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The Trade Agreements Act (TAA)   printable pdf

If the total dollar value of the contract for supply or construction exceeds a certain threshold, then things get more interesting with the applicability of the Trade Agreements Act (TAA). With a few exceptions (see Exhibit 2, p. 6), for supply contracts over $203,000 and construction contracts over $7.8 million, the TAA amends the BAA to allow the use of products manufactured in more than 70 countries with whom the U.S. holds trade agreements.

The TAA was passed in 1979 to protect the trading interests of the U.S. and key foreign allies by revising regulations that hindered international trade. In essence, regulations like the BAA had made it more difficult for countries with whom the U.S. had trade agreements to compete on a level playing field when it came to government contracts.

The key provision of the TAA, as it relates here, is that goods manufactured (“substantially transformed”—see Exhibit 1, p. 5) in designated countries with whom the U.S. has trade agreements are now treated the same as goods produced in the U.S. (It’s interesting to note that the TAA does not apply a component percentage test to these products, unlike the BAA requirements for U.S.-manufactured products.)

There is, as mentioned, a minimum dollar value threshold for the TAA. This threshold is different depending on whether the contract is a supply contract or a construction contract, and depending on which trade agreement the foreign country is party to. The WTO GPA (World Trade Organization Government Procurement Agreements) and individual FTAs (Free Trade Agreement), for example, frequently apply different thresholds. (See Exhibit 2, p. 6, for the most current thresholds.)

Another restriction is that not all state and local governments are party to these trade agreements, which could mean that projects for these government entities would not be covered under the TAA exceptions. Most states accept the WTO agreements, but most are not covered by the North American Free Trade Agreement (NAFTA), for instance.

The bottom line in its simplest form? If the product you wish to source for the government is produced in a country with which the U.S. has a trade agreement, the TAA will allow that product to be treated as if it were domestically made, as long as the appropriate contract threshold is exceeded.