Trump Administration Issues New Buy American Executive Order
On April 18, 2017, President Trump signed the “Presidential Executive Order on Buy American and Hire American.” While there is no immediate impact, the Executive Order (“EO”) sets the stage for executive agencies to perform reviews of compliance with Buy American laws and could potentially lead to changes in how these laws are implemented. Note that although there is a “Buy American Act” the term “Buy American” is also used as a generic term to describe a variety of laws and regulations that impose domestic content requirements.
The “Buy American” portion of the EO is based on what the Administration characterizes as the “twin pillars” of maximizing domestic content and minimizing waivers and exceptions to Buy American laws. The EO directs:
- Each agency to conduct top-to-bottom assessments of the monitoring, enforcement, implementation and compliance with the Buy American laws within their agencies; assess the use of waivers and the impact on domestic jobs and manufacturing; and develop proposed policies to maximize use of US made products to the extent permitted by law.
- The Commerce Department to provide guidance to agencies regarding how to make the assessments. Commerce must review all agency findings from the top-to bottom Buy American performance review, and within 220 days from the date of the signing of the order (Nov. 23), must present the President with a report recommending how to strengthen implementation of the Buy American laws.
- Each agency to construe public interest waivers narrowly. The granting of such waivers will be elevated to the heads of agencies to ensure accountability. There will also be an examination of the bidding process for government procurement contracts that will take into account the effect of foreign-sourced dumped or injuriously subsidized content in determination of the low bid.
- The Secretary of Commerce to comprehensively assess the effects of each of the relevant trade agreements (“FTAs”) to determine whether they are fair and reciprocal. If America is a net loser in relation to access to the government procurement markets of free trade agreement countries, those FTA provisions will be renegotiated or revoked.
As indicated above, any effects of this EO will most likely be felt following review and assessment of current Buy American programs.
The federal Buy American Act (“BAA”) and certain other federal Buy American laws contain provisions allowing for waivers of domestic content restrictions. One category of such waivers allows a federal agency to determine that applying a Buy American requirement would be inconsistent with the public interest. Current uses of public-interest waivers have been described by senior administration officials as “judicious,” and it is unclear what aspect of such waivers the Administration wishes to target. For example, in 2016 the Federal Transit Administration issued a public interest waiver of domestic content requirements for repairs being performed at the federally-funded World Trade Center Transportation Hub construction site involving damage caused by Hurricane Sandy, for which it was necessary to purchase equipment identical to that originally installed in 2003.
Public interest waivers have no relationship to existing waivers of the application of the BAA to products from countries with which the United States has entered into reciprocal commitments on government procurement, including the WTO Government Procurement Agreement (“GPA”) and most of the U.S. free trade agreements. Additional exemptions to the Act are available for specified articles and raw materials, which have been granted a non-availability class determination. A list of articles already determined to be non-available can be found at FAR 25.104, but the regulations also allow the head of the contracting activity to make individual determinations on a case by case basis. Additional waivers may be available for items that represent an unreasonable cost, are purely for commissary resale, or are commercial item information technology.
A recent report from the U.S. Government Accountability Office (“GAO”) reviewing government procurement globally found that the United States reported opening a higher value of procurement covered by the GPA than have other parties to the agreement. However, this information is from 2010 and the GAO found significant deficiencies in the reporting from FTA countries, including the United States. Moreover, no data has been published on the value of procurement contracts actually awarded to foreign suppliers in the member countries. Nonetheless, the report fuels arguments that the United States should tighten its Buy American policies.