Made in the U.S.A.
What does that mean today, given global supply chains and complex manufacturing processes? Most products, particularly electronics, have one or more components made in other countries. Can a company claim its product is made in the U.S.A. if it contains parts manufactured elsewhere?
For U.S. government procurement purposes, the answer depends on the size of the purchase.
The Buy America Act (BAA) generally applies to supply contracts greater than $2,500 (the threshold for micro-purchases) but below $193,000. It requires that a certain percentage of the product’s components (based on value) be produced, mined, or manufactured in the U.S. If companies are out of compliance with the BAA, they can still procure, but with a percentage fee (generally 6-12%).
The U.S. Trade Agreement Act (TAA), which generally applies to supply contracts for $193,000 or more, requires that the federal government procure only “U.S.-made or designated country end products.” To be TAA compliant, a product or service must be made or “substantially transformed” in the U.S. or a designated country. Unlike BAA, generally, if a product doesn’t meet TAA standards, it cannot be procured.
Unlike the BAA, the TAA focuses on the process of making the product. “Substantially transformed” means that the product has been made 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.” It is determined on a case-by-case basis by the Bureau of Customs and Border Protection (CBP).
For example, the CBP has ruled that cutting a material, attaching components, and assembling a product made in a non-TAA-compliant country do not constitute substantial transformation. Programming a device did qualify, although simply downloading software did not. To ensure compliance, companies should monitor CBP determinations and maintain good communication with all partners in their supply chains.
The TAA is designed to implement trade agreements negotiated between the U.S. and other countries and foster international trade opportunities for American companies. It also aims to promote the enforcement of international trade rules and an open trading system.
The TAA isn’t a mandate to “buy American.” In fact, it serves as an exception to the BAA. For government procurement purposes, products from designated countries must be treated the same as products made in the U.S.
Products from those countries are not eligible for listing on GSA schedules unless there is no alternative from the U.S. or a designated country. View a complete list of TAA-compliant and non-compliant countries.
Products and services must be TAA-compliant to qualify for General Services Administration (GSA) contracts. However, no governing body or third-party testing or auditing organization exists — suppliers self-certify that their products and services meet TAA requirements. The GSA and other organizations requiring TAA compliance may request that the supplier provide proof.
Certification is not to be taken lightly. Under the False Claims Act, GSA analysts may conduct compliance reviews and bring civil lawsuits against non-compliant suppliers. In recent years, several suppliers have made seven-figure settlements in such cases. One such ruling resulted in Ambu, Inc. paying a $3.3 million settlement to resolve False Claims Act allegations.
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