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The myth of ‘Made in the USA’ — and what the federal government is doing about it

Many products that claim to be made in America are actually made from foreign components. New rules aim to change that.

The myth of ‘Made in the USA’ — and what the federal government is doing about it
[Source Photo: Serg_Velusceac/iStock]

Days after taking office in January, President Joe Biden issued an executive order to strengthen of the U.S. government’s “Made in America” rules. These guidelines cover how the federal government uses its immense buying power to give preference to domestic manufacturers of everything federal agencies need, from desk chairs to solar panels. The executive order called on agencies to “close current loopholes in how domestic content is measured and increase domestic content requirements.”

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The subtext is that while many products claim to be made in America, many of their components are not. The executive order wants to make sure that not only is a bureaucrat’s desk chair built in an American factory but so is the foam in its seat and the screws in its arm rest.

To try to ensure more of the products the U.S. government buys are coming from where their manufacturers say, the General Services Administration is launching a new set of rules to require more transparency in how products are made. It’s an effort to stomp out counterfeit items that falsely claim to be made in the United States, and also to encourage domestic manufacturers to fill in supply gaps for products the government wants to buy but can’t source domestically. It’s an effort that could kickstart a new wave of manufacturing in the United States.

“Historically the federal government has spent over half a trillion dollars in procuring goods and services each year,” says Krystal Brumfield, associate administrator of the Office of Government-wide Policy at the GSA. “We’re a unique buyer.”

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The new rules for domestic products and components, which were crafted after Biden’s executive order, give preference to domestic suppliers when the government is issuing purchasing contracts, whether it’s for office equipment or pharmaceuticals. Cognizant that in a globalized world, goods are often produced in multiple countries, the new rules don’t require every part of every product to be made domestically, and they offer waivers in some instances. But gradually, more of the components in products will be required to be made in the United States, and the GSA hopes more foreign-produced goods will get domestic competitors.

“If we’re talking about a chair or some type of office furniture, the way this works is we’re increasing the domestic content required for a supplier to claim that the furniture is truly made in America,” Brumfield says. Those products that meet the standard are given a purchase preference in the GSA’s procurement system, and listed on its database of verified products.

Meeting the standard for the amount of domestically made components in products will become harder. “Right out of the gate it’s 60%,” says Brumfield, and the threshold will rise to 65% within two years. Brumfield says it will eventually go up to 75%, making almost anything bought by the government at least three-quarters domestically produced.

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“This allows businesses time to adjust their supply chains, knowing that they have to report this requirement,” she says. It could also help reduce the amount of counterfeit goods and products falsely claiming to be made in the United States. With manufacturers compelled to report and document the source of their materials in order to have access to government contracts, Brumfield believes bad actors slipping in counterfeit goods will be limited. Manufacturers could lie about where their suppliers are coming from, of course, but the government is hoping its auditing and huge buying power will deter dishonesty. “We provide contracts for billions of dollars of products each year. We have a lot we can leverage so that we’re creating a more conscious consumer through transparency and information,” says Brumfield.

The GSA is also hoping this added transparency will help small businesses see gaps in what the government is able to source domestically. Through a website listing products federal agencies are in the market for, businesses may be able to find new opportunities to address domestic deficiencies in the supply chain. “There are some areas that we know we want to focus on,” Brumfield says. “Pharmaceuticals and areas in healthcare, areas in sustainability as well as in technology, we really want to focus on growing that here in the U.S.”

Smaller businesses may not be jumping into the pharmaceutical big leagues any time soon, but Brumfield says the government’s variety of purchasing needs means that smaller companies can find ways to tap into the government’s growing demand for stuff made in the United States, whether it’s a desk chair or a new vaccine.

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“Our hope is that U.S. companies as well as small businesses will be able to see these opportunities more and more, and that they’ll begin to enter the government marketplace,” Brumfield says. As the threshold for domestic goods rises and more domestic production occurs, the big companies grabbing those lucrative government contracts won’t have to look beyond U.S. borders to make the billions of dollars worth of stuff their country needs.

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