Two provisions of the “American Recovery and Reinvestment Act of 2009” — the economic stimulus package — may cause difficulties for foreign exporters and trade partners of the United States.
The language of this provision requires that any public works or infrastructure project funded by the Act use only steel, iron and manufactured goods made in the United States. However, the law also allows foreign exporters to seek access to stimulus projects through exceptions in the bill. Mirroring the terms of the Buy American Act, the Buy American stimulus provision also provides limited exceptions to the domestic source restrictions of the Act, including:
- Public Interest Exception: An agency may waive domestic source requirements under the Buy American provision of the Act where it is determined that such restrictions would be “inconsistent with the public interest.”
- Lack of Domestic Supply: Waivers of the Buy American provision may also be granted in the event that required products are not available domestically in the United States in sufficient quantity or quality for a particular public infrastructure project.
- Twenty-Five Percent Cost: Waivers of the Buy American Act may be granted if the use of domestic substitutes for imported products would increase the overall costs of a given project by 25 percent.
Although the Act itself does not provide further guidance on how these waivers are to be applied, foreign exporters should expect the implementing regulations to be similar to the foreign acquisition provisions found in the Federal Acquisition Regulation (FAR). For example, although the Act does not expressly state what would be “inconsistent with the public interest,” FAR regulations implementing the Buy American Act restrictions have expressly provided that the public interest exception would apply “when an agency has an agreement with a foreign government that provides a blanket exception to the Buy American Act.”
Furthermore, in recognition of the chilling effect that the Buy American provision will have on foreign exporters, the Act also includes a section that requires that any application of the Buy American provision should be in “a manner consistent with United States obligations under international agreements.” Similar to the exemption to the Buy American Act under the Trade Agreements Act (TAA), this compromised language was included in the Act to allay fears of foreign exporters and to signal the federal government’s intent to honor its obligation to treat non-domestic products from its international trade agreements partners equally as those produced and manufactured domestically. Thus, assuming that the applicable dollar-value threshold has been satisfied, it is likely that products from any WTO country such as Japan and Korea will be, in theory, exempted from Buy American provisions.
Differing content requirements for imported products are provided in both the FAR and the TAA. FAR Section 25 recognizes products as domestic if the cost of its components mined, produced or manufactured in the United States exceeds 50 percent of the cost of all its components. Products from WTO member countries and those with bilateral or regional trade agreements with the United States, however, are covered by the Trade Agreements Act, which sets content as either wholly grown, produced or manufactured in a TAA country, or having undergone substantial transformation in a TAA country.
At the end of the day, although some protections are available for foreign products under the Act, given the domestic focus of the stimulus package — job creation in the United States — foreign governments may still be hard-pressed to address, in a consistent and sustained manner, the U.S. implementation of the Buy American provision of the law. U.S. agencies will likely seek to define “consistency” with international agreements in a fluid manner that will be open to argument and may default to rejecting foreign products on its face absent a strong rebuttal to the contrary. Exporters will need to improve their communications with their governments to ensure that the application of the Buy American provision is held to the standards established, for example, by WTO SCM 3.1(b), which would attack Buy American as a form of prohibited subsidy under the strictures of the WTO Government Procurement Agreement1 and the procurement chapters of various bilateral free trade agreements.
Employ American Workers Provisions
The law also preserves new restrictions on the issuance of H1-B visas to foreign workers. The provisions prohibit companies and financial institutions receiving funding from the Treasury Asset Relief Program (TARP) from hiring foreign workers under the H-1B program. This provision is defined to affect new employees, and does not apply, on its face, to foreign workers already maintaining H1-B status as employees of TARP-funded companies. No exceptions for this provision are provided for any circumstances, including for nationals of countries benefiting from special H1-B quotas in bilateral free trade agreements with the United States, Australia, Singapore and Chile. The prohibition is set to sunset (expire) two years after enactment.