Foreign Pollution Fee Act of 2025
The Foreign Pollution Fee Act of 2025 would add a new Subchapter E to the Internal Revenue Code to impose a fee on certain imported goods—called “covered products.” The fee is ad valorem (a percentage of the product’s customs value) and would be calculated from a variable charge tied to how polluting the country of origin’s production is compared with U.S. production (the baseline). The intent is to reduce the competitive advantage of high-polluting foreign producers (notably in China and other countries) by making their imports more expensive and to encourage cleaner production at home and abroad. The bill creates a detailed framework for defining, measuring, and adjusting pollution intensity, and it envisions ongoing rulemaking, data collection, and governance through an advisory committee. It also includes enforcement provisions, national-security carve-outs, and incentives for partner countries under international partnerships. Key design features include a country-by-country, product-by-product (by 6-digit HTS subheading) approach, a data-driven methodology for pollution intensity, offsets from carbon removal where appropriate, and a tiered adjustment later in the program. The Act asserts that the fee is not a carbon tax and lays out how the fee would be calculated, who pays it, and how it could be modified or reduced for partner countries or under national-security considerations.
Key Points
- 1Establishes a Foreign Pollution Fee on imported “covered products,” calculated as the import’s customs value times a variable charge set by country of origin and product category, effective about six weeks after enactment for initial application.
- 2Defines pollution intensity as the amount of pollution (in metric tons CO2e) per unit of product (per metric ton) and requires calculating direct, indirect, precursor, and transportation emissions. It uses a US production baseline for each product and country of origin comparisons.
- 3Sets up a data-driven, rulemaking process (including an Advisory Committee) to determine pollution intensity and to publish methods. The initial charge grid is in a detailed table; a later tiered system (three tiers) will apply after final rules are issued, with charges rising based on the pollution intensity difference between origin and the U.S. baseline.
- 4Creates enhancements for evasion and national security, including possible zeroing of charges for Department of Defense entries and penalties or import prohibitions for evasion, with enforcement support from DHS and related agencies.
- 5Provides for international partnership adjustments (reductions in the fee for partner countries) and allows countries to propose alternative pollution intensities if data are verifiable and transparent; the Advisory Committee helps verify data and calculate adjustments.
- 6Clarifies that the bill is not a carbon tax and sets up a process for reassessments and final rulemaking (classification of products, pollution intensity methods, and evasion rules) within specific timelines.