Buy American Requirement Is An Implementation Of Essay

Length: 8 pages Sources: 4 Subject: Economics Type: Essay Paper: #20675006 Related Topics: Government Contracts, Socialism, Free Trade, Renewable Energy
Excerpt from Essay :

Buy American Requirement is an implementation of rules and/or laws by the Buy American Act, which outlines that no foreign steel, iron, or any other manufactured goods should be permitted into the United States of America. This is irrespective of the source of funding to such items in public works or public building, which receives ARRA (American Recovery and Reinvestment Act). The Buy American clause states that none of the appropriated funds or otherwise made available through this act may be useful for a project for the alteration, construction, repair, or maintenance of public works and public buildings unless all of the steel, iron, and manufactured products used within the project are produced from within the United States (Frank, 2000).

The provision of this act engrosses the public work and public building projects, meaning public work and public building of governmental entities, including both local and the regional government entities. However, the non-for profit organizations do not receive the impacts of these requirements. A product is considered to be from the U.S. If its manufacturing took place within the United States. Frank (2000) elicits that this implies the processing of an item into a specific form or shape, and/or combination with other raw materials in order to create a material with more diverse properties than the individual raw material's properties. Nonetheless, this regulation exempts particular items including raw materials other than iron or steel, non-manufactured goods which are not of steel or iron, component and the sub-componential part origin of the manufactured goods, and Grant/Loan fund whose sole use was only for purchasing the equipment (Theodore, 2006).

Confusion should not arise in distinguishing between the "Buy American Requirements" and the "Buy America Provisions" as the two involve separate regulation and legislation requirements. The "buy America provisions" solely apply to the loans/grant funds issued by the FTA and FHA (federal transit administration and federal highway administration respectively). On the other hand, the "Buy American Requirements" may be applicable to all direct United States federal procurements. The buy American act applies to all the U.S. federal government agencies' purchases of items and any other product valued over the micro-purchase threshold; this does not apply to services (Theodore, 2006). This Act provides that all public goods (materials, articles, or supplies) must be from within the U.S., and any manufactured item must also be out of the U.S. materials (Hayek & Friedrich, 1988). In 1933, Buy American created a price preference, which favored and still favors the domestic end products from the American firms on the United States federal government contracts for manufactured items produced or mined within the U.S. And manufactured items on which the total cost of its American components exceeds fifty percent (50%) of the total cost of all its components. Nonetheless, the Buy American exemptions mentioned earlier may encompass waivers issued for the American products, projects, as well as the entire scope of technology, dependent on the process of review and requirements by a given federal agency or department.

The Buy American Requirements will benefit both the VectorCal and the QuickResponse Company since the technological devices, tools, and/or machines that will be useful to their projects will have to be manufactured by them or any of the locally available companies within the United States. By this, the VectorCal project, as well as the QuickResponse Company may both be able to cut on their extra cost of expenses, which could otherwise be used in importing materials or products from other nations. In the current technological developments, steel and iron are some of the principle materials for processing or manufacturing of a wide range of products. Additionally, the VectorCal together with QuickResponse projects will strongly and readily be eligible to the FTA grants/loan funds, which will aid their growth and technological developments.This is evident in the policies and provisions given.

In case of any product or equipment authorized for purchase by the financial assistance provided by the funds made accessible under Public Law No: 104-208, it is an obligation of Congress to ensure that all the entities receiving financial support, only purchase the American-made products and equipment (Hayek & Friedrich,1988). Under the Public Law 104-208, Statute 3009, offices and bureaus excluding the reclamation bureau will provide assistance to every recipient following the notice of the pursuant to section 307 of the Omnibus Consolidate Estimations...


Moreover, awarding financial support via the funds made accessible under the above Public Law, to a great extent, will be practicable, and the Bureau of Reclamation will only offer assistance to the recipients following the notice pursuant to section 501 0f the water and energy development appropriations act of 1997, and Public Law provision 104-206, 110 Statute 2984 (Theodore, 2006). This in only in the sense of Congress that the widest practicable extent is that all products and equipment purchased with such funds are made accessible by law and should be American-made.

Deeply buried into the new stimulus law are the "Buy American Requirements," which currently threatens to interrupt or even avert the use of stimulus funds for maintenance, repair, and construction of new highways, electric transmission lines, bridges, high-speed rail facilities, schools, port infrastructure, hospitals, and energy efficiency projects. According to Elliot & Peter (1990), unless the federal government acts swiftly to remedy this situation via the use of waivers, the Buy American Requirements could probably encourage protectionism amongst the United States trading partners during this period of struggle by the world's economies to avoid replay of the economic hiccups of 1930s. Section 1604 of the provision partially states that none of the appropriated funds or funds made available by this provision may be useful in the construction projects, maintenance, repair, or alterations of public works or public building. This Act thereby holds unless all the steel, iron, and manufactured goods utilized in the project are American-made or produced from within the United States (Theodore, 2006). Even though the waivers may be available under certain conditions, and the law may be applicable in consistence with the U.S. trading agreements, there still exist various unclear issues on whether, and how rapidly these safety valves may operate.

For instance, currently there is a heated response by the U.S. trading partners. Evidently, the official news agency of china, Xinhua, recently spoke out during the hours of enactment, stating that the history, as well as economic theories proves that during the financial crisis, trade protectionism is not the solution or the way out. Instead, it may only turn out to be the poison that worsens the global economic hardships. Moreover, citing the Great Depression as a perfect example, Xinhua proceeded to say that trade protectionism will as well, lead to catastrophic effects within the poor or developing nations, consequently leading the current financial crisis to be humanitarian crisis (Elliot & Peter, 1990).

Analysis on the scope of these requirements by great critics reveals their thoughts and views on this act as a tri-part test. That a project is subject to the necessities if: (i) the appropriated funds or otherwise funds made available by this provision are; (ii) useful in the construction, maintenance, repair, or alteration of; (iii) a public work or public building (Frank, 2000). In this interpretation, the first part outlays that most of projects which receive a loan or fund guarantee under the novel law are subjects to the necessities; however, there are exemptions. For instance, it is not applicable to the renewable energy projects, which receive grant in lieu of tax credits or allowed for a tax credit. The second part of the tri-part test includes an extremely wide range of work while the third part almost unquestionably ignores the work done with regards to any privately owned facility. Considering these terms as dependent on each other, none of them are defined within legislation, creating enough room for the possible economic interruptions (Elliot&Peter, 1990).

On the basis of its obligations, to endure consistence with the international trade agreements, as well as its concern about prompting more protectionism, the federal government under the Obama Administration seems to move quite fast in issuing waivers to member nations to either free trade agreements or WTO (world trade organization). With respect to the developing or least developed countries, waivers would presumably be of low priority. Similarly, with respect to the developed countries which are not parties to WTO or free trade agreement, waivers would as well be presumably low. According to those who seek stimulus dollars, there may be possible colossal pressure on the government to quickly eliminate the uncertainty cloud created by this Act, and struggle to minimize its impacts on projects which could otherwise qualify (Theodore, 2006). On the contrary, the prohibition supporters are not going to offer their ground without a fight.

There are various exceptions to the "buy American requirements," in which waivers can be issued for projects, products, or the total technological categories, and dependent on the process of review and requirements from a known federal agency or department. In certain situations, a project may…

Sources Used in Documents:


Elliot, J. & Peter J. (1990).The Political Economy of the U.S. Socialism: The Formative

Years, 1918 -- 1928. Boston: Kluwer.

Frank, D. (2000). Buy American Requirements: The Untold Story of Economic Nationalism.

New York, NY: Beacon Press.

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