The Trade Agreements Act (TAA) and Buy American Act (BAA) are among the most complex regulatory systems in federal contracting. There’s been a lot of confusion from both contractors and agencies on when they apply to a procurement and how. We have written on the BAA and TAA in the past. Recently, the Court of Federal Claims issued a decision discussing how the two laws interact, and showed that how they apply depends significantly on the circumstances of the procurement, providing some clarification on a past GAO decision we wrote on as well (which held that the TAA is inapplicable to small business set-asides). We will explore that here. 

Back in July 2024, the VA issued a solicitation seeking to purchase a prostate drug called Tamsulosin. Determining that this drug could be provided by small businesses, the VA made the procurement a small business set-aside. However, all the small businesses that could provide the drug were not domestic manufacturers, but domestic resellers. Tamsulosin is not manufactured in the United States. After getting a waiver of the domestic manufacturer requirement, the VA issued the Solicitation with language stating that the BAA applied. The Solicitation did not, however, apply the TAA. 

The DaVinci Company (DaVinci) submitted a proposal offering to provide Tamsulosin through Spain, a TAA-designated country. At the same time DaVinci submitted its proposal, it filed an agency protest arguing that the TAA, not the BAA, should apply. The VA denied this protest. The VA then awarded a contract to a company who offered to provide Tamsulosin through India, which is not a TAA-designated country. The VA then requested a domestic nonavailability waiver from the SBA stating that here are no domestic producers of any size, which was granted. After a corrective action for a separate issue and subsequent rebidding, the VA still awarded the contract to a company who offered to provide Tamsulosin through India. 

The parties argued that the issue was binary, whether the TAA or BAA applied. The court noted it wasn’t so simple. Both the TAA and the BAA could apply at certain points to the Solicitation. The real question was when does the TAA apply after the VA invokes the BAA? This was a question of which statute, the TAA or BAA, takes precedent, and which one takes precedent in fact depended on the steps the VA took before issuing its procurement decision. 

Up until the nonavailability waiver request to the SBA, the agency followed the rules. IT conducted a “Rule of Two” analysis, got a nonmanufacturing waiver from the SBA, and evaluated the offers. But, when it requested a waiver stating that the drug in question was not manufactured in the United States, this changed things. “Specifically, the agency ignored the TAA’s obligations, despite the procurement becoming dependent on international, instead of domestic, products to fulfill the VA’s needs. The VA, in other words, treated its Solicitation as still being a BAA set-aside when it had voluntarily—based on nonavailability—waived the BAA’s protections to trade with a foreign company.” 

The BAA is a domestic preference statute. It is “designed to limit agency procurement to domestic suppliers, unless the agency’s need cannot be fulfilled by either domestic manufacturers or some other reason needed to promote the public interest.” The TAA, on the other hand, is meant to limit procurement of foreign goods to U.S. trade partners so as to encourage countries to enter trade agreements with the U.S. 

The VA presumed that, once it got the nonavailability waiver, it didn’t have to apply the TAA. Its position was that FAR 25.401(a)(1) interprets 19 U.S.C. § 2511(f) (which discusses power to modify set-aside requirements) to bar application of the TAA “to … acquisitions set aside for small businesses.” But § 2511(f) does not say that. It says, “The authority of the President under subsection (a) of this section to waive any law, regulation, procedure, or practice regarding Government procurement does not authorize the waiver of any small business or minority preference.” This only means an agency can’t use the TAA to waive a small business or minority preference. It does not mean that the TAA can be waived. “Instead, FAR 25.401(a)(1), as it must, reaffirms that the TAA cannot waive—meaning the TAA cannot nullify—the BAA’s requirements when there is a domestic small business producer.” 

In other words, the BAA applies when it’s a small business set aside and there is a domestic small business producer. But here, there was no domestic producer, and the VA got a waiver that allows procurement from international sources. “The TAA—as a statute controlling international procurement preferences—must then apply when domestic preferences have been waived[.]” 

A lot of this entails confusion about waiver of the nonmanufacturer rule and the nonavailability waiver. The former only says that the agency as found there are no small business manufacturers in the United States that can produce the good. When this waiver is applied for a small business procurement, it means offerors can use large business domestic products. The BAA, which requires the use of domestic products, still applies. Where domestic products are required, it’s not that the TAA is waived, it just doesn’t matter, because the TAA is about acquiring foreign products. But when the VA got the nonavailability waiver, it basically said: “There’s no domestic producer of any size, we have to get a foreign good.” That necessarily waived the BAA’s domestic use requirement. So then, the question was whether the foreign good complied with the TAA. The moment the agency determined that there’s no domestic producers, that basically made the BAA irrelevant. Neither the BAA nor the TAA were ever waived, it’s just that an exception to the BAA applied because there were no domestic producers. So, the TAA can still apply to small business set-asides, depending on the details of the procurement. 

Questions about this post? Email us . Need legal assistance? Call us at 785-200-8919. 

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