Biden Centralizes Buy America Waiver Process at OMB

Biden Centralizes Buy America Waiver Process at OMB

January 29, 2021  | Jeff Davis

President Biden signed an order on January 25 (Executive Order 14005) setting domestic content/preference policies for his Administration and repealing President Trump’s orders in that same policy area.

In his remarks, Biden said that his new order would “[tighten] the existing Buy American policies, and go further.  We’re setting clear directives and clear explanations.  We’re going to get to the core issue with a centralized, coordinated effort.”

The U.S. Department of Transportation issued a statement in support of Biden’s order: ”

The Department of Transportation is a strong supporter of Buy American and we applaud President Biden for taking bold action today to ensure our future is made in America — and by American workers. The crises we face have created an opportunity to build back our economy better than before, and President Biden’s executive order will empower us to be a central force in our country’s recovery. We look forward to implementing President Biden’s Made in America executive order that will ensure transportation-related capital purchases, equipment, and supplies are acquired when available.  In addition, we will also ensure that the President’s strong support of the Jones Act is realized so that only U.S.-flag vessels carry cargo between U.S. ports.  With these goals in mind, the Department stands ready to help President Biden create good-paying, union jobs, and strengthen the middle class.

Some of Biden’s new orders represent 180-degree changes from Trump policy. But not this one. Compare the actual statement of policy from the initial 2017 Trump order (EO 13788) to the new Biden EO:

Trump (EO 13788): “it shall be the policy of the executive branch to maximize, consistent with law, through terms and conditions of Federal financial assistance awards and Federal procurements, the use of goods, products, and materials produced in the United States Biden (EO 14005): “It is the policy of my Administration that the United States Government should, consistent with applicable law, use terms and conditions of Federal financial assistance awards and Federal procurements to maximize the use of goods, products, and materials produced in, and services offered in, the United States.”

There is not a lot of daylight between those two statements of policy. The only substantive difference is that the Biden EO applies to services offered as well as goods manufactured, but only so far as applicable law goes, and there isn’t much on the Buy America side of the law for services at present.

Background: There are two different, but similar-sounding, sets of laws involved. The “Buy American Act” of 1933 requires the federal government to purchase American-made goods whenever possible. But Buy American only applies to direct federal purchases – not purchases made by the recipients of federal grants using their federal grant money. That had to wait until a series of laws enacted starting in 1977 called “Buy America” extended domestic content requirements to federal infrastructure grants (but the requirements are different for each kind of infrastructure). (See ETW’s extensive 2017 background piece here.) And then there is the Jones Act of 1920, requiring that any point-to-point ocean shipping between U.S. ports use vessels that were built in the U.S. and are owned and operated by U.S. citizens.

The Trump Administration grouped all of these policies under the umbrella term “Buy American.” The Biden Administration instead uses the term “Made in America Laws” for all of those statutes.

New order. Biden’s new order does several things. First, in section 3 of the order, he directs federal agencies to review all “agency actions” to ensure they are consistent with the new policy, and to consider new agency actions, if needed, to implement the policy. but since the new policy (above) is exactly the same as the old policy, this shouldn’t result in much. (There was an additional part of the policy in the new Biden order that we did not show above – it says that “each agency should vest waiver issuance authority in senior agency leadership, where appropriate and consistent with applicable law.” That could result in some changes, somewhere.)

Section 4 of Biden’s order does more. While all federal agencies have some degree of discretion to waive domestic content requirement laws (if petitioners can prove that there is no American-made source for a needed product, or that the American-made version costs so much more that it can’t be afforded, etc.), the Biden order directs that the waiver process be centralized in the White House Office of Management and Budget (OMB). The OMB Director would appoint a Made in America Director, and all federal agencies would then have to submit any proposed waivers of the various domestic content laws to OMB for approval.

Formally, this is a big deal. Informally, it is unclear to what extent Buy America waivers were already being cleared with OMB anyway. But, at least from the Department of Transportation perspective, the result is not likely to be very different from Trump Administration policy, because waivers were already hard to come by.

In his remarks, President Biden alleged, “But the previous administration didn’t take [Buy American] seriously enough.  Federal agencies waived the Buy American requirement without much pushback at all.  Big corporations and special interests have long fought for loopholes to redirect American taxpayers’ dollars to foreign companies where the products are being made.  The result: tens of billions of American taxpayers’ dollars supporting foreign jobs and foreign industries.”

This may have been true somewhere, but there isn’t much evidence that it was true at USDOT. The modal administrations keep their Buy America waiver requests and dispositions online: FHWA, FTA, FRA, FAA. FTA has not granted a single Buy America waiver request during the Trump Administration. FRA only approved waivers for specific fire alarm system components in 2017 and 2018, and then in 2020 granted Amtrak a waiver for some specific items: one tunnel crane; one track laying machine; and eight two-man rail car movers. FHWA’s waivers have been for specific cranes (apparently the U.S. doesn’t make specialty cranes anymore), plus one big recurring waiver for mass purchases of alternative fuel vehicles using CMAQ money, if final assembly is done in the U.S. There is, however, a big permanent set of products with Buy America waivers for recipients of Airport Improvement Grants from the FAA.

Beyond the issue of waivers, Biden’s new order does make one innovative change that has the potential to affect many infrastructure contracts. Section 5 of the order says:

To the extent permitted by law, before granting a waiver in the public interest, the relevant granting agency shall assess whether a significant portion of the cost advantage of a foreign-sourced product is the result of the use of dumped steel, iron, or manufactured goods or the use of injuriously subsidized steel, iron, or manufactured goods. The granting agency may consult with the International Trade Administration in making this assessment if the granting agency deems such consultation to be helpful. The granting agency shall integrate any findings from the assessment into its waiver determination as appropriate.

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