Do you sell to the government? Are your products on the GSA schedule? If you want to sell your products to the federal government, they must be TAA (Trade Agreement Act) compliant. This rule is now more strictly enforced than before and not complying may lead to penalties and suspensions.
To be TAA compliant, Customs and Border Protection (CBP) considers either that 50 percent of the cost of manufacture or location where product is “substantially transformed” is from/within a TAA “designated country”.
The designated countries are composed of:
- World Trade Organization Government Procurement Agreement Countries;
- Free Trade Agreement Countries;
- Least Developed Countries; and
- Caribbean Basin Countries
A product is TAA compliant if it is manufactured in the US or a designated country.
Then there is the issue of “substantial transformation”. If a vendor imports components from non-TAA compliant countries and the final product is substantially transformed in a designated country or within United States, it is TAA compliant. CBP defines substantial transformation as transforming an article into a new and different article of commerce, with a name, character, or use distinct from the original article.
Major non-designated countries include China, Brazil, Malaysia, Russia, India etc. The full list of designated and non-designated countries is here. With China being a huge manufacturing hub for electronics and fiber optic components, TAA compliance may be a challenge for technology companies directly selling to the government.
Another issue to consider now when importing foreign products is the additional duties imposed on Chinese goods. Earlier this year, US government imposed up to 25% tariff on fiber optic cables and other optical technologies coming from China. Optical components and transceivers may also be charged additional duties in the near future. To avoid these tariffs, companies are shifting their manufacturing processes from China to other countries like Taiwan. But, it may take at least a few months to a year to set up full-fledged operations.
Vitex can help you navigate this new environment. Our supply chain is not restricted to China. We work with global manufacturers in designated countries to bring top of the line fiber optic solutions to US customers.