On May 5, 2016, many schedule contractors received a notice of the government’s continual examination of compliance to the Trade Agreements Act (TAA). Schedule contractors are required to comply with this act by verifying the country of origin for all of their products.
If you are a government contractor, here are a few tips to help you stay compliant.
Abide by the TAA
The TAA states that the product produced by government contractors needs to be wholly grown, produced, or manufactured in the United States or a designated country. According to the Trade Agreements Act, the product can also be “substantially transformed into a new and different article of commerce in the US or designated country.”
To find a list of designated countries, you can reference The Federal Acquisition Regulation section 25.003. Major countries that don’t make the list are China and India. If you obtain products from multiple countries, each country of origin needs to be noted. Also, if you use suppliers, they need to tell you the country of origin for every item they provide for you.
Compliance standards for product contracts
If you are unsure if your product has been transformed in a way to make it compliant, you can find recent rulings on the Customs Ruling Online Search System (CROSS), a searchable database of rulings by the United States Customs and Border Protection (USCBP). In its role of investigating a product’s TAA compliance, the USCBP determines if the manufacturing process has changed the product’s functions or its traits.
Compliance standards for service contracts
If you are a government contractor providing services, the compliance standards are slightly different. The country of origin is determined by where the company is legally established and not by where the services are performed. So even though your services may be performed in another country, if your company is established in the United States or a designated country, you are compliant.
What this means for you
Schedule holders who receive an official notice have five business days to submit a spreadsheet that verifies the country of origin for each product on the GSA contract.
If schedule contractors discover that they aren’t compliant, they have to complete these three steps.
1. Remove all non-compliant products from the contracts.
2. Update GSA Advantage so that the non-compliant products are erased from the system.
3. Update and submit their price list to the National Schedules Information Center.
To improve your TAA compliance, incorporate the following procedures into your ongoing compliance efforts.
● Keep a record of your manufacturing process. Tracking each step of this process will make it much easier to prove compliance. It will also help you keep in touch with the right people if that manufacturing process changes.
● Verify that suppliers meticulously update their product’s country of origin. If any changes need to be made, be sure to let your GSA Contracts administrator know.
● Remove products that are not TAA-compliant. You can use the modifications clause to remove any products that are not compliant with the TAA.
Federal rules and regulations are ever changing, so it’s important to stay up to date on the government’s requirements for its contractors. One thing that never changes about working with the government is the need for steady cash flow. To learn more about how government contract financing can benefit your company, visit our invoice factoring page.