This post is the 13th in a series, “The ABCs of the AJP.”
As made clear by its name, the Biden Administration intends for its “infrastructure” plan to be a jobs plan. As is also apparent from the Administration’s proposal, it views requirements to ensure that goods are actually made in America as critical to creating new American jobs. According to the White House, “by ensuring that American taxpayers’ dollars benefit working families and their communities, and not multinational corporations or foreign governments, the plan will require that goods and materials are made in America.” Such rules should also help give the United States a boost in its competition with other countries, particularly China.
The federal government has long used such requirements that certain goods or materials are made in America, also known as domestic content preferences, to support American manufacturing and job creation. These preferences usually fall into two buckets: “Buy America” and “Buy American” rules.
Buy America rules date back to 1978, when Congress began implementing restrictions on certain federally funded infrastructure projects, under which the funding recipients are generally required to ensure the final product is assembled in the United States and that a certain percentage of the project costs are for component and subcomponent parts made in the United States. These rules generally apply domestic content restrictions on iron, steel, and certain manufactured goods like rolling stock, to infrastructure grants funded by agencies within the U.S. Department of Transportation, although they have also been applied to water infrastructure projects funded by the Environmental Protection Agency.
Separately, Buy American refers to the Buy American Act of 1933 and other related legislation, which applies similar domestic content restrictions to goods actually procured directly by the federal government. The impacts of these rules are limited by the country’s obligations under certain trade agreements.
While the American Jobs Plan does not detail exactly how the Administration proposes to change existing domestic content preferences, a major portion of the plan would be enacted by providing federal funding to local and state governments for projects, to which Buy America rules could be applied. Given that the plan is so wide-ranging in scope and industry, and that its overarching goal is to boost U.S. production and jobs, it seems the Biden Administration would support increasing Buy America protections and expanding them beyond the more traditional transportation market.
Domestic content preferences could also be applied to new federal procurement. For example, the Plan proposes to “[j]umpstart clean energy manufacturing through federal procurement.” In particular, President Biden wants Congress to provide a “$46 billion investment in federal buying power” to support the manufacturing of “electric vehicles, charging ports, and electric heat pumps for residential heating and commercial buildings, . . . as well as critical technologies like advanced nuclear reactors and fuel” in the United States.
Another area in which the American Jobs Plan could affect domestic content preferences is through narrowing waivers, and increasing transparency on the use of them. Currently, Buy America and Buy American programs allow waivers from the requirements, including for when such a waiver is in the public interest, when the inclusion of domestic materials would increase project costs by a certain percentage threshold, or where there is an insufficient domestic market for the particular components. Increased transparency around the waiver process could make them more difficult to obtain, and could also mean increased attention from federal agencies, customers, and competitors on those who do get them.
Recent executive action and proposals in Congress also shed light on options for Congress in crafting legislation to enact the American Jobs Plan. On January 25th of this year, President Biden signed an Executive Order entitled “Ensuring the Future is Made in All of America by All of America’s Workers.” The Order focused on Buy American restrictions. Among other things, the Order:
- Created a new Director of Made-In-America position within the Office of Management and Budget;
- Proposed a process to centralize the review of waivers and increase transparency;
- Directed agencies to use the Hollings Manufacturing Extension Partnership to connect with domestic suppliers; and
- Required the Federal Acquisition Regulation Council to consider redoing how domestic content is measured or defined to qualify purchases, as well as to consider increasing the domestic content percentage requirements and price preferences (the difference in price over which the government is allowed to purchase from a non-U.S. supplier).
Much of the Order still needs to be implemented by federal rulemaking, but it gives an idea of where the Administration wants to go.
As for Congress, there are various legislative proposals to expand Buy America requirements or narrow waivers, many of which already have bipartisan support, including:
- The BuyAmerica.gov Act, 732, would establish a website on which information would be posted for every requested waiver of and exception to Buy America and Buy American rules.
- The Make it in America Act, 363, would increase the required domestic content under Buy American procurement rules from 50% to 75% and narrow the availability of waivers.
- The Made in America Act of 2021 would expand Buy America protections to other products such as non-ferrous metals, plastic and polymer-based products, concrete, glass, lumber, and drywall.
- A group of bipartisan senators announced plans to reintroduce the Build America, Buy America Act, which would apply Buy America rules to all federally-funded infrastructure and public works projects.
- Other proposed legislation would expand Buy America requirements to school buses (S. 506/R. 1344) and school infrastructure (S. 96/H.R. 604).
- Congress previously passed the Transit Infrastructure Vehicle Security Act, which restricts federal transit agencies from purchasing rolling stock manufactured by foreign corporations, including those that are affiliated with the Chinese government.
Such pending and enacted proposals provide further insight in to how Buy America could be incorporated into future infrastructure packages.
Given bipartisan support and the Administration’s strong approval, it is likely that Buy America and Buy American restrictions will only be strengthened through future infrastructure legislation.
Many details still need to be hashed out, including how any new domestic preferences will be imposed, on what types of projects they will be imposed, and whether there will be any changes to how domestic preferences are defined and measured. Details will also need to be negotiated on any changes to the waiver process. Assuming any changes to domestic preference rules are one part of larger infrastructure reform and investments, they should provide greater opportunities for domestic manufacturers, those who want to expand production here, and those who are eager for stronger domestic supply chains.