‘Buy American, Hire American’: Your Supply Chain in the New Administration

‘Buy American, Hire American’: Your Supply Chain in the New Administration

All new government administrations are inevitably associated with uncertainty. The election of President Trump is no exception. In particular, the new administration is already making waves in the manufacturing sector as companies consider how to reconfigure their supply chains to avoid being left behind in the new order – one which openly seeks to put U.S. manufacturers at the front of the pack.


The America First Policy: Proposals and Promises

On the campaign trail, Donald Trump promised to withdraw from the Trans-Pacific Partnership (TPP), renegotiate the North American Free Trade Agreement (NAFTA), and levy tariffs and punitive duties on foreign goods in the American marketplace under a ‘Buy American, Hire American’ policy. While most campaign promises will need to jump through the various hurdles posed by congress, actions on trade are available to President Trump that do not require the involvement of congress. The President is wasting no time in pushing forward the means to establish his America First Policy, already withdrawing from the TPP and commencing NAFTA renegotiations within his first week in office.

To achieve these goals as part of the Administration’s priorities for the first 100 days in office, it has specifically proposed to:

  1. Strike down or renegotiate a number of free-trade agreements
  2. Penalize companies using non-U.S. labor to manufacture goods
  3. Provide incentives for companies manufacturing goods in the U.S.
  4. Place tariffs on goods not manufactured in the U.S.

 

What Does Buy American, Hire American Mean?

There are existing laws that have previously been used to implement policy objectives of this nature: ‘Buy American’ laws (U.S. preference) and Country of Origin Labeling laws (forced disclosure of non-U.S. origin).

While there’s no single ‘Buy American’ legislation, there are multiple requirements affecting a range of procurement activities including the Buy American Act, the Trade Agreement Act, the Recovery Act, the Berry Amendment and many more. These laws give preference to companies purchasing goods from U.S. manufacturers.

If the President’s Buy American claims are referencing these laws, manufacturers should reference the Buy American Act’s two-part test on Defense contractors as an example of emerging due diligence requirements. This test stipulates that (1) an end product should be manufactured in the U.S. and (2) more than 50 percent of the total cost of all components must also be manufactured in the U.S.

The implication of this regulatory shift is this: industry will need to adapt to this new reality to avoid tariffs and remain compliant with U.S. trade rules. To do so, companies will need to survey their supply chains to obtain Country of Origin (COO) data. This survey involves a few key steps:

  1. Survey the entire in-scope supply chain
  2. Place a value against the sourced parts
  3. Attach the survey results to parts in the Bill of Materials (BoM)
  4. Calculate the percentage of American-made products, then claim (a) domestic end product, (b) foreign product or (c) exemption status
  5. Pay the relevant tariffs and/or penalties that may be associated with that status

 


Want to learn more about how changes to the U.S. regulatory landscape could affect your business? Download our free webinar ‘Mapping the U.S. Regulatory Landscape’ here.


 

‘COOL’ and Supply Chain Surveying

In some cases, Country of Origin Labeling (COOL) is also required as part of the sale of products in U.S. markets, putting additional obligations on manufacturers and retailers. In these instances, companies in scope must survey their supply chain to obtain COO Certificates and mark their product accordingly to show country of origin information. At the time of import, the company must have supplier documentation available to demonstrate how they have determined the correct country of origin and that adequate due diligence has been performed in this process.

The Trump Administration’s commitment to enforce ‘Buy American, Hire American’ policies will require manufacturers to critically assess how their globalized supply chains and bottom lines will be affected. At the very least, they will be forced to direct more resources toward supply chain auditing and data collection to achieve and maintain compliance with this new priority.

 

Global Protectionism on the Rise

As uncertain as these new times may seem, the economic and political protectionism at the heart of the new administration’s America First Policy may be the new normal. In the UK, for example, protectionism has also been a defining feature of domestic and regional politics, as expressed through the Brexit events. This trend has also been emerging as a call to action among some other G-20 countries.

What will protectionism mean for global manufacturing companies and their supply chains? No one can predict which regulations will come to pass in the coming years. However, with history as our guide, it is unlikely there will be large scale reductions in the number and extent of trade and manufacturing regulations in force. Rather, existing domestic procurement laws that align with political objectives will likely garner newfound attention and new laws will arise that place increased emphasis on global supply chain transparency and fair labor.

 

Your Supply Chain in the New Era

In the context of these multiple unknowns for manufacturers, we can be sure of one thing: strong, sustainable supply chain management in a volatile trade environment requires flexibility, foresight and continuous contingency planning. How can your company exhibit these qualities and stay ahead of the pack? Setting up scalable supply chain surveying and analysis systems to help you meet these unknowns at every turn is essential. So, too, is having industry experts on your team to keep you up-to-date about emergent trends in the compliance and regulatory field.

This is far more achievable when you have compliance partners like Assent on your side. Get in touch today to find out how the Assent Compliance Platform help. Contact us at info@assentcompliance.com.  

For more information on what the Trump Administration’s ‘Buy American, Hire American’ policies could mean for your supply chain, and to find out more about how you can prepare, download our free webinar: ‘Mapping the U.S. Regulatory Landscape’.

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