Federal contractors have two additional markets to consider when providing commercial items, products and services to the government; now that New Zealand and Montenegro are included within the countries whose eligible supplies or products are exempt from the Buy American Act (“BAA”). On October 30, 2015, the Department of Defense issued final rule 48 CFR Part 252 amending “Defense Federal Acquisition Regulation Supplement: New Designated Countries” to reflect that Montenegro and New Zealand have been added as newly designated countries under the World Trade Organization Government Procurement Agreement (“WTO GPA”). The import of this final Rule signifies that the United States Trade Representative (“USTR”) waived the BAA and other discriminatory provisions for eligible products from New Zealand and Montenegro.
The fundamental purpose of the BAA is to encourage purchases of American-made goods by the Federal Government. However, under the authority of the Trade Agreements Act (“TAA”), which was delegated to the United States Trade Representative by the President, the USTR can waive BAA requirements for eligible products in acquisitions covered by countries that are signatories to the WTO GPA and other trade agreements. The waiver qualifies for purchases over specific thresholds that are based on a supply or service originating from a designated TAA country. Section 25.409 of the Federal Acquisition Regulation (“FAR”) specifies that eligible products from WTO GPA and Free Trade Agreement (“FTA”) countries are entitled to nondiscriminatory treatment from the BAA as described in 25.402(a)(1) of the FAR as well as to procurement procedures designed to ensure fairness as set forth in 25.408 of the FAR. The USTR waived BAA requirements for Montenegro and New Zealand because he determined that these countries will provide appropriate reciprocal competitive Government procurement opportunities to United States’ products and services.
Although, federal contractors now have two new options to explore when importing products and/or services to provide to the federal government, federal contractors should consult an attorney in order to assess any risks, exposure, or hardships that can potentially result from doing business in a BAA-exempt country. For example, New Zealand ranked high in the World Bank’s 2014 “Doing Business Report” and its lack of corruption has been touted in the Transparency International Corruption Index 2013 with a score of 91 on a scale of 0 being highly corrupt and 100 being “very clean.” Whereas, Montenegro ranked 59th in the World Bank’s 2014 “Doing Business Report” and ranked around 44 in the Transparency International Corruption Index of 2013. Montenegro has implemented steps to improve and modernize their customs systems and has worked with the World Bank Group to ensure that the reforms made will produce real and practical benefits for the private sector.