Many government contractors and subcontractors ask the question, “What does ‘Buy American’ mean?” Unfortunately, Buy American refers to number of complex statutory and regulatory schemes that impose different requirements. One thing is certain, however: whether you are conducting business with the federal government directly, as a prime contractor, or indirectly, as a subcontractor, you are required to execute certifications regarding Buy American compliance. Be certain you know what you are certifying and that your certifications are accurate.
A few basics:
- The Buy American Act (BAA) does not prohibit the purchase of foreign-made products. It provides a price preference for “domestic end products.”
- The BAA “restricts the purchase of supplies that are not domestic end products, for use within the United States. A foreign end product may be purchased if the contracting officer determines that the price of the lowest domestic offer is unreasonable or if another exception applies.” FAR 25.001(a).
- The Trade Agreement Act (TAA) does prohibit the purchase of certain foreign products and services – ones that are not “substantially transformed” in the U.S. or from a “designated country.” It is critical to know what countries currently are on the designated country list.
- The TAA “provides the authority for the President to waive the Buy American statute and other discriminatory provisions for eligible products from countries that have signed an international trade agreement with the United States, or that meet certain other criteria, such as being a least developed country.” FAR 25.402 (a)(1).
- The BAA and the TAA are very different schemes and compliance with one does not bring your company into compliance with the other.
- The BAA contains an important exception for “components” of commercial off-the-shelf (COTS) products, eliminating any concern regarding the origin of such “components.”
- Even when an item does not qualify as COTS, if more than 50% of the cost of all components is attributable to components manufactured in the U.S., you may have a qualifying “domestic end product.”
- The BAA also includes a critical exception for purchases of commercial information technology.
- Many agencies – for example, the Department of Defense and the Federal Transit Administration – have their own unique “Buy American” restrictions that govern the acquisition of specific products. These requirements are in addition to those imposed by the BAA or the TAA or, in some instances, override the BAA and/or the TAA.
- To make matters even more confusing, while the U.S. Customs and Border Protection makes “country of origin” determinations, those determinations are for tariff purposes only and do not necessarily correspond to the tests for “country of origin” under the BAA or TAA.
- Certain trade agreements such as the North American Free Trade Agreement (NAFTA) and the World Trade Organization Government Procurement Agreement (WTO GPA) can trump particular “Buy American” requirements.
The purpose of these bullets is to highlight the complexities involved in answering the question, “What does ‘Buy American’ mean?”, and to warn those of our readers wishing to do business with the government to seek the assistance of experts to determine how to comply with Buy American and related requirements.
Lindsay Simmons is responsible for the contents of this article.
© Jackson Kelly PLLC, 2014