President Trump has promoted his campaign agenda—bringing manufacturing jobs back to the United States (especially jobs relating or pertaining to the steel industry.) To do this, he has strengthened domestic preferences through the Buy America and Buy American Acts.[1]

  1. Buy America Act:

The Buy America Act refers to a collection of domestic contract restrictions pertaining to the U.S. Department of Transportation/Federal Highway Administration projects (highway, mass transit and other transportation projects). The USDOT grants provided to state and local governments prohibit the federal government from obligating funds unless the steel, iron and manufactured products used in the projects are produced in the U.S. Generally, Buy America applies to projects where USDOT provides part of the funding, applies to steel, iron and manufactured products, and requires that “all manufacturing processes, including application of a coating, for these materials…occur in the United States.”

  • Buy American:

Buy American is critical for construction contractors because FAR 52.225-9 requires that all federal construction contracts under approximately $7 million[2] contain a clause which mandates that contractors use “only domestic construction material in performing [the] contract.” [Note: This requirement is not limited to steel and steel products, as the Buy America Act is.]

The Buy American Act requires that substantially all materials making up the product have to be manufactured in the United States. The phrase “substantially all” means that the cost of the components making up the products  have to exceed “50% of the total costs.”

If a manufactured product is a commercially off-the-shelf (“COTS”) item, it will have to be a domestic sourced product (made in the U.S.).

  • Three Executive Orders: Since his election, President Trump has issued three executive orders pertaining to domestic preference in federal procurement.
    • “Buy American Hire American” (April 18, 2017). This Executive Order applies to the Buy America and Buy American Acts and requires the Commerce Department and US trade representatives to “assess the impacts of all United States free trade agreements and the World Trade Organization Agreement on Government Procurement on the operation of Buy American Laws.” For steel products, the order requires that they be produced in the United States meaning all manufacturing processes must be performed in the United States.
    • “Strengthening Buy American Preferences for Infrastructure Projects” (April 18, 2017): This Executive Order requires that federal agencies develop plans and rules to encourage contractors to adhere to domestic preference requirements for iron, aluminum, steel, cement and other manufactured products such as plastics, polymer-based products such as polyvinyl chloride (“PVC”) pipe, glass, optical fiber, and lumber. This Order may apply the Buy American Act to any project that receives federal assistance, even if the project was not solicited by the federal government.
    • “Maximizing Use of American Made, Goods, Products and Materials” (July 15, 2019): This Order mandates that the federal government enforce the Buy American Act to the greatest extent permitted by law and recommends two key changes for the Federal Acquisition Regulation (FAR) Council consideration:
      • For steel and iron manufactured products to be considered domestic construction materials the Executive Order proposes to increase the domestic content requirement from 51% to 95%.
      • The Order proposes to increase the price penalty levied against foreign end products from 6% to 20% in unrestricted procurements and from 12% to 30% in small business competitions.

Comment: The Executive Orders signal greater enforcement by the Administration on domestic preferences. The implementation of the Executive Orders requires the FAR Council and federal agencies to issue rules and guidelines to implement the executive orders. The actual implementation of the Orders will come through the Federal Acquisition Council and agencies likely in 2020. Sorting out the nuances contained in the Buy America and Buy American Acts is challenging even for seasoned government contract lawyers. The Executive Orders have added another layer of complexity to determining compliance. This is an area where contractors are well served to seek experienced legal counsel.

[1] This post is based on David Y. Yang’s article in Under Construction Winder 2019 edition entitled “Government Construction Contracts in the Era of Buying American.”

[2] Actually below $6,932,000.

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