This short guide provides general advice on how to comply with the Trade Agreements Act when you sell your goods to the U.S. Government. For specific questions, it is best to consult with an experienced attorney
What is a Trade Agreements Act?
The Trade Agreements Act allows U.S. businesses to sell foreign-made products to the U.S. Government under certain circumstances from specifically designated countries which can be profitable to the U.S. Government and you. The Trade Agreement Act waives the Buy American Statute preferences under certain circumstances. Initially, Congress created the Buy American Statute, which requires the U.S. Government to give a domestic preference to U.S.-made goods over foreign-made goods. Later, Congress created the Trade Agreements Act which waives the Buy American Statute requirements for eligible products from countries that have signed an international trade agreement with the United States. This agreement only applies once certain thresholds are met, among other requirements. You can read more in the Federal Acquisition Regulation, Part 25.
Which Countries Are Trade Agreements Act compliant?
Overtime, the U.S. Government has signed multiple trade agreements with many countries. For example countries that have signed World Trade Organization (WTO) Government Procurement Agreement may be compliant: Armenia, Aruba, Austria, Belgium, Bulgaria, Canada, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea (Republic of), Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Montenegro, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Singapore, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Taiwan (known in the World Trade Organization as "the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei)"), or United Kingdom. There are also Caribbean Basin Countries, Least Developed Countries, and Free Trade Agreement Countries. Since the list periodically changes, it is always best to double check it for accuracy.
Which Countries are Definitely not Trade Agreement Act compliant?
China, India, Malaysia, and Thailand are some of the countries that do not have an agreement with the U.S. Government. Since the list periodically changes, it is always best to double check it for accuracy.
Why Ensuring Compliance with the Trade Agreement Act is Important?
While selling to the U.S. Government offers many opportunities, it is important to be compliant with the Trade Agreement Act. Several months ago, the Department of Justice announced that U.S.-based firm has agreed to pay $3 million for allegedly using foreign materials on construction projects involving federal funds. Allegedly, the company repackaged foreign materials to comply with the 'Buy American' provisions which required it to buy domestic construction materials. The company also agreed not to contest debarment. The Department of Justice also pointed out that the claims resolved by the civil settlement are allegations only; there has been no determination of liability except to the extent admitted in the plea agreement. It appears that this matter originated from a qui tam lawsuit. You can read the entire announcement here:
What are Key Components of A Trade Agreement Act Compliance Program?
While each compliant program should be customized to specific needs, each Trade Agreement Act program should have the following components: Accountability, Due Diligence, Internal Policies, Training and Awareness, Tracking and Automating, Communicating and Cooperating, and Revising and Updating. Effective Trade Agreements Act and Buy American Statute compliance allows large and small businesses to sell more to the U.S. Government and to seize on new opportunities.
How Do I check if My Product is Trade Agreement Act Compliant?
There are several ways to check this. One way is to request an opinion from the U.S. Government. Another way is to request that the manufacturer verifies the country of origin. Yet, another way is to have someone prepare an opinion for you after conducting in-depth research. Since today many products consist of components and sub-assemblies from multiple countries, this can be quite complex. For example, your product could have 20 parts, but 10 are made in non-TAA compliant countries (China) and 10 are in TAA compliant countries (Japan). The question becomes when did the product undergo substantial transformation?
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