U.S. Customs and Border Protection recently issued an advisory letter paving the way for the US government to procure open source software solutions, and remain compliant with the requirements of government procurement regulations. The CPB issues advisory rulings on country-of-origin questions, including whether products comply with “Buy American” requirements or the waivers allowed to them. Although the advisory letter is not binding, it can guide courts or government agencies in making binding determinations.
The Buy American Act (41 U.S.C. 10) requires the United States government to give certain preferences to US-made products in its procurement. This means that a determination that a product is made in the US makes it easier to sell to the US government. But where a product is made can be a complex question. This question arose for Talend, vendor of enterprise open source software solutions for data integration, data management, and enterprise application integration. Talend’s business follows an “open core” model – Talend publishes the core software for its solution under GPL and Apache 2, but also provides solutions on a commercial basis. Talend’s development process – not unlike that of many enterprise software companies – included steps that took place China, France, Ireland, Germany and the US.
Under the Title III of the Trade Agreements Act, 19 USC 2511 (TAA), the US executive has the authority to waive waive certain US domestic purchasing preference requirements , including BAA, with respect to certain countries of origin — “Designated Countries” that give reciprocal treatment to US producers, such as under the Agreement on Government Procurement of the World Trade Organization. Examples of these Designated Countries would be Germany and France.
19 USC 2518 (B) helps define a country of origin, saying, “An article is a product of a country or instrumentality only if (i) it is wholly the growth, product, or manufacture of that country or instrumentality, or (ii) in the case of an article which consists in whole or in part of materials from another country or instrumentality, it has been substantially transformed into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was so transformed.”
Talend successfully argued that the development steps performed in the US, France and Germany constituted the “substantial transformation” of the product.
Country of origin disputes are nothing new, and the CBP letter’s guidance goes beyond open source software to provide guidance generally on how to comply with procurement requirements for software. However, according to Business Wire, “Country of Origin issues sometimes have been used as a pretext to make a case against the procurement of open source software.” The open source community has long viewed the US as lagging behind other countries on adopting open source for government procurement.
The full text of the letter is here.