NCPA - National Center for Policy Analysis


December 4, 2006

The U.S. government's 'Buy American' provisions -- rules that give special preference to American-made products -- are increasingly frustrating agencies and contractors as they try to comply in a world driven by global supply chain, says Kimberly Palmer in National Journal.

Industry groups argue that much of the legislation is too complicated, and on top of that, decades old:

  • The 1979 Trade Agreement Act, which governs most large government contracts, requires agencies to buy products that undergo "substantial transformations," or final assembly, in the United States or one of 30 approved countries that have trade agreements with Washington.
  • The 1933 Buy American Act, which has been altered over the years through a variety of exemptions, now applies mainly to small contracts and gives preference to products that originate in the United States or approve Countries.
  • The Defense Department is also restricted by the 1941 Berry Amendment, which governs the military's purchase of food, clothing, specialty metals, and other materials.

Forcing companies to comply with these domestic sourcing requirements runs up costs, said John Douglass, president of the Aerospace Industries Association, an Arlington, Va., Based group.  Because contractors often have large commercial businesses, which do not require domestic sourcing, companies end up building products separately for government agencies.  This makes the products more expensive, says Douglas.

But despite the burden on companies, Bruce Lienster, senior advisor to IBM and former director of the company's public-sector contracting, isn't optimistic about the possibility of persuading Congress to liberalize requirements any time soon.  In general, he says, Republicans have been more sympathetic to the need to loosen the rules.  Under a Democratic Congress, he said, "I think we'll have even less sympathy for our cause."

Source: Kimberly Palmer, "Can Uncle Sam 'Buy American'?" National Journal, November 18, 2006.


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