Many Federal contracts and grants require the awardee to certify that certain items provided or used in the performance of the award are American. The requirements and applicability of waivers vary depending on whether the award is covered by the Buy American Act, a Buy America statute, or the Build America, Buy American Act (BABA) (“domestic-preference laws”). If the prime contractor or prime recipient (“prime”) does not manufacture all of the items they provide or use under the award, they then flow down the certification to lower-tier suppliers. These certifications often require analyzing the cost of the components of those items, and for use of the Trade Agreements Act waiver, also require certifying the country of origin of the item itself.
On April 2, 2025, President Trump announced a number of new tariffs and issued an executive order on the same. These tariffs reached as high as 50% for some countries’ goods to be imported into the United States, and although some of those tariffs have since been reduced or paused temporarily, others have taken effect or even increased since then. For companies that have been making certifications under the above-referenced (and other) domestic-preference laws, there are two questions that cannot be ignored following the imposition of such sweeping (and in some instances, steep) tariffs:
1. How would a change in the supply chain affect our certifications?
As companies assess the impact of the tariffs, many are weighing options for moving their own foreign manufacturing facilities or replacing existing suppliers with new ones in different countries. Either type of move could impact the country-of-origin analysis of the items covered by the company’s current certifications. These certifications may fall under the domestic-preference laws or the Trade Agreements Act, which waives the Buy American Act for products or materials originating in certain countries. Thus, companies providing country-of-origin certifications must determine if a change in the supply chain impacts their country-of-origin analysis, and if so, whether they can still certify compliance.
2. Is our cost-of-components analysis still accurate?
The regulations and clauses implementing domestic-preference laws use different analyses to determine whether an item is deemed American (referred to as “domestic” or “produced in the United States”). Two of the most common certifications of late (BABA and Buy American Act)[1] include a cost-of-components analysis that must be revisited if the costs of imported components increase. Indeed, under the FAR[2] clauses implementing the Buy American Act, end products and construction materials are American if the cost of components mined, produced, or manufactured in the United States is greater than 65% of the total cost of all the item’s components.[3] Under the BABA implementing regulation,[4] manufactured products are American if the cost of components mined, produced, or manufactured in the United States is greater than 55% of the total cost of all the product’s components.
There are different rules for what to include in the cost of the product’s components, based on whether the component was purchased by the manufacturer or manufactured by it. For components purchased by the manufacturer of a manufactured product, the costs include “any applicable duty.”
Thus, if increased tariffs directly or indirectly increase the cost of any foreign component, the company must revisit whether the increase impacts the prior determination that the item is deemed American. Failing to update the analysis could result in a false statement or certification that the product or material is “domestic” (Buy American Act) or “produced in the United States” (BABA). Thus, suppliers providing analyses or certifications to primes must ensure that their certifications are accurate, and primes must ensure that their suppliers are providing updated certifications throughout contract or award performance.
The upshot
For primes and suppliers making certifications under the domestic-preference laws, ignoring these two questions gives rise to the real possibility of false statements or certifications and the related liability, which could arise if the company changes its supply chain or maintains it. Further, these questions must be revisited each time there is an increase in relevant tariffs.
Jayna Marie Rust is a government contracts and Federal grants attorney who regularly assists primes and suppliers with determining the applicability of the various domestic-preference laws and analyzing the country of origin of products and materials under Government-funded awards. She regularly works with the firm’s international trade attorneys, who maintain up-to-date resources on import and export topics, including tariffs.
[1] As referenced, for this question we are only addressing Buy American Act and BABA; this does not address each of the Buy America statutes analyses, but the same concern may be applicable under those analyses.
[2] Federal Acquisition Regulation.
[3] This amount increases to 75% in 2029.
[4] Found in 2 CFR Part 184.
