Background

The Biden administration has finalized a regulatory change that will increase U.S. content in the products purchased by the federal government and support domestic production of goods critical to U.S. economic and national security. This rule will take effect Oct. 25, 2022.

Domestic content threshold. Under the Buy American Act, products bought with taxpayer dollars must be “substantially all” made in the U.S, but currently products can qualify if just 55 percent of the value of their component parts was manufactured in the U.S. The final rule will initially increase this threshold to 60 percent, further raise it to 65 percent in 2024, and cap it at 75 percent in 2029. However, the current threshold may be accepted until 2030 when end products or construction materials that meet the new thresholds are not available or are of unacceptable cost.

Price preferences. Based on the idea that “some products are simply too important to our national and economic security to be dependent on foreign sources,” the final rule will apply enhanced price preferences to end products and construction materials deemed to be critical or made up of critical components. A definitive list of critical items and components, along with their associated enhanced price preferences, will be established in a subsequent rulemaking. The enhanced preferences will only be used once that final rule takes effect.

Transparency. The final rule does not include a proposed requirement for contractors to provide the specific domestic content of critical items, domestic end-products containing a critical component, and domestic construction material containing a critical component that were awarded under a contract. Instead, this requirement will be proposed in the price preference rulemaking referenced above.

For more information on this rule or Buy American requirements, please contact attorney Mark Tallo at (202) 730-4968 or via email.

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