Non-Compliance with Trade Agreements Act– Is it Worth the Risk?
One of the most challenging aspects of being a General Services Administration (GSA) Multiple Award Schedule (MAS) contract holder is maintaining Trade Agreements Act (TAA) compliance. Noncompliance can occur because the TAA has implemented several grants through trade treaties to signatory countries, which have been given the ability to supply non-discriminated commercial products to the United States. This is also relevant because it has developed grants to discriminate and prohibit the supply of products from non-signatory countries as well.
To comply with the TAA’s products standard, a GSA MAS contract holder must guarantee throughout its potential 20 year contract term, that each of its “final products” being sold has been manufactured or “substantially transformed” in the U.S. or in TAA-compliant country. This compliance however, can be very problematic because many commercial products sold in connection with GSA’s MAS program are currently manufactured in non-designated TAA countries, such as China, Taiwan and Malaysia.
Another pressing issue is that the product country of origin can change as well, due to factors such as cost, factory capacity and product availability. In addition, a single product Stock Keeping Unit (SKU) can have multiple countries of origin. This has become a recently persistent issue for industry categories, such as information technology, medical supplies and paper products. These industries encounter problems with the TAA because their procurement function fails to track information about product country of origin and it does not provide this information to responsible personnel.
We’ve seen numerous companies take the risk of not being TAA compliant. Many also have been caught and forced to pay, heavily. One of these was the recent False Claims Act lawsuit against Supplies Now Inc., who was selling products made in China through the GSA. Supplies Now Inc., not only was noncompliant with the TAA, which is a violation of their GSA contract, but they were forced to settle the False Claims Act lawsuit with payment of $270,000 to their competitor.
Guarantee Trade Agreements Act Compliance
Avoid taking this risk by adhering to the parameters that are compliant to the TAA. These can be outlined in three basic functions:
- Create procedures to monitor and to provide updated product country of origin information to the company’s MAS contract administrators.
- Form procedures to archive historical product country of origin information for future reference.
- MAS resellers should obtain a written TAA certification from manufacturers, as well as insurance for noncompliance.
To be noncompliant with the TAA is a risk that companies should not take. To avoid the risk and to learn more about how to make sure your company is compliant with the TAA, visit our website.