“Buy American” Executive Order Expands Potential Reach to Private Recipients of Federal Assistance

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President Trump signed an Executive Order yesterday January 31, calling on executive branch departments and agencies to encourage recipients of defined types of new federal awards to use cement, iron, steel, aluminum and certain manufactured products produced in the United States. The order builds on prior authority (Executive Order 13788 (April 18, 2017)) focused on procurements by the departments and agencies themselves. The new order extends the “Buy American” conversation to private parties that receive new support, to promote the use of domestic sources in their onward purchases.  It addresses programs that receive Federal financial assistance, 2 C.F.R. § 200.40, for creation, maintenance or repair of infrastructure projects.

The order is as remarkable for its limitations as for its scope. As noted, it only calls for encouragement; it is expressly qualified as “consistent with law” and does not apply where a “comparable” domestic preference is in effect; it calls for U.S. procurement to the extent “practicable”; and it creates no private rights of action. The order shows signs of the tension that often exists between domestic preference rules and the desire of awarding authorities for the highest value for their procurement.

There are a variety of existing programs under which the federal government provides funding to state and municipal governments for infrastructure projects, including highways, rail and other transit projects, airport development, and waste water treatment. Some of these programs already incorporate conditions on the use of the federal funds that require the procuring local governments to impose restrictions on the use of foreign-made steel, iron and manufactured goods. The Executive order raises the prospect that, in the future, those types of restrictions could be imposed on a wider range of materials and types of projects, including energy projects of private recipients of federal assistance, and unconventional types of programs such as “broadband internet” and “cybersecurity.”

The order is to be implemented department by department and agency by agency, and differences in approach and enforcement will emerge as they report within 120 days to the assistant to the President for manufacturing and trade policy on the conditions “that have been used or could be used, consistent with law.” That official, Peter Navarro, authored an opinion article, Peter Navarro: Trump is keeping his promise to buy American, hire American, that was linked in the White House announcement of the order.

Domestic preference rules can not only increase costs, but also impose substantial administrative burdens. Nothing in the order addresses either the standards or the process that agencies use when they waive Buy American requirements or declare them inapplicable. Lawyers, American lawyers, will be parsing the definitions and the agency approaches as they become apparent.

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