Earlier this month, a medical device company settled allegations that it had violated the False Claims Act (FCA) by improperly certifying that it had complied with the Trade Agreements Act (TAA) when providing the U.S. Government with end products manufactured in Malaysia. The TAA requires certain end products sold to the U.S. Government to be made in the United States or a country covered by a trade agreement with the United States. End products manufactured in Malaysia, as well as India and the People’s Republic of China, are not compliant with the TAA.
The settlement resolved litigation that began in 2008 when a former employee alleged that the company sold orthopedic devices on a federal supply schedule administered by the U.S. Department of Veterans Affairs (VA) after purchasing the devices from a third-party manufacturer in Malaysia. Although the TAA only applies to end products sold to the U.S. Government if the value of the end products meets a specific monetary threshold, the U.S. General Services Administration and the VA have taken the position that all end products sold on a federal supply schedule must comply with the TAA because the orders placed under a federal supply schedule are expected to meet the applicable threshold. As a result, different country-of-origin requirements may apply to commercial contractors depending on whether they sell their products to the U.S. Government on the open market, through a federal supply schedule, or under a separate federal contract. The company at issue had used multiple sales mechanisms to provide end products to the U.S. Government.