TAA compliance is a rather complex concept. To better grasp the ideas of being TAA compliant, make sure to read the below tips and guidelines to TAA compliance:
- One of the principal things for TAA compliance is the right manufacturer of your products. As a MAS contract holder, you should make sure that such countries as China, India, Russia and Malaysia are not TAA compliant, so any product made in these countries will automatically violate your GSA contract.
- Every single product you sell to the government must include proper documentation as well as agreements with the supplier including the Letter of Supply to confirm your ability to ship the product.
- For TAA compliance it is critical to documentarily confirm the country of origin of the product. Correct Country of Origin (COO) codes are vital!
- Make sure to provide a detailed inventory with product marking, examples of matching products, and sample products alike. A thought-out inventory is really important.
- Regular maintenance of your GSA MAS Contract is important both in terms of TAA compliance – to quickly expose products that become incompliant for some reason – and in terms of marketing. Provide samples of your product, participate in events and attend online and offline training – this surely will pay back.
- Make sure to watch for changes and updates in U.S. customs and border protection information. The CROSS website is an ideal source of vital news.
- Whenever you locate or even suspect a TAA compliance issue with your products, make sure to conduct a thorough research of the matter to finally eliminate the problem completely. Otherwise, you put the entire GSA contract at risk.
- Sometimes you may find out that you already made significant sales with a non-compliant product. In this case, we recommend asking for professional legal assistance to help you settle the matter before someone else exposes the fact to the government.
- Overall, whenever you are not sure what to do and how to treat a certain compliance issue, do not rely just on your own understanding of the problem. Always seek advice from GSA contracting experts that often can resolve even complex non-compliance situations correctly and safely.
Why Being TAA Compliant is Important?
What does TAA mean in the first place? The Trade Agreements Act (19 U.S.C. & 2501-2581) of 1979 had two goals. First, it was enacted to foster fair and open international trade. Second, the key idea behind the Act was to require the government to buy only the U.S. designated products. Products from other countries are OK only if they undergone substantial transformation in one of the designated countries or the U.S. Both terms – “designated countries” and “substantial transformation” are still sources of confusion for many MAS contract holders, so let’s elaborate them further.
Designated countries are countries where the product can originate from without becoming TAA-incompliant. Substantial transformation means that a product or parts of it originating from a non-TAA compliant country has been transformed significantly (constructed from components, programmed, substantially redesigned, changed functionality, and so on) which has made the product TAA compliant in the process.
Here are some TAA substantial transformation examples:
- “Simple assembly” operations are not substantial transformation. For example, the “Uniroyal, Inc. v. United States” case resulted in the U.S. Court of Appeals ruling that attaching an outsole to an upper (shoes without soles) is not a substantial transformation, because even shoes without soles are essentially shoes and transforming the upper does not substantially transform the shoes as a whole.
- In 2007 CBP ruled that re-programming cellphone software to make it works as a “testing tool for telecommunication networks” is substantial transformation, because the function of the device was modified significantly in the process.
- In 2009 CBP ruled that a USB storage device programmed in the U.S. was substantially transformed, although its firmware and application software had been developed outside of the United States.
- A CBP ruling of 2011 found that just simple assembly operations using screws and glue are not enough to call specific Chinese electronics substantially transformed.
- In 2013 CBP ruled that Ethernet switches assembled in Malaysia and shipped to Singapore were not substantially transformed even though the U.S.-made firmware was downloaded onto the equipment in the process. The Court ruled that the download operation is not the same as programming, so it is not “substantial” in the context.
- In another case in 2014, CPB ruled that constructing a CO2 tube by cutting its length and attaching other components to it is not a substantial change.
As you can see, the substantial transformation matter is not as straightforward as one may think.
Making sure your product remains TAA compliant is important, because unless stated otherwise, the Trade Agreement Act applies to all GSA Schedules. This means that you cannot sell non-compliant products to the government. Moreover, TAA compliance rules tend to change depending on politics, so a previously compliant product can quickly become non-compliant jeopardizing the entire GSA contract, so it is important to constantly monitor the corresponding Acts to maintain TAA compliance.
What is a TAA certification?
Officially, you don’t have to certify your products for TAA compliance. You are responsible, however, for verifying products and parts for TAA compliance and providing the corresponding confirmation documents as a proof if requested.
You can think of TAA certification as the in-house process, self-certification of a kind. Basically, you make sure that products and components you are to sell to the government are made in the U.S. or in the compliant countries. Then, you simply provide a proof to any organization that requests it, including the GSA.
Importantly, even though TAA certification is informal, remember that you are still responsible for ensuring TAA compliance and incur liability for not doing that.
How do you know if a product is TAA-compliant?
Begin with asking the manufacturer about TAA compliance. Many manufacturers publish TAA compliance statements and documents on their websites. Otherwise, you should ask for such documents directly.
Note that you should make sure that every component that is a part of the product is TAA compliant. Sometimes this is rather plain to see, but in other cases you may need to make additional inquires to the manufacturer or its local subdivisions to verify their TAA compliance.
Usually manufacturers claiming to be TAA compliant will be glad to provide you with all the required documents confirming that statement.
What about software?
If you sell software to the government, TAA compliance applies to your software products too. And if your product is based on third-part software libraries or component, you should verify their compliance as well.
For instance, a 2012 CBP ruling found that a software product based on Chinese open-source code was substantially transformed, because the final build of the product was made in the TAA-compliant country.
How do I determine whether a product is TAA compliant?
TAA compliance cannot be simply formulated as “one size fits all” rule. And you cannot just look at the “made in” label to determine if a product is TAA compliant. As we said above, the “substantial transformation” term is rather complex involving complex assessment processes where every tiny detail matters and can adjust product’s TAA compliance. For instance, specific details of the manufacturing process can easily render the product non-compliant.
As a GSA contractor, you have few possibilities to manually check compliance of each and every product in your pricelist. A better way to determine compliance is to rely on manufacturers of the source products or components. Indeed, the manufacturer knows their product much better than you, and also they are more interested in proper certification, because they have something to lose. Do obtain as much information about the product as you can from the manufacturer including but not limited to the supply chain information, source of third-party components, and so on. As a general rule of thumb you should prefer reputable manufacturers with the name and brand history.
Also, GSA typically works with MAS contract holders to help them eliminate non-TAA compliant from the Schedule, so usually with the assistance of a GSA contracting specialist you can remain TAA complaint without any unwanted consequences.
Is TAA enforced?
Previously, no. But today the government shifts to enforcement of TAA compliance. GSA now can suspend contracts that violate TAA compliance terms and debar its holder. Due to growing competition on the federal market, some vendors often investigate competitors to locate possible TAA compliance vulnerabilities among their products. Then, the can submit a protest and get rid of that competitor, at least temporarily. This is an unfair tactic, yes, but that makes TAA compliance even more important. You cannot afford to be noncompliant today. Not to mention possible consequences of remaining noncompliant.
Consequences of Non-Compliance with the TAA
Aside from fines and penalties for being non-compliant, you are risking losing your GSA contract completely. And the huge federal market sales will fly by you to your competitors. Indeed, if you fail to comply with the TAA regulation, you are literally giving your competitors an edge over you. And on top of all the above, you can even get to the “black list”, that is being banned totally from any way of federal contracting. And if federal sales were crucial for your business to stay alive, being cut from your GSA contract altogether means the end of your company. Think of it.
As you can see, the risk of losing your contract and significant fines is not worth the “award” of continuing to ignore TAA compliance. And what if those non-compliances get exposed? Anyone could do that, there is no strict procedure regulating how and who can point to a potential TAA violation and let the GSA know. So why put everything at stake when you can just stay TAA compliant and regularly maintain this compliance?
