Trade agreement fraud refers to the illegal manipulation of government contracting processes to bypass the requirements of laws like the Trade Agreements Act (TAA) or the Buy American Act (BAA). These laws are designed to ensure that the U.S. government prioritizes American-made goods or goods from designated countries when awarding contracts and procuring goods.
Under the Buy American Act, contractors must ensure that goods provided to the U.S. government are manufactured in the United States or meet specific domestic content requirements. Similarly, the Trade Agreements Act requires that goods originate from designated trade partners that meet certain international agreements.
Fraud occurs when companies misrepresent the origin, compliance, or manufacturing of goods or services to qualify for government contracts. This can include falsifying certifications, mislabeling products, or using deceptive practices to bypass legal requirements. By engaging in such misconduct, companies not only violate the law but also harm U.S. businesses, taxpayers, and government interests.
Trade agreement fraud can take many forms, often involving deception and misrepresentation to win lucrative government contracts. Some of the most common schemes include:
Falsifying country-of-origin certifications is a common form of fraud under both the Trade Agreements Act (TAA) and the Buy American Act (BAA). Contractors are required to certify the origin of goods they provide to the government, but some companies mislabel products to make them appear compliant with country-of-origin requirements, when in fact they are not. This type of fraud includes falsely certifying compliance by providing false documentation about the origin of materials or goods or using components from non-compliant countries like China or Russia.
Another fraudulent practice involves transshipping goods to evade trade restrictions. Transshipping occurs when companies send goods through an intermediary country to hide their true origin. For instance, a company might import products from a non-compliant country like China, ship them to a second country like Vietnam, and then falsely claim the second country as the product’s origin to meet TAA or BAA requirements. This tactic enables companies to bypass trade restrictions and unfairly compete for government contracts.
Misrepresenting manufacturing processes is another way companies commit fraud under the Buy American Act. To comply with the law, goods often need to be “substantially transformed” in the United States. However, some companies perform minimal assembly or make superficial changes to goods in the U.S. and then falsely claim that the product is American-made. Others misrepresent the extent of domestic manufacturing or labor involved in production, undermining the intent of the law to support American industry and workers.
Trade agreement fraud has far-reaching consequences, affecting taxpayers, businesses, and the integrity of government procurement systems. Fraudulent companies gain an unfair advantage over honest businesses by cutting corners and violating trade laws. This undermines fair competition and penalizes companies that follow the rules, discouraging ethical practices in the marketplace.
Fraud also causes significant economic harm to U.S. industries. Laws like the Buy American Act and Trade Agreements Act are designed to protect American manufacturing and labor. However, fraudulent practices often result in government contracts being awarded to companies that use foreign goods, depriving U.S. industries of economic opportunities and weakening domestic economic growth.
Taxpayer dollars are also misused in cases of fraud. When government contracts are awarded based on fraudulent certifications, public funds are wasted on projects or products that fail to comply with legal standards. This reduces the effectiveness of government spending and erodes public trust in how taxpayer money is managed.
Additionally, trade agreement fraud can pose serious national security risks. The use of non-compliant materials from adversarial countries is especially concerning in contracts that involve sensitive or critical infrastructure. Such practices can jeopardize the safety and security of vital national systems.
Yes. The U.S. government takes trade agreement fraud seriously and has aggressively pursued cases of non-compliance through the Department of Justice (DOJ) and other federal agencies. Violations of the TAA, BAA, or related laws often result in liability under the False Claims Act (FCA), which allows the government to recover three times the amount of damages caused by fraud.
These cases demonstrate the government’s commitment to prosecuting trade agreement fraud and ensuring compliance with procurement laws.
Whistleblowers are critical to uncovering trade agreement fraud, as they often have insider knowledge of fraudulent practices that would otherwise go undetected. Many violations of the Buy American Act or Trade Agreements Act involve false certifications or misrepresentations submitted to federal agencies, which can be prosecuted under the False Claims Act (FCA).
Under the False Claims Act, whistleblowers who report fraud may be eligible for financial rewards ranging from 15% to 30% of the government’s recovery. In addition to monetary compensation, whistleblowers are protected from retaliation by their employers, ensuring that they can report fraud without fear of losing their jobs.
Whistleblowing can be a complex legal process, and it’s essential to consult with a lawyer who specializes in these cases. An experienced attorney can advise you on how to protect your identity and avoid retaliation from your employer, guide you through the process of filing a whistleblower lawsuit under the False Claims Act (FCA), and ensure you have all the legal and procedural knowledge necessary to file a strong case. If you would like more information or to speak to an attorney at Whistleblower Partners, please contact us for a confidential consultation.
These descriptions of defense contracting frauds are general in nature and do not constitute legal advice. Defense contracting frauds are complex and ever-evolving. The attorneys at Whistleblower Partners understand the complicated, constantly changing legal landscape and are happy to discuss any potential matter further.
If you would like more information or would like to speak to an attorney at Whistleblower Partners, please contact us for a confidential consultation.