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Fara Fasat

BAA, TAA, and DoD

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Questions on the Buy American Act and Trade Agreements Act usually don't get many responses, but I figured I would try.

Scenario: DoD solicitation for products that will be used outside the US. Contract value will be over the TAA threshold.

My conclusion is that neither the BAA nor TAA will apply to it, and I need a sanity check on it. Here's how I arrived at my conclusion.

1. The BAA does not apply outside the US.

2. DoD only applies the TAA to products in the Federal Supply Groups (FSGs) listed in DFARS Subpart 225.4.

3. These products are not in any of the listed FSGs.

4. When the TAA does not apply, you go back to the BAA.

5. Since the products will be used outside the US, the BAA does not apply.

Therefore, neither the TAA nor BAA applies. Any flaws in that reasoning?

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Your reasoning makes sense to me. Not that my opinion matters much.

I never fully understood the language in FAR 25.402( a )( 1 )

The Trade Agreements Act (19 U.S.C. 2501, et seq.) provides the authority for the President to waive the Buy American statute and other discriminatory provisions for eligible products from countries that have signed an international trade agreement with the United States, or that meet certain other criteria, such as being a least developed country. The President has delegated this waiver authority to the U.S. Trade Representative. In acquisitions covered by the WTO GPA, Free Trade Agreements, or the Israeli Trade Act, the USTR has waived the Buy American statute and other discriminatory provisions for eligible products. Offers of eligible products receive equal consideration with domestic offers.

If the Buy American Act does not apply (due to supplies being used outside the US) what discriminatory provisions will the TAA waive?

Would you apply the TAA if the supplies being purchased fell under the FSGs covered in DFARS 225.4 even if the supplies are to be used outside the US?

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Fara Fasat,

Based on what you've written, neither the BAA or the TAA would apply to your acquisition. However, the Balance of Payments Program (BOPP) may apply. The BOPP works like the BAA, except it applies to end products and construction materials for use outside the United States. See DFARS subpart 225.75.

Martin,

The BOPP is a discriminatory provision that would be waived under the TAA. The BOPP used to apply across the Federal Government, but now it only applies to DoD. Also, for purposes of applying the TAA in DoD, it doesn't matter where the end products or construction material will be used. All that matters is the value of the acquisition, whether an exception applies, and for end products, whether the item is in one of the FSGs listed at DFARS 225.401-70.

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So let me see if I have this straight. Subpart 225.75 (the BOPP) says to acquire domestic end products for use outside the US. One of the exceptions then says, UNLESS the acquisition is covered by the World Trade Organization Government Procurement Agreement (WTO GPA). The WTO GTA applies to procurements over $204k. However, DoD only applies it to the FSGs listed at 225.401-70 (which of course is not mentioned in 225.75).

Since the products here are not in the listed FSGs, the WTO GPA will not apply, so DoD must acquire a domestic end product, unless a another exception applies. Under 225.7501(b )(iv), it looks like one exception allows the agency to apply the price evaluation factor of 50% like under the BAA.

BTW, under 225.7501(b )(i) and (ii), it looks like the agency can also accept qualifying country end products and eligible country end products, if they are the low offer. Of course, eligible countries are trade agreement countries, and DoD only applies the trade agreements to the listed FSGs, but that's not mentioned here. I guess under the BOPP that's OK. It would not be the only example of convoluted logic in the BAA/TAA regime.

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Fara Fasat,

You wrote:

So let me see if I have this straight. Subpart 225.75 (the BOPP) says to acquire domestic end products for use outside the US. One of the exceptions then says, UNLESS the acquisition is covered by the World Trade Organization Government Procurement Agreement (WTO GPA). The WTO GTA applies to procurements over $204k. However, DoD only applies it to the FSGs listed at 225.401-70 (which of course is not mentioned in 225.75).

Correct.

Since the products here are not in the listed FSGs, the WTO GPA will not apply, so DoD must acquire a domestic end product, unless a another exception applies. Under 225.7501(b )(iv), it looks like one exception allows the agency to apply the price evaluation factor of 50% like under the BAA.

Correct.

BTW, under 225.7501(b )(i) and (ii), it looks like the agency can also accept qualifying country end products and eligible country end products, if they are the low offer. Of course, eligible countries are trade agreement countries, and DoD only applies the trade agreements to the listed FSGs, but that's not mentioned here. I guess under the BOPP that's OK. It would not be the only example of convoluted logic in the BAA/TAA regime.

Not exactly. If the BOPP applies and the TAA does not apply, then you will use DFARS 252.225-7000 and -7001. These treat qualifying country end products the same as domestic end products. There's no special treatment of eligible products.

If both the BOPP and the TAA applied, then you would use DFARS 252.225-7035 and -7036. These would treat both qualifying country end products and eligible products the same as domestic end products.

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Congratulations, Don! You qualify to be a Philadelphia Lawyer.

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joel,

I had to look up "Philadelphia Lawyer." This is what I found:

A colloquial term that was initially a compliment to the legal expertise and competence of an attorney due to the outstanding reputation of the Philadelphia bar during colonial times. More recently the term has become a disparaging label for an attorney who is skillful in the manipulation of the technicalities and intricacies of the law to the advantage of his or her client, although the spirit of the law might be violated.

Whichever way you meant it, I take it as a compliment. Thank you.

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Don, I meant it as a compliment. I don't know where I first heard that expression but it referred to something so complicated, convoluted or clumsily worded that only a "Philadelphia Lawyer" could make sense of it. You appeared to work your way through some of the the maze in your explanation.

It also refers to something that looks like it was written by a "Philadelphia Lawyer", e.g., A Philadelphia lawyer must have written automobile insurances policies back in the 1970's. Hee Hee!. I wasn't using that context above.

Regarding car insurance policies, about 20 or 30 years ago, USAA decided to rewrite all of their insurance policies, using "Plain English", converting from the passive to active voice, using "We" and "You", etc. They took most of the "party of the first part", etc. gobblygook out. The intent was to make it more readable and understandable. I've been a mamber for over 44 years and the policies back then were unintelligible to me. However, I've noticed in the past 10 years or so that the next generation or two of USAA Lawyers are busy again...

Our contractors sometimes accuse the DoD and Corps of Engineers' technical publications writers of being Philadelphia Lawyers. Try following one of DoD's Unified Facility Criteria pubs through all the cited government references, each of which reference umptidump more government references, which can sometimes flow through about ten sub-layers of references. A construction industry rep once told me that their firm has learned to add at least 10% to their price for design-build proposals to cover additional costs when the government simply identifies UFC's as the technical requirements. He called the process to determine all requirements as "data mining". He said that sometimes some gov't clown (one of our design engineers) decides to track down some requirement only found many layers deep deep in sub-references and cross-references, in order to show them "who is in charge"... Sigh, what a waste of the taxpayers's money.

FAR/DFARS Part 25 is one one of the most difficult Parts for me to follow. Trying to cross-reference all of the applicable laws or exceptions reminded me of trying to read one of our UFC's.

.

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I agree. The foreign acquisition regs are a maze. My nomination for most difficult to clause prescription is at DFARS 225.1101(2)(i) (I had to make a decision tree to understand it):

Use the clause at 252.225-7001, Buy American and Balance of Payments Program, instead of the clause at FAR 52.225-1, Buy American—Supplies, in solicitations and contracts, including solicitations and contracts using FAR part 12 procedures for the acquisition of commercial items, unless—

(A) All line items will be acquired from a particular source or sources under the authority of FAR 6.302-3;

( B ) All line items must be domestic or qualifying country end products in accordance with Subpart 225.70. (However, the clause may still be required if Subpart 225.70 requires manufacture of the end product in the United States or in the United States or Canada, without a corresponding requirement for use of domestic components);

( C ) An exception to the Buy American statute or Balance of Payments Program applies (see FAR 25.103, 225.103, and 225.7501);

(D) One or both of the following clauses will apply to all line items in the contract:

(1) 252.225-7021, Trade Agreements.

(2) 252.225-7036, Buy American—Free Trade Agreements—Balance of Payments Program; or

(E) All line items will be acquired using a procedure specified in 225.7703-1(a).

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Don, I fully agree that parts 25 and 225 are the most difficult to understand. It certainly doesn't help that they are written inconsistently, and that parts are internally inconsistent. Try figuring out the difference between eligible products and designated country products, and you'll go in circles. It's not surprising that a GAO study found that the wrong clauses were used in over 60% of solicitations and contracts. From personal experience, I can tell you that many COs just throw in all of the clauses in the hopes that they have covered everything, not realizing that the use of some excludes the use of others.

Now, going back to your post #5, the "not exactly" part: I believe I have a small correction. -7036 is the clause you would use (or one of the alternates) when you are below the full TAA threshold, but over the various Free Trade Agreement (FTA) thresholds. -7021 is the full TAA clause, used when you are above the WTO GPA threshold of $204k.

There are important differences between the two. For example, below the WTO GPA threshold, a domestic product is required, along with the appropriate FTA product. Above the threshold, a US-made product is acceptable. The difference, of course, is the 50% content requirement for domestic products. Another example is the purchase restriction of the TAA. It applies when you are over the WTO GPA threshold, but does not apply to the FTAs.

Well, another minor correction: -7036 does not mention either eligible products or designated country products. -7021 allows designated country products, but does not mention eligible products. The word 'eligible' only shows up in the exception to the BOPP. This brings us back to the problem I mentioned above: the difference between eligible and designated.

Well, OK, another. When applying the BOPP, I don't think that both the TAA and the BOPP could apply. First, the TAA is a law that covers the applicability of the WTO GPA, the FTAs, and other agreements such as the treatment of Caribbean Basin countries and least-developed countries. The exception to the BOPP is only for when the WTO GPA applies, which is when you are over $204k. Second, the WTO GPA is an exception to the BOPP, so you can't have both. That's why the -7021 clause is just entitled "Trade Agreements," and -7001 and -7036 have BOPP in the title.

In the scenario under discussion in this thread, we are also looking at what it means to have "the trade agreements" apply. DoD only applies "the trade agreements" to the FSGs listed in DFARS 225.401-70. Does that mean collectively all agreements covered by the TAA, or just the FTAs? You could find arguments for both. For example, the prescription for -7036 (for FTAs), specifically says "for the items listed at 225.401-70," while the prescription for -7021, the full WTO GPA clause, does not. From this you would think that the restriction to the listed FSGs only applied to the FTAs. However, the text of the WTO GPA itself contains the exception to the listed FSGs for DoD.

Which is it? Who can possibly know? Unfortunately it makes a difference in whether a product needs to be domestic or can just be US-made. It also determines whether the purchase prohibition applies or not.

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Hi, Ron,

You wrote:

Now, going back to your post #5, the "not exactly" part: I believe I have a small correction. -7036 is the clause you would use (or one of the alternates) when you are below the full TAA threshold, but over the various Free Trade Agreement (FTA) thresholds. -7021 is the full TAA clause, used when you are above the WTO GPA threshold of $204k.

There are important differences between the two. For example, below the WTO GPA threshold, a domestic product is required, along with the appropriate FTA product. Above the threshold, a US-made product is acceptable. The difference, of course, is the 50% content requirement for domestic products. Another example is the purchase restriction of the TAA. It applies when you are over the WTO GPA threshold, but does not apply to the FTAs.

I agree with everything you wrote, but I don't understand how it corrects what I wrote. You then wrote:

Well, another minor correction: -7036 does not mention either eligible products or designated country products. -7021 allows designated country products, but does not mention eligible products. The word 'eligible' only shows up in the exception to the BOPP. This brings us back to the problem I mentioned above: the difference between eligible and designated.

DFARS 225.003 defines "eligible product" as follows:

"Eligible product" means, instead of the definition in FAR 25.003--

(i) A foreign end product that--

(A) Is in a category listed in 225.401-70; and

(B) Is not subject to discriminatory treatment, due to the applicability of a trade agreement to a particular acquisition;

(ii) A foreign construction material that is not subject to discriminatory treatment, due to the applicability of a trade agreement to a particular acquisition; or

(iii) A foreign service that is not subject to discriminatory treatment, due to the applicability of a trade agreement to a particular acquisition.

Instead of listing all of the "eligible products" in the clause (i.e., free trade agreement country end products, etc.), I just referred to them as "eligible products", the same way the term is used at DFARS 225.7501( b ). Also, I'm not confused by the difference between an "eligible product" and a "designated country end product." DFARS 252.225-7021 defines the term as follows:

“Designated country end product” means a WTO GPA country end product, a Free Trade Agreement country end product, a least developed country end product, or a Caribbean Basin country end product.

Given the definition of "eligible product" above, "designated country end products" includes the foreign end products described in ( i ) of the definition of "eligible product", least developed country end products, and Caribbean Basin country end products.

You also wrote:

Well, OK, another. When applying the BOPP, I don't think that both the TAA and the BOPP could apply. First, the TAA is a law that covers the applicability of the WTO GPA, the FTAs, and other agreements such as the treatment of Caribbean Basin countries and least-developed countries. The exception to the BOPP is only for when the WTO GPA applies, which is when you are over $204k. Second, the WTO GPA is an exception to the BOPP, so you can't have both. That's why the -7021 clause is just entitled "Trade Agreements," and -7001 and -7036 have BOPP in the title.

The TAA applies to the acquisition of end products as long as the value of the acquisition exceeds $25,000 (the lowest trade agreement threshold), the end product is in one of the FSGs listed at DFARS 225.401-70 and there are no exceptions. Period. The BOPP can also apply for acquisitions under $204K. Saying that the TAA applies to an acquisition does not imply that the WTO GPA applies--it may or may not.

Lastly, you wrote:

In the scenario under discussion in this thread, we are also looking at what it means to have "the trade agreements" apply. DoD only applies "the trade agreements" to the FSGs listed in DFARS 225.401-70. Does that mean collectively all agreements covered by the TAA, or just the FTAs? You could find arguments for both. For example, the prescription for -7036 (for FTAs), specifically says "for the items listed at 225.401-70," while the prescription for -7021, the full WTO GPA clause, does not. From this you would think that the restriction to the listed FSGs only applied to the FTAs. However, the text of the WTO GPA itself contains the exception to the listed FSGs for DoD.

Which is it? Who can possibly know? Unfortunately it makes a difference in whether a product needs to be domestic or can just be US-made. It also determines whether the purchase prohibition applies or not.

I don't think use of the term "trade agreements" is ambiguous. If you look at the table in FAR 25.402( b ), the column with the heading "Trade Agreement" lists the WTO GPA and the FTAs. I don't think it would reasonable to interpret the term "trade agreements" as just the FTAs. I would not infer anything from the absence of a reference to DFARS 225.401-70 in the prescription for DFARS 252.225-7021.

As complicated as the BAA/TAA/BOPP scheme is, I think I get it. Not to say there was not a garbage can full of crumpled up notebook paper with half-written decision trees along the way. Let me know if I'm missing something.

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Don,

I work for a civilian agency for which the BOPP does not apply and for which the agency FAR supplement provides no further guidance. My questions were more in line with what is discussed in Westlaw Journal, Government Contract, Volume 24, Issue 6 by Jeffrey Belkin and Donald Brown.

If the BAA does not apply (IT exception, foreign use, etc.) why apply the TAA?

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Don,

Thanks for the response. I think that we largely agree on most points, and that it wouldn't be productive to engage in one of those "you said this" and then" I said that" exercises. The BAA/TAA/BOPP topic is bad enough.

Much of the ambiguity is the result of careless drafting of parts 25 and 225. Although you say you wouldn't infer anything from the difference in the prescriptions for -7021 and -7036, others would say that the prescriptions are written exactly as they were intended. I lean towards the "careless drafting" explanation, as do you I think, but the other interpretation isn't without foundation. BTW, I have a large collection of articles, briefing papers, etc, on all BAA/TAA topics, and I can assure you that the ambiguous terms are used interchangeably in them. One article stated that the definitions in the BAA and TAA are "almost inscrutable." Another stated that 'eligible products' overlaps 'designated products' but was broader, because it includes the Israeli Trade Act and the Civil Aircraft Agreement. I think you and I would both disagree with that.

Ambiguities aside, here are the larger points that I think we agree on. Please feel free to correct this.

1. Eligible countries are WTO GPA and FTA countries. Designated countries are those plus Caribbean Basin and least developed countries. Despite some usage of these terms that suggests otherwise, I believe this is the most reasonable interpretation.

2. It's a common shorthand, but it's not accurate to talk about a TAA threshold. The TAA implements several agreements, which have different thresholds. The table in 25.402(b ) lists these. The highest is the WTO GPA threshold of $204k, which typically gets called the TAA threshold. I was guilty of that above and I should have been more clear.

I'm not 100% sure about the next, so please comment:

3. The "trade agreements" that the FAR and DFARS talk about are the WTO GPA and the FTAs. Products from these countries are eligible products. Products from Caribbean Basin countries and least developed countries are then "treated as eligible products.' (FAR 52.404 and 405). That's why the difference in the definitions of eligible and designated.

However, I have to add that while DFARS 225.401-70 talks about the applicability of the "trade agreements" to the listed FSGs, it also talks about Caribbean Basin countries in the same paragraph. That shouldn't be there if the trade agreements are just the WTO GPA and FTA. Then again, maybe it's there because Car.Bas. and L.Dev. products get "treated as" eligible products.

Finally, the BOPP. Reduced to its basics, it's just the BAA applied to products for use outside the US, although it doesn't apply below the SAT of $150k. In short, it requires the purchase of domestic or qualifying country products, and then when you reach an FTA threshold, products from those countries as well. Once you go above the WTO GPA threshold of $204k, the BOPP will apply only to the non-listed FSGs, and not to the listed FSGs because of the exception at 252.225-7501(a )(3).

That's all. I think in the earlier exchanges we may have been talking past each other a bit. I hope this clears it up.

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Don,

I work for a civilian agency for which the BOPP does not apply and for which the agency FAR supplement provides no further guidance. My questions were more in line with what is discussed in Westlaw Journal, Government Contract, Volume 24, Issue 6 by Jeffrey Belkin and Donald Brown.

If the BAA does not apply (IT exception, foreign use, etc.) why apply the TAA?

For acquisitions below $204,000, you wouldn't apply the TAA for commercial IT or foreign use. The prescription for the implementing clause, FAR 52.225-3, states (FAR 25.1101( b )(1)(i)):

Insert the clause at 52.225-3, Buy American—Free Trade Agreements—Israeli Trade Act, in solicitations and contracts if—
(A) The acquisition is for supplies, or for services involving the furnishing of supplies, for use within the United States, and the acquisition value is $25,000 or more, but is less than $204,000;
( B ) The acquisition is not for information technology that is a commercial item, using fiscal year 2004 or subsequent fiscal year funds; and
( C ) No exception in 25.401 applies. For acquisitions of agencies not subject to the Israeli Trade Act (see 25.406), see agency regulations.

If you're wondering why we don't have the same exceptions when the WTO GPA applies, I'm not sure. My guess is that the WTO GPA does not provide for such exceptions.

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ron,

We agree on 1, 2, 3, and everything you wrote after that.

As far as the prescription for DFARS 252.225-7021 being carelessly written or written exactly as intended, I believe it's the former. The prescription for the clause used to read:

Use the clause at 252.225-7021, Trade Agreements, instead of the clause at FAR 52.225-5, Trade Agreements, if the Trade Agreements Act applies.

I pointed out that "Trade Agreements Act" needed to be changed to "WTO GPA" and they changed it. I'm not buying that the omission of a reference to the list at DFARS 225.401-70 was the product of thoughtful deliberation.

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I'll go with careless too. Wouldn't be the first example in the FAR or DFARS.

By the way, if you want some fun reading, go through the AAP responses on some BAA/TAA questions. 'nuff said.

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A somewhat related question:

DoD only applies the TAA to the FSGs listed in DFARS Subpart 225.4. What does DoD do if it wants to buy something that is on a GSA contract, but not in one of the listed FSGs? Items on a GSA contract only have to be TAA-compliant, not BAA. Presumably, when DoD buys something that is not in the listed FSGs, it must follow the BAA. Does this prevent DoD from buying non-listed items from a GSA contract?

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I don't think so. I believe that FSS contracts contain a clause that allows agencies to incorporate agency-unique terms and conditions into a FSS order. Somebody once posted an example of such a clause in this forum, but I can't find it.

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Would it be just a matter of putting in a DoD-unique term? After all, it's more of a conflict between DoD and the rest of the government. GSA says that the TAA applies to all products on the schedule, and DoD says it will only apply to some. To make it work, DoD would have to add the correct BAA clause and delete the TAA clause, for items that are not in the listed FSGs.

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Just a thought --- not saying this is the answer.

The contract is with GSA, not DoD. A product qualifies by meeting GSA requirements, including the TAA. Would that make GSA laws, regulations etc. apply, even if DoD buys from it?

i would be interested in hearing from DoD buyers. Do you buy anything from a GSA contract, or do you intentionally screen for the listed FSGs?

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In the scenario under discussion in this thread, we are also looking at what it means to have "the trade agreements" apply. DoD only applies "the trade agreements" to the FSGs listed in DFARS 225.401-70. Does that mean collectively all agreements covered by the TAA, or just the FTAs? You could find arguments for both. For example, the prescription for -7036 (for FTAs), specifically says "for the items listed at 225.401-70," while the prescription for -7021, the full WTO GPA clause, does not. From this you would think that the restriction to the listed FSGs only applied to the FTAs. However, the text of the WTO GPA itself contains the exception to the listed FSGs for DoD.

ron,

In case you missed it, the prescription for DFARS 252.225-7021 was recently changed to read:

Except as provided in paragraph (6)(iv) of this section, use the basic or an alternate of the clause at 252.225-7021, Trade Agreements, instead of the clause at FAR 52.225-5, Trade Agreements, in solicitations and contracts, including solicitations and contracts using FAR part 12 procedures for the acquisition of commercial items, if the World Trade Organization Government Procurement Agreement applies, i.e., the acquisition is of end products listed at225.401-70, the value of the acquisition equals or exceeds $204,000, and none of the exceptions at 25.401(a) applies.

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