9 June 2009

Confusion reigns over Buy American

The following is excerpted from today's edition of "globeandmail.com".

Coping with the Obama administration's Buy American purchasing rules is bad enough, but now Canadian companies are fighting a ghost.

There's so much confusion about how Washington's nearly $800-billion (U.S.) in stimulus cash can be spent that U.S. distributors and construction companies are making their own rules, and most often buying only U.S.-made supplies.

"Everyone is feeling around in the dark on this," said an executive of one of the largest U.S. mechanical contractors.

"Unless there is a material difference in price, you're going to play it safe."

As a result, Canadian makers of everything from pipes and water pumps to steel beams and office furniture say they are being shut out of markets much wider than what's actually covered by Buy American rules as U.S. customers scramble to prevent "contaminating" their supply chain with ineligible foreign products.

For example, most projects valued at more than $7.4-million appear to be exempt from the Buy American rules. But U.S. construction companies say the language in the stimulus package is vague and unclear. U.S. contractors complain they have tried to get clarification from the U.S. Federal Acquisition Regulator, which sets the rules on all federal contracts, so far without success.

David Fung of the Canadian Manufacturers & Exporters said the chill on foreign purchases is working its way deep into the supply chain.

"Many distributors say they don't want any Canadian-made goods in their warehouses," Mr. Fung said. "They say they can't afford to have Canadian-made products contaminating the supply chain."...

In recent days, Ottawa has convinced the provinces to offer a reciprocity agreement on government purchases that would open up most purchases by state, provincial and local governments to companies on both sides of the border.

Some industry officials, however, are hopeful U.S. government purchasing rules can be amended so that stimulus funding constitutes a federal program, even when state and local governments spend the money. That would give some protection to Canadian suppliers under the North American free-trade agreement.

Meanwhile, the Canadian Manufacturers & Exporters is teaming up with sister groups in the U.S., and even some labour interests, in an effort to get the U.S. government to tone down some aspects of the Buy American initiative....

The dilemma for Canada is that getting a reciprocity deal could take months, if not years. By then, the billions in stimulus money flowing out of Washington will likely be gone. And Canadian officials have yet to formally pitch the idea to the Obama administration.

Federal officials also concede that an easy quick fix, such as an executive order from U.S. President Barack Obama exempting Canadian companies from Buy American restriction, is unlikely. Other countries would demand similar treatment, and there would be opposition in Congress....