SPONSORED

This article brought to you with: Finale Inventory.

See how Finale Inventory helps you improve and scale your operations with their all-in-one, multi-channel inventory management solution.

How the Push to Buy American Could Impact the U.S. Defense Supply Chain

How the Push to Buy American Could Impact the U.S. Defense Supply Chain

How the Push to Buy American Could Impact the U.S. Defense Supply Chain
Image via Flickr by Thomas Hawk

Many people strive to buy local, but for government agencies, purchasing American-made supplies and products is mandated by federal law. Agencies can often sidestep this legislation due to legal loopholes, but more stringent enforcement may put an end to this practice and force agencies to buy strictly American-made articles. Learn how phasing out foreign vendors could impact the U.S. Department of Defense’s supply chain and global trade relationships.

What the Buy American Act States

The Buy American Act dates back to 1933, when it became law with the intention of prioritizing domestically produced materials and goods over those made overseas. The act requires federal agencies to buy American-made products unless they exceed certain price thresholds.

For decades, the Buy American Act ensured that taxpayer funds would have a positive impact on domestic supply chains and the national economy. However, numerous loopholes and reciprocal free trade agreements have compromised the original intention of the act, often giving equal priority to international firms and contractors, especially in terms of defense spending.

This article is for Premium Members only. Please login below to read the rest of this article.
Not a Premium Member yet? Join today.

In fact, The Washington Post reports that about 6.4 percent of U.S. military spending, or almost $20 billion, went to foreign suppliers and producers in 2014. Historically, many federal agencies have neglected to enforce the law, largely due to the agency’s lack of knowledge or administrative error.

How New Enforcement Affects the Buy American Act

In April 2017, President Trump signed an executive order that emphasized the administration’s support of the Buy American Act. The order, which demanded that the U.S. Department of Commerce investigate federal procurement policies and analyze free trade provisions that affect procurement, also emphasized the importance of building up domestic supply chains, stating that doing so could have a multiplier effect on the U.S. economy.

On June 30, the Office of Management and Budget released specific guidelines for enforcing the Buy American Act. First, agencies must evaluate their adherence to the Buy American Act and train employees on best practices for following the original legislation. In addition, agencies must provide detailed reports regarding their use of waivers and exemptions, including details on the spending level related to each exemption.

How These Changes Could Impact the Department of Defense

Enforcing the Buy American Act more strictly could impact the DOD in several ways. The effects could be wide-rangin since the agency is part of a global supply chain that’s much more complex and firmly established than it was in 1933.

First, the Buy American Act could affect how domestic weapons manufacturers source raw materials and build supply chains. To do business with the DOD, these manufacturers may have to place tighter restrictions on their supply chains, eliminating some foreign suppliers and potentially increasing costs.

In addition, agency heads may be less willing than ever before to consider waivers and exemptions, even legitimate ones. This could draw retaliation from foreign suppliers and compromise U.S. firms’ future participation in reciprocal trade agreements.

The full impact of renewed enforcement and tighter restrictions remains to be seen, but defense manufacturers and contractors may better understand the range of effects in late 2017. The administration has given Commerce Secretary Wilbur Ross a November 2017 deadline for providing in-depth analysis and recommendations related to the impact of the Buy American Act.

Global Procurement & Supply Chain Professionals Read This…

Free Case Study When You Subscribe

…Carefully curated procurement & supply chain issues that make you look smart, sent to your inbox every week.

PLUS: Get the FREE Procurement Case Study when you subscribe: “How McDonald’s Overcame Global Supply Chain Obstacles”

Procurement Bulletin eNL Subs Email Only Step 1

Similar Posts