Six Essential Tips for Navigating Buy American Compliance in Government Contracts

In celebration of the release of the 6th Edition of the Government Contracts Compliance Handbook, we are sharing six essential tips for understanding and navigating Buy American compliance in government contracts. These requirements are critical for contractors working with the U.S. federal government, as failure to comply can lead to penalties, contract disputes, and potential disqualification from future procurement opportunities. This article offers practical guidance to help contractors navigate the complexities of the Buy American Act and ensure they remain in full compliance with federal laws and regulations. 

1. Understand the Basics of the Buy American Act and Trade Agreements Act

The Buy American Act (BAA) and the Trade Agreements Act (TAA) serve as the foundation of U.S. domestic preference laws. The BAA, enacted in 1933, provides a preference for U.S.-manufactured products in government contracts. In contrast, the TAA, enacted in 1979, allows for the procurement of products from designated countries that have trade agreements with the U.S. 

A key distinction is that the BAA applies an evaluation price preference for domestic products, while the TAA establishes an absolute prohibition on non-designated country products when applicable. Federal contractors must correctly identify which regulation applies to a particular procurement and ensure their products comply accordingly. 

2. Determine the Domestic Content Thresholds

The BAA applies a domestic content test to determine if a product qualifies as a “domestic end product.” Recent regulatory changes have increased these thresholds: 

• 2022: Increased from 55% to 60% 

• 2024: Increased to 65% 

• 2029: Set to increase to 75% 

Contractors must monitor these phased-in changes and ensure ongoing compliance with rising domestic content thresholds. 

3. Identify the Correct Country of Origin

For BAA compliance, a product must be “manufactured” in the U.S., and its domestic components must exceed the applicable threshold discussed above. For TAA compliance, a product must be “substantially transformed” in a designated country. 

The FAR does not define what actions constitute “manufacturing,” though case law confirms that merely packaging or testing a product in the U.S. does demonstrate that the product was “manufactured” in the U.S.  The concept of “substantial transformation” is determined by whether a product undergoes significant changes that result in a new and distinct article of commerce. Both “manufacturing” and “substantial transformation” are fact-specific analyses. 

4. Avoid Common Pitfalls in Certifications

BAA and TAA compliance largely relies on self-certification, making it imperative for contractors to verify their supply chains. Common mistakes include: 

• Incorrectly certifying foreign products as compliant based on a misunderstanding of the COO rules 

• Failing to update certifications when suppliers change 

• Misunderstanding when the TAA applies (i.e., procurements exceeding the threshold values for trade agreement coverage) 

Failure to comply can lead to severe penalties, including contract termination, False Claims Act liability, and suspension or debarment from federal contracting. 

5. Monitor Changes in Supply Chains and Government Policy

Buy American requirements are subject to frequent updates due to executive orders and regulatory changes. For example: 

• Executive Order 14005 emphasized strengthening Made in America laws 

• The Build America, Buy America Act (BABA) expanded domestic sourcing requirements for federally funded infrastructure projects 

Contractors must establish internal compliance programs to track changes in regulations and maintain accurate documentation of their supply chains. 

6. Implement Robust Compliance and Oversight Measures

To mitigate compliance risks, contractors should: 

• Conduct regular audits of supply chains to verify country-of-origin compliance 

• Maintain separate inventories of BAA- and TAA-compliant products 

• Establish internal review processes for certifications and supplier changes 

• Seek legal guidance when facing complex country-of-origin determinations 

Given the risks of noncompliance—including financial penalties and potential exclusion from federal contracting—proactive compliance measures are essential. 

Navigating Buy American compliance is a critical component of federal contracting, but with the right approach, contractors can avoid the risks of noncompliance and leverage opportunities to enhance their relationship with the U.S. government. By following these six essential tips, contractors can better ensure that their products meet the necessary requirements, their documentation is in order, and they are up-to-date with the latest regulations. 

These insights, drawn from the 6th Edition of the Government Contracts Compliance Handbook, reflect our commitment to helping contractors navigate complex government contracting challenges. For tailored guidance on Buy American and other domestic sourcing compliance, our government contracts practice group is here to provide expert legal advice and support.