Is the Government Going to Investigate Your Company for Trade Agreement Act Compliance? How Would You Do?

In Government Contracting What is TAA Compliance? What are the consequences of not being Trade Agreement Act compliant?

Trade Agreements Act TAA Compliance Lawyers TAA compliance in federal government contracting is critical for companies who sell their products either directly or indirectly to the federal government to make sure their products comply with the Trade Agreements Act (TAA). ( 19 USC Ch. 13: TRADE AGREEMENTS ACT OF 1979)

 The U.S. Trade Agreement Act which has a minimum contract amount $193K or more, means that if you selling products to the federal government, whether on a GSA schedule contract or otherwise, your products are TAA compliant if your product or service must be made or “substantially transformed” in the U.S. or a designated country.

TAA compliant products fall under three main categories. They are

  • domestic end products – made entirely in the United States of America
  • designated country end products – made in a country that has a trade agreement with the United States (TAA Compliant products made outside of the U.S.)
  • foreign end products – made outside of the United States and do not meet the requirements for designated country end products

Federal law enforcement agencies such as the Office of Inspector General (OIG) and Department of Justice (DOJ) have ramped up their investigations of small businesses, prime contractors, subcontractors, and manufacturers. As a result, record numbers of corporations and CEOs are charged and or convicted for False Claims Act crimes.

TAA Compliance Meaning – What is Required for Your Products to be TAA Compliant?

To meet the regulatory TAA compliance requirements, your products must be made completely in the United States or one of the TAA designated countries, or the product must be substantially transformed or have undergone a significant change in form or character in one of the designated countries.

Substantial transformation means that your products underwent a fundamental change (normally as a result of processing or manufacturing in the country claiming origin) in form, appearance, nature, or character. This becomes a highly contested issue.

Government contractors must realize that they cannot guess and certify to the government that their products are TAA compliant.  See FAR 52.225-5 Trade Agreements.

Without an actual analysis for compliance, companies face significant civil and criminal exposure.

  • Saying that you made a certification mistake does not get you off the hook with OIG or DOJ
  • During TAA investigations, federal agents want to see if you have an internal policy or control and helps the company determine whether it meets the Trade Agreements Act requirements.
  • Simply packing and assembling parts generally will be deemed non-TAA compliant.

Why Does Being TAA Compliant Matter?

Congress passed the Trade Agreement Act as an important part of the United States’ economic, diplomatic, and defense strategy. Government contractors also must follow the TAA statutes and manufacture their products in TAA compliance countries. This is not a choice. Federal law enforce agencies have prosecuted several cases where companies paid millions to resolve False Claims Act TAA non-compliance liability.   

It is no secret that selling products to the federal government is very lucrative but with that comes severe consequences if the TAA requirements are not met. Companies must be very careful to make sure that they comply with GSA Trade Agreements Act compliance requirements.

GSA TAA Compliant Products

Avoid fierce government investigations or exposure to criminal liability:

The Trade Agreements Act (TAA)  as it applies to GSA Schedule holders simply means that unless otherwise stated in the solicitation, the contracting officer, or contract. The GSA TAA compliance means that there limits the country of origin for products sold through your Schedule contract.  To become GSA TAA compliant, you can only sell to the federal government:

  1. Articles that are wholly the growth, product, or manufacture of the U.S. or a designated country, or
  2. Articles that are “substantially transformed” in the U.S. or a 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.

As a government contractor, you are solely responsible for ensuring that your product information is accurately incorporated into the contract and displayed on GSA Advantage throughout the life of your contract. You must keep the information on your GSA contract current. Blaming manufacturers, or claiming you did not understand the law is not usually an excuse for DOJ or OIG investigators. You are solely responsible for information about TAA compliance in 52.225-5 Trade Agreements.

What are TAA Compliant Countries?

The full list of TAA compliant countries can be found HERE. Government contractors must make sure that they keep up to date on the various designated countries since they may change.

TAA-designated countries are those with whom the United States has an executed multilateral or bilateral agreement, such as a Free Trade Agreement, or the World Trade Organization Government Procurement Agreement, or that have otherwise been designated as TAA eligible (i.e., Least Developed Countries and Caribbean Basin Countries).

Non- TAA Trade Agreement Act compliant countries are omitted from the list, including, but not limited to:

China, India, Indonesia, Iran, Iraq, Malaysia, North Korea, Pakistan, Russia, Sri Lanka, …

What Trade Agreement Act Compliance Exceptions?

FAR 25.40 mentions TAA Compliance Exceptions.

(a) This subpart 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., under subpart  8.6, and acquisitions under subpart  8.7, Acquisition from Nonprofit Agencies Employing People Who Are Blind or Severely Disabled;

(5) Other acquisitions not using full and open competition, if authorized by subpart  6.2 or 6.3, when the limitation of competition would preclude the use of the procedures of this subpart; or sole source acquisitions justified in accordance with 13.501(a); and

(6) Goods and services specifically excluded under individual trade agreements, such as exceptions negotiated by the U.S. Trade Representative for particular agencies. See the agency supplementary regulations.

What To Do If You Are Investigated or Charged for Non-TAA Compliance?

If your company is under investigation for alleged Trade Agreement Act compliance violations, you do not want to handle it on your own. There can be serious mistakes related to incriminating documents or testimony requested via a civil investigative demand (CID) or responding to criminal subpoenas by the DOJ, OIG or other law enforcement agencies.

When federal law enforcement believes that your company is not Trade Agreement Act compliant, it will seek to investigate and or charge you with False Claims Act violations or some type of procurement fraud.

How can you overcome charges for False Claims Act charges for not being Trade Agreement Act compliant?

Government attorneys often have a difficult time proving intent. When you develop your internal policies and controls and diligently try to abide by those policies, it is then difficult to claim that you intended to defraud the government by not complying with the Trade Agreements Act requirements.

Consider retaining a Trade Agreement Act TAA compliance attorney to help. At Watson & Associates, LLC our trade agreements lawyers help your company to minimize civil and criminal liability and to become TAA compliant.

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Call our TAA compliance attorneys for immediate help at 1.866.601.5518 today or contact us online. Speak to Theodore Watson our Department Head.