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  • Question

    In determining if the part is a domestic end product, as defined in DFAR 252.227-7001, does the U.S. business manufacturing cost contribute to the total cost of the component, as defined in DFAR 252.227-7001? Thanks.


    Answer

    A lot going on here.  First, you should really enlist the help of your contract legal (OGC, JAG, etc).  Second, you should take the new and improved CLC 027 Buy American Statute learning module, it will teach how to handle a situation like this and many more.  It’s fantastic!
     
    In this scenario, when it comes to determining if a manufactured end product is domestic, there is a two pronged test described at FAR 25.003, which reads:
     
    “Domestic end product” means—
    (1) An unmanufactured end product mined or produced in the United States;
     

    (2) An end product manufactured in the United States, if
     
    (i) The cost of its components mined, produced, or manufactured in the United States exceeds 50 percent of the cost of all its components.  Components of foreign origin of the same class or kind as those that the agency determines are not mined, produced, or manufactured in sufficient and reasonably available commercial quantities of a satisfactory quality are treated as domestic.  Scrap generated, collected, and prepared for processing in the United States is considered domestic; or
     
    (ii) The end product is a COTS item.
     

    Note: this language is also included in 252.225-7001 
     
    So, to answer your question; the manufacturing cost itself is not included in the calculation, just the cost of components and raw materials; see 25.101(a)(2), it spells this out a little clearer.  You did not say if your end product is considered a COTS item, I suspect not because you use the phrase “prototype”.  Therefore in your scenario it does not matter that the Russian aluminum is considered COTS.  But if your end product is COTS… then the component rule is waived.
     
    Note: this would be different if your acquisition was subject to trade agreements and the “substantial transformation” test was being used… but that is beyond the scope of this question.  Check your end item with the list of items found at DFARS 225.401-70. 
     

    If you can’t answer in the affirmative the 50% component test AND If your market research truly reveals the aluminum you need is not mined or produced in the U.S. you should consider the use of an individual non-availability determination [25.103(b)(2) and all of DFARS 225.103(b)].

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