Government Contracts Medication with Foreign-Sourced Ingredient Was U.S. Made
Monday, March 16, 2020

Medication with Foreign-Sourced Ingredient Was U.S. Made

By Government Contracts Editorial Staff

The Court of Appeals for the Federal Circuit affirmed a protester’s successful challenge to a solicitation for a hepatitis medication because the government did not construe and apply the solicitation’s Trade Agreements clause properly. The solicitation incorporated FAR 52.225-5, which requires the awardee to deliver “only U.S.-made or designated country end products.” The protester, which distributed tablets manufactured in the United States but containing an active ingredient sourced from India, contended its products qualified as domestic end products and the government erred in concluding the tablets were “products of” India.

Final Product . However, as the CFC held (62 CCF ¶81,433), the government’s interpretation of the Trade Agreements Act of 1979 and the Federal Acquisition Regulation was erroneous. The government identified no authority to support its position that a pharmaceutical product’s country of origin is determined by the country in which its active ingredient is manufactured. It was clear that the “product” was the final procured product—the tablet—rather than its ingredients. The tablets did not meet the prongs of the TAA’s country-of-origin test (19 USC 2518(4)(B)) for India, because they were not “wholly the … manufacture” of India and were not “substantially transformed” into tablets in India. In addition, FAR 25.003 defines “U.S.-made end product” as an article that is “manufactured” or “substantially transformed” in the U.S. The regulatory history of the term makes clear that the source of components is irrelevant in determining where a product is “manufactured,” and the definition indicates that “manufacture” does not require substantial transformation. (Acetris Health, LLC v. U.S., CA-FC, 64 CCF ¶81,853)

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