The Buy America Act applies only to grants issued by the Federal Transit Administration and Federal Highway Administration for transit-related procurements in excess of the stated procurement amount. Federal grants to state, municipal, local governments, including transit authorities, may also contain Buy America Act conditions. Projects funded by the Federal Highway Administration require all iron and steel products and their coatings to be 100% U.S.-manufactured. Projects funded by the Federal Transit Administration require all steel and manufactured products to have 100% U.S. content and to be 100% U.S.-manufactured. Different rules apply to rolling stock (trains, buses, trolleys, etc.) The Buy America Act is not limited by the NAFTA or WTO Agreement on Government Procurement.
The Buy American Act (often BAA, not to be confused with the Buy America (no "n") Act) applies to all U.S. federal government agency purchases of goods over certain contract thresholds. The BAA restricts purchases of supplies and construction materials to domestic products, unless an exception or waiver applies. Unmanufactured products must be mined or produced in the United States. There is a two-part test for manufactured articles: (1) article must be manufactured in the United States, and (2) cost of U.S. components must exceed 50% of the cost of all components in the item. Note: this calculation does not include labor and overhead for final assembly in the United States. The component cost test is waived for commercial-off-the-shelf (COTS) items. (FAR 25.001(c)(1). BAA waivers may be available, often at the discretion of the contracting officer.
ARRA Section 1605 establishes requirements for federal government projects funded with stimulus monies: "None of the funds appropriated or otherwise made available by [the ARRA] may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States." Iron and steel used as components or subcomponents of other manufactured construction materials do not need to be produced in the United States. There is no requirement that components and subcomponents be U.S.-origin provided the manufactured construction material is "produced in the United States." (FAR 25.001(c)(4)) Section 1605 does not contain a domestic cost requirement. However, the government has not defined "produced" for purposes of the ARRA Buy American provision. Many commentators have adopted the "substantial transformation" test to determine whether a manufactured article is "produced" in the United States for purposes of Section 1605. Section 1605 contains a requirement that the Buy American provision be applied in a manner consistent with U.S. obligations under international agreements. As a result, national treatment is extended to products from countries with which the United States has entered a free trade agreement (e.g., Canada, Mexico, Bahrain, Chile, etc.) and to products from countries that have signed the WTO Government Procurement Agreement. National treatment is also extended to least developed countries (LDCs) (e.g., Bhutan, Mali, Zambia, etc.) but not to Caribbean basin countries (e.g., Belize, Haiti, Bahamas, etc.).
The Caribbean basin countries are Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, British Virgin Islands, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Netherlands Antilles, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, or Trinidad and Tobago. (FAR 25.003)
The United States has free trade agreements with the following countries: Australia, Bahrain, Canada, Chile, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Morocco, Nicaragua, Oman, Peru, or Singapore. (FAR 25.003)
The United States recognizes the following countries as least developed countries (LDCs): Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Central African Republic, Chad, Comoros, Democratic Republic of Congo, Djibouti, East Timor, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Laos, Lesotho, Liberia, Madagascar, Malawi, Maldives, Mali, Mauritania, Mozambique, Nepal, Niger, Rwanda, Samoa, Sao Tome and Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, Tanzania, Togo, Tuvalu, Uganda, Vanuatu, Yemen, or Zambia. (FAR 25.003)
NAFTA Article 1003 requires that each party accord national treatment to goods of the other NAFTA parties in government procurement contracts greater than the stated threshold. The threshold is currently $8,817,449. If the contract is for less than the threshold, national treatment under NAFTA Article 1003 for goods from Canada and Mexico is not guaranteed but may be granted at the discretion of the contracting officer.
A "substantial transformation" occurs when the processing in the foreign country results in a new and different article of commerce with a name, character, or use distinct from the original article. (FAR 25.001(c)(2); 25.003)
The Trade Agreements Act (TAA) grants the President the authority to waive the Buy American Act and other discriminatory provisions for eligible products from countries with which the United States has a trade agreement or that meet other criteria (e.g., goods from least developed countries). The President delegated waiver authority under the TAA to the U.S. Trade Representative. The USTR has waived the BAA and other discriminatory provisions for goods from WTO Government Procurement Act signatories, free trade agreement partners, least developed countries, and Caribbean countries. Eligible goods from these countries receive equal consideration with domestic goods. Eligibility is determined on the basis of substantial transformation. Various (and variable) contract thresholds apply. (FAR 25.402)
Signatories to the WTO Government Procurement Agreement (GPA) agree to accord national treatment to and not discriminate against goods, services, and suppliers of the other signatories in the government procurement process. Contract thresholds apply. Some U.S. states have voluntarily agreed to be bound the WTO GPA requirements.
The signatories to the WTO GPA are Aruba, Austria, Belgium, Bulgaria, Canada, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea (Republic of), Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Singapore, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Taiwan, or United Kingdom. (FAR 25.003)