After taking office on January 25, 2021, President Joe Biden signed into law Executive Order 14005 on Ensuring the Future is Made in All of America by All of America’s Workers (so-called “Made in America Order” or “E.O. 14005”), which strengthened the obligations to buy American-made goods.  On July 28, 2021, as a follow-up measure to E.O. 14005, the Biden administration published proposal for strengthened “Buy American Rule” to further increase the purchase of American-made products by American government. 

The Biden administration stressed that leveraging the US government’s purchasing power to facilitate market formation and innovation is the core industrial strategy to support American workers, local communities and companies by fostering future industries.  Further, as proven during the COVID-19 pandemic, the federal government’s purchasing power can facilitate the restoration of the domestic supply network and can reduce the risk of becoming vulnerable to the adverse influences from competitors of the US during a time of crisis. 

E.O. 14005 and the proposed Buy American Rule aim to (i) enhance the criteria for recognizing American-made goods and improve preferential conditions applied to such goods, (ii) restructure the implementation system of the existing Buy American Act, and (iii) strictly manage any exceptions: 
 

1)   Stricter Criteria for Recognizing American-Made Goods and Improved Preferential Conditions

• In case of public procurement, the proposed Buy American Rule increases requirement of American-made contents from the previous 55% (95% for steel products) to 60%, with further increases to 65% by 2024 and 75% by 2029.

• Expand price benefits applied to American-made goods (based on the lowest price of foreign-made goods) (20% and more for large companies and 30% and more for small companies), namely:
  -  Certain critical goods, including semiconductors, key minerals and metals, and high-capacity batteries, among others, are currently being reviewed as potential goods to be provided price benefits.

• Delegate federal regulatory agencies to verify the ratio of American-made parts included in finished products of critical goods. 

2)    Restructured Implementation System

• Establish a new Made in America Office under the US Office of Management and Budget to strengthen the monitoring and supervising of the Buy American Act.

• Institute a reporting line for regular implementation status updates.

3)    Stricter Management of Exceptions

• Regularly review the list of goods that qualify for exceptions.

• Review the exclusion of commercial goods and information technologies from the list of exceptions.

The proposed Buy American Rule will be finalized after 60 days of public hearings and review. 

The vast majority of Korean companies that participate in the federal government’s procurement sell to the United States Forces Korea.  The applicable US laws also defer substantial authority to the United States Forces Korea to procure locally, which means the proposed amendment to the Buy American Act is unlikely to critically impact the existing procurement practices in Korea. 

However, when American companies choose subcontractors or parts/materials suppliers, they could potentially exclude non-American companies due to the enhanced Buy American Act requirements and certification procedures.  Evidently, the largest ten foreign vendors witnessed their combined share in the market for subcontracting or parts/materials suppliers for American companies dip from 0.54% in 2018 to 0.51% in 2019 and again to 0.38% in 2020, which is presumed to be the effect of the strengthened Buy American Act under the Trump Administration.