Biden turns to ‘Buy American’ law to aid US manufacturing

Lawmakers, industry and unions call on Biden to make significant changes to the Buy American Act

President Joe Biden signs executive orders in the White House on Jan. 22. (Jabin Botsford/The Washington Post via Getty Images)
President Joe Biden signs executive orders in the White House on Jan. 22. (Jabin Botsford/The Washington Post via Getty Images)
Posted January 25, 2021 at 9:13am

President Joe Biden signed an executive order Monday to tighten “Buy American” rules to boost federal purchases of U.S.-made goods as part of his campaign pledge to invest in the country’s manufacturing industry.

“I’ve long said that I don’t accept the defeatist view that the forces of automation and globalization can keep union jobs from growing here in America. We can create more of them, not fewer of them,” Biden said as he prepared to sign the document at the Eisenhower Executive Office Building.

“I don’t buy for one second that the vitality of American manufacturing is a thing of the past. American manufacturing was the arsenal of democracy in World War II. It must be part of the engine of American prosperity now,” he said.

He said agencies in the Biden administration will take a tougher line on waivers or exemptions that allow federal agencies to make purchases of foreign goods. He singled out the Defense Department, noting that in 2018 it spent $3 billion on foreign construction contracts, “leaving American steel and iron out in the cold.”

In a Sunday press call that preceded the signing ceremony, an administration official said the executive order is part of Biden’s Build Back Better campaign platform “to address the structural challenges to our economy that have existed before the COVID crisis” and reflects the president’s view that “making things in America is core to our economic strategy.”

“The goal is to make sure that companies can’t undermine or get around the purpose of the made America rules by importing largely foreign-made products and making modest changes or tweaks onshore that add little value for American workers or American industry, don’t actually utilize America’s manufacturing capabilities,” the official said.

Members of Congress, U.S. industries, unions and labor advocates have called for Biden to make significant changes to the Buy American Act, which Congress passed during the Great Depression.

In a Jan. 22 letter, Sen. Tammy Baldwin, D-Wis., called on Biden to take several steps such as cracking down on waivers or exemptions that federal agencies receive under the law.

“I urge you to use your authority to narrow the application of waivers granted for domestic content preferences throughout the federal government. This includes Buy America waivers at the Department of Transportation for iron, steel, and manufactured goods as well as broader waivers granted to the Buy American Act,” Baldwin wrote. She said the law also is weakened by a trade agreement law that allows companies from 60 countries to bid for federal contracts. 

The Biden emphasis on Buy American as a tool for boosting U.S. manufacturing is similar to former President Donald Trump’s populist focus on manufacturing as a key U.S. economic component and a source of well-paying jobs. Trump also issued executive orders to prod the federal government to increase purchases and use of U.S. goods.

Trump’s most recent Buy American executive order was issued in July 2019, and the Federal Acquisition Regulation Council issued a final rule on Jan. 19, 2021, to implement the order. The council proposed changing the threshold for qualifying domestic content from 50 percent of the cost of an end product to 55 percent of the cost. It also raised the domestic content for iron and steel end products to 95 percent.

The rule issued to carry out the Trump order won’t affect new solicitations for contracts until after Feb. 21. The Biden administration has not made a decision on possibly suspending the Trump regulations.

A Biden official said the Biden approach differed from Trump’s because it is focused on results.

“The former administration spent a lot of time talking about it. What is included in this order  . . .  is a clear directive with clear direction and clear time-limited windows to deliver on updating domestic content, the definitions, increasing the domestic content requirements and a process to reduce any unnecessary waivers that will change how Buy American operates in this country,” an administration official said.

New oversight position

The federal government spends $600 billion a year on purchases, and Biden’s executive order will move oversight of implementing new rules on federal purchases to a newly created position, director of Made-in-America, at the Office of Management and Budget. A fact sheet indicated the order also set more stringent domestic preference rules for federal grants and other federal assistance.

The order creates a central oversight of the waiver process that allows federal agencies to get exemptions from Buy American requirements. Requests for such waivers will be posted so that businesses can review them and find potential opportunities to bid on contracts.

Biden also directed the Federal Acquisition Regulation Council to evaluate how domestic content is measured or defined for qualified purchases and to increase the threshold for domestic content. Essentially, the council will be establishing tougher rules of origin that would limit the amount of foreign content.

Under the current law, there is a two-step process for determining if a product meets the threshold for being considered American-made. An end product or construction material must be manufactured in the United States, and more than 50 percent of all component parts as determined by cost of the components must also be mined, produced or manufactured in the U.S.

The council also is directed to increase the price differential that federal agencies add to prices of non-U.S. products when comparing products from foreign bidders and products by domestic bidders. The process is designed to give U.S. companies a more equal standing on price when competing with lower-priced foreign products.

“We’ll also close loopholes so that content rules drive new opportunities for American businesses and workers,” the official said.

The executive order also requires federal agencies to use the Manufacturing Extension Partnership, a public-private operation with centers in all 50 states and Puerto Rico, to find domestic suppliers. The partnership works with small and medium-sized manufacturers.

Administration officials said the Buy American changes are among several steps to strengthen U.S. supply chains after COVID-19 demands for medical supplies highlighted U.S. reliance on China and other countries. 

On Monday, Biden also said he will work with trading partners “to modernize international trade rules, including those related to government procurement, to make sure we can all use our taxpayer dollars to spur investment that promotes growth and resilient supply chains.”