Ronald Oleynik, Jonathan Epstein, Antonia Tzinova and Eric Lee are Partners and Daniel Burkard is an Associate in the Washington D.C. office
Directs Agencies to Promote Use of Domestic Materials in all Federally Funded Infrastructure Projects
- The White House has issued a new Executive Order designed to promote the use of American-made products in all infrastructure projects receiving federal funding, another step in the Trump Administration's Buy American policy.
- The Executive Order requires federal agencies to develop programs within 90 days for encouraging the use of iron, aluminum, steel, cement, and construction materials made from aluminum, plastics, polymer-based products, glass, optical fiber and lumber produced in the United States for all federally funded infrastructure projects.
- Federal agencies are also required to submit a report within 120 days to the Assistant to the President for Trade and Manufacturing Policy, describing additional policies that could or do encourage the use of American-made products in infrastructure projects receiving federal assistance.
President Donald Trump issued an Executive Order (EO) on Jan. 31, 2019, expanding upon the "Buy American and Hire American" EO issued in April 2017. The new EO, "Strengthening Buy-American Preferences for Infrastructure Projects," further reinforces the Buy American elements of the previous EO by mandating that federal agencies encourage recipients of federal financial assistance to use domestically produced products for widely defined infrastructure projects. The products subject to the EO include iron, aluminum, steel, cement and other construction materials made from aluminum, plastics, polymer-based products, glass, optical fiber and lumber "Produced in the United States."
Overview and Scope
The EO defines "Produced in the United States" to mean, for iron and steel products, that "all manufacturing processes, from the initial melting stage through the application of coatings, occurred in the United States." The EO does not provide a clear definition as to what constitutes "Produced in the United States" for the other products covered in the Order. However, it appears likely that the intent of the EO is to require the entire manufacturing process of other products to occur within the U.S. as well.
The scope of the EO reaches beyond federally issued contracts to federal financial assistance programs, including grants, cooperative agreements, non-cash contributions of property, direct appropriations, food commodities and other financial assistance that a federal agency provides to a state or local project.
The type of infrastructure projects targeted in the EO is broad and includes technology such as broadband internet, energy production, electrical grid infrastructure, and stormwater and sewer infrastructure, as well as more traditional projects such as roadways, bridges, railroads, airports, ship channels, pipelines and ports. The inclusion of high-tech as a focus of the EO is especially evident in its specific requirement that optical fiber materials be domestically produced. This policy remains consistent with the Trump Administration's focus on shifting the manufacture of technology back to the U.S. in an effort to avoid future reliance upon foreign sources for the production of critical infrastructure and building supplies.
Importantly, the EO clarifies that it does not alter or impair existing programs promoting the use of American-made products and is not intended to displace existing applicable law on the issue of federal procurement. The existing domestic preference laws governing the procurement of goods include:
- The Buy American Act – which creates a preference for U.S.-made goods, meaning that the cost of domestic components of an end product must be 50 percent or more of the product's cost
- The Trade Agreements Act – which creates an exception to the Buy American Act for certain countries with which the United States has entered a trade agreement, allowing products "substantially transformed" in those designated countries to be treated as domestic products
- The Buy America Acts – a series of laws that impose preferences and restrictions similar to those found in the Buy American Act on federally funded projects, primarily those funded by the modal administrations of the U.S. Department of Transportation
- The Berry Amendment – a U.S. Department of Defense-specific requirement that imposes a 100 percent domestic content restriction on enumerated items such as textiles, food and certain hand tools in procurement
Although the EO does not provide enforcement mechanisms or specific purchasing targets, it directs all federal agencies, within 90 days, to implement programs designed to encourage recipients of new federal financial assistance awards to use iron, aluminum, steel, cement and certain construction materials "Produced in the United States" for covered infrastructure projects.
The new EO also requires each agency to issue a report within 120 days to the Assistant to the President for Trade and Manufacturing Policy, describing any "tools, techniques, terms, or conditions" that have been or could be used in furtherance of the Buy American program. The current officeholder, Peter Navarro, is expected to press a strict domestic preference policy. The purpose of the report is to consider additional policies to maximize the use of certain domestically produced products in the performance of contracts, subcontracts and purchase orders related to federally funded infrastructure projects. The reports must also include additional details pertaining to the strategy that each agency intends to utilize to encourage the use of American-made products.
Considerations and Takeaways
Manufacturers, contractors and suppliers performing work that receives federal funding, directly or indirectly, must pay close attention to the EO and develop an understanding of the domestic preference laws. Additional attention should be paid to the upcoming agency-level policies to be issued during the next 90 to 120 days that are meant to encourage the Buy American program for all infrastructure projects receiving federal assistance. As the new EO highlights, enforcement of preference laws is a top priority of the current Administration.
Beyond watching for future developments, the first step in meeting these domestic performance requirements is determining which rule applies and then matching the facts to the rule. The second step is to develop internal controls to ensure the integrity of supply chain practices focusing on products that meet the particular domestic preference rule at all meaningful stages. Holland & Knight's International Trade Group will continue to monitor this policy and issue additional alerts as the agencies provide further clarification in response to the EO's mandate.
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