The "Foreign Pollution Fee Act of 2025" aims to level the playing field for American manufacturers by imposing a fee on certain imported products based on their pollution intensity, addressing the competitive disadvantage caused by stringent domestic environmental regulations compared to foreign producers with weaker standards. This fee is designed to counteract the unfair cost advantage enjoyed by foreign polluters, particularly those in nonmarket economies like China. The bill explicitly states that it is not a carbon tax on domestically produced goods.

The bill imposes an ad valorem fee on imported goods, calculated as a percentage of their customs value. This fee is determined by a variable charge, initially set by a fixed table for specific countries and product categories, with higher rates for high-polluting nations like China and Russia. Subsequently, a tiered system based on the pollution intensity difference between the imported product's country of origin and the U.S. baseline will apply, leading to higher charges for greater differences.

The variable charge can be significantly increased for products originating from nonmarket economy countries or facilities owned or controlled by foreign entities of concern, potentially quadrupling the fee. The Secretary of Commerce is authorized to adjust fees or prohibit imports to counter evasion, though an exception allows for reducing the fee to zero for specific imports fulfilling Department of Defense contracts.

The calculation of a product's pollution intensity considers direct, indirect, precursor, and transportation emissions, expressed in metric tons of carbon dioxide equivalent per metric ton of product. The Secretary of the Treasury, in consultation with an Advisory Committee on Global Pollution Challenges, develops consistent methodologies and uses various data sources for these calculations. Recycled materials can be deemed to have zero pollution intensity, and verifiable carbon capture or removal activities can reduce a product's assessed pollution.

The bill encourages the United States Trade Representative to negotiate international partnership agreements with other countries to promote global pollution reduction. These agreements require interoperable pollution assessment methods, compatible monitoring and reporting, and collaboration on market distortions, explicitly excluding nonmarket economy countries. Partner countries may receive reduced fees, and low-income and lower-middle-income countries are granted a grace period and support to meet the agreement requirements.

A process is established for individual foreign facilities to apply for facility-specific treatment, allowing their products to be assessed based on their actual pollution intensity rather than the country average. This requires strict monitoring and verification by U.S. officials, and such treatment is not available for facilities in or owned by nonmarket economy countries or foreign entities of concern. The bill mandates regular rulemaking for implementation and reassessments of the fee structure and pollution intensity calculations, along with annual reports to Congress on the act's impact.