For manufacturers of building construction materials, offering products that are “Made in America” has gained greater importance recently with the adoption in January 2009 of the Federal Stimulus Bill. Following the inclusion in the 2009 Federal stimulus legislation of Buy America provisions, Clients have urgent concerns about whether their products will satisfy the Buy American provisions of the 2009 stimulus act, in addition to the longstanding requirements of the Buy America Act, adopted in 1933. Manufacturers of construction materials would like to sell their products for new construction and repair projects that may receive federal stimulus funds, and manufacturers are fearful of being excluded from public sector or private sector projects because the project may be funded, in full or some small part, from an appropriation under the 2009 stimulus bill.
Although the stimulus bill and the laws in effect before it both restrict government procurement in such a way as to direct funding to products that are Made in America, they do so in different ways. The stimulus bill is a stunning departure from the earlier law, called the Buy American Act, that was adopted in 1933 and was later amended from time to time, both by the Congress and by the President, in a series of Executive Orders. The earlier law restricts government procurement in a way that is neutral concerning whether a manufacturer bought its materials from China or from any other foreign country because all that mattered was that the U.S. content be a majority of the total product cost. But the stimulus bill is different. The stimulus bill provides, as a general rule, that products within its coverage are not permitted to have any foreign content, but also provides an important exception–foreign content is okay as long as it is manufactured in only those foreign countries that are parties to trade agreements with the U.S. and only if those trade agreements prohibit the U.S. from discriminating against that the foreign imports concerning government procurement. NAFTA is such an agreement, so goods or materials made in Canada or Mexico are treated as compliant with the Buy America provision of the stimulus. On the other hand, goods or materials made in China are not compliant. In fact, any small Chinese content of a product would make the product not purchasable for construction financed by the stimulus.
Clients also ask me whether their packaging can read “Made in America.” Although the rules about what the product packaging can say and the rules about the making of product itself are easily confused, they are very different.
For instance one client, who should easily meet the test in the Buy America provisions of the stimulus act and definitely meets the test in the Buy American Act, wonders whether their packaging can state Made in America. Not necessarily.
The client buys some foreign materials and parts from countries with bilateral trade agreements with the U.S., and then makes all of its products in the US. Under the stimulus act, stimulus funds can be used for goods that are made in the USA (or that are treated the same as U.S.-made goods under international trade agreements, for example under NAFTA). Under the Buy American Act, the US content needs to be at least 50% of the total cost. But product packaging is regulated by the Federal Trade Commission, and under its guidelines, a Made in USA claim can only be made for those goods with all or substantially U.S. content. The inconsistency of these laws in causing some confusion.
It should help to remember that government procurement rules do not require the product packaging to read “Made in America” and indeed there are allowances to buy foreign goods under the “Buy American” procurement laws. However, the claims made on packaging are generally aimed at private sector consumers. Therefore, the stricter rules that apply to advertising and labeling are meant to protect consumers from confusion. Until we know definitively how consumers would interpret a label that reads “Buy America,” it would be safest to assume that the consumer would interpret it as meaning “Made in USA.” Made in USA claims are appropriate for only for goods manufactured in substantial part in the U.S. and whose foreign content, measured by relative manufacturing costs, is minimal.
