The Trade Agreements Act (TAA) and its companion, the Buy American Act (BAA), both set policies for a preference for increased domestic purchases by the federal government and its contractors. However, the TAA is designed as kind of a counterweight to the BAA. The BAA (passed in 1933), “the first of the major domestic content restriction laws, requires federal agencies to apply a price preference for ‘domestic end products’ and use ‘domestic construction materials’ for covered contracts performed in the United States.” So, the BAA encourages use of US-produced goods.
The TAA, on the other hand, waives some of those BAA requirements for goods coming out of certain favored countries that have trade agreements with the US. In other words, the TAA puts items from those favored countries on an even playing field with the US items. The TAA has some other unique aspects, including a “substantial transformation” test to determine if something is an end product.
In this post, we discuss the basics of the TAA.
Overview
The TAA permits waiver of BAA domestic content rules for certain countries that have trade agreements with the United States including World Trade Organization Government Procurement Agreement countries. With respect to covered end products or construction materials that are imported from such designated countries, and the materials that are manufactured or transformed in those countries, the TAA treats those as domestic end products or materials.
The TAA provides that eligible products from those agreed countries are are entitled to “nondiscriminatory treatment.” FAR 25.403(a). For those eligible products, the President is authorized to and has waived the BAA.
The TAA Waives the BAA for Designated Country Products
Generally, if the TAA applies to a U.S. Government contract, a contractor can supply a product from a foreign country, if that country has a free trade agreement with the United States. In other words, the U.S. Government won’t discriminate against its free-trade partners’ goods when it purchases supplies under certain circumstances (e.g., the contract is above the relevant threshold for the TAA’s application). The TAA applies to both supplies and construction materials, and can even apply to services.
The TAA prohibits providing products and services that are not TAA-eligible, and there is no unreasonable cost exception.
Designated Countries include:
- WTO Government Procurement Agreement countries
- Free Trade Agreement countries
- Least developed countries
- Caribbean Basin countries
A list of these countries can be found here.
Conspicuously Absent Countries include:
- China
- India
- Malaysia
- Indonesia
- Vietnam
The “Substantial Transformation” Test
Under the FAR’s TAA clause, FAR 52.225-5, a contractor must deliver “only U.S.-made or designated country end products.” And “U.S.-made end product” is defined as “an article that is mined, produced, or manufactured in the United States or that is substantially transformed in the United States.”
A product “need not be wholly manufactured or substantially transformed in the United States to be a ‘U.S.-made end product.’” Instead, such products may be . . . “manufactured in the United States from foreign-made components.” Acetris Health, LLC v. United States, No. 2018-2399 (Feb. 10, 2020). The court noted that “The language of the FAR reflects an intent not to require ‘substantial transformation’ for analysis under the FAR; ‘manufacture’ does not require substantial transformation.” This means that you may be able to deliver a U.S.-made end product if it is merely manufactured in the United States, even if the components are foreign made. In other words, under the FAR’s TAA clause and for purposes of a U.S.-made end product, manufacture does not require substantial transformation.
Does the BAA apply to Small Business set-asides?
In an older decision, the GAO held that the TAA does not apply to small business set-asides. In particular, the decision held that the “FAR explicitly provides that the BAA applies to small business set-asides and that the TAA does not apply to acquisitions set aside for small businesses.”
In 2025, we wrote about a decision where the COFC held that the TAA can apply to small business set-asides. That case held that the TAA doesn’t authorize waiver of small business preferences. This means that an agency can’t use the TAA to waive small business preferences, but it does not mean that the TAA itself can be waived. “TAA cannot waive—meaning the TAA cannot nullify—the BAA’s requirements when there is a domestic small business producer.” If there no domestic producer, and a waiver allows international purchase, “the TAA—as a statute controlling international procurement preferences—must then apply when domestic preferences have been waived.”
TAA Thresholds
Above the TAA threshold, the TAA—not the BAA—applies to many contracts. And, when the TAA applies, the BAA is waived. Those TAA thresholds are updated about every 2 years, and were most recently updated March 13, 2026. At that time, The FAR was updated “to incorporate revised thresholds for application of the World Trade Organization Government Procurement Agreement and the Free Trade Agreements.” The effect of this rule change is that “eligible products and services will receive equal consideration with domestic offers if the estimated value of the contract meets or exceeds the new thresholds set by” this rule change. Be sure to stay up to date on current thresholds.
For instance, the updated numbers for WTO GPA are: Construction Contract (equal to or exceeding): $6,683,000. The old threshold was $6,708,000; Supply contract (equal to or exceeding): $174,000. This is the same as the prior standard.
Conclusion
The TAA is an important rule for those in the supply or construction industry. It requires use of a domestic product or a product from a limited list of foreign country trade partners, and alters the BAA requirements if the TAA applies. If you have questions about how this law applies, please contact us.
Questions about this post? Email us or give us a call at 785-200-8919.
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