SETTING THE BENCHMARK

Unpacking Appropriations Law: What Electronics Industry Professionals Need to Know Now

by Jen McAlpine / February 12, 2025

Over the past four years, several pieces of legislation greatly expanded federal spending on infrastructure, high-tech manufacturing, and green energy. This led many electronics OEMs to pursue manufacturing strategies that met Buy America requirements. Now, electronics industry professionals may find themselves navigating complex guidance containing appropriations law terms they never needed to understand previously. If this sounds familiar, this blog article is for you.

President Trump has indicated that he will seek changes to funding levels established in the Inflation Reduction Act (IRA), Infrastructure Investment and Jobs At (IIJA), and the CHIPS and Science Act (CHIPS Act). Our first blog in this series, Buy America Initiatives Likely to Remain a Focus While Federal Spending Priorities Shift, offers insights as to why the expansion of Buy America requirements that took place under these pieces of legislation is unlikely to change.

However, the new administration is likely to seek reductions to the level of funding provided for these programs, including those generating demand for communications, green energy, and other infrastructure systems. For companies predicting market growth for Buy America-compliant systems, understanding what changes are likely and what to watch in Congress can provide critical data for upcoming manufacturing sourcing decisions.

Regardless of the administration's priorities and political challenges, it is important to understand the government's legal options for curtailing spending under federally funded grants and incentive programs. In large measure, the available options depend on whether money has already been "obligated" by an executive agency to a specific purpose (e.g., a grant or financial assistance agreement), so that is where we start below.

Obligated Funds

Businesses relying on existing grants will be most immediately concerned with the security of current funding commitments. While distributed money can generally only be "clawed back" based on recipient misconduct, the government has broad discretion to cancel unearned portions of grants. The primary mechanisms are:

Clawback Risk: Generally, the government can only claw back funds, including those owed on a cost reimbursement basis, where the recipient has failed to comply with its obligations under the terms of a grant award or other binding agreement funded with federal dollars. Therefore, if a grant recipient or sub-recipient has already incurred allowable costs under the award and has not violated any contract terms, the government typically cannot recoup those funds on a unilateral basis. Special rules also govern clawback authority under funds provided in the form of financing payments.

That said, agency officials under the new administration may scrutinize awards made by their predecessors for strict compliance with all terms, particularly if the award falls under a program that does not align with their administration's policy priorities. Such reviews will almost certainly look into whether proposed or delivered products comply with applicable Buy America requirements, so now is a good time to review your company's internal analysis of those matters and make any necessary adjustments to manufacturing and sourcing practices (and make any appropriate disclosures to federal authorities of any past compliance oversights).

Termination of Grants: While pure clawbacks may end up being rare, the government generally has the right to cancel grants for default or for its convenience (i.e., with or without cause). For example, an agency may terminate a grant award if the awardee defaults on its grant obligations or if the government decides that "an award no longer effectuates the program goals or agency priorities." See 2 C.F.R. § 200.340. With the new administration, executive agencies could reexamine existing grants, particularly those tied to clean energy initiatives, infrastructure, and high-tech manufacturing, for alignment with changing priorities. However, the government's right to terminate is not unlimited, and agencies generally may not terminate an agreement in bad faith. Notably, after the 2024 election, the Biden Administration made an expedited push to obligate funds under potentially at-risk programs (e.g., clean energy). Incoming policymakers have indicated that they intend to carefully review these last-minute awards, which could make for an active 2025 in the world of grant terminations. Yet again, compliance with Buy America requirements could feature prominently in these award reviews, and companies would do well to evaluate their compliance with those requirements.

Appropriated but Unobligated Funds

By law, only Congress has the power to authorize the federal government, through executive agencies, to spend money. Congress does so by enacting appropriations legislation, which, once signed into law, assigns money to agencies in accounts that often have broad purposes. Appropriations bills are accompanied by committee reports that provide detailed guidance on how to allocate the funds. While these reports are not legally binding, agencies usually follow Congress's spending guidance. However, there is ongoing debate among politicians, lawyers, and academics about the extent of the President's authority to withhold statutorily appropriated funds. This issue has already become relevant during the first few weeks of the new administration.

Reprogramming: The Executive Branch has the authority to "reprogram" funds between uses within an agency appropriation account, provided the use is not inconsistent with the purpose for which Congress provided the funds unless the authorizing statute imposes added restrictions. Where required, the procedures for requesting approval by a congressional committee would be contained in non-binding committee reports. A key question will be whether the new administration will follow such non-binding guidance if it conflicts with executive funding priorities. During his first term in office, for example, President Trump used reprogramming to finance construction of the border wall with funds initially appropriated for National Guard and Reserve units and other Pentagon expenses, stating that the wall construction was "necessary in the national interest." And though only time will tell if or how Buy America requirements might factor into any reprogramming decisions, one can reasonably assume that programs benefitting from redirected funds will be subject to Buy America.

Executive Orders/Agency Guidance: Executive Orders rescinding existing executive guidance on program implementation and directing agencies to delay issuing new rules could also slow the expenditure of appropriated funds. An Executive Order issued on January 20 froze or rescinded many regulatory actions, including many needed for the implementation of several infrastructure grant programs. This Executive Order rescinded Biden's Executive Order 14082, which established the White House Office on Clean Energy Innovation and Implementation to coordinate the implementation of the IRA. The revocation will likely significantly delay grant spending of interest to many electronics OEMs. At the same time, new regulations strengthening and expanding Buy America regulations are possible under the new administration based on the President's proposed policies on U.S. manufacturing.

Impoundment: President Trump could also decline to spend (i.e., impound) allocated funds as a way to unwind prior spending priorities. However, many experts contend that such a refusal to spend congressionally appropriated funds for policy reasons would be unconstitutional and potentially also violate the Impoundment Control Act of 1974 (ICA). Still, the Trump campaign made clear that the President and his incoming legal team believe the ICA is itself unconstitutional, setting the stage for another legal battle over the limits of presidential power. Efforts to bolster American manufacturing via Buy America requirements could also factor into the decision to exercise impoundment authority, as an impoundment of funds on job-creating programs would risk a political backlash.

Options Involving Congressional Cooperation

Apart from exercising Executive authority, the President may also seek to work with the GOP-controlled Congress to shift federal funding priorities. Many legislative options are available.

Legislative Repeal: While significant political challenges make complete repeals of the IRA, the IIJA, or the CHIPS Act unlikely, Congress could still repeal substantial portions, rescinding certain program funds while leaving others intact. For example, Congress may look to repeal IRA-provided consumer tax credits for the purchase of electric vehicles but preserve tax incentives for domestic products used in large-scale infrastructure projects.

Transfer: While the executive branch can only reprogram funds within an appropriations account, Congress is empowered to move funds between accounts, allowing the money to serve a different purpose than originally intended. Through this option, Congress could help President Trump accomplish something he could not do on his own: redirect funding from one program to entirely unrelated programs that support Buy America initiatives in a preferred industry segment (e.g., infrastructure/construction).

Congressional Review Act (CRA): A popular tool in Trump's first administration, the CRA generally permits Congress to pass a joint resolution, to be signed by the President, to repeal a recently finalized regulation or other agency rule. Under CRA rules, the current lookback period allows Congress to repeal any regulation finalized on or after August 1, 2024, but any regulation finalized before August 1, 2024, will be subject to more stringent notice and comment procedures to be repealed. The CRA could be an avenue for blocking IRA tax credits without needing to repeal part of the IRA itself. The implementing rules for section 45X (manufacturing production tax credit), which were finalized in November 2024, are already facing legislative scrutiny. Late last year, as the 118th Congress ended, Congressmen John Moolenaar (R-MI) and Jared Golden (D-ME) introduced a resolution in the House under the CRA expressing the House's disapproval of the section 45X regulations. If enacted, the resolution would have repealed the section 45X regulations and prohibited any "substantially similar" rule in the future. The bill has already been reintroduced in the 119th Congress. Regulations for sections 45Y (renewable energy production tax credits) and 48E (renewable energy investment tax credits) were finalized in January 2025 and are also susceptible to a CRA challenge.

What You Can Do

What should an electronics OEM do in the face of so many shifting variables? Before taking any action, conduct a thorough Total Cost of Ownership review of your current sourcing strategy. If your market segment is impacted by federal funding that may be at risk, like green energy systems, evaluate the costs and benefits of maintaining U.S. manufacturing and supply chain. Will your customers value U.S. manufacturing regardless of Buy America incentives? What cost advantages could off-shore or partially off-shore options offer? And what are the potential tariff implications of such a move? Suppose you no longer need to meet Buy America content requirements because funding isn't available; in that case, small pivots like moving to an off-shore supply chain and maintaining U.S. manufacturing can help you balance costs and flexibility to address future policy changes.

With nine U.S. manufacturing locations in our global network, Benchmark is well-positioned to help electronics OEMs develop U.S. sourcing strategies. Are you ready to talk about options for your supply chain? Contact us here.

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about the author

Jen McAlpine

Jen McAlpine is the Director of Product Marketing and Strategy at Benchmark, developing offering strategy and messaging for Benchmark's product realization services. Prior to joining Benchmark, she was a Foreign Service Officer with the U.S. Department of State, serving in U.S. Embassies in Ireland, Gabon, Algeria, and Guinea. She holds an MBA from W. P. Carey School of Business at Arizona State University and a BA in Economics from the University of Minnesota.

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