While often confused or interchanged, there is a big difference between Buy America and the Buy American Act . In this blog, we provide an overview of the two and what each means to Canadian businesses.
Do you get confused by the terms “Buy America” vs “Buy American”? Rest assured that you are not alone. While they sound very similar, from a legislative perspective, they affect Canadian businesses differently. Here is a quick snapshot of the difference between the two.
For purchases over $10,000 USD for construction projects, infrastructure investments, and procurement of goods and services.
Under FAR 25.003, for products that are not iron and steel products, a product qualifies as a domestic end product if the item is manufactured in the U.S. and more than 60 percent of the cost of all the component parts is also mined, produced, or manufactured in the U.S.
The standard for domestic end products increased to 60 percent on October 25, 2022, further increases to 65 percent in calendar year 2024, and 75 percent in calendar year 2029
“Buy America” refers to various loosely related statutes that provide for a domestic sourcing preference that apply to certain U.S. federal financial assistance programs.
The Build America, Buy America Act (BABAA) is the most expansive statute in the group requiring that financial assistance programs for infrastructure utilize American-made iron, steel, construction materials, and manufactured products. Affected projects include those involving highways, public transportation, airports, aviation and intercity passenger rail and some water infrastructure projects.
U.S. departments and agencies that are required to abide to Buy America requirements include 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).
Buy America requirements vary by department and agency and this table from the Canadian Trade Commissioner Service demonstrates what Canadian businesses need to know when evaluating potential procurement opportunities with each.
Contract value threshold at or above which the requirements apply
Impacted goods
Requirements
Federal Transit Administration (FTA) – Buses, subways and other mass transit projects
Iron, steel and other components of rolling stock (such as buses, vans, cars, railcars, locomotives, and ferry boats)
70% made in the U.S. Final assembly must also take place in the U.S.
100% made in the U.S.
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.
Iron, steel and manufactured goods
100% made in the U.S.
Amtrak – National Railroad Passenger Corporation
All manufactured and unmanufactured goods
50% made in the U.S.
Final assembly must also take place in the U.S.
Steel and manufactured goods
60% made in the U.S.
Final assembly must also take place in the U.S.
100% of the total cost of iron and steel products must come from U.S. components
Buy America requirements are typically attached to appropriations related to federally funded infrastructure projects for specific departments and agencies. For this reason, there are no Buy America requirements for Canadian contracts with U.S. DoD.
For non-U.S. DoD opportunities, if a U.S. procurement is covered by the obligations of the relevant section of the revised WTO Agreement on Government Procurement (GPA), Canadian suppliers may bid on the opportunity. When procurements are not covered by other trade agreements, the applicable Buy America requirements may be waived to allow the use of non-U.S. goods. Generally, waivers may be granted when:
Waiver requests and reviews are posted on the U.S. Federal Register. Each U.S. federal department and agency may have its own specific rules for the issuance of waivers and Canadian suppliers should consult with the department or agency to get a full understanding of when waivers may be granted and what documentation is required to apply for a waiver.
The Buy American Act (BAA), as implemented in Federal Acquisition Regulation (FAR) Part 25, requires the U.S. government to preferentially purchase goods and services that are made in the United States. The policy applies to a wide range of purchases over $10,000 USD made by federal agencies for construction projects, infrastructure investments, and procurement of goods and services.
Starting October 25, 2022, for a product to be considered as being produced in the U.S., it must be manufactured in the U.S. and at least 65 percent of the cost of their components must come from the U.S. These thresholds are due to increase in 2029 or later.
The Buy American Act requires all U.S. Federal agencies to procure domestic (U.S.-based) materials and products. Two conditions must be present for BAA to apply:
The U.S. government waives Buy American requirements for long-standing U.S. DoD bilateral reciprocal defence procurement agreements, such as the U.S. International Traffic and Arms Regulations that regulate the export of military equipment and the Canada-U.S. Defence Production Sharing Agreement (DPSA), which gives Canadian companies access to U.S. DoD procurement opportunities.
DFARS 225.872-1 which supports U.S. DoD’s ability to purchase products, services and solutions from Canada specifically states that:
As a result of memoranda of understanding and other international agreements, DoD has determined it inconsistent with the public interest to apply restrictions of the Buy American statute to the acquisition from qualifying countries, Canada being one of those countries.
Essentially, U.S. DoD contracts with Canada businesses are exempt from Buy American regulations and Canadian suppliers benefit from the same treatment as American suppliers.
When procurements are not covered by other trade agreements, the applicable Buy American restrictions may be waived if:
Canadian businesses looking for a Buy American Waiver may have to work with their sponsors and be prepared to help provide information for supporting documents.
In addition to exemptions for contracts with the U.S. DoD, Buy American requirements and Buy America 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.
When bidding on U.S. federal procurements covered by these agreements, Canadian suppliers benefit from the same treatment as American suppliers.