Expect GSA to More Closely Scrutinize Trade Agreements Act Compliance

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Merle M. DeLancey Jr.

On January 21, 2022, the General Services Administration (“GSA”) Office of Inspector General (“OIG”) informed the Federal Acquisition Service (“FAS”) that ongoing monitoring by the OIG found that the FAS failed to properly monitor the sale of products for compliance with the Trade Agreements Act (“TAA”) during the COVID-19 response. Previously, in April 2020, GSA relaxed compliance with the TAA for a limited number of Federal Supply Classes (“FSCs”) to aid the government’s response to the COVID-19 pandemic. The applicable FSCs included those covering N95 masks, cleaners and disinfectants, disposable gloves, and hand sanitizers. After several extensions, the TAA exception policy expired on April 30, 2021.

The OIG identified two deficiencies in FAS’ implementation of the TAA exception policy. First, the OIG found that FAS failed to properly track the addition of non-compliant products to contracts. As a result, after expiration of the exception policy, there was no effective way for GSA to remove the non-compliant products from contracts. Second, the OIG found that GSA improperly permitted the addition of non-compliant products to GSA contracts. For example, some products that were added were unrelated to the government’s response to the pandemic; some products were added to GSA contracts prior to the effective date of the TAA exception policy; and, remarkably, in one case, a product was added to a contract that identified North Korea as its country of origin.

Continue reading “Expect GSA to More Closely Scrutinize Trade Agreements Act Compliance”

After Acetris Decision, Trade Agreements Act Compliance Questions Abound: Contractors Need Guidance

Merle M. DeLancey Jr., Jay P. Lessler, and James R. Staiger

The Federal Circuit’s recent decision in Acetris has left many contractors scratching their heads and asking questions. To recap, on February 10, 2020, the Federal Circuit held that, under the Federal Acquisition Regulation (“FAR”), to qualify as a “U.S.-made end product” under the Trade Agreements Act (“TAA”), a drug must be either “manufactured” in the United States or “substantially transformed” in the United States. (See Federal Circuit Holds Generic Drugs Manufactured in the U.S. from API Produced in India Qualify for Sale to U.S. under Trade Agreements Act (Acetris Decision).) This is a stark change from the Government’s long-held position that manufacturing and substantial transformation were one in the same.

As a result of the Acetris decision, federal contractors seeking to comply with or maintain compliance with the TAA are facing many questions. Some of the more prominent questions are below. Continue reading “After Acetris Decision, Trade Agreements Act Compliance Questions Abound: Contractors Need Guidance”

Federal Circuit Holds Generic Drugs Manufactured in the U.S. from API Produced in India Qualify for Sale to U.S. under Trade Agreements Act (Acetris Decision)

Merle M. DeLancey Jr., Jay P. Lessler, and James R. Staiger

Earlier today, the United States Court of Appeals for the Federal Circuit issued a decision that is sure to send shockwaves through the generic drug industry. In Acetris, the Federal Circuit held that a generic drug manufactured in the United States complied with the Trade Agreements Act (“TAA”) and could be sold to the Department of Veterans Affairs. The court made this determination even though the drug’s active pharmaceutical ingredient (“API”) came from a non-designated country, India. In reaching its decision, the court broke away from longstanding Customs and Border Protection (“CBP”) precedent that the country where the API was produced dictated the location of “substantial transformation” and thus the country of origin for any resulting drug. The court held that under the Federal Acquisition Regulation (“FAR”), to qualify as a “U.S.-made end product” under the TAA, a drug must be either “manufactured” in the United States or “substantially transformed” in the United States—but not be both.

For years, generic drug manufacturers that manufacture drugs in the United States from API produced in India and China have been precluded from selling their drugs to the U.S. Government under the TAA. The Federal Circuit’s Acetris decision opens up the U.S. Government market for generic drugs manufactured in the U.S. from API produced in India and China.

 

 

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