The Buy American Act and Buy America requirements
Other key Information
- 1. Buy America(n) essentials
Buy American and Buy America are separate legislative and regulatory requirements:
- Buy American requirements apply to direct purchases by the U.S. federal government valued at more than US$10,000.
- Buy America requirements apply to purchases of iron, steel and other manufactured products permanently incorporated into infrastructure projects. Further, these projects must be undertaken by U.S. states and municipalities with funds issued by certain U.S. federal departments and agencies.
- These departments and agencies are: the U.S. Environmental Protection Agency (EPA), the U.S. Federal Transit Administration (FTA), the U.S. Federal Highway Administration (FHWA), the U.S. Federal Railroad Administration (FRA), Amtrak and the U.S. Federal Aviation Administration (FAA).
The 1933 Buy American ActFootnote 1
The Buy American Act applies to all U.S. federal government agency purchases of goods (articles, materials, or supplies) valued over the U.S. micro-purchase threshold (currently set at US$10,000). When purchased by federal entities for public use, the Act requires that these goods be produced in the U.S.
To be considered as being produced in the U.S., goods must be manufactured in the U.S. and at least 50% of the cost of their components must come from the U.S.
There are exceptions to Buy American requirements. Waivers can be granted for the public interest, or if the cost of U.S. products is unreasonable compared to equivalent foreign products.
Waivers may also be granted if products are not produced in the U.S. in sufficient and reasonably available commercial quantities of satisfactory quality. For more information, please see Exceptions and Waivers.
Buy American requirements do not apply to Canada for U.S. federal purchases covered by the revised World Trade Organization Agreement on Government Procurement (WTO GPA), to which Canada, the U.S. and 46 other countries are Parties (see below).
When bidding on U.S. federal procurements covered by these agreements, Canadian suppliers benefit from the same treatment as American suppliersFootnote 2.
Buy America requirements attached to U.S. federal funding
Over the years, the U.S. Congress has enacted a number of Buy America requirements applying to purchases of iron, steel and other manufactured products used in infrastructure projects that receive federal funding from specific departments and agencies (hereafter 'agencies').
While waivers are possible, these requirements put Canadian goods and services at a serious disadvantage when they are applied to a procurement process.
Buy America requirements vary depending on the funding agency as well as the type of good being purchased. Even if a federal agency funds only a small part of an infrastructure project undertaken by a state or municipality, Buy America requirements apply to the project as a whole.
The following table summarizes the most important Buy America requirements. For the complete details, consult the relevant U.S. agency's website.
| N/A | Contract value threshold at or above which the requirements apply | Impacted goods | Requirements |
|---|---|---|---|
| Federal Transit Administration (FTA) - Buses, subways and other mass transit projects | US$150,000 | Iron, steel and other components of rolling stock (defined in 49 CFR Part 661.3 as transit vehicles such as buses, vans, cars, railcars, locomotives, trolley cars and buses, and ferry boats) Non-rolling stock | 70% made in the U.S. Final assembly must also take place in the U.S. 100% made in the U.S. |
| Federal Highway Administration (FHWA) - Highways | US$2,500 or 0.1% of the contract value, whichever is higher | Iron, steel and manufactured goods made predominantly of steel and iron Does not apply to raw materials such as iron ore, pig iron, scrap steel and limestone. | 100% made in the U.S. |
| Federal Railroad Administration (FRA) - Trains | US$100,000 | Iron, steel and manufactured goods | 100% made in the U.S. |
| Amtrak - National Railroad Passenger Corporation | US$1 million | All manufactured and unmanufactured goods | 50% made in the U.S. Final assembly must also take place in the U.S. |
| Federal Aviation Administration (FAA) - Airport construction | No threshold | Steel and manufactured goods | 60% made in the U.S. Final assembly must also take place in the U.S. |
| Environmental Protection Agency | No threshold | Manufactured goods made with iron and steel funded by the following EPA programs: Clean Water State Revolving Fund; Drinking Water State Revolving Fund; Water Resources Reform and Development Act (PDF format); and Water Infrastructure Finance and Innovation Act | 100% of the total cost of iron and steel products must come from U.S. components |
Buy America requirements at the state level
Many U.S. states include Buy American-like local content requirements in their procurement legislation. Refer to the website of the relevant state-level government for more information.
Set asides for small businesses
The U.S. federal government requires that procurements below US$250,000 be set aside for U.S. small businesses if at least two of them are expected to be qualified to bid on a specific procurement.
Canadian firms legally do not qualify to bid directly on contracts set aside for small, minority or disadvantaged businesses. However, there are a number of ways Canadian suppliers may participate in such a contract:
- Subcontracting: The small business prime contractor may spend up to 50% of the value of a contract set aside for a small business on any other type of business.
- Joint venture - small business: If you are a small business under the size standards applicable to a procurement, you may form a joint venture with a U.S. small business to bid on a set aside contract.
- Joint venture - mentor: If you are a large business, you may enter into a protégé-mentor joint venture with a U.S. small business, and be able to bid on a set aside contract. A mentor must provide assistance to a protégé (it can be technical or financial). The small business must be designated as the manager of the joint venture, and perform at least 40% of the work performed by the joint venture. For a legally established joint venture, the small business must own at least 51% of the joint venture entity.
You can find out more about rules applicable to small business set asides at 13 C.F.R. Subpart 125 (PDF format).
The U.S. government procurement trade obligations
Revised WTO Agreement on Government Procurement
Canada, the U.S. and 46 other countries are Parties to the revised World Trade Organization Agreement on Government Procurement (WTO GPA), which came into force in April 2014Footnote 3. The WTO GPA sets out common rules and procedures regarding covered government procurement activities, which reflect the principles of non-discrimination, transparency, impartiality and fairness.
All parties to the WTO GPA have adopted specific commitments with regard to their procurement markets, which indicate which of their entities, goods and services are covered by the obligations of the Agreement. They have also identified thresholds (monetary contract values) above which the obligations apply, as well as specific exceptions. The U.S.' and other Parties' specific obligations can be found in their market access schedule (annex) to the WTO GPA, accessible through the e-GPA Portal.
In addition to covering the procurement of most federal entities, the U.S. has adopted WTO GPA commitments to varying degrees for 37 statesFootnote 4.
When bidding on these covered procurements in the U.S., Canadian suppliers benefit from the rules set out in the WTO GPA, including the requirement to treat foreign suppliers no less favourably than U.S. domestic suppliers. For a list of covered entities at the U.S. federal and state level, refer to the WTO GPA Market Access Schedule (Annex) for the United States. Note that none of the U.S.' WTO GPA commitments apply to procurements at the municipal level.
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