Industrials Regulatory News and Trends - August 11, 2023
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.
Steel industry is expanding in response to government stimulus and electric-vehicle growth. Partly in response to the billions of dollars of infrastructure spending and of solar-power and wind-power investment fostered by the Biden Administration, the US steel industry is now expanding rapidly. The Wall Street Journal reported August 3 that steelmakers are investing in new plants, anticipating a big payoff from the steel needed for federal infrastructure projects, increased car production, and new electric-vehicle battery facilities. The industry is also anticipating the construction of large new plants to manufacture semiconductors. According to the article, steel executives expect that funding will start to reach specific projects later this year, allowing orders for steel and other materials to follow. The construction and automotive industries are the biggest users of steel made in the United States.
Automakers join in project to build EV charging network. On July 26, seven major automakers announced they are joining to build a large North American electric vehicle charging network. Auto industry analysts say that the move by General Motors, BMW, Honda, Hyundai, Kia, Mercedes, and Stellantis to build a network of rapid chargers will nearly double the number of quick-charging plugs in the US and Canada and is designed to induce the mass of US consumers to consider buying EVs instead of gasoline-powered vehicles. These seven brands represent about half the US vehicle market. The companies said they aim to roll out 30,000 chargers in North America, starting along major highways and in cities. The automakers project that the first stations in the network will be in the US and will open in 2024.
In related EV news, Stellantis announced on August 7 that it will add a second affordable battery-electric vehicle to its lineup, a Fiat-branded entry-level EV with a projected price tag of about $27,500. Initially, the vehicle will target the European market, competing with the Renault Dacia Spring. Earlier this year, Stellantis announced it will begin delivering its Fiat 500e to the US market in early 2024. The new all-electric model has been on sale in Europe since 2021.
Major Air Force contract for eVTOL manufacturer. On July 31, Archer Aviation, a California-based manufacturer of electric vertical takeoff and landing (eVTOL) aircraft, signed a contract to provide its new Midnight aircraft to the US Air Force. The deal, worth up to $142 million, includes delivery of up to six eVTOL aircraft, pilot training, development of maintenance and repair operations, and the sharing of data such as additional flight test and certification-related test reports. The Air Force intends to deploy Midnights for such uses as personnel transport and rescue operations; other military branches will be able to leverage the contract for additional projects. The Midnight can carry up to four passengers and a pilot and has a range of up to 100 miles. The Air Force contract appears to be among the largest-ever contracts for an eVTOL manufacturer.
Senate proposes 100 percent domestic content requirement for US Navy ships. The US Senate has unanimously passed an amendment to the 2024 National Defense Authorization Act (NDAA) that would significantly alter domestic content requirements for US Navy ships. The amendment proposes that, by 2026, 65 percent of components for all Navy ships must be “manufactured substantially all from articles, materials or supplies mined, produced or manufactured” in the United States. The percentage would increase to 75 percent in 2028 and then to 100 percent in 2033. If the amendment is included in the version of the 2024 NDAA that is ultimately signed into law, US Navy shipbuilding contractors will be required to make significant changes to their sourcing and procurement practices. This will likely have a significant long-term impact on all companies that are involved in the shipbuilding supply chain, especially engine manufacturers and producers of navigation systems.
Coalition calls for improved Build America, Buy America guidance. A group of electrical and technology industry groups has sent a letter to the Biden Administration criticizing the Administration’s rollout of Build America, Buy America (BABA) requirements that apply to certain projects that receive federal funding. According to the industry groups, the “inability to deploy resources and technologies due to BABA compliance barriers and complexities will result in fewer infrastructure, decarbonization, and electrification projects in the coming years.” The trade groups requested that, moving forward, implementing agencies balance domestic content requirements with practical considerations (eg, project delays and cost overruns), leverage existing trade agreements “with key foreign allies,” and align domestic content requirements for projects funded under the Inflation Reduction Act with the requirements for projects funded under the Infrastructure Investment and Jobs Act. It is unclear how the Administration will respond to this criticism, if at all. However, if the federal agencies tasked with carrying out infrastructure projects share the industry groups’ concerns, there may be an uptick in BABA-related waivers and/or revised BABA-implementing regulations that incorporate new exceptions or carveouts to the domestic content requirements.
EPA proposes more reporting of pollution-emitting “point sources.” The Environmental Protection Agency on July 24 proposed new rules that it believes will give it more and better information, more quickly, about potentially toxic or carcinogenic air pollutants. The rules would target the nearly 130,000 facilities nationwide the EPA identifies as “point sources” – defined as single identifiable sources from which pollutants are discharged. Examples include stationery objects, such as pipes or smokestacks, but sources can also be in impermanent locations – for instance, floating oil rigs. Under the rules, emitters of hazardous air pollutants will be required to report their emissions directly to the EPA annually. Currently, the EPA says, laws requiring such reporting are inconsistent, creating a disparity in data that leaves the agency unable to clearly understand where air pollution may be a potential health hazard. The change is part of an EPA drive to gather missing data on pollution hotspots and on the human populations that may be exposed to harmful air pollution. EPA Administrator Michael Regan stated, “Data and science are the very foundation of the work we do every day at EPA to protect public health and the environment. When we have the most recent, most accurate data on air toxics and other emissions, we can improve our identification of areas where people may be at risk from pollution, develop solutions and help ensure everyone has clean air to breathe.” The proposed rules would go into effect in 2027.
Senate subcommittee hearing focuses on single-use plastics. On July 27, the US Senate’s Environment and Public Works Committee’s Chemical Safety, Waste Management, Environmental Justice, and Regulatory Oversight Subcommittee held a hearing focusing on the potential harms of single-use plastics. Senator Jeff Merkley (D-OR), the panel’s chairman, said at the hearing, “Generations have grown up believing the mantra of the three R’s: reduce, reuse, recycle. Instead, it’s the three B’s: it’s burned, it’s buried, it’s borne out to sea.” Senator Merkley said plastics have a “remarkable, near-eternal” lifespan as they break down into smaller and smaller pieces. He noted that scientists have even found microplastics in human bloodstreams and breast milk. During the previous session of Congress, Senator Merkley introduced legislation requiring producers to bear responsibility for packaging product recycling, as well as the sale and distribution of certain single-use plastic products. Although this legislation failed, he said he intends to reintroduce such a bill.
NHTSA opens probe of Ram trucks’ power steering. On August 8, the National Highway Traffic Safety Administration said that it is opening an investigation of whether 1.1 million older Ram 1500 pickup trucks should be recalled because of issues related to the loss of power steering. The agency said that it has received 380 reports alleging the intermittent or complete loss of power steering assistance in 2013-2016 model year Ram 1500 pickup trucks, including reports of three crashes. Ram is now a separate line from Dodge, and both are owned by the Chrysler group, which is in turn owned by Stellantis. In March 2016, Fiat Chrysler Automotive recalled 440 vehicles to address a possible contamination of the electrical power steering unit. NHTSA said this week that complaints now indicate that similar failures may be occurring in vehicles outside the recall scope. NHTSA said that it is opening a recall query “to determine if the scope of the recall mentioned above is correct or if another defect might exist.”
Decline in imports from China as US companies adjust supply chains. Imports into the US from China have declined 24 percent through May compared to the same period last year. The decline is being attributed to a number of factors, among them that many US companies are repositioning their supply lines closer to the US, and even onshoring such operations; a growing concern about fallout from the chilly relationship between China and the US; higher wages for Chinese factory workers, shrinking China’s competitive advantage; and the effect of US tariffs imposed during the Trump Administration. The Washington Post’s coverage of this development observes that, ultimately, “decisions made in countless boardrooms – not the White House – are behind the change.” Overall, of course, China remains the world’s factory, accounting for 31 percent of global manufacturing value added, compared with 17 percent for the second-ranked US.
Plastics expert says his industry has become politicized. Don Loepp, editor of Plastics News, wrote in an op-ed article in the magazine’s August 7 issue that the production and disposal of plastics has become “at least somewhat a partisan issue in the United States.” He pointed to the EPA’s request for public comment on a draft strategy to prevent plastic pollution, which, he said, generated dueling responses from state attorneys general. Some 16 Republican state AGs signed a letter saying that the EPA’s strategy was “deeply flawed” and that it “irrationally targets domestic industry rather than waste.” At the same time, Loepp noted, 14 Democratic AGs signed a letter of their own recommending that the agency adopt a more comprehensive strategy that includes reducing the production of virgin plastic.
