Domestic sourcing requirements are not new, but the Government is always developing new tools for increasing the sourcing of goods from the U.S. and allied countries. Both sides of the political aisle have marched to a drumbeat of increased domestic sourcing for the past several years. Most recently, the Biden Administration implemented Executive Order 14005
Following our recent overview of key topics to watch in the National Defense Authorization Act (“NDAA”) for Fiscal Year (“FY”) 2024, available here, we continue our coverage with a “deep dive” into NDAA provisions related to the People’s Republic of China (“China” or “PRC”) in each of the House and Senate bills. DoD’s focus on strengthening U.S. deterrence and competitive positioning vis-à-vis China features prominently in the 2022 National Defense Strategy (“NDS”) and in recent national security discourse. This focus is shared by the Select Committee on Strategic Competition Between the United States and the Chinese Communist Party (“Select Committee”), led by Chairman Mike Gallagher (R-WI) and Ranking Member Raja Krishnamoorthi (D-IL).
It is no surprise, then, that House and Senate versions of the NDAA include hundreds of provisions—leveraging all elements of national power—intended to address what the NDS brands as China’s “pacing” challenge, including many grounded in Select Committee policy recommendations. Because the NDAA is viewed as “must-pass” legislation, it has served in past years as a vehicle through which other bills not directly related to DoD are enacted in law. In one respect, this year is no different—the Senate version of the NDAA incorporates both the Department of State and Intelligence 2024 Authorization bills, each of which includes provisions related to China.
Continue Reading Not to Be Outpaced: NDAA Presents Measures Addressing China
It’s that time of year again: the House and Senate have each passed their respective version of the National Defense Authorization Act for FY 2024 (“NDAA”) (H.R. 2670, S. 2226). The NDAA is a “must pass” set of policy programs and discretionary authorizations to fund Department of Defense (“DoD”) operations. Lawmakers are currently undertaking the arduous process of reconciling these bills, while jockeying to include topics of importance in the final legislation. The engrossed bills contain a number of significant provisions for defense contractors, technology providers, life science companies and commercial-item contractors – many of which we discuss briefly below and others that we will analyze in more depth in our NDAA series in the coming weeks. Subscribe to our blog here so that you do not miss these updates.
Continue Reading Key Topics to Watch as Congress Works to Fund Next Year’s DoD Budget
On May 12, 2023, the Department of Treasury issued long-awaited guidance addressing the so-called domestic content “bonus credit” available under the Inflation Reduction Act of 2022 (“IRA”). As we have discussed elsewhere in detail, the IRA incorporates extensions of the existing clean energy tax credits under IRC section 45 and section 48 and establishes new “technology neutral” versions of these credits (pursuant to sections 45Y and 48E) that will become available starting in 2025. At the same time, the IRA also establishes a new 10% domestic content bonus credit that may be claimed in combination with these tax credits provided that the taxpayer: (1) uses U.S.-made iron and steel during construction of the energy-generation facility; and (2) ensures that the cost of any domestic manufactured products that are components of the facility meets a specified domestic content threshold.
The IRA statutory provision left open several key questions regarding how these domestic content requirements would work in practice (including, for example, how the threshold percentage would be calculated). Last Friday, Treasury issued long-awaited guidance (Notice 2023-38 or the “Notice”) that, among other things, addresses: (1) the contours of the “iron and steel” requirement; and (2) the method by which the adjusted percentage is to be calculated. While the guidance is consistent with traditional Buy America principles in certain respects, it also introduces both new concepts and new terminology — particularly with regards to the domestic content percentage calculation — which we discuss in detail below.
On November 4, 2022, the U.S. Department of Transportation (“DOT”) published two proposed waiver notices with request for comments related to the Bipartisan Infrastructure Law’s Build America, Buy America Act (“BABA”). Both notices stated that DOT’s existing temporary waiver for construction materials would not be extended past its expiration on November 10, 2022. One notice proposes a public interest waiver for certain narrow categories of contracts and solicitations to continue transitioning the construction materials standard. The other notice proposes a public interest waiver for de minimis costs, small grants, and minor components. Comments are due November 20, 2022 for both notices.
On July 28, 2022, the United States Department of Transportation (“DOT”) published a Request for Information (“RFI”) on the implementation of the Infrastructure Investment and Jobs Act’s Build America, Buy America Act (“BABA”). As discussed in our previous post, BABA expanded Buy America preferences to cover all infrastructure projects and sets new domestic content standards for federal financial assistance programs. The RFI focuses specifically on implementing these domestic content standards for construction materials, which were not subject to the Buy America regime prior to BABA. Given the wide range of products that might conceivably constitute a “construction material,” industry participants would be wise to closely monitor both the RFI and DOT’s implementation progress and to take steps to ensure that policymakers understand their views on the subject.
Continue Reading DOT Seeks Additional Stakeholder Input on Build America, Buy America Implementation
On April 18, 2022, the Office of Management and Budget (“OMB”) published a memorandum entitled “Initial Implementation Guidance on Application of Buy America Preference in Federal Financial Assistance Programs for Infrastructure” (“OMB Guidance”). OMB M-22-11. The OMB Guidance supplements the Build America, Buy America Act (“BABA”) provisions of the Infrastructure Investment and Jobs Act (“IIJA”), which was enacted in November 2021. In addition, OMB issued a Notice of Listening Sessions and Request for Information (“RFI”) on April 21, 2022 seeking public input on BABA implementation. Public comments are due by May 23, 2022.
Continue Reading Infrastructure Update: OMB Issues New Buy America Guidance for Federal Infrastructure Projects
The American Rescue Plan, signed into law last month, includes $1.9 trillion in economic stimulus, healthcare, and related funding. And just last week the Biden administration released an infrastructure proposal, the American Jobs Plan, that includes $2.3 trillion in transportation, connectivity, power, and other critical infrastructure investments.
Contractors are right to view these plans as massive opportunities — but should be cognizant of the regulatory strings that often attach to government spending. In general, these can include Federal Acquisition Regulation (FAR) and agency-specific FAR supplements for federal procurements, as well as the nonprocurement uniform requirements (2 C.F.R. Part 200) and related agency-specific regulations that attach to Federal grant funds even when disbursed by state or local entities.
Now, some Congressional members are seeking to add new restrictions that would significantly overhaul the existing domestic preference regime for Federal procurements — mere weeks after the promulgation of new Buy American regulations and the release of a new Executive Order to further tighten the application of these rules.
Continue Reading U.S. Senators Propose Trade-Pact Waivers Amidst Focus on Domestic Preference Laws
On Monday, the U.S. Court of Appeals for the Federal Circuit issued an opinion in Acetris Health, LLC v. United States, No. 2018-2399 (Fed. Cir. Feb. 10, 2020) (“Acetris”), that would permit pharmaceutical manufacturers to source a drug’s active pharmaceutical ingredient (“API”) from India, China and other non “designated countries” and yet still offer the end product for sale to the U.S. Government. Under the Trade Agreements Act (“TAA”), if a drug’s API was sourced from outside of the United States or a designated country, at least some Government agencies previously had taken the position that the U.S. Government could not purchase it. In Acetris, the Federal Circuit explained that the TAA inquiry should turn not on where the API (or some other component) is sourced, but instead on where the pill (or other end product) is manufactured. Consistent with this approach, the court held that a pill manufactured in the United States was compliant with the TAA and implementing regulations even though the pill’s API was sourced from India.
Although the full implications of the Acetris decision are not yet clear, there is no doubt that the ruling alters the TAA compliance landscape and offers broader lessons outside of the pharmaceutical manufacturing context. Consequently, the decision warrants close attention by contractors seeking to maximize supply chain efficiency.
Continue Reading A New Path to TAA Compliance: U.S.-Made End Products in Acetris
A long-standing dispute over the approach to country of origin determinations under the Trade Agreements Act (“TAA”) may soon be resolved, as the Federal Circuit recently heard oral argument in one of two cases presently examining key aspects of this statute. Among other questions presented, the court may decide the standard for determining whether a product may be considered a U.S.-made end product — a question that could have far reaching implications for product manufacturers across all industries.
Continue Reading How Much Is Enough? Federal Circuit Appeal May Decide Level of U.S. Manufacturing Required Under the TAA