Key takeaways
- Buy American Act: a price penalty on foreign products in direct federal purchases below the trade agreement thresholds. A US-made product needs more than 65% US components (75% from 2029).
- Trade Agreements Act (TAA): for larger federal purchases and GSA Schedules, products from 127 designated countries are treated like US products. Products from other countries generally can't be offered at all.
- Build America, Buy America (BABA): applies to infrastructure projects that states, cities, utilities and tribes pay for with federal grants. Iron, steel, manufactured products and construction materials must be produced in the US. There is no designated-country list, so the TAA doesn't help.
- For most state and local purchases paid with their own money, none of the three apply, though states have their own preferences.
- The same product can be compliant for one buyer and not for another, so check the funding source and contract type before you price a bid.
The three rules compared
| Buy American Act | Trade Agreements Act | Build America, Buy America | |
|---|---|---|---|
| Who it binds | Federal agencies buying directly | Federal agencies buying directly, at or above the thresholds | States, local governments, utilities, tribes and others spending federal grant or loan money on infrastructure |
| When it applies | Supplies and construction below the trade agreement thresholds (and some purchases the trade agreements exclude) | Covered purchases at or above the thresholds, such as $174,000 for supplies under the WTO GPA in 2026, and GSA Schedule contracts | Infrastructure projects funded by federal financial assistance |
| What it requires | Made in the US with more than 65% US component cost; otherwise a price penalty applies | Made in the US or a designated country, or substantially transformed there | Iron and steel produced in the US; manufactured products made in the US with more than 55% US component cost; construction materials made in the US |
| Effect on a foreign product | Can still win, but its price is marked up 20% (large business), 30% (small business) or 50% (Defense) during evaluation | Products from designated countries compete equally; products from other countries are generally excluded | Generally can't be used on the project unless the agency grants a waiver |
| Where the rules are | FAR Subpart 25.1 | FAR Subpart 25.4 | 2 CFR Part 184 |
Thresholds and percentages checked November 8, 2026 against the FAR and the March 2026 trade agreements thresholds notice. They change, so confirm them for your bid.
The Buy American Act
The Buy American statute dates from 1933. It doesn't ban foreign products from federal purchases. Instead, when a foreign product competes against a US-made one, the contracting officer adds a percentage to the foreign price before comparing offers: 20% if the lowest domestic offer is from a large business, 30% if it's from a small business, and 50% for Department of Defense purchases.
To count as a US product, a manufactured item has to be made in the US and the cost of its US-made components must exceed 65% of the cost of all its components for deliveries in 2024 through 2028. That rises to 75% for deliveries starting in 2029. Commercial off-the-shelf (COTS) items are exempt from the component test, though they must still be manufactured in the US.
What it means for you: the Buy American Act mostly matters for smaller federal orders. For larger orders the Trade Agreements Act usually takes over, and that's often better for companies in designated countries.
The Trade Agreements Act
The Trade Agreements Act of 1979 waives the Buy American Act for covered federal purchases at or above the trade agreement thresholds. For those purchases, products from 127 designated countries are treated the same as US products. The list includes the EU, the UK, Japan, South Korea, Taiwan, Canada, Mexico, Israel, Australia and most of Latin America. Products from countries that aren't on the list, such as China, India, Vietnam and Brazil, generally can't be offered.
The test is country of origin: where the product was wholly made, or where it was last substantially transformed into a new product with a different name, character or use. Assembling imported parts doesn't always count as substantial transformation. US Customs and Border Protection issues rulings when the answer isn't clear.
What it means for you: the TAA is the rule that matters most for GSA Schedule contracts, which are subject to it. If you make your product in a designated country, you can usually compete for large federal contracts on equal terms.
Build America, Buy America (BABA)
BABA was passed in November 2021 as part of the Infrastructure Investment and Jobs Act. It applies to infrastructure projects paid for with federal financial assistance: water and wastewater systems, roads, bridges, transit, broadband, the power grid, public buildings and similar projects. The buyers are usually not federal agencies. They are states, counties, cities, water and power utilities, transit agencies and tribes spending federal grant or loan money.
The Office of Management and Budget's guidance in 2 CFR Part 184 sets three tests:
- Iron and steel: all manufacturing processes, from the initial melting stage through the coating, must happen in the US.
- Manufactured products: made in the US, and the cost of US-made components must be greater than 55% of the cost of all components.
- Construction materials such as non-ferrous metals, plastics, glass, fiber optic cable, lumber and drywall: all manufacturing processes must happen in the US.
Unlike the TAA, BABA has no list of designated countries, so a product made in Germany or Japan is treated the same as one made anywhere else outside the US. The federal agency funding the project can grant waivers when US products aren't available in enough quantity or quality, when using them would raise the project's overall cost by more than 25%, or when a waiver is in the public interest. Some agencies have issued general waivers, such as for small grants or very low-cost components.
What it means for you: BABA is the rule foreign suppliers to US utilities and infrastructure owners run into most. Many foreign manufacturers respond by doing final manufacturing or assembly in the US, partnering with a US manufacturer, or concentrating on projects and buyers that aren't federally funded.
Other "Buy America" rules you may hear about
- Transit and highways: the Federal Transit Administration and the Federal Highway Administration have their own Buy America rules, which existed before BABA. Transit rolling stock, such as buses and rail cars, needs more than 70% US component cost and final assembly in the US.
- Water: the EPA's American Iron and Steel requirement applies to projects funded by the State Revolving Funds, alongside BABA.
- Defense: the Berry Amendment requires US-made clothing, textiles, food and certain other items for Defense Department purchases.
State and local buyers
The Buy American Act and the TAA govern federal purchasing. When a state, county, city or school district spends its own money, its own procurement law applies. Some states have preferences for US-made steel or in-state businesses, and 37 states have agreed to open some of their purchasing to suppliers from WTO Government Procurement Agreement countries. When the same buyer spends federal grant money on infrastructure, BABA applies on top.
That's why the funding source matters as much as the buyer. A city buying software with its general fund usually has no domestic-content rule at all. The same city buying water meters for a project funded by the State Revolving Fund does. For how utilities pay for projects, see our utility funding tracker.
What to do next
- Map your buyers and their money. List the buyer types you'll target and how they usually pay: direct federal purchase, GSA Schedule, federal grant or the buyer's own budget.
- Document your country of origin. Know where each product is made and where it was last substantially transformed, and keep component cost records.
- Check the TAA list. If your products come from a designated country, federal and GSA Schedule work is open to you.
- Plan for BABA early if you sell to utilities or infrastructure owners: a US manufacturing or assembly partner, or a focus on projects without federal funding.
- Register. See our guide to SAM.gov, UEI and NCAGE for non-US companies.
Domestic-content rules are one module of our US public sector sales training for international companies. If you'd rather have a team find the buyers for you, see our US market entry service.
Sources
- FAR 25.101, Buy American, supplies: general
- FAR Subpart 25.4, Trade Agreements
- 2 CFR Part 184, Buy America preferences for infrastructure projects
- Federal Register, FAC 2026-01, trade agreements thresholds (March 13, 2026)
This page is general information, not legal advice. Confirm the requirements for your products and contracts with the contracting officer, the grant recipient or trade counsel.