Request By:
Vic Hellard, Jr.
Director, Legislative Research Commission
Capitol Building
Frankfort, Kentucky 40601
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Paul E. Reilender, Jr., Assistant Attorney General
You requested an opinion from this office regarding the constitutionality of Sections 1 and 2 of BR 22 which was prefiled on September 13, 1982. These two sections of BR 22 deal with requiring "purchasers", as defined in Section 1 of the Act, to buy "American products", as defined in Section 2.
A question closely related to the one you present was addressed by this office in an earlier opinion written by Assistant Deputy Attorney General Charles W. Runyan. I am enclosing a copy of that opinion, 81-34, for your reference.
OAG 81-34 dealt with the Louisville and Jefferson County Metropolitan Sewer District (MSD). The question presented in that opinion was whether the MSD could include in its purchasing contracts a "Buy American" clause. The conclusion reached in that opinion was that this office knew of no Kentucky constitutional or statutory provision which would prohibit such a clause. The same reasoning would also apply to proposed legislation in question here.
However, it is also necessary to review the federal constitutionality of BR 22 as it relates to the Commerce Clause (Art. I Sec. 8 cl. 3) and the Supremacy Clause (Art. VI cl. 2) of the United States Constitution. Generally, such legislation has been held not to run afoul of the Commerce Clause and the federal preemption in that field. American Institute for Imported Steel Inc. v Erie County, N.Y., 297 NYS 2d 602, 58 Misc. 2d 1059, reversed on other grounds 302 NYS 2d 61, 32 A 2d 231 (1968); K.S.B. Tech Sales v North Jersey, Etc., N.J., 381 A 2d 774 (1977). The challenges to such "Buy American" legislation have arisen under the Supremacy Clause of the United States Constitution and the General Agreement on Tariffs and Trade (GATT).
It is well settled that a treaty, a manifestation of the federal foreign affairs power, stands on the same footing of supremacy as the constitution and federal laws. United States v Schooner Peggy, 5 U.S. (1 Cranch.) 103, 2 L Ed 49 (1801); Bacardi Corp. v Domenech, 311 U.S. 150, 61 S Ct 219, 85 L Ed 98 (1940). Therefore, GATT has the same force and effect as the constitution and federal statutory law, U.S. v Belmont, 301 U.S. 324 (1937).
Part II, Art. III, par. 2 of the 1947 General Agreement on Tariffs and Trade provides that products imported into the territory of a signatory country from another "shall be accorded treatment no less favorable than that accorded to like products of national origin in respect to all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution, or use." The treaty does contain an exception dealing with the use of imported materials by government agencies in paragraph 5 of the same article. It provides:
"The provision of this Article shall not apply to the procurement by governmental agencies of products purchased for governmental purposes and not for resale or use in the production of goods for sale . . . ." (Emphasis added).
This exemption indicates that the federal government would tolerate such a "Buy American" statute as not being inconsistent with national policy regarding foreign trade. It must be further noted that the exemption applies only to purchases made in pursuit of governmental purposes. The exemption does not apply to purchases made by government agencies for use in proprietary matters or functions. It is likely that litigation could arise challenging purchases made pursuant to BR 22 arguing that such purchases were made for use in a proprietary as opposed to a governmental function. For example see K.S.B. Tech Sales v North Jersey, Etc, N.J., 376 A 2d 960 (1977).
In summary, absent conflicting congressional or executive action BR 22 does not conflict with the Commerce Clause of the United States Constitution. As the Supreme Court stated Hughes v Alexandria Scrap Corp, 426 US 794 (1976) at 810:
"Nothing in the purposes animating the Commerce Clause forbids a state, in the absence of Congressional action, from participating in the market and exercising the right to favor its own citizens over others."
With respect to the Supremacy Clause and GATT, purchases made pursuant to BR 22 could run afoul of the governmental exemption in GATT if made for a proprietary as opposed to a governmental purpose. If such purchases are challenged as proprietary, the issue would ultimately have to be resolved in the courts.