89–006

107TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 107–173

DEFENSE PRODUCTION ACT AMENDMENTS OF 2001

JULY 30, 2001.—Committed to the Committee of the Whole House on the State of

the Union and ordered to be printed

Mr. OXLEY, from the Committee on Financial Services,

submitted the following

R E P O R T

[To accompany H.R. 2510]

[Including cost estimate of the Congressional Budget Office]

The Committee on Financial Services, to whom was referred the

bill (H.R. 2510) to extend the expiration date of the Defense Production Act of 1950, and for other purposes, having considered the

same, report favorably thereon without amendment and recommend that the bill do pass.

CONTENTS

Page

Purpose and Summary ............................................................................................ 1

Background and Need for Legislation .................................................................... 2

Hearings ................................................................................................................... 2

Committee Consideration ........................................................................................ 2

Committee Votes ...................................................................................................... 2

Committee Oversight Findings ............................................................................... 4

Performance Goals and Objectives ......................................................................... 4

New Budget Authority, Entitlement Authority, and Tax Expenditures ............. 4

Committee Cost Estimate ....................................................................................... 4

Congressional Budget Office Estimate ................................................................... 4

Federal Mandates Statement ................................................................................. 6

Advisory Committee Statement .............................................................................. 6

Constitutional Authority Statement ...................................................................... 6

Applicability to Legislative Branch ........................................................................ 6

Section-by-Section Analysis of the Legislation ...................................................... 6

Changes in Existing Law Made by the Bill, as Reported ..................................... 7

PURPOSE AND SUMMARY

H.R. 2510, the ‘‘Defense Production Act Amendments of 2001’’ extends the effective termination date for expiring sections of the Defense Production Act of 1950 (DPA) by three years, from September

30, 2001, to September 30, 2004. The legislation provides for the

2

continued authorization of appropriations to carry out title III functions, and makes a number of technical corrections to allow for

proper sectional cross references, consistent term usage throughout

the Act, and corrects references to the House Committee on Financial Services.

BACKGROUND AND NEED FOR LEGISLATION

The Defense Production Act was enacted in 1950 to mobilize U.S.

productive capacity after the outbreak of the Korean War. The Act

authorizes the utilization of economic tools to provide prompt, adequate and uninterrupted supplies of industrial resources to satisfy

both national security needs and needs arising from civil emergencies. Dramatically scaled back from its original form, the DPA

is periodically amended to extend the expiration date of its critical

authorities and modernize those authorities to respond to changing

preparedness needs.

Unless the Act is reauthorized, the President may find himself

without these important authorities in a time of need. For instance,

the DPA expired on September 30, 1990 during Operation: Desert

Shield. In order to give the President needed authority during this

time of crisis, Congress passed an emergency extension of the Act

on October 20, 1990, which was followed by a longer, 3-year extension.

The Federal Emergency Management Administration (FEMA), on

behalf of the Administration, sent a request for proposed legislation

to the House Committee on Financial Services on June 29, 2001.

The legislation was introduced by request on July 17, 2001.

HEARINGS

The Subcommittee on Domestic Monetary Policy, Technology,

and Economic Growth held a hearing on the reauthorization of the

Defense Production Act of 1950 on June 13, 2001. The subcommittee received testimony from the Departments’ of Defense,

Commerce, Energy, and the Federal Emergency Management Administration.

COMMITTEE CONSIDERATION

On July 25, 2001, the Committee met in open session and ordered H.R. 2510 reported to the House, without amendment, with

a favorable recommendation by a voice vote, a quorum being

present.

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion

to report legislation and amendments thereto. A motion by Mr.

Oxley to report the bill to the House with a favorable recommendation was agreed to by a voice vote. The following amendments were

considered:

An amendment by Mr. Sherman, no. 1, changing the length of

the reauthorization from 3 years to 2 years, was not agreed to by

a record vote of 17 yeas and 34 nays (Record vote no. 5). The

names of Members voting for and against follow:

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YEAS NAYS

Mr. Paul Mr. Oxley

Mr. Frank Mrs. Roukema

Ms. Waters Mr. Bereuter

Mr. Sanders Mr. King

Mr. Gutierrez Mr. Royce

Mr. Watt of North Carolina Mr. Lucas of Oklahoma

Ms. Carson of Indiana Mr. Ney

Mr. Sherman Mrs. Kelly

Mr. Meeks of New York Mr. Gillmor

Ms. Lee Mr. Cox

Mr. Inslee Mr. Weldon of Florida

Ms. Schakowsky Mr. Ryun of Kansas

Mr. Moore Mr. Riley

Mr. Gonzalez Mr. Ose

Mrs. Jones of Ohio Mrs. Biggert

Mr. Capuano Mr. Green of Wisconsin

Mr. Hinojosa Mr. Toomey

Mr. Gary G. Miller of California

Mr. Cantor

Mr. Grucci

Ms. Hart

Mrs. Capito

Mr. Rogers of Michigan

Mr. Tiberi

Mr. LaFalce

Mrs. Maloney of New York

Mr. Ackerman

Mr. Maloney of Connecticut

Mr. Mascara

Mr. Lucas of Kentucky

Mr. Shows

Mr. Crowley

Mr. Israel

Mr. Ross

An amendment by Mr. Sherman, no. 2 (as modified by unanimous consent), authorizing the President to establish price controls

for retail electricity in Western States, was not agreed to by a

record vote of 25 yeas and 28 nays (Record vote no. 6). The names

of Members voting for and against follow:

YEAS NAYS

Mr. LaFalce Mr. Oxley

Mr. Frank Mrs. Roukema

Ms. Waters Mr. Bereuter

Mr. Sanders Mr. Castle

Mrs. Maloney of New York Mr. King

Mr. Gutierrez Mr. Lucas of Oklahoma

Mr. Watt of North Carolina Mr. Ney

Ms. Hooley of Oregon Mrs. Kelly

Ms. Carson of Indiana Mr. Paul

Mr. Sherman Mr. Gillmor

Mr. Meeks of New York Mr. Cox

Ms. Lee Mr. Weldon of Florida

Mr. Mascara Mr. Ryun of Kansas

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Mr. Inslee Mr. Riley

Ms. Schakowsky Mr. Ose

Mr. Moore Mrs. Biggert

Mr. Gonzalez Mr. Green of Wisconsin

Mrs. Jones of Ohio Mr. Toomey

Mr. Capuano Mr. Gary G. Miller of California

Mr. Ford Mr. Cantor

Mr. Hinojosa Mr. Grucci

Mr. Shows Ms. Hart

Mr. Crowley Mrs. Capito

Mr. Israel Mr. Rogers of Michigan

Mr. Ross Mr. Tiberi

Mr. Bentsen

Mr. Maloney of Connecticut

Mr. Lucas of Kentucky

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House

of Representatives, the Committee held a hearing and made findings that are reflected in this report.

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House

of Representatives, the Committee establishes the following performance related goals and objectives for this legislation:

The legislation will extend and improve the President’s emergency powers under the Defense Production Act of 1950.

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the

House of Representatives, the Committee finds that this legislation

would result in no new budget authority, entitlement authority, or

tax expenditures or revenues.

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by

the Director of the Congressional Budget Office pursuant to section

402 of the Congressional Budget Act of 1974.

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House

of Representatives, the following is the cost estimate provided by

the Congressional Budget Office pursuant to section 402 of the

Congressional Budget Act of 1974:

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U.S. CONGRESS,

CONGRESSIONAL BUDGET OFFICE,

Washington, DC, July 27, 2001.

Hon. MICHAEL G. OXLEY,

Chairman, Committee on Financial Services,

House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared to enclosed cost estimate for H.R. 2510, the Defense Production Act Amendments of 2001.

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contacts are Sam Papenfuss (for

federal costs) and R. Williams Thomas (for the private-sector impact).

Sincerely,

STEVEN M. LIBERMAN

(For Dan L. Crippen, Director).

Enclosure.

H.R. 2510—Defense Production Act Amendments of 2001

H.R. 2510 would extend the authorities of the Defense Production Act of 1950 (DPA) for an additional three years through September 30, 2004, and would authorize all necessary appropriations

for that period. The DPA provides the President the authority to

require preferential performance on contracts and orders to meet

approved national defense requirements; and to allocate materials,

services and facilities as necessary to promote the national defense

in a major national emergency (Title I); authorizes loan guarantees,

direct loans, and purchase guarantees for those goods necessary for

national defense (Title III); and allows the President to void international mergers that would adversely affect national security

(Title VII). These authorities are set to expire on September 30,

2001. CBO estimates that implementing H.R. 2510 would cost

about $85 million over the 2002–2006 period, assuming appropriation of the necessary amounts. Because the bill would not affect direct spending or receipts, pay-as-you-go procedures would not

apply.

The bill would authorize the appropriation of such sums as necessary for direct loans and loan guarantees under Title III to correct for shortfalls in domestic industrial capacity. In recent years,

the Department of Defense (DoD) has used the authority for purchase guarantees—that is, the authority to commit to buying a specific quantity of a defense good if a manufacturer cannot sell it

elsewhere. Appropriations for purchase guarantees have averaged

about $20 million a year over the 1986–2001 period, ranging from

$29 million in 1986 to $100 million in 1994 to $3 million in 2001.

No money was appropriated for this purpose in 1992, 1993, or over

the 1996–1999 period. The Administration has requested an appropriation of $50 million for 2002. Because of the sharp variations in

annual funding, specific yearly amounts for the indefinite authorization are difficult to project.

Based on information from DoD and the historical average over

the past 16 years, CBO estimates that extending the authorization

would require about $90 million in appropriations for the threeyear period covered by the bill. Based on historical spending patVerDate 11-MAY-2000 07:58 Jul 31, 2001 Jkt 089006 PO 00000 Frm 00005 Fmt 6659 Sfmt 6602 E:\HR\OC\HR173.XXX pfrm07 PsN: HR173
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terns, CBO estimates outlays from that funding would total less

than $75 million over the 2002–2006 period. In addition, the administrative support to carry out the DPA would require appropriated funds of about $4 million a year, split between DoD, the

Federal Emergency Management Agency, and the Department of

Commerce.

To date, no funds have been appropriated for other provisions of

the DPA. As a result, CBO has no basis for estimating any additional costs that could be triggered by extending its authorization

for three more years.

Section 4 of the Unfunded Mandates Reform Act excludes from

the application of that act any legislative provisions that are necessary for the national security. CBO has determined that the provisions of the DPA would fall under that exclusion.

The CBO staff contact for federal costs in Sam Papenfuss. The

CBO staff contact for the private-sector impact is R. William Thomas. This estimate was approved by Peter H. Fontaine, Deputy Assistant Director for Budget analysis.

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office

pursuant to section 423 of the Unfunded Mandates Reform Act.

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the

Federal Advisory Committee Act were created by this legislation.

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House

of Representatives, the Committee finds that the Constitutional

Authority of Congress to enact this legislation is provided by Article 1, section 8, clause 1 (relating to the general welfare of the

United States); Article 1, section 8, clause 3 (relating to the power

to regulate interstate commerce); Article 1, section 8, clause 5 (relating to the power to coin money and regulate the value thereof);

and Article I, section 8, clause 18 (relating to making all laws necessary and proper for carrying into execution powers vested by the

Constitution in the government of the United States).

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the

terms and conditions of employment or access to public services or

accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act.

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

This section establishes the short title of the bill, the ‘‘Defense

Production Act Amendments of 2001.’’

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Section 2. Extension of the Defense Production Act of 1950

This section amends section 717(a) of the DPA to extend the termination date for expiring sections of the Act by three years from

September 30, 2001, to September 30, 2004.

Section 3. Authorization of appropriations

This section amends section 711(b) of the DPA to authorize appropriations for fiscal years 2002 through 2004 to carry out title III

of the Act. Current law authorizes appropriations for fiscal years

1996 through 2001 to carry out title III.

Section 4. Technical amendments

This section makes several technical amendments to the DPA. It

amends the Act to correct incorrect cross-references in sections

301(a) and 304(b), makes the language of sections 301(3) and

303(a) consistent with the other sections of the Act, and updates

a reference to the Committee on Financial Services.

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the

House of Representatives, changes in existing law made by the bill,

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic,

existing law in which no change is proposed is shown in roman):

DEFENSE PRODUCTION ACT OF 1950

* * * * * * *

TITLE III—EXPANSION OF PRODUCTIVE CAPACITY AND

SUPPLY

SEC. 301. (a)(1) In order to expedite production and deliveries or

services under Government contracts, the President may authorize,

subject to such regulations as he may prescribe, the Department of

Defense, the Department of Energy, the Department of Commerce,

and such other agencies of the United States engaged in procurement for the national defense as he may designate (herein-after referred to as ‘‘guaranteeing agencies’’) without regard to provisions

of law relating to the making, performance, amendment, or modification of contracts, to guarantee in whole or in part any public

or private financing institution (including any Federal Reserve

bank), by commitment to purchase, agreement to share losses, or

otherwise, against loss of principal or interest on any loan, discount

or advance, or on any commitment in connection therewith, which

may be made by such financing institution for the purpose of financing any contractor, subcontractor, or other person in connection with the performance of any contract or other operation

deemed by the guaranteeing agency to be necessary to expedite or

expand production and deliveries or services under Government

contracts for the procurement of industrial resources or critical

technology items essential to the national defense, or for the purpose of financing any contractor, subcontractor, or other person in

connection with or in contemplation of the termination, in the interest of the United States, of any contract made for the national

8

defense; but no small-business concern (as defined in section

ø714(a)(1) of this Act¿ 702(16)) shall be held ineligible for the

issuance of such a guaranty by reason of alternative sources of supply.

* * * * * * *

(e)(1)(A) Except as provided in subparagraph (D), a guarantee

may be made under this section only if the øindustrial resource

shortfall¿ industrial resource or critical technology item shortfall

which such guarantee is intended to correct has been identified in

the Budget of the United States, or amendments thereto, submitted

to the Congress, accompanied by a statement from the President

demonstrating that the budget submission is in accordance with

the provisions of subsection (a)(3) of this section.

(B) Any such guarantee may be made only after 60 days have

elapsed after such øindustrial resource shortfall¿ industrial resource or critical technology item shortfall has been identified pursuant to subparagraph (A).

(C) If the making of any guarantee or guarantees to correct an

øindustrial resource shortfall¿ industrial resource or critical technology item shortfall would cause the aggregate outstanding

amount of all guarantees for such øindustrial resource shortfall¿

industrial resource or critical technology item shortfall to exceed

$50,000,000, any such guarantee or guarantees may be made only

if specifically authorized by law.

(D) The requirements of subparagraphs (A), (B), and (C)

may be waived—

(i) * * *

(ii) upon a determination by the President, on a nondelegable basis, that a specific guarantee is necessary

to avert an industrial resource or critical technology

item shortfall that would severely impair national defense capability.

(2) The authority conferred by this section shall not be used primarily to prevent the financial insolvency or bankruptcy of any

person, unless

(A) * * *

(B) a copy of such certification, together with a detailed justification thereof, is transmitted to the Congress and to the

Committee on Banking, Housing, and Urban Affairs of the

Senate and the øCommittee on Banking, Finance and Urban

Affairs of the House of Representatives¿ Committee on Financial Services of the House of Representatives at least ten days

prior to the exercise of that authority for such use.

* * * * * * *

SEC. 303. (a) PRESIDENTIAL PROVISIONS.—

(1) * * *

* * * * * * *

(7) WAIVER.—The requirements of paragraphs (1) through (6)

may be waived—

(A) * * *

(B) upon a determination by the President, on a nondelegable basis, that a specific guarantee is necessary to avert

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an industrial resource or critical technology item shortfall

that would severely impair national defense capability.

* * * * * * *

SEC. 304. DEFENSE PRODUCTION ACT FUND.

(a) * * *

(b) MONEYS IN FUND.—There shall be credited to the Fund—

(1) all moneys appropriated for the Fund, as authorized by

section ø711(c)¿ 711(b); and

* * * * * * *

SEC. 309. (a) ANNUAL REPORT ON IMPACT OF OFFSETS.—

(1) REPORT REQUIRED.—Not later than 18 months after the

date of the enactment of the Defense Production Act Amendments of 1984, and annually thereafter, the President shall

submit to the øCommittee on Banking, Finance and Urban Affairs of the House of Representatives¿ Committee on Financial

Services of the House of Representatives and the Committee on

Banking, Housing, and Urban Affairs of the Senate, a detailed

report on the impact of offsets on the defense preparedness, industrial competitiveness, employment, and trade of the United

States.

* * * * * * *

TITLE VII—GENERAL PROVISIONS

SEC. 711. (a)***

(b) TITLE III AUTHORIZATION.—There are authorized to be appropriated for each of fiscal years ø1996 through 2001¿ 2002 through

2004, such sums as may be necessary to carry out title III.

* * * * * * *

SEC. 717. (a) Title I (except section 104), title III, and title VII

(except sections 708 and 721), and all authority conferred thereunder, shall terminate at the close of September 30, ø2001¿ 2004:

Provided, That all authority hereby or hereafter extended under

title III of this Act shall be effective for any fiscal year only to such

extent or in such amounts as are provided in advance in appropriation Acts. Section 714 of this Act, and all authority conferred thereunder, shall terminate at the close of July 31, 1953. Section 104,

title II, and title VI of this Act, and all authority conferred thereunder shall terminate at the close of June 30, 1953. Title IV and

V of this Act, and all authority conferred thereunder, shall terminate at the close of April 30, 1953.

* * * * * * *

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