You probably know that the Buy American Act (BAA) establishes a preference, in procurements by U.S. government agencies, for the purchase of items manufactured in the United States. But did you know that the BAA contract clause does not itself define the phrase “manufactured in the United States?”
Everyone agrees that the BAA’s domestic preference is meant to benefit U.S. manufacturers, but there is less consensus when it comes to defining just what operations must be performed in the United States to constitute domestic “manufacturing.” The Made in America Office of the U.S. Office of Management and Budget (OMB) has raised that lack of consensus in a recent Request for Information (RFI), seeking public comment on how the federal government should define the standards for domestic manufacture under the BAA.
For iron/steel items, many domestic preference requirements contain explicit instructions about what manufacturing processes must be performed in the United States: Every manufacturing process from the melt stage to the application of a protective coating. And, even for non-iron/steel items, there are certain minimal finishing operations, like packaging or painting, that plainly do not qualify as “manufacturing” of the underlying product. Consensus and clarity become harder to achieve, however, when attempting to identify whether the final, U.S.-based steps of a multi-stage manufacturing process are sufficiently significant to count as domestic “manufacturing,” as compared to the earlier stages performed in a foreign country.
When a product has undergone significant processing outside the United States prior to arrival in the U.S. for final processing, the assessment of whether the U.S.-based processing is sufficient to constitute domestic “manufacturing” typically requires a fact-intensive analysis that evaluates the comparative time, complexity, and value of the processing operations performed in the U.S. and in foreign countries. The courts, the U.S. Government Accountability Office (GAO), and federal regulations have all articulated slightly different definitions or standards for what it means to “manufacture” an item, and OMB is now seeking feedback from the public on “the meaning of manufacturing for purposes of determining if an end product is manufactured in the United States.”
Manufacturers wanting to comment on OMB’s RFI and offer their suggestions on how to define manufacturing for the purposes of domestic preference requirements need to submit their comments through the Federal eRulemaking Portal by Monday, June 6, 2022.