MSC Case Illustrates Complexities in Doing Business with Government

The Melville, NY-based distributor of metalworking and MRO supplies, MSC Industrial Direct Co. Inc., is facing an audit by the General Services Administration related to government sales and compliance with the Trade Agreements Act. According to an SEC filing of its quarterly results, "the U.S. Department of Justice has advised the company that GSA OIG's audit identified non-compliant sales and potential liability arising therefrom." MSC reported however that it does not anticipate its potential liability, if any, to have "any material adverse effect on the company's consolidated financial position, results of operations or liquidity."
 
And that's all we know. MSC is one of many companies that do business with the government, which has stringent rules ...

The Melville, NY-based distributor of metalworking and MRO supplies, MSC Industrial Direct Co. Inc., is facing an audit by the General Services Administration related to government sales and compliance with the Trade Agreements Act. According to an SEC filing of its quarterly results, "the U.S. Department of Justice has advised the company that GSA OIG’s audit identified non-compliant sales and potential liability arising therefrom." MSC reported however that it does not anticipate its potential liability, if any, to have "any material adverse effect on the company’s consolidated financial position, results of operations or liquidity."
 
And that’s all we know. MSC is one of many companies that do business with the government, which has stringent rules covering country of origin and other product specifications of what it buys from government contractors. The government has in recent years stepped up its enforcement of its Trade Agreements Act, which prohibits the selling of any product made in certain countries (who have not signed onto certain trade agreements with the U.S.) to the U.S. government. The law is more complex than this, of course. Read from the MDM Archive, The Trade Agreements Act, and Federal Government Contract Compliance for more on this topic.
 
You can find the SEC filing from MSC here. Note that the filing includes just one paragraph under Legal Proceedings in the document.”

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