As America Evolves, So Does the Buy American Act
How to comply with increasing domestic content threshold percentages
In early 2020, I wrote a blog post for Window + Door about the Buy American Act, its newly adopted rules and further anticipated changes. Since then, additional rules have been adopted that are more stringent than expected in early 2020. The Buy American Act only automatically applies in very specific circumstances: where a federal government contract requires compliance with the act. A state or other entity might also include the rules in its procurement requirements. Of course, for where it does apply, it is important to know whether your company’s windows and doors comply with the requirements.
History of the act
To recap, the Buy American Act requires federal public agencies to purchase products manufactured in the U.S. that are “substantially all” made from articles, materials or supplies that are mined, produced or manufactured in the U.S. by offering price preferences when these types of products are procured. (The “substantially all” test in the Buy American Act is different than the “all or virtually all” test for Made in America claims, the latter of which requires an even higher percentage of domestically sourced components.)
The Buy American Act intends to support American workers and manufacturers by using U.S. services and materials. “Substantially all” was originally interpreted by the Federal Acquisition Regulations to mean that a domestic end product must be manufactured in the U.S. and 50 percent of the components must be of U.S. origin. The percentage of domestic content in an end product, such as a window or door, is determined by the cost of the components.
Signed by former President Trump on July 15, 2019, Executive Order 13381: Maximizing Use of American-Made Goods, Products, and Materials changed the long-standing interpretation in two big ways. First, “components” was split into two categories with different thresholds:
- Iron and steel end products must have components of at least 95 percent U.S. origin, and
- All other end products must have components of at least 55 percent U.S. origin.
This second prong does not apply to items commercially available off-the-shelf. The EO added an exception allowing the government to purchase products not meeting the U.S. origin threshold if using a compliant end product would be unreasonably expensive compared to using a non-compliant end product.
The EO also asked the Federal Acquisition Regulatory council to determine whether the end component thresholds, now called “domestic content thresholds,” for non-iron or steel end components should be raised even higher. And they did just that.
Changes to the act
Signed by President Biden on Jan. 25, 2021, Executive Order 14005: Ensuring the Future is Made in All of America by All of America’s Workers announced big changes to the Buy American Act. The new rules increase the domestic content threshold percentages over time:
- Starting Oct. 25, 2022, the threshold was increased to 60 percent.
- Starting Jan. 1, 2024, the threshold will increase to 65 percent.
- Starting Jan. 1, 2029, the threshold will increase to 75 percent.
It is important to understand that the applicable threshold percentage is the threshold required at the time of delivery of the end product, not when the contract was signed. For example, windows sold pursuant to a contract signed in 2023 must meet the domestic content thresholds in place at the time of delivery. The new rules provide for an exception where it is not feasible for a contractor to comply with the changing threshold throughout the life of the contract.
Another new exception is a fallback threshold that will allow an end product meeting a 55 percent domestic content threshold to qualify as a domestic product until one year after the 75 percent threshold is implemented in 2029 if certain circumstances are present, including the unavailability of products meeting the required threshold or the unreasonable cost of the products.
How to comply
Federal contractors undertake most of the work to comply with the Buy American Act, where it applies. However, there are things a window manufacturer can do upfront to increase the chance of getting the order for government projects.
First, make sure your salespeople know to look for references to the Buy American Act when they are seeking business for federal projects. The act may be written into contracts between the government and the manufacturer, or could be referenced in a contract entered into with a builder or distributor.
Second, do the work now to determine the percentage of domestic content in your windows and doors by performing a domestic versus foreign component cost analysis. You may need to enlist the help of your suppliers to complete this task. If the thresholds are comfortably met, document the percentages for future reference and end the review there. If your company sells product that does not or may not meet the applicable threshold, consider whether it would be beneficial to incorporate more domestic components into your windows and doors to increase the domestic content percentage of your product. In other words, play it safe.