Buy American Act Compliance Requires More Than a Certificate

Buy American Act compliance now requires closer review of component origin, domestic content thresholds, and contract-specific exceptions. For government contractors, the increased domestic content requirements and differences between FAR and DFARS make sourcing, supplier certifications, and documentation critical to supporting accurate compliance certifications.

Highlights

• Buy American Requirements. Covered federal supply contracts require contractors to determine whether delivered end products qualify as domestic or must be identified as foreign end products under the Buy American Act.
• Domestic Content Thresholds. The domestic component threshold is 65 percent for 2024 through 2028 and increases to 75 percent beginning in 2029, making component origin and cost tracking increasingly important.
• Prime Contractor Responsibility. Prime contractors remain responsible for verifying Buy American compliance for subcontracted items, even when supplier certifications are obtained or contract clauses are flowed down.
• FAR and DFARS Differences. Contractors performing both DoD and non-DoD work must distinguish between FAR and DFARS treatment of domestic end products, especially when qualifying country rules may apply.
• Certification Risk. Inaccurate origin determinations or unsupported Buy American certifications can create significant contract and compliance exposure, including termination risk and potential False Claims Act liability.

The Buy American Act (BAA) clause, FAR 52.225‑1 Buy American- Supplies, and provision FAR 52.225-2 Buy American Certificate are included in federal contracts exceeding the micro-purchase threshold and require government contractors to deliver domestic end-products unless an exception applies. This is an important and complex topic, and it is vital to ensure you are complying with the requirement.

The key definitions in the clause are:

• Domestic end-product: manufactured in the United States or meets domestic component thresholds.
• Component: any articles, material, or supply incorporated directly into an end-product.
• Cost of components: acquisition cost includes transportation and duties for purchased components or manufacturing cost, including overhead (excluding profit) for contractor produced components.
• Commercially available off-the-shelf (COTS) item: COTS components are exempt from the component test.
• United States: includes the 50 States, the District of Columbia and outlying areas.
• Predominantly iron or steel: the cost of the iron and steel content exceeds 50 percent of the total cost of all the components.
• Steel: an alloy that includes at least 50 percent iron, between 0.02 and 2 percent carbon.

The FAR 52.225-2 Buy American Certificate is a provision whereby government contractors must provide a list of:

• Foreign end products
• Products that contain a critical component (e.g., FAR 25.105)

As of the date of this article, FAR 25.105 has not yet been populated with a list of critical components, but government contractors will need to include any critical end-item components in the Buy American Certificate once the FAR is updated.

What is the Domestic Content Threshold?

The domestic content threshold under the Buy American Act (BAA) is the minimum percentage of the total cost of components of an end item that must be manufactured in the United States for a product to qualify as a domestic end-product. The domestic content requirement has increased over time. For 2024 – 2028, the required US component threshold is 65%. Beginning in 2029, the percentage increases to 75%. The percentage calculation is based solely on the cost of components in the end-product. It excludes labor, overhead, and other costs added by the prime contractor.

For example, if a supplier builds a component/sub-assembly in the U.S., the component is a domestic component even if it contains 100% Chinese electronics. However, other prohibitions may apply (read more in our article, FAR Case 2023-008 The Proposed Rule on Prohibiting Certain Semiconductor Products and Services).

If the supplier moves the final assembly step of that component from the U.S. to Mexico, the entire cost of the component is considered foreign for the threshold content calculation. Prime contractors sign the Buy American Act (BAA) certificate to certify that the end items meet the domestic content threshold or provide a list of foreign line items that do not qualify as domestic. DoD can treat some qualifying foreign countries as domestic, as discussed below.

There are additional requirements if 50% of the components of an end item are predominantly iron or steel.

Is FAR 52.225-1 a Flowdown Clause?

Although FAR 52.225‑1 (Buy American—Supplies) is not a mandatory flowdown clause, a prime contractor should flow it down when a subcontractor is providing a deliverable end item under the prime contract. The prime contractor remains responsible for ensuring that any subcontracted items comply with Buy American requirements and may require supporting documentation to demonstrate compliance.

Some prime contractors choose to include this clause in all subcontracts for consistency; however, doing so does not relieve the prime contractor of its obligation to verify that components or materials supplied by vendors or subcontractors qualify as domestic.

Are There Other Exceptions?

For DoD contracts, DFARS 252.225‑7001 (Buy American and Balance of Payments Program) applies, and this clause allows contractors to treat qualifying‑country end-products as domestic. This is a key distinction from FAR 52.225‑1, which does not recognize the qualifying‑country exception and therefore does not apply to civilian agencies.

Prime contractors performing both DoD and non‑DoD work must account for these differences when applying the domestic content test. In particular, an item that qualifies as “domestic” under DFARS because it originates from a qualifying country may not qualify as domestic under FAR rules. As a result, primes must ensure that sourcing decisions, supplier certifications, and compliance documentation comply with the applicable regulations for each contract.

Takeaway

Under the Buy American Act, prime contractors are responsible for ensuring that the end products they deliver to the Government comply. This requires the prime contractor to trace the supply chain, verify the origin of components, document how domestic content was calculated, and identify any applicable exceptions, such as COTS items or qualifying‑country components under DoD contracts.

The origin of a component is determined by where it is physically manufactured or where final assembly occurs. A component shipped from a U.S. warehouse does not qualify as domestic unless its manufacturing or final assembly took place in the United States. Prime contractors must therefore verify the actual manufacturing location of each component and apply the correct exceptions based on the contract type.

For government contractors performing both DoD and non‑DoD work, it is critical to recognize that qualifying‑country components may be treated as domestic under DFARS 252.225‑7001 but cannot be excluded from the domestic content calculation under FAR 52.225‑1 for civilian agencies. Misapplying these rules can result in inaccurate origin certifications.

Providing incorrect origin or compliance information exposes contractors to significant consequences, including contract termination and potential liability under the False Claims Act.

Maintaining Buy American Act Compliance

Redstone GCI supports government contractors by reviewing contract clauses, supplier certification documentation, subcontract flowdowns, purchasing procedures, and documentation practices tied to Buy American Act requirements. This includes helping government contractors distinguish between FAR 52.225 1 and DFARS 252.225 7001 requirements, assess whether domestic content and qualifying country rules are being applied correctly, evaluate how component origin is documented, and align purchasing, contracts, accounting, and program teams around the records needed to support accurate certifications. Our team of experts can also provide training and operational support to enable government contractors to strengthen internal review processes before sourcing decisions, subcontract awards, or certificate submissions create avoidable compliance risk.

Frequently Asked Questions (FAQs)

• What is the Buy American Act? The Buy American Act requires certain federal contractors to deliver domestic end products to the Government unless an exception applies. For supply contracts, contractors must know where end products and components are manufactured and whether they meet the domestic content threshold.
• When does the Buy American Act apply? The Buy American Act generally applies when a contract includes Buy American supply requirements and exceeds the micro-purchase threshold. Contractors should review the contract clauses and certification requirements before assuming the rule applies.
• What makes an end product domestic? An end product may qualify as domestic when it is manufactured in the United States and meets the applicable domestic component threshold. For 2024 through 2028, the threshold is 65 percent; beginning in 2029, it increases to 75 percent.
• Does buying from a U.S. supplier make a component domestic? Not necessarily. A component shipped from a U.S. warehouse does not qualify as domestic unless it was manufactured or finally assembled in the United States. Verify the actual manufacturing or final assembly location, not just the supplier’s shipping location.
• Does a prime contractor have to flow Buy American requirements to subcontractors? FAR 52.225 1 is not a mandatory flowdown clause, but a prime contractor should consider flowing it down when a subcontractor provides a deliverable end item under the prime contract. The prime contractor remains responsible for Buy American compliance for the items delivered to the Government.
• Why do FAR and DFARS differences matter? DoD contracts may allow certain qualifying country end products to be treated as domestic under DFARS rules. That treatment does not apply the same way under FAR rules for civilian agency contracts, so contractors performing both DoD and non-DoD work must apply the correct rule to each contract.