The Buy American Act: Requiring Government Procurements to Come from Domestic Sources

The Buy American Act: Requiring Government Procurements to Come from Domestic Sources

The Buy American Act: Requiring
Government Procurements to Come from
Domestic Sources
John R. Luckey
Legislative Attorney
March 13, 2009
Congressional Research Service
7-5700
www.crs.gov
97-765
CRS Report for Congress
P
repared for Members and Committees of Congress

The Buy American Act: Requiring Government Procurements from Domestic Sources

Summary
The Buy American Act is the major domestic preference statute governing procurement by the
federal government. Essentially it attempts to protect domestic labor by providing a preference
for American goods in government purchases. It was enacted in 1933 and has only been
substantively amended four times in the succeeding years. In determining what are American
goods, the place of mining, production, or manufacture is controlling. The nationality of the
contractor is not considered when determining if a product is of domestic origin.
In the 110th Congress a new reporting requirement was added to the Buy American Act. Under
P.L. 110-28, the head of each federal agency is required to annually report to Congress
concerning procurements from non-domestic sources.
There have been no amendments to the Buy American Act introduced in the 111th Congress. The
American Recovery and Reinvestment Act (“The Stimulus Plan”) did not amend the Buy
American Act. It did, however, include a provision attaching domestic content considerations to
the funds disbursed under the Plan.
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The Buy American Act: Requiring Government Procurements from Domestic Sources

Contents
Coverage of the Buy American Act ............................................................................................. 5
Exceptions to the Buy American Act ........................................................................................... 6
Inconsistent with the public interest....................................................................................... 6
Unreasonable in cost ............................................................................................................. 7
Use outside of the United States ............................................................................................ 7
Not produced or manufactured in the United States in sufficient and reasonably
available commercial quantities and of satisfactory quality................................................. 7
Micro Purchase Threshold..................................................................................................... 8
Amendments to the Buy American Act ........................................................................................ 8
Current Legislation ..................................................................................................................... 9

Contacts
Author Contact Information ...................................................................................................... 10

Congressional Research Service

The Buy American Act: Requiring Government Procurements from Domestic Sources

he Buy American Act1 is the major domestic preference statute governing procurement by
the federal government.2 Essentially, it attempts to protect domestic labor by providing a
T preference for American goods in government purchases. It was enacted in 19333 and has
only been substantively amended four times in the succeeding years.4 In determining what are
American goods, the place of mining, production, or manufacture is controlling. The nationality
of the contractor is not considered when determining if a product is of domestic origin.5
While the act appears to control most procurements of the federal government, it should be noted,
when considering a particular procurement, that the application of the act may be controlled by
other legislation or international agreement. For example, the Trade Agreements Act of 19796
authorizes the President to waive any otherwise applicable “law, regulation or procedure
regarding Government procurement” that would accord foreign products less favorable treatment
than that given to domestic products.7 Article 1004 of The North American Free Trade Agreement
(between the United States, Mexico, and Canada) disallows domestic protection legislation, such
as the Buy-American Act, in government procurement. Other treaties and agreements also place
limitations on the application of the act and must be considered when looking at any Buy
American question.
Coverage of the Buy American Act
The domestic preference requirement of the act is quite broad in its scope. The federal
government is required to buy domestic “articles, materials, and supplies” when they are acquired
for public use unless a specific exemption8 applies.9
The act applies to all federal procurements, but has separate provisions for supply contracts10 and
construction contracts.11 Most of the rules and definitions used in applying the act are found in the

1 41 U.S.C. §§ 10a through 10d.
2 There are numerous “little Buy American” provisions which generally govern specific types of procurements that are
for some reason exempt from the Buy American Act, usually because the procurement is for articles for use outside of
the United States. These provisions are beyond the scope of this paper, but should be considered when researching
whether or not a domestic preference affects a particular procurement. These provisions are often attached to the
appropriations acts for the agencies making the procurement in question. The most well known of these Acts is
commonly referred to as the “Berry Amendment” and applies to certain procurements of the Department of Defense,
see, CRS Report RL31236, The Berry Amendment: Requiring Defense Procurement to Come from Domestic Sources,
by Valerie Bailey Grasso. The American Recovery and Reinvestment Act of 2009 (“The Stimulus Plan”) contains a
“little Buy American” provision governing contracts entered into by entities utilizing federal funds received under the
act. P.L. 111-5, § 1605, Stat.
(2009).
3 Ch. 212, 47 Stat. 1520, 72nd Congress, 2nd Session. (1933).
4 See, P.L. 100-418, Title VII; 102 Stat. 1545, 100th Congress, 2nd Session (1988), P.L. 103-355, 108 Stat. 3346-7, 103rd
Congress, 2nd Session (1994), codified at 41 U.S.C. 10a., P.L. 104-201, § 827, 110 Stat. 2611 104th Congress, 2nd
Session (1996), codified at 41 U.S.C. 10b-3, and P.L. 110-28, Title VIII, § 8306, 121 Stat. 112, 211, 110th Congress, 1st
Session (2007), codified at 41 U.S.C. 10a(b).
5 See, E-Systems, Inc., 61 Comp. Gen. 431 (1982); and Patterson Pump Co., B-200165, 80-2 CPD ¶ 453 (1980).
6 19 U.S.C. §§ 2501 et seq.
7 19 U.S.C. § 2511. This provision was implemented by E.O. 12260, 46 Fed. Reg. 1653 (1981). See, also, FAR § 25.4.
8 See discussion below. “Exceptions to the Buy American Act”
9 41 U.S.C. §§ 10a & 10b. The act applies to leases as well as purchases. National Office Equipment Co., B-191003,
78-1 CPD ¶ 413 (1978).
10 41 U.S.C. § 10a and Federal Acquisition Regulation (FAR) § 25.1.
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Federal Acquisition Regulation part 25, not in the act itself. The rules for determining whether
products are of foreign or domestic origin are the same for both types of procurements, but
different terminology is used and the step in the manufacturing or construction process at which
the test is applied is different.12 The test of origin is applied to supplies delivered to the
government.13 In contrast, under construction contracts, the test is applied to articles, materials,
and supplies used by the contractor and subcontractors in constructing, altering, or repairing the
building or work.14 In the case of supply contracts the test is applied to “end products.”15
Construction contracts are concerned with the origin of “construction materials.”16
The act differentiates between manufactured and un-manufactured articles. An un-manufactured
article will be deemed a domestic end product or construction material if it has been mined or
produced in the United States.17 Manufactured articles are considered domestic if they have been
manufactured in the United States from components, “substantially all” of which have been
mined, produced, or manufactured in the United States.18 “Substantially all” means that the cost
of foreign components does not exceed 50% of the cost of all components.19
Exceptions to the Buy American Act
There are five primary exceptions to the Buy American Act. The act does not apply to
procurements to which application would be inconsistent with the public interest or unreasonable
in cost.20 The act does not apply to procurements of products for use outside the United States or
of products not produced or manufactured in the United States in sufficient and reasonably
available commercial quantities and of satisfactory quality.21 Lastly, the act does not apply to
procurements under $2,500.22
Inconsistent with the public interest
The head of the procuring agency may waive the requirements of the act if a determination is
made that the application of the act would be inconsistent with the public interest. This public
interest exception has often been used like a national security exception by the Department of

(...continued)
11 41 U.S.C. § 10b and FAR § 25.2.
12 See Cibinic and Nash, Formation of Government Contracts, 1449 (3rd ed.) (1998).
13 FAR § 25.1.
14 41 U.S.C. § 10b and FAR § 25.2.
15 FAR § 25.101.
16 FAR § 25.201.
17 41 U.S.C. §§ 10a & 10b. The United States is defined to include “the United States and any place subject to the
jurisdiction thereof.” 41 U.S.C. § 10c(a).
18 41 U.S.C. §§ 10a & 10b. This two part test is only applied to end products or construction materials. A component is
of domestic origin if it was manufactured in the United States, regardless of where its components were manufactured.
Hamilton Watch Co., B-179939, 74-1 CPD ¶ 306 (1974).
19 FAR § 25.101; and E.O. 10582, 19 Fed. Reg. 8723 (1954).
20 41 U.S.C. § 10a.
21 Id.
22 P.L. 103-355, 108 Stat. 3346-7, 103rd Cong., 2nd Sess. (1994), codified at 41 U.S.C. 10a.
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Defense,23 but is also available for non-defense purposes. This exception places considerable
discretion in the head of the agency. For example, this exception has been invoked after bids have
been opened.24
Unreasonable in cost
A federal agency is permitted to use a foreign product if the head of the agency determines that
the cost of the lowest priced domestic product is “unreasonable.”25 A system of price differentials
has been established for use in making this determination.26 The general differential, applicable to
most federal contracts, is 6%. A 12% differential is used if the contract involves a small business
or labor surplus area. A 50% differential is applied to Department of Defense procurements.27
The differential is added to the lowest acceptable foreign offer and then compared to the domestic
offer. The differential is applied only to the bid price for material to be delivered under the
contact, not the total contract price.28 Generally the differential is applied on an item by item
basis, but a solicitation may provide that, for purposes of the act, certain items will be lumped
together.29
Use outside of the United States
The act exempts articles purchased “for use outside of the United States.”30 This exception is not
limited to only the country of use, but to products of any origin.31 For example, the exemption has
applied to purchase of Canadian made steel towers for use in West Germany for a
communications system procured by the U.S. military.32
Not produced or manufactured in the United States in sufficient
and reasonably available commercial quantities and of satisfactory
quality
The act exempts articles not produced or manufactured in the United States in sufficient and
reasonably available commercial quantities and of satisfactory quality.33 The FAR provides a list

23 See Self-Powered Lighting, Ltd., 492 F.Supp. 1267 (S.D.N.Y. 1980); and American Hospital Supply, B-221357, 86-
1 CPD ¶ 70 (1986).
24 E-Systems, Inc., 61 Comp. Gen. 431 (1982).
25 41 U.S.C. §§ 10a & 10b.
26 E.O. 10582, 19 Fed. Reg. 8723 (1954). These differentials have been codified in the FAR at FAR §§ 25.105 and
25.204.
27 Id.
28 See Allis-Chalmers Corp. v. Freidkin, 635 F.2nd 248 (3rd Cir. 1980).
29 FAR § 25.105(b).
30 41 U.S.C. § 10a. As noted above, this exception is often the reason for enactment of “Little Buy American Acts.”
31 B-166137, 49 Comp. Gen. 176 (1969).
32 Id.
33 41 U.S.C. § 10a; and FAR § 25.104. The provision of the act which covers construction contracts includes an
additional exception for situations where the head of an agency determines that use of a domestic article would be
(continued...)
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of articles which come under this exemption.34 If an agency makes a determination that an article
not on the list is eligible for this exception, the agency must document this determination and
submit the documentation to the appropriate FAR Council.35
Micro Purchase Threshold
The Buy American Act is not applicable to procurements under $2,500 according to the Federal
Acquisitions Act of 1994.36
Amendments to the Buy American Act
There have been four substantive amendments to the Buy American Act in its long history. The
first such amendment was the Buy American Act of 1988, enacted as part of the Trade and
Competitiveness Act of 1988.37 The act’s general purpose was to prohibit federal procurement
from countries that discriminate against the United States in their procurement practices.38 The
1988 Act, by its terms, was to expire if not specifically extended by Congress. Congress did not
extend this act, and it expired on April 30, 1996.
The 1988 Act did contain one general amendment which applied to the Buy American Act as a
whole (i.e., it was not just limited to the prohibition on procurement from discriminating
countries). This amendment provided a definition for the Buy American Act of the term “federal
agency.”39 Because Congress placed this definition in the 1988 Act following the expiration
provision, one could argue that Congress did not intend for this provision to expire with the rest
of the amendments. However, due to the unequivocal nature of the expiration language of the
statute, the stronger argument appears to be that the definition lapsed as well, and that there is no
definition of “federal agency” in the current Buy American Act.40
The second substantive amendment to the Buy American Act added the micro purchase threshold
exception to the act.41 Under this exception the act does not apply to purchases under $2,500.

(...continued)
impractical. See 41 U.S.C. § 10b. See also 48 C.F.R. § 25.202(a)(1). Neither the act or the regulations give any
guidance as to the definition of this term. The regulations do require that if any of the exceptions are used, the excepted
materials must be listed in the contract and a written finding must be produced and be available for public inspection.
See FAR. § 25.202(b). We were unable to find any case which discussed this term in the context of the Buy American
Act. It should be noted that this is a separate exception from the one provided for situations where the material is
unavailable. Therefore, one might conclude that impractical is different from unavailable.
34 FAR § 25.104.
35 FAR § 25.103(b)(2).
36 P.L. 103-355, 108 Stat. 3346-7, 103rd Congress, 2nd Session (1994), codified at 41 U.S.C. 10a.
37 P.L. 100-418, 102 Stat. 1107, 100th Congress, 2nd Session (1988), codified at 41 U.S.C. 10b-1.
38 P.L. 100-418, § 7004, 102 Stat. 1552.
39 P.L. 100-418, § 7005, 102 Stat. 1552, codified at 41 U.S.C. § 10c.
40 See, explanatory notes following 41 U.S.C.A. § 10C and 41 U.S.C.S. § 10C.
41 P.L. 103-355, 108 Stat. 3346-7, 103rd Congress, 2nd Session (1994), codified at 41 U.S.C. 10a.
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The third amendment to the Buy American Act was contained in the National Defense
Authorization Act for Fiscal Year 1997.42 It requires the Secretary of Defense to submit a report to
Congress detailing the amount of purchases from foreign entities each year. The report must
contain the dollar value of items for which the act was waived in that year.
The 110th Congress extended, for FY2007 to FY2011, the requirement of annual reporting of
purchases from foreign sources to all federal agencies.43 These reports must include the total
dollar value of procured non-domestic articles, an itemized list of all waivers of the Buy
American Act with a citation to the authority for the waiver, citation of the specific exemption
utilized, and a summary of all the agency’s procurements.
Current Legislation
There have been no amendments to the Buy American Act introduced in the 111th Congress. The
American Recovery and Reinvestment Act44 (“The Stimulus Plan”) did not amend the Buy
American Act. It did, however, include a provision attaching domestic content considerations to
the funds disbursed under the Plan. Section 1605 of the Plan provided
Sec. 1605. Use of American Iron, Steel, and Manufactured Goods. (a) None of the funds
appropriated or otherwise made available by this Act 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.
(b) Subsection (a) shall not apply in any case or category of cases in which the head of the
Federal department or agency involved finds that—
(1) applying subsection (a) would be inconsistent with the public interest;
(2) iron, steel, and the relevant manufactured goods are not produced in the United States in
sufficient and reasonably available quantities and of a satisfactory quality; or
(3) inclusion of iron, steel, and manufactured goods produced in the United States will
increase the cost of the overall project by more than 25 percent.
(c) If the head of a Federal department or agency determines that it is necessary to waive the
application of subsection (a) based on a finding under subsection (b), the head of the
department or agency shall publish in the Federal Register a detailed written justification as
to why the provision is being waived.
(d) This section shall be applied in a manner consistent with United States obligations under
international agreements.

42 P.L. 104-201, § 827, 110 Stat. 2611 104th Congress, 2nd Session (1996), codified at 41 U.S.C. 10b-3.
43 P.L. 110-28, Title VIII, § 8306, 121 Stat. 112, 211, 110th Congress, 1st Session (2007), codified at 41 U.S.C. 10a(b).
44 P.L. 111-5,
Stat.
(2009).
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The Buy American Act: Requiring Government Procurements from Domestic Sources

Author Contact Information

John R. Luckey

Legislative Attorney
jluckey@crs.loc.gov, 7-7897

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