The Biden administration is seeking a clear definition of what it means for a product to be manufactured in the U.S. in the context of recent changes to federal procurement laws. A final determination will likely have a dramatic effect on importers and other companies that supply goods to the federal government.
The Build America Buy America Act enacted as part of the Infrastructure Investment and Jobs Act in November 2021 requires all of the iron, steel, manufactured products, and construction materials used in infrastructure projects funded at least partly by federal financial assistance to be produced in the U.S. It also directs the Office of Management and Budget to issue guidance that will help federal agencies apply the new requirements.
BABA establishes different standards for determining whether construction materials and manufactured products are “produced in the U.S.” For construction materials, all manufacturing processes for the materials must occur in the U.S. However, manufactured products must be made in the U.S. and the cost of their components that are mined, produced, or manufactured in the U.S. must be greater than 55 percent of the total cost of all components.
BABA also requires the Federal Acquisition Regulations Council to provide a definition in the FAR for “end product manufactured in the U.S.,” including guidelines to ensure that manufacturing processes involved in production of the end product occur domestically. The FAR currently define end products as articles, materials, and supplies to be acquired for public use and further define domestic end products as those having more than 55 percent of the cost of their components mined, produced, or manufactured in the U.S. This figure will increase to 60 percent later this year, 65 percent in 2024, and 75 percent in 2029.
However, the term “manufacturing” is not defined in the FAR; the Buy American Act, which governs domestic preferences for federal procurement of supplies; or executive orders that implement the BAA. The Government Accountability Office and the courts have not articulated a single standard either but instead have generally found during challenges arising under the BAA that manufacturing involves changes in physical character (i.e., actions such as testing and packaging are not part of the manufacturing process).
As a result, OMB is seeking no later than May 23 public comments that will inform the definition and guidance on the meaning of manufacturing for purposes of determining if an end product is manufactured in the U.S. OMB is also seeking information on the value of aligning the definition of manufacturing for the purposes of federal procurement and federal financial assistance.
For more information on this initiative or Buy American requirements, please contact attorney Mark Tallo at (202) 730-4968 or via email.
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