On January 25, 2021, President Biden issued an Executive Order on Ensuring the Future Is Made in All of America by All of America’s Workers. The order is part of his “Build Back Better Recovery Plan” to strengthen American manufacturing and has potentially far-reaching effect. The order will tighten the federal government’s requirements to buy American products, support American jobs and rationalize the enforcement of the country’s patchwork of “Made in America” laws.

Companies that supply goods and services to the federal government may no longer benefit from statutes like “Buy American.” The January 25 order will tighten agencies’ purchasing by increasing domestic content requirements and close loopholes for determining country of origin under Made in America laws. Companies that benefit from domestic preferences now must re-examine whether they will continue to benefit under the proposed new regulations. Contractors and subcontractors will need to closely monitor developments to implement the order to ensure compliance and maximize their ability to continue benefiting from these preferences.

The federal government spends some $600 billion dollars annually on goods and services. Federal law requires government agencies to give preferences to American firms. In the past, Buy American requirements have not been consistently enforced and waivers of the requirements have become common. The Executive Order aims to “strengthen and enforce ‘Buy American’ so that the massive amount of taxpayer money the federal government spends every year on everything from defense equipment to steel to auto fleets is used to help American manufacturers and their workers.”

Among other things, the Executive Order will close loopholes that allow companies to offshore production and jobs while still qualifying for domestic preferences. Federal agencies are directed to close current loopholes in how domestic content is measured and increase domestic content requirements. To accomplish this, the January 25t Executive Order:

• Directs an increase in the threshold amount of domestic content for a product to be made in the United States and qualify under the Buy America law. “The content threshold of 50 percent isn’t high enough,” according to President Biden’s remarks before signing the Executive Order.
• Directs a change in how domestic content is measured, basically changing how the government decides if a product is sufficiently “Made in America”: “The way we measure the content doesn’t account for U.S jobs and economic activity,” and that will change, Biden said. The new proposed test would measure domestic content by the value that is added to the product through U.S.-based production or U.S. job-supporting economic activity.
• Creates a new Made in America Office within the Office of Management and Budget (OMB) and appoints a new “Director of Made in America” to oversee implementation of the Executive Order.
• Directs a central review of agency waivers of Buy American requirements, to reduce the number of unnecessary waivers. The review process makes issuing a waiver more cumbersome and time-consuming for agencies. It also includes the publication of waivers on a publicly available website.
• Directs an increase in the price preferences for domestic goods—the difference in price over which government can buy a product from a non-U.S. supplier. This pricing premium was recently increased significantly under a Final Rule issued January 19, 2021 (from 6% to 20% for large businesses and from 12% to 30% for small businesses). It is unclear whether the Federal Acquisition Regulatory Council (the FAR Council) will propose additional increases.
• Directs the FAR Council to review existing constraints on the extension of the requirements in Made in America Laws to information technology that is a commercial item and develop recommendations for lifting these constraints.
• Supports enforcement of the Jones Act, requiring the use of U.S.-flagged vessels carrying cargo between U.S. ports, to support U.S. production and U.S. workers.

Although it is unclear whether the proposed changes will simplify compliance with the Made in America laws, it is likely they will significantly affect which products qualify for preferential treatment. That said, it is worth highlighting several important limitations to the scope of the order:

• The Administration’s goal to increase federal purchasing of domestic products is limited by a number of treaty obligations. Under the Trade Agreements Act (TAA), foreign end products produced in certain countries must be treated as equivalent to U.S. products for purposes of the BAA if they are part of an acquisition that is equal to or exceeds certain monetary thresholds set forth in Section 25.402 of the Federal Acquisition Regulations (FAR).
• The Department of Defense (DOD) has entered into reciprocal procurement agreements with 27 foreign counterparts, and has determined that it would be inconsistent with the public interest to apply Buy American Act restrictions on products from these 27 qualifying countries. Unlike the TAA, offers that fall under these blanket DOD waivers are not subject to any threshold.
• Within 180 days (on or before July 24, 2021), the FAR Council must consider for publication and comment amendments to the FAR. However, recent history indicates that any changes will likely not be effective for at least another year.

Nonetheless, the Executive Order fulfills a promise of the Biden campaign and is intended to ensure that the federal government is investing taxpayer dollars in American businesses—both small and large. The administration’s policy is to buy from all of America—including minority entrepreneurs and businesses—so that “Made in America” means “Made in All of America.”

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