Why is TAA compliance important when buying transceivers?

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TAA

What is TAA compliance?

The Trade Agreements Act (TAA) was enacted in 1979 (19 U.S.C. & 2501-2581) to promote fair and open international trade with certain designated countries. This specifically implied that the U.S. Government can only obtain products and services that were made or substantially transformed in the U.S. and/or in any of the TAA compliant countries. The U.S. Federal Government TAA is a requirement to market products on the General Services Administration (GSA) schedule. Remember, TAA compliance is not a product attestation standard, it is rather a certification of compliance offered by the Customs and Border Protection (CBP) agency.

 

List of TAA compliant countries:

To understand if your products or services are TAA compliant, you need to know which countries these products/services are developed/substantially-transformed in. The list of TAA compliant countries belong to one or more of these groups:

  • World Trade Organization Government Procurement Agreement Countries
  • Free Trade Agreement Countries
  • Least Developed Countries
  • Caribbean Basin Countries

The full list of countries which are TAA compliant can be found here.

 

How does it affect transceivers?

Transceivers and switches, as most of you all know, are manufactured primarily in the Asian countries like People’s Republic of China, Malaysia, Thailand, Taiwan, Republic of Korea etc. Now if you compare this list with the list of TAA compliant countries, a lot of them are not included, primarily – People’s Republic of China and Malaysia. For this reason, a lot of companies are shifting their manufacturing facilities to Taiwan, Republic of Korea, Singapore, and other Asian countries which are TAA compliant. The cost of manufacturing in the Asian countries goes down considerably because of high availability of cheap raw materials and labor.

For this very reason, Vitex has partners in TAA compliant countries for fulfilling requests from Government contractors and companies. We ensure that our products are fully TAA compliant when supplying products to Government affiliated companies.

 

Difference between ‘manufactured’ and ‘substantially transformed’ products:

TAA compliant products, as specified in the agreement, can either be ‘manufactured’ or ‘substantially transformed’ in the US or any TAA compliant country. Let us understand the meaning of these terms:

  • ‘Manufactured’: The final products which are wholly manufactured and developed in the US or any TAA compliant country are deemed as ‘manufactured’. Starting from the raw materials to the end-product, all of them must belong to the US/TAA compliant country.
  • ‘Substantially transformed’: This means transforming a product into a new and different article of commerce with a name, character, or use distinct from the original product. There might be a case that a product is assembled in several different countries but the rule of substantially transformed applies to the last country that the product is in before it comes to the US. As long as 50% of the production is done in a TAA compliant country, the product will be TAA compliant.

 

How to prepare yourself when dealing with “outside-US” suppliers?

Companies dealing with products coming from outside the US must ensure that the products and services are TAA compliant. In the case of transceivers, the CBP released its verdict on which products are compliant:

Customs and Border Protection has released it’s final determination concerning different versions of certain network transceivers and high-speed cabling devices that require software to be functional. CBP concludes that “blank” network transceivers imported in the U.S. where proprietary software was first downloaded were substantially transformed in the U.S., whereas network transceivers already programmed with generic software when imported were not substantially transformed by subsequent replacement of the generic software with proprietary software that enhanced or broadened functionality allowing interoperability with different OEM systems1.

Thus, companies dealing with these products must document substantial transformation. They should continually maintain the following documentation:

  • Documentation of every supply chain agreement, such as a letter of supply
  • Proper and correct documentation of the country of origin, including origin markings, the country of origin code, and the most current country of origin.

References

1Federal Register, Vol. 81, No. 104, Tuesday, May 31, 2016

 

For questions on TAA compliant Transceivers or Video Extenders, please contact Vitex Sales.

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