Trade Agreements Act — Expanding the Exception … Maybe

The Context

It is the long-standing US procurement policy to purchase goods, products, and materials produced in the United States when possible. The Trump administration has strongly reaffirmed and strengthened the policy. The preference to purchase American goods is established in the Buy American Act (“BAA”) and FAR 25.

The Trade Agreements Act Exception

Under the Trade Agreements Act (“TAA”) the BAA’s preference for domestic end products is waived for products of countries that have signed a trade agreement with the United States, when the value of the contract is over a required threshold, generally $191,000. If the TAA applies, “designated country end products” may be treated as equal to “US-made end products.” For many years the analysis widely applied by contracting officers to determine a “US-made end product” was: (1) is the end product “wholly” the growth, product or manufacture in the United States or a designated country? If not, (2) has the end product been substantially transformed in the US or a designated country into a new and different article of commerce? Under the first prong of the analysis, if all components were not grown or produced in the US, any product incorporating the component was not “wholly manufactured” in the US, and thus ineligible for the TAA exception. In that case, the analysis shifted to whether the product was “substantially transformed” in the US, which was usually determined for the contracting officer by the Customs and Border Patrol (CBP).

Expanding the Exception…Maybe

On July 16, 2018, the U.S. Court of Federal Claims (“Court”) reviewed the first prong of the above TAA analysis in Acetris Health, LLC v. United States, Case No. 18-433C. The Court ruled that requiring all components to be “wholly” produced in the US was incorrect, because the TAA only requires them to be “US-made end products.” The Court essentially held there can be “US-made end products” that are manufactured in the US using non-US components. The Court did not define what “manufactured” means, but left it to the contracting officer to determine.

The Acetris Health ruling may represent a significant expansion under the TAA, allowing acquisition of goods “manufactured” in the US, even if they are not “wholly” produced in the US, or are not “substantially transformed.” Future cases will show if contracting officers and courts apply the analysis, or limit the case to its specific facts.

Additional Information

If you have questions regarding Buy American restrictions or other federal government contract issues, contact the professionals at Williamson Law Group at (301) 788-8198 for confidential and candid assistance and counsel, or e-mail Scott Williamson, managing attorney, at srw@williamsonlawgroup.com.

This Contract Compliance Update is intended to keep readers current on developments in federal government contract matters and is not intended to be legal advice. If you have any questions, please contact Williamson Law Group for legal advice regarding your particular case.