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Inception date: 27 Nov 2018 | Removal date: open ended

Public procurement localisation

On November 27, 2018 the Rural Utilities Service (RUS) of the U.S. Department of Agriculture published a final rule in the Federal Register that codifies a Buy American requirement for the agency. The rule covers the purchas of any good, whether manufactured or not, by the agency. 

The Rural Electrification Act requires that in making loans pursuant to the Rural Electrification Act of 1936, the Secretary of Agriculture shall require that, to the extent practicable and the cost of which is not unreasonable, the borrower agrees to use in connection with the expenditure of such funds only such unmanufactured articles, materials, and supplies, as have been mined or produced in the United States or in any eligible country, and only such manufactured articles, materials, and supplies as have been manufactured in the United States or in any eligible country, substantially all from articles, materials, or supplies mined, produced or manufactured, as the case may be, in the United States or any eligible country. This regulation will codify long-standing RUS requirements which agency borrowers have been required to follow pursuant to statute, bulletin, and contract as early as the 1950s, but which (according to the agency) "were inadvertently never codified when all existing RUS bulletins were incorporated into regulation." The rule states that the regulation will not "change or modify those procedures with respect to borrowers' responsibilities in complying with the Buy American requirement, such as the waiver process, but will simplify compliance by compiling all such existing requirements into a single document."

The rules provide for waivers in cases where (a) The cost between the nondomestic product and domestic product is unreasonable; (b) There is a non-availability of domestic products; or (c) It is not in the public interest or impractical for the RUS Borrower to purchase a domestic product.

These rules provide that a product is considered to be nondomestic for the purpose of compliance with the “Buy American” requirement if:

(a) The product is manufactured outside the United States or any eligible country; or

(b) The product is manufactured in the United States or in any eligible country, but the cost of nondomestic components used therein constitutes 50 percent or more of the cost of all components. The cost of components shall be determined on a comparable basis, so that only the cost of domestic and nondomestic components, up to the point where they are combined and manufactured into a complete product shall be considered.

(1) The determination of the cost of the nondomestic components of a product shall include:

(i) The price paid to the nondomestic source;

(ii) The cost of shipment to the port of entry into the United States;

(iii) Applicable tariffs or duties;

(iv) The cost of transportation from the port of entry to the distributor's plant or warehouse; and

(v) Profit, overhead, and commissions of domestic and nondomestic suppliers and subcontractors of the components.

(2) The following items shall not be considered in determining the cost of components, although they are proper elements in the determination of the final selling price of the product:

(i) Fabrication or processing costs, if any, of nondomestic or domestic components at the assembly plant, or any other place of fabrication in the United States or any eligible country;

(ii) Testing costs at the assembly plant or at the installation site;

(iii) Direct profit, overhead, and commissions of the domestic distributor; and

(iv) Cost of transportation from the domestic assembly point to the installation site.



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