In contrast to its expansion of Buy American policies, the Trump administration took an unusual step and lifted a ban on procurement of N95 masks, hand sanitizers, personal protective equipment (PPE) and other products needed to fight covid-19 from non-trade agreement countries. It will allow the government to purchase these products from China and other countries that are not parties to the WTO Government Procurement Agreement (GPA) or a free trade agreement (FTA) – albeit on a temporary basis. This post examines the temporary waiver in the context of U.S. trade agreements.
On April 3, the General Services Administration (GSA) issued a non-availability determination that certain products produced domestically or by GPA or FTA partners are insufficient to meet government needs in fighting covid-19. The products affected are N95 masks, bleach, disinfectants, cleaners (including sanitizing surface and floor cleaners) and hand sanitizers, soaps and dispensers, as well as personal protective equipment and critical cleaning supplies.
The GSA determination applies to Multiple Award Schedules (MAS), long-term government-wide contracts with commercial firms that provide federal, state and local governments with access to more than 11 million commercial products and services at volume discount pricing. Due to the covid-19 pandemic, many MAS contractors are unable to meet federal demands with compliant products. GSA’s action will allow these contractors to offer N95 masks and other listed products from China and other countries that would otherwise not be eligible for federal contracts because they are not parties to the GPA or an FTA.
The waiver also applies to GSA contracts for personal protective equipment and critical cleaning supplier. Additional items may be added as needs evolve. Currently, the ban is scheduled to expire on July 1 but could be extended. As support for its action, GSA cited the president’s declaration of a National Emergency Concerning the COVID-19 Outbreak on March 13, 2020.
GSA action was needed because the Trade Agreements Act of 1979 prohibits federal agencies from purchasing goods or services covered by the GPA from countries that do not provide the U.S. with reciprocal procurement opportunities under the GPA or FTAs. The prohibition applies to goods at or above $182,000 in value from countries such as China that are not a party to the GPA or an FTA, unless an exception such as non-availability is invoked. (China has been in negotiations to join the GPA since 2007 but has yet to complete the accession process. It tabled its latest market access offer in October.)
The U.S. can purchase goods from such countries below $182,000 if they meet the price preference requirements of the Buy American Act of 1933 (BAA). The BAA requires a six percent evaluation factor to be added to the price of a foreign product (12 percent if a small business is participating in the procurement or 50 percent for defense procurement). If after adding that factor, the foreign product is the lowest priced tender, agencies may purchase it. The BAA is waived for GPA and FTA partners.
The GSA action lifts the restrictions in both agreements. The products subject to the waiver may be manufactured in any country except those listed in the federal regulations (FAR subpart 25.7): most transactions involving Cuba, Iran and Sudan are prohibited, as are most imports from Burma or North Korea).
Jean Heilman Grier
April 20, 2020