In these early days of Donald Trump’s administration, domestic sourcing requirements are receiving heightened focus. President Trump’s Jan. 24, 2017, “Presidential Memorandum Regarding Construction of American Pipelines” asks the Secretary of Commerce to “develop a plan under which all new pipelines . . . inside the borders of the United States . . . use materials and equipment produced in the United States, to the maximum extent possible and to the extent permitted by law.” Yet, when a company is asked to certify to its customer that its products comply with domestic content law, the answer is rarely straightforward. Contractors should therefore be proactive and review the Buy America and the Buy American Acts. The penalties for non-compliance are serious and include civil or criminal False Claims Act violations, suspension or debarment, contract terminations and other claims against a contractor by the Government.
Buy America Act
The Buy America Act is the popular name for a group of domestic content restrictions that attach to specific funds administered by the Department of Transportation (DOT). The Buy America provision of the Surface Transportation Assistance Act of 1982, 23 U.S.C. § 313, state that the Secretary of Transportation “shall not obligate any funds authorized to be appropriated to carry out the Surface Transportation Assistance Act . . . unless steel, iron, and manufactured products used in such project are produced in the United States.” These funds are used to make grants to states and other non-federal government entities for various transportation purposes.
There are Buy America Act regulations with different standards for the Federal Highway Administration (FHWA), Federal Transit Authority and other DOT agencies. Simply because a product is manufactured in the United States or meets the requirements of one domestic content rule does not mean it meets the requirements of another agency’s Buy America Act provisions.
Nationwide waivers of the Buy America Act exist for narrow areas (e.g., ferryboat construction) but determining whether an item falls on the list is no easy task. Waivers for specific contracts are also available, such as under FHWA’s Buy America regulations, but are rarely granted due to the high standards required for a waiver.
Buy American Act
Separate and distinct from the Buy America Act is the Buy American Act, passed by Congress in 1933 (and implemented by FAR part 25). Unlike the Buy America Act, the Buy American Act only applies to “federal” procurement. It does not apply to DOT funded state/local projects because, while the source of the money for those projects is federal, such purchases are not made directly by the federal government. The Buy American Act prohibits the Government from acquiring an article, material or supply for public use within the United States that is not a domestic end product, and allows only domestic construction materials to be used for public use subject to certain exceptions. The Department of Defense has created exceptions to the Act by negotiating memorandum of understandings with foreign governments.
Importantly, the Buy American Act does not apply to products covered by the Trade Agreements Act, NAFTA, or other free trade agreements. The Buy America Act, in contrast, has no waivers for countries that have a trade agreement with the United States.
President Trump reiterated his administration’s focus to “Buy American” in his Joint Address to Congress on Feb. 28, 2017. That focus is a priority of the Trump Administration and attention to these requirements is critical when executing Buy America/n certifications. Contractors should also monitor any changes to United States participation in trade agreements such as NAFTA. The stakes are too high not to pay close attention to any certification of compliance with domestic content law and regulations.