The presence of Bombardier and Nova Bus are the face of Buy America in our community. Buy America has many different statutory foundations as well as colloquial meaning. It first came
to life in the “Buy America Act” (1933). In 1979, the Trade Agreements Act (TAA) that provided for a system of exemptions became law.
Buy America at the governmental level (federal, state or local) is about the percentage of U.S. content required to meet statutory obligations. This concept flows through to NAFTA compliant products as well as to products sold to consumers as “Made in America”.
Federal legislation enacting “Buy America” provisions can be found not only in Defense and Transportation legislation, but many other federal statutes which also require Buy America compliance. In our region the Buy America requirements are embedded in railroad car and bus production because those products are sold to municipalities who receive federal and state funding. Many states and municipalities have also adopted Buy America provisions that are more stringent than federal law which translates to a higher requirement for U.S. content.
Vendors to Bombardier and Nova Bus come to assist in boosting the U.S. content of the end product, so that that product meets the Buy American provisions of the applicable statute, most often around 50%.
In order to qualify as NAFTA goods to avoid the payment of duty yet another standard for U.S. content is imposed. NAFTA rules generally require evidence of fifty or more percent of raw materials coming from a NAFTA country that are incorporated into a prod- uct as determined by the Customs and Border Protection Division of Department of Homeland Security. This is an issue about which our local Customs brokers are quite knowledgeable as it impacts whether or not an item being imported is subject to duty.
During a recent panel at the Conference du Montreal, attended by about 3,800 people, one of my fellow panelists who operates a steel manufacturing business mentioned that he had frequently been questioned about opening an American facility of equal size to his Quebec business. He indicated that his response to such questions was that he finds Buy America to be very helpful because once in the United States, he was able to block-out, if you will, competitors not located in the U.S. from any solicitations that had Buy America provisions. This obviously will not work for every potential seller, but it is an interesting insight into the process, and one which all of us involved in economic development should consider as a poten- tial marketing tool.
The TAA and NAFTA contain provisions that provide for exemp- tions which are based upon the “public interest”. A clear example is the defense industry in which it has been determined that “it would be inconsistent with the public interest to apply the restrictions of the Buy American Act with respect to certain supplies, which have been determined to be of a military character or involved in programs of mutual interest to the United States and Canada,” thus allowing the sale of certain defense products made in Canada to our military.
If we move to the private sector and look at manufacturers touting their products as American made, what does that really mean? For most products sold to the public, unless they are automobiles or items made from textiles or wool, there is no law requiring manufacturers and marketers to make a “Made in USA” claim. But if a business chooses to make the claim, the Federal Trade Commission’s Made in USA standard applies which requires that “all or virtually all” the product has been made in America. That is, all significant parts, process- ing and labor that go into the product must be of U.S. origin, which is a significantly higher standard than Buy America or NAFTA.
Our Canadian neighbors are legitimately concerned about the utilization of Buy America as a protectionist device that adversely impacts their ability to export into the U.S. This is clearly not an unreasonable concern.
It’s obvious that the imposition of Buy America has benefited our region. Nonetheless, we need to be sensitive to our largest trading partner Canada.
William Owens is a former member of Congress representing the New York 23rd, a strategic advisor at Dentons out of its Washington, DC, office, and a partner in the firm of Stafford, Owens, Piller, Murnane, Kelleher & Trombley, PLLC, in Plattsburgh, New York. Mr. Owens is available to consult on US/Canadian trade, as well as to provide legal advice and assistance.