Buy American Update #1

 

This post initiates a new series that will provide periodic insights into Buy American issues, issues that are becoming increasingly prominent in the trade debate under the Trump Administration.

 

 

American Pipelines: To comply with the President’s directive to develop a plan for the construction of American-made pipelines (by July 23), the Department of Commerce is seeking industry comments on the use of domestic iron and steel in pipelines. The agency’s request, published in the Federal Register on March 16, is directed at “all stakeholders involved in the manufacturing and construction of pipelines (including the retrofit, repair, or expansion of existing pipelines) as well as the production and distribution of pipeline materials”.

Those responding to Commerce’s request for comments are asked to provide information that includes: their role with regard to U.S. pipelines, their location, number of employees and sales revenue; the extent to which they obtain pipeline material from U.S. sources; the share of their current inventory that is fully produced in the United States; and how domestic content requirements would affect their operations. The Commerce Department will use the comments in its preparation of a plan for the domestic sourcing of materials for the construction, retrofitting, repair, and expansion of pipelines inside the U.S. Comments are due by April 7.

Border Wall: On March 17, Customs and Border Protection (CBP), a unit of the Department of Homeland Security, issued a Request for Proposal (RFP), seeking bids for the border wall. The wall, which has been long promised by President Trump, would stretch from San Diego, California to Brownsville, Texas. In order to comply with U.S. obligations under trade agreements, the CBP’s solicitation provides that the Buy American Act of 1933 (BAA) will be waived for construction materials with a value at or above the thresholds in the agreements. For countries that are parties to the WTO Government Procurement Agreement (GPA) or most free trade agreements (FTAs), the threshold is $7,358,000. But, for Bahrain, Oman and Mexico, the threshold is $10,079,365.

The BAA will not be waived for bids that are not covered by a trade agreement unless the  cost of domestic construction material for the wall is unreasonable. The CBP has determined that the cost of domestic products would be unreasonable if it exceeds foreign material costs by more than 25%.

Canada on Procurement: A recent letter by Senators calling on the President to suspend Buy American waivers prompted a sharp response from Canada’s Ambassador to the United States. In a March 16 letter, Ambassador David MacNaughton touted the openness of Canada’s public procurement market, arguing that it has awarded more federal contracts to foreign suppliers than has the United States. He also asserted that U.S. suppliers win more than 9% of Canada’s federal contracts, while Canadian suppliers win only “a mere 0.15% of U.S. contracts”. In a likely reference to the President’s call for imposing Buy American requirements on pipelines, the Ambassador pointed out that restricting procurement decisions by private companies would violate the WTO and the North American Free Trade Agreement (NAFTA).

Canada has been a long-standing critic of U.S. domestic preferences, and was a particularly critical of the Buy American requirement in the 2009 stimulus package (American Recovery and Reinvestment Act of 2009). It would be expected to be equally vocal if the infrastructure package that is promised by the President materializes and includes a Buy American restriction.

School Lunch Programs: Legislation (HR 1241) introduced in the House of Representatives at the end of February would tighten the requirements for school authorities to purchase foreign products for school lunches. Under current law, Buy American requirements require schools to buy domestic products for the school lunch program to the maximum extent practicable. An exception applies where domestic products are not produced or available domestically. The proposed legislation would require the schools to seek a waiver from the Department of Agriculture to use foreign products.

Jean Heilman Grier

March 29, 2017

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