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FAR Part 25, Foreign FAR Part 25, Foreign AcquisitionAcquisition

Living Within BAA & TAA Living Within BAA & TAA RestrictionsRestrictions

Meredith Murphy Meredith Murphy GSA OCAOGSA OCAO

FAR Staff AnalystFAR Staff Analyst

March 3, 2009March 3, 2009

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FAR Part 25, Foreign FAR Part 25, Foreign Acquisition:Acquisition:

What Every User Should What Every User Should KnowKnow

Two statutes govern:Two statutes govern: The Buy American Act (BAA); orThe Buy American Act (BAA); or The Trade Agreements Act (TAA)The Trade Agreements Act (TAA)

The United States Trade The United States Trade Representative (USTR) negotiates Representative (USTR) negotiates trade agreements that govern trade agreements that govern applicability of these laws.applicability of these laws.

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Trade Agreements ActTrade Agreements Act

The USTR sets dollar thresholds for TAA The USTR sets dollar thresholds for TAA applicability by country and type of applicability by country and type of procurement.procurement.

If the estimated cost of your procurement is If the estimated cost of your procurement is over the TAA threshold, then the TAA governs.over the TAA threshold, then the TAA governs.

If the estimated cost of your procurement is If the estimated cost of your procurement is less than the TAA threshold, then the BAA less than the TAA threshold, then the BAA governs. governs.

For ID/IQ contracts, the estimated total dollar For ID/IQ contracts, the estimated total dollar value is thevalue is the the total dollar value of ALL task the total dollar value of ALL task orders to be issued under the ID/IQ.orders to be issued under the ID/IQ. TAA ALWAYS applies to ID/IQ task orders. TAA ALWAYS applies to ID/IQ task orders.

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TAA ThresholdsTAA ThresholdsTrade Trade AgreementAgreement

Supply Supply ContractContract

Service ContractService Contract Construction Construction ContractContract

WTO GPAWTO GPA $193,000$193,000 $193,000$193,000 $7,407,000$7,407,000

FTAsFTAs

Australia FTAAustralia FTA $64,786$64,786 $64,786$64,786 $7,407,000$7,407,000

Bahrain FTABahrain FTA $193,000$193,000 $193,000$193,000 $8,422,165$8,422,165

CAFTA-DR CAFTA-DR (El (El Salvador, Dominican Salvador, Dominican Republic, Guatemala, Republic, Guatemala, Honduras, and Honduras, and Nicaragua)Nicaragua)

$64,786$64,786 $64,786$64,786 $7,407,000$7,407,000

Chile FTAChile FTA $64,786$64,786 $64,786$64,786 $7,407,000$7,407,000

Morocco FTAMorocco FTA $193,000$193,000 $193,000$193,000 $7,407,000$7,407,000

NAFTANAFTA

--Canada--Canada $25,000$25,000 $64,786$64,786 $8,422,165$8,422,165

--Mexico--Mexico $64,786$64,786 $64,786$64,786 $8,422,165$8,422,165

SingaporeSingapore $64,786$64,786 $64,786$64,786 $7,407,000$7,407,000

Israeli Trade Israeli Trade ActAct

$50,000$50,000 ---- ----

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If Under TAA Threshold--If Under TAA Threshold--

BAA governs:BAA governs: No designated countriesNo designated countries Only one test, but two parts—Only one test, but two parts—

Domestic end product:Domestic end product: Manufactured in the United StatesManufactured in the United States ANDAND Cost of components mined, produced, or Cost of components mined, produced, or

manufactured in the United States manufactured in the United States exceeds 50 percent of the cost of all its exceeds 50 percent of the cost of all its components.components.

OR, if not manufactured, then end product OR, if not manufactured, then end product is mined or produced in the United States.is mined or produced in the United States.

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If Over TAA Threshold--If Over TAA Threshold--

TAA governs.TAA governs. Then, product must be from U.S. or a TAA Then, product must be from U.S. or a TAA

country.country. Products from TAA countries treated same Products from TAA countries treated same

as U.S. products. as U.S. products. ““Product” includes lease, rental, or lease-Product” includes lease, rental, or lease-

purchase purchase If not from U.S. or TAA country, then apply If not from U.S. or TAA country, then apply

substantial transformation test. substantial transformation test.

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What are Designated What are Designated Countries?Countries?

WTO GPA or Free Trade Agreement WTO GPA or Free Trade Agreement countriescountries

Least developed countries Least developed countries Caribbean Basin countries Caribbean Basin countries All are treated as TAA countriesAll are treated as TAA countries

Defined at FAR 25.003. Lists change Defined at FAR 25.003. Lists change periodically.periodically.

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Designated CountriesDesignated Countries

WTO GPA CountriesWTO GPA Countries: Australia, Bahrain, Canada, Chile, Dominican : Australia, Bahrain, Canada, Chile, Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Morocco, Republic, El Salvador, Guatemala, Honduras, Mexico, Morocco, Nicaragua, or SingaporeNicaragua, or Singapore

Free Trade Agreement CountriesFree Trade Agreement Countries: : Australia, Bahrain, Canada, Chile, Australia, Bahrain, Canada, Chile, Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Morocco, Nicaragua, or Singapore Morocco, Nicaragua, or Singapore ..

Least Developed CountriesLeast Developed Countries:: Afghanistan, Angola, Bangladesh, Benin, Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Cape Verde, Central African Bhutan, Burkina Faso, Burundi, Cambodia, Cape Verde, Central African Republic, Chad, Comoros, Democratic Republic of Congo, Djibouti, East Republic, Chad, Comoros, Democratic Republic of Congo, Djibouti, East Timor, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Timor, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Laos, Lesotho, Madagascar, Malawi, Maldives, Bissau, Haiti, Kiribati, Laos, Lesotho, Madagascar, Malawi, Maldives, Mali, Mauritania, Mozambique, Nepal, Niger, Rwanda, Samoa, Sao Mali, Mauritania, Mozambique, Nepal, Niger, Rwanda, Samoa, Sao Tome and Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, Tome and Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, Tanzania, Togo, Tuvalu, Uganda, Vanuatu, Yemen, or Zambia Tanzania, Togo, Tuvalu, Uganda, Vanuatu, Yemen, or Zambia

Caribbean Basin countriesCaribbean Basin countries: Antigua and Barbuda, Aruba, Bahamas, : Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, British Virgin Islands, Costa Rica, Dominica, Grenada, Barbados, Belize, British Virgin Islands, Costa Rica, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Netherlands Antilles, St. Kitts and Guyana, Haiti, Jamaica, Montserrat, Netherlands Antilles, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, or Trinidad and Nevis, St. Lucia, St. Vincent and the Grenadines, or Trinidad and Tobago Tobago

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Substantial Substantial TransformationTransformation

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 177.21-31).

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Foreign AcquisitionForeign Acquisition

Federal Acquisition Regulation (FAR) Federal Acquisition Regulation (FAR) Part 25, Foreign AcquisitionPart 25, Foreign Acquisition

http://acquisition.gov/far/index.htmlhttp://acquisition.gov/far/index.html

QUESTIONS?QUESTIONS?