Understanding the Buy American Act

Product must be manufactured in the United States: Final assembly and substantial transformation must occur domestically
Domestic component cost threshold: Component costs must exceed the applicable percentage (currently being phased upward from 55%)
Component cost calculation: Based on the cost of components, not their weight, volume, or other measures
Exceptions for commercial-off-the-shelf items: COTS items have different calculation methods under certain circumstances
Waivers available: Non-availability waivers, public interest waivers, and unreasonable cost determinations can allow foreign products

Trade Agreements Act Compliance

WTO GPA countries: Canada, European Union members, Japan, South Korea, Singapore, and others participating in the Government Procurement Agreement
Free Trade Agreement countries: Australia, Bahrain, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, Singapore, and South Korea
Least developed countries: Countries meeting UN criteria for least developed status receive designation to support development
Caribbean Basin countries: Certain Caribbean nations under regional trade preferences
Non-designated countries: China, India, Russia, Malaysia, Thailand, Vietnam, and others—products substantially transformed in these countries are prohibited

1
Identify all manufacturing locations
Document where each component is manufactured and where final assembly occurs. Trace the supply chain back far enough to identify substantial transformation points.
2
Analyze manufacturing processes
Evaluate what manufacturing operations occur at each location. Consider whether operations change the product's name, character, or use.
3
Determine country of origin
Apply the substantial transformation test to identify where the product last underwent transformation substantial enough to create a new article of commerce.
4
Verify designated country status
For TAA compliance, confirm whether the country of origin is a designated country. Non-designated country products are prohibited under TAA.
5
Calculate domestic content
For BAA compliance, calculate the cost of domestic components as a percentage of total component costs to verify threshold compliance.
6
Document your analysis
Maintain records supporting your country of origin determination, including manufacturing documentation, supplier certifications, and cost calculations.

Supply chain opacity: Many contractors don't have visibility into sub-tier suppliers and component origins, making accurate certification difficult
Changing suppliers: Supply chain changes can affect compliance status—what was compliant last year may not be compliant now
Complex products: Products with hundreds of components from dozens of countries require sophisticated tracking systems
Contractor responsibility: Prime contractors are responsible for subcontractor compliance, adding another layer of complexity
Evolving regulations: Threshold changes, country designations, and regulatory interpretations continue to evolve
Commercial item confusion: Commercial item acquisition rules don't eliminate BAA/TAA requirements—different rules apply

Non-availability: When domestic products of satisfactory quality aren't available in sufficient quantities, foreign products may be permitted
Unreasonable cost: When domestic products cost more than a specified percentage above foreign equivalents, the price premium may be waived
Public interest: Broad exception allowing waivers when domestic preference conflicts with public interest, rarely invoked
Micro-purchases: Very small purchases below micro-purchase thresholds are generally exempt from domestic preference requirements
Commercial-off-the-shelf: COTS items have modified compliance requirements under certain procurement vehicles
Information technology: Certain IT products receive treatment under different regulatory frameworks

Document your supply chain: Maintain current documentation of component sources, manufacturing locations, and supplier certifications
Establish verification procedures: Create processes for verifying supplier representations and conducting substantial transformation analysis
Train relevant personnel: Ensure procurement, sales, and contract staff understand BAA/TAA requirements and your compliance procedures
Monitor regulatory changes: Track changes in domestic content thresholds, country designations, and regulatory interpretations
Audit periodically: Regularly review compliance processes and product-specific determinations to identify and correct issues
Maintain records: Keep compliance documentation for the contract period plus applicable retention requirements