Doreen Edelman, partner and chair of the Global Trade & Policy Team at Lowenstein Sandler LLP, delves into the impact and nuance of the Biden Administration’s push to increase the percentage of American-made products purchased by the U.S. government.
The “Buy American” program has been in existence for some 70 years, but this is the first time that the government has actively sought to change domestic content requirements for items that it procures, says Edelman. The proposed changes in the rule, which are likely to take effect this fall, won’t preclude foreign product purchases; it will just make it more expensive to do so, she adds.
The effort dovetails with the work of the Administration’s task force on critical U.S. supply chains, as well as pending congressional legislation to boost domestic purchasing. More than just about defense purchases, the Buy American push covers a wide range of commercial items, all part of the estimated $600 billion that the U.S. government spends on procurement each year.
“Companies need to be aware of where they fit in this whole picture,” says Edelman. “They have to understand their supply chains, and there’s no shortcut to doing this.”
The exercise involves more than acquiring knowledge of one’s immediate suppliers. It extends through multiple tiers of the supply chain, involving acquisition of components and raw materials. Edelman says companies will have to be aware of any products that might be sourced in areas relying on slave labor. And the initiative must come from the C-suite, not just a procurement or transportation department. “This has to be part of your strategic planning,” she says.
There are nuances to the rule, which offers exceptions for countries that have close trade relations with the U.S., such as Mexico and Canada.
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