Compliance with the Trade Agreements Act (“TAA“) in Federal Contracts
 



Included in most Department of Defense (“DoD”) contracts, and many civilian agency contracts, such as GSA Schedules, is a contract clause dedicated to implementing and enforcing the Trade Agreements Act (“TAA”).1 All offerors are obligated to complete a certification2 that states “The offeror certifies that each end product … is a U.S. made or designated country end product, as defined in the clause of this solicitation entitled “Trade Agreements'”.

The TAA is an element in the Public Policy known as the“ Domestic Preference Policies” that have been in place since the Depression Era of the 1930s. The Buy America Act (“BAA”)3 was signed into law in 1931 and provided general preference for the acquisition by the Federal Government of domestic, i.e. made in the United States of America (“USA”), articles, materials, and supplies when they are acquired for public use in the USA. The Buy America Act is limited to an acquisition at or below $193,000.00.4 Above this value, the TAA supersedes the BAA and permits the Government to acquire goods and services from foreign “designated countries”5 or “qualifying countries”6 when domestic companies cannot provide the item(s) at a fair and reasonable cost.

The TAA authorizes the President to waive the BAA and other discriminatory policies, i.e., domestic preference policies, for eligible products from countries that have signed an international trade agreement with the United States or have otherwise met certain criteria.

Under the TAA, the Government may acquire goods that are “designated country end products” and “qualifying country end products” when they are wholly the growth, product, or manufacture of the “designated country”7 or a “qualifying country”.8 If, however, the goods consist in whole or in part of material from another country, then it may be identified as a “designated country end product” or a “qualifying country end product” only if 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 has so transferred.”9

It is critical to understand that the TAA cannot be ignored or disregarded by contractors when the RFP requires its implementation. The contractor must complete the certification mentioned above and must comply with the “Trade Agreements” clause set forth at 52.225-1 or 52.225-5 or DFARS 252.225-7021.

The General Accountability Office (“GAO”) discussed the subject of the TAA in a recent case10 involving a solicitation issued by the Federal Prison Industries for Hewlett Packard HP Compaq t5520 Thin Client devices. The procurement was conducted under FAR Subpart 12.6 and Part 13. The solicitation incorporated FAR section 52.212-3, Offeror Representations and Certifications--Commercial Items. Among the certifications incorporated and required by this solicitation was the Trade Agreements Certificate, FAR section 52.225-6 (Jan. 2005). CDWG, an offeror, refused to complete the TAA certification. Eventually, an award was made to CDWG based on their lowest price offer. The other offeror, Wyse Technologies, protested the award on the grounds that the awardee's brand name product was the end product of either Taiwan or the People's Republic of China, and thus the award was in violation of the TAA, inasmuch as these countries are not designated countries under the TAA. The GAO sustained the protest because (1) CDWG did not offer to comply with the TAA in its proposal or otherwise, (2) that the agency was required to ensure CDWG's compliance with the TAA prior to making award to that firm, and (3) that this failure resulted in the delivery of products that apparently do not comply with the TAA.

The GAO clearly stated in this protest case that “Where a bidder or offeror represents that it will furnish end products of the United States or designated countries, it is obligated to comply with that representation.”11 This is not an option. If the “bidder or offeror leaves the certificate blank and does not otherwise exclude any end product from the certificate, and does not otherwise indicate that it is offering anything other than a TAA-compliant end product, acceptance of the offer will result in an obligation on the offeror's or bidder's part to furnish a TAA compliant end product”.12 Thus, the agency can rely on “an offeror's representation/certification with the TAA unless the agency has reason to believe, prior to award, that the offeror will not provide a compliant product”.13 The GAO stated very clearly and unequivocally that “Award may not be based upon a proposal where, as here, the offeror declines to certify compliance, as required, with a material term of the solicitation, in this case the TAA, such that the proposal consequently fails to establish a legal obligation to comply with that material term.”14

Enforcement of the TAA has received a great deal of attention at the Department of Justice as well as at the General Services Administration (“GSA”) particularly with respect to contractors that have a GSA Schedule. The GSA announced15 that a press release (source unidentified) dated February 10, 2006 about another office products contractor reaching a $5.02 million settlement with the Department of Justice over violations of U.S. trade regulations. That brings the total to (5) five office products contractors having reached settlements with a combined value of nearly $30 million. The contractors ranged from large businesses to 8(a) and veteran-owned small businesses. There is no preferential treatment under the TAA for small businesses.

Remember that “in solicitation provision FAR 52.212-3(f)(2), Offeror Representations and Certifications-Commercial Items, you must include a list of those offered items that are obtained from sources other than the U.S. or a designated country.” If an item is not listed, it is deemed to be compliant with the TAA. If, in fact, an item not listed is later determined to be from a non-designated country or not from the U.S., you can be subject to sanctions or prosecution by the Department of Justice.

Therefore, in this age of heightened surveillance of foreign products and services, and foreign companies, you may have a contract cancelled if you fail to provide the proper TAA certification. Don't take a chance - be sure you list all products that are obtained from other than a designated country or the U.S.

Tom Petruska, Owner
Contract Unlimited Incorporated

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Footnotes:

  1. Codified at 19 U.S.C. 2501-2581 (2000)
  2. FAR 52.225-6
  3. Codified at 41 U.S.C. 10a - d (2000)
  4. FAR 25.402
  5. A designated country is defined as a (1) World Trade Organization Government Procurement Agreement country; (2) Free Trade Agreement Country; (3) Least Developed country; and (4) Caribbean Basin country
  6. DFARS 252.225-7021
  7. FAR 25.401
  8. A qualifying country means any country set forth in subsection of 225.872-1 of the Defense Federal Acquisition Regulation Supplement. DFARS 252.225-7021.
  9. FAR 52.225-5
  10. Wyse Technologies, B-297484, January 24, 2006
  11. id
  12. id
  13. id
  14. id
  15. GSA Steps 10/Mar. 2006
This discussion should not be interpreted as legal advice or a legal opinion. Please consult with an attorney for a legal opinion.