As a result of its January 2020 trade deal with China, under which the United States agreed to find new ways to stop counterfeit goods in online marketplaces, the Trump administration has stepped up its fight to stop counterfeit goods from China – and that fight may have a direct impact on a pending GSA procurement (no longer under protest) to open commercial online marketplaces to federal purchasers.
In a recent piece, Jason Miller of Federal News Network asked whether President Trump’s January 31, 2020 Executive Order, Ensuring Safe & Lawful E-Commerce for US Consumers, Businesses, Government Supply Chains, and Intellectual Property Rights, may affect the U.S. General Services Administration (GSA) “electronic marketplaces” acquisition.
GSA’s “electronic marketplaces” procurement was previously stalled by a protest by Overstock.com at the U.S. Government Accountability Office (GAO). The grounds for that protest may never be known, since the protest was withdrawn on February 24, 2020. The “electronic marketplaces” procurement would allow federal officials (users – not necessarily contracting officials) to make billions of dollars in micro-purchases (generally below $10,000) directly from the awardee commercial e-commerce platforms.
The January 31, 2020 Executive Order, which press reports made clear was aimed at counterfeit goods on Amazon and other online marketplaces, said this in relevant part:
Section 1. Policy. E-commerce, including transactions involving smaller express-carrier or international mail packages, is being exploited by traffickers to introduce contraband into the United States, and by foreign exporters and United States importers to avoid applicable customs duties, taxes, and fees.
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It is the policy of the United States Government that any person who knowingly, or with gross negligence, imports, or facilitates the importation of, merchandise into the United States in material violation of Federal law evidences conduct of so serious and compelling a nature that it should be referred to U.S. Customs and Border Protection (CBP) of the Department of Homeland Security for a determination whether such conduct affects that person’s present responsibility to participate in transactions with the Federal Government.
It is the policy of the United States Government, as reflected in Executive Order 12549 of February 18, 1986 (Debarment and Suspension), and elsewhere, to protect the public interest and ensure the integrity of Federal programs by transacting only with presently responsible persons. In furtherance of this policy, the nonprocurement debarment and suspension system enables executive departments and agencies to exclude from Federal programs persons who are not presently responsible. CBP implements this system by suspending and debarring persons who flout the customs laws, among other persons who lack present responsibility. To achieve the policy goals stated herein, the United States Government shall consider all appropriate actions that it can take to ensure that persons that CBP suspends or debars are excluded from participating in the importation of merchandise into the United States.
It is the policy of the United States Government that express consignment operators, carriers, hub facilities, international posts, customs brokers, and other entities, including e-commerce platform operators, should not facilitate importation involving persons who are suspended or debarred by CBP.
Senior White House trade adviser Peter Navarro said this on CNN on the same day:
The DHS will immediately begin working to combat trafficking in counterfeit and pirated goods by: aggressively applying civil fines and penalties to bad actors, suspending and debarring repeat offenders and treating foreign sellers of goods as responsible parties subject to sanctions.
As this new report documents, the private sector can do much more to combat counterfeit and pirated products trafficking. It sets forth a set of private sector “best practices” that include: significantly enhanced third-party marketplace vetting; limits on high-risk products such as prescription drugs, infant formula and airbag components; rapid notice and takedown procedures; and pre-sale identification of third-party sellers. The administration also wants e-commerce platforms to provide clearly identifiable country of origin disclosures, which brick-and-mortar retail providers are required to provide but online sellers often are not.
These best practices are not meant as mere suggestions. The federal government will use all means necessary to encourage rapid adoption and to monitor progress.
Taken together, these announcements suggest:
- GSA’s assessment of the electronic marketplaces bidders may include the “best practices” outlined by Peter Navarro. Navarro called on Amazon and other e-commerce platforms to fight counterfeits in the wake of the recent U.S. trade agreement with China, and he again cited those “best practices” in an interview with the Washington Post, in which he sharply criticized Amazon and others for not having adequate protections against counterfeiters. GSA’s “Statement of Objectives” for the electronic marketplaces procurement already calls on the e-marketplaces to control supply chain risk; the revised solicitation was not explicit as to whether these new anti-counterfeit concerns would also be part of the technical evaluation and/or the contracting officer’s responsibility assessment for award.
- The Trump administration’s focus on preventing counterfeits suggest that federal users buying directly with government purchase cards may be required, or at least strongly encouraged, to use the e-commerce platforms eventually approved under GSA’s “electronic marketplaces” initiative. Federal users, in other words, may be discouraged from making direct purchases outside the GSA-approved platforms.
- Mass debarments of vendors on the e-commerce platforms — which are very possible, because the government has no other ready means (e.g., past performance or technical evaluations, responsibility determinations, etc.) to protect itself when federal users make rapid purchases from the e-commerce platforms — may begin with Customs and Border Protection (CBP) debarments:
- CBP may target for debarment any third-party vendor on an e-commerce platform that “knowingly, or with gross negligence, imports, or facilitates the importation of, merchandise into the United States in material violation of Federal law.” While the Executive Order focuses on counterfeits and contraband, in principle a wider array of importing firms may be at risk if they facilitate violations of federal law.
- The e-commerce platforms themselves may be targeted for debarment, on the same grounds. Since each user micro-purchase is a new purchase, debarment (a bar against purchasing) may in effect disable an e-commerce platform from selling to further federal purchasers.
