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Buy American Statute for supplies

DAU GLOSSARY DEFINITION

Alternate Definition

The Buy American Act (41 U.S.C. § Chapter 83) was passed by U.S. Congress in 1933. The purpose is to provide preferential treatment for domestic sources of supplies, manufactured goods, and construction material for public use unless a specific exemption (exception or waiver) applies.
The statute requires the federal government to purchase domestic supplies for use in the United States and outlying areas. This includes the “supply” portion of a contract for services that involves the furnishing of supplies in an amount exceeding the micro-purchase threshold. The Buy American Statute does apply to small business set-asides.

General Information

When determining if a product is a “domestic” good, it is the place of mining, production, or manufacture that is the controlling factor. The statute uses a two-part test to define a domestic end product when it is not COTS.

  1. The article must be manufactured in the United States
  2. The cost of domestic components must currently exceed 60% of the cost of all the components. 

    The percentage will increase to 65% for items delivered in calendar years 2024 through 2028, and then 75% in calendar year 2029.

Note: “Component” means an article, material, or supply incorporated directly into an end product or construction material. The component cost test has been waived for acquisition of commercially available off-the-shelf items. DFARS 252.225-7001 and 252.225-7036 have a slightly different definition of a “domestic” product than FAR 25.003; they incorporate the primary DoD public interest exception to Buy American described later in this article.

 

Applicability

The Buy American Statute does not apply to procurements at or below the micro purchase threshold or for supplies to be used outside the United States and outlying areas. 

If the below exceptions listed in the prescription of DFARS clause 252.225-7001 do not apply to a supply procurement, Buy American applies and therefore DFARS provision 252.225-7000 and DFARS clause 252.225-7001 must be added to the solicitation. 

1. FAR 6.302-3 applies to the whole procurement

2. DFARS subpart 225.70 applies to the whole procurement

3. One or more of the exceptions listed at FAR 25.103 and DFARS 225.103 apply. They include:

  • Public Interest. The head of the agency determines that a domestic preference would be inconsistent with the public interest. This exception applies when an agency has an agreement with a foreign government that provides a blanket exception to the Buy American Act. DoD has the most prominent public interest exception known as “Contracting with Qualified Countries”. Memorandums of Understanding (MOUs) with Qualifying Countries listed in DFARS 225.872.
  • Non-availability. The statute does not apply with respect to articles, materials, or supplies not mined, produced, or manufactured in the U.S. in sufficient and reasonable available commercial quantities and of a satisfactory quality. FAR 25.104 and DFARS 225.104 list articles determined to be non-available.
  • Unreasonable Costs. If purchasing the material domestically would burden the government with an unreasonable cost. The unreasonable cost exception is implemented through the use of an evaluation factor applied to low foreign offers. The Contracting Officer may determine unreasonable cost in accordance with FAR 25.105/Subpart 25.5 and DFARS 225.105/Subpart 225.5.
  • Resale. The contracting officer may purchase foreign end
  • Information Technology that is a commercial item.
     
  • Note: Market research will not always reveal if one of these exceptions will apply. It is often not known if a public interest or unreasonable cost exception may be applicable until offers are received in response to a solicitation.

4. The supplies will be used outside the U.S. under the Balance of Payments Program (BoPP) but one of the exceptions to BoPP apply. 

5. One of the below Trade Agreements applies when there are certain eligible products listed at DFARS 225.401-70 and the procurement exceeds a specific dollar threshold listed at FAR 25.402(b). 

  • World Trade Organization Government Procurement Agreement (WTO GPA). This also includes Caribbean Basin Trade Initiative (CBTI) and Least Develop Countries end products.

6. A Free Trade Agreement applies when there are certain eligible products listed at DFARS 225.401-70 and the procurement exceeds a specific dollar threshold listed at FAR 25.402(b). 

Under the Trade Agreements, the test to determine country of origin is “substantial transformation” (i.e., transforming an article into a new and different article of commerce, with a name, character, or use distinct from the original article, see FAR 25.001(c)(2).

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