The U.S. Government Accountability Office (GAO) recently prepared a report for Congress on the effectiveness of a Buy American provision in the 2009 stimulus package that was intended to restrict the Department of Homeland Security’s (DHS) purchase of foreign textile products. GAO concluded that the restriction had limited effect. This post examines the results of the GAO study and the implications of the restriction with respect to trade agreements.
The American Recovery and Reinvestment Act of 2009 (ARRA) included a provision, known as the “Kissell Amendment” after its author, Representative Larry Kissell of North Carolina. The provision generally restricts DHS from procuring certain fibers, textiles and clothing that are directly related to the national security interests of the United States unless they are grown, reprocessed, reused or produced in the U.S. The affected categories and types of textiles include clothing, tents, tarpaulins, covers and protective equipment, as well as the fibers used for fabrics such as cotton and other natural and synthetic fabrics. Unlike the Buy American requirement that applied to infrastructure projects funded by ARRA, the Kissell Amendment continues to apply to procurement with any DHS funds.
Congress limited the application of the Kissell Amendment’s restriction with a number of exceptions. They include: (i) small purchases below the simplified acquisition threshold (SAT), currently set at $150,000; (ii) lack of availability (a Kissell-covered item cannot be procured at a satisfactory quality and in sufficient quantity at U.S. market prices); (iii) procurements outside the U.S.; and (iv) de minimis purchases (the total value of foreign fibers in a Kissell-covered item, does not exceed 10% of the total purchase price of the item.
An important exception from a trade agreement perspective is the requirement that the Amendment be applied in a manner consistent with U.S. obligations under international agreements. As a consequence, DHS procurement of uniforms and other textile items that are covered by the WTO Government Procurement Agreement (GPA) and free trade agreements (FTAs) are not subject to the domestic purchasing requirement, regardless of the item’s relationship to U.S. national security interests.
DHS procurement is covered under the GPA and FTAs, except for textiles and apparel purchased by the Transportation Security Administration (TSA). These TSA purchases are excluded from all trade agreements, except the North American Free Trade Agreement (NAFTA) and the U.S.-Chile FTA. In addition, the Trade Agreements Act of 1979, which authorizes the federal government to waive certain domestic purchasing requirements, provides that federal agencies may purchase from least developed countries (LDCs), without regard to whether they provide reciprocal access to their procurement.
At the behest of the Senate, the GAO examined the extent to which the DHS has incorporated the Kissell Amendment into its procurement policies and procedures and the effect of that Amendment on DHS’s procurement of textiles.
The GAO concluded “the Kissell Amendment restriction affects a limited number of procurements due to multiple factors and has not fully restricted DHS from purchasing textiles from foreign sources”. The majority of textile products procured by components of DHS are uniforms and body armor.
In September 2014, DHS entered a $164.6 million, Department-wide contract for uniforms, the largest procurement covered by the Kissell Amendment. Under that contract, 58% of the uniform items came from 12 countries, with Mexico accounting for 30%, El Salvador, 10%, Honduras, 6%, and 8% from LDCs (5% from Cambodia and 2% from Bangladesh). The remaining 42%, or $69 million, in uniform items were reported as originating in the U.S. With regard to TSA orders of uniforms under the contract, 68% were from Mexico and 32% from the U.S.
The second largest current textile contract is a DHS-wide contract for body armor. That contract became effective on November 1, 2016 and is not to exceed $93.8 million. According to GAO, DHS reported that, to date, all the body armor ordered under the contract was produced in the U.S.
The GAO found that limiting sourcing of uniforms to the U.S. could be more costly for DHS: “both the price of the uniform items and the time it would take to find appropriate U.S. sources could potentially increase if current statutory and trade agreements requirements changed and DHS was required to source all of its uniform items from the United States”. The prices could increase 50% to 150% and it could take two years for DHS to find U.S. suppliers for the textile products that it currently purchases from foreign countries. With reference to the federal procurement requirement that agencies obtain the “best value” for the government in conducting procurement, DHS officials observed that the best value may come from foreign sources “especially when the country is party to an international trade agreement with the U.S.
The GAO also determined that DHS utilizes several procedures to ensure that its contracting officers comply with the Kissell Amendment. They include an acquisition review process, a requirement that all DHS components use DHS-wide contracts, verification procedures, and training for contracting personnel on the Kissell Amendment restriction.
Jean Heilman Grier
December 6, 2017