- Identify if your company holds GSA Schedule Contracts.
- If it does, are all products provided TAA compliant?
- If not, this may need to be reported, the product removed and further implications may arise.
On Thursday, May 5, 2016, several government contractors holding United States General Services Administration (GSA) Multiple Award Schedule contracts received a notice highlighting Congressional ongoing scrutiny pertaining to Trade Agreements Act (TAA) compliance (Notice). The Notice requires those contractors with GSA Schedules (Schedule Contractors) to verify the country of origin (COO) for all products on their schedule contracts within five business days and provide either (1) a copy of the Certificate of Origin or (2) a certification from the manufacturer that demonstrates the end products being provided comply with the TAA. Products that are not TAA compliant must be removed from a contractor’s schedule contracts.
- Schedule Contracts and the TAA
Multiple Award Schedules are government-wide contracts administered by GSA that allow agencies (and other federal and state governmental bodies) to procure commercial products and services at already negotiated discounts. While schedule contracts can provide contractors with an advantage in the federal marketplace, they are not all “fun and games” as they also come with certain special compliance requirements. One such requirement is that end products supplied under schedule contracts must comply with the TAA. The TAA implements free trade agreements to which the United States is a signatory. Under the TAA, contractors must provide either U.S.-made or designated-country end products. Designated countries include Caribbean Basin countries, World Trade Organization Agreement on Government Procurement countries and Free Trade Agreement countries. Importantly, India, China, Malaysia and Philippines are not designated countries. Accordingly, Schedule Contractors must ensure that the end products they provide under these contracts are either made in the United States or a designated country. Schedule Contract holders are also required to certify that end products provided comply with the TAA.
Determining an end product’s COO and whether it complies with the TAA is a complex process that requires a detailed examination of the product’s manufacturing process. The TAA utilizes a “substantial transformation” test to assess whether articles from one country are “substantially transformed 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.” Schedule Contractors are responsible for determining a product’s COO but can seek either an advisory opinion or final determination from the U.S. Department of Homeland Security’s U.S. Customs and Border Protection.
- The Notice
The Notice explains that over the last year, GSA has responded to multiple Congressional inquiries regarding “failed compliance” with the TAA and Made in America designations as well as Freedom of Information Act requests. GSA explains that in each of those inquiries, the allegations were substantiated and the products at issue were found not to be made in the United States or a designated country. As a result, the Notice explains that the “continued reoccurrence of non-compliant product threatens the integrity of [Schedule Contracts]” and that the “threat cannot be tolerated for the good of the federal procurement community.”
As a result, the Notice requires the receiving Schedule Contractor to review its total product offering and
Submit a spreadsheet that verifies the COO for each product approved on [the] GSA contract. For any item found to be manufactured in the United States or a TAA Designated Country, provide a copy of the Certificate of Origin OR certification from manufacturer on official letterhead verifying the product(s) they supply are compliant with Trade Agreements Act.
Schedule Contractors must provide this spreadsheet and proof of compliance within five (5) business days of receiving the Notice. While speculative, such a short response deadline is likely due to GSA’s desire to know now whether a product is compliant and to not provide the contractor sufficient time to remedy any non-compliance issues.
The Notice explains that if Schedule Contractors determine that products on their contracts are not TAA compliant, they must take the following steps:
- Delete all non-TAA compliant products from the Schedule Contracts;
- Update GSA Advantage (GSA’s schedule contracting website and online catalog) to remove the deleted products from the catalog; and
- Submit an updated pricelist to the National Schedules Information Center.
Contractors are also required to update any incorrect COO designations in GSA Advantage. Failing to comply with the Notice’s requirements can result in the removal of a contractor’s entire GSA Advantage file.
- What You Should Do if You Have a Schedule Contract
Schedule Contractors receiving the Notice will need to react quickly and review the COO of the products they provide under their GSA schedule contracts. Undertaking a COO determination, particularly for complex products, is an involved process. Accordingly, contractors should engage their suppliers, manufacturing teams, import/export team and legal counsel to ensure that their reviews are accurate.
Schedule Contractors determining that products on their schedule contracts are not TAA compliant will need to take the corrective action steps identified in the Notice and described above. Further, contractors with non-TAA compliant end products will need to determine if any of the non-compliant products have been provided to the government. If non-compliant products have been delivered to the government, Schedule Contractors may need to make mandatory disclosures pursuant to FAR 52.203-13 and FAR Subpart 9.4. The delivery of non-compliant products can also subject contractors to potential criminal and civil penalties as well as suspension and debarment. Indeed, the past few years have seen several high-profile recoveries by the government from Schedule Contractors under the False Claims Act for, among other things, TAA violations.
Lastly, even if you are a Schedule Contractor that does not receive the Notice, you should still consider performing the review and audit required by the Notice as a preventative and proactive measure. What is clear is that the government will continue, and may well expand, TAA enforcement. Being proactive and addressing any potential issues as early as possible can help mitigate potential liability.