The Trade Agreements Act was passed to provide a framework for governing the terms of trade deals between the United States of America and other nations. One of the most important aspects of the Trade Agreements Act (Act TAA) is that it restricts the items the United States government can buy to those manufactured in the United States or certain other nations.
Because the Trade Agreements Act applies to GSA Schedule Contracts as well, if businesses make sales to the state or have plans to do so in the future, they are obligated to ensure that their items comply with the Act’s requirements TAA.
Depending on the industry, this could pose an issue for your business receiving a GSA Schedule. Therefore, it is important to know all the ins and outs of Act TAA before embarking on your GSA schedule journey.
Trade Agreements Act Compliance
The Trade Agreements Act compliance is achieved in a product when all the following conditions exist.
- At least fifty percent of the product’s total cost to produce comes from the United States or one of the other nations recognized.
- The goods have experienced profound modification in the United States or one of the nations recognized for this purpose. The descriptor U.S.-made refers to an item that has either been sourced, generated, or developed in the United States. Or it can apply to goods that have undergone a major transformation in the United States into a new and exclusive news piece of marketing with a name, quality, or use that is different from the original, non-American-made product.
A product is regarded as compliant with the Trade Agreements Act if it comes from a country on the approved list. This list indicates that companies can legally offer these goods per their GSA Schedule contract. The company must manage and ensure that all of the items in the GSA contract are manufactured in the United States or a specified country as final products. For this reason, it is essential to perform regular checks on the source of all of the goods’ components and pieces.
Moreover, the GSA Schedule contract will be null and void if the item you supplied to the government violates the Trade Agreements Act because the participation of designated nations in the total cost of the product falls below the threshold of fifty percent.
The following nations, the United States, and other specified countries get included among those classified as Trade Agreements Act compliant.
- Countries that are members of the World Trade Organization’s Government Procurement Agreement like Australia, Germany, South Korea, and Japan.
- Countries signatory to the Free Trade Agreement like Mexico, Canada, and Singapore.
- Least developed countries with few resources like Afghanistan, Cambodia, Samoa, and Yemen.
Countries located in the Caribbean Basin like Antigua and Barbuda, Aruba, Bahamas, Curacao, and such.
Would the United States Allow the Sale of Products that are Not Trade Agreements Act Compliant?
Only purchases made by the federal government are obliged to comply with the Trade Agreements Act. Concerning contracts for more than a certain amount, government entities are prohibited from buying products that the Trade Agreements Act does not cover. In all actuality, the value of every GSA Schedule is higher than the threshold; hence, one may argue that the Trade Agreements Act applies to each Schedule.
The Trade Agreements Act does not impose restrictions on international commerce that are not directly related to government acquisition. This stipulation indicates that companies are free to sell products that do not comply with Trade Agreements Act regulations on the open commercial market.
How to Ensure that the Products Continue to Meet All of the Trade Agreements Act Requirements
Trade Agreements Act compliance is necessary for maintaining any GSA Schedule agreements businesses may acquire. Therefore, they must always ensure that their products continue to adhere to the specifications of the Trade Agreements Act throughout the entire performance period specified in the contract.
- Choose the element, part, suppliers, and manufacturers with great care if one desires the manufactured goods to be of the highest quality. At least half of the value of the goods should come from the United States or other nations designated by the United States.
- If the fulfillment of the GSA contract depends on the shipment of items created by a third party, businesses need to ensure that these products get produced in countries that comply with the Trade Agreements Act.
- Always provide a thorough understanding of where the source components and materials come from as they come from the partners. You must ensure that every detail has the appropriate documentation and commitments regarding its source of supply.
- Insist on receiving a complete inventory whenever placing an order for several components or commodities upon which the product depends.
- Administrators should make it a habit to perform regular checks on the Trade Agreements Act status of the elements that have been ordered to ensure to not overlook any shifts in the provenance of any essential components.
- Maintain vigilance regarding the Trade Agreements Act and FAR to monitor potential modifications or amendments.
Importance of Trade Agreements Act Compliance
In other words, businesses cannot sell and market goods to a state that does not adhere to the Trade Agreements Act. If a business wants to succeed in its bid for a contract with the GSA Schedule, the company must conduct a deep analysis of the real place of origin for each item. In addition, it is essential to maintain Trade Agreements Act compliance once the business has already received recognition.
Trade agreements are created to benefit the countries that sign and participate in them. The goals of trade agreements are usually to increase the growth in the economy, remove trade restrictions, and diversify the market to remove the image of the conservative state, which has its own set of downsides.
Ultimately, whether your company engages in this practice depends on your business values and core market. So, the best thing you can do is garner as much information as possible before making your decision.