On December 30, 2021, the FAR Council issued a final rule to update the trade agreements thresholds implemented under the Trade Agreements Act (“TAA”). The new thresholds take effect January 1, 2022.
The TAA thresholds are adjusted every two years and set the value a contract must meet or exceed in order for the World Trade Organization Government Procurement Agreement (“WTO GPA”) and free trade agreements (“FTAs”) to apply. For supply, service, and construction contracts that meet or exceed the stated thresholds, Buy American Act (“BAA”) requirements are waived in accordance with the TAA, and the Government is required to treat eligible products and services from designated countries on an equal basis as domestic products and services.
The updated thresholds, to be listed in FAR 25.402(b), are provided below.
|Trade Agreement||Supply Contract (equal to or exceeding)||Service Contract (equal to or exceeding)||Construction Contract (equal to or exceeding)|
|CAFTA-DR (Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua)||$92,319||$92,319||$7,032,000|
|Israeli Trade Act||$50,000||—||—|
*The Canada thresholds remain unchanged in this rule because they are in the process of being modified by a separate rulemaking to match WTO GPA thresholds, in accordance with the United States-Mexico-Canada Agreement Implementation Act. See 86 Fed. Reg. 70808 (Dec. 13, 2021).
While the changes to the TAA thresholds generally are not large, they still could be significant, as the thresholds represent a bright-line below which the Buy American Act applies with full force. So long as the Government continues to aggressively pursue – and enforce – its “Made in America” policy, it is especially important for contractors to have a firm understanding of the scope and application of the BAA, TAA, and other domestic preference regimes – and to consider updating their internal processes accordingly. We will continue to track developments and provide further updates in this space.