FAR 52.225-5—Trade Agreements.
Plain-English Summary
FAR 52.225-5, Trade Agreements, implements the Trade Agreements Act framework in federal supply contracting by defining which products qualify as acceptable end products from designated countries and how those products are treated for evaluation and award. This clause covers the key definitions needed to apply trade agreement preferences, including Caribbean Basin country end product, designated country, designated country end product, end product, Free Trade Agreement country end product, least developed country end product, and the related concept of substantial transformation. It also explains how to treat incidental services in the value of a supply item, and it ties the clause to the specific countries covered by the WTO Government Procurement Agreement, free trade agreements, least developed country designations, and Caribbean Basin trade preferences. In practice, the clause tells contractors what origin claims are acceptable and tells contracting officers how to evaluate offered products under applicable trade agreements. It matters because it can determine whether a foreign-made item is eligible for award, whether a domestic preference applies, and whether a product must be rejected as ineligible. The clause also requires careful attention to country of origin, tariff-status exclusions, and the distinction between the article itself and incidental services included in the acquisition value.
Key Rules
Use only defined country categories
The clause limits qualifying products to designated countries, which include WTO GPA countries, FTA countries, least developed countries, and Caribbean Basin countries. A product must fit one of the clause’s specific end-product definitions to receive trade agreement treatment.
Substantial transformation controls origin
For many foreign products, origin is not based only on where materials came from; the item must be substantially transformed in the designated country into a new and different article with a distinct name, character, or use. This is the core test for determining whether a product qualifies as a designated country end product.
Caribbean Basin products have exclusions
Not every article from a Caribbean Basin country qualifies. The clause excludes certain products from duty-free treatment, including specific tuna, petroleum products, watches and watch parts containing materials from certain column 2 countries, and certain textile, apparel, footwear, leather, and folklore items.
Incidental services may be included
For supply contracts, the term end product can include incidental services other than transportation services when calculating acquisition value, but only if the value of those services does not exceed the value of the article itself. This prevents service content from overwhelming the product classification.
End product means the item being bought
The clause defines end product as the articles, materials, and supplies to be acquired under the contract for public use. This definition is important because the trade agreement analysis applies to the actual item offered, not to unrelated components or general contractor capabilities.
Country-specific end product categories differ
The clause separately defines WTO GPA country end products, FTA country end products, least developed country end products, and Caribbean Basin country end products. Although the origin test is similar across categories, the applicable country list and any exclusions or special treatment depend on the category.
Tariff schedule references matter
The clause points users to the Harmonized Tariff Schedule of the United States and specific general notes and chapters for determining whether an article is excluded or eligible for special tariff treatment. Contractors and contracting officers must use these references when origin or duty-free status is unclear.
Responsibilities
Contracting Officer
Determine whether the clause applies to the acquisition, identify the relevant trade agreement coverage, and evaluate offered products against the designated-country and end-product definitions. The contracting officer must also ensure that origin claims are supported and that excluded Caribbean Basin items or nonqualifying products are not treated as eligible.
Contractor
Offer only products that meet the applicable country-of-origin and end-product requirements, and be prepared to substantiate claims that an item is a designated country end product. The contractor must understand whether incidental services are included in the value of the supply item and must avoid misrepresenting origin or eligibility.
Agency
Apply the trade agreement framework consistently in procurement planning, solicitation drafting, and evaluation. The agency must ensure the clause is inserted when prescribed and that acquisition personnel use the correct country lists, tariff references, and eligibility rules.
Subcontractors and Suppliers
Provide accurate origin and manufacturing information for components and finished items so the prime contractor can determine whether the end product qualifies. They must also identify any materials or processing that could affect substantial transformation or exclusion status.
Practical Implications
This clause can change award eligibility, so a product that looks foreign-made may still qualify if it is substantially transformed in a designated country, while a product from a listed country may still be excluded if it falls into a prohibited category.
Country-of-origin analysis is often the biggest compliance risk. Contractors should document manufacturing steps, component sourcing, and tariff classification early rather than waiting until proposal submission or post-award review.
The Caribbean Basin rules are especially easy to misapply because some items are eligible and others are expressly excluded. Watches, petroleum-derived products, and certain textiles/apparel items require extra scrutiny.
Incidental services can be counted in the value of a supply item only in limited circumstances, so contractors should not bundle significant service content into a product and assume it remains a qualifying end product.
Contracting officers should verify that the solicitation and evaluation approach match the applicable trade agreement coverage, because using the wrong country list or overlooking an exclusion can lead to an improper award or a protest risk.
Official Regulatory Text
As prescribed in 25.1101 (c)(1) , insert the following clause: Trade Agreements (Nov 2023) (a) Definitions . As used in this clause- Caribbean Basin country end product — (1) Means an article that- (i) (A) Is wholly the growth, product, or manufacture of a Caribbean Basin country; or (B) In the case of an article that consists in whole or in part of materials from another country, has been substantially transformed in a Caribbean Basin country into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was transformed; and (ii) Is not excluded from duty-free treatment for Caribbean countries under 19 U.S.C.2703(b) . (A) For this reason, the following articles are not Caribbean Basin country end products: (1) Tuna, prepared or preserved in any manner in airtight containers; (2) Petroleum, or any product derived from petroleum; (3) Watches and watch parts (including cases, bracelets, and straps) of whatever type including, but not limited to, mechanical, quartz digital, or quartz analog, if such watches or watch parts contain any material that is the product of any country to which the Harmonized Tariff Schedule of the United States (HTSUS) column2 rates of duty apply ( i.e., Afghanistan, Cuba, Laos, North Korea, and Vietnam); and (4) Certain of the following: textiles and apparel articles; footwear, handbags, luggage, flat goods, work gloves, and leather wearing apparel; or handloomed, handmade, and folklore articles; (B) Access to the HTSUS to determine duty-free status of articles of these types is available at https://usitc.gov/tata/hts/index.htm . In particular, see the following: (1) General Note3(c), Products Eligible for Special Tariff treatment. (2) General Note17, Products of Countries Designated as Beneficiary Countries under the United States-Caribbean Basin Trade Partnership Act of 2000. (3) Section XXII, Chapter 98, Subchapter II, Articles Exported and Returned, Advanced or Improved Abroad, U.S. Note7(b). (4) Section XXII, Chapter 98, Subchapter XX, Goods Eligible for Special Tariff Benefits under the United States-Caribbean Basin Trade Partnership Act; and (2) Refers to a product offered for purchase under a supply contract, but for purposes of calculating the value of the acquisition, includes services (except transportation services) incidental to the article, provided that the value of those incidental services does not exceed that of the article itself. Designated country means any of the following countries: (1) A World Trade Organization Government Procurement Agreement (WTO GPA) country (Armenia, Aruba, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea (Republic of), Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Moldova, Montenegro, Netherlands, New Zealand, North Macedonia, Norway, Poland, Portugal, Romania, Singapore, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Taiwan (known in the World Trade Organization as "the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei)"), Ukraine, or United Kingdom); (2) A Free Trade Agreement (FTA) country (Australia, Bahrain, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Korea (Republic of), Mexico, Morocco, Nicaragua, Oman, Panama, Peru, or Singapore); (3) A least developed country (Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Central African Republic, Chad, Comoros, Democratic Republic of Congo, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Laos, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Nepal, Niger, Rwanda, Samoa, Sao Tome and Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, South Sudan, Tanzania, Timor-Leste, Togo, Tuvalu, Uganda, Vanuatu, Yemen, or Zambia); or (4) A Caribbean Basin country (Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Bonaire, British Virgin Islands, Curacao, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saba, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Sint Eustatius, Sint Maarten, or Trinidad and Tobago). Designated country end product means a WTO GPA country end product, an FTA country end product, a least developed country end product, or a Caribbean Basin country end product. End product means those articles, materials, and supplies to be acquired under the contract for public use. Free Trade Agreement country end product means an article that- (1) Is wholly the growth, product, or manufacture of a Free Trade Agreement (FTA) country; or (2) In the case of an article that consists in whole or in part of materials from another country, has been substantially transformed in an FTA country into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was transformed. The term refers to a product offered for purchase under a supply contract, but for purposes of calculating the value of the end product includes services (except transportation services) incidental to the article, provided that the value of those incidental services does not exceed that of the article itself. Least developed country end product means an article that- (1) Is wholly the growth, product, or manufacture of a least developed country; or (2) In the case of an article that consists in whole or in part of materials from another country, has been substantially transformed in a least developed country into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was transformed. The term refers to a product offered for purchase under a supply contract, but for purposes of calculating the value of the end product, includes services (except transportation services) incidental to the article, provided that the value of those incidental services does not exceed that of the article itself. United States means the 50 States, the District of Columbia, and outlying areas. U.S.-made end product means an article that is mined, produced, or manufactured in the United States or that is substantially transformed in the United States into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was transformed. WTO GPA country end product means an article that- (1) Is wholly the growth, product, or manufacture of a WTO GPA country; or (2) In the case of an article that consists in whole or in part of materials from another country, has been substantially transformed in a WTO GPA country into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was transformed. The term refers to a product offered for purchase under a supply contract, but for purposes of calculating the value of the end product includes services, (except transportation services) incidental to the article, provided that the value of those incidental services does not exceed that of the article itself. (b) Delivery of end products . The Contracting Officer has determined that the WTO GPA and FTAs apply to this acquisition. Unless otherwise specified, these trade agreements apply to all items in the Schedule. The Contractor shall deliver under this contract only U.S.-made or designated country end products except to the extent that, in its offer, it specified delivery of other end products in the provision entitled "Trade Agreements Certificate." (End of clause)