“For purposes of this subtitle:

“(1) ADMINISTRATOR.—The term ‘Administrator’ means the Administrator of the Environmental Protection Agency.

“(2) BASELINE EMISSIONS.—The term ‘baseline emissions’ means the average greenhouse gas emissions of a company’s relevant sector, as determined under section 9903(a).

“(3) BENCHMARK EMISSIONS.—The term ‘benchmark emissions’ means the greenhouse gas emissions of the highest emitting sites within a company’s relevant sector in the United States, as determined under section 9903(b).

“(4) BORDER CARBON ADJUSTMENT.—The term ‘border carbon adjustment’ means the fee imposed pursuant to section 9904.

“(5) CO2-e.—The term ‘CO₂-e’ means the number of metric tons of carbon dioxide emissions with the same global warming potential as one metric ton of another greenhouse gas.

“(6) COVERED FUEL.—The term ‘covered fuel’ means natural gas, petroleum, coal, or any other product derived from natural gas, petroleum, or coal that is used or may be used so as to emit greenhouse gases to the atmosphere.

“(7) COVERED GOOD.—The term ‘covered good’ means a covered fuel or a product produced within a sector.

“(8) DOMESTIC ENVIRONMENTAL COST INCURRED.—The term ‘domestic environmental cost incurred’ means the amount determined under section 9902.

“(9) GREENHOUSE GAS.—The term ‘greenhouse gas’ has the same meaning given such term under paragraph (3) of section 901 of the Energy Independence and Security Act of 2007 (42 U.S.C. 17321).

“(10) GREENHOUSE GAS CONTENT.—The term ‘greenhouse gas content’ means the amount of greenhouse gases, expressed in metric tons of CO₂-e, which would be emitted to the atmosphere by the use of a covered fuel.

“(11) IMPORTED.—Irrespective of any other definition in law or treaty, the term ‘imported’ means to have landed on, brought into, or introduced into any place subject to the jurisdiction of the United States from a person or place outside the United States.

“(12) IMPORTER.—The term ‘importer’ means a person who, for any reason, brings a product from a foreign country into the United States for consumption, use, or warehousing.

“(13) PRODUCTION GREENHOUSE GAS EMISSIONS.—The term ‘production greenhouse gas emissions’ means the quantity of greenhouse gases, expressed in metric tons of CO₂-e, emitted to the atmosphere resulting from the production, manufacture, or assembly of a product, as determined under section 9905.

“(14) SECRETARY.—The term ‘Secretary’ means the Secretary of the Treasury, or the Secretary's delegate.

“(15) SECTOR.—The term ‘sector’ means industrial facilities which produce one of the following products:

“(A) Steel.

“(B) Aluminum.

“(C) Cement.

“(D) Iron.

“(E) Any product identified pursuant to section 9905(e).

“(F) Any product for which greater than 50 percent of the composition of such product consists of a product described in subparagraphs (A) through (E).

“(16) STATE.—The term ‘State’ means any of the 50 States, the District of Columbia, or the Commonwealth of Puerto Rico.

“(17) UPSTREAM GREENHOUSE GAS EMISSIONS.—The term ‘upstream greenhouse gas emissions’ means the quantity of greenhouse gases, expressed in metric tons of CO₂-e, emitted to the atmosphere resulting from the extraction, processing, transportation, financing, or other preparation of a covered fuel for use, as determined under section 9905.

“Not later than July 1, 2023, and annually thereafter, the Secretary (in coordination with the Director of the Office of Management and Budget, the Secretary of Commerce, the Secretary of Energy, the Administrator, the Secretary of Agriculture, the Secretary of Transportation, the United States Trade Representative, and the Secretary of the Interior) shall determine the domestic environmental cost incurred for each sector, and for the production of each covered fuel, based on the average cost incurred by companies within such sector (or, in the case of a covered fuel, the average cost incurred to produce such fuel) to comply with any Federal, State, regional, or local law, regulation, policy or program which is—

“(1) in effect at the time of such determination, including any such law, regulation, policy, or program which is implemented after the date of enactment of the FAIR Transition and Competition Act, and

“(2) designed to limit or reduce greenhouse gas emissions, including—

“(A) the Clean Air Act (42 U.S.C. 7401),

“(B) greenhouse gas emissions standards for passenger cars and light trucks, and

“(C) any State, regional, or local law, regulation, policy, or program that imposes a cap-and-trade system with respect to, or a tax or fee on, carbon dioxide.

“(a) Baseline emissions.—Not later than July 1, 2023, and annually thereafter, the Administrator shall determine and publish the average greenhouse gas emissions of each sector during the prior calendar year in order to demonstrate the amount of progress made in reducing greenhouse gas emissions in the United States.

“(b) Benchmark emissions.—Not later than July 1, 2023, and annually thereafter, the Administrator shall determine and publish the production greenhouse gas emissions for the top 1 percent of the emitting production sites within each sector in the United States during the prior calendar year.

“(a) Border carbon adjustment.—Beginning on January 1, 2024, in the case of any importer that imports a covered good into the United States, there shall be imposed a fee—

“(1) in the case of a covered fuel, in an amount equal to the product of—

“(A) the domestic environmental cost incurred in the production of such fuel, multiplied by

“(B) the upstream greenhouse gas emissions of such fuel,

“(2) in the case of a product produced within a sector which is not a covered fuel, in an amount equal to the product of—

“(A) the domestic environmental cost incurred for the sector in which such product was produced, multiplied by

“(B) the production greenhouse gas emissions of the product, or

“(3) in the case of a product produced within a sector for which reliable data with respect to the production greenhouse gas emissions of such product is not available, in an amount equal to the product of—

“(A) the benchmark emissions for the sector which produced such product, multiplied by

“(B) the domestic environmental cost incurred for the sector in which such product was produced.

“(b) Exemptions.—

“(1) IN GENERAL.—Not later than July 1, 2023, and annually thereafter, the Secretary shall publish an annual report which identifies all applicable countries, with any covered good imported from an applicable country during the calendar year beginning after the date of publication of such report to be exempt from the border carbon adjustment.

“(2) APPLICABLE COUNTRIES.—For purposes of this subsection, the term ‘applicable country’ means—

“(A) any country included on the list of Least Developed Countries on the most recent Development Assistance Committee List of Official Development Assistance Recipients published by the Organisation for Economic Co-operation and Development, and

“(B) any country which—

“(i) does not impose a border carbon adjustment on products produced or manufactured in the United States, and

“(ii) the Secretary (in coordination with the Secretary of State, the United States Trade Representative, the Secretary of Commerce, the Secretary of Energy, the Administrator, the Secretary of Agriculture, the Secretary of Transportation, and the Secretary of the Interior) determines enforces laws and regulations designed to limit or reduce greenhouse gas emissions that are at least as ambitious as Federal laws and regulations designed to limit or reduce greenhouse gas emissions.

“(a) In general.—The Secretary (in consultation with the Administrator, the United States Trade Representative, and the Secretary of Homeland Security) shall prescribe regulations and guidance to implement the border carbon adjustment.

“(b) Methodology.—In determining the production greenhouse gas emissions of a covered good, the Secretary shall use reliable methodologies which—

“(1) as may be necessary or convenient—

“(A) distinguish between different types of covered fuels,

“(B) distinguish between a covered fuel’s greenhouse gas content and that covered fuel’s upstream greenhouse gas emissions,

“(C) distinguish between the different types of greenhouse gas emissions which compose a covered fuel’s upstream greenhouse gas emissions, as well as the various processes which produced those emissions, and

“(D) distinguish between the different types of greenhouse gas emissions which compose a covered good’s production greenhouse gas emissions, as well as the various processes which produced those emissions,

“(2) ensure that no covered good has the border carbon adjustment imposed upon it more than once, and

“(3) are consistent with international treaties and agreements, including free trade agreements.

“(c) Petition procedure.—The Secretary shall establish fair, timely, impartial, and, to the extent necessary, confidential procedures by which the importer of any covered good may petition the Secretary to revise the Secretary’s determination of the production greenhouse gas emissions of that importer’s covered good.

“(d) International negotiations.—The Secretary of State and the United States Trade Representative shall engage with other countries regarding reducing global greenhouse gas emissions through trade and ensuring fairness in the application of emissions-based tariffs.

“(e) Additional sectors.—The Secretary (in consultation with the Director of the Office of Management and Budget, the Secretary of Commerce, the Secretary of Energy, the Administrator, the Secretary of Agriculture, the Secretary of Transportation, the Secretary of the Interior, and the United States Trade Representative) shall, for purposes of section 9901(15)(C), annually identify any product for which the Secretary determines—

“(1) there is reliable data for determining the production greenhouse gas emissions of such product, and

“(2) that it is in the interest of the United States to include such product under section 9901(15) for purposes of application of the border carbon adjustment with respect to such product.

“With respect to the revenues collected under section 9904—

“(1) such revenues shall be used to supplement appropriations made available in fiscal year 2024 and each fiscal year thereafter to U.S. Customs and Border Protection, in such amounts as are necessary to administer the border carbon adjustment, and

“(2) from any amounts remaining following any supplemental appropriation made with respect to amounts described in paragraph (1)—

“(A) 50 percent of such amounts remaining shall be used to provide grants to States as prescribed in section 3 of the FAIR Transition and Competition Act, and

“(B) 50 percent of such amounts remaining shall be available, as provided by appropriation Acts, for making expenditures to support the high-impact research, development, demonstration, technology transfer, commercialization, and export of technologies that reduce or eliminate greenhouse gas emissions.”.