BABA Compliance Starts in the BOM — Not at Final Assembly

“Made in America” can sound like a final-assembly question.

For products subject to Build America, Buy America requirements, it often is not.

A product may be assembled in the United States and still fail the applicable domestic-content test. For manufactured products covered by BABA, the analysis reaches into the components that make up the product and the evidence supporting where those components were produced.

That is why BABA compliance should be considered while the BOM and approved supply base are being established—not after production is complete.

Start With the Requirement That Actually Applies

Build America, Buy America does not apply to every product manufactured in the United States. It establishes a domestic-content procurement preference for covered articles, materials and supplies used in certain federally funded infrastructure projects. The specific award terms, agency guidance and any applicable waiver still control the actual requirement for a program. U.S. Department of Energy — Build America, Buy America.

It is also important not to confuse BABA with the federal Buy American Act. They are different domestic-preference frameworks with different applications and tests. Made in America Office.

For an OEM, the practical first question therefore is not simply:

Is this product made in the United States?

It is:

What domestic-content requirement applies to this specific project, and what evidence will be required to support it?

Does U.S. Final Assembly Automatically Make a Product BABA Compliant?

No. For a manufactured product subject to BABA, U.S. final assembly can be only one part of the applicable test. The component mix, origin, cost basis and supporting documentation may also determine whether the product satisfies the domestic-content requirement.

For electronics programs, that makes the BOM and AVL part of the compliance review before material is committed—not paperwork added after the build is complete.

Final Assembly in the U.S. Is Only Part of the Manufactured-Product Test

Under the BABA framework in 2 CFR part 184, a covered manufactured product generally must satisfy two conditions to be considered produced in the United States:

• the manufactured product itself is manufactured in the United States; and
• the cost of components mined, produced or manufactured in the United States is greater than 55 percent of the total cost of all components, unless another domestic-content standard applies under law or regulation.

DOE summarizes that same two-part test in its current implementation guidance. DOE — BABA-Compliant Manufactured Products.

That means a U.S. manufacturing location by itself does not answer the compliance question.

If the domestic-content calculation depends on the origin and cost of the components incorporated into the product, then the BOM becomes part of the compliance analysis.

The BOM Becomes a Compliance Document

In a normal sourcing review, the BOM tells the supply chain what to buy.

Under a domestic-content requirement, it may also help establish what must be proven.

For each relevant component, the team may need to understand:

• what the component is;
• who manufactures it;
• where it is produced;
• the approved manufacturer and source;
• the component cost used in the applicable calculation; and
• what supplier certification or other documentation supports the claimed origin.

The regulation also matters in how component cost is calculated. For purchased components, 2 CFR 184.5 uses acquisition cost, including transportation to the place where the component is incorporated into the manufactured product and applicable duty. For components manufactured by the manufacturer, the rule addresses manufacturing costs and allocable overhead while excluding profit and the cost of manufacturing the final manufactured product itself. OMB Memorandum M-24-02.

That is not a calculation an OEM wants to reconstruct from memory after the product has already been sourced and built.

An Approved Part Is Not Automatically a Compliant Part

An AVL answers an engineering and sourcing question: which manufacturers and sources are approved for the product?

A domestic-content requirement adds another question: which of those approved options support the required compliance position?

Two technically equivalent approved components may not have the same origin. A supplier may change a manufacturing location. A part purchased through a U.S. distributor may still require evidence regarding where the component itself was produced.

That creates an important control point.

Compliance cannot be assumed from the distributor's address, the EMS provider's location or the final assembly site.

The approved part, approved source and required origin evidence need to line up.

Documentation Has to Move Through the Supply Chain

DOE's implementation guidance states that prime recipients must maintain certifications or equivalent documentation supporting compliance, and that proof must flow from suppliers and manufacturers through contractors and vendors to the recipient. DOE — Build America, Buy America.

For electronics manufacturing, that makes documentation planning part of sourcing.

Before material is purchased, the parties should establish:

• which items require domestic-content evidence;
• what form of supplier documentation is acceptable;
• who is responsible for obtaining and retaining it;
• how changes in manufacturer, source or production location will be controlled; and
• what happens if compliant material is unavailable.

If a required component cannot support the applicable BABA standard, the solution is not to relabel the final assembly. Depending on the award and agency, the options may include an approved alternate, a sourcing change, redesign, schedule adjustment or a properly authorized waiver.

Those decisions belong with the customer and the applicable contracting or grant authority—not with the EMS provider acting unilaterally.

Review Compliance Before the Purchase Order

The best time to find a domestic-content problem is before material commitments are placed.

A practical pre-production review should connect the requirement to the actual BOM and AVL:

• Which assemblies or products are subject to the requirement?
• How is each item classified under the applicable rule?
• Which components drive the domestic-content calculation?
• What origin evidence is already available?
• Where is the AVL limited to a source that may not support the requirement?
• Would an alternate require engineering qualification?
• Are supplier certifications available before procurement?
• Who owns the final compliance determination and record set?

The EMS provider can help surface those questions, identify sourcing constraints and collect agreed supplier documentation. The OEM or award recipient still controls the product requirements, approved sources and the determination of what compliance standard applies.

BABA Compliance Is Designed Into the Supply Chain

Domestic-content compliance is much easier to manage when it is treated as an input to sourcing rather than an inspection at the end.

Final assembly location matters.

But for a covered manufactured product, it is not the whole test.

The component mix, approved sources, cost basis and supporting documentation can all matter before the first unit is built.

So the better question is not:

Was this product assembled in America?

It is:

Does the approved BOM, sourcing path and documentation support the domestic-content requirement that applies to this project?

Because for BABA-covered manufactured products, compliance starts in the BOM—not at final assembly.

About Brian Lamers

Brian Lamers is COO and Vice President of Surface Mount Technology Corporation. He brings more than 30 years of EMS leadership and operating experience across manufacturing, supply chain, quoting, production planning, customer programs and finance. Learn more about SMT and its leadership.