President Biden Signs Made in America Executive Order
Kelley Drye Client Advisory
Future of Trump Administration’s Final Buy American Rulemaking Uncertain
“American manufacturing was the arsenal of democracy in World War Two, and it must be part of the engine of American prosperity now. That means we are going to use taxpayers’ money to rebuild America. We’ll buy American products and support American jobs, union jobs.”
President Joseph R. Biden, Jr., January 25, 2021
On January 25, 2021, President Joseph R. Biden, Jr. signed an Executive Order entitled Ensuring the Future Is Made in All of America by All of America’s Workers (the Order). The Order fulfills a campaign promise of Biden’s, directing federal agencies to strengthen Buy America requirements for procuring goods and services from sources that will support U.S. businesses and workers.
Among other things, President Biden’s Order pledges to close loopholes to the Federal Acquisition Regulations (FAR) implementing the 1933 Buy American Act (BAA) and directs changes to the standards for determining domestic origin. Notably, the Order comes less than a week after publication by the FAR Council of a final rule implementing one of President Trump’s three major Buy America Executive Orders – Executive Order 13881, Maximizing Use of American-Made Goods, Products, and Materials (July 2019) – and calls into question whether that now “frozen” rule will ever take effect.
Overview of New Made in America Executive Order
At its outset, the Order sets forth the policy of the Biden Administration with respect to domestic procurement – namely, that the United States Government should, through federal procurement as well as the terms and conditions of federal financial assistance awards, maximum the use of U.S.-produced goods and U.S.-offered services. The Order directs a whole-of-government approach, including the creation of a new “Made in America Office” within the White House Office of Management and Budget (“OMB”) to oversee and implement the Order’s directives.
Streamlining and Reducing Buy America Waivers
The Order directs the new Made in America Office to update and centralize the Made in America waiver process across the federal government. As contemplated in the Order, the Director of Made in America will be responsible for evaluating waiver requests both for direct federal agency procurements subject to the BAA and for the litany of “Buy America” laws applied to certain federal-aid infrastructure programs. Under the new process, an agency must submit any proposed waiver – and justification for such – to the Made in America Office for review and approval. Notably, many of the federal Buy America laws include statutory waiver notice and determination requirements, which must be followed, even in the face of the potentially duplicative process within the new Made In America Office.
The Order directs a central review of waivers of what the Order defines as “Made in America Laws,” including their requirements, with the ostensible intent of reducing unnecessary waivers. To this end, the Order directs the General Services Administration (“GSA”) to publish relevant waivers on a public database with the aim of enabling manufacturers and other interested parties the ability to identify proposed waivers as well as those granted.
Currently, the Federal Government maintains the BuyAmerican.gov website, which links to the GSA’s SAM.gov, which links to an aggregated list of BAA waivers. It is unclear whether the Biden Administration anticipates using that website to effectuate this directive of the Order.
The Order directs agencies to 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” prior to granting a waiver in the public interest. Agencies may consult with the Commerce Department’s International Trade Administration on such assessments.
Closing Loopholes and Strengthening Enforcement
The Order directs all agency heads to conduct a review of previous agency action and to consider: (1) suspending, revising, or rescinding agency actions that are inconsistent with the Administration’s Buy America policy; and (2) proposing “any additional agency actions necessary” to meet and enforce such policy.
The Order directs all agency heads to submit to the new Made in America Director a report on the agency’s implementation and compliance with domestic procurement laws; the agency’s use of any “longstanding or nationwide waivers of any Made in America Laws,” including the justification for such waivers; and recommendations to further effectuate the Administration’s Buy America policy.
Initial agency reports are required to be submitted by July 24, 2021. Subsequently, the Order requires each agency to submit bi-annual reports on its ongoing implementation and compliance with domestic procurement laws, as well as its use of waivers to such laws and a country-by-country analysis of spending as a result of waivers issued pursuant to the Trade Agreements Act.
As highlighted above, the Order directs the FAR Council to strengthen standards applied to the Buy American Act, which covers direct federal procurement of construction materials and supplies. Specifically, President Biden’s Order directs the FAR Council to consider proposing, “within 180 days,” a notice and comment rulemaking to make several changes to existing BAA standards:
Replace the FAR’s existing “component test” with a new method of measuring domestic content based upon the “value that is added to the product through U.S.-based production or U.S. job-supporting economic activity.”
Increase the domestic content threshold for federal agency procurements subject to the 1933 BAA. Currently under the BAA, an end product is considered domestic if: (1) it is mined, produced or manufactured in the United States; and (2) the cost of its components mined, produced or manufactured in the United States exceed 50 percent of the cost of all components.
Modify the formula executive agencies must use when determining whether a bid or offered price of materials of domestic origin is unreasonable or inconsistent with the public interest. Currently under the BAA, a domestic bid will not be accepted if the lowest foreign bid is more than 6 percent less expensive than the domestic bid.
Unlike former President Trump’s Executive Order 13881, President Biden’s new Order does not offer any suggestions as to what those standards should be increased to from their current 50+% domestic component content and, relative to the price preference, 6% generally and 12% for small business entities.
The Order also prohibits the FAR Council from updating its list of nonavailable articles under the Buy American Act (FAR 25.104(a)) until the OMB’s Office of Federal Procurement Policy (OFPP) – in consultation with the Secretary of Commerce and the new Made in America Director – conducts an extensive review and economic analysis “to determine whether 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.” The current list of unavailable articles can be found here.
Order directs the FAR Council to review the application of Buy American requirements to information technology that is a commercial item and to develop recommendations to remove any identified constraints related to such application. Currently, the FAR excepts information technology that is a commercial item from the BAA requirements, as directed by Congress. This exception to the BAA has been included in Congressional annual appropriations since FY 2005 and was implemented via rulemaking in 2006.
Directs federal agencies to use the Manufacturing Extension Partnership (MEP) – an office of the National Institute of Standards and Technology (NIST) at the U.S. Department of Commerce – to conduct “supplier scouting” to better identify small and medium-sized domestic manufacturers to meet federal procurement needs. The MEP program has a strong history of partnering with federal agencies administering federal-aid Buy America laws for similar supplier scouting support.
Directs the General Services Administration to develop within 180 days recommendations for ensuring that products offered to the general public on Federal property are procured in accordance with the Administration’s Made in America policy.
Reiterates the Administration’s support for Jones Act, a century-old law requiring, unless waived, that goods shipped from one American port to another be transported on a ship that is U.S.-built, U.S.-owned, and registered in the United States. The Executive Order builds off of a provision the 116th Congress included in the FY 2021 National Defense Authorization Act, which aimed to clarify the application of the Jones Act to all offshore renewable energy production in the United States’ Exclusive Economic Zone.
On January 19, 2021 – former President Trump’s last full day in office – the FAR Council issued a final rule imposing changes to the FAR provisions implementing the Buy American Act as directed by President Trump’s Executive Order 13881, Maximizing Use of American-Made Goods, Products, and Materials.
Among other things, the final rule sought to change FAR clauses implementing the BAA by:
Increasing the domestic content requirements for “domestic end products” and “domestic construction materials” to:
95% for predominantly iron and steel products (excluding COTS fasteners); and
55% for all other products and materials;
Increasing the price differential for domestic products, utilized to determine a bid’s reasonableness, to:
20% - from 6% - for large businesses; and
30% - from 12% - for small businesses;
Applying the domestic content requirement to “predominantly iron and steel products” that heretofore have been treated as “commercial off-the-shelf” and for which the BAA’s traditional domestic component content requirement had been waived; and
Imposing a robust origin requirement for iron and steel used as inputs to predominantly iron and steel construction material and other end products, which will require that most ferrous inputs originate from steel “melted and poured” in the United States.
The outcome of the final rule remains in flux, despite its express effective date of January 21, 2021. That uncertainty is tied to the Biden Administration’s day one regulatory freeze of pending rules that had not yet taken effect. Specifically, on January 20, 2021, President Biden’s chief of staff Ron Klain issued a memorandum to the federal heads of executive departments and agencies requesting that they postpone effective dates of final rules for 60 days from the date of his memorandum, and potentially reopen the comment period for another 30 days. The Biden Administration could potentially further delay the effective date of the final rule by issuing a new proposed rule, subject to notice and comment, which would further delay the effective date of the final rule beyond the 60 days requested for the regulatory freeze.
President Biden’s executive order does not go so far as to revoke, outright, Executive Order 13881, rendering the FAR Council’s final rule in a state of flux. The new Order simply directs that Executive Order 13881 be superseded to the extent it is deemed inconsistent with the Order. Although many of the changes to the FAR included in the final rule can be seen as consistent with the aims of President Biden’s Order, much of it can be argued to be inconsistent, including the final rule’s reliance on the existing regulatory framework for determining whether a product is a domestic end product or construction material, most notably the “component test.”
No More Encouraging?
President Biden’s Order repeals former President Trump’s first two Buy American Executive Orders: Executive Order 13788, Buy American and Hire American, and Executive Order 13858, Strengthening Buy American for Preferences for Infrastructure Projects. Although those two executive orders did not include directives imposing new Buy American requirements, the latter did direct agencies administering federal financial assistance infrastructure programs and state and local awardees to encourage the application of Buy American requirements when administering aid to construct public works infrastructure projects. To implement Executive Orders 13788 and 13858, the OMB issued revisions to its Guidance for Grants and Agreements.
President Biden’s Order also rescinded former President Trump’s eleventh-hour Buy American order directed at the United States Postal Service, Executive Order 13975 (January 14, 2021). The Postal Service is subject to its own procurement regulations and therefore unaffected by the any FAR changes. Although President Biden’s Order did not include directives mandating the Postal Service buy domestic products, revocation of Executive Order 13975 comes as the Postal Services has a major, and delayed, fleet vehicle contract award and pending.