Please note, your browser is out of date.
For a good browsing experience we recommend using the latest version of Chrome, Firefox, Safari, Opera or Internet Explorer.

Newsletter Articles

What Foreign Companies Need to Know About Doing Business With the U.S. Government

26 Sep 2023 North America

Even in a protectionist landscape, procurement deals are possible with the right approach.

Editor’s note: This sponsored article was contributed by Tenley Carp, a partner at the Arnall Golden Gregory, LLP, office in Washington, D.C.

If your company seeks to take advantage of lucrative U.S. government contracts, it’s essential to understand that contracting with the U.S. government is very different from dealing with commercial entities. More statutes and regulations govern the relationship from start to finish. 

With knowledge of the legal and regulatory landscape, however, it’s possible for foreign-owned entities to successfully market their goods and services to a customer with $665 billion in procurement outlays to outside contractors annually; tap into the $1 trillion bipartisan infrastructure law for road repaving, water system upgrades, massive bridge and transit projects; and profit from the $750 billion Inflation Reduction Act, which invests in domestic energy production while promoting clean energy. 

Below are a few policies to know and administrative tips to help navigate the complexities of the process. It may be slow, but the payoff for the persistent can be great, with the company receiving added benefit from the de facto imprimatur that comes from being approved to supply the world’s biggest public customer.  

Buy American Act

  • Under the Buy American Act (“BAA”), all goods for public use (articles, materials, or supplies) must be produced in the U.S., and manufactured items must be manufactured in the U.S. from U.S. materials. 
  • The BAA restricts the federal government’s purchase of foreign-produced products by imposing a “price preference” for purchases of U.S.-origin goods (to favor U.S.-origin goods).  Non-steel/iron “unmanufactured” end products must be mined or produced in the U.S. in order to qualify as domestic under the BAA. But, non-steel/iron “manufactured” end products qualify as domestic if they are manufactured in the U.S. and either (1) the cost of the components mined, produced or manufactured in the U.S. exceeds 60% of the cost of all components; or (2) the end product is a commercially available off-the-shelf (“COTS”) item. End products consisting predominantly of iron and/or steel are domestic under BAA if the cost of domestic iron or steel (including COTS fasteners) is greater than 95% of the cost of all components.
  • Some domestic content restriction laws apply only to specific federal agencies. For example, the Berry Amendment (covering food, clothing, tents, textile fabrics and fibers, hand measuring tools, stainless steel flatware and cookware) applies specifically to the Department of Defense (“DOD”); it requires DOD to purchase items that have been entirely grown, reprocessed, reused or produced within the U.S. DOD is also subject to a specialty metals restriction, which requires certain types of steel and metal alloys used in weapon systems, etc., to be melted or produced in the U.S.
  • But, international agreements, such as Free Trade Agreements, serve as exceptions to the application of the BAA. Where goods are made in certain countries, such as countries that are parties to the World Trade Organization Government Procurement Act, and the value of the acquisition is above the applicable threshold (currently $183,000 for WTO countries for 2022-2023 and just over $7 million for construction), no price preference applies, and foreign goods are evaluated in the same manner as U.S. goods. 

Trade Agreements Act

  • In applying the Trade Agreement Act (“TAA”) exception to the BAA described above, the origin of an article not wholly the product or manufacture of a single country is determined by the rule of “substantial transformation.” 
  • An article is a product of a country if it has been substantially transformed into a new and different article of commerce with a name, character, or use different from that of the article or articles from which it was transformed.
  • For a product made at least in part from materials manufactured in another country to undergo a “substantial transformation,” it must acquire a new name, character or use. For example, attachment of a Pulaski tool head together with its wooden handle did not result in “substantial transformation.”
  • Every company – whether domestic or international – doing business with the U.S. government must register in the U.S. General Services Administration’s System for Award Management (“SAM”), a mandatory requirement for prime contractors.
  • To register in SAM, every company, including a foreign company, must have a government-issued Unique Entity ID (“UEID”), a 12-character alphanumeric value.
  • A foreign company must request a UEID on the SAM website, and the U.S. government will assign it. The UEID is free; the U.S. government does not charge contractors to be listed in SAM. 
  • There is an extra step for a foreign company in completing the SAM registration. A foreign company must obtain a North Atlantic Treaty Organization (“NATO”) Commercial and Government Entity code, referred to as an NCAGE code, by registering with the NATO Support and Procurement Agency. This code is assigned by the U.S. Defense Logistics Agency (“DLA”) and typically takes 10 business days to obtain. Your company will receive an email to verify all information, and ultimately, DLA will issue the NCAGE code.
  • Only after the NCAGE code has been validated can your company finalize its SAM registration.

Tips on Bidding for Foreign Companies

  • Become familiar with the Federal Acquisition Regulations (“FAR”). Your company must comply with all US laws when selling its products and/or services to the United States. These laws are outlined in the FAR. The FAR is the principal set of rules regarding US government procurement and is codified at Chapter 1 of Title 48 of the Code of Federal Regulations. It governs the relationship of a contractor to any US civilian agency. There are also supplements to the FAR which are worth reading depending on which US agency your company is pursuing.
  • Pursue subcontracting opportunities. Subcontracting may allow a foreign company to learn the ropes of bidding on U.S. government contracts without the entire responsibility of the prime contract. This can also be an effective way to meet future US government customers.
  • Establish a presence in the U.S. A foreign company will not be ineligible to bid without having a presence in the U.S., but it helps to have significant operations based in the United States that are contributing to the US economy if you want your company to receive a small-business size status designation – which can make your company more competitive by eliminating competition from large companies. It will also be helpful to have one or more employees in the US if your company wins a contract.
  • Consider looking for U.S. government opportunities in your home country. Since the U.S. government also operates in foreign countries, it might be worth pursuing opportunities in or near your country to eliminate the time, risk and expense of shipping products to the U.S. 

Working with the U.S. government on any level – whether as a prime contractor or a subcontractor, whether in the U.S. or another country, and whether your company is selling products or services– can always open doors to additional and/or larger contracts.

Once your foreign company is registered in SAM and understands how to comply with the laws governing U.S. government contracts, a foreign company can pursue any bidding opportunities with the U.S. government.