KPMG report: Implications of the Inflation Reduction Act and CHIPS Act for U.S. importers

The two laws provide potentially significant benefits to U.S. importers.

The two laws provide potentially significant benefits to U.S. importers.

A pair of new U.S. laws will invest potentially hundreds of billions of dollars in spending and tax breaks in an effort to accelerate private investment, address supply chain and national security concerns, and reduce carbon emissions. The “Inflation Reduction Act of 2022” (IRA) (Pub. L. No. 117-169) and the “Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022” (CHIPS Act) (Pub. L. No. 117-167), offer incentives for investments in clean energy production and semiconductor manufacturing in the United States. The two laws provide potentially significant benefits to U.S. importers. However, because of various intersecting business and compliance concerns, it remains to be seen whether these significant pieces of legislation will result in an immediate change to the current trade landscape.

While the onshoring and reshoring incentives under the CHIPS Act may present an opportunity for importers and manufacturers of semiconductors (and related technology) to open factories for production in the United States, the significant investment needed to relocate to the United States and the requirement to cut ties with China may prove too burdensome for all but the largest chip manufacturers. Further, under the IRA, several bonus clean energy tax incentives are conditioned upon the taxpayer’s compliance with the “Buy America Act” (BAA), often a complicated and costly endeavor for companies that are unfamiliar with the BAA.

At the same time, U.S. allies in the European Union (EU) argue that the protectionist underpinnings of the IRA and CHIPS Act are potentially discriminatory and a reversal of the historical trend toward globalization of supply chains. As a result, taxpayers should closely monitor the response by U.S. trading partners to mitigate potential actions and long-term consequences while continuing to consider more traditional duty and tariff mitigation strategies.

Read a KPMG report* that considers what the IRA and CHIPS Act could mean for U.S. importers.

* This article appears in The Tax Adviser (June 1, 2023) and is provided with permission.



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