Every two years, the U.S. Trade Representative updates the dollar values at which certain international trade agreements apply to certain types of U.S. government contracts. This means that certain contracts over the dollar thresholds are subject to the trade agreements, in other words, foreign-made products are placed on equal footing with U.S.-made goods. On the other hand, contracts beneath the dollar thresholds remain subject to certain “Buy American” provisions, preferring U.S.-made goods over foreign-made alternatives. Because most of you reading this post probably sell the Government products and components sourced from the global marketplace (where “Made in China” and “Made in Taiwan” may seem much more common than “Made in America”), you might want to know where these thresholds will sit until 2018. And since the U.S. Trade Representative took the unusual step of reducing these thresholds for 2016, this may be one of those rare occasions where a change in the regulations actually works to your advantage.
On December 15, 2015, the U.S. Trade Representative published the updated thresholds. See 80 Fed. Reg. 77,694. Remarkably – not letting any grass grow under their feet – the FAR Council and the Department of Defense promptly issued updates to the regulations (80 Fed. Reg. 81,470 and 80 Fed. Reg. 81,894), amending FAR Part 25 and DFARS Part 225 as follows:
| Trade Agreement | Supply Contract (equal to or exceeding) | Service Contract (equal to or exceeding) |
Construction Contract (equal to or exceeding) |
|||
| Old | New | Old | New | Old | New | |
| WTO GPA | $204,000 | $191,000 | $204,000 | $191,000 | $7,864,000 | $7,358,000 |
| FTAs | ||||||
| Australia FTA | $79,507 | $77,533 | $79,507 | $77,533 | $7,864,000 | $7,358,000 |
| Bahrain FTA | $204,000 | $191,000 | $204,000 | $191,000 | $10,335,931 | $10,079,365 |
| CAFTA-DR (Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua) | $79,507 | $77,533 | $79,507 | $77,533 | $7,864,000 | $7,358,000 |
| Chile FTA | $79,507 | $77,533 | $79,507 | $77,533 | $7,864,000 | $7,358,000 |
| Columbia FTA | $79,507 | $77,533 | $79,507 | $77,533 | $7,864,000 | $7,358,000 |
| Korea FTA | $100,000 | $100,000 | $100,000 | $100,000 | $7,864,000 | $7,358,000 |
| Morocco FTA | $204,000 | $191,000 | $204,000 | $191,000 | $7,864,000 | $7,358,000 |
| NAFTA | ||||||
| —Canada | $25,000 | $25,000 | $79,507 | $77,533 | $10,335,931 | $10,079,365 |
| —Mexico | $79,507 | $77,533 | $79,507 | $77,533 | $10,335,931 | $10,079,365 |
| Oman FTA | $204,000 | $191,000 | $204,000 | $191,000 | $10,335,931 | $10,079,365 |
| Panama FTA | $204,000 | $191,000 | $204,000 | $191,000 | $7,864,000 | $7,358,000 |
| Peru FTA | $204,000 | $191,000 | $204,000 | $191,000 | $7,864,000 | $7,358,000 |
| Singapore FTA | $79,507 | $77,533 | $79,507 | $77,533 | $7,864,000 | $7,358,000 |
| Israeli Trade Act | $50,000 | $50,000 | N/A | N/A | N/A | N/A |
Practically speaking, the lower dollar thresholds mean that more U.S. government contracts will be subject to the Trade Agreements Act, and that contractors will be more frequently able to deliver products or services from any number of 120+ countries (including Taiwan, but not including China).
Given that federal spending has declined significantly over the last few years, due in large part to sequestration, it seems only fitting that the dollar thresholds have rolled back to where they were roughly 10 years ago. And with federal spending expected to rise as agencies grow more and more weary of belt tightening, the lower dollar thresholds should give the Federal Government more purchasing flexibility over the next two years.