Overview
FAR Subpart 25.4 implements policies and procedures for international trade agreements, including the World Trade Organization Government Procurement Agreement (WTO GPA) and various Free Trade Agreements (FTAs). It provides the authority to waive the Buy American statute for "eligible products" from designated countries, ensuring that offers from these countries receive equal consideration with domestic offers when specific dollar thresholds are met.
Key Rules
- Waiver of Buy American Statute: The U.S. Trade Representative (USTR) has the authority to waive the Buy American statute and other discriminatory provisions for eligible products/services from signatory countries.
- Dollar Thresholds: Applicability is determined by the estimated value of the acquisition. These thresholds (e.g., $174,000 for WTO GPA supplies/services) are typically revised every two years by the USTR.
- Small Business Set-Aside Exception: Trade agreements do not apply to acquisitions set aside for small businesses, regardless of the contract value.
- Purchase Restrictions: Under the Trade Agreements Act, if an acquisition is covered by the WTO GPA, the government must acquire only U.S.-made or designated country end products/services, unless no such offers are received.
- Valuation Logic: When determining if a threshold is met, the Contracting Officer must include the value of all options. For lease or rental contracts, specific formulas based on contract term or monthly payments must be used.
- Prohibited Splitting: Agencies are prohibited from dividing an acquisition into smaller parts with the intent of reducing the value below the trade agreement thresholds.
- Service Exclusions: Certain services are universally excluded from trade agreement coverage, including dredging, R&D, and most transportation or utility services.
Responsibilities
- Contracting Officers:
- Must determine the origin of services based on the country where the firm is established.
- Must calculate the total estimated acquisition value (including options) to determine which trade agreements apply.
- Ensure solicitations require offers in the English language and U.S. dollars.
- Provide notice to unsuccessful offerors from WTO GPA or FTA countries.
- Ensure technical requirements are not written specifically to exclude eligible foreign products.
- U.S. Trade Representative (USTR): Responsible for negotiating agreements, designating "least developed countries," and updating the dollar thresholds for applicability.
- Offerors: Responsible for certifying the country of origin for their products and complying with submission requirements (English language/U.S. currency).
Practical Implications
- Equal Footing for Foreign Bidders: In large-scale acquisitions (above the thresholds), a product from a "designated country" (like Mexico, Japan, or Germany) is treated as if it were a domestic product, neutralizing the price preferences normally given to U.S. firms under the Buy American statute.
- Strategic Market Research: Contracting Officers must carefully review the "Excluded Services" table. For example, if a project involves "Research and Development," the trade agreement waivers do not apply, and the Buy American restrictions remain in full force.
- The "Small Business" Safe Harbor: Because these agreements do not apply to small business set-asides, agencies can prioritize domestic small businesses over international trade obligations by utilizing set-aside authorities.
- Administrative Compliance: Solicitations for high-value contracts must include specific FAR clauses (found in subpart 25.11) that require offerors to identify whether they are providing domestic, foreign, or "eligible" products.