Resetting the “Buy American” Waiver List: Federal Government Slashes Exceptions to Domestic Procurement

By Brett W. Johnson, Derek Flint, T. Troy Galan, Cole Craghan, and Kristen N. Iteen

With the goal of bolstering domestic U.S. manufacturers and supply chains, the Federal Government has announced revisions to the “Buy American” program that will pressure U.S. agencies and companies to work with domestic suppliers. The Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) worked with the Executive Branch’s procurement offices to review all 109 “domestically non-available articles” that are exempt from “Buy American” controls in the Federal Acquisition Regulations (FAR). The resulting proposed rule removes 70 of those articles from the Federal Government’s non-availability list, marking the shortest list since the FAR were initiated. The changes will have a significant impact on government contractors and those who obtain grants or tax credits under a variety of government programs.

The “Buy American” Program & Waiver List

“Buy American,” formally known as the Build America Buy America Act or “BABA,” was passed as part of a domestic infrastructure investment policy, and focuses on increasing domestic procurement of iron, steel, manufactured products, and construction materials used in infrastructure projects. Products subject to the “Buy American” restrictions are selected based on their impact to strategic industries relating to national defense, as well as their pivotal role in completing infrastructure projects across the country.

The waiver list, however, is a recognition of the limitations of American manufacturing and allows for the foreign purchase of covered goods when no domestic sources with “sufficient and reasonably available commercial quantities” exist. For most products, a federal agency must seek out and announce each waiver for a foreign procurement. However, the 109 articles currently on the waiver list are presumed to be domestically unavailable and are not subject to the traditional waiver process.

The comprehensive review of the program represents a shift from the previous practice of relying on public comments to identify items that should be removed. Instead, the Federal Government, responsible for over $750 billion in annual procurement spending, took proactive steps to revitalize the waiver list. Leveraging this purchasing power to bolster domestic manufacturing is a central element of the Administration’s industrial strategy.

Removals from the Waiver List

The DoD, GSA, and NASA selected products for removal based on various criteria related to domestic availability. These products encompass a wide range of industries, from simple goods like leather and sheepskin, to advanced technologies such as microprocessor chips.

These products are set to be removed due to recent increases in domestic manufacturing, to the extent that U.S.-based producers can now meet more than 50 percent of the federal demand for the product in question. One notable inclusion in this area is crude oil, as the U.S. is now the largest producer of petroleum in the world.

Certain items were also removed due to decreased government demand for the products. Removing products such as asbestos, rabbit pelts, and certain types of lumber, the reviewing agencies identified such articles as obsolete, and future procurements in this area will once again be limited to domestic suppliers.

Moreover, when determining which products to remove, the DoD, GSA, and NASA also took into consideration necessity. Items such as microprocessor chips, critical and rare earth minerals, and industrial diamonds were removed from the waiver list to protect national security interests.

By pressuring agencies into seeking out domestic sources for these products, the Federal Government aims to strengthen U.S. supply chains that serve critical industries. Thus, while all products are now considered “domestically available,” procurement officers may soon find that this is not the case for some premium items.

Domestic Impact of Buy American

Overall, the proposed regulations reset the waiver list, thus encouraging domestic market research for government contractors. The Federal Government is again indicating that it will continue to push investment in U.S. supply chains, mirroring recent actions to decrease dependency on foreign markets for a range of products.

At present, the rule is still in a “pre-publication” phase, and will be subject to a 60-day public comment period once published; however, the Federal Government has been moving swiftly to implement measures impacting U.S. reliance on foreign trade, and companies should be prepared for these sweeping changes to come into effect soon. As such, companies that are impacted should consider ensuring that they provide a public comment as to why any of the changes are impractical or would actual hinder national security.

If finalized for articles presenting national security and supply chain concerns, agencies will be required to publish proposed waivers when opting to procure items from foreign sources and a final waiver when acquiring items not procured domestically or from a partner to the World Trade Organization on Government Procurement. This process is meant to promote a more competitive and resilient domestic industrial base, but the realities on supply chain support for government programs have not been fully analyzed – hence, the importance of providing comment if impacted.

Companies attempting to win government contracts should begin to review their own supply chains and conduct market research to identify domestic sources of soon-to-be covered articles. As mentioned, companies should consider making public comment on the adverse impact of the changes or highlight why additional domestic sources are actually available to encourage making the list even smaller. But, due to these requirements and other supply chain issues, such as counterfeiting, companies should ensure that their procurement practices are tracking the various sources and countries of origin. This would include requested certification of country of origin and highlighting the requirements of the Buy American Act in subcontracts and purchase orders.