Buying American: Protecting U.S. Manufacturing Through the Berry and Kissell Amendments
Released: 2017-05-18T00:00:00

Introduction

Congress has passed several laws requiring that goods purchased by federal agencies be produced in the United States. Among these are two separate but closely related laws applying to national security agencies. The Berry Amendment covers direct Department of Defense (DOD) purchases of textiles, apparel, footwear, food, and hand or measuring tools. The Kissell Amendment is more limited, applying to textiles, apparel, and footwear procured by certain Department of Homeland Security (DHS) agencies. Under these two laws, the purchased items must be 100% domestic in origin, unless exemptions laid out in the laws apply.

The two laws are controversial. Proponents argue the amendments are important to the U.S. economy by helping to preserve the U.S. industrial base and creating manufacturing jobs for American workers. They also claim domestic preference laws may lessen dependence on foreign sources for certain critical U.S. military and nonmilitary needs, and that these laws encourage some foreign manufacturers to invest within the United States so that their products can be sold to the U.S. government. On the other hand, opponents believe the laws give monopolies to certain companies, raise the government's procurement costs, and fail to fully utilize the international supply chains that many U.S. manufacturers rely on to meet their production needs.

Berry Amendment

The Berry Amendment (10 U.S.C. §2533a) is the popular name of a 1941 statute enacted as part of the Fifth Supplemental National Defense Appropriations Act (P.L. 77-29). It has been amended numerous times. It became a permanent part of the U.S. Code when it was codified by the FY2002 National Defense Authorization Act ( P.L. 107-107 ). Proposals to alter the Berry Amendment typically are advanced during consideration of defense appropriations acts and the National Defense Authorization Act. DOD implements the Berry Amendment through its Defense Federal Acquisition Regulation Supplement (DFARS).

The Berry Amendment specifies that affected products purchased directly by DOD must be "entirely grown, reprocessed, reused, or produced in the United States." Unless DOD grants a waiver because domestic firms do not make the product or because other exceptions in the law are met, the entire production process of an affected product, from the production of raw materials to the manufacture of all components to final assembly, must be performed in the United States. As an example, when DOD purchases a military uniform, it must be sewn in the United States using fabric, thread, buttons, and zippers made in the United States from raw materials of U.S. origin.

The Berry Amendment mandates a much higher level of domestic content than the Buy American Act of 1933, which generally governs the procurements of other federal agencies. Under the Buy American Act, the final product must be mined, produced, or manufactured in the United States, and if manufactured, either at least 50% of the cost of its components, by value, must be manufactured in the United States, or the end product must be a commercially available off-the-shelf item.

International Obligations

The United States has made binding commitments related to the government procurement market under the World Trade Organization Agreement on Government Procurement (WTO GPA). Of the more than 45 countries that are parties to this arrangement, each has agreed to provide producers in other signatory countries access to its national government procurement markets. This can result in certain "foreign" products being treated as "domestic" ones in specific procurements. However, the agreement expressly does not apply to DOD procurements involving textiles, clothing, food, and hand or measuring tools. This Berry Amendment restriction also applies to most U.S. free-trade agreements, including the North American Free Trade Agreement and the Dominican Republic-Central America Free Trade Agreement, as well as to bilateral free-trade agreements with Australia, Morocco, Peru, South Korea, and Colombia.

Kissell Amendment

A second law, sometimes referred to as the Kissell Amendment (6 U.S.C. §453b), is modeled on, but not identical to, the Berry Amendment. The Kissell Amendment was enacted as Section 604 of the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). It applies to the Coast Guard and the Transportation Security Administration (TSA), both of which are within DHS. It is implemented through the Homeland Security Acquisition Regulation, which imposes domestic content restrictions on certain clothing, textile, and footwear products acquired by particular DHS agencies when an item is directly related to national security.

In introducing the amendment, Representative Lawrence Kissell noted he was particularly interested in supporting the domestic textile industry. Thus, the narrowly defined purpose of the Kissell Amendment is to ensure that DHS purchases of textile, apparel, and footwear products are wholly produced in the United States. The law covers clothi ng (including materials and components), canvas or textile products, natural and synthetic fabrics, individual equipment items, and footwear products. If these items are related to "the national security interests of the United States," they must be "domestically grown, reprocessed, reused, or produced in the United States" to the greatest extent possible. Unlike the Berry Amendment, the Kissell Amendment does not apply to food or to hand or measuring tools.

International Obligations

Although the Kissell Amendment as enacted applies to all agencies of DHS, in practice its restrictions apply only to the Coast Guard and TSA. The reason for this is that, prior to the Kissell Amendment's passage, the United States had entered into commitments under various trade agreements to open U.S. government procurement to imported goods. However, the WTO GPA entitles the United States to exempt agencies critical to national security from its international procurement obligations. The United States has applied this exemption to those two agencies, so the Kissell Amendment governs their procurement.

Other DHS agencies, such as Customs and Border Protection, Immigration and Customs Enforcement, the Federal Emergency Management Agency, and the Secret Service are not covered by the exemption, and the Kissell Amendment therefore does not apply. Like many other agencies, these agencies' procurement is subject to the less stringent Buy American Act. However, under the Trade Agreements Act of 1979, if a procurement is covered under a trade agreement, then Buy American Act restrictions are waived. Thus, DHS can purchase textile and apparel products from more than 100 countries if certain conditions are met.

The United States has also entered into commitments under various free-trade agreements to open U.S. government procurement to imported goods. As a result of these trade agreements, manufacturers in Mexico, Canada, and Chile are treated as "American" sources under the Kissell Amendment.

Exceptions to the Berry and Kissell Requirements

The Berry Amendment includes several exemptions, which may apply at the discretion of DOD. For example, DOD may buy covered items from non-U.S. sources when

products are unavailable from American manufacturers at satisfactory quality and in sufficient quantity at market prices; items are used in support of combat operations or contingency operations; products are purchased by vessels in foreign waters (e.g., a Navy ship is docked overseas and the crew needs to purchase textile, clothing, or footwear items); products contain noncompliant fibers, if the value of those fibers is not greater than 10% of the product's total price; items are for emergency acquisitions; products are intended for resale at retail stores such as military commissaries or post exchanges; or the purchase is part of a contract whose value is below the Simplified Acquisition Threshold, generally $150,000, beneath which certain federal procurement regulations do not apply.

Kissell Amendment exemptions are often the same as those in the Berry Amendment, such as purchases beneath the Simplified Acquisition Threshold. But there are also some notable differences. For example, the Kissell Amendment has "national security" limiting language that is not included in the Berry Amendment. This restricts Kissell Amendment coverage to purchases intended for or used by DHS to protect against internal or external threats to the United States. Thus, if an item, such as curtains for a DHS office, is not related to activities to protect the United States from internal or external national security threats, its procurement most likely would not be subject to the Kissell Amendment.

Appendix A shows the differences between the Berry Amendment, the Kissell Amendment, and the Buy American Act.

The Berry and Kissell Amendments and Domestic Manufacturing

Sales to DOD in the four Berry-applicable product categories totaled $2.4 billion in FY2016 (see Figure 1 ). DOD expenditures on Berry Amendment products accounted for roughly 1% of the department's spending on products and services in FY2016, according to figures from the Federal Procurement Data System-Next Generation (FPDS-NG).

One reason for the drop in spending on Berry-related products in recent years is the decrease in Armed Forces end strength. The number of active-duty personnel fell to 1.38 million in 2016 from 1.51 million in 2010, when the U.S. military was more actively engaged in Iraq and Afghanistan. If there is a higher level of defense spending in coming years, this could result in increased DOD demand for Berry-applicable products.

In FY2016, the Coast Guard and TSA combined accounted for more than $30 million in procurement obligations for Kissell items. Most of this amount involves uniforms. TSA provides 14 different uniform items to new hires.

Textiles and Apparel

Under the Berry and Kissell Amendments, all covered textile and apparel items must be manufactured in the United States from domestic components. This has created niche markets for domestic producers. Figure 2 provides a graphic depiction of the textile and apparel production steps affected by these laws.

DOD spent approximately $1.6 billion on Berry-compliant purchases of textiles and apparel in FY2016, and DHS purchases of apparel under the Kissell Amendment came to more than $30 million. Purchases subject to the Berry and Kissell Amendments represented around 2% of the $68 billion of textile and apparel shipments from U.S. factories in 2016.

In FY2016, the top apparel products consumed by DOD were special-purpose clothing, personal armor, individual equipment, and footwear. Among the large private contractors benefiting from the Berry Amendment market were American Apparel, a producer of military uniforms, in Alabama; Ceradyne, a major supplier of military body armor, in California; Campbellsville Apparel, a large supplier of undergarments to the military, in Kentucky; and contractors that sell textile fabrics to DOD, such as the International Textile Group's Burlington Industries of North Carolina.

Outside the mainland United States, Puerto Rico is the largest source of military apparel items. Several large private suppliers operate Berry-compliant manufacturing facilities there, including Propper International, M&M Manufacturing, and Bluewater Defense. Government supply sources, including those that operate under the AbilityOne program, such as the National Industries for the Blind, the Travis Association of the Blind, and Goodwill Industries, are also significant suppliers of apparel for the military market.

Federal Prison Industries (FPI), also known as UNICOR, delivers prison-manufactured apparel compliant with the Berry Act. FPDS reports that action obligations of clothing from UNICOR to the Department of Defense totaled nearly $100 million in FY2016. As of September 30, 2016, 18 U.S. penitentiaries and federal correctional institutions produced clothes and textiles, including facilities in Atlanta, GA; Beaumont, TX; Jesup, GA; Talladega, AL; and Butner, NC. FPI/UNICOR buys raw materials and component parts from private industry.

DOD's awarding of clothing contracts to this government-owned supplier has proven controversial in both Congress and the apparel industry. Critics have voiced concern that prison industrial programs hurt private industry and provide jobs for inmates rather than residents who are not incarcerated. Among other issues, critics have challenged FPI/UNICOR's mandatory source provision, which requires DOD to purchase from FPI/UNICOR factories if they can provide the desired product within the required time frame and at a competitive price. The mandatory source requirement is waived when the prison share of federal purchases of a product rises above 5% of total DOD purchases of that product. In FY2016, DOD accounted for more than 90% of FPI/UNICOR's textile and apparel sales. In that year, FPI/UNICOR also sold about $250,000 in apparel to the U.S. Coast Guard.

Over the years, Congress has considered various bills to eliminate FPI's mandatory source clause and require FPI/UNICOR to compete for federal contracts. For example, in the 114 th Congress, the Federal Prison Industries Competition in Contracting Act of 2015 ( H.R. 1699 ) would have eliminated FPI's no-bid contract status.

TSA's biggest supplier of apparel under the Kissell Amendment in FY2016 was VF Imagewear, a subsidiary of VF Corporation, and owner of brands such as Lee Brand and Wrangler Hero. DHS accounts for around 10% of VF's sales. The company produces clothes in a number of U.S. locations.

Exemptions

Congress regularly considers exemptions to the Berry Amendment. For instance, over the years, lawmakers have passed legislation granting permanent waivers for flame-resistant rayon fabrics used in standard ground combat uniforms. A 1999 waiver for para-aramid fibers and yarns used as a principal fiber in antiballistic body armor, taking the form of a grant of authority to DOD to procure articles containing para-aramids from foreign sources, has since been implemented in the DFARS as a Berry Amendment exception.

Economic Effects

In the commercial market, apparel firms have been outsourcing the labor-intensive manufacturing process to low-wage countries for many years, often constructing elaborate supply chains that allow inputs from multiple countries to be combined into a single finished product. As shown in Figure 3 , direct employment in apparel manufacturing dropped 85% from 1990 to 2016, from about 900,000 jobs to roughly 130,000 jobs. In the more highly automated textile manufacturing industry, employment fell from 700,000 in 1990 to about 230,000 in 2016. Many of the remaining textile industry workers are involved in producing fabrics for industrial applications, such as conveyor belts and automotive floor coverings, rather than for apparel.

The Berry and Kissell Amendments require apparel manufacturers to construct supply chains separate from those used in commercial apparel production, relying exclusively on domestic manufacturers of components such as buttons and zippers. Because these producers lack scale and face little competition in the market for 100% U.S.-made products, they may have cost structures that make it difficult to compete in the commercial apparel market.

Notwithstanding the protection offered by the Berry Amendment and, more recently, the Kissell Amendment, manufacturers have found it difficult to sustain domestic production of many types of textiles and apparel. For example, six years after opening a $500 million factory, DuPont recently announced plans to shutter its South Carolina Kevlar para-aramid production plant, which manufactures a fiber used in bulletproof vests and combat helmets for the military. DuPont cited uncertainty over DOD orders for para-aramid fibers as one reason for the plant closure, along with a lack of commercial demand.

The Bureau of Industry and Security at the Department of Commerce is updating its 2003 assessment of the U.S. textile, apparel, and footwear industries. The updated assessment, which the bureau expects to finish in summer 2017, is expected to address the effectiveness of the Berry and Kissell Amendments and other domestic-source laws.

Footwear

About 99% of all footwear sold in the United States is imported, according to the Footwear Distributors and Retailers of America, the main trade group representing solely the footwear industry. The United States maintains a small number of firms manufacturing nonorthopedic footwear, including boots and other types of footwear for the military. These firms employed about 10,800 workers in 2015. DOD's direct purchases of footwear, such as combat boots and military dress shoes, totaled about $157 million in FY2015. This is equivalent to roughly 9% of the sales of U.S. footwear manufacturers, implying that the domestic-purchase requirement protected approximately 1,000 jobs. Leading DOD footwear contractors include McRae, Rocky Brands, and Wolverine.

In the 2017 National Defense Authorization Act, Congress extended the Berry Amendment to require the military services to provide recruits with 100% U.S.-made running shoes. Previously, DOD provided vouchers to recruits to purchase athletic footwear, which did not have to be domestic in origin. The new requirement is to be implemented beginning on October 1, 2018, and may create a new market for athletic shoes manufactured domestically.

As with other types of footwear, assembling a running shoe may require more than a dozen parts (see Figure 4 ). New Balance, a maker of running shoes, reportedly manufactures about 25% of its domestically sold products in Massachusetts and Maine, but imports the majority of its inventory from China and Vietnam. Currently, a "Made in the USA" New Balance sneaker can include up to 30% foreign content, which would not meet the 100% U.S.-made requirement of the Berry Amendment. However, the company says it will be able to manufacture a wholly American-made athletic shoe for the military. Wolverine Worldwide, a Michigan-based footwear firm, manufactures some shoes in the United States, including combat boots and military dress shoes, and the rest in Asia. Nike, which sources virtually all of its footwear from independent manufacturers overseas, had opposed a strict American-made athletic shoe purchase policy for the military. Adidas, another major athletic shoe brand, has announced that it plans to open a factory in the United States in 2017 to produce U.S.-made running shoes. Adidas's so-called "speedfactory" would be largely operated by robots.

Food

Military food items, also known as subsistence items, are purchased, with few exceptions, through the Defense Logistics Agency (DLA) Troop Support Subsistence Directorate in Philadelphia, PA, which serves as the operational manager for all food operations. Just as with textiles, apparel, and footwear, DLA must buy food items in accordance with the provisions of the Berry Amendment, generally requiring food served to U.S.-based troops be of wholly domestic origin, with certain allowable exemptions and waivers. The Kissell Amendment contains no provisions related to food products.

Food products were the second-largest share of DOD's contract obligations subject to Berry Amendment requirements, at more than $655 million in sales in FY2016. These sales represented slightly more than 1% of overall domestic food, beverage, and tobacco manufacturing shipments that year.

Most packaged, nonperishable food items are purchased through DLA's subsistence prime vendor program. Current participants include about 50 commercial food distributors, ranging from large companies such as U.S. Foods, Sysco, and Labatt Food Service to much smaller companies. DLA buys U.S.-origin food products from manufacturers such as Kraft Heinz, Nestle, General Mills, Tyson Foods, ConAgra, and Campbell Soup, which then ship the purchases to a prime vendor for delivery to military dining facilities and other locations. DOD also buys some unique and perishable items directly from producers.

Meals ready-to-eat (MREs) are a major share of food sourced for DOD under the Berry Amendment. AmeriQual, SoPakCo, and Wornick are the three main companies that supply MREs to the military, with DOD sales of more than $300 million in FY2016. Combined, the three companies employ more than 1,600 people. For AmeriQual, sales of MREs to the U.S. military account for approximately 85% of revenue.

Under Berry Amendment requirements, DOD, with certain exceptions, must purchase food and ration kits for the military services from sources that manufacture, grow, or process food in the United States. Meeting this standard is generally easier with food than other manufactured products because there is a large domestic agricultural sector that supplies the overwhelming majority of food purchased by U.S. consumers. The food industry's output contains a larger share of domestic content than the output of any other manufacturing industry.

Affecting the purchase of food under the Berry Amendment are certain distinctions between food types and considerations of where the food was grown, caught, and/or harvested. For example, DOD interprets the Berry Amendment to provide that if a food item is processed in the United States, it may contain food grown or harvested in other countries. Thus, DOD may buy corn canned in the United States even if the corn was grown abroad. The same logic applies to many other items, such as potato chips, boxed cereals, and juices; as long as these items are processed in the United States, they are deemed compliant with the Berry Amendment.

The Federal Acquisition Regulations provide exemptions for a list of items that are generally not available from U.S. growers, such as bananas, capers, cashew nuts, coffee, cocoa beans, olive oil, bulk spices and herbs, raw sugar, tea in bulk, and vanilla beans. In addition, in 2008, the Under Secretary of Defense for Acquisitions, Technology, and Logistics issued a Domestic Non-Availability Determination affecting seasonal fresh fruits and vegetables, which allows DOD to purchase fruits and vegetables from foreign producers during off-season. Previous Congresses have considered amending the Berry Amendment to permit the purchase of fresh fruits and vegetables from all sources.

The most restrictive food-related provisions in the Berry Amendment pertain to fish, shellfish, and seafood. These food items must be taken from the sea in U.S.-flag vessels or caught in U.S. waters, and must be processed in the United States or on a U.S.-flag ship. The rule applies to both fresh and frozen products whether sold whole, in parts, or as fillets. American Samoa's tuna fishing and processing industry, which comprises the majority of private-sector employment in this unincorporated territory of the United States, has benefited from the domestic preference provisions for food items in the Berry Amendment. In recent years, however, tuna companies, such as Chicken of the Sea, have eliminated or cut back operations in American Samoa, reportedly due to an increase in the minimum wage there.

Food procurement for places such as Iraq and Afghanistan has been excluded from the Berry Amendment due to operational considerations, but most nonperishable food is still acquired from U.S. manufacturers. Food sold in military commissaries and post exchanges is explicitly excluded from the Berry Amendment requirements by law.

Hand or Measuring Tools

Hand or measuring tools such as chisels, files, hammers, pliers, screwdrivers, calipers, and micrometers are specifically indicated as products covered by the Berry Amendment. The amendment requires each individual tool or all the tools within tool sets or kits purchased by DOD be wholly produced in the United States, unless exemptions laid out in the law apply. A hand or measuring tool is defined as wholly U.S.-made if it is assembled in the United States out of components, or otherwise made from raw materials into the finished product. For example, DOD is generally prohibited from buying a wrench not forged in the United States. The Kissell Amendment contains no provision related to hand or measuring tools.

Assuring compliance with the Berry mandate may be complicated, as some sets or kits may consist of thousands of tools. Domestic supply of certain hand or measuring tools may be very limited; according to one estimate, in 2016, imports of hand tools accounted for more than 40% of domestic demand. Suppliers to DOD must provide assurance that all items in a tool or measuring set or kit are compliant with the Berry Amendment.

Hand or measuring tools account for a relatively small share of DOD's total Berry-applicable contract procurement obligations, worth about $100 million in FY2016. Leading distributors and manufacturers of hand or measuring tools and equipment to DOD are Federal Resources Supply, Snap-On, and Kipper Tool.

Because commercial demand for hand or measuring tools far outweighs sales to DOD, the law seemingly does little to encourage manufacturers to produce or assemble tools in the United States, or to move the manufacture of tools produced in a foreign country to the United States. According to the federal government, cutlery and hand tool shipments totaled $10.3 billion in 2015, implying that sales to DOD under the Berry Amendment accounted for about 1% of shipments. Thus Berry Amendment purchases may be responsible for roughly 380 of the 38,000 jobs in cutlery and hand tool manufacturing.

Allowable exceptions to the Berry Amendment include a nonavailability waiver if hand or measuring tools are not available domestically. This waiver became a requirement as part of the FY2011 Defense Authorization Act ( P.L. 111-383 ).

Congressional Debate

Proponents of the Berry and Kissell Amendments assert that the laws serve to keep certain U.S. production lines operating. They argue that the U.S. military should not be dependent on foreign sources for critical items, including those covered by the Berry and Kissell Amendments, and that dependence on foreign sources for military and national security items could lead to supply problems during times of war or military mobilization.

Critics of the amendments point out that the laws may raise procurement costs and lengthen delivery times by requiring the purchase of domestic products when less expensive imports are available. They claim that the amendments are inconsistent with modern practices in manufacturing, which often involve supply chains that source components and raw materials from multiple countries, and that domestic purchase requirements may alienate foreign trading partners, thereby potentially provoking retaliation and harming foreign sales.

This controversy notwithstanding, Congress has not considered repeal of the Berry or Kissell Amendments. Legislative action has centered on the scope of the amendments, the requirements for obtaining waivers, and the use of audits to determine the laws' effectiveness.

Changes in Scope

There have been attempts over the years to reduce the scope of the Berry Amendment. For example, lawmakers have offered bills that would have eliminated FPI/UNICOR's federal contract mandate and made changes to the Simplified Acquisition Threshold, such as raising the Berry and Kissell thresholds to $500,000. The higher limit would reduce the number of purchases covered by the Berry and Kissell Amendments, making foreign suppliers eligible to bid on more DOD and DHS procurement contracts. None of these proposals has passed.

In recent Congresses, lawmakers have introduced bills that would have widened the scope of these domestic preference laws. For instance, in the 115 th Congress, the Homeland Production Security Act, H.R. 1811 , would amend the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) to prohibit the use of funds appropriated to DHS for the procurement of uniforms not manufactured in the United States. Such a change would expand the Kissell Amendment to the Customs and Border Patrol, the Secret Service, and Federal Emergency Management Agency (FEMA) of DHS.

Waiver Requirements

According to DLA Troop Support, more than a dozen domestic nonavailability determinations were approved between 2005 and 2015 (see Appendix B for more information about selected determinations). These waivers of Berry Act requirements generally apply only for a specific time period. In some cases, waivers remain in force until a domestic source or a substitute material can be found.

On April 18, 2017, President Donald Trump issued an executive order directing executive branch agencies "to maximize, consistent with law ... the use of goods, products, and materials produced in the United States" and directing them to "minimize the use of waivers, consistent with applicable law." An explicit reference to the Berry Amendment was mentioned in a White House background briefing on the executive order. It is unclear how the executive order will affect DOD and DHS interpretations of waiver requirements under the Berry and Kissell Amendments, respectively.

Audits

Pursuant to the FY2014 National Defense Authorization Act ( P.L. 113-66 ), Congress directed DOD's Office of Inspector General to conduct periodic audits to ensure compliance by the military services with the Berry Amendment and the Buy American Act. Three recent audits found the Navy fully complied with the Berry law in 12 of 23 contracts, the Air Force in 15 of 21 contracts, and the Army in 29 of 33 contracts. In addition, Senator Christopher Murphy has requested the Government Accountability Office (GAO) to investigate U.S. government compliance with the Berry Amendment and the Buy American Act. The committee report on the Senate-reported 2016 DHS appropriations bill ( S. 1619 ) requested that GAO audit DHS's compliance with the Kissell Amendment. This legislation was incorporated in the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). GAO expects to complete its study in 2017.

Appendix A. Comparison of Berry Amendment, Kissell Amendment, and Buy American Act

Appendix B. Selected Berry Amendment Domestic Nonavailability Waivers (DNAD) Since 2005