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)
WTO GPA $183,000 $183,000 $7,032,000
FTAs:
Australia FTA $92,319 $92,319 $7,032,000
Bahrain FTA $183,000 $183,000 $12,001,460
CAFTA-DR (Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua) $92,319 $92,319 $7,032,000
Chile FTA $92,319 $92,319 $7,032,000
Colombia FTA $92,319 $92,319 $7,032,000
Korea FTA $100,000 $100,000 $7,032,000
Morocco FTA $183,000 $183,000 $7,032,000
NAFTA:
—Canada* $25,000* $83,099* $10,802,884*
—Mexico $92,319 $92,319 $12,001,460
Oman FTA $183,000 $183,000 $12,001,460
Panama FTA $183,000 $183,000 $7,032,000
Peru FTA $183,000 $183,000 $7,032,000
Singapore FTA $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.

Tags: Buy American, Buy American Act, domestic content, Domestic Preferences, Domestic Sourcing, Free Trade Agreements, Made in America, Trade Agreements Act, WTO GPA
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Photo of Michael Wagner Michael Wagner

Mike Wagner represents companies and individuals in complex compliance and enforcement matters arising in the public procurement context. Combining deep regulatory expertise and extensive investigations experience, Mike helps government contractors navigate detailed procurement rules and achieve the efficient resolution of government investigations and…

Mike Wagner represents companies and individuals in complex compliance and enforcement matters arising in the public procurement context. Combining deep regulatory expertise and extensive investigations experience, Mike helps government contractors navigate detailed procurement rules and achieve the efficient resolution of government investigations and enforcement actions.

Mike regularly represents contractors in federal and state compliance and enforcement matters relating to a range of procurement laws and regulations. He has particular experience handling investigations and litigation brought under the civil False Claims Act, and he routinely counsels government contractors on mandatory and voluntary disclosure considerations under the FAR, DFARS, and related regulatory regimes. He also represents contractors in high-stakes suspension and debarment matters at the federal and state levels, and he has served as Co-Chair of the ABA Suspension & Debarment Committee and is principal editor of the American Bar Association’s Practitioner’s Guide to Suspension & Debarment (4th ed.) (2018).

Mike also has extensive experience representing companies pursuing and negotiating grants, cooperative agreements, and Other Transaction Authority agreements (OTAs). In this regard, he has particular familiarity with the semiconductor and clean energy industries, and he has devoted substantial time in recent years to advising clients on strategic considerations for pursuing opportunities under the CHIPS Act, Inflation Reduction Act, and Bipartisan Infrastructure Law.

In his counseling practice, Mike regularly advises government contractors and suppliers on best practices for managing the rapidly-evolving array of cybersecurity and supply chain security rules and requirements. In particular, he helps companies assess and navigate domestic preference and country-of-origin requirements under the Buy American Act (BAA), Trade Agreements Act (TAA), Berry Amendment, and DOD Specialty Metals regulation. He also assists clients in managing product and information security considerations related to overseas manufacture and development of Information and Communication Technologies & Services (ICTS).

Mike serves on Covington’s Hiring Committee and is Co-Chair of the firm’s Summer Associate Program. He is a frequent writer and speaker on issues relating to procurement fraud and contractor responsibility, and he has served as an adjunct professor at the George Washington University Law School.

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Photo of Jennifer Bentley Jennifer Bentley

Jennifer Bentley is an associate in the Government Contracts Practice Group. Her practice is focused on litigation, investigations, and regulatory counseling across a range of government contracts matters. She has particular expertise in domestic sourcing issues, including the Buy American Act, Trade Agreements…

Jennifer Bentley is an associate in the Government Contracts Practice Group. Her practice is focused on litigation, investigations, and regulatory counseling across a range of government contracts matters. She has particular expertise in domestic sourcing issues, including the Buy American Act, Trade Agreements Act, and Build America, Buy America. She also maintains an active pro bono practice.

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