Western Hemisphere Nearshoring Act
The Western Hemisphere Nearshoring Act is a comprehensive set of policy, financing, and trade provisions intended to encourage U.S. companies to relocate manufacturing from the People’s Republic of China (PRC) to Latin America or the Caribbean. Key tools include directing a portion of U.S. development finance funding to cover moving and workforce development costs, offering favorable loan terms, providing duty-free treatment for goods produced by relocated operations, and creating tax incentives for qualifying relocations. The bill also seeks to expand U.S. trade diplomacy in the region, restricts support for foreign government–owned entities, and ties these nearshoring efforts to broader goals like migration reduction and national security. A new trust fund funded by PRC tariffs would support these activities, and there are additional provisions on energy cooperation, and temporary expensing for relocated manufacturing property through 2038. In short, the bill aims to reduce dependence on Chinese manufacturing, spur Western Hemisphere economic development, and create jobs in the region and the United States by combining financing, tariff funding, tax incentives, and trade negotiation support, while imposing specific ownership and relocation requirements on beneficiary firms.
Key Points
- 1Financing and moving costs: Requires the U.S. International Development Finance Corporation (DFC), in coordination with multiple federal agencies, to devote at least 10% of certain financing to cover qualified moving costs and workforce development for eligible companies relocating from China to Latin America or the Caribbean, with favorable loan terms (lower interest rates) and rules governing unused funds and repayment.
- 2Duty-free treatment for relocated goods: Directs the President to provide duty-free or other preferential treatment for goods produced by qualified relocations in Latin American or Caribbean countries for up to 15 years, with regulatory rules to implement this, and a mechanism to restrict benefits if noncompliance occurs.
- 3Compliance and conditions on assistance: Ties benefits to concrete commitments, including creation of jobs in the destination country, a binding pledge that the company will not be owned or controlled by the PRC or other adversaries, and a requirement that assets related to the assistance are moved to the region within a set period, with ongoing retention of assets in the region.
- 4Oversight and enforcement: The appropriate federal agency (the DFC for assistance under section 3; the USTR for duty-free treatment under section 4) would determine compliance and impose actions if noncompliance occurs, including removing benefits and adjusting loan terms.
- 5Tariff-funded support mechanism: Establishes a trust fund in the U.S. Treasury funded by tariffs collected on PRC-manufactured goods, with appropriations to the General Fund to offset revenue reductions due to DFC assistance.
- 6Amendments to the BUILD Act of 2018: Adds policy goals prioritizing U.S.-owned businesses and national security considerations in nearshoring activities, and creates a new prohibition on support for entities owned or controlled by foreign governments, with limited exceptions for non-adversaries.
- 7Trade negotiations and energy cooperation: Directs the USTR to begin negotiations for free trade agreements with eligible Latin American or Caribbean countries that meet certain criteria (migration reduction, reduced dependence on China, and allowing Taiwan offices). Also authorizes possible nuclear cooperation under section 123 to certain compliant countries or entities, with technical assistance on energy grid improvements.
- 8Tax incentives for relocation: Provides temporary enhanced expensing (75% bonus) for qualified relocated manufacturing property placed in service by a qualified manufacturer in the specified period, encouraging capital investments in the region.
- 9Definitions and scope: Clarifies terms for “Latin American or Caribbean country” (with Cuba and Venezuela included only if certain political criteria are met) and defines a “qualified corporation” as excluding state-owned enterprises, among other definitions related to moving costs and the Western Hemisphere.