How trade agreements affect federal purchases

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1. How trade agreements change the Buy American rules

Subpart 25.4 of the Federal Acquisition Regulation (FAR) sets out how trade agreements affect federal purchasing. The Trade Agreements Act, 19 U.S.C. 2501 and following, lets the President waive the Buy American statute and other discriminatory provisions for eligible products (FAR 25.402(a)(1)). The waiver covers products of countries that have signed an international trade agreement with the United States, or that meet other criteria, such as being a least developed country. The President has delegated this authority to the United States Trade Representative.

For acquisitions covered by the World Trade Organization Government Procurement Agreement (WTO GPA), free trade agreements (FTAs) or the Israeli Trade Act, the Trade Representative has waived the Buy American statute for eligible products (FAR 25.402(a)(1)). Offers of eligible products receive equal consideration with domestic offers. The contracting officer determines the origin of services by the country in which the firm providing them is established (FAR 25.402(a)(2)). Evaluation procedures for supply contracts covered by trade agreements are in FAR subpart 25.5. For acquisitions covered by the WTO GPA, least developed country end products, construction material and services must be treated as eligible products (FAR 25.404).

2. What the subpart never covers

Subpart 25.4 does not apply to six kinds of acquisition (FAR 25.401(a)). The first is acquisitions set aside for small businesses. The second is acquisitions of arms, ammunition or war materials, or purchases indispensable for national security or for national defense purposes (FAR 25.401(a)(2)). The third is end products for resale.

The fourth is acquisitions from Federal Prison Industries under FAR subpart 8.6, and from nonprofit agencies employing people who are blind or severely disabled under subpart 8.7 (FAR 25.401(a)(4)). The fifth is other acquisitions without full and open competition, where authorized by FAR subpart 6.2 or 6.3 and the limited competition would preclude the subpart’s procedures (FAR 25.401(a)(5)). Sole source acquisitions justified under FAR 13.501(a) are a separate limb of the same exception, without that condition. The sixth is goods and services excluded under individual agreements, such as exceptions the Trade Representative negotiated for particular agencies, which appear in agency supplements (FAR 25.401(a)(6)).

3. Services excluded from the agreements

The WTO GPA and each FTA contain a United States schedule of services excluded from that agreement (FAR 25.401(b)). The FAR sets these out in a table by agreement. The first row excludes all services purchased in support of military services overseas, under every agreement in the table.

4. Value decides coverage

Under subpart 25.4 of the Federal Acquisition Regulation (FAR), the value of an acquisition is a determining factor in whether trade agreements apply (FAR 25.402(b)). Most of the dollar thresholds are subject to revision by the United States Trade Representative about every 2 years. The FAR summarizes them in a table by agreement, with separate thresholds for supply, service and construction contracts.

In the FAR text current as of 29 September 2026, the World Trade Organization Government Procurement Agreement (WTO GPA) applies to supply and service contracts of $174,000 or more (FAR 25.402(b)). It applies to construction contracts of $6,683,000 or more. Free trade agreements (FTAs) carry their own figures, some lower than the WTO GPA for supplies and services and some higher for construction. The Israeli Trade Act applies to supplies from $50,000.

5. Valuing leases and rentals

For products acquired by lease, rental or lease-purchase, including lease-to-ownership and lease with option to purchase, the FAR sets a method for estimating value (FAR 25.403(b)(1)). For a fixed-term contract of 12 months or less, the total estimated value of the acquisition is used (FAR 25.403(b)(1)(i)). For a fixed term of more than 12 months, the estimated value includes the estimated residual value of the leased equipment at the end of the term (FAR 25.403(b)(1)(ii)).

For an indefinite-term contract, the estimate is the monthly payment multiplied by the total number of months ordering would be possible, including optional ordering periods (FAR 25.403(b)(1)(iii)). If there is any doubt about the term, the estimated monthly payment is multiplied by 48 (FAR 25.403(b)(1)(iv)).

6. Options, recurring awards and splitting

The estimated value includes the value of all options (FAR 25.403(b)(2)). If recurring or multiple awards for the same type of product are expected in any 12-month period, the total estimated value of those projected awards decides whether the WTO GPA or an FTA applies (FAR 25.403(b)(3)). An acquisition may not be divided with the intent of bringing its estimated value below a WTO GPA or FTA threshold.

7. The purchase restriction

The Trade Agreements Act adds a purchase restriction of its own, at 19 U.S.C. 2512 (FAR 25.403(c)(1)). In acquisitions covered by the WTO GPA, agencies acquire only United States-made or designated country end products, or United States or designated country services. The exception is where offers for such products or services are not received or are insufficient to meet the requirement.

The restriction does not apply below the WTO GPA threshold for supplies and services, even if an FTA covers the acquisition (FAR 25.403(c)(1)). It also does not apply to purchases of supplies by the Department of Defense from a country with which the Department has a reciprocal agreement, as departmental regulations provide (FAR 25.403(c)(2)).

8. Solicitation steps when an agreement applies

If the WTO GPA or an FTA applies, the contracting officer must follow the FAR rules on publicizing, response times and synopses (FAR 25.408(a)). The contracting officer must not include technical requirements in solicitations solely to preclude acquisition of eligible products (FAR 25.408(a)(3)). Solicitations must require offers in English and in United States dollars (FAR 25.408(a)(4)). Unsuccessful offerors from WTO GPA or FTA countries must be given notice under the FAR’s sealed bidding or negotiated procurement rules (FAR 25.408(a)(5)). Evaluation procedures and examples are in FAR subpart 25.5 (FAR 25.408(b)).

9. The Israeli Trade Act

Acquisitions of supplies by most agencies are covered by the Israeli Trade Act if their estimated value is $50,000 or more but does not exceed the WTO GPA threshold for supplies (FAR 25.406). Agencies covered must evaluate offers of Israeli end products without regard to the Buy American restrictions. Several agencies are not covered by that evaluation rule, and the Department of Defense is the first on the list. The Act does not prohibit buying other foreign end products.

Key terms

Eligible product	A product of a covered agreement country that receives equal consideration.
Defense exclusion	Arms, ammunition, war materials and purchases indispensable for national security.
WTO GPA threshold	$174,000 for supplies and services and $6,683,000 for construction, in the current FAR.
No splitting	Acquisitions may not be divided to fall below a threshold.
Purchase restriction	WTO GPA buys limited to United States-made or designated country products.

Every statement above links to the document behind it. The full source list for this piece is on the sources page.

This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.

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