§ 4652. Semiconductor incentives

§ 4652. Semiconductor incentives

(a) Financial assistance program

(1) In general The Secretary shall establish in the Department of Commerce a program that, in accordance with the requirements of this section and subject to the availability of appropriations for such purposes, provides Federal financial assistance to covered entities to incentivize investment in facilities and equipment in the United States for the fabrication, assembly, testing, advanced packaging, production, or research and development of semiconductors, materials used to manufacture semiconductors, or semiconductor manufacturing equipment.

(2) Procedure

(A) In general A covered entity shall submit to the Secretary an application that describes the project for which the covered entity is seeking financial assistance under this section.

(B) Eligibility In order for a covered entity to qualify for financial assistance under this section, the covered entity shall demonstrate to the Secretary, in the application submitted by the covered entity under subparagraph (A), that—

(i) the covered entity has a documented interest in constructing, expanding, or modernizing a facility described in paragraph (1) 11 So in original. Probably should be followed by a semicolon.

(ii) with respect to the project described in clause (i), the covered entity has—

(I) been offered a covered incentive;

(II) made commitments to worker and community investment, including through—

(aa) training and education benefits paid by the covered entity; and

(bb) programs to expand employment opportunity for economically disadvantaged individuals; and

(III) secured commitments from regional educational and training entities and institutions of higher education to provide workforce training, including programming for training and job placement of economically disadvantaged individuals;

(IV) an executable plan to sustain the facility described in clause (i) without additional Federal financial assistance under this subsection for facility support;

(V) determined—

(aa) the type of semiconductor technology, equipment, materials, or research and development the covered entity will produce at the facility described in clause (i); and

(bb) the customers, or categories of customers, to which the covered entity plans to sell the semiconductor technology, equipment, materials, or research and development described in item (aa); and

(VI) documented, to the extent practicable, workforce needs and developed a strategy to meet such workforce needs consistent with the commitments described in subclauses (II) and (III);

(iii) with respect to the project described in clause (i), the covered entity has an executable plan to identify and mitigate relevant semiconductor supply chain security risks, such as risks associated with access, availability, confidentiality, integrity, and a lack of geographic diversification in the covered entity’s supply chain; and

(iv) with respect to any project for the production, assembly, or packaging of semiconductors, the covered entity has implemented policies and procedures to combat cloning, counterfeiting, and relabeling of semiconductors, as applicable.

(C) Considerations for review With respect to the review by the Secretary of an application submitted by a covered entity under subparagraph (A)—

(i) the Secretary may not approve the application unless the Secretary—

(I) confirms that the covered entity has satisfied the eligibility criteria under subparagraph (B);

(II) determines that the project to which the application relates is in the economic and national security interests of the United States; and

(III) has notified the appropriate committees of Congress not later than 15 days before making any commitment to provide a grant to any covered entity that exceeds $10,000,000;

(ii) the Secretary may consider whether—

(I) the covered entity has previously received financial assistance made under this subsection;

(II) the governmental entity offering the applicable covered incentive has benefitted from financial assistance previously provided under this subsection;

(III) the covered entity has demonstrated that they are responsive to the national security needs or requirements established by the Intelligence Community (or an agency thereof), the National Nuclear Security Administration, or the Department of Defense; and

(IV) when practicable, a consortium that is considered a covered entity includes a small business concern, as defined under section 632 of this title, notwithstanding section 121.103 of title 13, Code of Federal Regulations;

(iii) the Secretary shall consider the type of semiconductor technology produced by the covered entity and whether that semiconductor technology advances the economic and national security interests of the United States;

(iv) the Secretary may not approve an application, unless the covered entity provides a plan that does not use Federal financial assistance to assist efforts to physically relocate existing facility infrastructure to another jurisdiction within the United States, unless the project is in the interest of the United States; and

(v) the Secretary may not approve an application if the Secretary determines that the covered entity is a foreign entity of concern.

(D) Priority In awarding Federal financial assistance to covered entities under this subsection, the Secretary shall—

(i) give priority to ensuring that a covered entity receiving financial assistance will—

(I) manufacture semiconductors necessary to address gaps and vulnerabilities in the domestic supply chain across a diverse range of technology and process nodes; and

(II) provide a secure supply of semiconductors necessary for the national security, manufacturing, critical infrastructure, and technology leadership of the United States and other essential elements of the economy of the United States; and

(ii) ensure that the assistance is awarded to covered entities for both advanced and mature technology nodes to meet the priorities described in clause (i).

(E) Records The Secretary may request records and information from the applicant to review the status of a covered entity. The applicant shall provide the records and information requested by the Secretary.

(3) Amount

(A) In general The Secretary shall determine the appropriate amount and funding type for each financial assistance award made to a covered entity under this subsection.

(B) Larger investment Federal investment in any individual project shall not exceed $3,000,000,000 unless the Secretary, in consultation with the Secretary of Defense and the Director of National Intelligence, recommends to the President, and the President certifies and reports to the appropriate committees of Congress, that a larger investment is necessary to—

(i) significantly increase the proportion of reliable domestic supply of semiconductors relevant for national security and economic competitiveness that can be met through domestic production; and

(ii) meet the needs of national security.

(4) Use of funds A covered entity that receives a financial assistance award under this subsection may only use the financial assistance award amounts to—

(A) finance the construction, expansion, or modernization of a facility or equipment to be used for the purposes described in paragraph (1), as documented in the application submitted by the covered entity under paragraph (2)(B), as determined necessary by the Secretary for purposes relating to the national security and economic competitiveness of the United States;

(B) support workforce development for a facility described in subparagraph (A);

(C) support site development and modernization for a facility described in subparagraph (A); and

(D) pay reasonable costs related to the operating expenses for a facility described in subparagraph (A), including specialized workforce, essential materials, and complex equipment maintenance, as determined by the Secretary.

(5) Clawback

(A) Target dates For all awards to covered entities, the Secretary shall—

(i) determine target dates by which a project shall commence and complete; and

(ii) set these dates by the time of award.

(B) Progressive recovery for delays If the project does not commence and complete by the set target dates in (A), the Secretary shall progressively recover up to the full amount of an award provided to a covered entity under this subsection.

(C) Technology clawback The Secretary shall recover the full amount of an award provided to a covered entity under this subsection if, during the applicable term with respect to the award, the covered entity knowingly engages in any joint research or technology licensing effort—

(i) with a foreign entity of concern; and

(ii) that relates to a technology or product that raises national security concerns, as determined by the Secretary and communicated to the covered entity before engaging in such joint research or technology licensing.

(D) Waiver In the case of delayed projects, the Secretary may waive elements of the clawback provisions incorporated in each award after—

(i) making a formal determination that circumstances beyond the ability of the covered entity to foresee or control are responsible for delays; and

(ii) submitting congressional notification.

(E) Congressional notification The Secretary shall notify appropriate committees of Congress—

(i) of the clawback provisions attending each such award; and

(ii) of any waivers provided, not later than 15 days after the date on which such a waiver was provided.

(6) Expansion clawback

(A) Definition of legacy semiconductor

(i) In general In this paragraph, the term “legacy semiconductor”—

(I) includes—

(aa) a semiconductor technology that is of the 28 nanometer generation or older for logic;

(bb) with respect to memory technology, analog technology, packaging technology, and any other relevant technology, any legacy generation of semiconductor technology relative to the generation described in item (aa), as determined by the Secretary, in consultation with the Secretary of Defense and the Director of National Intelligence; and

(cc) any additional semiconductor technology identified by the Secretary in a public notice issued under clause (ii); and

(II) does not include a semiconductor that is critical to national security, as determined by the Secretary, in consultation with the Secretary of Defense and the Director of National Intelligence.

(ii) Updates Not later than 2 years after August 9, 2022, and not less frequently than once every 2 years thereafter for the 8-year period after the last award under this section is made, the Secretary, after public notice and an opportunity for comment and if applicable and necessary, shall issue a public notice identifying any additional semiconductor technology included in the meaning of the term “legacy semiconductor” under clause (i).

(iii) Functions of the Secretary The functions of the Secretary under this paragraph shall not be subject to sections 551, 553 through 559, and 701 through 706 of title 5.

(iv) Consultation In carrying out clause (ii), the Secretary shall consult with the Director of National Intelligence and the Secretary of Defense.

(v) Considerations In carrying out clause (ii), the Secretary shall consider—

(I) state-of-the-art semiconductor technologies in the United States and internationally, including in foreign countries of concern; and

(II) consistency with export controls relating to semiconductors.

(B) Definition of semiconductor manufacturing In this paragraph, the term “semiconductor manufacturing”—

(i) has the meaning given the term by the Secretary, in consultation with the Secretary of Defense and the Director of National Intelligence; and

(ii) includes front-end semiconductor fabrication.

(C) Required agreement

(i) In general On or before the date on which the Secretary awards Federal financial assistance to a covered entity under this section, the covered entity shall enter into an agreement with the Secretary specifying that, during the 10-year period beginning on the date of the award, subject to clause (ii), the covered entity may not engage in any significant transaction, as defined in the agreement, involving the material expansion of semiconductor manufacturing capacity in the People’s Republic of China or any other foreign country of concern.

(ii) Exceptions The prohibition in the agreement required under clause (i) shall not apply to—

(I) existing facilities or equipment of a covered entity for manufacturing legacy semiconductors; or

(II) significant transactions involving the material expansion of semiconductor manufacturing capacity that—

(aa) produces legacy semiconductors; and

(bb) predominately serves the market of a foreign country of concern.

(iii) Affiliated group For the purpose of applying the requirements in an agreement required under clause (i), a covered entity shall include the covered entity receiving financial assistance under this section, as well as any member of the covered entity’s affiliated group under section 1504(a) of title 26, without regard to section 1504(b)(3) of title 26.

(D) Notification requirements During the applicable term of the agreement of a covered entity required under subparagraph (C)(i), the covered entity shall notify the Secretary of any planned significant transactions of the covered entity involving the material expansion of semiconductor manufacturing capacity in the People’s Republic of China or any other foreign country of concern.

(E) Violation of agreement

(i) Notification to covered entities Not later than 90 days after the date of receipt of a notification described in subparagraph (D) from a covered entity, the Secretary, in consultation with the Secretary of Defense and the Director of National Intelligence, shall—

(I) determine whether the significant transaction described in the notification would be a violation of the agreement of the covered entity required under subparagraph (C)(i); and

(II) notify the covered entity of the Secretary’s decision under subclause (I).

(ii) Opportunity to remedy Upon a notification under clause (i)(II) that a planned significant transaction of a covered entity is a violation of the agreement of the covered entity required under subparagraph (C)(i), the Secretary shall—

(I) immediately request from the covered entity tangible proof that the planned significant transaction has ceased or been abandoned; and

(II) provide the covered entity 45 days to produce and provide to the Secretary the tangible proof described in subclause (I).

(iii) Failure by the covered entity to cease or remedy the activity Subject to clause (iv), if a covered entity fails to remedy a violation as set forth under clause (ii), the Secretary shall recover the full amount of the Federal financial assistance provided to the covered entity under this section.

(iv) Mitigation If the Secretary, in consultation with the Secretary of Defense and the Director of National Intelligence, determines that a covered entity planning a significant transaction that would violate the agreement required under subparagraph (C)(i) could take measures in connection with the transaction to mitigate any risk to national security, the Secretary—

(I) may negotiate, enter into, and enforce any agreement or condition for the mitigation; and,

(II) waive the recovery requirement under clause (iii).

(F) Submission of records

(i) In general The Secretary may request from a covered entity records and other necessary information to review the compliance of the covered entity with the agreement required under subparagraph (C)(i).

(ii) Eligibility In order to be eligible for Federal financial assistance under this section, a covered entity shall agree to provide records and other necessary information requested by the Secretary under clause (i).

(G) Confidentiality of records

(i) In general Subject to clause (ii), any information derived from records or necessary information disclosed by a covered entity to the Secretary under this section—

(I) shall be exempt from disclosure under section 552(b)(3) of title 5; and

(II) shall not be made public.

(ii) Exceptions Clause (i) shall not prevent the disclosure of any of the following by the Secretary:

(I) Information relevant to any administrative or judicial action or proceeding.

(II) Information that a covered entity has consented to be disclosed to third parties.

(III) Information necessary to fulfill the requirement of the congressional notification under subparagraph (H).

(H) Congressional notification Not later than 60 days after the date on which the Secretary finds a violation by a covered entity of an agreement required under subparagraph (C)(i), and after providing the covered entity with an opportunity to provide information in response to that finding, the Secretary shall provide to the appropriate Committees of Congress—

(i) a notification of the violation;

(ii) a brief description of how the Secretary determined the covered entity to be in violation; and

(iii) a summary of any actions or planned actions by the Secretary in response to the violation.

(I) Regulations The Secretary may issue regulations implementing this paragraph.

(b) Coordination required In carrying out the program established under subsection (a), the Secretary shall coordinate with the Secretary of State, the Secretary of Defense, the Secretary of Homeland Security, the Secretary of Energy, and the Director of National Intelligence.

(c) GAO reviews The Comptroller General of the United States shall—

(1) not later than 2 years after the date of disbursement of the first financial award under subsection (a), and biennially thereafter for 10 years, conduct a review of the program established under subsection (a), which shall include, at a minimum—

(A) a determination of the number of instances in which financial assistance awards were provided under that subsection during the period covered by the review;

(B) an evaluation of how—

(i) the program is being carried out, including how recipients of financial assistance awards are being selected under the program;

(ii) other Federal programs are leveraged for manufacturing, research, and training to complement the financial assistance awards awarded under the program; and

(iii) the Federal Government could take specific actions to address shortages in the semiconductor supply chain, including—

(I) demand-side incentives, including incentives related to the information and communications technology supply chain; and

(II) additional incentives, at national and global scales, to accelerate utilization of leading-edge semiconductor nodes to address shortages in mature semiconductor nodes; and

(C) a description of the outcomes of projects supported by awards made under the program, including a description of—

(i) facilities described in subsection (a)(1) that were constructed, expanded, or modernized as a result of awards made under the program;