Buy American Act: What It Means, Its Limits, and Staying Compliant

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As a federal contractor, you’re going to run into the phrase, “Buy American” a lot. Many government contracts actually feature a Buy American Act clause in them as part of their terms. Naturally, this is going to raise a lot of questions. It may also make international or non-American companies steer away from contracting with the U.S. government as a whole (which it shouldn’t).

Here, we’re going to go over the Buy American Act, what it is, its limits, and the easiest way to make sure you’re compliant. After all, you do not want to end up with charges for defrauding the U.S. federal government.

What is the Buy American Act? 

In general, Buy American means that the federal government prefers to buy U.S.-made products or that federal construction projects use American materials. The most well known Buy American Act is the original one passed by Congress in 1933. However, there have been several policies put in place with the same principle. Here’s a list of just a few of the “Buy American Acts” over the years:

Every statute is different with their own requirements. You will have to figure out which ones are applicable based on your specific contract. However, there are some general rules of thumb to go by for the Buy American Act.

Products:

Goods that are compliant with Buy American must pass a two-part test.

  1. The article must be manufactured in the United States.
  2. The cost of domestic components must exceed 50% of the cost of all the components.

Construction Materials:

For federal construction work, there are several are also two main requirements for the materials that are used. This applies to prime contractors, subcontractors, and suppliers.

  1. Unmanufactured materials must have been mined or produced in the United States.
  2. Manufactured materials must have been substantially made in the United States from materials produced, mined, or manufactured in the United States.

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Again, these are just two sets of general rules. Make sure that if your contract has a Buy American clause, you read it carefully and evaluate the products you offer or the materials you use for construction.

Exceptions to the Buy American Act

Because of Buy American, many international/non-American businesses don’t think they have any place in U.S. federal government contracting. This could not be any further from the truth. With Buy American comes several exemptions where it doesn’t apply.

Public Interest

When an agency determines that the preference of Buy American doesn’t match up with the public interest. For some countries, the U.S. government has blanket exceptions that exempt their businesses from Buy American.

Non-availability 

Sometimes the materials needed for a product aren’t available in a sufficient quantity in the United States. You can find a list of them in FAR 25.104. 

Unreasonable Costs

Agencies owe a responsibility to the American taxpayer. If obtaining an item domestically is drastically more expensive than getting it from a foreign source, then Buy American would be exempt in this case.

Use Outside of the Country

Buy American is also exempt for products bought for use outside of the country. However, the Department of Defense has similar Buy American restrictions for items and construction materials used outside of the United States.

Information Technology 

Buy American Act regulations are exempt on any I.T. commercial items (products anyone can buy).

Micropurchase Threshold

Items that are underneath the micropurchase threshold ($10,000 as of 2018) are exempt from the regulation.

Compliance Made Simple

Digging through government regulations isn’t everyone’s forte. Unless you work in law or in the government, figuring out your compliance with the Buy American Act can seem intimidating. The simple solution is to ask your Contracting Officer about it. 

One of the biggest parts of a Contracting Officer’s job is to answer your questions. Take advantage of this resource. You don’t want to get in any hot water for issues with compliance, and they don’t want to deal with these types of issues. Your Contracting Officer is your single best resource for clearing up the requirements of a contract.

Filed under: Government Contracting Tips

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