Background

The Biden administration announced recently a proposed regulatory change that it said would increase U.S. content in the products purchased by the federal government and support domestic production of goods critical to U.S. economic and national security. Comments on this proposal are due no later than Sept. 28.

A White House fact sheet states that the proposal, which “marks just the first set of proposed reforms to procurement policy,” would direct the following changes to strengthen requirements under the Buy American Act.

Domestic content threshold. The BAA says products bought with taxpayer dollars must be “substantially all” made in the U.S. However, products currently can qualify if just 55 percent of the value of their component parts was manufactured in the U.S. The proposed rule would immediately increase this threshold to 60 percent, further raise it to 65 percent in two years, and cap it at 75 percent five years after the second increase. However, for several years the current threshold could be accepted when end products or construction materials that meet the new thresholds are not available or are of unacceptable cost.

Price preferences. Based on the idea that “some products are simply too important to our national and economic security to be dependent on foreign sources,” the proposed rule would apply enhanced price preferences to select critical products and components identified by the critical supply chain review mandated under Executive Order 14017 and the pandemic supply chain strategy called for under EO 14001. That products that will receive a price preference will be determined in a separate rulemaking to allow time for the supply chain reviews and trade pact waiver review to be completed first.

Transparency. Currently, contractors simply tell the government if they meet the content threshold rather than reporting the total domestic content in their products. The proposed rule would require contractors to provide the specific domestic content of critical items, domestic end-products containing a critical component, and domestic construction material containing a critical component that were awarded under a contract. This reporting requirement would improve data on the actual U.S. content of goods purchased that would then be used to target future improvements to support U.S. entrepreneurs, farmers, ranchers, and workers.

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