U.S. Senators Propose Trade-Pact Waivers.

• Author: Plitsch, Jennifer
• Position: Government Contracting Insights

* The recently enacted American Rescue Plan includes $1.9 trillion in economic stimulus, health care and related funding, while President Joe Biden's American Jobs Plan proposal includes $2.3 trillion in critical infrastructure investments. Contractors are right to view these initiatives as massive opportunities, but should be cognizant of the regulatory strings that often attach to government spending.

These strings can include the Federal Acquisition Regulation and agency-specific supplements, as well as the non-procurement uniform requirements and related agency-specific regulations that attach to federal grant funds even when disbursed by state or local entities.

Now, some members of Congress are seeking to add new restrictions that would significantly overhaul the existing domestic preference regime for federal procurements--mere weeks after the promulgation of new Buy American regulations and the release of a new executive order to further tighten the application of these rules.

The provisions of the Buy American Act (BAA) and Trade Agreements Act (TAA) are arguably the two most important sourcing preference regimes for federal procurements.

Under the BAA, companies doing business with the U.S. government must formally certify whether end products they deliver are "domestic end products" within the meaning of the law and its implementing regulations. A product generally qualifies as a "domestic end product" if: it is manufactured in the United States; and the cost of its components mined, produced, or manufactured in the United States exceeds 55 percent of the cost of all components.

However, the Trade Agreements Act allows the president to waive laws, regulations, procedures, or practices of government procurement that would discriminate against eligible products or suppliers from "designated countries" so that the United States may comply with its obligations under various international trade agreements. Waivers to the Buy American Act can be issued for acquisitions that exceed the thresholds in the relevant trade agreements, typically $182,000. When applicable, the Trade Agreements Act prohibits supplying end products to the U.S. government from non-designated countries.

In the days following the passage of the American Rescue Plan, a group of senators petitioned Biden to "temporarily suspend the trade-pact waivers to Buy American and other domestic procurement preferences that allow foreign firms to bid as American companies."...