Buy American Act Compliance Guide 2025: Requirements and Waivers
Learn Buy American Act requirements for government contractors. Understand domestic content rules, component tests, waivers, and how to ensure BAA compliance.
Quick Answer: What is the Buy American Act?
The Buy American Act (BAA) requires the federal government to purchase domestic end products unless an exception applies. For a product to qualify as domestic, it must be manufactured in the U.S. and contain at least 60% domestic content by cost (increasing to 75% by 2029). BAA applies to direct federal purchases, not grants or state purchases.
What is the Buy American Act?
Enacted in 1933, the Buy American Act is the primary domestic preference law for federal procurement. It promotes American manufacturing by giving preference to domestic products.
BAA Basics
What BAA Covers
- • Direct federal agency purchases
- • Supplies and end products
- • Construction materials
- • Products used in federal contracts
What BAA Does NOT Cover
- • Services (only goods)
- • Products for resale
- • Purchases outside the U.S.
- • Grants to states/localities
BAA vs. Trade Agreements Act
The Trade Agreements Act (TAA) applies to larger purchases and allows products from designated countries. When TAA applies (generally over $183,000), it supersedes BAA. Products must be made or substantially transformed in the U.S. or a TAA country.
Domestic End Product Test
To qualify as a domestic end product under BAA, an item must meet two requirements:
Two-Part Test
1. Manufactured in the United States
The end product must be manufactured or mined/produced in the United States. Final assembly alone is not enough—substantial transformation must occur here.
2. Domestic Content Threshold
The cost of domestic components must exceed the threshold percentage of the total cost of all components. This is the component test.
Domestic Content Thresholds
| Time Period | Threshold |
|---|---|
| Through 2024 | 60% |
| 2025-2028 | 65% |
| 2029 and beyond | 75% |
The Component Test Explained
Calculating Domestic Content
Step 1: Identify Components
List all components that are incorporated into the end product. Components are articles, materials, or supplies directly incorporated.
Step 2: Determine Origin
Classify each component as domestic (mined, produced, or manufactured in the U.S.) or foreign.
Step 3: Calculate Costs
Total the cost of domestic components and divide by total component costs. Use actual acquisition costs, not retail prices.
Step 4: Compare to Threshold
If domestic content percentage exceeds the threshold (currently 60%), the product qualifies as domestic.
Example Calculation
Manufacturing a product with:
- • Domestic components: $700
- • Foreign components: $300
- • Total component cost: $1,000
Domestic content = $700 / $1,000 = 70% ✓ Qualifies
Price Evaluation Preference
Even if a foreign product is cheaper, BAA gives domestic products a price preference during evaluation.
Price Preference Factors
Example: If a foreign product costs $100, a domestic product can win even if priced up to $120 (large business) or $130 (small business).
Enhanced Price Preference
Recent executive orders have increased preferences for certain critical products:
- →Critical items may receive enhanced preferences
- →Supply chain resiliency products prioritized
- →Made in America waivers more scrutinized
Exceptions and Waivers
BAA includes several exceptions where foreign products may be purchased:
Public Interest Exception
When the head of the agency determines purchasing foreign products is in the public interest. Requires detailed justification.
Unreasonable Cost Exception
When domestic products cost more than the price preference allows. The foreign product must be significantly cheaper even after applying the percentage preference.
Non-Availability Exception
When domestic products are not available in sufficient quantity or quality. Requires market research documenting unavailability.
Micro-Purchase Exception
Purchases under the micro-purchase threshold ($10,000) are generally exempt from BAA requirements.
Commercial IT Exception
Certain commercial information technology products may be exempt under specific FAR provisions.
BAA Compliance Tips
For Contractors
Frequently Asked Questions
Does BAA apply to construction?
BAA applies to construction materials used in federal construction. There are specific rules for iron, steel, and manufactured products in construction under the Build America, Buy America Act (BABA).
What is substantial transformation?
Substantial transformation occurs when an article emerges with a new name, character, or use. Simply assembling foreign components in the U.S. typically does not qualify as substantial transformation.
How do I certify BAA compliance?
You certify compliance through contract representations and certifications. The standard clause is FAR 52.225-1 (Buy American—Supplies). Maintain documentation supporting your certification.
What are the penalties for non-compliance?
False certification can result in False Claims Act liability, contract termination, suspension, and debarment. Penalties can include treble damages and criminal prosecution.
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