[Federal Register Volume 83, Number 245 (Friday, December 21, 2018)]
[Rules and Regulations]
[Pages 65560-65562]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27557]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 225 and 252

[Docket DARS-2018-0004]
RIN 0750-AJ22


Defense Federal Acquisition Regulation Supplement: Restrictions 
on Acquisitions From Foreign Sources (DFARS Case 2017-D011)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Final rule.

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SUMMARY: DoD is issuing a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement sections of the 
National Defense Authorization Act for Fiscal Year 2017 to apply 
domestic source requirements to acquisitions at or below the simplified 
acquisition threshold when acquiring athletic footwear to be furnished 
to enlisted members of the Armed Forces upon their initial entry into 
the Armed Forces, and add Australia and the United Kingdom to the 
definition of the ``National Technology and Industrial Base.''

DATES: Effective December 21, 2018.

FOR FURTHER INFORMATION CONTACT: Ms. Amy G. Williams, telephone 571-
372-6106.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD published a proposed rule in the Federal Register at 83 FR 
42828 on August 24, 2018, to implement sections 817 and 881(b) of the 
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017.
    Section 817 extends the domestic source requirements of 10 U.S.C. 
2533a (the Berry Amendment) below the simplified acquisition threshold, 
when acquiring athletic footwear to be furnished to the members of the 
Army, Navy, Air Force, or Marine Corps upon their initial entry into 
the Armed Forces.
    Section 881(b) amends 10 U.S.C. 2500(1) by adding Australia and the 
United Kingdom of Great Britain and Northern Ireland to the United 
States and Canada as the countries within which the activities of the 
national technology and industrial base are conducted. 10 U.S.C. 2534, 
Miscellaneous Limitations on the Procurement of Goods Other Than United 
States Goods, requires that DoD only procure certain items if the 
manufacturer of the items is part of the national technology and 
industrial base.
    One respondent submitted a public comment in response to the 
proposed rule.

II. Discussion and Analysis

    The public comment received addressed concern with regard to 
importation of radioactive steel and use of radioactively contaminated 
scrap metal. This issue is outside the scope of this rule. There were 
no changes from the proposed rule as a result of this public comment.
    However, the final rule is affected by a change in the baseline. On 
May 30, 2018, DoD published a final rule in the Federal Register (83 FR 
24890) to amend the DFARS to implement section 813(a) of the NDAA for 
FY 2018 (Pub. L. 115-91), which amended 10 U.S.C. 2534(c) to establish 
a sunset date of October 1, 2018, for the limitation on procurement of 
chemical weapons antidote contained in automatic injectors (and 
components for such injectors). The final rule deleted DFARS 225.7005 
in its entirety to remove the limitation as implemented in the DFARS. 
As a result, this final rule does not include the changes proposed to 
DFARS 225.7005-1.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold and for Commercial Items, Including Commercially Available 
Off-the-Shelf Items

    This rule amends the applicability of existing DFARS solicitation 
provisions and contract clauses as follows:
    <bullet> To implement section 817 of the NDAA for FY 2017, this 
rule extends use of DFARS clause 252.225-7012, Preference for Certain 
Domestic Commodities, to acquisitions at or below the simplified 
acquisition threshold (SAT) when buying athletic footwear to be 
furnished to enlisted members of the Armed Forces upon their initial 
entry into the Armed Forces. This clause is already prescribed for use 
in solicitations and contracts using FAR part 12 procedures for the 
acquisition of commercial items, including commercially available off-
the-shelf (COTS) items.

[[Page 65561]]

    <bullet> To implement section 881(b) of the NDAA for FY 2017, this 
rule modifies the provision at DFARS 252.225-7037, Evaluation of Offers 
for Air Circuit Breakers, and the clause at DFARS 252.225-7038, 
Restriction on Acquisition of Air Circuit Breakers, to add Australia as 
a country from which items restricted by 10 U.S.C. 2534 may be 
purchased. This rule does not change the prescriptions for the use of 
this provision or clause, which are already required for use in 
solicitations and contracts for commercial items, including COTS items. 
The clause does not apply below the SAT.

A. Applicability to Contracts at or Below the SAT

    41 U.S.C. 1905 governs the applicability of laws to contracts or 
subcontracts in amounts not greater than the SAT. It is intended to 
limit the applicability of laws to such contracts or subcontracts. 41 
U.S.C. 1905 provides that if a provision of law contains criminal or 
civil penalties, or if the Federal Acquisition Regulation (FAR) Council 
makes a written determination that it is not in the best interest of 
the Federal Government to exempt contracts or subcontracts at or below 
the SAT, the law will apply to them. The Director, Defense Pricing and 
Contracting (DPC), is the appropriate authority to make comparable 
determinations for regulations to be published in the DFARS, which is 
part of the FAR system of regulations.

B. Applicability to Contracts for the Acquisition of Commercial Items, 
Including Commercially Available Off-the-Shelf (COTS) Items

    41 U.S.C. 1906 governs the applicability of laws to contracts for 
the acquisition of commercial items and is intended to limit the 
applicability of laws to contracts for the acquisition of commercial 
items. 41 U.S.C. 1906 provides that if a provision of law contains 
criminal or civil penalties, or if the FAR Council makes a written 
determination that it is not in the best interest of the Federal 
Government to exempt commercial item contracts, the provision of law 
will apply to contracts for the acquisition of commercial items. 
Likewise, 41 U.S.C. 1907 governs the applicability of laws to COTS 
items, with the Administrator for Federal Procurement Policy the 
decision authority to determine that it is in the best interest of the 
Government to apply a provision of law to acquisitions of COTS items in 
the FAR. The Director, DPC, is the appropriate authority to make 
comparable determinations for regulations to be published in the DFARS, 
which is part of the FAR system of regulations.

C. Determinations

    A determination under 41 U.S.C. 1905 is not required to prescribe 
DFARS 252.225-7012 for use in solicitations and contracts valued at or 
below the SAT, because section 817 of the NDAA for FY 2017 specifically 
states that DoD shall acquire athletic footwear that complies with the 
requirements of 10 U.S.C. 2533a ``without regard to the applicability 
of any simplified acquisition threshold under chapter 137 of title 10 
(or any other provision of law).''
    A determination under 41 U.S.C. 1906 and 1907 is not required to 
apply the requirements of DFARS 252.225-7037 and 252.225-7038 to 
acquisitions for commercial items, including COTS items, because the 
statute that this provision and clause implements is not a covered 
statute subject to 41 U.S.C. 1905-1907. At the time of the Federal 
Acquisition Streamlining Act of 1994 (FASA) (Pub. L. 103-355), now 
codified in part at 41 U.S.C. 1905-1907, this provision and clause were 
a single clause, DFARS 252.225-7029, Restriction on Acquisition of Air 
Circuit Breakers, which implemented 10 U.S.C. 2534. Because 10 U.S.C. 
2534 predated FASA, it was not subject to 41 U.S.C. 1905-1907. The 
DFARS clause 252.225-7029 was included on the initial list of statutes 
applicable to the acquisition of commercial items at DFARS 252.212-
7001, incorporated in the DFARS by DFARS Case 95-D712 on November 30, 
1995 (Defense Acquisition Circular 91-9).

IV. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993. This rule is not a major rule 
under 5 U.S.C. 804.

V. Executive Order 13771

    This final rule is not subject to E.O. 13771, because this rule is 
not significant under E.O. 12866.

VI. Regulatory Flexibility Act

    A final regulatory flexibility analysis has been prepared and is 
summarized as follows:
    This rule implements sections 817 and 881(b) of the National 
Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017 (Pub. L. 
114-328). The objective of the rule is to--
    <bullet> Remove the exception to domestic source restriction of the 
Berry Amendment (10 U.S.C. 2533a) for acquisitions at or below the 
simplified acquisition threshold when buying athletic footwear to be 
furnished to enlisted members of the Armed Forces upon their initial 
entry into the Armed Forces, as required by section 817 of the NDAA for 
FY 2017; and
    <bullet> Allow acquisition of certain items from Australia and the 
United Kingdom, for which purchase is currently restricted to items 
from the United States or Canada, in accordance with 10 U.S.C. 2534, in 
accordance with section 881(b) of the NDAA for FY 2017 and 10 U.S.C. 
2534.
    There were no significant issues raised by the public comment in 
response to the initial regulatory flexibility analysis.
    With regard to implementation of section 817, this rule may apply 
to only a few small entities, because there are few sources that meet 
the domestic source requirements of the Berry Amendment with regard to 
athletic footwear. The Defense Logistics Agency (DLA) estimates a 
potential annual demand for approximately 200,000 to 250,000 pairs of 
athletic shoes to be delivered at the rate of approximately 27,500 
pairs per month. In response to a request for information issued by DLA 
in December 2016, there were 5 responses from athletic footwear 
manufacturers, one of which was a small business. Small entities who 
are athletic shoe manufacturers could likely support portions of the 
Department's total requirements for athletic footwear. In addition, 
there are likely a number of domestic component suppliers who are small 
entities who would benefit from this new requirement as well. On the 
other hand, small entities that cannot provide athletic shoes that meet 
the domestic source requirements of the Berry Amendment, will no longer 
be able to compete for acquisition of athletic footwear at or below the 
simplified acquisition threshold that are for the purpose of providing 
athletic

[[Page 65562]]

footwear to enlisted members of the Armed Forces upon their initial 
entry into the Armed Forces.
    With regard to implementation of section 881(b), this rule will not 
apply to any small entities at the prime contract level, as there are 
only a few prime contractors for the restricted items, which are all 
U.S. firms that are other than small businesses. For the definition of 
``small business,'' the Regulatory Flexibility Act refers to the Small 
Business Act, which in turn allows the U.S. Small Business 
Administration (SBA) Administrator to specify detailed definitions or 
standards (5 U.S.C. 601(3) and 15 U.S.C. 632(a)). The SBA regulations 
at 13 CFR 121.105(a)(1) discuss who is a small business, providing that 
except for small agricultural cooperatives, a business concern eligible 
for assistance from SBA as a small business is a business entity 
organized for profit, with a place of business located in the United 
States, and which operates primarily within the United States or which 
makes a significant contribution to the U.S. economy through payment of 
taxes or use of American products, materials or labor. Therefore, if an 
item currently purchased from a U.S. entity that is other than a small 
business were to be purchased from an entity in the Australia or the 
United Kingdom, there could be an impact on a few small entities that 
are currently subcontractors to a U.S. prime contractor.
    There are no reporting, recordkeeping, or other compliance 
requirements of the rule, other than to furnish athletic footwear 
compliant with the Berry Amendment and the other restricted items 
manufactured by a manufacturer that is part of the national technology 
and industrial base (which is now expanded to include the United 
Kingdom and Australia, as well as the United States and Canada).
    By extending the restriction of the Berry Amendment to acquisitions 
that do not exceed simplified acquisition threshold, this rule may 
benefit small entities that can provide Berry Amendment-compliant 
athletic footwear, because they may be more able to compete for smaller 
acquisitions. DoD was unable to identify any alternatives that would 
meet the requirements of the statutes).

VII. Paperwork Reduction Act

    The rule does not contain any information collection requirements 
that require the approval of the Office of Management and Budget under 
the Paperwork Reduction Act (44 U.S.C. chapter 35).

List of Subjects in 48 CFR Parts 225 and 252

    Government procurement.

Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 225 and 252 are amended as follows:

0
1. The authority citation for 48 CFR parts 225 and 252 continues to 
read as follows:

    Authority:  41 U.S.C. 1303 and 48 CFR chapter 1.

PART 225--FOREIGN ACQUISITION

0
2. Amend section 225.7002-2 by revising paragraph (a) to read as 
follows:


225.7002-2   Exceptions.

* * * * *
    (a) Acquisitions at or below the simplified acquisition threshold, 
except for athletic footwear purchased by DoD for use by members of the 
Army, Navy, Air Force, or Marine Corps upon their initial entry into 
the Armed Forces (section 817 of the National Defense Authorization Act 
for Fiscal Year 2017 (Pub. L. 114-328)).
* * * * *


225.7002-3   [Amended]

0
3. Amend section 225.7002-3, in paragraph (a) by removing ``commercial 
items, that exceed the simplified acquisition threshold'' and adding 
``commercial items'' in its place.


225.7004-1   [Amended]

0
4. Amend section 225.7004-1 by removing ``United States or Canada'' and 
adding ``United States, Australia, Canada, or the United Kingdom'' in 
its place.


225.7004-3   [Amended]

0
5. Amend section 225.7004-3 by:
0
a. In paragraph (a) by removing ``manufactured in the United States or 
Canada'' and adding ``manufactured in the United States, Australia, 
Canada, or the United Kingdom'' in two places.
0
b. In paragraphs (a), (b), and (c) by removing ``United States and 
Canada'' and adding ``United States, Australia, Canada, or the United 
Kingdom'' in its place wherever it appears.


225.7006-1   [Amended]

0
6. Amend section 225.7006-1 by removing ``United States or Canada'' and 
adding ``United States, Australia, Canada, or the United Kingdom'' in 
its place.

0
7. Revise section 225.7006-3 to read as follows:


225.7006-3   Waiver.

    The waiver criteria at 225.7008(a) apply to this restriction.

0
8. Amend section 225.7006-4 by revising paragraphs (a)(2) and (b)(2) to 
read as follows:


225.7006-4   Solicitation provision and contract clause.

    (a) * * *
    (2) A waiver has been granted.
    (b) * * *
    (2) A waiver has been granted.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


252.225-7037   [Amended]

0
9. Amend section 252.225-7037 by:
0
a. Removing the provision date of ``(JUN 2012)'' and adding ``(DEC 
2018)'' in its place; and
0
b. In paragraphs (a) and (b), removing ``outlying areas, Canada,'' and 
adding ``outlying areas, Australia, Canada,'' in its place in both 
places.


252.225-7038   [Amended]

0
10. Amend section 252.225-7038 by:
0
a. Removing the provision date of ``(JUN 2005)'' and adding ``(DEC 
2018)'' on its place; and
0
b. Removing ``outlying areas, Canada,'' and adding ``outlying areas, 
Australia, Canada,'' in its place.

[FR Doc. 2018-27557 Filed 12-20-18; 8:45 am]
 BILLING CODE 5001-06-P