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AUSFTA Government Procurement Chapter - Exceptions

United States - Exceptions [1]

The core purpose of the Chapter is non-discrimination in the conduct of government procurement. In this context non-discrimination requires each government to afford the suppliers, goods and services of the other country the same treatment that applies to domestic suppliers, goods and services.

However, there are transactions that will not be covered by this obligation. It is important for Australian companies to find out whether the product they offer and their potential buyer are covered by the Government Procurement Chapter of AUSFTA.

Application of the Chapter is determined by a staged approach:

  1. The Government Procurement Chapter only applies to 'covered procurements'

Article 15.1 outlines the scope and coverage of the Chapter. The following provisions outline transactions which are not considered 'covered procurements':

  • Non-contractual agreements or any form of assistance that a Party or a government enterprise provides, including grants, loans, equity infusions, fiscal incentives, subsidies, guarantees, cooperative agreements, and sponsorship arrangements.
  • Procurement of goods and services by a Party from its own entities and provision of goods or services by or between a procuring entity of a Party and a regional or local government of that Party.
  • Purchases funded by international grants, loans or other assistance, where the provision of such assistance is subject to conditions inconsistent with this Chapter.
  • Purchases funded by grants and sponsorship payment from persons not listed in Annex 15-A.
  • Procurement for the direct purpose of providing foreign assistance.
  • Procurement of research and development services.
  • Procurement of goods and services (including construction) outside the territory of the procuring Party, for consumption outside the territory of the procuring Party.
  • Acquisition of fiscal agency or depository services, liquidation and management services for regulated financial institutions, and sale and distribution services for government debt.
  1. The Government Procurement Chapter applies only to procurements by entities listed in the Annexes with a value equal to or above certain thresholds.

The Chapter takes a 'positive list' approach – it will only apply to the government entities listed in the Annexes:

Central Government Entities: Section 1 of Annex 15-A lists 79 US Federal Departments ('Central Government Entities') covered by the Chapter. Subsidiary agencies of the US listed entities are covered unless specifically excluded. For Central Government Entities, the provisions of the Government Procurement Chapter do not apply to:

  • Procurement of goods and services: Adjusted Thresholds: A$106,000 or US$80,317[2]
  • Procurement of construction services: Adjusted Thresholds: A$9,247,000 or US$6,932,000

Regional Government Entities: In Section 2 of Annex 15-A, the United States has listed a number of entities (mainly agencies, departments or authorities) from the 31 states[3] that have adopted the Government Procurement Chapter. See the attached list of the states that have signed on to the Chapter, and a list of the entities that these states have elected to list as covered. For Regional Government Entities, the provisions of the Government Procurement Chapter do not apply to:

  • Procurement of goods and services: Adjusted Thresholds: A$657,000 or US$492,000
  • Procurement of construction services: Adjusted Thresholds: A$9,247,000 or US$6,932,000

Government Enterprises: Section 3 of Annex15-A includes 7 government enterprises to which the Chapter applies. The provisions of the Government Procurement Chapter do not apply to :

  • Procurement of goods and services
    • of List A entities, Adjusted Thresholds: A$455,000 or US$387,667
    • Procurement of construction services: Adjusted Thresholds: A$9,247,000 or US$6,932,000

(see Section 3 of Annex 15-A for List A and List B entities)

  • Procurement of construction services for List A and List B below A$8,652,000 or US$7,358,000.

NOTE: Some listed entities have excluded ALL procurement by some of their sub-entities. These are:

  • The (Federal) Department of Transportation: Procurement by the Federal Aviation Administration.
  • The (Federal) Department of Homeland Security: Procurement by the Transportation Security Administration.
  • Arkansas: Procurement by the Office of Fish and Game.

Annex 15-A of AUSFTA includes lists of all of the US Central Government Entities, Regional Government Entities and Government Enterpriseswhich are covered by the Government Procurement Chapter. This list should be consulted by exporters to confirm whether potential clients are covered by the Chapter.

  1. In addition to the value thresholds, and the 'positive list approach' the Government Procurement Chapter is limited in application by specific exceptions or 'carve-outs' :

These 'carve-outs' are specific by jurisdiction – i.e. a carve-out will either apply to central government entities, to government enterprises, specifically to a certain regional government entity, or a combination of these. The product specific carve-outs and their application are listed below.

The provisions of the Government Procurement Chapter (including non-discrimination) do not apply to:

General Carve-Outs

All Entities:

  • Measures that a Party considers necessary for the fulfilment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.
  • Set asides on behalf of small or minority businesses. Set-asides include any form of preference, such as the exclusive right to provide a good or service and price preferences.
  • Where the measures applied do not constitute an arbitrary or unjustifiable discrimination between Parties where the same conditions prevail, or a disguised restriction on international trade –
    • Measures that are necessary to protect public morals, order or safety
    • Measures that are necessary to protect human, animal or plant life or health (including environmental measures necessary to protect human, animal or plant life or health)
    • Measures that are necessary to protect intellectual property
    • Measures relating to the goods or services of handicapped persons, of philanthropic or not for profit institutions, or of prison labour.

All Regional Government Entities:

  • Preferences or restrictions associated with programs promoting the development of distressed areas or businesses owned by minorities, disabled veterans, or women.
  • Nothing in Annex 15-A shall be construed to prevent any state entity from applying restrictions that promote the general environmental quality in that state, as long as such restrictions are not disguised barriers to international trade.

Any procurement made by a covered entity on behalf of non-covered entities at a different level of government.

Agriculture

Federal Department of Agriculture: Procurement of agricultural goods made in furtherance of agricultural support programs or human feeding programs.

Government Enterprises: Specific requirements apply to procurements by the Rural Utilities Service: see Section 3 of Annex 15-A for details.

Georgia: Procurement of compost or mulch.

Georgia, South Dakota: Procurement of beef.

Construction

All Entities: Dredging services

All Regional Government Entities: The provisions of the Government Procurement Chapter do not apply to restrictions attached to Federal funds for mass transit and highway projects.

All Government Enterprises: The provisions of the Government Procurement Chapter do not apply to restrictions attached to Federal funds for airport projects.

Arkansas, Hawaii, Kansas: Procurement of construction services.

Kentucky: Procurement for construction projects.

Delaware, Florida, Maine, Maryland, New Hampshire, New York, Pennsylvania, Wyoming: Procurement of construction grade steel (including requirements on sub-contracts).

Defence

Federal Department of Defence: Procurement of the goods listed below: (complete list of US Federal Supply Classification (FSC))

(a) FSC 11 Nuclear Ordnance

FSC 18 Space Vehicles

FSC 19 Ships, Small Craft, Pontoons, and Floating Docks (the part of this classification defined as naval vessels or major components of the hull or superstructure thereof)

FSC 20 Ship and Marine Equipment (the part of this classification defined as naval vessels or major components of the hull or superstructure thereof)

FSC 2310 Passenger Motor Vehicles (only Buses)

FSC 2350 Combat, Assault & Tactical Vehicles, Tracked

FSC 51 Hand Tools

FSC 52 Measuring Tools

FSC 60 Fibre Optics Materials, Components, Assemblies, and Accessories

FSC 8140 Ammunition & Nuclear Ordnance Boxes, Packages & Special Containers

FSC 83 Textiles, Leather, Furs, Apparel, Shoes, Tents, and Flags (all elements other than puns, needles, sewing kits, flagstaffs, flagpoles and flagstaff trucks)

FSC 84 Clothing, Individual Equipment, and Insignia (all elements other than subclass 8460 – luggage)

FSC 89 Subsistence (all elements other than sub-class 8975-tobacco products)

(b) "Specialty metals" defined as steels melted in steel manufacturing facilities located in the United States or its possessions, where the maximum alloy content exceed one or more of the following limits, must be used in products purchased by the Department of Defense: (1) manganese, 1.65 percent; silicon, 0.60 percent; or copper, 0.60 percent; or which contains more than 0.25 percent of any of the following elements: aluminum, chromium, cobalt, Columbian, molybdenum, nickel, titanium, tungsten or vanadium; (2) metal alloys consisting of nickel, iron-nickel and cobalt base alloys containing a total of other alloying metals (except iron) in excess of 10 percent; (3) titanium and titanium alloys; or (4) zirconium base alloys.

(c) Procurement of the goods in the following FSC categories, due to the Application of Article 22.2 (Essential Security):

  • FSC 10 Weapons
  • FSC 12 Fire Control Equipment
  • FSC 13 Ammunitions and Explosives
  • FSC 14 Guided Missiles
  • FSC 15 Aircraft and Airframe Structural Components
  • FSC 16 Aircraft Components and Accessories
  • FSC 17 Aircraft Launching, Landing, and Ground Handling Equipment
  • FSC 19 Ships, Small Craft, Pontoons, and Floating Docks
  • FSC 20 Ship and Marine Equipment
  • FSC 28 Engines, Turbines, and Components Bearings
  • FSC 58 Communications, Detection, and Coherent Radiation
  • FSC 59 Electrical and Electronic Equipment Components
  • FSC 95 Metal Bars, Sheets, and Shapes

Resources

Washington: Procurement of fuel.

Delaware, Florida, Maine, Maryland, New Hampshire, New York, Pennsylvania, Wyoming: Procurement of coal.

National or Essential Security

All Entities: Measures that a Party considers necessary for the fulfilment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.

All Entities: Where the measures applied do not constitute an arbitrary or unjustifiable discrimination between Parties where the same conditions prevail, or a disguised restriction on international trade – measures that are necessary to protect public morals, order or safety.

All Entities: Procurement of any service in support of military forces overseas.

Federal Department of Energy: National security procurements made in support of safeguarding nuclear materials or technology and entered into under the authority of the Atomic Energy Act, or oil purchases related the Strategic Petroleum Reserve.

Federal Department of Homeland Security: Procurements by the Transportation Security Administration. Also, the essential security interests of the United States equally apply to the United States Coast Guard.

Services

All Entities: Procurement of the following services:

  • Basic telecommunications network and services
    • listed in paragraph 2C(a) through (g) of WTO document MTN.GNS/W/120, such as public voice and data services. This exclusion does not include information services, as defined in 47 United States Code (USC) 153(20).
  • Maintenance, Repair, Modification, Rebuilding and Installation of Goods/Equipment

J019 Maintenance, Repair, Modification, Rebuilding and Installation of Equipment relating to Ships

J998 Non-nuclear Ship Repair.

  • Operation of Government-Owned Facilities
    • All facilities operated by the Department of Defense, Department of Energy, and the National Aeronautics and Space Administration; and for all entities in Section 1 through Section 3: M180 Research and Development Facilities.
  • Utilities: All Classes.
  • Transportation, Travel and Relocation Services: All Classes except V503 Travel Agent Services.
  • Any service in support of military forces overseas.
  • (Construction) dredging services.
  • Transportation Services that form a part of, or are incidental to, a procurement contract.

All Regional Government Entities: Procurement of printing services.

Mississippi: Procurement of services.

Texas: Preferences for travel agents located in Texas.

Transportation

All Entities: Procurement of:

  • Transportation, Travel and Relocation Services: All Classes except V503 Travel Agent Services.
  • Transportation Services that form a part of, or are incidental to, a procurement contract.

Federal Department of Commerce: Shipbuilding activities of the US National Oceanic and Atmospheric Administration (NOAA).

All Government Enterprises: The provisions of the Government Procurement Chapter do not apply to restrictions attached to Federal funds for airport projects.

All Regional Government Entities: The provisions of the Government Procurement Chapter do not apply to restrictions attached to Federal funds for mass transit and highway projects.

Kansas: Procurement of automobiles or aircraft.

New York: Procurement of transit cars, buses, or related equipment.

Rhode Island: Procurement of boats, automobiles, buses, or related equipment.

Delaware, Florida, Maine, Maryland, New Hampshire, New York, Pennsylvania, Wyoming: Procurement of motor vehicles.

Texas: Preferences for motor vehicles.

Washington: Procurement of boats, ships, or vessels.

Other Procurements

Federal General Services Administration: Procurement of Goods in the following FSC categories

  • FSC 51 Hand Tools
  • FSC 52 Measuring Tools
  • FSC 7340 Cutlery and Flatware.

Texas: Preferences for rubberized asphalt paving made from scrap tires by a Texas facility.

Washington: Procurement of paper products.

Hawaii: Procurement of software developed in the state.

New York: For the entities listed for New York, the Government Procurement Chapter does not cover public authorities and public benefit corporations with multi-state mandates.



[1]These notes are intended for Australian companies seeking to supply goods or services to US public sector buyers or prime contractors. While we have made our best efforts to ensure the accuracy of this information, it does not constitute legal advice.

[2] All 'threshold' amounts are subject to adjustment at two-year intervals, as per AUSFTA Section 8 of Annex 15-A.

[3] Continuing efforts are being made to encourage US states to sign on to the Government Procurement Chapter.

Last Updated: 31 May 2018
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