How Is Your Domestic Preference Compliance? President Trump Signals More Scrutiny of “Buy American, Hire American” Practices

Justin A. Chiarodo and Stephanie M. Harden

President Trump signed an Executive Order yesterday, marking another step forward in his promotion of “Buy American” and “Hire American” policies. The Executive Order focuses on two areas: cracking down abuse of the H-1B guest worker program and promoting the purchase of American products in federal procurements. We tackle in this post the “Buy American” portion of the Executive Order, which is of particular importance to federal contractors.

According to an April 17 White House press briefing, the Executive Order “ushers in a new, more muscular Buy American policy based on the twin pillars of maximizing Made in America content and minimizing waivers and exceptions to Buy American laws.” In furtherance of these pillars, the Executive Order features four main “Buy American” components:

  1. It directs agencies to strictly enforce Buy American laws (including the Buy American Act and the Berry Amendment). Each agency will be required to conduct a Buy American performance review assessing, among other things, its use of waivers and exceptions and to provide recommendations for strengthening the United States’ Buy American policies.
  2. It also directs agencies to use public-interest waivers narrowly and to obtain approval from the heads of agencies before using them. Agencies will also be permitted for the first time to consider the effect of unfair trade practices, such as dumping and subsidization, in their evaluation of proposals. According to a senior administration official, “it is simply unfair for government contracts to be awarded to low bidders that use dumped or injuriously subsidized foreign-source content to push out domestic producers.”
  3. It also directs the Secretary of Commerce and the United States trade representative to assess the effects of the numerous trade agreements to which the United States is a party, with the goal of determining whether the agreements are “fair and reciprocal.” The administration has signaled that agreements that do not meet this standard may be rescinded or renegotiated by President Trump.
  4. Finally, it reaffirms the “melted and poured” standard for U.S. steel production in an effort to ensure that steel slabs are not imported from countries such as China and Russia, where lesser standards are used.

The stated goal of all of these policies is to ensure that the United States is not a “net loser” to other countries in the spending of federal dollars.

Contractors with significant foreign components in their supply chain should pay close attention to this issue as it unfolds over the coming weeks and months. The Secretary of Commerce is required to report back to the president within 220 days with recommendations about how to strengthen the “Buy American” policies of the federal procurement system and we can expect a significant push to strengthen these policies at that time. Given the prospect of enhanced enforcement in these areas, contractors with domestic preference issues impacting their business should take advantage of this opportunity to review their compliance with the Buy American Act, Trade Agreements Act, Berry Amendment, and other trade-related laws and regulations.