State & Local Problems with "Buy American" Has Led Canada and Others to Suggest Exemptions, Etc.
The "Buy American" provisions of the American Recovery and Reinvestment Act of 2009 ("Stimulus Bill") prohibit, with certain exceptions1, Recovery Act funds from being used for a project or public work unless all of the iron, steel, and other manufactured goods used as construction material in the project are produced or manufactured in the U.S.
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The provisions must be implemented in a manner that is consistent with U.S. obligations under international agreements. The provisions also apply to all Recovery Act funds, including those disbursed at the state and local level.
"Buy American" Relatively New for State and Local Governments
As state and local governments have not generally been required to comply with "Buy American" requirements, it is causing major market disruption and concern among U.S. trading partners.
Great Complexity Even if State/Local Governments are Parties to Int'l Agreements
The Recovery Act requirement that the "Buy American" provisions be implemented in a manner "consistent with U.S. obligations under international agreements" means that if the parties involved are members of certain international agreements, they must treat each other's goods and services as domestic goods and services.
Therefore, the "Buy American" requirements do not apply2 where the steel, iron, or manufactured goods used in a project are from a party to: (i) a U.S. Free Trade Agreement (FTA); (ii) the World Trade Organization's Government Procurement Agreement (GPA); (iii) the U.S.-European Communities Letters of Exchange; (iv) etc.
However, only 40 state governments and only a handful of local governments and port authorities are parties to these international agreements.
In addition, even when a state is party to such an agreement, the details are difficult to understand. For example, for the state of Iowa, the Department of General Services, Department of Transportation, and Board of Regents' Institutions are covered by the GPA, the U.S.-Chile FTA, and the U.S.-Singapore FTA. However, construction-grade steel, motor vehicles, and coal are excluded; not all agencies in Iowa are covered; and Iowa is not subject to U.S. obligations under other international agreements such as DR-CAFTA, the U.S.-Bahrain FTA, etc.
State & Local Gov'ts/Contractors are Excluding Products from Other Countries
According to various sources, because the "Buy American" requirements are so new and confusing, some state and local contractors and agencies are simply excluding all products from other countries, including Canada.
Canada, U.S. Chamber, Others Have Suggested Changes & Exemptions
Concern over state and local implementation of this Act has lead Canada, the U.S. Chamber of Commerce and others to suggest exemptions and other changes to limit the impact of "Buy American" at the sub-Federal level.
Canada proposes mutual access. According to a Canadian Embassy article, Canada's International Trade Minister Stockwell Day sent a letter to U.S. Trade Representative Ron Kirk in August 2009 offering U.S. firms access to Canadian provincial and municipal contracts in exchange for exemptions for Canada from the Recovery Act's "Buy American" provisions. (However, the article notes that USTR Kirk probably cannot negotiate on behalf of U.S. states or cities.)
Obama suggests Provinces become GPA Signatories. In a September 16, 2009 press conference between President Obama and Canadian Prime Minister Harper, President Obama suggested one solution might be for Canadian provincial governments to become signatories to the GPA, members of which are treated as domestic entities under the "Buy America" restrictions.
U.S. Chamber wants waiver for states/municipalities. Another solution, proposed by the U.S. Chamber of Commerce, is a general waiver of the "Buy American" requirements for state and local government contracts. The Chamber says this would allow all state and local governments to treat projects funded with Recovery Act funds in a manner similar to the federal government, even though they themselves are not necessarily signatories to international agreements.
Federal agencies could issue more waivers. Another possible solution is for federal agencies to issue waivers, as the Recovery Act allows for waivers of the "Buy American" provisions for (i) unavailability; (ii) unreasonable cost and (iii) inconsistency with the public interest. The Environmental Protection Agency and the Rural Utilities Service have both already issued "public interest" waivers, in order to relieve compliance with the "Buy American" provisions for certain de minimis incidental components. (See ITT's Online Archives or 09/28/09 and 08/11/09 news, 09092899 2, and 09081199 5, for BP summaries.)
1The Recovery Act does not apply to acquisitions covered by international agreements. It also allows for waivers of the "Buy American" provisions for (i) unavailability; (ii) unreasonable cost and (iii) inconsistency with the public interest.
2The exception for parties to international agreements only applies to projects above a certain dollar threshold and projects that are not specifically excluded from the application of an international agreement.
(See ITT's Online Archives or 09/18/09 news, 09091810, for BP summary of a September 2009 Obama/Harper press conference which mentioned "Buy American."
See ITT's Online Archives 06/15/09, 09061505, for BP summary of the U.S. Chamber of Commerce complaint over state/local implementation of "Buy American."
See ITT's Online Archives or 05/27/09 and 04/09/09 news, 09052720 and 09040910, for BP summaries of the interim final guidance and the interim rule implementing certain Recovery Act "Buy American" provisions.
See ITT's Online Archives or 05/27/09 and 04/09/09 news, 09052720 and 09040910, for BP summaries of OMB's interim final guidance and an interim rule on the Recovery Act's "Buy American" provisions.)
Canadian Embassy Magazine "Day's Buy American letter panned" (dated 09/02/09) available at http://www.embassymag.ca/page/view/buy_america-9-2-2009
U.S. Chamber of Commerce comments on "Buy American" in the Stimulus Bill (dated 06/01/09 and 06/21/09) available at http://www.uschamber.com/issues/comments/2009/090601_buyamerican.htm and http://www.uschamber.com/NR/rdonlyres/ecuqg7teqes4di36o4hhg5n4upvriqtd757uq3yvgbpii2ewv7duyhldutcv4rgkj2qy3clugyvdtwdfkawkj2zyr4f/090622_buyamerican.pdf
OMB April 2009 interim final guidance on "Buy American," with list of all states, port authorities, etc. subject to international agreements, etc. (FR Pub 04/23/09) available at http://edocket.access.gpo.gov/2009/pdf/E9-9073.pdf