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What is the “Buy American Act” and What Does it Say?

The most important objective of the Buy American Act is to assure that American goods are prioritized when the US government purchases products. The important question is: What is the definition of an American Good? This is found in the text of the actual Legislation, and the important aspects are in the definition of a Domestic End Product. Lets look directly into the text of the legislation for this:

“Domestic end product” means—

(1) An unmanufactured end product mined or produced in the United States; or

(2) An end product manufactured in the United States, if the cost of its components mined, produced, or manufactured in the United States exceeds 50 percent of the cost of all its components (see below). Components of foreign origin of the same class or kind as those that the agency determines are not mined, produced, or manufactured in sufficient and reasonably available commercial quantities of a satisfactory quality are treated as domestic. Scrap generated, collected, and prepared for processing in the United States is considered domestic.

“Cost of components” means—

(1) For components purchased by the contractor, the acquisition cost, including transportation costs to the place of incorporation into the end product or construction material (whether or not such costs are paid to a domestic firm), and any applicable duty (whether or not a duty-free entry certificate is issued); or

(2) For components manufactured by the contractor, all costs associated with the manufacture of the component, including transportation costs as described in paragraph (1) of this definition, plus allocable overhead costs, but excluding profit. Cost of components does not include any costs associated with the manufacture of the end product.

In short, over 50% of the cost in the manufacturing process must be in incurred in the United States. If you are looking to offer your products to the federal government, then you will want to get a GSA Contract, and offer your products on your schedule. We advise that you look into any modifications or amendments to the law before taking action on the information provided in this blog post.