There was a significant development in TAA compliance for federal resellers, when a recent decision by the U.S. Court of Appeals for the District of Columbia Circuit dismissed a False Claims Act suit filed against contractors for reselling Chinese-made (non-TAA compliance) technology products to the U.S. government. In case number 13-7049, Govplace, Inc. and Government Acquisitions Inc. were accused of engaging in fraudulent behavior because they relied on their product supplier’s (Ingram Micro, Inc.) certification, which stated that the technology products supplied were from a TAA compliant country.
Prosecutors argued that it is a contractor’s responsibility to not simply rely on the TAA compliant certification, but also to conduct their own investigation to affirm the country of origin for every supplied product. However, the case was dismissed after the court decided that there was no reason to doubt the legitimacy of the supplier’s certifications, and that trusting them should not be considered reckless or fraudulent.
This decision sets a new and unique precedent for federal resellers because as long as they receive a supplier’s TAA certification, they are not faced with the burden of conducting their own Country of Origin (COO) due diligence of supplied products and potentially, are not liable for accidentally selling non-TAA compliant products to the U.S. government.
Despite these encouraging developments, it is still important for federal resellers to remain aware of TAA compliance and to take action if they suspect that their suppliers are not properly conforming to TAA regulations. There is still potential exposure under the False Claims Act from qui-tam whistleblowers and the Justice Department. First, it’s important that federal resellers, including GSA Schedule contractors, ensure all their supplier agreements and Letters of Supply have the necessary TAA certification language.
Second, if a reseller is aware of their supplier’s noncompliance, or if a reseller finds “credible evidence” contradicting a COO representation, the contractor still needs to exercise reasonable due diligence and make the corrections to ensure TAA compliance. And third, ensure sufficient training is done so that employees and suppliers can be informed enough to make the right decisions. As it is probable that courts will be less forgiving to contractors that turn a blind eye to contract compliance.
If you have any questions on TAA compliance, what is “substantial transformation”, or with your supplier agreements, contact us for assistance.
