Biden Executive Order Aims to Strengthen “Buy American” Policies and Give Teeth to Enforcement Mechanisms

On January 25, 2021, President Biden signed an Executive Order outlining his vision for a new “Made in America” policy that would strengthen the terms and conditions of financial assistance awards and procurement agreements with the Federal Government under the Buy American Act.  This law requires or provides a preference for goods and services produced in the United States (including U.S. steel, aluminum, manufactured goods, and maritime services) and promotes government procurement of U.S. goods and services that help American businesses compete in strategic industries. 
 
The Executive Order also appears to promote accountability in government procurement procedures by vesting waiver authority (to grant exceptions from Made in America Laws or procedures) in senior agency leadership and implement additional transparency requirements, as outlined below.

 

Transparency provisions and requirements detailed in the Executive Order

1. Requires Government Agencies to review and “consider” suspending, revising, or rescinding prior agency actions that are inconsistent with the stated policy and to propose additional agency actions necessary to enforce the policy;
2. Centralize “Made in America” waiver approval procedures under a new Made in America Office (and newly appointed Director) that would:
   1. Review required supplemental information and justification for proposed waivers of Made in America requirements;
   2. Assess whether foreign-sourced product cost advantages (in granting waivers) result from the use of dumped or subsidized steel, iron, or manufactured goods; and
   3. Report proposed waivers, along with descriptions and justifications provided and the approval decision (where permitted by law and consistent with national security objectives) to the Office of Management and Budget for publishing on a public website;
3. Conduct supplier scouting efforts to identify U.S. companies (including small- and medium-sized businesses) capable of producing the covered goods and services in the United States;
4. Replace the “component test” used to identify domestic end products and construction materials (in the Federal Acquisition Regulations) with a test that measures the domestic content value added to the product, increases the threshold requirements for domestic content for end products and materials, and increases price preferences for domestic end products;
5. Review economic analyses and market research in connection with the “List of Nonavailable Articles” (in sufficient commercial quantities) from domestic sources to determine whether a reasonable basis for proposed amendments or additions exists;
6. Review and make recommendations to lift constraints on the extension of “Made in America” requirements to commercial information technology items; and
7. Revokes certain prior Executive Orders that are inconsistent with the new policy.

 

The Administration signaled that it would comply with its obligations and commitments to the World Trade Organization (WTO) and work with trade partners to modernize global rules.

 

How BDO can help

Businesses may wish to review the following areas to better understand the interdependencies of U.S. import rules of origin, the WTO Government Procurement Agreement, and Buy American Act:

• Review and update policy and procedure documentation used to qualify goods covered by Government Procurement Agreements to ensure they fully cover the requirements of the Buy American Act;
• Review the “substantial transformation” rules of U.S. Customs & Border Protection to conform origin determinations with this agency’s standards where applicable;
• Review supply chain models to ensure they effectively support the sourcing requirements of the Buy American Act;
• Evaluate supplier contract documentation to ensure they reflect Buy American Act requirements and other specific government contract obligations; and
• Assess internal and supplier compliance with documented procedures and agreements.