A New Dissection in the Certification Requirements Under the Trade Agreements Act

When can an agency rely upon a contractor’s Trade Agreements Act (TAA) certification? The GAO’s recent decision in HPI Federal, LLC, B-422583, Aug 09, 2024, addressed this very issue. The protest was over the Air Force’s procurement of technology products, specifically monitors and docking stations, under a GSA Task Order Solicitation.  

The TAA country of origin rule states that a product is considered an end product of a country if it meets one of two conditions: (1) it is wholly made in a TAA compliant country, or (2) it is “substantially transformed” in a TAA compliant country into a new and different product that has a unique name, character, or use. (19 U.S.C. § 2518(4)(B)). In other words, after substantial transformation, the product should emerge as a new and different article of commerce. 

Typically, agencies are permitted to rely upon an offeror’s attestation that products are TAA compliant. In this case, however, the GAO determined that the agency had a reason to doubt that the monitors were TAA compliant, which required additional diligence on the part of the procuring agency. 

The protestor claimed that it was unreasonable for the agency to rely on the awardee’s statement that the monitors are TAA-compliant because LG, the manufacturer of the monitor, had sent the awardee  a letter stating that due to supply chain issues, LG could no longer guarantee that the monitors were TAA compliant   In response, the awardee showed a statement from LG that the monitors were assembled in Mexico.1 Additionally, the awardee presented ruling letters from the Department of Homeland Security, U.S. Customs and Border Protection (CBP), which stated that the assembly of other computer monitors in Mexico constituted substantial transformation.  

GAO sustained the protest regarding the monitors.  The GAO noted that agencies may typically rely on an offeror’s representation of TAA compliance, “[i]f . . . an agency has reason to believe that a firm will not provide compliant end products, the agency should go beyond a firm’s representation without further investigation.”  In addressing the letter from LG that stated the monitors were assembled in Mexico, GAO noted that “a product is not necessarily an end product of the country in which it was assembled, as assembly alone may not constitute substantial transformation.”  Thus, the letter stating the monitors were assembled in Mexico was not a representation that they were TAA compliant. 

Next, the GAO addressed the CBP letter: “the decision in each of those ruling letters, however, depended upon a fulsome recitation of facts regarding the nature of the components and the assembly process”. In other words, each TAA analysis is determined specifically based on its unique facts. The GAO particularly referred to CBP HRL 562385 (May 14, 2002) (citations omitted) and pointed out that in that case very detailed extensive facts were discussed regarding the major components of a thin film transistor-liquid crystal display module, the assembly of one of those major components in China from Japanese parts, as well as the assembly process of the completed module. In line with that decision, the GAO stated, “that it was unreasonable for the agency to rely on the awardee’s statement as there were no details about the assembly process of the monitors”. The GAO noted, “here, by contrast, the LG letter included in Transource’s quotation contains no similar detail. It does not, for example, list the components of the monitors or describe what assembly operations occur in Mexico. Rather, it states only that the monitors are “assembled [in] Mexico[.]” The statement only noted that the assembly process took place in Mexico. It did not provide the facts that CBP had relied on in making its determinations, on a case-by-case basis, whether the assembly process was complex and meaningful, whether the parts lost their identity and emerged as a new and different item of commerce, and finally, if substantial transformation occurs. 

The GAO further noted, “while the ruling letters cited by the agency do demonstrate, as the agency contends, “that assembly can consistently equate to substantial transformation for certain items,” Agency Supp. Resp. at 3 (emphasis added), the minimal facts provided here do not reasonably support the conclusion that this particular assembly process constitutes substantial transformation.”  

It is important to understand that sometimes an assembly can constitute substantial transformation, provided it is a “complex” assembly process. It is important to note that the GAO identified in an earlier case that CBP has the authority to make country of origin determinations relating to government procurements under the TAA. 

Regarding the docking stations, the GAO noted that the protestor failed to demonstrate that it was unreasonable for the agency to trust the awardee’s certification. The GAO noted that the protestor had identified another model of docking stations that were made in China and not the ones procured by the Air Force.  Therefore, the GAO noted that, “Transource expressly represented that the docking station’s country of origin is [DELETED], not simply that the docking station is assembled in [DELETED]. Thus, in the absence of a reason for the agency to believe that Transource will not provide compliant end products, the agency reasonably relied on Transource’s representation in this regard.”2 

If you have a question about whether your product is TAA compliant, reach out to the author.