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Jon Greenberg
By Jon Greenberg June 21, 2021

White House moves on new Buy American guidelines

The same day that President Joe Biden sat down at the G-7 meeting in England to renew America's ties with its closest economic and geopolitical partners, back home, his administration released a plan to have the U.S. buy fewer foreign-made goods. 

A June 11 memo from the Office of Management and Budget was Biden's latest step toward making good on a campaign promise. 

"The president has control of $600 billion, handing out contracts for construction, Biden said Nov. 2, 2020. "For everything from building aircraft carriers, to public housing. Well, here's the promise I'm making to you, not one single contract will be let to a contractor who doesn't have products that are all made in America."

Since 1933, in the depths of the Great Depression, the U.S. has had the Buy American Act. It requires the government to buy American made goods whenever possible.

But there are waivers and exceptions. If, for example, the goods aren't made in the U.S., or the domestic versions are much more expensive, then agencies can buy the product outside America's borders. There is also a broad exception for many defense and other national security related products.

In his first week in office, Biden signed an executive order aimed at reducing the loopholes that allow government agencies to buy foreign made goods.

The June 11 memo laid out the steps it would take over the next several months. Those included building a website to make it easier to see what sort of waivers agencies had requested, and targeting foreign-made goods that could likely be made in the U.S. The ultimate goal, the memo said, is  to "increase U.S.-made content and limit the use and impact of waivers."

It's important to not be misled by Biden's reference to $600 billion in contracting. That includes both goods and services. The scope of the Buy American Act is much narrower. The Government Accountability Office said that as of 2017, about 40% of all government contracting, about $200 billion, was subject to the act. 

And of the $200 billion, only $7.8 billion were foreign made goods. The buying of goods used outside the U.S.( for example, a military base buying local products) accounted for about half of the $7.8 billion. Waivers pure and simple accounted for $700 million.

The numbers today would be different, but the GAO report suggests that tightening waiver rules will have a limited impact on overall federal spending patterns.

Still, Wiley, a large Washington law firm with a sizeable practice of companies selling to the government, told its clients to be on their guard with the new policy.

"While there are many open questions about what this will mean in practice, the bottom line is that it is likely going to be more difficult for agencies to waive Made in America laws," the firm wrote June 15.

William Reinsch, a trade specialist at the Center for Strategic and International Studies, said waivers are the smaller part of the administration's agenda. The bigger issue is defining what counts as domestic.

"If an item is assembled in the U.S. with more than 50% U.S. content, the entire item counts as 'American' for Buy American Act purposes," Reinsch said. "What that means is that items with as much as 49% foreign content are considered American products. That is what the administration plans to change."

Those changes fall under a related promise we are tracking on tightening the Made in America rules. One detail to note however: That definition is unlikely to fall to zero foreign content to be considered American-made. So, Biden's full promise to buy products that are "all made in America" doesn't appear to be in the cards.

As for this promise on buying American, we rate it In the Works.

 

Our Sources

White House, New Steps to Help Ensure the Future is Made In America, June 11, 2021

White House Office of Management and Budget, Increasing opportunities for domestic sourcing, June 11, 2021

Acquisition.gov, Part 25 - Foreign Acquisition, March 10, 2021

White House, Executive Order on Ensuring the Future Is Made in All of America by All of America's Workers, Jan. 25, 2021

Wiley LLP "Made in America" Follow-Through: OMB Guidance on Steps to Strengthen U.S. Supply Chains, Reduce Domestic Content Waivers, June 15, 2021

Congressional Research Service, The Buy American Act and Other Federal Procurement Domestic Content Restrictions, March 31, 2021

Government Accountability Office, Actions Needed to Improve Exception and Waiver Reporting and Selected Agency Guidance, December 2018

Government Executive, Federal Contract Spending Reaches Its Highest Level Ever in Fiscal 2019, June 26, 2020

Office of Sen. Sherrod Brown, Brown, Portman, Peters, Braun Reintroduce 'Build America, Buy America' legislation, April 22, 2021

Federal Aviation Administration, AIP Buy American Preference Requirements, May 18, 2021

Email exchange, William Reinsch, Scholl chair in international business, Center for Strategic and International Studies, June 21, 2021

 

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