Companies regularly engage the Whay Law Firm to assist with determining whether its products are compliant with the Trade Agreements Act. A compliance determination is fact specific to each product. In order to provide an opinion regarding compliance, we will need information regarding the product’s manufacturing process, the locations of manufacturing, a list of its components, the country of origin for its components (and sometimes parts), and other requested information. We rely upon agency guidance and applicable case law from a variety of sources (e.g. U.S. Customs) in making a determination of compliance for your products.
Below is a brief overview of the Trade Agreements Act. Although the requirement may at first appear straightforward, it is a complicated and nuanced law that can cause significant financial loss to companies that violate it. Before bidding as a prime contractor or a subcontractor for a U.S. Government contract, please make sure you understand the requirements and make the appropriate representations regarding your compliance.
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The United States is a signatory to the World Trade Organization Government Procurement Agreement. The agreement is codified into U.S. law as the Trade Agreements Act (“TAA”) and is implemented at FAR 52.225-5. The TAA allows the President to waive Buy American Act (“BAA”) requirements for certain goods from designated countries. To the extent a procurement is subject to the TAA, the BAA would not apply.
As of 2014, the TAA applies to many, but not all, procurement for goods and services at or above $204,000, or construction procurements at or above $7,864,000. Even if a procurement is at or above the threshold, the TAA does not apply to (1) acquisitions set aside for small businesses; (2) acquisitions of arms, ammunition, or war materials, or purchases indispensable for national security or for national defense purposes; (3) acquisitions of end products for resale; (4) acquisitions from Federal Prison Industries, Inc., or Nonprofit Agencies Employing People Who Are Blind or Severely Disabled; (5) other acquisitions not using full and open competition; and (6) certain services listed in FAR 25.401(b). If the TAA does not apply, then the BAA is applicable.
Procurements subject to the TAA require that all products qualify as U.S.-made or designated country end products. Unlike the BAA which allows offers for non-domestic end products based upon price reasonableness, the TAA generally does not allow non-TAA compliant products to be purchased if compliant products are offered.
In order to qualify as a U.S.-made or designated country end product, the product must be manufactured in the United States or the designated country, or the product must be substantially transformed in the United States or the designated country 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 transformed. Country of origin under the TAA is the country in which the end product was last “substantially transformed.” Unlike the BAA, the “substantial transformation” test of the TAA does not depend upon the relative value of the components. As such, a product which is TAA compliant, may not be BAA compliant.
