Taiwan is partially DFARS compliant: it is a Trade Agreements Act designated country, so its products compete on equal footing with domestic goods on DoD contracts that clear the TAA dollar threshold, but Taiwan is not on the DFARS qualifying countries list. That gap decides whether a Taiwanese part is acceptable on any given contract. On larger trade-agreement buys, it usually is. On smaller Buy American acquisitions, on specialty metals, and on Berry Amendment items, it usually is not.
Designated Country, Not Qualifying Country
Two different classifications are doing the work here, and contractors routinely conflate them.
Taiwan is a designated country under the TAA because it participates in the WTO Government Procurement Agreement. The FAR lists it formally as “the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei).”1Acquisition.GOV. 48 CFR 52.225-5 – Trade Agreements When the U.S. Trade Representative has waived the Buy American statute for a covered acquisition, the contracting agency cannot discriminate against a Taiwanese product because of its origin.2Acquisition.GOV. Federal Acquisition Regulation 25.402 – General
Qualifying country status is different and more privileged. Countries earn it by signing a reciprocal defense procurement MOU with the United States. The DFARS 225.872-1 list includes Australia, Canada, the United Kingdom, Japan, Israel, and about twenty others, with Switzerland, Turkey, and Austria treated on a purchase-by-purchase basis.3Acquisition.GOV. DFARS 225.872-1 General Taiwan is not on it. Products from qualifying countries enjoy broad exemptions from both the Buy American Act and the Balance of Payments Program regardless of contract value. Taiwanese products get preferential treatment only when the TAA applies and certain material-specific restrictions don’t.
When Taiwanese Products Are Acceptable
The dividing line is the contract’s total value. For WTO GPA countries like Taiwan, the TAA applies to supply contracts valued at or above $174,000.2Acquisition.GOV. Federal Acquisition Regulation 25.402 – General Above that threshold, the Buy American statute is waived and Taiwanese products compete on equal footing with domestic ones. Below it, Buy American takes over, and the government favors U.S. goods and qualifying country goods. Taiwanese products lose their preferential treatment on smaller contracts because Taiwan is not a qualifying country.
The USTR adjusts these thresholds every two years for currency and economic changes, so the cutoff can move between contract periods.4United States Trade Representative. Thresholds The same Taiwanese part can be perfectly compliant on a large platform contract and problematic on a smaller spare-parts order for the same program.
Specialty Metals Kill the Trade Agreement Benefit
This is where Taiwan’s exclusion from the qualifying countries list hurts most. DFARS imposes independent sourcing rules on specialty metals: high-alloy steels above certain thresholds for manganese, silicon, copper, chromium, nickel, or titanium content; nickel and cobalt alloys; titanium; and zirconium.5eCFR. 48 CFR 252.225-7008 – Restriction on Acquisition of Specialty Metals Two clauses apply, and neither one helps Taiwan.
DFARS 252.225-7008 requires specialty metals to be melted or produced in the United States or its outlying areas. There is no qualifying country exception and no designated country exception.5eCFR. 48 CFR 252.225-7008 – Restriction on Acquisition of Specialty Metals DFARS 252.225-7009 is broader, allowing melt or production in the United States, its outlying areas, or a qualifying country, but still excludes Taiwan.6eCFR. 48 CFR 252.225-7009 – Restriction on Acquisition of Certain Articles Containing Specialty Metals
Even on a TAA-compliant contract where Taiwanese end products are otherwise acceptable, the specialty metals clause operates independently. A Taiwanese-made part containing a small amount of restricted specialty metal melted in Taiwan fails. Contractors have to trace metal origin through the supply chain, not just the final assembly location.
The COTS and Electronics Exception
Two exceptions rescue a large share of Taiwanese sourcing. Commercially available off-the-shelf (COTS) items are generally exempt from the specialty metals rule under DFARS 252.225-7009. Electronic components are also exempt regardless of where their specialty metals originate.6eCFR. 48 CFR 252.225-7009 – Restriction on Acquisition of Certain Articles Containing Specialty Metals Taiwan’s manufacturing strength sits heavily in electronics and semiconductors, so this exception covers much of what defense contractors actually buy there.
The COTS exception has real limits. It does not cover specialty metal mill products like bar, billet, wire, or sheet that haven’t been incorporated into a finished COTS item. Forgings and castings of specialty metals fall outside the exception unless already built into COTS assemblies. And if a COTS item is modified beyond its standard commercial configuration after acceptance, the added specialty metals become restricted again. The test is whether the item was a standard commercial product accepted without modification by the next tier of the supply chain.
The Berry Amendment Ignores TAA Status Entirely
Do not assume TAA compliance solves Berry Amendment problems. The Berry Amendment (10 U.S.C. 4862) prohibits DoD from spending appropriated funds on certain items unless they are grown, reprocessed, reused, or produced in the United States. The list is narrow but strict: food, clothing and textiles, tents and tarpaulins, cotton and natural fiber products, hand and measuring tools, stainless steel flatware, dinnerware, and U.S. flags.7Office of the Law Revision Counsel. 10 USC 4862 – Requirement to Buy Certain Articles From American Sources
No designated country or qualifying country exception applies. Taiwan’s TAA designation provides zero benefit here. A Taiwanese-made textile component in a military uniform violates the Berry Amendment even on a fully TAA-compliant contract. The statute does include a small-purchase exception for acquisitions under $150,000. Contractors sourcing any Berry-covered category need to verify Berry compliance separately from any TAA analysis.
End Products Versus Components
DFARS 252.225-7021 draws a sharp line between the end product delivered to the government and the individual components inside it. A “designated country end product” is one wholly grown, produced, or manufactured in Taiwan, or substantially transformed there. A “component” is an article, material, or supply incorporated directly into the end product.8Acquisition.GOV. DFARS 252.225-7021 Trade Agreements
The distinction changes the math. If you deliver a Taiwanese-manufactured end product on a TAA-covered contract, it passes as long as substantial transformation is satisfied. But when a Taiwanese component goes into a U.S.-manufactured end product under the Buy American Act, qualifying country components count toward the domestic content threshold like American parts, and Taiwanese components do not. They count as foreign content and can push a product below the required domestic content percentage, which sits at 65 percent for deliveries through 2028 and rises to 75 percent starting in 2029.
Country of Origin and Substantial Transformation
Country of origin for TAA purposes is not simply the last shipping point. If a product is assembled or processed in Taiwan using materials from other countries, it qualifies as a Taiwanese end product only if it was substantially transformed there into something with a new name, character, or use.8Acquisition.GOV. DFARS 252.225-7021 Trade Agreements A change in any one of those three factors can be enough.
Raw silicon wafers fabricated into finished semiconductor chips in Taiwan would likely qualify because the character and use are fundamentally different. Minor processing like testing, repackaging, or simple assembly of pre-made components usually does not. Customs and Border Protection rulings offer guidance, but contracting agencies make their own determinations, and those determinations are not always consistent across agencies. This matters most for products that pass through several countries before final assembly. If Chinese-origin materials are substantially transformed in Taiwan, the result can qualify as Taiwanese. If the Taiwan step is just packaging or labeling, origin remains the earlier country, and the product may not be compliant at all.
When You Can’t Find a Compliant Source
If no compliant domestic or qualifying country source exists, DFARS provides for a nonavailability determination. The Head of Contracting Activity can approve an individual waiver when compliant materials of satisfactory quality and quantity cannot be procured at a reasonable price.9Acquisition.GOV. PGI 225.7018-4 Nonavailability Determination The contractor documents the noncompliant source (country of origin, pricing, lead times, material specifications) and the results of market research into compliant alternatives, and a government representative verifies the information and submits the request. Approval is not guaranteed. The path is a safety valve, not a routine workaround.
What Getting It Wrong Costs
Misrepresenting the origin of materials on a defense contract can trigger False Claims Act liability under 31 U.S.C. 3729. The statute imposes treble damages plus a per-claim civil penalty starting at $5,000 and adjusted upward for inflation.10Office of the Law Revision Counsel. 31 USC 3729 – False Claims A contractor who self-reports and cooperates fully may see damages reduced to double rather than triple, but only if no investigation was already underway. False certifications about sourcing can also produce contract termination and suspension or debarment.
The FCA reaches anyone who “knowingly” submits a false claim, and “knowingly” includes deliberate ignorance or reckless disregard of the truth. A contractor who never verifies where a sub-tier supplier melted a specialty metal is not protected by not knowing. Supply chain documentation is not optional.
Semiconductor Rules to Watch
Taiwan’s dominance in semiconductor manufacturing makes the regulatory direction here worth tracking. In February 2026, the FAR Council released a proposed rule implementing Section 5949 of the FY2023 National Defense Authorization Act, which would prohibit procurement of certain semiconductor products and services from specified foreign sources. The primary targets are Chinese-origin semiconductors, not Taiwanese ones, and the electronic components exception under DFARS 252.225-7009 continues to shield most Taiwanese semiconductor products from specialty metals restrictions. Contractors relying on Taiwanese chips should read the final rule when it lands, because the scope could change which semiconductor products remain compliant for defense use.