New Buy American Act Requirements for Businesses

New Buy American Act Requirements for Businesses

On July 15, 2019, U.S. President Donald Trump signed an executive order raising the minimum threshold of American-made components required in order to be eligible for federal projects. 

New Requirements Under the Buy American Act

Under the Buy American Act, companies supplying goods to federal agencies must ensure a percentage of those goods are made in the U.S. with domestically sourced material. The latest executive order will increase the required threshold from 50 percent to 75 percent. For goods using iron or steel, 95 percent of those metals must be supplied from the U.S.

By January 11, 2020, businesses competing for lucrative government contracts must ensure their goods meet the new threshold, or risk disqualification from the bidding processes. Companies that win contracts must also be prepared to produce evidence of country of origin due diligence for sourced components and materials.

Learn how the Assent Compliance Platform can help you source your products with our Country of Origin guide.

More Scrutiny for Buy American Requirements

Initially signed in 1933, the Buy American Act applies to articles, materials and supplies made for public use. An earlier executive order issued in 2017 required all agencies to assess their compliance with the Buy American Act and related legislation. While the order did not change the law, it signaled a shift toward greater scrutiny and enforcement of existing sourcing regulations and policy.

In past iterations of the act, allegations of non-compliance generally came from competing businesses or whistleblowers; however, the government also monitors activity. This means businesses that win contracts should be prepared to prove the country of origin of their products.

Penalties for Non-Compliance

The U.S. awards hundreds of billions of dollars worth of contracts every year, creating a large, highly competitive market. Companies that win contracts but fail to adhere to the requirements outlined in the act face a number of penalties, including:

  • Fines.
  • Debarment from future government contracting opportunities.
  • Termination of existing contracts.
  • Mandatory replacement of non-compliant materials.
  • Reputational harm.

In 2016, a Wisconsin-based architectural firm pled guilty to charges under the False Claims Act after it was found they were concealing the use of foreign-made materials in federal construction projects. The company paid a $3 million USD fine, and the firm was banned from bidding on future government projects.

Product Composition

The percentage cost of a manufactured product determines its compliance with the Buy American Act, as the total cost of components not sourced from the U.S. must not exceed 25 percent of the total product value. As a result, companies producing manufactured goods for government contracts must prove the overall composition of a product is compliant by presenting country of origin information down to the part level.

Certain exemptions allow for the procurement of goods from countries that signed a free trade agreement with the U.S.

How Assent Can Help

Part of the Assent Compliance Platform, the Trade Classification & Origin Module helps companies comply with the Buy American Act requirements by automating data collection for country of origin information, product-level percentage content data and product classifications. To learn more, contact us at info@assentcompliance.com.

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