This post was written by Andrew C. Bernasconi.
As many government contractors are aware, the Trade Agreements Act (“TAA”) and its implementing regulations generally provide that the government may only acquire end products made in the United States or other “designated countries.” Government contracts frequently incorporate TAA regulations and require contractors to certify that products sold to the government derive from the U.S. or designated countries.
Liability under the False Claims Act (“FCA”) can arise when contractors sell and supply products to the government from non-designated countries like China and Malaysia, despite their certifications to the contrary. The FCA’s treble damages, civil penalties, and unique qui tam provisions – which allow private whistleblowers to bring claims of fraud against the government and receive a percentage of any recovery – make the FCA a powerful and popular vehicle for current and former employees of contractors, competitors, the Department of Justice, and others to assert claims of fraud under the FCA against government contractors.
The FCA has been used with increasing frequency and financial force to prosecute claims of TAA violations. There are currently several FCA cases involving alleged violations of the TAA pending throughout the country, and there have been substantial settlements of FCA/TAA allegations in recent years. The Bottom Line: Government contractors should examine their contracts to determine whether they incorporate the TAA requirements and certifications, and if so, take steps to verify that their supply chain of products sold to the government satisfies all applicable requirements.