Contracts & Legal

Buy American Act (BAA)

The Buy American Act (BAA) (41 U.S.C. 8301-8305) was passed in 1933 and restricts the purchase of supplies that are not domestic end products. It applies to all U.S. federal government agency purchases of goods valued over the purchase threshold but does not apply to services. Under the Act, all goods for public use (articles, materials, or supplies) must be produced in the U.S., and manufactured items must be manufactured in the U.S. from U.S. materials. Contracts awarded by State and local authorities under Federal grant programs are not covered by the act unless authorizing statutes explicitly provide for the application of the act.

Definition: The Buy American Act of 1933 (BAA) requires federal agencies to purchase “domestic end products” and use “domestic construction materials” on contracts above certain monetary thresholds performed in the United States.

Buy American Act (BAA) Regulation

The Buy American Act requires Federal agencies to procure domestic materials and products. Two conditions must be present for the Buy American Act to apply: (1) the procurement must be intended for public use within the United States, and (2) the items to be procured or the materials from which they are manufactured must be present in the United States in sufficient and reasonably available commercial quantities of satisfactory quality. The BAA applies to all U.S. federal government agency purchases of goods valued over the U.S. micro-purchase threshold ($10,000). Companies that sell goods to the U.S. government must comply with domestic source restrictions that dictate the percentage of domestic content and have the potential to impact design, sourcing, and manufacturing decisions.

Note: The “Buy American Act” is not to be confused with the similar “Buy America Act” that occurred in 1982.

Purpose of the Buy American Act (BAA)

The purpose of the BAA is to protect the U.S. industrial base.

Buy American Act (BAA) Two-Part Test

The BAA uses a two-part test to define a domestic end product.

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

DoD has issued a final rule amending DFARS 252.225-7000 and 252.225-7001 provision and clause, including a partial waiver to the two-part test. The waiver allows a Commercial-Off-The-Shelf (COTS) item to be treated as a domestic end product if it is manufactured in the U.S., without tracking the origin of the item’s components.

Office of Management and Budget Increased Domestic Content Thresholds

The Federal Acquisition Regulation (FAR) Council issued the final rule pursuant to President Biden’s Executive Order of January 25, 2021 (EO 14005), which outlined that US government procurement should “maximize the use of goods, products, and materials produced in, and services offered in, the United States. Changes to the percentage of manufacturing in the US

  • Raises the required amount of domestic content from 55% to 60% as measured by cost by 2022.
  • Raises the required amount of domestic content from 60% to 65% as measured by cost by 2024.
  • Raises the required amount of domestic content from 65% to 75% as measured by cost by 2029.

The threshold increase does allow, until one year after the increase of the domestic content threshold to 75 percent, for the use of the 55 percent domestic content threshold ( i.e., the threshold in effect prior to the effective date of this rule) in instances where an agency has determined that there are no end products or construction materials that meet the new domestic content threshold or such products are of unreasonable cost.

Buy America Act (BAA) Exceptions

Exceptions that allow the purchase of a foreign end product are listed at FAR 25.103 and DFARS 225.103. Under certain conditions, federal and/or DoD procurements may be waived:

  • 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 currently has the following agreements: World Trade Organization Government Procurement Agreement (WTO GPA), Free Trade Agreements (FTAs) with various countries (including Caribbean Basin Trade Initiative (CBTI)), Memorandum of Understandings (MOUs) with Qualifying Countries listed in DFARS 225.872 and North American Free Trade Agreement (NAFTA).
  • Non-availability: BAA 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 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 the 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 products specifically for commissary resale.
  • Information Technology is a commercial item.

Executive Order 13881’s Buy American Act Changes

Three Major Changes have changed with EO 13881 (Jan 2021) which are:

  • Raises the required amount of domestic content from 50% to 55% as measured by cost.
  • Except for commercial-off-the-shelf (COTS) fasteners (g., nuts, bolts, pins, rivets, nails, and screws), domestic iron and steel end products and construction material, including commercial items and COTS items, may contain no more than 5% foreign iron or steel.
  • Raises the price evaluation preference for domestic items in non-Department of Defense (DoD) procurements from 12% to 30% for small businesses and from 6% to 20% for large businesses (the DoD price preference, 50% regardless of the size of the business before this rule, remains the same).

Buy American Act (BAA) Under Trade Agreements

Under the WTO Agreement on Government Procurement (GPA) (19 U.S.C. § 2511(a)) and certain US free trade agreements, the United States has assumed obligations to afford non-discriminatory treatment to goods from participating foreign countries when it conducts procurements covered by the agreement.  This obligation is implemented in US law through the Trade Agreements Act of 1979, which limits the Buy American Act’s applicability by requiring US government procurements to treat as if they were domestic those materials originating in a country with which the United States has a covered trade agreement.

Main Domestic Procurement Laws

The three major domestic content regimes, which apply in different contexts and impose different requirements upon the use of federal procurement funds, are: [1]

  1. The Buy American Act of 1933 (BAA) (41 U.S.C. §§ 8301-8305), requires federal agencies to purchase “domestic end products” and use “domestic
    construction materials” on covered above certain monetary thresholds (typically $10,000) performed in the United States;
  2. The Trade Agreements Act of 1979 (TAA) (19 U.S.C. §§ 2501-2581), which permits the waiver of the BAA and has resulted in “eligible products” from “designated countries” receiving equal consideration with domestic offers for certain federal acquisitions exceeding specified monetary thresholds; and
  3. Department of Defense (DOD)–specific restrictions, which include both (a) the Berry Amendment, which generally requires that food, clothing, tents, certain textile fabrics and fibers, hand or measuring tools, stainless steel flatware, and dinnerware purchased by DOD be entirely grown, reprocessed, reused, or produced in the United States (10 U.S.C. § 4862); and (b) a “specialty metals restriction” that generally requires that any “specialty metals” contained in any aircraft, missile and space system, ship, tank, and automotive item, weapon system, ammunition, or any components thereof purchased by DOD be melted or produced in the United States (10 U.S.C. § 4863).

FAR 52.225-1 Buy American-Supplies

Buy American, (FAR 52.225) provides a preference for domestic end products for supplies acquired for use in the United States. In accordance with 41 U.S.C. 1907, the domestic content test of the Buy American statute is waived for an end product that is a COTS item (see 12.505(a)(1)), except that for an end product that consists wholly or predominantly of iron or steel or a combination of both, the domestic content test is applied only to the iron and steel content of the end product, excluding COTS fasteners.

Build America Buy America

The Build America Buy America Act, enacted as part of the Infrastructure Investment and Jobs Act on November 15, 2021, established a domestic content procurement preference for all Federal financial assistance obligated for infrastructure projects after May 14, 2022.  The domestic content procurement preference requires that all iron, steel, manufactured products, and construction materials used in covered infrastructure projects are produced in the United States

Difference Between Buy American Act (BAA) and Buy America

The phrase “Buy America” describes domestic preferences generally applied to awards made with Federal financial assistance. There is no single “Buy America” statute. Instead, several statutes require certain Federal agencies providing Federal financial assistance to apply domestic content procurement preferences for goods, products, and materials made in the U.S.

Document: Buy American (BAA) or Buy America

AcqLinks and References:

Updated: 2/16/2024

Rank: G45

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