1 FAR Part 25, Foreign Acquisition Living Within BAA & TAA Restrictions Meredith Murphy GSA OCAO FAR Staff Analyst March 3, 2009

2 FAR Part 25, Foreign Acquisition: What Every User Should Know Two statutes govern: Two statutes govern: The Buy American Act (BAA); or The Buy American Act (BAA); or The Trade Agreements Act (TAA) The Trade Agreements Act (TAA) The United States Trade Representative (USTR) negotiates trade agreements that govern applicability of these laws. The United States Trade Representative (USTR) negotiates trade agreements that govern applicability of these laws.

3 Trade Agreements Act The USTR sets dollar thresholds for TAA applicability by country and type of procurement. The USTR sets dollar thresholds for TAA applicability by country and type of procurement. If the estimated cost of your procurement is over the TAA threshold, then the TAA governs. If the estimated cost of your procurement is over the TAA threshold, then the TAA governs. If the estimated cost of your procurement is less than the TAA threshold, then the BAA governs. If the estimated cost of your procurement is less than the TAA threshold, then the BAA governs. For ID/IQ contracts, the estimated total dollar value is the the total dollar value of ALL task orders to be issued under the ID/IQ. For ID/IQ contracts, the estimated total dollar value is the the total dollar value of ALL task orders to be issued under the ID/IQ. TAA ALWAYS applies to ID/IQ task orders. TAA ALWAYS applies to ID/IQ task orders.

4 TAA Thresholds Trade Agreement Supply Contract Service Contract Construction Contract WTO GPA $193,000$193,000$7,407,000 FTAs Australia FTA Australia FTA$64,786$64,786$7,407,000 Bahrain FTA Bahrain FTA$193,000$193,000$8,422,165 CAFTA-DR (El Salvador, Dominican Republic, Guatemala, Honduras, and Nicaragua) CAFTA-DR (El Salvador, Dominican Republic, Guatemala, Honduras, and Nicaragua)$64,786$64,786$7,407,000 Chile FTA Chile FTA$64,786$64,786$7,407,000 Morocco FTA Morocco FTA$193,000$193,000$7,407,000 NAFTA NAFTA --Canada --Canada$25,000$64,786$8,422,165 --Mexico --Mexico$64,786$64,786$8,422,165 Singapore Singapore$64,786$64,786$7,407,000 Israeli Trade Act $50,

5 If Under TAA Threshold-- BAA governs: BAA governs: No designated countries No designated countries Only one test, but two parts— Only one test, but two parts— Domestic end product: Domestic end product: Manufactured in the United States AND Manufactured in the United States AND Cost of components mined, produced, or manufactured in the United States exceeds 50 percent of the cost of all its components. Cost of components mined, produced, or manufactured in the United States exceeds 50 percent of the cost of all its components. OR, if not manufactured, then end product is mined or produced in the United States. OR, if not manufactured, then end product is mined or produced in the United States.

6 If Over TAA Threshold-- TAA governs. TAA governs. Then, product must be from U.S. or a TAA country. Then, product must be from U.S. or a TAA country. Products from TAA countries treated same as U.S. products. Products from TAA countries treated same as U.S. products. “Product” includes lease, rental, or lease- purchase “Product” includes lease, rental, or lease- purchase If not from U.S. or TAA country, then apply substantial transformation test. If not from U.S. or TAA country, then apply substantial transformation test.

7 What are Designated Countries? WTO GPA or Free Trade Agreement countries WTO GPA or Free Trade Agreement countries Least developed countries Least developed countries Caribbean Basin countries Caribbean Basin countries All are treated as TAA countries All are treated as TAA countries Defined at FAR Lists change periodically. Defined at FAR Lists change periodically.

8 Designated Countries WTO GPA Countries: Australia, Bahrain, Canada, Chile, Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Morocco, Nicaragua, or Singapore WTO GPA Countries: Australia, Bahrain, Canada, Chile, Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Morocco, Nicaragua, or Singapore Free Trade Agreement Countries: Australia, Bahrain, Canada, Chile, Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Morocco, Nicaragua, or Singapore. Free Trade Agreement Countries: Australia, Bahrain, Canada, Chile, Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Morocco, Nicaragua, or Singapore. Least Developed Countries: Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Cape Verde, Central African Republic, Chad, Comoros, Democratic Republic of Congo, Djibouti, East Timor, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Laos, Lesotho, Madagascar, Malawi, Maldives, Mali, Mauritania, Mozambique, Nepal, Niger, Rwanda, Samoa, Sao Tome and Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, Tanzania, Togo, Tuvalu, Uganda, Vanuatu, Yemen, or Zambia Least Developed Countries: Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Cape Verde, Central African Republic, Chad, Comoros, Democratic Republic of Congo, Djibouti, East Timor, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Laos, Lesotho, Madagascar, Malawi, Maldives, Mali, Mauritania, Mozambique, Nepal, Niger, Rwanda, Samoa, Sao Tome and Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, Tanzania, Togo, Tuvalu, Uganda, Vanuatu, Yemen, or Zambia Caribbean Basin countries: Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, British Virgin Islands, Costa Rica, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Netherlands Antilles, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, or Trinidad and Tobago Caribbean Basin countries: Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, British Virgin Islands, Costa Rica, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Netherlands Antilles, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, or Trinidad and Tobago

9 Substantial Transformation Applicable only over TAA threshold An article is substantially transformed when it emerges from processing as a new and different article of commerce that possesses a new name, character, or use. (19 U.S.C. 2518(4)(B)(ii)) “Processing” can include assembly, machining, mixing, or blending. Example: National Juice Products Assoc. v. U.S. U.S. Customs and Border Protection: Advisory rulings & final determinations (19 CFR ).

10 Foreign Acquisition Federal Acquisition Regulation (FAR) Part 25, Foreign Acquisition Federal Acquisition Regulation (FAR) Part 25, Foreign Acquisition QUESTIONS? QUESTIONS?