The Buy America Act (BAA) is a domestic preference statute that attempts to protect the U.S. labor force by providing a preference for American goods purchased by the government. A contractor’s “nationality” is not considered – it is the place where the goods are mined, produced or manufactured that controls whether or not they are considered “American” goods. Most government solicitations contain a BAA clause requiring contractors to certify that the goods they propose to provide to the government are domestic. Federal Acquisition Regulation (FAR) Clause 52.225-3.
The Trade Agreements Act (TAA) authorizes the President to waive otherwise applicable laws – such as the BAA – that would give foreign products less favorable treatment than that given to domestic products. This waiver applies to eligible products from countries that have signed an international trade agreement with the United States. The current threshold for the TAA is $203,000. Contracting Officers are required to insert FAR Clause 52.225-5 into solicitations and contracts if the TAA threshold has been met and the restrictions of the BAA are not applicable. The TAA Certificate accompanies this clause. In completing this certification, contractors must specifically list any end products that are not U.S.-made or designated country end products. The government will consider for award only offers of U.S-made or designated country end products (unless there is a determination that there are no such products).
The False Claims Act poses a threat to contractors who are not careful in completing the BAA and TAA certifications. If a contractor’s products are not American-made (domestic end products) as required under the BAA, the BAA certification must contain a listing of the foreign end products. And, where the TAA applies, if the offered products are not manufactured in countries that have reciprocal trade agreements with the United States, the TAA certification must so state. The government will not purchase a product that is not a domestic product or does not originate from a designated country. Thus, a contractor who misrepresents the country of origin of a product or sells a product to the government that did not originate in the U.S. or a designated country, is considered to have made a false claim to the government.
According to Justice Department press releases, the United States has collected over $30 million in False Claims Act settlements over the past several years from companies alleged to have violated the BAA and the TAA.
The take-away is this: Contractors must work to make certain that items they offer for sale to the government are either “domestic” items or compliant with the Trade Agreements Act. This is not always easy to accomplish. Contractors change suppliers and suppliers themselves change their sources of products. In short, there can be and often are numerous changes in the supply chain that can lead to TAA non-compliance. Conducting regular and on-going due diligence on the country of origin of your products and training those who prepare and submit proposals to accurately complete the BAA and TAA certifications will help protect against a False Claims Act allegation.
Lindsay Simmons is the attorney responsible for the content of this post.