The Buy American Act was originally passed by Congress in 1933 and has undergone numerous changes across several presidential administrations. While the core of the Act has essentially remained the same, requiring the U.S. government to purchase goods produced in the U.S. in certain circumstances, the domestic preference requirements have changed over the years. While the Buy American Act applies to direct government purchases, the separate (but similarly named) Buy America Act passed in 1982 imposes similar U.S. content requirements for certain federally funded infrastructure projects. Generally, the Buy American Act’s “produced in the U.S.” requirement ensures that federal government purchases of goods valued at more than $10,000 are 100% manufactured in the U.S. with a set percentage of the cost of components coming from the U.S. As of 2024, that set percentage has been increased to 65%. Therefore, the cost of domestic components must be at least 65% of the total cost of components to comply with the rule. Under the existing rules, the threshold will increase to 75% in 2029. These planned changes are consistent with the trend of increasing preferences for domestic goods over time (a trend that has continued across administrations from both sides of the political spectrum).
Unsurprisingly, protectionist policies favoring American production can produce similar protectionist measures enacted by foreign countries. The European Union’s (EU) European Green Deal Industrial Plan (sometimes referred to as the Buy European Act), which includes the Critical Raw Materials Act (CRMA) and the Net-Zero Industry Act (NZIA), were both formally adopted within the last few months. The NZIA, which was agreed upon in February, is aimed at the manufacture of clean technologies in Europe and sets two benchmarks for such manufacturing in the EU: (1) that 40% of the production needed to cover the EU will be domestic by 2030; and (2) that the EU’s production will account for at least 15% of the world’s production by 2040. The NZIA contains a list of net-zero technologies, including wind and heat pumps, battery and energy storage, hydropower, and solar technologies. The CRMA, adopted on March 18, sets forth objectives for the EU’s consumption of raw materials by 2030: that 10% come from local extractions; 40% to be processed in the EU; and 25% come from recycled materials. The CRMA also provides that “not more than 65% of the Union’s annual consumption of each strategic raw material at any relevant stage of processing from a single third country.”[1] While Europe’s new acts are perhaps more geared towards raw materials and clean technology, the U.S. and Europe’s concerted efforts to focus on domestic production will be something to watch for years to come. In particular, it is worth watching whether the recent EU measures generate a response from U.S. lawmakers. If so, it could accelerate the already increasing stringency of Buy American and Buy America requirements.
[1] https://www.consilium.europa.eu/en/policies/eu-industrial-policy/
[View source.]
