US Export Plan - Sector Report - Engineering and Advanced Manufacturing

Trade, policy and regulation considerations

Scottish companies seeking to export engineering services and advanced manufacturing solutions to the US must navigate a complex regulatory landscape shaped by federal and state-level requirements. Compliance with US technical standards, such as American National Standards Institute (ANSI), American Society of Mechanical Engineers (ASME), and American Society for Testing and Materials (ASTM), is often mandatory for market access, while trade policies like the Build America, Buy America Act (BABA) and sector-specific initiatives such as the CHIPS Act influence sourcing and investment decisions. Exporters must also consider origin determination rules, tariff implications, and security regulations for dual-use technologies under ITAR and EAR frameworks. In addition, state-level variations in incentives, procurement preferences, and data protection laws can create both challenges and opportunities, making early engagement on trade compliance and strategic planning essential for competitive entry into the US market.

The engineering and advanced manufacturing sector is diverse, with a wide variety of potential considerations depending upon the part of the sector Scottish exporters are active in. Examples include:

Origin determination: As tariffs are calculated based on the origin of goods, rather than their point of export, manufacturers must have absolute clarity on where each component of their product originates. This is especially important for products in this sector that can be assembled from parts sourced globally, where the final country of assembly may not be the country of origin under US customs rules^[31]. To minimise risks and remain competitive it is crucial for Scottish exporters to work closely with their American importers when they are responsible for tariff compliance and payment.

Restrictions on sensitive technologies: International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR) may be a requirement if products being exported are dual-use technologies. Controlled items could include high-performing computing systems, semiconductor manufacturing equipment and certain precision engineering tool. In these cases, ITAR/EAR compliance is non-negotiable nationwide.

Technical standards and certification: US often requires compliance with American National Standards Institute (ANSI), American Society of Mechanical Engineers (ASME), or American Society for Testing and Materials (ASTM) standards for engineering products. For Scottish exporters, this means that products must be engineered to meet these standards from the outset, which may require adjustments in design, materials or processes. Achieving compliance may also require third-party testing, documentation, and certification, adding cost and time to market entry.

Professional qualification requirements: Advanced manufacturing is one of the sectors that can require licensing, usually though state level bodies. Different states and different professions often have differing requirements^[32]. In states like Oregon, Tennessee, and Texas, onboarding licensed engineers can be required. Sometimes this can be slow and costly.

Business structure restrictions: Some states restrict certain business structures from legally providing engineering and other professional services. For example. In California, engineering limited liability companies (LLC) are not recognised. An engineering company looking to set up in the state would need to be sole proprietorship, partnership, limited liability partnership or cooperation^[33].

Trade policies favouring local production: An example is The Build America, Buy America Act ("BABA"), which requires that all iron and steel, construction materials, and manufactured products used in federally-funded infrastructure projects are produced in the United States. The Act introduced the “Buy America Preference” which applies to all spending on public infrastructure projects by Federal agencies. The domestic content requirements significantly limit the ability to directly export finished engineering or manufacturing products for the US in federally funded projects unless they meet domestic content thresholds. However, exporters could establish local manufacturing facilities, joint venture or assembly operations in the US to meet domestic content requirements. While BABA primarily applies to physical goods incorporated into infrastructure projects (and therefore not pure engineering services), if a company’s services involve supplying equipment or materials for federally funded projects, those items must comply with BABA^[34].

Incentives: There are a range of incentives in some areas, and these are often at a state level. For example, states like Texas, Alabama, and Georgia offer tax credits and grants for aerospace and defence manufacturing, which can influence where foreign firms set up US operations.

Tax credits: There are some credits available against tax for certain activities. For example, the Advanced Manufacturing Production & Investment Credit can be applicable for eligible components such as solar and wind energy components, battery components, applicable critical minerals, and semiconductors and semiconductor manufacturing equipment.^[35]

The UK-US Economic Prosperity Deal aims to mitigate the impact of US tariffs on UK industries with commitments to reduce tariffs and regulatory barriers across certain sectors including automative, steel and aluminium. Under the deal, the UK could see the current 25% rate on steel, aluminium and derivative goods removed, contingent on meeting US supply chain security requirements. The deal particularly benefits the automotive and aerospace sectors^[36]. It also protects the UK from possible tariffs on semiconductors.