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Does TAA apply to replacement parts supplied under maintenance contract?


PennGC57

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I am helping a contractor determine whether and how TAA applies to their contract. Here are the pertinent details:

 

  • Contractor provides inspection and repair of equipment on multiple DoD contracts under a GSA Schedule.

  • 52.225-5 Trade Agreements is incorporated into the schedule.

  • Contractor did not supply the equipment being inspected.

  • The Contract Line Items are broad in nature, requesting inspection of equipment.

  • The Government entity issues a separate work order for needed repairs as a result of the inspection. (“work order” is a generous term here, as most requests come via email)

  • Replacement parts may be small in nature (i.e., batteries) or multiple in nature (several components).

  • Are replacement parts supplied to repair equipment required to comply with the TAA?

 

Let me know what other information you need to advise. Thank you!

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The clause at FAR 52.225-5 applies to contracts for supplies, or contracts for services that involve the furnishing of supplies.  See FAR 25.1101.  But your client's task order seems to be for the furnishing of services without any delivery of end products.  So, maybe the clause isn't operative in your client's task order (even though the clause is included in the task order's parent schedule contract).

For services, the TAA's implementation in the FAR simply requires the contracting officer to determine the origin of the services by the country in which the firm providing the services is established.  See FAR 25.402(a)(2).  You should be able to assume that the schedule contracting officer did this when awarding the parent schedule contract.

This is just a thought from a federal contracting practitioner.  For a reliable legal answer on TAA application, you may want to consult an attorney.

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18 hours ago, ji20874 said:

The clause at FAR 52.225-5 applies to contracts for services that involve the furnishing of supplies . . . your client's task order seems to be for the furnishing of services without any delivery of end products.  

@ji20874 I think the question is: what qualifies as an "end product" in this situation. If the Contractor must repair a pipe, and repair requires a pipe fitter to install replacement parts on the existing equipment, are those replacement parts end products? Does it make a difference whether the replacement part is specifically listed and priced on the work order? This seems like it could be an end product within the scope of TAA -- but that casts a really broad definition of end product. 

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Nena,

If it is a contract for services, then the clause at FAR 52.225-5 is inapt.  See FAR 25.1101.

If it is a contract to repair a Government-provided pipe, that is a contract for services -- and the clause at FAR 52.225-5 does not apply.  TAA application for services contracts is at FAR 25.402(a)(2) -- the FAR does not prescribe a clause for TAA coverage for services contracts that do not involve the furnishing of supplies.

FAR Part 25 differentiates between end products and components.  See the definitions in FAR 25.003.  We must not conflate them as being the same.  In your example, the replacement parts seem to be components, not end items.  The TAA clause at FAR 52.225-5 covers end products, not components, and we're talking about TAA, so we're not talking about components.  Note, however, that this is different from the BAA, which covers both end products and components.

We also have to understand what "furnishing of supplies" means -- in your example, installing replacement parts on the pipe is not furnishing supplies to the Government -- the contract is 100% for services, and 0% for supplies.  The replacement parts are used in the repair process by the repair contractor as part of the repair service, and are not separately furnished to the Government as supplies.

 

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10 minutes ago, ji20874 said:

We also have to understand what "furnishing of supplies" means -- in your example, installing replacement parts on the pipe is not furnishing supplies to the Government -- the contract is 100% for services, and 0% for supplies.  The replacement parts are used in the repair process by the repair contractor as part of the repair service, and are not separately furnished to the Government as supplies.

 

@ji20874 thanks for the input. I like your conclusion, and want to make sure I'm following the logic. 

[Let's set aside any discussion of BAA/TAA distinction for the time being]

Because this is a contract for inspection/maintenance/minor repair, it is 100% for services. If inspection indicates minor repair/maintenance is required, then the contractor will purchase the necessary materials, install them on government fixtures and charge the government for the parts. Because the materials are used in repair work, they are not supplies that are furnished to the government. 

On the other hand, the following is an example of a contract for supplies and services: government purchases replacement parts as individual CLINS and repair services under separate CLINS on the same contract. In that case, the replacement parts would be subject to BAA/TAA requirements.

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Nina,

Except that let's change one sentence:  "If inspection indicates minor repair/maintenance is required, then the contractor will purchase the necessary materials, and install them on government fixtures and charge the government for the parts."

A services contract for repair might or might not provide for separate payment for repair parts.

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19 minutes ago, ji20874 said:

A services contract for repair might or might not provide for separate payment for repair parts.

Great. Thanks, @ji20874. To confirm - for the purpose of this analysis, it does not matter whether the contractor charges the government separately for the repair parts.

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1 hour ago, ji20874 said:

We also have to understand what "furnishing of supplies" means -- in your example, installing replacement parts on the pipe is not furnishing supplies to the Government -- the contract is 100% for services, and 0% for supplies.  The replacement parts are used in the repair process by the repair contractor as part of the repair service, and are not separately furnished to the Government as supplies.

ji,

I would agree with your interpretation, but are you sure it's correct? I couldn't find anything official saying that TAA does not apply to incidental supplies under a service contract. If the CO for Nena's contract interpreted "furnishing of supplies" to include replacement parts used in the repair process, how could she prove them wrong?

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41 minutes ago, Don Mansfield said:

I couldn't find anything official saying that TAA does not apply to incidental supplies under a service contract.

Thanks, @Don Mansfield. We looked hard to find this answer before putting it out to the group. As compliance counsel to the contractor, I  get nervous when I cannot find authority to justify my conclusion that a reg doesn't apply. In this case, we don't want to ask the CO because the contractor has been operating as if TAA doesn't apply here.  But they just asked the question: "are we right?"

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Nena,

For this discussion, what matters is whether the contract is for supplies, services, or services involving the furnishing of supplies.

  • A contract for 100 pipes is a contract for supplies.  The clause at FAR 52.225-5 applies (depending on the dollar threshold in FAR 25.1101(c)(1)).  The pipes are end products.
  • A contract to repair Government-provided pipes is a contract for services.  The clause at FAR 52.225-5 does not apply.  The replacement parts used in the repairs are not end items.
  • A contract to repair Government-provided pipes and also to provide a supply of spare parts delivered to a Government warehouse is a contract for services involving the furnishing of supplies.  The clause at FAR 52.225-5 applies (depending on the dollar threshold in FAR 25.1101(c)(1)).  The replacement parts used in the repairs are not end items, but the spare parts delivered to the warehouse are end items.

Don,

The clause at FAR 52.225-5 (TAA) clearly refers to end products, in contrast to the clauses at FAR 52.225-1 (BAA) and -3 (BAA/FTA) (these three clauses are a matched set).  See the definitions of end product and component in the clauses and also at FAR 25.003 -- but see also the definitions in FAR 2.101 for contrast.  Reading the term "end product" in 52.225-5 as reaching both end products and components would be an unreasonable reading of the clause -- there must be a space for end products separate from components.  Other than pointing to reasonableness, I cannot prove anything.  If a competitor alleges a TAA violation (almost all TAA and BAA violations are raised by competitors; the system is purposefully designed that way), the contractor would probably make a reasonable interpretation argument in its defense.  

I see the contract described here as one for services, period, so the clause at FAR 52.225-5 does not apply.  The replacement parts used in the repairs do not constitute the furnishing of supplies.  However, I am operating only on what I see here; I have not read the contract.  If the CO in Nena's contract asserts that the contract is one for services involving the furnishing of supplies (and that the clause at FAR 52.225-5  therefore applies), I would want to reply that the replacement parts used in the repair are not end products (thus negating any effect of the clause).  Pretty soon, the disputes process may be implicated to provide a resolution.

Nena,

Don't take my word for it -- I'm just providing insight based on experience as a contracting practitioner.  I haven't seen everything yet (but I have seen a lot of TAA and BAA matters).

 

 

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Guest Vern Edwards
4 hours ago, ji20874 said:

If the CO in Nena's contract asserts that the contract is one for services involving the furnishing of supplies (and that the clause at FAR 52.225-5  therefore applies), I would want to reply that the replacement parts used in the repair are not end products (thus negating any effect of the clause).  Pretty soon, the disputes process may be implicated to provide a resolution.

What if the "repair" is not minor? See FAR 22.1003-6. Would TAA apply? I'm asking, not arguing.

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If the contract is for delivery of remanufactured items, then one might say it is a contract for supplies which could be subject to the TAA and the clause at FAR 52.225-5 (based on the clause prescription at FAR 25.1101(c)(1)).  If so, the remanufactured pipe, to continue with the example, would be an end item of supply and would have to be manufactured in the U.S. or a designated country.  But remember that the clause only covers end products -- it does not address components -- so the replacement parts used in the remanufacturing still would not be covered by the clause.

Note 1:  The BAA does cover components (in most cases), but we're not talking BAA.

Note 2:  The Customs and Border Protection bureau in DHS makes TAA country of origin determinations.  Here's a relevant quote from the article Carl shared:   "Customs has repeatedly emphasized that it must consider the totality of the circumstances and make such determinations on a case-by-case basis, making it difficult for GSA Schedule holders to apply the test to their own or third-party products, particularly where there is no sufficiently-analogous published determination."

 

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Guest Vern Edwards
7 hours ago, ji20874 said:

If the contract is for delivery of remanufactured items, then one might say it is a contract for supplies which could be subject to the TAA and the clause at FAR 52.225-5 (based on the clause prescription at FAR 25.1101(c)(1)).  If so, the remanufactured pipe, to continue with the example, would be an end item of supply and would have to be manufactured in the U.S. or a designated country.  But remember that the clause only covers end products -- it does not address components -- so the replacement parts used in the remanufacturing still would not be covered by the clause.

I cannot find the term "end item of supply" anywhere in FAR Part 25. It appears only once in the FAR, in FAR Part 37. So what is the correct term for what you are talking about? When you say "end item of supply" do you mean "end product," as defined in FAR 25.003?

Quote

"End product” means those articles, materials, and supplies to be acquired for public use.

If "end product" is what you mean by "end item of supply," and if the statement of work/specification in the schedule of a remanufacturing contract specifies the particular replacement parts that are to be used, then wouldn't those replacement parts be end products for purposes of FAR 52.225-5? Neither the definition of end product nor the clause states that articles, materials, and supplies must be separately deliverable and separately priced in order to be end products. Does FAR say that somewhere else? Do you know of any case law?

I don't know much about this topic, so, again, I'm asking, not arguing.

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The law and regulations aren’t always logical. However, it would seem logical to me that the purpose of the contract is to inspect and service or repair equipmenI. If the equipment was originally “domestic”, then it ought to remain domestic after repairs or refurbishment. .  If that equipment was originally purchased under the BAA and TAA, then supplying and installing replacement parts for that equipment ought to be consistent with the original equipment purchase. I’m assuming that the contract value is high enough for applicability of TAA. 

If the government is paying for the parts on a cost reimbursable basis, what is the issue? Price differences shouldn’t be a concern.

If the parts being replaced were originally “domestic”, then they ought to remain domestic after repairs or refurbishment.  

 

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Vern,

Please read end item of supply as simple words strung together, rather than as a term.  If it will work better for you, you may change those words to end product, which is a term in the context of the FAR.  Nothing changes in this case.

I want to avoid conflating “end product” and “component” as identical.  I have a different opinion.  In my practice, I treat these as different, because FAR Part 25 treats them differently (see the definitions in FAR 25.003) and the clauses at FAR 52.225-1, -3, and -5 treat them differently.

6 hours ago, Vern Edwards said:

Neither the definition of end product nor the clause states that articles, materials, and supplies must be separately deliverable and separately priced in order to be end products.

I haven’t made that assertion.  

If you want case law, ask Nena.  I’m just sharing information as a contracting practitioner, not as an attorney.  As a matter of practice, I am not persuaded that every replacement part in every repair service, or every piece part in a supply end (or end product), must be of domestic or designated country origin.  

Sometimes in these matters, the same item will be seen as an end item by one person and a component by another person — this happens such as when buying an airplane, as an example — one might say the engines are components while another might say the engines are end items.  It depends on the terms of the contract.  But I don’t think we’re talking at this level.  This discussion would require (1) an understanding that end products and components are different, and (2) an understanding of the exact text and context of a contract.

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Guest Vern Edwards
53 minutes ago, ji20874 said:

I haven’t made that assertion.  

Don't get defensive. I didn't say that you did. I made the point in order to explain my questions.

The distinction between the definition of "end product" in FAR 2.101 and the definition applicable to FAR Part 25 strikes me as significant.

53 minutes ago, ji20874 said:

If you want case law, ask Nena.  I’m just sharing information as a contracting practitioner, not as an attorney.  As a matter of practice, I am not persuaded that every replacement part in every repair service, or every piece part in a supply end (or end product), must be of domestic or designated country origin.

I would have asked Nena if I had wanted an answer from her. I asked you, because you've been posting as a practitioner, because you have had a lot to say on this topic, and because you came across like you know what's what. I'm trying to understand how to interpret the term end product in different contexts and how we can recognize one based on the definition and the language of a contract. I especially want to understand how particular contract language can affect analysis and a determination of end product or component. But I'll stop asking you questions now, because I sense that they're making you edgy, or on the verge of doing so, and that there's no point in pressing you. I'll answer my own questions, as should everyone else.

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On 8/27/2018 at 11:20 AM, PennGC57 said:

I am helping a contractor determine whether and how TAA applies to their contract. Here are the pertinent details:

 

  • Contractor provides inspection and repair of equipment on multiple DoD contracts under a GSA Schedule.

  • 52.225-5 Trade Agreements is incorporated into the schedule.

  • Contractor did not supply the equipment being inspected.

  • The Contract Line Items are broad in nature, requesting inspection of equipment.

  • The Government entity issues a separate work order for needed repairs as a result of the inspection. (“work order” is a generous term here, as most requests come via email)

  • Replacement parts may be small in nature (i.e., batteries) or multiple in nature (several components).

  • Are replacement parts supplied to repair equipment required to comply with the TAA?

 

Let me know what other information you need to advise. Thank you!

If the parts are priced under a work order, what difference does it make to the contractor and what does the government say it wants? 

Or should I mind my own business and simply assume that this is a contract interpretation question? 

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Vern,

Yes, the differences in definitions in FAR 25.003 and 2.101 are significant -- that's why I recommended, early in this thread, that people wanting to understand this matter should read them.  Also important to understanding is reading FAR Part 25 as a whole and comparing and contrasting the three matched set clauses at FAR 52.225-1, -3, and -5 -- this has been very helpful to me in understanding this matter.

All I can do, and all I want to do, is share a practitioner's perspective for the benefit of the original poster and other readers.  You ask too much of me when you ask me to prove or to provide case law, especially for an assertion I have not made, and more especially after I earlier admitted I cannot prove anything and invited others to make their own decisions.  I acknowledged that is "difficult for GSA Schedule holders to apply the test to their own or third-party products" -- if it is difficult for them, knowing the exact text and context of their contracts and knowing the provenance of their materials, surely it is nigh impossible for us to be definitive in this forum.

I hope all readers will agree with a general principle that there is no requirement for every replacement part in every repair service contract, or every piece part of an end product in every supply contract, to be of domestic or designated country origin in a contract that includes the clause at FAR 52.225-5.  I think this answers the original poster's question as best as it can be answered, based on the information provided.  

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I don’t think that you can find a domestic  source for every replacement part

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I have not handled a contract as a CO to which TAA is applicable for sometime but with regard to the OP’s scenario and some of the thoughts expressed throughout this thread I want to offer a more concise view than my original post.  Just views with hopes it helps the OP

  • TAA is a standalone act that allows use of other than American made products.  As such TAA is enforced using its language solely.

  • FAR part 25 as well as 52.225-5 defines “End product” as meaning those articles, materials, and supplies to be acquired for public use.

  • FAR subpart 25.4 nor FAR 52.225-5 and 225-6 do not use the word “component”.   Noted here TAA as a whole by my read uses “product” but not component in its language.

  • The OP states –

    • Contractor provides inspection and repair of equipment on multiple DoD contracts under a GSA Schedule.

      • Response - GSA FSS Contracts are subject to TAA and not BAA.  Example see FSS 03FAC BAA clauses are absent TAA clauses are present.  

    • 52.225-5 Trade Agreements is incorporated into the schedule.

      • Response  - OP’s has not provided its specific schedule but as ALL GSA Schedule contracts include TAA this statement makes sense.

    • Contractor did not supply the equipment being inspected.

      • Response - As provided this fact is not relevant, what is relevant is what is the contractor providing in the repair of equipment.

    • The Contract Line Items are broad in nature, requesting inspection of equipment.

      • Response -This statement is a little confusing as the OP is stating that the contractor also provides repair, see next bullet.

    • The Government entity issues a separate work order for needed repairs as a result of the inspection. (“work order” is a generous term here, as most requests come via email)

      • Response – Here the question is whether the work order is issued under the authority of the GSA Schedule contract.   If it is then TAA applies.   If it not then it is “open market” and the specifics of the terms and conditions in the work order would need to be known.

    • Replacement parts may be small in nature (i.e., batteries) or multiple in nature (several components).

      • Response – Use of the word “component” by the OP confuses the matter.  The contractor is supplying parts to repair the equipment simple as that and as such the parts could likely fit being one of 3 things covered by TAA – an article, a material and  a supply.

    • Are replacement parts supplied to repair equipment required to comply with the TAA?

      • Response – If the work orders for the repair is issued under the authority of the GSA Schedule then the work order is subject to TAA.  As such all the parts could likely need to be evaluated with regard to TAA.  If the work orders for the repairs is an “open market” order then the order would stipulate whether TAA is applicable or not.  With regard to “likely” application of TAA it is the contractors responsibility to make the determination.  For making this determination specific to the parts being provided the contractor should seek appropriate legal counsel or assistance from U.S. Customs and Border Protection (see “Trade” on this website - https://www.cbp.gov/about )

PS – I have edited my initial post  in this thread to refer to this post

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Guest Vern Edwards
2 hours ago, ji20874 said:

You ask too much of me when you ask me to prove or to provide case law, especially for an assertion I have not made, and more especially after I earlier admitted I cannot prove anything and invited others to make their own decisions. 

I didn't ask you to prove anything. I didn't ask you to provide case law. And I didn't say you asserted anything. Here's what I said and asked:

11 hours ago, Vern Edwards said:

If "end product" is what you mean by "end item of supply," and if the statement of work/specification in the schedule of a remanufacturing contract specifies the particular replacement parts that are to be used, then wouldn't those replacement parts be end products for purposes of FAR 52.225-5? Neither the definition of end product nor the clause states that articles, materials, and supplies must be separately deliverable and separately priced in order to be end products. Does FAR say that somewhere else? Do you know of any case law?

Emphasis added. Three questions. A simple yes or no to each of those would have sufficed. If you had said yes to any of them, then I would have asked for more information. You are too much on the defense.

As for this:

2 hours ago, ji20874 said:

I hope all readers will agree with a general principle that there is no requirement for every replacement part in every repair service contract, or every piece part of an end product in every supply contract, to be of domestic or designated country origin in a contract that includes the clause at FAR 52.225-5.  I think this answers the original poster's question as best as it can be answered, based on the information provided.

That's like saying the sky is not always blue, which is true enough, but not helpful if what I want to know is the color of today's sky.

Here is the original question:

On 8/27/2018 at 9:20 AM, PennGC57 said:
  • Are replacement parts supplied to repair equipment required to comply with the TAA?

And here is an appropriate answer to that question:

Based on FAR 52.225-5, the answer depends on how the contract is written. If the replacement parts are "end products," i.e., "articles, materials, and supplies to be acquired under the contract for public use," and if they are "items in the [contract] schedule," then the answer is yes. Otherwise, the answer is no.

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Carl, Etal,  i apologize for incorrectly using the term “domestic” to refer to either US made or eligible products from a participating country under Trade Agreements Act. I should have refreshed my memory.  I wasn’t trying to limit allowable products to US made where TAA is applicable. 

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