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[Federal Register Volume 78, Number 245 (Friday, December 20, 2013)]
[Rules and Regulations]
[Pages 76993-76995]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30496]

[[Page 76993]]

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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Part 252

RIN 0750-AI18

Defense Federal Acquisition Regulation Supplement: Photovoltaic 
Devices (DFARS Case 2014-D006)

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

ACTION: Interim rule with request for comments.

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SUMMARY: DoD is issuing an interim rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to clarify rules of origin 
under trade agreements for photovoltaic devices to be utilized under 
covered DoD contracts, as required by a section of the National Defense 
Authorization Act for Fiscal Year 2011.

DATES: Effective December 20, 2013.
    Comment date: Comments on the interim rule should be submitted in 
writing to the address shown below on or before February 18, 2014, to 
be considered in the formation of a final rule.''

ADDRESSES: Submit comments identified by DFARS Case 2014-D006, using 
any of the following methods:
    [cir] Regulations.gov: http://www.regulations.gov. Submit comments 
via the Federal eRulemaking portal by entering ``DFARS Case 2014-D006'' 
under the heading ``Enter keyword or ID'' and selecting ``Search.'' 
Select the link ``Submit a Comment'' that corresponds with ``DFARS Case 
2014-D006.'' Follow the instructions provided at the ``Submit a 
Comment'' screen. Please include your name, company name (if any), and 
``DFARS Case 2014-D006'' on your attached document.
    [cir] Email: dfars@mail.mil. Include DFARS Case 2014-D006 in the 
subject line of the message.
    [cir] Fax: 571-372-6094.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Ms. Amy 
G. Williams, OUSD(AT&L)DPAP/DARS, Room 3B855, 3060 Defense Pentagon, 
Washington, DC 20301-3060.
    Comments received generally will be posted without change to http://www.regulations.gov, including any personal information provided. To 
confirm receipt of your comment(s), please check www.regulations.gov, 
approximately two to three days after submission to verify posting 
(except allow 30 days for posting of comments submitted by mail).

FOR FURTHER INFORMATION CONTACT: Ms. Amy G. Williams, Defense 
Acquisition Regulations System, OUSD(AT&L)DPAP/DARS, Room 3B855, 3060 
Defense Pentagon, Washington, DC 20301-3060. Telephone 571-372-6106; 
facsimile 571-372-6101.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 846 of the National Defense Authorization Act for Fiscal 
Year 2011 (Pub. L. 111-383) addresses the origin of photovoltaic 
devices purchased by a contractor under an energy savings performance 
contract, a utility service contract, or a private housing contract, if 
such contract will result in DoD ownership of photovoltaic devices, by 
means other than DoD purchase as end products. DoD is deemed to own a 
photovoltaic device if the device is--
    (1) Installed on DoD property or in a facility owned by DoD; and
    (2) Reserved for the exclusive use of DoD for the full economic 
life of the device.
    The statute requires that photovoltaic devices provided under 
covered contracts shall comply with the Buy American statute (41 U.S.C. 
chapter 83), subject to the exceptions to that statute provided in the 
Trade Agreements Act, or otherwise provided by law.
     Under the Buy American statute, there is an exception for 
other foreign photovoltaic devices, if covered by the Buy American 
statute and the cost of a domestic photovoltaic device would be 
unreasonable (i.e., 50 percent more than the cost of the foreign 
photovoltaic device).
     For DoD, qualifying country photovoltaic devices may be 
utilized in any covered contract, because DFARS 225.103(a)(i)(A) 
provides an exception to the Buy American statute for products of 
qualifying countries, as defined in 225.003.
     Depending on the value of the photovoltaic devices to be 
utilized, various trade agreements may apply to photovoltaic devices 
that are the product of a designated country. These photovoltaic 
devices may be broadly identified as World Trade Organization 
Government Procurement Agreement photovoltaic devices, Free Trade 
Agreement photovoltaic devices, or by the specific country of origin.
    DoD initially implemented this statute through an interim rule 
(DFARS Case 2011-D046), published in the Federal Register on December 
20, 2011 (76 FR 78858). The interim rule added a new DFARS section 
225.7017, Utilization of domestic photovoltaic devices; a clause at 
252.225-7017, Photovoltaic Devices; and a provision at 252.225-7018, 
Photovoltaic Devices--Certificate. DoD finalized the interim rule, with 
changes on May 22, 2012 (77 FR 30368).
    The final rule explains that for purposes of determining that a 
photovoltaic device is eligible for an exception to the Buy American 
statute due to applicability of a trade agreement, the origin of a 
photovoltaic device is the country in which the photovoltaic device was 
wholly manufactured (including all components), or the country in which 
the photovoltaic device was ``substantially transformed'' into a new 
and different article with a name, character, or use distinct from that 
of the article or articles from which it was transformed.
    Since implementation in the DFARS, some questions have arisen as to 
where the substantial transformation of some solar panels occurs, when 
different phases of the production process occur in different 
countries. DOD has determined, after consultation with the United 
States Trade Representative, that clarification is needed to avoid 
confusion by offerors on how to determine the country of origin of a 
photovoltaic device, when trade agreements provide an exception to the 
Buy American statute.

II. Discussion and Analysis

    This rule makes two clarifications to provide greater certainty and 
avoid confusion by offerors responding to solicitations that are 
governed by section 846 and the associated DFARS implementing 
provisions. Both clarifications are consistent with existing DoD 
practices.
    First, the rule clarifies that the country of origin is the country 
in which the final substantial transformation occurred. Each of the 
definitions for specific types of designated photovoltaic devices has 
been amended to specify that the photovoltaic device is not 
subsequently substantially transformed outside of the specified 
country.
    For example:

``Bahrainian photovoltaic device'' means an article that--
    (i) Is wholly manufactured in Bahrain; or
    (ii) In the case of an article that consists in whole or in part of 
materials from another country, has been substantially transformed in 
Bahrain into a new and different article of commerce with a name, 
character, or use distinct from that of the article or articles from 
which it was transformed, provided that the photovoltaic device is

[[Page 76994]]

not subsequently substantially transformed outside of Bahrain.
    Second, a new paragraph (c) has been added to the provision at 
252.225-7018, which directs offerors to certify the origin of a 
designated country photovoltaic device consistent with country of 
origin determinations by U.S. Customs and Border Protection for the 
same or similar items. If the offeror is uncertain, the provision 
directs the offeror to request a determination from U.S. Customs and 
Border Protection. This guidance applies only to the origin of 
designated country photovoltaic devices (as defined in 252.225-
7017(a)).
    The origin of domestic photovoltaic devices and qualifying country 
photovoltaic devices is not based on substantial transformation, but on 
place of manufacture (regardless of the origin of the components). FAR 
52.225-18 defines ``place of manufacture'' as the place where an end 
product is assembled out of components, or otherwise made or processed 
from raw materials into the finished product to be provided to the 
Government (in this case the photovoltaic device to be utilized under 
the contract).
    U.S.-made photovoltaic devices are not designated country 
photovoltaic devices, but their utilization is allowed, consistent with 
FAR 25.403(c), when the value of the photovoltaic devices utilized 
exceeds $202,000, so that U.S.-made photovoltaic devices that do not 
qualify as domestic photovoltaic devices are not disadvantaged in favor 
of designated country photovoltaic devices. U.S.-made photovoltaic 
devices may be manufactured or substantially transformed in the United 
States. Therefore, a U.S.-made photovoltaic device may qualify on the 
basis of manufacture in the U.S., even if it does not meet the more 
stringent requirements of substantial transformation in the United 
States.

III. 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.

IV. Regulatory Flexibility Act

    DoD does not expect this rule to have a significant economic impact 
on a substantial number of small entities within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because this rule 
only impacts the determination of whether photovoltaic devices are 
substantially transformed in a designated country. No domestic entities 
will be impacted because the United States is not a designated country. 
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 discuss who is a small business: 
``(a)(1) 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, an initial regulatory flexibility analysis has not been 
performed. DoD invites comments from small business concerns and other 
interested parties on the expected impact of this rule on small 
entities.
    DoD will also consider comments from small entities concerning the 
existing regulations in subparts affected by this rule in accordance 
with 5 U.S.C. 610. Interested parties must submit such comments 
separately and should cite 5 U.S.C. 610 (DFARS Case 2014-D006), in 
correspondence.

V. Paperwork Reduction Act

    The rule contains 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; however, these changes to the 
DFARS do not impose additional information collection requirements to 
the paperwork burden previously approved under OMB Control Number 0704-
0229, entitled Defense Federal Acquisition Regulation Supplement 
(DFARS); Part 225, Foreign Acquisition.

VI. Determination To Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense that urgent and compelling reasons exist to promulgate this 
interim rule without prior opportunity for public comment. This action 
is necessary to ensure that section 846 of the National Defense 
Authorization Act for Fiscal Year 2011 is being appropriately 
implemented in accordance with DoD practices for achieving consistent 
adherence with international trade rules. Section 846 addresses the 
origin of photovoltaic devices acquired by DoD. The statute requires 
that photovoltaic devices comply with the Buy American statute, subject 
to the exceptions to that statute provided in the Trade Agreements Act 
(TAA), or otherwise provided by law. When an acquisition is subject to 
the TAA, the substantial transformation test is used to establish the 
origin of products. Questions have arisen regarding interpretation of 
the substantial transformation test for photovoltaic devices, in light 
of varying interpretations that have been issued by U.S. Customs and 
Border Protection (CBP) and the Department of Commerce in carrying out 
their respective missions. These opinions were issued after DOD 
published its final rule implementing section 846 in May 2012.
    DoD has determined, after consultation with the United States Trade 
Representative, that clarification is necessary to avoid unintended 
confusion in the marketplace and potential non-compliance with section 
846 and to ensure the proper and appropriate application of 
international trade rules. This rule makes explicit DOD's practice of 
generally following determinations made by CBP regarding when an end 
product is considered to have been substantially transformed. Because 
this rule addresses ``photovoltaic devices'' rather than ``end 
products,'' it also clarifies that the country of origin is the country 
in which the final substantial transformation occurred. These immediate 
clarifications will ensure that offerors are properly certifying their 
compliance with existing law and regulation addressing the acquisition 
of photovoltaic devices and provide greater certainty to the 
marketplace when offering these products to DoD at a time when the U.S. 
Government is working aggressively to take greater advantage of green 
energy industries as part of its comprehensive energy and environmental 
policies. The rule provides guidance to offerors that will facilitate 
offeror certifications that are consistent with existing DoD policy and 
practice when DoD directly acquires end products. Failure to implement 
this requirement promptly can also have

[[Page 76995]]

adverse effects on the U.S. photovoltaic industry, which this statute 
was designed to protect.
    DOD will consider, pursuant to 41 U.S.C. 1707 and FAR 1.501-3(b), 
public comments received in response to this interim rule in the 
formation of the final rule.

List of Subjects in 48 CFR Part 252

    Government procurement.

Manuel Quinones,
Editor, Defense Acquisition Regulations System.

    Therefore 48 CFR part 252 is amended as follows:

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

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

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

0
2. Section 252.225-7017 is amended by--
0
a. Removing the clause date ``(OCT 2013)'' and adding ``(DEC 2013)'' in 
its place; and
0
b. In paragraph (a)--
0
i. In the definition of ``Bahrainian photovoltaic device'' in paragraph 
(ii), removing ``transformed.'' and adding ``transformed, provided that 
the photovoltaic device is not subsequently substantially transformed 
outside of Bahrain.'' in its place.
0
ii. In the definition of ``Canadian photovoltaic device'', removing 
``transformed.'' and adding ``transformed, provided that the 
photovoltaic device is not subsequently substantially transformed 
outside of Canada.'' in its place.
0
iii. In the definition of ``Caribbean Basin country photovoltaic 
device'' in paragraph (ii), removing ``transformed.'' and adding 
``transformed, provided that the photovoltaic device is not 
subsequently substantially transformed outside of a Caribbean Basin 
country.'' in its place.
0
iv. In the definition of ``Free Trade Agreement country photovoltaic 
device'' in paragraph (ii), removing ``transformed.'' and adding 
``transformed, provided that the photovoltaic device is not 
subsequently substantially transformed outside of a Free Trade 
Agreement country.'' in its place.
0
v. In the definition of ``Korean photovoltaic device'' in paragraph 
(i), removing ``Korea'' and adding ``Korea (Republic of)'' in its 
place, and in paragraph (ii) removing ``transformed.'' and adding 
``transformed, provided that the photovoltaic device is not 
subsequently substantially transformed outside of Korea (Republic 
of).'' in its place.
0
vi. In the definition of ``Least developed country photovoltaic 
device'' in paragraph (ii), removing ``transformed.'' and adding 
``transformed, provided that the photovoltaic device is not 
subsequently substantially transformed outside of a least developed 
country.'' in its place.
0
vii. In the definition of ``Moroccan photovoltaic device'' in paragraph 
(ii), removing ``transformed.'' and adding ``transformed, provided that 
the photovoltaic device is not subsequently substantially transformed 
outside of Morocco.'' in its place.
0
viii. In the definition of ``Panamanian photovoltaic device'' in 
paragraph (ii), removing ``transformed.'' and adding ``transformed, 
provided that the photovoltaic device is not subsequently substantially 
transformed outside of Panama.'' in its place.
0
ix. In the definition of ``Peruvian photovoltaic device'' in paragraph 
(ii), removing ``transformed.'' and adding ``transformed, provided that 
the photovoltaic device is not subsequently substantially transformed 
outside of Peru.'' in its place.
0
x. In the definition of ``U.S.-made photovoltaic device'' in paragraph 
(ii), removing ``transformed.'' and adding ``transformed, provided that 
the photovoltaic device is not subsequently substantially transformed 
outside of the United States.'' in its place.
0
xi. In the definition of ``WTO GPA country photovoltaic device'' in 
paragraph (ii), removing ``transformed.'' and adding ``transformed, 
provided that the photovoltaic device is not subsequently substantially 
transformed outside of a WTO GPA country.'' in its place.

0
3. Amend section 252.225-7018 by--
0
a. Removing the clause date ``(NOV 2012)'' and adding ``(DEC 2013)'' in 
its place; and
0
b. Adding to paragraph (a) the phrase ``designated country photovoltaic 
device'' after the phrase ``designated country'';
0
c. Removing, in paragraph (b)(1), ``(c)(2)(ii), (c)(3)(ii) or 
(c)(4)(ii)'' and adding ``(d)(2)(ii), (d)(3)(ii) or (d)(4)(ii)'' in its 
place; and
0
d. Redesignating paragraph (c) as paragraph (d) and adding a new 
paragraph (c) to read as follows:

252.225-7018  Photovoltaic Devices--Certificate.

* * * * *
    (c) Country in which a designated country photovoltaic device was 
wholly manufactured or was substantially transformed. If the estimated 
value of the photovoltaic devices to be utilized under a resultant 
contract exceeds $25,000, the Offeror's certification that such 
photovoltaic device (e.g., solar panel) is a designated country 
photovoltaic device shall be consistent with country of origin 
determinations by the U.S. Customs and Border Protection with regard to 
importation of the same or similar photovoltaic devices into the United 
States. If the Offeror is uncertain as to what the country of origin 
would be determined to be by the U.S. Customs and Border Protection, 
the Offeror shall request a determination from U.S. Customs and Border 
Protection. (See http://www.cbp.gov/xp/cgov/trade/legal/rulings/.)
* * * * *

[FR Doc. 2013-30496 Filed 12-19-13; 8:45 am]
BILLING CODE 5001-06-P
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