DECEMBER 8 , 2008

ISSUE 1247

A final rule appearing recently in the Federal Register requires that certain federal contractors and subcontractors use the Department of Homeland Security’s E-Verify program to verify the employment authorization of their workers. Outside of the federal contracting process, the E-Verify program is voluntary and allows participating employers to submit electronically the names and numbers offered by job applicants to the Social Security Administration and DHS databases to determine work authorization in the United States.
The final rule narrows the group of federal contractors who must use E-Verify so that most agricultural producers contracting with the federal government – as well as their subcontractors – will not have to use E-Verify. The final rule affects both prime contractors and subcontractors. It obliges federal contracting officers to require that federal contractors use E-Verify on contracts with a value greater than $100,000.

Subcontractors will be required to use E-Verify if the subcontract value is more than $3,000. The major exception to this requirement is for contracts or solicitations for commercially available-off-the-shelf (COTS) items. A COTS item is one that is sold commercially and is offered to the federal government in basically the same form as it is offered on the open market. Goods shipped as bulk cargo, without mark or count, however, are not COTS.

The regulation preamble explains: “Nearly all food and agricultural products should fall within the definition of COTS. The only likely exceptions would be bulk shipments of grains in a ship hold.” Thus, a contract to sell agricultural products to the federal government through such programs such as the school lunch program or a military base would not include an E-Verify requirement.
Because of this, most of agricultural companies doing business with the federal government will be exempt from the regulation.