A recent posting considered a provision in legislation passed by the U.S. House of Representatives that may restrict negotiations of new procurement commitments. The provision is aimed at prohibiting new waivers of the Buy American Act of 1933, which applies to federal government procurement of goods.
In late June, Canada raised concerns with U.S. federal and state legislative measures “that increase domestic content requirements in procurement conducted by federal, state and municipal-level entities”. It expressed these concerns at a June 25, 2014 meeting of the WTO Committee on Government Procurement. According to the Washington Trade Daily (June 27, 2014), these concerns were echoed by the European Union, which “also complained about growing local content requirements in US procurement at the federal and state levels.”
Canada cited two U.S. measures that would impose Buy America requirements on state and local water infrastructure projects that receive federal financial assistance. One is the Water Resources Reform and Development Act (WRRDA), which the President signed on June 10, 2014. The WRRDA imposes new Buy America restrictions on iron and steel used in large water infrastructure projects that receive federal funding. Canada noted that the Act also “imposes new and permanent Buy America restrictions” on projects funded by the Environmental Protection Agency’s Clean Water State Revolving Loan Fund.
The WRRDA includes the three exceptions typically attached to “buy America” provisions. It also includes a provision, first included in the American Recovery and Reinvestment Act of 2009 (ARRA), that the requirement must be applied consistent with U.S. obligations under international agreements. That means that if the project receiving the federal funding is covered by a U.S. trade agreement, the Buy America provision would not be applied.
The second federal measure cited by Canada is legislation proposed by the Administration — the Generating Renewal, Opportunity, and Work with Accelerated Mobility, Efficiency and Rebuilding of Infrastructure and Communities Throughout America Act, referred to as the GROW AMERICA Act. It was introduced in the House on June 11, 2014. Canada complains that this measure would expand domestic content requirements attached to federal funding for urban transportation projects. In particular, it cites the proposed “increase in the Buy America domestic content provisions for so-called rolling stock —buses, urban rail cars—from the current 60 percent to 100 percent by 2019.”
In its WTO intervention, Canada’s also cited concerns “with the growing list of Buy America legislative initiatives at the state government level.” It outlined its concerns with three state measures:
- Minnesota: A measure adopted by the state legislature requires use of American-made steel in projects funded by a $1-billion capital investment.
- New York: Pending legislation would impose Buy America restrictions that “mirror” federal restrictions on federally funded transportation projects. It also includes the ARRA provision that requires consistency with international obligations.
- Massachusetts: Legislation pending in the state senate would impose a preference for domestic products purchased by state agencies.
At the WTO meeting, Canada asked the United States for clarifications regarding the various measures. In particular, Canada asked the U.S. to specify the steps that it had taken to fulfill its obligation under the WTO Government Procurement Agreement (Article XXII(6)) to “seek to avoid introducing or continuing discriminatory measures that distort open procurement.”
The significance and potential impact of these federal and state measures will be examined in a subsequent posting.
Jean Heilman Grier
July 7, 2014