President Biden Issues Order on “Made in America Laws”
On January 25, 2021, President Biden issued Executive Order (E.O.) 14005 to implement the President’s domestic sourcing and manufacturing policy agenda by tightening federal procurement and contracting requirements and directing rulemaking to favor domestic companies in federal contracts. The E.O.’s aim is to strengthen “Made in America Laws,” which refers to all regulations, rules, and executive orders relating to federal financial assistance awards or federal procurement, including the “Buy American Act.”
A number of different laws and regulations impose requirements for government agencies to prefer U.S.-made and manufactured products over foreign products. In some cases the requirements apply to products made in the United States using imported steel. The best-known such law is the Buy American Act of 1933, which applies to purchases by federal government agencies below certain value thresholds. There are other laws with different names that apply to different categories of government purchases. For example, there is the similarly sounding “Buy America Act,” which applies to purchases made by state and municipal agencies using funds provided by the Department of Transportation’s Federal Transit Administration and Federal Highway Administration; “the Berry Amendment,” which prohibits the Defense Department from purchasing foreign food, clothing and other textile products, and certain tools; and Federal Aviation Administration (FAA) rules implemented under the Airport Improvement Program statute through which the FAA supports construction projects at airports.
The United States has entered into international trade agreements, such as the WTO Government Procurement Agreement and various free trade agreements, such as the U.S.-Mexico-Canada Agreement, that prohibit the federal government from discriminating against products from the member countries when the procurement is above certain value thresholds. These U.S. commitments are implemented under the Trade Agreements Act and the Federal Acquisition Regulation (FAR). These international agreements apply to federal procurements, including those made through GSA Schedule contracts, but not to purchases made by states and municipalities using federal funds.
“Made in America Laws” incorporate exceptions, including the possibility to obtain waivers when in the public interest, including when either the needed product or component is not available from a U.S. manufacturer or the added cost of using domestic sources would significantly increase the cost of a project. Such waivers are administered by different agencies under the different laws.
Updates to Waiver Process
The E.O. establishes an office within the Office of Management Budget (OMB) headed by a director (the “Made in America Director”) who will provide an additional layer of oversight over all waivers being considered under all of the federal Made in America Laws. Within 45 days of being appointed, the Made in America Director is required to (i) publish a list of information that granting agencies shall include when submitting descriptions of proposed waivers and justifications, and (ii) publish a deadline, not to exceed 15 business days, for reviews to be conducted by OMB. There remains no deadline for individual agencies to consider waiver requirements and submit them to OMB.
Under the E.O., agencies must provide the Made in America Director with a description of any proposed waiver and a detailed justification for the goods, products, or materials that are sourced from outside the U.S.
Before granting a waiver in the public interest, the relevant agency will need to assess whether a “significant portion” of the cost advantage of a foreign-sourced product is the result of the use of dumped steel, iron, or manufactured goods or the use of injuriously subsidized steel, iron, or manufactured goods.
Updates to the FAR
The E.O. directs the Federal Acquisition Regulatory Council (FAR Council) to make several changes to the rules of the Buy American Act to enhance the competitiveness of domestic industry. Specifically, it instructs the FAR Council to engage in rulemaking that would:
(i) replace the Buy American Act’s longstanding “cost of component test” currently used to identify domestic end products and construction materials, with a new test that measures domestic content based on the value added to the product through U.S.-based production or U.S. job-supporting economic activity;
(ii) increase the percentage of domestic content required for end products and construction materials to qualify as a domestic item under the Buy American Act;
(iii) increase the price preferences for domestic end products and domestic construction materials covered by the Buy American Act; and
(iv) review, revise, or potentially remove the current exception for commercial off the shelf information technology products from the restrictions of the Buy American Act.
This instruction applies only to the Buy American Act, and not to the other Made in America Laws. Any proposed change to the FAR will be subject to notice and comment, so impacted businesses will have an opportunity to submit comments on the new rules.
Directs Federal Agencies to Partner with Manufacturing Extension Partnership
The E.O. also directs agencies to partner with the Hollings Manufacturing Extension Partnership (MEP) to conduct supplier scouting in order to identify American companies that are able to produce goods, products, and materials in the United States, with an emphasis on small- and medium-sized companies. MEP is a national network of centers established by the Omnibus Trade and Competitiveness Act of 1988 (P.L. 100-418) that provides custom services to small and medium-sized manufacturers to improve production processes, upgrade technological capabilities, and facilitate product innovation.