Candidate Joe Biden promised to tighten the rules that define what counts as Made in America for goods the government buys. In March, the federal body that writes those rules issued new ones that moved the country in that direction.
Right now, if a product has at least 55% domestic content, it passes muster. The Federal Acquisition Regulatory Council said March 7 that percentage will go up to 60% in 2022. In 2024, it will rise again to 65%, and hold there until 2029, when it will go to 75%.
To recap Biden's promise, during the campaign, he complained that "loopholes in the law allow products to be stamped 'made in America' for purposes of federal procurement even if barely 51% of the materials used to produce them are domestically made."
Biden promised to "tighten these rules to require more legitimate American content — so when we deem something made in America, it reflects the work and output of American workers."
William Reinsch, a trade specialist at the Center for Strategic and International Studies, said the new rules move the government in that direction. But Reinsch cautions that it will be important to see how the administration deals with waivers to the rules.
"Historically, administrations have granted thousands of waivers annually, most of them to the Defense Department," Reinsch said.
That is often because of international agreements in which other countries agree to buy American military hardware, with the guarantee that certain components are made by their companies. Reinsch gave the example of the F-35 jet, which has components made by NATO allies.
"Failing to grant waivers in cases like that would breach our agreements," Reinsch said.
Waivers, however, can be used outside of military goods, and that's the area Reinsch will be watching.
There's an additional feature to the latest rules.
The domestic content rules allow the government to buy at a higher price — for larger American companies, the government can pay 20% more than a comparable foreign-made product, and smaller companies can be 30% more expensive. The new approach opens the door to giving an even larger price preference for certain goods and materials that the administration deems "critical" to the supply chain.
Making that list of goods is in the hands of the Office of Management and Budget, and that process has just begun.
Reinsch said he is curious to see how companies respond.
"Companies for which the U.S. government is a primary customer will likely adjust their supply chains to accommodate the new rules," Reinsch said. "Companies for which federal government sales are only a small part of their revenue may well decide that it is simply too much trouble."
Biden said he would tighten the rules for determining what counts as made in America.
We rate this a Promise Kept.