Joe Biden, the presumptive Democratic nominee for president, on July 9 put forward a Buy American plan that includes elements that coincide with President Trump’s aims of tightening domestic content requirements and waivers. The Biden plan also includes a proposal to work with trading partners to revise international procurement rules, in contrast to the unilateral actions favored by the current administration. This post looks at the key elements of the Biden plan in relation to current practices and Trump’s Buy American directives.
Tighten domestic content rules: The former vice president wants to increase the current 51 percent domestic content required for a product to be considered U.S.-made under the Buy American Act of 1933. This is an aim that he shares with President Trump who is seeking an increase in the required U.S. content to 55 percent for all products, except steel and iron products, for which the domestic content would be boosted to 95 percent. The government entities responsible for the Federal Acquisition Regulation (FAR) are developing a proposed rule to amend the FAR to implement the president’s directives. They report that after reviewing a draft proposed FAR rule, the Office of Federal Procurement Policy identified issues that need to be resolved before the proposed rule can be published in the Federal Register for public comments.
Crack down on waivers of Buy American requirements: The Biden plan calls for closing loopholes that allow agencies to issue waivers of Buy American requirements “without explanation or scrutiny.” It would require all requests by federal contractors for a waiver “based on a claim that something can’t be made in America” to be published on a website, and presumably stakeholders would be invited to submit comments on the request. The proposal would build transparency into the beginning of the waiver process in contrast to the current practice, most prevalent at the Department of Transportation, of requiring agencies to publish proposed waivers for public comment before they are issued.
Extend Buy American to Other Forms of Governmental Assistance: The former vice president’s proposal would require companies that “benefit from taxpayer-funded research that leads to new products and profits” to make the product in the U.S. or reimburse the government for the support. Biden wants to do away with “invent it here, make it there.”
Strengthen and enforce Buy America: Biden’s plan extends beyond the Buy American Act of 1933, which applies to federal procurement, to a wide array of transportation projects under a Buy America umbrella. The plan does not elaborate on this element.
Ship American: The former vice president reiterates his support for the Jones Act mandate that only U.S.-flag vessels carry cargo between U.S. ports.
Update the trade rules for Buy American: Biden wants to “work with allies to modernize international trade rules and associated domestic regulations regarding government procurement to make sure that the U.S. and allies can use their own taxpayer dollars to spur investment in their own countries.” This proposal does not detail proposed changes but would likely focus on the WTO Government Procurement Agreement (GPA), which sets the standard for international procurement rules.
A request by the U.S. to update procurement rules could provide an opening for the European Union to seek revisions of GPA rules to address its concern with the harmful effect of foreign subsidies on public procurement, as described in a recent post. Provisions incorporated in trade agreements with two GPA partners indicate the types of changes that the EU could seek in the GPA. The EU’s trade agreements with both Japan and Singapore allow a procuring entity to verify whether a tender with a price that is abnormally lower than the price in other tenders is the result of foreign subsidies. The Singapore FTA goes further and allows a procuring entity to reject a tender that is abnormally low when it establishes that the supplier has obtained subsidies.
Biden's support of Buy American policies is not surprising. At the beginning of the Obama-Biden administration, the major stimulus package, the American Recovery and Reinvestment Act of 2009 (ARRA), required the use of U.S.-made iron, steel and manufactured goods in a broad array of state and local projects funded by the legislation. However, it recognized the need to comply with international agreements. As a consequence, ARRA excluded procurement covered by the GPA or a bilateral agreement from the domestic purchasing mandate.
A challenge for any plan to strengthen Buy American requirements is that the U.S. already has an extensive array of such requirements sprinkled throughout its procurement system. It carves most of them out of its trade agreement obligations. The exceptions are the Buy American Act, the Department of Defense’s balance of payments program and the Rural Utilities Service domestic purchasing requirements for electric and telecommunications projects. For goods covered by these agreements, the U.S. waives the domestic content requirements.
While the Biden plan is short on concrete details, its overall emphasis on the importance of Buy American indicates that such policies will likely continue in some form whatever the outcome of the presidential election in November. However, under a Biden presidency, one would expect compliance with U.S. trade obligations, as illustrated in ARRA.
Jean Heilman Grier
July 14, 2020
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Federal Domestic Content Restrictions on State & Local Projects
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