Buy American, Hire American

Dear Friends,

President Trump is expected to sign an Executive Order today in furtherance of his “Buy American, Hire American” agenda.  The agenda, which includes pushing Congress for a $1 trillion infrastructure spending bill to help fix roads, bridges, tunnels, airports, etc. (which has not materialized, thus far), seeks to ensure that government procurement dollars are spent in accordance with existing ‘Buy America’ legislation (i.e., legislation that requires, or gives preference to, U.S.-qualified products in U.S. government-funded procurements).  It also seeks to ensure that this legislation is properly enforced.

As any company who participates directly or indirectly in the government procurement market knows, this can be a confusing area.  There is no one “Buy America” standard across the federal government.  Often, just figuring out which standard (e.g., the Buy American Act of 1933, the Trade Agreements Act of 1979, the Surface Transportation Assistance Act of 1982, etc.) applies can be quite an ordeal, particularly if you are further down the chain – you supply a customer who supplies the government.  The good news is that, for those companies that have invested in figuring this out (or at least figuring out the piece that impacts them), there is quite an opportunity here.  As today’s Executive Order demonstrates there is going to be a renewed focus on acquiring qualifying articles, which means people can expect more scrutiny of their certifications.  That is also the potential bad news – this is an area where procurement officers have historically had a great deal of discretion and audits are relatively rare.  Given the Trump Administration’s interest in this issue, we expect that to change (i.e., a lot more scrutiny of the certifications).

If you are selling directly or indirectly to the government, then we recommend that you review your processes for ensuring that your “Buy America” certifications are accurate and auditable (i.e., make sure you are retaining the right supporting documentation).  Companies that are confident in their programs are expected to have a distinct advantage in this space for the foreseeable future.

We hope this is helpful.  If you have any questions about these issues, please let us know.  We have a great deal of experience in this area helping companies set up compliance programs, advising on compliance, obtaining final determinations of origin and defending enforcement actions.  We’d be happy to answer any questions you may have.

Best regards,
Ted

 

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False Designations of Origin on GSA Advantage!

Dear Friends,

We thought you might be interested in a letter Sen. Charles Schumer (NY-D) recently sent to the General Services Administration regarding potential misstatements of origin on GSA-Advantage!  As you may know, GSA Advantage! is the on-line shopping site for federal agencies.  A copy of Sen. Schumer’s letter can be found here.

In the letter, Senator Schumer alleges that GSA Advantage! contains numerous products with potentially false designations of origin.  This is an issue because in order to be listed on GSA Advantage!, products are required to comply with the country of origin requirements contained in the Trade Agreements Act of 1979 (“TAA”).  This generally means that the products must be manufactured/last substantially transformed in the United States or in a TAA country in order to be listed/acquired.  TAA countries do not include countries like China, India, Malaysia, etc.

If a product is not TAA eligible, it is not supposed to be listed on GSA Advantage!  In practice, however, this is not very well enforced.  Generally, if a product is listed by the offeror as TAA eligible, such representation is not questioned by GSA.  Since products are often offered for sale to the government by third-party resellers (i.e., many companies do not themselves list products on GSA Advantage!), there can be a disconnect between the actual origin and what is included by the reseller.

We expect the GSA Administrator to take Sen. Schumer’s request seriously.  While the request was focused on a particular industry, we believe that the review will likely expand to other products.  We encourage all companies to do a quick search on GSA Advantage! to see if their products are included (you can search by your company name) and, if so, whether the origin is identified correctly (e.g., is “Made in:  United States of America” correct?).  If not, please let us know.  We have helped clients in the past clear up potential misstatements of origin made to GSA by third-party resellers.

We hope this is helpful.  If you have any questions, please let us know.

Best regards,

Ted

Government Procurement Rule of Origin-Related Qui Tam Action

Dear Friends:

We are writing to let you know about the settlement of a False Claims Act (“FCA”) case, involving country of origin claims for products sold to the U.S. government.

Earlier this week, the U.S. Attorney’s Office for the District of Maryland announced that a U.S. division of a Korean electronics manufacturing giant agreed to pay $2.3 million to settle allegations that it knowingly provided inaccurate country of origin information to the authorized resellers of its products.  This settlement stems from a qui tam suit filed in 2011 by a former employee.  A copy of the USAO’s press release if available here.

The underlying complaint alleged that from 2005 to 2013, the Company caused authorized resellers to resell certain products to the U.S. government under General Service Administration (“GSA”) Multiple Award Schedule (“MAS”) contracts in violation of the Trade Agreements Act (19 U.S.C.  § 2501, et. seq.) (“TAA”).  More specifically, the complaint alleged that the Company knowingly provided its resellers with false certifications regarding the origin of its products (i.e., certifications that its products were made in TAA-complaint countries, when in fact many of the products were produced in non-TAA countries, such as China).  The resellers relied on the Company’s certifications in making sales to the U.S. government under the MAS contracts.

There are a couple of key takeaways from this settlement.

First, this settlement underscores the Dept. of Justice’s interest in prosecuting government procurement rule of origin violations.  In announcing this settlement, Assistant Attorney General Stuart F. Delery reiterated that it “upholds important trade priorities by ensuring that the United States only uses its buying power to purchase from countries that trade fairly with us.”  Thus, while the FCA has evolved to address a variety of trade compliance violations, the importance of “guarding against abuse of federal procurement programs” has not fallen from the Dept. of Justice’s focus.

Second, given the increasing number of FCA-related trade cases being initiated by current/former employees (here the former employee who brought the case will be entitled to receive up to 30% of the $2.3 million), it is more important than ever that companies have documented controls over their government sales (whether direct, or indirect, as was the case).  The government procurement rules of origin can be confusing (to say the least) and, if this is a meaningful part of your business, steps should be taken to ensure that the certifications are being done correctly.  In addition, it is important that companies have:

(1)          a reporting structure for employees to report potential trade compliance issues to management;
(2)          procedures for management to review, investigate and address credible trade compliance issues; and
(3)          periodic audits to review the effectiveness of the substantive controls, as well as the employee reporting and management review procedures.

With good internal controls, most companies will be able to protect themselves from these types of costly enforcement actions.

We hope this is helpful.  If you have any questions, or if you would like to discuss these issues further, please let us know.

Best regards,
Ted