Why is compliance with either the Trade Agreements Act (“TAA”) or the Buy American Act (“BAA”) so important now? I am seeing increased scrutiny of federal contractors by both the General Services Administration (“GSA”) and the Department of War (previously known as the Department of Defense) on both supply chain accuracy and country of origin.
Quick Summary of the Acts
Trade Agreements Act
The TAA applies to all GSA Schedule contracts. The TAA applies to other government contracts currently over $183,000 for service and supply contracts. In such cases, the BAA requirements are generally waived, and the TAA requirements would apply.
For an item to be TAA compliant, the item must comply with one of the following:
- the item must be wholly grown, produced, or manufactured in the United States or in a “Designated Country”; or
- the item must be substantially transformed into a new and different article of commerce in the United States or in a “Designated Country.”
Articles that are “substantially transformed” in the U.S. or a designated country are turned into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was transformed. For example, an avocado grown in a country with which the U.S. does not have a trade agreement, such as India or China, is not compliant, but if the avocado is made into guacamole in the U.S., it would be compliant.
Buy American Act
For a manufactured product to qualify as compliant under the BAA, that is, to qualify as a “domestic product,” the item must be manufactured in the United States; and the cost of the item’s components mined, produced, or manufactured in the United States must exceed 65% of the cost of all components.
| Buy American Act (41 U.S.C. §§ 8301–8305) | Trade Agreements Act (19 U.S.C. §§ 2501–2581) |
|---|---|
| Applies to supplies and construction materials | Applies to covered procurements above threshold |
| Requires preference for domestic end products | Prohibits acquisition of non-designated country end products |
| Allows price differentials | Is a waiver statute — it overrides BAA |
| Allows exceptions for unreasonable cost | Not a price preference — it’s an eligibility rule |
Here is when it gets a bit murky… A December 2025 decision by the U.S. Court of Federal Claims found that the Department of Veterans Affairs violated the Trade Agreements Act by awarding to a non-TAA-compliant supplier even though a compliant (but more expensive) offer existed. The court emphasized that unlike the Buy American Act, TAA does not allow price to justify bypassing compliance — customer agencies must either receive no compliant offers or pursue an official waiver to procure non-compliant goods.
Steps Every Contractor Should Take:
- Seek clarification regarding regulatory inconsistencies, for example, a BAA Federal Acquisition Regulation (FAR) clause in a TAA-covered procurement. Both Acts cannot apply at the same time. If the task or delivery order is off a GSA Schedule, then only TAA applies.
- When in doubt, consider seeking an advisory opinion from U.S. Customs and Border Protection.
- If BAA applies, then conduct a country-of-origin analysis of all components.
- Get supplier certifications.
- Put flow-down clauses in supplier agreements.
- Monitor supply chain and request that suppliers inform your POC if anything changes regarding country of origin.
Other Related Domestic Preferences
- Buy America Act: Applies to federally funded state and local infrastructure projects (e.g., highways, transit), often requiring 100% domestic iron and steel.
- Build America, Buy America Act (BABAA): A 2021 expansion requiring domestic sourcing for all federally funded infrastructure, including construction materials like lumber and glass.
- Berry Amendment: Specific to the Department of Defense; requires items like food, clothing, and specialty metals to be 100% domestic.
