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TAA and BAA Compliance Regulations Explained

Posted by QuoteColo on September 13, 2016 - Updated on September 07, 2016

complianceRunning a business is hard enough without constantly having to check to ensure you’re operating within regulations and compliance codes. Two compliance regulations you may find yourself asking questions about someday are the TAA and BAA, so let’s explore them right now.

The Buy American Act

Some version of this act has been around since 1933 when the original was passed in an attempt to help bolster US jobs. Much like when it was originally passed, this most recent version was introduced during a time of great economic turmoil, 2009. The Recovery and Reinvestment Act helped reminded legislators of what BAA restrictions could potentially do for the economy.

Between 1933 and now, versions of BAA laws have been used largely to regulate projects funded by the government. As is generally the norm throughout the world, our lawmakers have insisted that government officials always look to spend money with American companies if the taxpayers are funding a project.

Therefore, if your company is working on a project and receiving government funds to do so, it’s important that you make sure you’re complying with BAA.

The TAA

Before we can discuss complying with BAA laws, though, we need to bring up the TAA (Trade Agreement Acts). In short, this act allows for the purchasing of products from certain foreign countries. It’s meant to provide a bit of leeway for companies that may otherwise be overburdened by the BAA.

Complying with BAA Laws

Right away, it’s important to note that just because your products are made here in America doesn’t mean that you’re actually complying with BAA. This is a lazy interpretation of the rules that could land you in a lot of trouble with the law.

First, the BAA only applies to supply contracts that exceed the $2,500 micro-purchase limit.  The item being purchased must be considered a domestic-end product. This means that, if it is “unmanufactured,” it was mined or produced in this country. If it is manufactured, then it has to have been done so in the U.S. and the cost of components produced, mined or manufactured here can’t exceed 50%.

There is also an exception to this rule. Basically, the government says that if you need to purchase a product and it’s not a domestic-end product, you can still do so, you just have to pay a fine of 6% or 12% of its price, depending on the size of your business.

However, the TAA threshold kicks in at $193,000. Therefore, you could find yourself working to stay BAA-compliant and all of a sudden realize that you’re now running into trouble with the TAA.

Now, there are some “designated countries” you could purchase from that are exempt from the TAA. Other times, there may be lower thresholds for some countries (e.g. Mexico, Canada, Australia, Chili, etc.).

Unfortunately, when the threshold kicks in is generally up to the agency in question. Some of them apply the determination on which act applies on an overall contract basis. On the other hand, there are agencies that will use a line-item approach to figuring out when to apply either act. This is why it’s fairly common for both the TAA and BAA to apply because of the expected dollar value of the individual line items.

In the end, you’re best off by working closely with the Bureau of Customs and Border Protections to make this determination. Give them all the information on the products you wish to purchase and their expected amounts. This will probably prove to be a laborious process the first few times you do it, but it’s far better than paying tens of millions of dollars in fines for making a mistake like other companies have had to do.

Categories: Data Center

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