United States: President Trump Issues Third Installment Of Buy American Initiative

President Trump continues to push forward with his “Buy American, Hire American” initiative with the issuance of his third Executive Order No. 13881 (the “Order”) on July 15, 2019, entitled “Maximizing Use of American-Made Goods, Products, and Materials.” This Order attempts to strengthen the standards that federal agencies must follow under the Buy American Act (“BAA”) by raising the threshold for domestic purchasing requirements.

Specifically, this Order proposes rule changes that would require iron and steel end products used in federal procurements to contain 95% U.S. materials. This is significantly above the current 50% threshold. The Order further proposes a rule requiring non-iron and steel end products used in federal procurements to contain 55% U.S. materials, up from the current 50% threshold.

This recent Order comes on the heels of two prior Executive Orders issued over the last two years.

Executive Order No. 13788, signed on April 28, 2017, required federal agencies to “scrupulously monitor, enforce, and comply with Buy American laws, to the extent they apply, and minimize the use of waivers, consistent with applicable law.” Executive Order 13788 also mandated federal agency action on Buy American laws at specified dates, as well as subsequent reporting on implementation of Buy American laws. In short, agencies were instructed to follow the law and report back.

Executive Order No. 13858 signed on January 31, 2019, instructed all agencies to maximize the use of iron and aluminum, as well as steel, cement, and other manufactured products produced in the United States in contracts, sub-contracts, purchase orders, or sub-awards. While Executive Order 13788 targeted recipients of “federal grants”, Executive Order 13858 amended that language to include those receiving “Federal financial assistance”, as defined in 2 C.F.R. § 200.40—federal assistance received by private entities in the form of grants, cooperative agreements, direct appropriations, loans, etc. Thus, private entities receiving public funds will be “encouraged” to use domestic sources when procuring goods or services.

Congress passed the BAA during the Great Depression to foster American industry by protecting it from foreign competition for federal procurement contracts. The BAA affords generous pricing preferences to offerors who certify their compliance with the domestic purchasing requirements stated in the act. Specifically, the BAA requires public agencies to procure articles, materials, and supplies that were mined, produced, or manufactured in the United States, except under five exempt circumstances. See 41 U.S.C. § 8302(a).

The BAA is one of several federal statutes implementing domestic purchasing requirements, including the “Buy America Act” and related regulations applicable to certain federal infrastructure and federal stimulus projects. See 49 U.S.C. § 5323(j) (mass transit grants); 23 U.S.C. § 313 (federally-funded highway grants); 49 U.S.C. § 24305(f) (federal grants to Amtrak); 49 U.S.C. § 50101 (grants to the Federal Aviation Administration); 48 C.F.R. § 25.600, et seq. (projects using funds appropriated by the American Reinvestment and Recovery Act).

The key to understanding the BAA is determining whether the solicited goods or “end products” are domestic, i.e. were mined, produced, or substantially manufactured in the United States. The FAR defines an “end product” as “those articles, materials, and supplies to be acquired for public use.” See 48 C.F.R. § 25.003. The analysis of whether an end-product qualifies as domestic is done using a two-part test. See 48 C.F.R. § 25.101. First, the end-product must be manufactured in the United States; second, more than 50% of all component parts (determined by cost of the components) must also be manufactured in the United States. If a product meets this two-part test, then it can be considered a “domestic end product” under the BAA. End products that do not qualify as domestic under this test are treated as foreign.

The most recent Order proposes a new standard for iron and steel end products to qualify as domestic end products, by requiring that iron and steel end products contain 95% U.S. material. In addition, the new Order proposed to amend the Federal Acquisition Regulation (“FAR”) to increase the percentage of required U.S. material for all non-iron and steel products to 55%. The Order also directs the FAR Council to consider whether this threshold should be gradually increased over time to require that an end product contain a minimum 75% U.S. components in order to qualify as domestic. While the Order does not address the existing FAR requirement that the end product also be “manufactured” in the United States, it is assumed that this would remain a threshold requirement for constituting a “domestic end product.” See 48 C.F.R. § 25.101

The Order also directs the FAR Council to consider increasing the price evaluation preference that domestic end products enjoy under the BAA. The FAR currently provides that when a domestic offer is not the lowest offer, the Contracting Officer must assert an evaluation penalty against the price of any contractor’s proposal. See 48 C.F.R. § 25.105. Generally speaking, the applicable penalties for foreign offers are: 6% where the lowest domestic offer is from a large business; 12% when the lowest domestic offer is from a small business; and 50% for any Department of Defense procurements. See 48 C.F.R. § 25.105(b)(1) and (2). The recent Order asks the FAR Council to consider amending these penalties from 6% to 20% for large businesses and from 12% to 30% for small businesses.

Under the Order, the Secretary of Commerce and the Director of the Office of Management and Budget, in consultation with others, including the FAR Council, are required to submit a report to the President on any other changes to the FAR that “the FAR Council should consider in order to better enforce the Buy American Act.”

The practical impact of this Order, as well as prior Executive Orders, remains to be seen. If implemented, domestic industries supplying domestic end products are certain to benefit in the form of a competitive advantage. However, this home field advantage could likely come at a cost to the American taxpayers, as the pool of qualified suppliers would be reduced, resulting in lesser competition. With decreased competition comes a possible increase in prices that the Government will pay to procure these products. Whatever the outcome, Buy American will continue to grab headlines as part of the President’s agenda moving forward.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions