Why you should be TAA compliant and how to achieve this
TAA compliance is one of those things vendors aiming for government sales often do not completely understand. You must be TAA compliant to sell to federal agencies, but what does it mean to be TAA compliant? And how can your company see if it is TAA compliant? Let’s find out.
What is TAA compliance?
TAA stands for Trade Agreements Act. The act requires GSA contractors to only sell products to federal agencies that are manufactured inside the United States or at least products that was substantially transformed in the U.S. Put this simply, the Trade Agreements Act gives preference to U.S.-made products over any other products manufactured outside the country when it comes to government procurement.
What does it mean to be TAA compliant?
A product is TAA compliant if:
- At least 50% of its monetary value originates from the United States or designated countries.
- The product was originally manufactured outside of the U.S., but has undergone some substantial transformation in the U.S.
The reason why TAA compliance is often so hard to understand is that TAA compliance rules governing TAA contract and the list of GSA compliant countries may change at any time when the political weather changes. Remaining TAA complaint is a dynamic process, not a one-time job.
“Substantial transformation” is tricky. Overall, a transformation is substantial if it leads to a new product that none of the imported parts individually is. For instance, if you import parts from a non TAA compliant country, and assemble those parts in the U.S., that is a substantial transformation. But if you import a product, paint it black and stick a label onto it, this is not a substantial transformation.
“Designated countries” are easier to grasp. This is merely a list of “good” countries where a product may originate from without violating TAA compliance. Such countries are also called “GSA compliant countries”.
FAR Part 25 contains the complete and actual list of the designated countries. Some of them are:
- World Trade Organization Government Procurement Agreement Countries (Australia, Germany, Japan, South Korea)
- Free Trade Agreement Countries (like Canada, Mexico, or Singapore)
- Least Developed Countries (Afghanistan, Cambodia, Samoa, Yemen, etc.)
- Caribbean Basin Countries (Antigua and Barbuda, Aruba, Bahamas, Curacao and such).
Why is TAA compliance important?
This is simple: if your product is not TAA compliant, you cannot sell it to the government. Moreover, if you product is TAA compliant and you successfully sell it to federal agencies, and then something changes and your product suddenly becomes not TAA compliant – your GSA contract may be cancelled. That is why it is vital to maintain TAA compliance all the way through the period of validity of your GSA MAS contract.
How to become TAA compliant?
- Select suppliers of components, parts and materials of your products very carefully. Avoid suppliers from non TAA compliant countries.
- If your TAA-compliant contract is based on some goods manufactured by a third-party company, make sure to check if those products are TAA compliant too.
- When working with your partners make a habit of asking where those parts and good are coming from. Make sure every single product of your contract has a proper documentation indicating its country of origin.
- Periodically check if components and parts of your manufactured product are still TAA compliant. If you see the TAA compliance of some component has broken, you will be able to promptly replace it with a TAA compliant counterpart.
- Make sure to monitor changes in TAA compliance regulations. Any unnoticed changes in TAA status of certain countries or products may lead to your GSA contract cancelled.
Maintaining TAA compliance is crucial for businesses working with the governmental procurement system. Surely, it is totally possible to keep your products TAA compliant with your own resources. However, if your GSA pricelist is vast, a more efficient approach would be to hire an agent that will monitor the TAA status for you.