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Legal Update

President Trump Signs “Buy American and Hire American” Executive Order

18 April 2017
Mayer Brown Legal Update

On April 18, 2017, at the Snap-On Tools® plant in Kenosha, Wisconsin, US President Donald Trump signed an Executive Order (EO) addressing two aspects of the administration’s policy: protection of US jobs and preference for US-manufactured products or goods.

Hire American

With regard to US jobs, the EO directs the Departments of Labor, Justice, Homeland Security and State to review employment-based foreign worker programs to ensure that the integrity of these programs is restored and that US workers are provided with adequate protections from lower-cost foreign labor. The EO calls for increased scrutiny and reform of existing nonimmigrant worker programs, in particular the H-1B program.

The EO directs the inter-agency group to do the following:

Propose New Rules and Guidance to Supersede Prior Rules and Guidance. The EO requires the inter-agency group to propose new rules and guidance as soon as practicable. The EO focuses on prevention of fraud and abuse to protect the interests of US workers affected by the administration of the immigration system. While the EO states these agency actions must be consistent with applicable law, the express reference to “supersede or revise” previous rules and guidance aligns with prior announcements that companies have abused the visa system and disadvantaged American workers.

Review and Reform the H-1B Visa Program. The EO singles out the H-1B program, requiring the inter-agency group to “suggest reforms to help ensure that H-1B visas are awarded to the most-skilled or highest-paid petition beneficiaries.” Based on the remarks made by the president during the signing of the EO and remarks made at the White House press briefing on April 17, 2017, the reforms are designed to attain the following:

  • Merit-Based Versus Random, Allocation of Annual Visas. H-1B visas are currently awarded by random lottery. The agencies are directed to consider ways to allocate H-1B visas based on merit and to ensure that the beneficiaries of these visas are the best and the brightest, consistent with the intent of the “specialty occupation” visa category.
  • Heightened Wage and Skill Levels to Avoid Undercutting US Jobs and Wages. The president stated that reform is needed to restore a “level playing field” in the job market, which he indicated “has not happened for decades.” In the White House press briefing the day before the EO’s signing, a senior administration official stated that 80 percent of H-1B workers are paid less than the median wage in their fields. The official was quoted as saying, “if you change that current system that awards visas randomly without regard for skill or wage to a skills-based awarding, it makes it extremely difficult to use the visa to replace or undercut American workers because you’re not bringing in workers at beneath the market wage.”

The EO’s establishment of an inter-agency initiative comes on the heels of multiple announcements over the past three weeks by several of these departments about their intended increased oversight of fraud and abuse in the US visa programs, including the H-1B program. For instance, on April 3, 2017, DHS issued a news release titled “Putting American Workers First: USCIS Announces Further Measures to Detect H-1B Visa Fraud and Abuse Agency Creates Avenue for American Workers to Report Abuse,” and the Department of Justice issued a news release titled “Justice Department Cautions Employers Seeking H-1B Visas Not to Discriminate Against U.S. Workers”; and on April 7, 2017, the Department of Labor issued a news release titled “US Department of Labor Announces Plans to Protect American Workers from H-1B Program Discrimination.”

Possible Administrative Actions:

  • The reference in the EO to section 212(a)(5) is likely to prompt a comprehensive review of all the bases on which USCIS issues employment authorization with the intent of reducing the number of employment authorization documents issued annually;
  • USCIS is likely to issue further guidance concerning ineligibility of entry-level positions for H-1B status (going beyond computer programmers);
  • USCIS may extend the moratorium on premium processing of H-1B visas as it revisits skill level issues;
  • In time for next year's cap season, USCIS could establish by rulemaking a minimum salary level for selection of petitions for processing. Such petitions, for example, could be accepted a month earlier, on March 1, at a designated drop box. Petitions with salary offers below the threshold would be subject to a random lottery; and
  • The Department of Labor could, by regulation, revise the calculation of the prevailing wage levels, with the effect of increasing the wages across the levels.

Buy American

Scope. The EO heralds a new emphasis on domestic sourcing, including all existing statutes, regulations, rules and executive orders relating to federal procurement or federal grants that require or provide a preference for goods, products or materials produced in the United States, which the EO collectively refers to as “Buy American laws.” Oddly, the EO does not expressly address services.

Guidance for EO. The EO directs creation of an inter-agency group, led by the secretary of commerce and the director of the Office of Management and Budget and including the Federal Acquisition Regulatory Council (among others), to issue guidance to agencies for complying with the EO within 60 days.

Assessment of Compliance. The EO requires the inter-agency group to assess the monitoring, enforcement, implementation and compliance with regard to Buy American laws, assess the use of waivers based on type and impact on domestic jobs and manufacturing, and develop policies for federally funded projects to maximize the use of US-manufactured products and materials. During this same window, the secretary of commerce and the USTR will assess how Buy American laws impact “all” US free trade agreements and the World Trade Organization Agreement on Government Procurement on the operation of existing Buy American laws, including impacts on domestic procurement preferences.

This emphasis on domestic sourcing may lead to a tightening of the various exceptions and waivers under such laws for products produced overseas and acquired or used in federal contracts or federally funded projects.

Treatment of Waivers. Section 3 of the EO calls for “scrupulous[]” enforcement and compliance with Buy American laws and minimization of the use of waivers, “consistent with applicable law.” Section 4 of the EO provides that to “the extent permitted by law,” public interest waivers should be construed to “ensure maximum utilization” of goods, products and materials manufactured in the United States. The EO also requires consideration of the effect of dumped steel, iron or manufactured goods or the use of “injuriously subsidized steel, iron, or manufactured goods” when granting public interest waivers. (Sec. 4(c).)

Based on the EO, significant changes may be forthcoming in the treatment of foreign goods in federal contracts and federally funded projects, which also may pose significant compliance risks for contractors and suppliers.

View our Meaningful Discussions blog.

Authors

  • David F. Dowd
    T +1 202 263 3378
  • Marcia G. Madsen
    T +1 202 263 3274
  • Elizabeth (Liz) Espín Stern
    T +1 202 263 3825
  • Paul Virtue
    T +1 202 263 3875
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