HR 2871119th CongressIn Committee

Safeguarding U.S. Supply Chains Act

Introduced: Apr 10, 2025

Standard Summary

Comprehensive overview in 1-2 paragraphs

The Safeguarding U.S. Supply Chains Act would amend the Internal Revenue Code to limit the impact of the Advanced Manufacturing Production Credit (Section 45X). Specifically, it would bar the 45X credit for any eligible component that is produced by a foreign entity of concern (as defined in the NDAA for FY2021) and would also tighten the eligibility for qualifying battery components by excluding components produced using technology supplied or developed by such foreign entities of concern. These restrictions would apply to components produced and sold after enactment. The goal is to ensure that tax incentives for domestic manufacturing do not financially support parts produced by entities deemed a national security or supply-chain risk.

Key Points

1Adds a new paragraph to 45X(d): No credit under 45X shall be allowed for any eligible component produced by a foreign entity of concern (as defined in the NDAA FY2021).
2Tightens battery component qualifications (45X(c)(5)): A qualifying battery component shall not include components produced using technology designed, developed, manufactured, licensed, or supplied by a foreign entity of concern.
3Effective date: These amendments apply to components produced and sold after the enactment date of the bill (no retroactive effect).
4Uses NDAA 2021 definition: The bill anchors the definition of “foreign entity of concern” to the statutory definition in 15 U.S.C. 4651(8).
5Policy aim and potential impact: The bill seeks to safeguard U.S. supply chains by ensuring tax credits support components from non-foreign-entity-of-concern sources, potentially reshaping sourcing and procurement for manufacturers that rely on 45X credits, especially in battery-related sectors.

Impact Areas

Primary group/area affected- U.S.-based manufacturers and suppliers claiming the Advanced Manufacturing Production Credit (45X) for eligible components, especially battery components.Secondary group/area affected- Battery and energy storage industries, as well as electric vehicle supply chains that rely on qualifying battery components.- Tax professionals, corporate tax departments, and supply-chain compliance teams responsible for verifying component origin and technology provenance.Additional impacts- Increased due diligence and supply-chain tracing requirements to verify that components or any implicated technology are not produced with involvement from foreign entities of concern.- Possible shifts in sourcing toward non-FEC suppliers or domestic equivalents, with potential cost and availability implications.- Signals strengthening of national-security-aligned procurement policies tied to tax incentives, potentially influencing investment decisions and supplier diversification strategies.

Generated by gpt-5-nano on Oct 31, 2025