Are you a contractor selling to the government under the Federal Acquisition Regulation (FAR) Buy American Act? If so, there is a new final rule that will gradually increase the U.S. content of products, beginning October 25, 2022. This new rule is intended to grow domestic production of goods and support workers critical to U.S. economy and national security in products purchased by the federal government.

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

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 complete list of critical items and components—along with their associated enhanced price preferences—will be established in a future rulemaking. The enhanced preferences will only be used once that future rule takes effect.

The October 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 planned in the price preference rulemaking referenced above.

What can I do to prepare?

  • Understand the final rule’s changes and the impact they will have on your products.
  • Review your purchasing practices to meet the increasing U.S. content requirements.
  • Make sure to maintain recordkeeping to support your claim.

If you have questions about this new rule and how it will impact your supply chain, reach out to Mohawk Global Trade Advisors.

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