffs with an eye on wrapping up a long-running review early this year. Chinese electric vehicles are subject to a 25 percent tariff, which has limited Chinese automakers’ ability to sell vehicles in the US market. That tariff is on top of a 2.5 percent tariff on auto imports. As a result, raising the 25 percent tariff may have little immediate impact on US consumers.

NDAA provision limits contractor disclosure of GHG emissions. A provision in the recently passed National Defense Authorization Act (NDAA) for fiscal year 2024 prohibits the Secretary of Defense from requiring that certain contractors disclose their greenhouse gas (GHG) emissions as a condition of receiving a contract from the Department of Defense (subject to several exceptions). This provision substantially limits a proposed rule that the Executive Branch issued in November 2022 – based on an Executive Order issued by President Biden – requiring “significant contractors” to disclose their scope 1 and 2 emissions and “major contractors” to disclose their scope 1, 2, and 3 emissions, make annual climate disclosures, and set science-based targets for emissions reductions. Although the NDAA prohibition is specific to the Department of Defense and does not apply to civilian agencies, it will significantly limit the reach of a final rule on GHG emissions.

EPA signals environmental justice will be a top priority. The EPA has extended the comment period for a draft revision of its Technical Guidance for Assessing Environmental Justice in Regulatory Analysis to January 30, 2024. The guidance signals that environmental justice will be a top priority in future agency rulemaking. For the regulated community, more information may be found in our alert.

Rail crossings reopen. US Customs and Border Protection officials have reopened two major rail crossing at the US-Mexico border. The crossings, at El Paso and Eagle Pass, Texas, had been closed by CBP on December 18 to address a wave of migrants crossing the border illegally, and were reopened on December 22. Closing these key rail crossings impacts large-scale shipment of agricultural, food, and beverage products, vehicles, consumer goods, and other industrial commodities – about USD200 million worth of trade moves through these entry points every day. Mexican and US agricultural and rail groups as well as US lawmakers had called for the crossing to be reopened, stating that the embargoes hurt both countries’ economies. Transborder rail traffic at those two crossings previously had been embargoed by the Department of Homeland Security in September after Mexican railway operator Ferromex temporarily suspended 60 trains on south-north routes because of a surge in numbers of migrants climbing aboard freight rail trains.

Railroads and shippers differ on STB’s reciprocal switching proposals. On December 21, the federal Surface Transportation Board’s controversial service-performance-based reciprocal switching proposal faced another round of criticism, with many manufacturers and other rail shippers saying that it doesn’t go far enough and carriers saying the proposal is unworkable and goes too far. The proposal, unveiled in September, would allow shippers located in certain terminal areas that are served by only one major carrier to seek access to service by a second rail carrier via “reciprocal switching” if the serving carrier failed to meet performance standards. “The most effective way to address inadequate rail service is to allow more competition through reciprocal switching,” stated a coalition that includes the American Chemistry Council, The Fertilizer Institute, and The National Industrial Transportation League. But the railroads said that their service is subject to many variables largely outside their control, such as bad weather, dispatching decisions made by terminal railroads, and rail traffic volume.

1/1/2024 is first compliance deadline in sweeping California climate disclosure bills.  California’s new suite of sweeping climate-disclosure bills is in place, and one of those, AB 1305, is now in effect.  Under AB 1305, a business entity that sells or markets carbon offsets in California for the voluntary market must now disclose on its website certain details about the project that generated the credits. Those making climate-based marketing claims – such as “net zero emissions” and “climate neutral” – must disclose the factual basis for the claims. See our alert.

US military on safety of commercial shipping in the Red Sea and Suez Canal. The US military is seeking to reassure shipping companies that a new multinational mission is making it safe for commercial vessels to sail through the Red Sea and Suez Canal, even though Yemen-based Houthi rebels show no sign of stopping their attacks. The Pentagon is “engaged with industry on a near-daily basis to gauge needs and provide reassurance that the international community is there to help with safe passage,” Air Force Lieutenant Colonel Bryon McGarry, a Defense Department spokesperson for the Middle East and Africa, said December 28. On December 31, Vice Admiral Brad Cooper stated that since the mission, Operation Prosperity Guardian, was announced in mid-December, 1,200 merchant ships have traveled through the Red Sea region, and none have been hit by drone or missile strikes. The Iran-backed Houthis have said they are targeting commercial ships linked to Israel to show support for Palestinians in Gaza. On December 31, US helicopters sank three Houthi vessels in the Red Sea after coming under fire. On January 3, Houthis claimed they had targeted a French container ship; the French shipping firm CMA CGM said its vessel was unharmed and that the ship was heading for Egypt, not Israel.

Major airlines ask FAA to do more to reduce flight delays and cancellations. On December 29, a group representing major passenger airlines urged US transportation officials to do more to address the impact of private planes and air traffic controller staffing shortages on holiday flight delays and cancellations. Airlines for America, a group representing American Airlines, Delta Air Lines, United Airlines, Southwest Airlines, and others, urged Transportation Secretary Pete Buttigieg and Federal Aviation Administration chief Michael Whitaker to “take all possible actions to find the appropriate balance between commercial and private aviation traffic with the goal of minimizing delays and cancellations for the traveling public.” The FAA said "as air travel continues to rebound, the agency is taking immediate action to recruit, train and hire more air traffic controllers" but has acknowledged that is still has about 3,000 fewer controllers than it would like to have.

California lists BPS as a female reproductive toxicant. Starting December 24, 2024, companies doing business in California will be required to provide a clear and reasonable warning under Proposition 65 for exposures to BPS, including for exposures from products manufactured or distributed prior to this date. Companies doing business in California that suspect their products may cause an exposure to BPS are encouraged to review their compliance options now. See our alert.