H.R. 509 — Western Hemisphere Nearshoring Act

This section sets forth congressional findings on the importance of the Western Hemisphere for U.S. peace, security, democracy, and trade—including $174.62 billion in U.S. exports and $121 billion in imports with Central and South America in 2021 (making the United States a net exporter)—and the benefits of free trade agreements, privatization, free markets, anti-corruption measures, and economic cooperation to promote regional stability, curb migration in violation of the Immigration and Nationality Act, and reduce supply chain dependence on China.

This section directs the United States International Development Finance Corporation (DFC), in coordination with specified federal agencies (e.g., U.S. Trade and Development Agency, Export-Import Bank) and U.S. executive directors at international financial institutions (e.g., World Bank Group, Inter-American Development Bank), to use not less than 10% of amounts available for financing under 22 U.S.C. 9621 for each fiscal year after enactment to cover qualified moving costs and necessary workforce development costs for, and to reduce interest rates on loans to, qualified corporations (i.e., those eligible for or receiving DFC assistance) relocating from China to Latin America or the Caribbean. The reduced interest rate is the lesser of (1) the Federal funds rate or (2) the loan rate reduced by 0.5 to 1 percentage point (not below zero percent). Unused amounts carry forward to the next fiscal year for this purpose or other DFC programs in Latin America or the Caribbean; DFC must obtain a Secretary of Commerce determination of no negative U.S. employment effects prior to assistance; recipients must remit unexpended funds on a DFC-determined schedule; loans must be commercially viable with DFC-set repayment terms; and DFC must submit a plan to Congress within 180 days of enactment to streamline such assistance.

This section directs the President to proclaim duty-free treatment (or other preferential treatment) for goods or services produced in a Latin American or Caribbean country by a qualified corporation that has received assistance under section 3, subject to regulations and terms prescribed by the President. Such treatment applies for the 15-year period beginning on the date the corporation begins operations in such country.

This section establishes additional conditions prohibiting the appropriate federal agency—DFC for assistance under section 3, or USTR for duty-free (or other preferential) treatment under section 4—from providing such assistance or treatment to a corporation unless (1) the corporation creates jobs in the relevant Latin American or Caribbean country commensurate with the assistance provided; (2) the corporation commits not to come under ownership or control of China, Russia, or any other foreign adversary and not to locate its headquarters there; (3) all relevant assets are moved from China to a Latin American or Caribbean country within two years (subject to agency extension); and (4) those assets are retained there thereafter. The agency, in coordination with the Department of State, determines compliance; non-compliant corporations lose duty-free treatment for goods or services produced in a Latin American or Caribbean country (except those in free trade zones or eligible under free trade agreements) and must repay any agency loans at prevailing market interest rates.

This section establishes in the Treasury a trust fund consisting of amounts equivalent to tariffs collected by the U.S. on goods manufactured in the People's Republic of China. The section appropriates from the trust fund to the General Fund amounts equivalent to revenue reductions to the General Fund resulting from assistance provided by the U.S. International Development Finance Corporation (DFC) under this Act, with transfers governed by rules similar to those of IRC §9601.

This section amends the Better Utilization of Investments Leading to Development (BUILD) Act of 2018, which established the U.S. International Development Finance Corporation (DFC) to mobilize private capital for sustainable economic growth and development in less developed countries. Specifically, it (1) expands the DFC's statement of policy by adding two new paragraphs prioritizing U.S.-owned businesses for support under title II (i.e., DFC's core financing authorities) to further U.S. economic growth, and prioritizing production of goods in critical industries (as determined by the DFC in consultation with the Department of Homeland Security) to further U.S. national security; and (2) prohibits the DFC from providing support under title II for entities owned or controlled by foreign governments, except for feasibility studies and technical assistance for those not deemed foreign adversaries (i.e., foreign governments engaged in a long-term pattern or serious instances of conduct significantly adverse to U.S. national security or the security and safety of U.S. persons).

This section directs the United States Trade Representative to initiate negotiations for free trade agreements with each Latin American or Caribbean country not party to an existing U.S. free trade agreement that meets specified conditions, including (1) taking steps to reduce migration in violation of the Immigration and Nationality Act, (2) taking steps to reduce economic dependence on the People's Republic of China, and (3) allowing Taiwan to establish and maintain a commercial office in the country.

This section authorizes the President to initiate negotiations for agreements for cooperation pursuant to section 123 of the Atomic Energy Act of 1954 (42 U.S.C. 2153)—i.e., bilateral nuclear cooperation agreements required for U.S. transfers of nuclear reactors—with Latin American and Caribbean countries to approve reactor sales to such countries or qualified corporations receiving assistance under this Act, provided the President determines the sales do not threaten U.S. national security and the recipients meet the nonproliferation conditions specified in paragraphs (1), (2), and (3) of section 8(b). The section further authorizes the USAID Administrator, in consultation with the Secretary of Energy and the U.S. International Development Finance Corporation (DFC), to provide technical assistance and expertise in electrical grid and energy efficiency improvements related to such sales.

This section provides a 75% bonus depreciation allowance under section 168(k) of the Internal Revenue Code (instead of the phase-down percentages otherwise applicable under paragraph (6), from 60% in 2024 to 0% after 2026), treats qualified relocated manufacturing property as qualified property eligible for such allowance, and disregards paragraphs (8) and (10) of that section, for property placed in service by a qualified manufacturer in a Latin American or Caribbean country after enactment of this Act and before January 1, 2038. (Bonus depreciation allows businesses to deduct a specified percentage of the cost of certain depreciable assets in the year placed in service.) Qualified relocated manufacturing property includes section 168(k) qualified property or nonresidential real property acquired in connection with a qualified relocation of manufacturing—defined as shifting production of substantially identical tangible personal property from China to such a country, with the increase in production units in the new location at least equaling the reduction in China (property relocation not required). A qualified manufacturer is one engaged in manufacturing tangible personal property that receives a determination from the Secretary of the Treasury under section 5(a)(1) and enters an enforceable binding agreement to meet section 5(a)(2) requirements.

This section defines terms for purposes of the Act, including (1) DFC as the United States International Development Finance Corporation; (2) qualified corporation, which excludes a State-owned enterprise; (3) qualified moving costs as the costs of moving inventory, equipment, and supplies from the People's Republic of China to a Latin American or Caribbean country, and the costs of workforce development and construction of facilities; (4) Latin American or Caribbean country (or Western Hemisphere) as a country in the Caribbean Sea, South America, Central America, or Mexico, excluding Cuba and Venezuela unless the Secretary of State certifies to Congress that specified conditions are met (e.g., free and fair elections, respect for human rights, privatization steps, release of detainees, and expulsion of foreign adversary security services); and (5) Federal funds rate as the discount window primary credit interest rate most recently published on the Federal Reserve Statistical Release on selected interest rates (H.15 release).