Manufacturers are likely to face a tighter definition of American-made products and a stricter process for securing waivers as a result of President Joe Biden’s executive order this week. But the exact details will come from the Federal Acquisition Regulatory (FAR) Council within the next six months.
On January 25, President Biden signed an executive order aimed at long-standing “Buy American” provisions the federal government follows in its procurement process. The Buy American Act of 1933 requires that a portion of products purchased by federal agencies be made in the United States. The original intent was to limit the purchase of foreign-made products, encourage the purchase of American-made goods, and contribute to the growth of American jobs.
The Buy American Act applies only to federal procurement and when the materials and products to be procured are intended “for public use within the United States.” Further, “the items to be procured or the materials from which they are manufactured must be present in the United States in sufficient and reasonably available commercial quantities of a satisfactory quality.”
Biden’s executive order instructs the FAR Council to come up with new regulations increasing the Buy American requirements and changing the way those requirements are measured. Before, a product qualified as domestic if 55% of the cost of components were made in America, or 95% for iron or steel products. While this order does not specify what the new percentages will be, it does suggest:
- Replacing the “component test” with a test that measures domestic content “by the value that is added to the product through U.S.-based production or U.S. job-supporting economic activity.”
- Increasing the domestic content thresholds.
- Increasing the price preferences for domestic end products and domestic construction materials.
The FAR Council has until late July to propose the new regulations.
The order also instructs the director of the Office of Management and Budget to create a Made in America Office with a Made in America director. This new senior-level position will be accountable for a stricter waiver process, including a publicity component where descriptions of proposed waivers will be made available online. The public notice would include information on all proposed waivers and whether those waivers have been granted.
Under the order, and with this public information, agencies will further be expected to partner with a national network of manufacturers to identify American companies that are able to produce goods, products, and materials in the United States that meet federal procurement needs.
Further clarification and guidance will be available as the agencies review and propose ways to implement these policies in the coming weeks and months. For more information, please contact us or your regular Parker Poe contact.