On April 18, 2017, President Trump signed an Executive Order (Order) that appears designed to strengthen domestic preference procurement requirements and to make changes to the H-1B visa program for the benefit of U.S. workers.
The Order may be of particular interest to pharmaceutical and medical device manufacturers because of its potential impact on Federal Supply Schedule contracts, which are typically subject to the Trade Agreements Act (TAA), 19 U.S.C. § 2501 et seq, or other federal government contracts containing Buy American or TAA provisions. For example, in contracts for which the TAA applies, the government is generally prohibited from purchasing products manufactured in countries that are not TAA-designated countries, including China and India. To determine whether a product is manufactured in a designated country, the government applies a “substantial transformation” test, which finds such a substantial transformation if the article is transformed into a new and different article of commerce that has a distinct name, character, or use when compared to the original article.
The key elements of the Buy American Provisions in the Order include:
- All “Buy American Laws” which are defined to include “all statutes, regulations, rules and Executive Orders … that require, or provide a preference for, the purchase or acquisition of goods, products, or materials produced in the United States, including manufactured goods.”
- Potential increased scrutiny on compliance with domestic preference regimes including the TAA.
- Potential increased scrutiny on buy national requirements during contract negotiation.
- Potential narrowing of the current “substantial transformation” test under the TAA to restrict those products that qualify as manufactured in the United States or in a designated country.
- Direction for agencies to assess the impact of the U.S. free trade agreement and the WTO Agreement on Government Procurement commitments could indicate an interest on the part of the Administration to rescind the U.S.’s accession to such agreements. However, such a step would be radical and could have significant international ramifications.
The Order, while not imposing any new restrictions, calls for agencies to “suggest reforms to help ensure that H-1B visas are awarded to the most-skilled or highest-paid petition beneficiaries.”
Sidley Austin LLP provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship.
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