Up to speed: Trade Agreements Act (TAA) compliance

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Is your TAA compliance robust… and up to date?

The Trade Agreements Act (TAA) is a federal law applicable to all Federal Supply Schedule (FSS) contracts; it prohibits federal agencies from acquiring products made in certain countries. 

A product created in a foreign country and containing components from foreign countries must meet the “substantial transformation” test as outlined in Federal Acquisition Regulation (FAR) 25.001(c)(2) in order to be considered compliant. This test determines whether the country where the product underwent the “substantial transformation” is on the list of TAA-compliant countries.

Enforcement highlights and trends from 2016-17

With a reinvigorated focus on TAA compliance, an increase in False Claims Act (FCA) cases, and President Trump’s “Buy American” executive order, contractors should expect increased scrutiny of their TAA compliance efforts. 

  • In April 2017, the General Services Administration (GSA) Office of the Inspector General issued a memorandum summarizing the results of its audit of TAA compliance across Federal Acquisition Service (FAS) purchasing programs. Here were some of the observations:
  • FAS can further develop controls to detect TAA noncompliance, including providing guidance on how to use its online data dashboard
  • Instances where TAA noncompliance was not always remediated
  • Schedule solicitations including an outdated TAA clause 

Failure to comply with the TAA can result in a False Claims Act suit from the U.S. government, which can impose major damages on companies that have allegedly defrauded government agencies. In FY 2017 alone, there were a total of 799 FCA cases, resulting in $3.7 billion in federal recoveries.

Trade Agreements Act: Determining country of origin

High-risk areas

  • Substantial transformation determinations
  • Kitting, or grouping/ packaging/supplying separate but related items together as one unit 
  • Including contract manufactured items on schedules
  • Active Pharmaceutical Ingredient source 
  • Healthcare software products

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Contractor considerations

  • Simple assembly vs. substantial transformation: How is substantial transformation defined and tracked?
  • Are any kit components made in non TAA designated countries? 
  • Where do the various physical and ingredient components come from? 
  • Where was the source code developed?

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How PwC can help

PwC’s Government Contracts professionals are well versed with all aspects of FSS contracting, including Trade Agreements Act compliance. 

Our team assists contractors with assessing or implementing TAA compliance programs, including measures to ensure that TAA non-compliant products are removed from FSS contract product listings. We also can help remediate TAA noncompliance occurrences.

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Partner, PwC US

Philip Koos

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Partner, PwC US

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Partner, PwC US

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