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FTA Waivers of Buy American Laws Under Scrutiny

Thursday, April 20, 2017
Sandler, Travis & Rosenberg Trade Report

President Trump issued April 18 an executive order that a senior administration official said will “usher in a new, more muscular Buy American policy” based on maximizing the use of goods, products, and materials produced in the U.S. This effort aims to promote economic and national security, help stimulate economic growth, and support the U.S. manufacturing and defense industrial bases.

The EO directs every federal agency to “scrupulously monitor, enforce, and comply with Buy American laws” and minimize the use of waivers. “Buy American laws” refers to all statutes, regulations, rules, and EOs relating to federal procurement or federal grants, including those that refer to “Buy America” or “Buy American,” that require or provide a preference for the purchase or acquisition of goods, products, or materials produced in the U.S., including iron, steel, and manufactured goods.

Within 150 days federal agencies must assess their compliance with Buy American laws, evaluate how their use of waivers is affecting domestic jobs and manufacturing, and develop and propose policies to ensure compliance with the EO. A senior administration official predicted that this will “immediately change” an existing culture of “lax enforcement, lax monitoring, lax compliance.” For example, the official said, “from day one … there are going to be fewer waivers that are going to be granted.” One reason is a new standard that will allow agencies to consider the effect of foreign-sourced dumped or injuriously subsidized content “that might give a low bidder an unfair advantage relative to domestic-sourced content.”

Also within 150 days the Department of Commerce and the Office of the U.S. Trade Representative must assess the impacts of all U.S. free trade agreements and the World Trade Organization Agreement on Government Procurement on the operation of Buy American laws, including the implementation of domestic procurement preferences. The administration official explained that through these agreements the U.S. has waived Buy American laws for 59 trading partners “in exchange for so-called reciprocal access to those countries’ markets.” However, “compelling evidence” from a February 2017 Government Accountability Office report “strongly suggests the U.S. may not be getting its fair share of global government procurement” through these concessions. If the review determines that “America is a net loser” because of these waivers, the official said, they “may be properly renegotiated or revoked.”

Before the end of the year DOC will be required submit to the White House a report setting forth the findings from the above reviews along with recommendations on strengthening the implementation of Buy American laws. An administration official said this report and its recommendations “will serve as a blueprint for additional executive and regulatory actions to further strengthen Buy American, as well as guide possible legislative proposals.”

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