Co-Authored by Sharath Patil
Biden Signs Executive Order Strengthening Buy American Laws
Buy American laws are a set of statutes, regulations, rules, and Executive Orders that require that the U.S. federal government require or provide preferences for purchasing goods produced in the United States. Buy American laws were created and continue to be amended with the intention of promoting economic and national security, stimulating economic growth, creating good jobs at decent wages, and supporting the U.S. manufacturing and defense industrial bases.
On January 25, 2021, President Biden signed Executive Order 14005 titled Ensuring the Future is Made in All of America by All of America’s Workers. At its core, EO 14005 amends standards to ensure that the federal government invests taxpayer dollars in U.S.-owned businesses. EO 14005 sought to close loopholes that allow companies to offshore production and jobs while still qualifying for domestic preferences.
Specifically, EO 14005 does the following:
- Directs agencies to close current loopholes in how domestic content is measured and increase domestic content requirements
- Appoints a new senior leader in the Executive Office of the President in charge of the government’s Made-in-America policy approach
- Increases oversight of potential waivers to domestic preference laws
- Connects new businesses to contracting opportunities by requiring active use of supplier scouting by agencies
- Reiterates the President’s strong support for the Jones Act, which requires that only U.S.-flag vessels carry cargo between U.S. ports
- Directs a cross-agency review of all domestic preferences
EO 14005 requires the Federal Acquisition Regulatory Council (“FAR Council”), which coordinates U.S. government procurement activities, to consider amendments to current Buy American Act rules such as:
- Replace the “component test” in Part 25 of the Federal Acquisition Regulations that is used to identify domestic end products and domestic construction materials with a test under which domestic content is measured by the value that is added to the product through U.S.-based production or U.S. job-supporting economic activity
- Increase the numerical threshold for domestic content requirements for end products and construction materials
- Increase the price preferences for domestic end products and domestic construction materials.
EO 14005 has importation implications for the federal procurement process. After all, U.S. federal procurement is big business accounting for $600 billion in federal spending annually. Detailed information on U.S. government procurement activities by fiscal year is available on usaspending.gov. EO 14005 is estimated to apply to a third (or $200 billion worth) of U.S. annual federal procurement activities.
Buy American & U.S. WTO Commitments
Despite the popularity of Buy American laws domestically, the set of laws sometimes violates U.S. commitments under the World Trade Organization’s Agreement on Government Procurement, which works to ensure open, fair, and transparent conditions of competition in government procurement markets.
With regards to concerns that strengthened Buy American preferences violate U.S. WTO commitments, a White House press release indicating the Biden administration’s intent to change WTO rules: “The President remains committed to working with partners and allies to modernize international trade rules—including those related to government procurement–to make sure all countries can use their taxpayer dollars to spur investment in their own countries.”
Similarly, when asked if the order would be seen as protectionist, a Biden administration official said that EO 14005 would be fully consistent with U.S. commitments under the WTO and the administration would work with trade partners to modernize global rules.
However, EO 14005 has drawn criticism from foreign leaders. “We are always concerned by ‘Buy American’ … for sure that is going to be an issue very, very high on our agenda in our work with the Biden administration,” Canadian Finance Minister Chrystia Freeland told reporters.
If you have questions about federal procurement, Buy American waivers, country of origin determinations, Made in USA rules, or other customs and trade matters, contact Diaz Trade Law today at email@example.com or 305-456-3830.