[House Report 107-173]
[From the U.S. Government Publishing Office]




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 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:
        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
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:

                                     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 three-year period covered by the bill. Based on 
historical spending patterns, 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.''

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 defense; 
but no small-business concern (as defined in section [714(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 [industrial 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 [industrial 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 [industrial resource shortfall] industrial resource or 
critical technology item shortfall would cause the aggregate 
outstanding amount of all guarantees for such [industrial 
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 [Committee 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 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 [711(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 [Committee 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 [1996 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, [2001] 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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