"MADE IN AMERICA" : GSA Stepping Up Trade Agreements Act Compliance Enforcement
Government Contractors should be aware that the General Services Administration ("GSA") is taking a more aggressive approach to policing Contractor compliance with the Trade Agreements Act ("TAA") among GSA Schedule contract holders.
The Trade Agreements Act
The Federal Acquisition Regulations ("FAR") have long required that the Government purchase products which are manufactured in the United States. This "Made in America" policy began with the 1933 Buy American Act ("BAA") and has further evolved through the Trade Agreements Act of 1979 ("TAA") which redefined the requirements to designate a product as made in the United States.
Under the TAA, contractors selling products under GSA Schedule contracts are required to provide products which are "wholly produced or manufactured" in the United States or a Designated Country or that were "substantially transformed" into a new and different article of commerce in the United States or a Designated Country. Under the FAR, a "substantial transformation" occurs when products that consist in whole or in part of materials from another country have been substantially transformed into a new and different article of commerce with name, character, or use distinct from that of the article from which it was transformed.
Apparently the Government may not have been as diligent in enforcing these long standing policies as it should have been. That is about to change.
Compliance With The Trade Agreements Act
In early 2016, New York Senator Charles Schumer sent a letter to the GSA raising concerns that GSA Contract Schedule holders were selling products under their Government Schedule Contracts which were not compliant with the TAA. It has yet to be determined whether there is any substance to Schumer's allegations, but regardless of the outcome, the GSA has commenced a time-sensitive TAA Compliance enforcement program as a result of these and other compliance allegations.
In May 2016, the GSA issued a draft Notice Letter to government contractors holding GSA Schedule contracts (the "Notice"). The Notice informed the contractors that, as a result of numerous inquiries regarding failed compliance with the Trade Agreements Act and "Made In America" designations, it was in the best interest of all parties to require that each vendor review their total product offering and submit the following information:
- A spreadsheet verifying the Country of Origin (COO) for each product approved on the contractor's GSA contract; and
- A copy of the Certificate of Origin for every product manufactured in the United States or a Designated Country, or certification from the manufacturer, on official letterhead, verifying that the product(s) they supply are compliant with the TAA.
Contractors are required to respond to this Notice with the requested information no more than close of business, five (5) business days after receipt of the final letter when issued. The GSA warned contractors that a failure to respond by the required date might result in the removal of the contractor's entire GSA Advantage file. To date, the GSA has completed an initial review of the "Made in America" notations on its GSA Advantage website and, as a result of this investigation, removed nearly a dozen companies falsely advertising that their products were "Made In America."
Recommendations For Contractors
Determining whether products listed on your GSA Schedule Contract are compliant with the TAA is a complex process that requires the involvement of multiple parties. One way to ensure compliance with the TAA is to ensure that the manufacturers and suppliers providing products certify the country of origin and keep that certification up to date. The manufacture of items with parts from non-Designated Countries becomes increasingly complex and should include the consultation of your outside legal counsel.
If any awarded items are found to be noncompliant, a Contractor should immediately:
- Delete all noncompliant items from its Contracts;
- Update its GSA Advantage catalog to remove the noncompliant items; and
- Submit an updated pricelist to the National Schedules Information Center.
If noncompliant products have been sold to the Government, contractors have a duty to disclose these sales to the GSA and they may be subject to fines and penalties. If you are a contractor holding a GSA Schedule contract, now is the time to ensure that your products are compliant with the TAA. Please contact Bret Wacker (202.772.0906) or Bill Eshelman (202.552.2374) of Clark Hill's Government Contracts Practice Group or Tom O'Donnell (312.985.5570) or Kevin Williams (312.985.5907) of Clark Hill's Trade Compliance Practice Group for more information on compliance requirements and best practices.