Washington: In the first Federal law against outsourcing, the US Senate last night (Jan 22, 2004) passed a law barring doling out sub-contracts to India and other countries by American companies to cut their costs.

The legal measure, originally sponsored by Republican Senator from Ohio George Voinovich and others, was included in a $ 328 billion spending Bill passed by the Senate.

Under the measure, when the Federal US Government gives contracts to an American firm - as it has to on public money - that firm cannot give subcontracts out of that to a source outside the United States.

The measure avoids challenging the Government's right to give projects to contractors. But what it does provide is that that contract cannot be subcontracted out by the outsourcing mechanism to India or other countries like China and Russia to cut costs.

Generally, what is included in such "omnibus" Bills adopted in a hurry when a budget measure is long overdue, as in this case, it is not changed later and the President does not veto it.

The provision is the first Federal law that limits companies from performing contracted work outside the US ever since outsourcing became a potent political issue in the US a year ago.

The Chambers of Commerce and other business groups said the move would undercut the ability of US companies to compete with their overseas rivals.