Supply Chain

On March 7, 2024, the Department of Transportation’s (“DOT”) Federal Highway Administration (“FHWA”) announced a proposed rule to rescind a longstanding general waiver of Buy America requirements for manufactured products (the “Manufactured Products Waiver”).  If finalized, this would be a major change for the agency, reversing a policy that has been in place for more than 40 years.

FHWA has imposed Buy America requirements for domestic iron and steel on its projects since 1978 (see 23 U.S.C. § 313; 23 CFR § 635.410), but in 1983, the agency determined that it was in the public interest to waive the requirement as to manufactured products based on the agency’s belief that manufactured products were not used in federal highway projects in sufficient quantities to have an effect on the overall cost of a project and therefore did not require Buy America protections.  That general waiver has been in place ever since.

This change in policy comes in the wake of the 2021 Infrastructure Investment and Jobs Act’s Build America, Buy America (“BABA”) provisions, which expanded Buy America coverage broadly in federal financial assistance programs for infrastructure.  BABA requires that all steel, iron, construction materials, and manufactured products used in such products be “produced in the United States.”  BABA also discourages the use of general applicability waivers like FHWA’s Manufactured Products Waiver and required review of existing waivers. 

FHWA sought comments on its longstanding manufactured products waiver in March 2023 and received over 9,400 comments from the public.  Commenters included manufacturers, labor organizations, construction contractors, industry associations, State departments of transportation, and even members of Congress.  Based on a consideration of this feedback and in recognition of other domestic content policies, including Executive Order 14005, “Ensuring the Future Is Made in All of America by All of America’s Workers,” FHWA is proposing to discontinue its Manufactured Products Waiver and modify its regulations to include domestic content requirements for manufactured products.Continue Reading Federal Highway Administration Announces Proposed Rule Ending Longstanding Buy America Waiver for Manufactured Products

On January 4, 2024, the U.S. Attorney’s Office for the District of New Jersey announced that it has filed criminal wire fraud and false statement charges against the Chief Executive Officer (CEO) of a company that knowingly sold certain surveillance and security cameras to prosecutors’ offices, sheriffs’ offices, and police departments in the state of

This post continues our ongoing coverage of the FY 2024 NDAA. 

The FY 2024 NDAA includes numerous supply chain and stockpile management provisions aimed at addressing a host of perceived vulnerabilities and weaknesses in Department of Defense (“DoD”) supply chain networks used to secure goods and services for our national defense.  Of particular note, this year’s NDAA seeks to address China’s and Russia’s continued dominance in the global supply chain for many critical materials and rare earth elements.  Supply chain- and stockpile-related measures in the NDAA could present significant opportunities for contractors poised to support the U.S. Government’s efforts to on-shore and friend-shore U.S. and DoD sourcing and manufacturing, but Congress’s focus on increasing supply chain visibility could also herald new rounds of compliance and reporting requirements attached to federal procurements.Continue Reading Key Supply Chain Provisions of the National Defense Authorization Act (“NDAA”) for Fiscal Year (“FY”) 2024

On October 5, 2023, the Federal Acquisition Regulatory Council (FAR Council) issued an interim Federal Acquisition Regulation rule (FAR rule) that implements the Federal Acquisition Supply Chain Security Act (FASCSA).  This FAR rule implements the requirements of the Federal Acquisition Supply Chain Security Act of 2018 and the Federal Acquisition Security Council (FASC) final rule for complying with exclusion or removal orders. The FAR rule represents yet another step by the Government to mitigate the security risks that the Government perceives with the use of information technology that may be produced or provided by countries considered to be foreign adversaries.  Like similar supply chain prohibitions, the rule requires contractors to conduct diligence to ensure that articles and sources covered by a FASCA exclusion or removal order are not provided to the Government, to make an affirmative representation to the Government that such articles and sources will not be provided, and to promptly report if any are identified.  The FAR rule will become effective on December 4, 2023, and will apply to new contracts and contracts subject to extension or renewal.  The rule instructs that existing IDIQ contracts should be modified by the Government within six months of December 4, 2023 to apply the requirements to future orders.

Additional information about the rule and its relationship to existing FASCSA regulations is outlined below.Continue Reading FAR Council Issues Interim Rule Outlining Procedures Relating to Excluded Covered Articles and Sources

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

This is the twenty-sixth in a series of Covington blogs on implementation of Executive Order 14028, “Improving the Nation’s Cybersecurity,” issued by President Biden on May 12, 2021 (the “Cyber EO”).  The first blog summarized the Cyber EO’s key provisions and timelines, and the subsequent blogs described the actions taken by various government agencies to

As the House and Senate Armed Services Committees prepare to mark up the Fiscal Year 2024 National Defense Authorization Act (NDAA), they are very likely to consider a number of China-related measures that have been recommended by the national security community and which could enjoy bipartisan support.  These recommendations are generally focused on countering Chinese influence in the United States or increasing the United States’ relative power advantage in the Pacific region. Continue Reading Fiscal Year 2024 National Defense Authorization Act: More China-Related Measures on the Horizon

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. Continue Reading Treasury Releases Long-Awaited Guidance for Domestic Content Bonus Credit Under Inflation Reduction Act

On December 23, 2022, President Biden signed the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023 into law.  The Act contains two significant prohibitions regarding the procurement and use of semiconductor products and services from specific Chinese companies and other foreign countries of concern that will come into effect in December 2027. Continue Reading NDAA Prohibits Government Purchase and Use of Certain Semiconductors