When submitting a government bid, companies may incorrectly guess that they do not have to comply with the Buy American Act because their products meet the exemption requirements. However, that guess could end up being a costly mistake causing your company to lose the contract in a bid protest.
Buy American exemptions exists if the head of the contracting agency makes a determination that by applying the Buy American Act to the procurement would be inconsistent with the public interest. See 41 USC 8302(a); FAR 25.103(a); DFARS 225.103(a).
In line with American made exemptions, DOD has exempted from the Buy American statute end products from countries that have entered into “a reciprocal defense procurement memorandum of understanding or international trade agreement with the United States. The memorandum of understanding allows for both countries to agree to remove barriers to purchases of supplies produced in the other country.” See DFARS 225.003(10); DFARS 225.872-1 (exempting qualifying country end products from the Buy American statute). Government contract and DOD procurements are exempt from the “made in the USA” product requirement if purchased from qualifying countries.
What Does Manufacture Mean?
The term “manufacture” means completion of the article in the form required for use by the government. General Kinetics, Inc., Cryptek Div., B-242052.2, May 7, 1991, 91-1 CPD para. 445 at 7.
Does Refurbishing Count As Manufacturing Under Buy American Made Exemptions?
In one case, GAO said that refurbishing does not count as meeting the “made in the USA” requirement. GAO decided that that “minimal operations such as assembly of certain components may constitute manufacturing for purposes of the Act, where they are necessary for the product to meet the operational or performance requirements of the solicitation.” See, e.g.,Saginaw Machine Sys. Inc., B-238590, June 13, 1990, 90-1 CPD para. 554 at 4.
When it comes to refurbished products, GAO has also decided that “limited domestic assembly or manufacturing operations which do not alter the essential nature of a component which is the core or essence of the end product being procured may not be used to circumvent the plain requirement of the Buy American Act that the end product must be manufactured “substantially all” from domestic articles, material or supplies.” See 41 USC 10a.
DFARS uses a two-part test under the BAA to determine whether your product in manufactured in the USA. An end product
- must be manufactured in the United States, and
- the cost of its domestic components must exceed 50 percent of the cost of all its components.
To avoid costly mistakes with Buy American Act exceptions, call the BAA attorneys at Watson & Associates, LLC at 1-866-601-5518.