Made in America – Executive Order Highlighting and Strengthening Domestic Preferences

On January 25, 2021, the White House issued an Executive Order on Ensuring the Future Is Made in All of America by All of America’s Workers (“Made in America EO” or “Order”). The Order is directed at enhancing the preference for American-made products in federal financial assistance awards and federal procurements.

Application of the Executive Order

Both federal financial assistance (grants) and federal procurements (contracts) are subject to various domestic preference requirements, including the similarly named Buy American Act (which applies to procurements) and the Buy America Act (which applies to transit-related projects—such as the construction of highways, railways or rapid transit systems—using funds granted by agencies within the US Department of Transportation). In addition, the Merchant Marine Act of 1920 (known as the Jones Act) requires preference in maritime transport among US ports. The Made in America EO generally refers to these statutes, regulations, rules and executive orders as “Made in America Laws.”

Scope of the Executive Order

Through several of its sections, the Made in America EO seeks to decrease reliance on, and increase transparency regarding, the use of waivers involving application of Made in America Laws. Among other changes, the Made in America EO establishes a Made in America Office and director (the “Director”) within the Office of Management and Budget (OMB) to centralize management of the Made in America statutes and, among other things, centralize the waiver process. Before an agency grants a waiver to permit acquisition of non-U.S. goods, products or materials, it must provide this Director with a description of its proposed waiver and a detailed justification for the use of such items that have not been mined, produced or manufactured in the United States. The Director may approve the waiver or request further justification. The new process for executing waivers highlights them and requires oversight and review—which may well lead to fewer of them, apparently a key objective of the Order.

Section 5 of the Order requires consideration of the cost advantage obtained by a supplier of “dumped” or heavily subsidized steel or other products. Before granting a “public interest” waiver, the relevant granting agency must assess whether a significant portion of the cost advantage of a foreign-sourced product is the result of the use of dumped steel, iron or manufactured goods or the use of injuriously subsidized steel, iron or manufactured goods. The assessment must be incorporated into the waiver so that the determination is visible.

Section 6 calls for the establishment of a website on which descriptions of the proposed waivers and whether they have been granted will be published.

Section 7 directs agencies to partner with the Hollings Manufacturing Extension Partnership (MEP) to identify American companies, including small- and medium-sized companies, as sources that are able to produce goods, products and materials in the United States that meet federal procurement needs. The Order thus imposes market research obligations with regard to potential domestic products.

Section 8 addresses potential Federal Acquisition Regulation (FAR) changes to promote enhanced enforcement of the Buy American Act. If implemented through the notice and comment process, such new rules could have a significant effect on procurement decisions. The Order directs the FAR Council to consider:

(i)    replacing the “component test” in Part 25 of the FAR that is used to identify domestic end products and domestic construction materials with a test under which domestic content is measured by the value that is added to the product through US-based production or US job-supporting economic activity;

(ii)   increasing the numerical threshold for domestic content requirements for end products and construction materials; and

(iii)  increasing the price preferences for domestic end products and domestic construction materials.

The Order calls for the FAR Council to make recommendations within 180 days. Although new rules would require notice and an opportunity to comment, new rules could be issued in the near term on an interim basis.

Section 9 addresses updates to the list of “nonavailable articles” in Section 25.104(a) of the FAR. These are items that have been determined to be unavailable at a reasonable cost from domestic sources and thus are exempt from application of the Buy American preference. Before the FAR Council amends this list, the Administrator of the Office of Federal Procurement Policy (OFPP), is required to review such an amendment with the Secretary of Commerce and the Made in America Director. These officials are required to devote “particular attention to economic analyses of relevant markets and available market research” to determine if “there is a reasonable basis to conclude that the article, material, or supply is not mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities and of a satisfactory quality.“ In other words, a process for oversight, review and a more searching analysis is required.

Section 10 raises the prospect of tighter restrictions on the acquisition of information technology (IT) that qualifies as a commercial item under federal procurement rules. FAR 25.103(e) currently provides an exception to the “restriction on purchasing foreign end products” for the acquisition of commercial item IT using certain year fiscal funds as specified in appropriations acts. The Order directs the FAR Council to “promptly review existing constraints on the extension of the requirements in Made in America Laws” to such IT and “develop recommendations for lifting these constraints to further promote the policy” of encouraging domestic preference.

Again, focusing on oversight and transparency, Section 11 requires each agency head to prepare a report concerning application of Made in America Laws, including use of waivers.

Finally, Section 12 of the Made in America EO revokes or supersedes other executive orders concerning domestic preferences. Three executive orders (or parts thereof) are revoked: (i) Executive Order 13788 of April 18, 2017 (Buy American and Hire American); (ii) Section 5 of Executive Order 13858 of January 31, 2019 (Strengthening Buy-American Preferences for Infrastructure Projects); and (iii) Executive Order 13975 of January 14, 2021 (Encouraging Buy American Policies for the United States Postal Service). Two executive orders are “superseded to the extent they are inconsistent” with the Made in America EO: (i) Executive Order 10582 of December 17, 1954 (Prescribing Uniform Procedures for Certain Determinations Under the Buy-America Act) and (ii) Executive Order 13881 of July 15, 2019 (Maximizing Use of American-Made Goods, Products, and Materials). The latter (EO 13881) was the subject of a recently issued final rule that increased domestic content requirements and price preference adjustments for federal procurements.

Conclusion

For decades, the implementation and use of the Made in America statutes and regulations has been a bit of an arcane process, allowing agencies to largely address their own interests as they have seen fit. The new Made in America EO is clear that the use of these laws has been elevated, with accompanying oversight, review and discipline.