Investing in the Home Team: Continued Effort to Strengthen American Infrastructure and Manufacturing

This post was written by Melissa E. Beras.

On March 13, 2012, the Senate (by voice vote) unanimously passed an amendment to the $109 billion Senate Transportation bill designed to strengthen “Buy America” preferences. The legislation, introduced by Sens. Sherrod Brown (D-Ohio) and Jeff Merkley (D-Ore.), improves transparency and reporting of proposed “Buy America” waivers by requiring the Department of Transportation to provide notification on a public website and a 15-day comment period before such waivers are granted. The measure also ensures an annual accounting of federal funds used to purchase foreign-produced iron and steel, and explicitly requires that “Buy America” preferences be carried out in “a manner consistent with United States obligations under relevant international agreements.”

In addition, the measure ensures that public works projects receiving federal aid cannot be “segmented” to evade “Buy America” preferences. According to a press release from Sen. Brown’s office, “segmentation” has been one of the “most egregious examples” of practices used to circumvent “Buy America” preferences. Segmentation occurs when an infrastructure project is split into various contracts so that contracts under the project that plan to use foreign iron, steel, and manufactured goods do not receive federal funding. The press release states that segmentation allowed for Chinese-made steel to be used during the construction of the new Oakland, California Bay Bridge.

Furthermore, on Friday, March 16, Sens. Brown, Debbie Stabenow (D-Mich.), and Bob Casey (D-Pa.) led 188 members of Congress in an effort to urge President Obama to address China’s unfair practices in the auto parts sector. Members of both the House and Senate, including all the Democratic members of the House Ways and Means Committee, expressed their concerns in a letter that encourages President Obama to utilize the newly created Interagency Trade Enforcement Center (“ITEC”) to address such practices. President Obama established the ITEC February 28, 2012, to combat other nations’ violations of trade rules.

Referencing figures from a report released by the Economic Policy Institute (“EPI”) January 31, 2012, the lawmakers argue that 75 percent of jobs in the automotive sector are in auto parts, and that up to 1.6 million U.S. jobs could be at risk if China’s practices are not curtailed. The letter also claims that because of China’s practices, China has increased the number of auto parts it imports into the United States by 900 percent since 2000.

Global Supply Chain: Human Trafficking, Sourcing, and Transparency - Do Your Suppliers Know What You Expect From Them? Do You?

This post was written by James P. Gallatin, Jr.

Companies with global supply chains are rapidly imposing detailed standards for their suppliers that go way beyond the traditional performance and quality specifications. Until recently, the most obvious categories of concerns for global manufacturers were rules of origin for products and parts for purposes of customs valuations and treaties, heightened by protectionist legislation such as that recently introduced in the U.S. Congress regarding steel. Now come laws regarding the use of conflict minerals and the state of California (where else?) has gotten into the action to require the disclosure of how companies act to prevent human trafficking in their supply chain . And Apple is grappling publicly with allegations regarding its China-based manufacturing.

To minimize legal challenges and, more importantly, brand damage, companies with global supply chains are moving rapidly to address a broad range of issues with every level of those chains. They are imposing detailed and public supplier standards for workers' health and safety, wages and benefits, and the use of child labor, as well as prohibitions against the use of coercion and discipline to maintain a workforce, and prohibitions against forced sex. Two examples of companies that have imposed such standards are Hewlett Packard, the U.S.-based manufacturer of IT products, and LEGO, the Danish manufacturer of children's toys and games. Their standards and practices reflect the dramatic impact that recent laws and social norms are having on such diverse global enterprises. 

But standards are not enough. Companies with global supply chains are also moving rapidly to enforce these standards through unannounced audits and inspections, and by reviewing facilities, inspecting records, and interviewing current and former employees. They are using internal or third-party resources, and are cooperating with local governments, NGOs, and international standards organization. Where they find noncompliance, they are taking action under their agreements. Many companies are still trying to figure out where their products are actually being made this month. They are falling behind of today's norms.

Senators Believe that Steel for DOD Should be 'Made in America'

This post was written by Melissa E. Beras.

On Thursday, February 9, Sen. Sherrod Brown (D-Ohio) introduced the United States Steel and Security Act, along with Sens. Chuck Schumer (D-N.Y.), Kirsten Gillibrand (D-N.Y.), Amy Klobuchar (D Minn.), Robert P. Casey Jr. (D-Pa.), and Al Franken (D-Minn.). The legislation would reinstate the requirement that armor steel plate purchased by the U.S. military be 100 percent both melted and finished in the United States, reversing a 2009 decision by the U.S. Department of Defense (DOD) that allowed the military to purchase steel that had been melted in foreign countries. Armor steel plate is used by the military in vehicles, tanks, and other equipment.

The DOD’s 2009 decision was made in the midst of the wars in Iraq and Afghanistan, when the demand for steel was especially high. The final rule, published by DOD July 29, 2009, defined the word "produced" as it applied to armor steel plate under the Special Metals Amendment to include simple finishing processes. This change in definition allowed armor steel plate melted in foreign countries, including Russia and China, to be deemed "produced domestically" if it was subsequently subject to simple finishing processes in the United States. The decision reversed more than 35 years of legal interpretation and administrative practice.

After inquiries questioning the DOD on its steel purchasing standards, the National Defense Authorization Act for fiscal year 2011 included a provision requiring a review of the existing regulation to ensure the definition was consistent with congressional intent. The review was required to be completed within 270 days of enactment of the law, or early October 2011. On July 25, 2011, DOD published its request for comment, and the deadline for public comment was September 8, 2011. DOD has still yet to finalize its review.

On September 28, 2011, Sen. Brown and others sent a letter to Defense Undersecretary Ashton Carter, urging him to revise the Department’s requirements on armor steel plate. During consideration of the National Defense Authorization Act in December 2011, Brown and Senate Armed Services Committee Chairman Carl Levin (D-Mich.) called for the DOD to expedite its review of this issue. The Senators hope that the change will create jobs by providing a boost to the domestic steel industry.