TAA (Trade Agreements Act) Compliance Explained

taa compliant countries

This article explains what is Trade Agreements Act, what it means for a product to be TAA compliant, and why TAA compliance is important for any company seeking cooperation with the government via GSA Schedules.

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What is TAA

The Trade Agreements Act was enacted to govern trade agreements between the United States and foreign countries. One of principal features of the Act is that it limits the U.S. Government procurement to US-made products or products made in designated countries. Such products are called then “TAA compliant”.

GSA Schedule Contracts are also a subject to the Trade Agreements Act, so if you sell or plan to sell goods to the government, you must make sure your products are TAA compliant.

taa products

What is TAA compliance

A product is TAA compliant if:

  • At least 50% of its overall manufacture cost originates from the US or designated countries.
  • The product has undergone substantial transformation in the US or designated countries.

What does it mean “substantially transformed”?

The idea behind this term is that the product must undergo through certain significant changes (manufacturing, assembly, processing etc.) that result in distinctive character, name or use of the emerged new product. So, a “substantially transformed” product is considered originating from the country where those transformations were made.

For instance, if you take aluminum from one country, PET (Polyethylene terephthalate) from another country, and then produce aluminum foil and cover it with PET coating, the resulting aluminum lid is “substantially transformed” product. On the other hand, if you take concentrated fruit juice, then dilute it with water, the resulting product is not “substantially transformed”, because no principally new character, name or use emerged in the process.

what is the taa trade agreement act

What are designated countries?

The designated countries are ones that are:

  • World Trade Organization Government Procurement Agreement Countries (like Australia, Germany, South Korea, Japan)
  • Free Trade Agreement Countries (like Mexico, Canada, or Singapore)
  • Least Developed Countries (Afghanistan, Cambodia, Samoa, Yemen, etc.)
  • Caribbean Basin Countries (Antigua and Barbuda, Aruba, Bahamas, Curacao and such).

TAA compliant countries are designated countries and the U.S. You can find the complete TAA compliant countries list in FAR, part 25. Correspondingly, non TAA compliant countries are countries outside of this list, for instance, China, Russia, North Korea.

What does “TAA compliant product” mean?

If a product originates from a designated country, it is considered “TAA compliant”. Which in turn means you can legitimately sell this product under your GSA Schedule contract. It is your responsibility to control and make sure that all products you include in your GSA contract are U.S. made or designated country end products. This why it is important to periodically check the origin of components and parts of your product. If the product you deliver to the government becomes non TAA compliant because the contribution of designated countries to the overall cost of the product drops below 50%, your GSA Schedule contract will be rendered void. More on importance below.

what is taa compliant mean

For instance, suppose you have an assembly facility in the U.S. that manufactures a product consisting of three parts. Part A makes up 25% of the cost and comes from Canada, Part B makes up 40% of the cost and is imported from Taiwan, Part C makes up 15% of the cost and comes from China, and the labour makes up 20% of manufacturing costs. Since only 15% of the cost originates from non TAA compliant country (China), the product is substantially transformed in the U.S. and designated countries, so it is TAA compliant.

Now, let’s consider Part B supplier changed to China components as well. And now 55% of the product cost emerges from non designated countries which essentially renders your product non TAA compliant.

Can I sell non TAA products in the U.S.?

TAA compliance is only required for federal procurements. Governmental agencies cannot purchase non TAA products for contracts above the threshold of $180,000 (the value may change). Practically, each GSA Schedule value exceeds the threshold, so one could say that the TAA is applicable to all Schedules.

However, the TAA does not limit foreign trade outside the scope of federal procurements. Which means you can sell non TAA compliant products on the commercial market freely.

Why TAA compliance is important

Put this simply, you cannot sell non Trade Agreements Act compliant products to the government. Hence, if you plan to compete for a GSA Schedule contract, you should assess the true origin of your products very carefully. And if you are already awarded, it is important for you to keep your TAA compliance.

How to keep your products TAA compliant

Since TAA compliance is vital for retaining any GSA Schedule contracts you may have, you should always make sure that your products remain compliant to the requirements of the Trade Agreements Act along the entire performance period of the contract. Here is a short checklist you may want to follow to ensure TAA-eligibility of your goods:

  • Carefully select suppliers of components, parts and materials of your manufactured goods. The value of your product should be at least 50% coming from the U.S. or designated countries.
  • If your GSA contract relies on shipping goods manufactured by a third-party, make sure these products are manufactured in TAA compliant countries.
  • Always clarify the origin of all source parts and materials coming from your partners. Ensure each and every component has proper supply documentation and agreements.
  • Insist on detailed inventory of you order multiple parts or goods your product relies upon. You want to be sure the country of origin complies with the TAA.
  • Periodically (once per quarter or once per pricelist update) check the TAA status of ordered components so you don’t miss changes in the origin of some vital part.
  • Keep an eye on any changes and amendments to the TAA and FAR at Acquisition.org. The thresholds and margins and even the list of GSA compliant countries may change!

Are there any exceptions to the TAA regulations?

Yes, there are certain exceptions to the rule. 

The main one to pay attention to currently, has to do with the COVID -19 pandemic.

In order to deal with the crisis more effectively, the GSA is bypassing TAA requirements by allowing vendors to offer items that would otherwise be prohibited. The below Federal Supply Classes are exempt as of March 31, 2021, until further notice: 

FSC 4240 for N95 masks

FSC 6810 for Sodium Hypochlorite (bleach)

FSC 6840 for disinfectants including cleaners, sprays and wipes

FSC 7930 for cleaners including sanitizing surface and floor cleaners

FSC 8520 for hand sanitizers, soaps and dispensers

Should you decide to offer some of the items that fall within these categories, they would have to be added to your schedule though either a new SIN Addition, or a Product Addition Modification within an existing SIN.

How to keep in compliance with TAA?

Basically, to be TAA compliant, the items one offers on their schedule have to either be manufactured in the USA or another approved country, or to have been substantially transformed in such a country. The substantially transformed requirement can be satisfied by having shown that either at least 50 percent of production took place there, or that the changes that took place in a TAA approved country were essential to the end product, i.e. to its purpose and function.

DoesTAA apply to IT software ?

Yes, software is judged by the same standards as tangible products.

The CBP would look at where the software originated; in case the inception took place in a forbidden country, the CBP would then follow through the development stages to see if any major alterations or additions took place in a designated one.

There was a situation, for instance, where an open-source program was deemed complaint due to having been substantially transformed in an accepted country, even though the source codes were originally developed in China.

TAA compliant countries 2021

RankCountry2021 Population 
1United States332,915,073
2Bangladesh166,303,498
3Mexico130,262,216
4Japan126,050,804
5Ethiopia117,876,227
6Dr Congo92,377,993
7Germany83,900,473
8United Kingdom68,207,116
9France65,426,179
10Tanzania61,498,437
11Italy60,367,477
12South Korea51,305,186
13Colombia51,265,844
14Uganda47,123,531
15Spain46,745,216
16Ukraine43,466,819
17Afghanistan39,835,428
18Canada38,067,903
19Poland37,797,005
20Morocco37,344,795
21Angola33,933,610
22Peru33,359,418
23Mozambique32,163,047
24Yemen30,490,640
25Nepal29,674,920
26Madagascar28,427,328
27Australia25,788,215
28Niger25,130,817
29Taiwan23,855,010
30Burkina Faso21,497,096
31Mali20,855,735
32Malawi19,647,684
33Chile19,212,361
34Romania19,127,774
35Zambia18,920,651
36Guatemala18,249,860
37Senegal17,196,301
38Netherlands17,173,099
39Cambodia16,946,438
40Chad16,914,985
41Somalia16,359,504
42Guinea13,497,244
43Rwanda13,276,513
44Benin12,451,040
45Burundi12,255,433
46Belgium11,632,326
47Haiti11,541,685
48South Sudan11,381,378
49Dominican Republic10,953,703
50Czech Republic10,724,555
51Greece10,370,744
52Portugal10,167,925
53Sweden10,160,169
54Honduras10,062,991
55Hungary9,634,164
56Austria9,043,070
57Israel8,789,774
58Switzerland8,715,494
59Togo8,478,250
60Hong Kong7,552,810
61Laos7,379,358
62Bulgaria6,896,663
63Nicaragua6,702,385
64El Salvador6,518,499
65Singapore5,896,686
66Denmark5,813,298
67Finland5,548,360
68Norway5,465,630
69Slovakia5,460,721
70Oman5,223,375
71Liberia5,180,203
72Costa Rica5,139,052
73Ireland4,982,907
74Central African Republic4,919,981
75New Zealand4,860,643
76Mauritania4,775,119
77Panama4,381,579
78Croatia4,081,651
79Moldova4,024,019
80Eritrea3,601,467
81Jamaica2,973,463
82Armenia2,968,127
83Lithuania2,689,862
84Gambia2,486,945
85Lesotho2,159,079
86Slovenia2,078,724
87Guinea Bissau2,015,494
88Latvia1,866,942
89Bahrain1,748,296
90Equatorial Guinea1,449,896
91Trinidad And Tobago1,403,375
92Timor Leste1,343,873
93Estonia1,325,185
94Cyprus1,215,584
95Djibouti1,002,187
96Comoros888,451
97Guyana790,326
98Bhutan779,898
99Luxembourg634,814
100Montenegro628,053
101Maldives543,617
102Malta442,784
103Belize404,914
104Bahamas396,913
105Iceland343,353
106Vanuatu314,464
107Barbados287,711
108Sao Tome And Principe223,368
109Samoa200,149
110Saint Lucia184,400
111Curacao164,798
112Kiribati121,392
113Grenada113,021
114Saint Vincent And The Grenadines111,263
115Aruba107,204
116Antigua And Barbuda98,731
117Dominica72,167
118Saint Kitts And Nevis53,544
119Sint Maarten43,412
120Liechtenstein38,250
121British Virgin Islands30,421
122Tuvalu11,931
123Montserrat4,977

Conclusion

Now you know what the TAA (Trade Agreement Act) is, and why being TAA compliant is important. As a professional, you may want to focus solely on doing your business, without the need to dig deeply into the TAA-related matters at all. In this case hiring a professional procurement consulting firm can help a lot in passing TAA certification and keeping your inventory TAA compliant for every GSA Schedule contract you have.

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  • There are three ways a product may be qualified as TAA-compliant:
    1.It was manufactured wholly in either the US or a TAA designated country
    2.At least 50% of it was manufactured in either the US or a TAA designated country; manufacturing process should be traced carefully to demonstrate this.
    3.The product was substantially transformed, i.e. essential changes or additions were performed in either the US or a TAA designated country.

  • What is a TAA product?

  • The federal gov’t wants to make sure that GSA vendors properly pick their manufacturers. It is important for the feds to procure TAA-compliant goods, thereby benefitting companies and individuals that are located in countries that are in conformity with certain standards, that the US have in place, on various levels. Offering and then selling non-complaint items may lead to penalties and even disqualification from GSA.
    Examples of non-compliant countries are: Russia, China, and Malaysia, among others.

  • Why is TAA compliance important?

  • There are three ways a product may be qualified as TAA-compliant:
    It was manufactured wholly in either the US or a TAA designated country
    At least 50% of it was manufactured in either the US or a TAA designated country; manufacturing process should be traced carefully to demonstrate this.
    The product was substantially transformed, i.e. essential changes or additions were performed in either the US or a TAA designated country.

  • What makes an item TAA compliant?

  • What if the product is a consumable product that is unique and covered by patents here in the US, but owned by a US Small Business and manufactured in China as no options for producing it currently exist in the US?

  • I have found no authority for the following statement on this site: “A product is TAA compliant if: At least 50% of its overall manufacture cost originates from the US or designated countries.”

    Can you please provide a citation to authority. I think this sounds more like a Buy American Act standard.

  • Hi,
    I have read alot about what TAA Compliance is and what counts as a TAA Compliant devices however I have not been able to find any information on how to start the process for getting a TAA certification or even how long the process takes or costs. Would you be able to help with this?

  • These requirements are quite logical. What could be more wrong than federal purchases from companies that do not work for the benefit of their own country.

  • Suppose I have a GSA contract and my product is TAA compliant. If the supplier of one part of the product changes at this time, but it also complies with TAA – what should I do in this case? Could this be a problem?

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