When Congress returns from its August recess, it will be met with a variety of legislative proposals to extend Buy American requirements. One would add aluminum to the domestic purchasing requirements for the Departments of Defense and Transportation. Other proposals would require the federal government to purchase American-made personal protective equipment (PPE). This post looks at the legislative proposals in terms of their consistency with U.S. international trade obligations.
NDAA FY 2021: In July, the Senate and House of Representatives each passed their own version of the National Defense Authorization Act (NDAA) for Fiscal Year 2021. Lawmakers will need to reconcile the two bills before the end of the year. The House bill adds aluminum to domestic purchasing restrictions in procurement by the Department of Defense (DoD) and under financial assistance programs administration by the Department of Transportation (DOT).
First, the House NDAA legislation would designate aluminum and aluminum alloys as a specialty metal that DOD must purchase from domestic sources. Subjecting aluminum to a Buy American requirement would raise concerns of U.S. compliance with the WTO Government Procurement Agreement (GPA) and free trade agreements (FTAs). Under those agreements, the U.S. excludes specialty metals from DoD procurement commitments. However, it does so by specifically listing each of the specialty metals subject to the exclusion. Aluminum is not included on the list, except as an alloy of steel.
Second, the House measure would add aluminum products to the products that must be purchased domestically in state and local projects funded by various units of DOT. The legislation would add aluminum to the list of current products subject to Buy America requirements in financial assistance programs administrated by DOT units, which are as follows: the Federal Highway Administration (steel, iron, and manufactured products); Federal Transit Administration (steel, iron and goods); Federal Railroad Administration (steel, iron and manufactured goods); Federal Aviation Administration (FAA) (steel and manufactured goods); and Amtrak (supplies).
This proposed expansion of Buy America requirements would likely face criticism from U.S. trading partners as further limiting opportunities for foreign suppliers, as in the case of the American Recovery and Reinvestment Act of 2019. Because the U.S. takes a broad exclusion of domestic purchasing restrictions attached to federal funding under the DOT programs in the GPA and FTAs, the addition of aluminum would likely fall under the reservation. In addition, the U.S. does not cover the FAA or Amtrak under the agreements.
The House NDAA legislation includes additional Buy American provisions that U.S. military allies are seeking to block, according to Inside U.S. Trade (Aug. 31, 2020).
American-made PPE Legislation: A variety of legislative proposals would require federal agencies to purchase American-made PPE and related products. Senators Lindsay Graham (R-SC) and Mike Rounds (R-SD) introduced the U.S. MADE Act of 2020 to require PPE and related products to be acquired from domestic producers for the Strategic National Stockpile. The American PPE Supply Chain Integrity Act, introduced by Congressman Patrick McHenry (R-NC), would direct the Departments of Defense, Health and Human Services, Homeland Security and Veterans Affairs to purchase U.S.-made PPE. Most recently, former U.S. Trade Representative and Senator Rob Portman (R-OH) and Senator Gary Peters (D-MI) announced that they would introduce legislation to require the federal government to issue long-term contracts for American-made PPE “to strengthen efforts to onshore production.”
PPEs and related products purchased by federal agencies are covered by the GPA and FTAs. As a consequence, imposing a Buy American requirement on U.S. government purchases would not be consistent with U.S. trade obligations unless: the purchase was below the thresholds in the agreements ($180,000 under the GPA and lower under many FTAs); it could be justified under an exception to the GPA or FTAs; or PPEs are removed from U.S. commitments, as a recent presidential order mandates for essential medicines. That August 2020 order requires agencies to use limited tendering procedures to restrict competition in procurement of essential medicines to products produced in the U.S. and directs the U.S. Trade Representative to remove the products from U.S. commitments under the GPA and FTAs.
On a practical level, any PPE legislation requiring purchase of domestic-made PPEs would need to allow for foreign purchases in the likelihood that U.S. sources were not sufficient, as the federal government found earlier this year. In April 2020, the General Services Administration (GSA) issued a determination that sufficient quantities of PPEs and other products needed to fight covid-19 were not available from domestic sources or GPA or FTA partners. The determination allowed the government to purchase those products from China and other countries, which is generally prohibited since they do not provide reciprocal access to their procurement.
As with the president’s medicine order, enactment of these legislative measures could contribute to the erosion of U.S. commitments under the GPA and FTAs.
Jean Heilman Grier is the Principal and Manager, Trade Practice, at Djaghe, LLC., where she advises and provides assistance to businesses, governments, international organizations and trade groups in the United States, Europe, Asia and Latin America on a wide variety of international trade and procurement issues.
To view the original article, please click here.