Australia-United States Free Trade Agreement: Fact sheets

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’:

  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:

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:

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 :

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

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

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:

All Regional Government Entities:

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):

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:

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

J998        Non-nuclear Ship Repair.

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:

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

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.