What are TAA-Compliant Countries? What are the Requirements?

Despite the highly globalized, integrated nature of today's product value chains, solutions intended for US government procurement must nonetheless meet specific country requirements regarding the national origin or development locale of their components. The Trade Agreements Act (TAA) is the primary measure in place that firms must comply with to bid for lucrative government contracts.

Understanding TAA Compliance

Created in 1979 to bolster global trading system transparency and fairness, the TAA restricts US government procurement to goods manufactured or substantially transformed in the US or a TAA-compliant country. For bidding firms with products created or composed of parts from different countries, the rule applies to the last country the product was in before being imported-at least half of the production must take place within TAA-compliant borders.

When Does TAA Apply?

Firms intending to bid for government projects are subject to the TAA's compliance requirements. Regulatory controls are typically built into federal procurement contracts like:

• General Services Administration (GSA) Schedule
• Indefinite delivery/indefinite quantity (IDIQ)
• Department of Defense (DoD) contracts

That said, suppliers that don't have (or ever plan on attaining) a GSA Schedule contract should nonetheless be critical of their downstream product supply chains. Increasingly, contractors are wary of doing business with vendors selling products that are not certified TAA-compliant. In some cases, contractors may even require indemnity clauses in place to protect against noncompliance damages that may arise.

List of Countries Compliant With TAA

The US government maintains an expansive list of TAA-compliant countries. Suffice to say, if the country is not on this list, it is considered non-TAA-compliant. The countries are categorized into the following four groups:

1. World Trade Organization (WTO) Agreement on Government Procurement (GPA) Countries

WTO GPA member countries include Armenia, Aruba, Austria, Belgium, Bulgaria, Canada, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong, Hungary, Iceland, Ireland, Israel, Italy, Japan, South Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Moldova, Montenegro, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Singapore, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Taiwan (known in the World Trade Organization as "the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei)"), Ukraine, and the U.K.

2. Free Trade Agreement Countries

Partner countries include Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, South Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, and Singapore.

3. Least Developed Countries

These include Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Central African Republic, Chad, Comoros, Democratic Republic of Congo, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Laos, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Nepal, Niger, Rwanda, Samoa, Sao Tome and Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, South Sudan, Tanzania, Timor-Leste, Togo, Tuvalu, Uganda, Vanuatu, Yemen, and Zambia.

4. Caribbean Basin Countries

These countries include Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Bonaire, British Virgin Islands, Curacao, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saba, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Sint Eustatius, Sint Maarten, and Trinidad and Tobago.

Noncompliant Countries

The following countries are considered non-TAA-compliant and could pose issues for firms intending to sell products via a GSA Schedule:

• China
• India
• Indonesia
• Iran
• Iraq
• Malaysia
• Pakistan
• Russia
• Sri Lanka

Again, TAA compliance stipulates that a manufacturer or reseller's final products sold through a GSA Schedule cannot be developed in one or more of these countries. For an updated list of TAA-compliant or non-compliant countries, please visit the Federal Acquisition Regulation (FAR) Trade Agreements page.

How To Be TAA-Compliant: What Are the Requirements?

Noncompliance Penalties

The US government's enforcement of TAA requirements has been, up until recently, notoriously lax. Recent years have seen more stringent policing measures and government oversight to validate compliance, with fines and penalties ranging from suspension or cancellation of contracts and multimillion-dollar fines, to name a few.

By looking to vendors whose products have been validated for compliance, such as Fortinet's TAA-compliant transceivers, Microsoft's TAA-compliant laptops, and Brother's TAA-compliant printers, contractors can rest assured they won't be held liable for TAA compliance penalties down the line.

For example, a medical device manufacturer recently agreed to an $8.3 million settlement after being sued for improperly certifying its products as TAA-compliant. Similarly, a major supplier to the US government and all branches of the US military was recently fined over $6 million in penalties and fees for improperly tracking its products' country of origin.

Reducing Noncompliance Risk

At the end of the day, ensuring that a product meets TAA compliance standards comes down to careful manufacturer selection.

• Countries that are not TAA-designated should be avoided. Partners responsible for any subparts or components should be continuously validated for compliance. This can be accomplished through periodic dialogue and communication. Of course, suppliers may not bring up the issue of their own volition, so the onus falls on the GSA contractor to maintain vigilance.
• The importance of keeping documentation in proper order cannot be overstated. It is critical to reducing non-compliance risk. In the case of the unfortunate US government/military supplier, lack of proper paperwork played a major part in its failure to comply and penalty assessment. TAA compliance entails comprehensive documentation of operations, maintaining supply agreements for validating origination, and checking that product documentation is indeed related to its origin country. Any discrepancies discovered along the way should be researched jointly with the TAA for proper remediation, as not all cases of noncompliance necessarily lead to contract termination.

Maintaining TAA Compliance for Business Growth

Commercial firms looking to engage in lucrative, long-term government-wide contracts must first comprehend what TAA compliance means for their products' supply chain. Typically, this means products and parts or subparts developed in countries that follow the TAA's compliance requirements are subjected to numerous check-and-balance control processes.