Problems relating to Trade and Investment on United States

25. Government Procurement
Issue	Issue details	Requests	Reference

(1) Discrimination under Buy American Act on Government Procurement: Domestic vs. Foreign	- The Buy American Provisions for iron and steel, etc. passed the Congress under the American Recovery and Reinvestment Act of 2009 ("Recovery Act"), which compels the use of the U.S. made products relating to the public procurement of iron and steel and other general industrial products. The public work under this Act includes, without limitation, construction, alteration, maintenance or repair of airport, bridge, canal, dam, banks, pipeline, railway, public transportation system, road, tunnel, port, and landing bridge. Circumvention is a matter of concern by non-member countries like PRC, closed out from the WTO GPA membership on steel products. Japan, being a Member State to WTO Government Procurement Agreement (GPA), Japanese Steel Industries have sustained no direct negative interest. However, it remains a matter of concern that indirect damage to the maintenance of the sound international trade environment could result from the circumventing export via third countries by non-GPA Member States such as PRC. - The U.S. gives priority to domestic products in federal procurement under BAA, discriminating foreign products.	- It is requested that the GOU implements The Buy American Provisions in the manner compatible with the WTO GPA. - It is requested that the GOU deregulates its BAA policy of prioritising the domestic products in the U.S.	- The Buy American Act (Federal Law - Obligation to procure the U.S. made parts) - 41 U.S.C. S10a-10d - Federal Acquisition Regulation(FAR) Part25 & DFARS 225.1(Supplies) and DFARS 225.2(Construction) - Compulsory Procurement of the U.S made Parts and Components
	(Action) - In 2002, Kawasaki Heavy Industries, Ltd. Newly established in Lincoln, NE, the latest integrated rail car manufacturing plant (Kawasaki Motors Manufacturing Corp (KMMC)), which has substantially increased the U.S. local contents. In cooperation with many Japanese manufacturers, KMMC manufactures quality rail car with high reliability and safety, and its business grows in the public construction work. (JETRO Business News of 5 March 2012). - In the Japan-U.S. Deregulation Talk, GOJ requested GOU to repeal the Buy American Act concerning the federal government procurement to which application of the WTO Agreement is exempted. GOJ also requested GOU that it will take all necessary measures to establish a foreign-US non-discriminatory policy in procurement by its local governmental agencies. - In October, 2001, during the U.S.-Japan Regulatory Reform Initiative, GOJ requested GOU to take measures as follows under the direction and leadership of the federal government: 1) improvement of double structured regulations, federal vs. state or of varying regulations by each state; 2) express statement of the schedule toward liberalization; 3) review of The Public Utility Holding Company Act (PUHCA); 4) proposal as to the future direction public businesses should take; and 5) establishment of the upper limit price (price cap) in the wholesale market, by reflecting the predictability of enterprises upon direction of the federal government. GOJ thereafter has kept pressing GOU each year for GOU to review the Buy American system at both Federal and State levels to ensure that an equal business opportunity is afforded indiscriminately to both domestic and overseas enterprises. - Effective as of October 1, 2003, contractors wishing to do business with the US Department are mandated to file Central Contractor Registration (CCR) trading partner profiles and to update such information at least once a year. - In December 2004, at the negotiation to widen the scope of application for Agreement on Government Procurement under WTO, GOJ requested GOU to add 13 states that are outside the scope. - In December 2005, in the Japan-U.S. Deregulation Initiative, GOJ requested GOU to ensure that GOU affords the equal business opportunities to foreign industry as it gives to the U.S. industry in respect of the Federal Buy American Act. - On 17 February 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 H.R.1 ("Recovery Act"), otherwise called "Stimulus Plan". This law includes the "Buy American" provision that compels the use of American Iron, Steel, and Manufactured Goods produced in the United States (with local contents of more than 50% where Federal Procurement Regulations apply) in a project for the construction, alteration, maintenance, or repair of a public building or public work employing "the funds appropriated or otherwise made available by this Act". This Buy American provision includes 3-exceptions:-- (i) it would be inconsistent with the public interest; (ii) iron, steel, and the relevant manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; or (iii) inclusion of iron, steel, and manufactured goods produced in the United States will increase the cost of the overall project by more than 25 percent. The head of the department or agency shall publish in the Federal Register a detailed written justification as to why the provision is being waived. It also provides: "This section shall be applied in a manner consistent with United States obligations under international agreements", excluding from the scope of its application, the Member States of WTO Agreement on Government Procurement, the Member States of the FTA's, and such Less Developed Countries (LDC's) as designated by the U.S. Trade Representative. (Ref: the American Recovery and Reinvestment Act of 2009 H.R.1 ("Recovery Act") (http://www.govtrack.us/congress/billtext.xpd?bill=h111-1)) - GOJ at the WTO Government Procurement Committee in February and May 2009 presented: "GOJ will watch GOU's employment of the The Buy American Provisions of the Act," and pointed out in spring 2009 at the Japan-USA Regulatory Reform Initiative, GOU's thorough implementation of the non-discrimination principle domestic vs. foreign in the U.S. Government Procurement and the U.S. review of the protectionist measures including this issue. - On 5 February 2010, the U.S.-Canada Governments mutually signed "Agreement Between GOC and GOU on Government Procurement (Canada-US GPA)": (1) exempting Canadian enterprises from application of "Buy American" provision of the Recovery Act, and (2) permanently liberalising mutually the state/provincial government procurement under the WTO Agreement on Government Procurement (WTO-GP). Furthermore, with coming into effect of Canada-US GPA on 16 February 2010, GOU would amend the Appendix of WTO-GP, deregulating Canadian Enterprises' entry into the government procurement by the 37 states, while excluding Canadian enterprises from application of the Buy American provision to the 7-programmes implemented by the state governments. - On 6 April 2014, amended government procurement agreement came into force. The U.S. newly added 10-Federal Government Agencies to the List of International Government Procurement. - On 4 February 2016, TPP agreement was signed, newly liberalising Tennessee River Regional Development, Bonneville Power Administration, etc.

(2) Exclusion of Non Designate Countries in Government Procurement	- Under Buy American Act provided for in FAR (Federal Acquisition Regulation), its application remains unauthorised to products from highly price competitive States such as PRC, India, Brazil, etc., while some of them, it would appear, are left to discretionary judgement of contract officers. It remains a far cry from flexible implementation. - Due to the exclusion of products manufactured in PRC, participation in government tender is either disallowed or excessively burdensome. - What with the cabinet decision on the three principles on transfer of defense equipment and technology, member firm contemplating development of business destined to the U.S. finds existence of the Buy American Act on Government Procurement which could get in the way of business development hereafter.	- It is requested that GOU repeals or deregulates Buy American Act Provisions (in FAR). - It is requested that the GOU repeals the restrictions as soon as possible. - It is requested that GOU takes step to deregulate or repeal the legislation.	- US General Service Administration
	(Action) - Pursuant to the Trade Act of 1979, the U.S. governmental agencies are not authorized to procure products from countries other than the Member States of WTO Agreement on Government Procurement, NAFTA (Canada/Mexico) and Caribbean countries, except where the required products are not available from the authorized countries, procurement is possible from non-authorized countries. - PRC committed itself to the U.S. that it would start a formal negotiation with a view to ratify WTO Agreement on Government Procurement by 31 December 2007, at the JCCT conference between the U.S. and PRC held in April 2006. - On December 28, 2007, PRC signed and submitted to WTO Secretariat application form to accede to WTO Agreement on Government Procurement. Thus, the official talk on PRC's accession to WTO Agreement on Government Procurement has begun. - On 4 February 2016, 13-Non-Signatories to WTO GPA, including Vietnam, Malaysia, and Australia signed TPP Agreement. Upon its enforcement, access becomes possible to the U.S. Government procurement market.

(3) The U.S. Regulation on Defence Equipment

- The U.S. Registration applicable only to defense equipment exists, deregulation/repeal of which will be requested via Ministry of Defence, and Ministry of Economy, Trade and Industry.
Now, GOJ works toward ratification of G-to-G Agreement with the U.S. on removal of restrictions applicable to defence equipment (while the U.S. has ratified such Agreement with 23-countries centering the EU Member States)

<<BACK