The Buy American Act (BAA) has been a significant piece of legislation that has impacted American companies and workers for decades. At its core, the BAA is designed to protect American labor and businesses by restricting the acquisition and use of end products that are not considered “domestic.” In other words, the BAA makes federal government agencies purchase certain goods that are manufactured and produced in the United States.
The BAA traces its origins to the 1930s, yet it continues to have a substantial impact on the US economy today, for the following reasons:
At the end of January, President Biden initiated an executive order to maximize the purchase of American-made supplies. Many of the Solar Lighting players in North America import components form abroad and these recent changes are likely to affect their products compliance with the Buy American Act.
The first significant change centered on the qualifications for “domestic end products” under the BAA. Looking at the long-standing rule, an end product would be deemed domestic if at least 50% of the cost of components had an American origin. That 50% threshold is being raised to 55%, meaning that solar lighting suppliers may need to find new domestic suppliers to comply with this update.
From the increase of the “domestic end products” threshold, President Biden’s executive order increased the price evaluation preference that was enjoyed by offerors of domestic end products. Before the change, these offerors received a 6% evaluation preference in civilian procurements, as compared to offerors of foreign end products. That 6% preference doubled to 12% if the offeror was a small business. Now, the price evaluation preference has been bumped up to 20% for domestic offerors and 30% for domestic offerors that are small businesses, like SOL. Notably, this change does not affect Department of Defense procurements (and their 50% evaluation preference).
Third, the executive order replaces the BAA’s “cost of component test.” This long-standing test was replaced with a new test for determining the country of origin under the BAA. Specifically, this test measures domestic content through “the value that is added to the product through U.S.-based production or U.S.-job supporting economic activity.” Even though the BAA does not define how to measure “value,” this change may force some solar lighting manufacturers to take a hard look at whether they are out of compliance.
From this new country of origin test, there has been an update to the Federal Acquisition Regulation (FAR) list of “nonavoidable articles.” These articles are exempt from the BAA. The update is to help determine whether there is still a reasonable basis to conclude that the listed articles are not mined, produced, or manufactured in America in sufficient quality and quantities. Solar lighting manufacturers will have to review this update to see whether certain items have been added or removed from the nonavoidable articles list.
Finally, there is a new requirement before agencies grant a public interest waiver. Agencies have to consider whether any cost advantage from a foreign-sourced product is from the use of “dumped steel, iron, or manufactured goods” or the use of “injuriously subsidized steel, iron, or manufactured goods.” It is recommended that waiver-granting agencies work with the Commerce Department (specifically, the International Trade Administration when making this determination. In essence, solar energy manufacturers need to be extremely careful where they sourcing their products and components.
At SOL, we are proud that 87% of the components in the EverGen are made in the United States. That being said, recent changes to the BAA will force other manufacturers to make internal changes, which may affect the solar lighting industry as a whole.
Manufacturers in the solar lighting space need to ensure that they are up to speed on these new requirements. By doing so, they can not only comply with the law, but provide value to both their customers and their country.
For more information on the changes made to the Buy America Act, feel free to click here
