51916 Federal Register / Vol. 76, No. 161 / Friday, August 19, 2011 / Proposed Rules 

Proposed Amendments to the CBP 

Regulations 

For the reasons set forth above, it is 

proposed to amend parts 10 and 163 of 

title 19 of the Code of Federal 

Regulations as set forth below. 

PART 10—ARTICLES CONDITIONALLY 

FREE, SUBJECT TO A REDUCED 

RATE, ETC. 

1. The general authority citation for 

part 10 continues to read and a specific 

authority is added for § 10.121 as 

follows: 

Authority: 19 U.S.C. 66, 1202 (General 

Note 3(i), Harmonized Tariff Schedule of the 

United States (HTSUS)), 1321, 1481, 1484, 

1498, 1508, 1623, 1624, 3314. 

* * * * * 

Section 10.121 also issued under 19 U.S.C. 

2501; 

* * * * * 

2. Section 10.121(b) is revised to read 

as follows: 

§ 10.121 Visual or auditory materials of an 

educational, scientific, or cultural character. 

* * * * * 

(b) Articles entered under subheading 

9817.00.40, HTSUS, will be released 

from CBP custody prior to submission of 

the document required in paragraph (a) 

of this section only upon the deposit of 

estimated duties with the port director. 

Liquidation of an entry which has been 

released under this procedure will be 

suspended for a period of 314 days from 

the date of entry or until the required 

document is submitted, whichever 

comes first. In the event that 

documentation is not submitted before 

liquidation, the merchandise will be 

classified and liquidated in the ordinary 

course, without regard to subheading 

9817.00.40, HTSUS. 

PART 163—RECORDKEEPING 

3. The authority citation for part 163 

continues to read as follows: 

Authority: 5 U.S.C. 301; 19 U.S.C. 66, 

1484, 1508, 1509, 1510, 1624. 

* * * * * 

Appendix to Part 163—[Amended] 

4. Section IV is amended by removing 

the listing ‘‘§ 10.121 Certificate from 

USIA for visual/auditory materials’’ and 

adding in its place the listing ‘‘§ 10.121 

Certificate from the U.S. Department of 

State for visual/auditory materials’’. 

Alan D. Bersin, 

Commissioner, U.S. Customs and Border 

Protection. 

Approved: August 16, 2011. 

Timothy E. Skud, 

Deputy Assistant Secretary of the Treasury. 

[FR Doc. 2011–21275 Filed 8–18–11; 8:45 am] 

BILLING CODE 9111–14–P 

AGENCY FOR INTERNATIONAL 

DEVELOPMENT 

22 CFR Part 228 

[Aid Reg. 228] 

RIN 0412–AA70 

Procurement of Commodities and 

Services Financed by USAID 

AGENCY: Agency for International 

Development (USAID). 

ACTION: Proposed rule. 

SUMMARY: This proposed rule 

implements the statutory requirement 

that funds made available by the United 

States Congress (Congress) to USAID 

under the authority of the Foreign 

Assistance Act of 1961, as amended 

(FAA), be used for procurement in the 

United States (U.S.), the recipient 

country, or developing countries. It does 

so by revising USAID’s current source, 

origin and nationality (S/O/N) 

regulation to track more closely the 

statutory procurement authority 

provided under the FAA and referenced 

above; by establishing a single code for 

procurements from the U.S., recipient 

country and developing countries; by 

deleting the concept of ‘‘origin,’’ which 

is increasingly obsolete and difficult to 

apply in today’s globalized economy; 

and by simplifying the concepts of 

‘‘source’’ and ‘‘nationality’’ in order to 

reflect better Congress’s directive to 

procure from the U.S., recipient or 

developing countries. 

DATES: Comments must be received by 

close of business October 3, 2011. 

ADDRESSES: You may submit comments, 

identified by Regulatory Information 

Number, RIN 0412–AA70, by any of the 

following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: jniemeyer@usaid.gov. 

Include RIN number 0412–AA70 in the 

subject line of the message. 

• Mail: U.S. Agency for International 

Development, Office of the General 

Counsel, Room 6.07–105, 1300 

Pennsylvania Ave., NW., Washington, 

DC 20523, Attention: John R. Niemeyer, 

Esq. 

• Instructions: All submissions 

received must include the Agency name 

and docket number or Regulatory 

Information Number (RIN 0412–AA70) 

for this rulemaking. All comments 

received will be included in the public 

docket without change and will be made 

available online at http://www.

regulations.gov, including any personal 

information provided. Public 

Participation: Because security 

screening precautions have slowed the 

delivery and dependability of surface 

mail and hand delivery to USAID/ 

Washington, USAID recommends 

sending all comments to the Federal 

eRulemaking Portal. The e-mail address 

listed above is provided in the event 

that submission to the Federal 

eRulemaking Portal is not convenient 

(all comments must be in writing to be 

reviewed). You may submit comments 

by electronic mail, avoiding the use of 

any special characters and any form of 

encryption. 

USAID will consider all comments in 

response to the proposed rule as USAID 

determines how to revise its S/O/N 

regulation, and will reconcile all 

comments (similar comments by 

category) in any published, final rule. 

All comments will be posted at the 

portal for Federal rulemaking, 

regulations.gov, under Regulatory 

Information Number, RIN 0412–AA70. 

FOR FURTHER INFORMATION CONTACT: John 

Niemeyer (or designee), Attorney 

Advisor, Office of the General Counsel, 

USAID, Rm. 6.07–105, 1300 

Pennsylvania Ave., NW., Washington, 

DC 20523; telephone: (202) 712–5053 

(this is not a toll-free number); 

jniemeyer@usaid.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

• Part I. Background 

• Part II: The Proposed Rule 

Æ Purpose of the Rule 

Æ USAID Regulations Amended by This 

Rule 

Æ Summary of Changes to the Existing 

Rule 

Æ Regulatory Planning and Review: 

Findings and Certifications of Impact 

Assessment 

Æ List of Subjects in 22 CFR Part 228 

Æ Proposed Rule: Part 228, Rules on 

Procurement of Commodities and 

Services Financed by USAID 

I. Background 

On February 16, 2011, USAID 

published in the Federal Register (76 

FR 8961) an Advanced Notice of Public 

Rulemaking (ANPRM), notifying the 

public that USAID intended to review 


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1A CIP is a program in which USAID provides 

foreign exchange to a host country that, by the 

terms of the applicable agreement between USAID 

and the host country, is used to finance particular 

commodity import transactions of the host country. 

and revise its S/O/N regulation found at 

22 CFR part 228, which in turn 

implements section 604(a) of the FAA. 

The Agency provided a forty-five (45)- 

day public comment period on the 

ANPRM, which ended Monday, April 4, 

2011. The Agency also offered the 

public the opportunity to submit 

comments by surface mail, e-mail or fax. 

The ANPRM invited comments and 

suggestions on the existing S/O/N rules 

in 22 CFR part 228. In particular, USAID 

inquired 

• What, if any, sections of 22 CFR 

part 228 lead to inefficiencies and 

ineffectiveness in implementing USAID 

development assistance activities and 

programs? What are the efficiency 

impacts to contractors and grantees from 

provisions reflecting the concept of 

‘‘origin’’ and ‘‘source’’ (essentially, the 

country where a commodity is produced 

and the country from which a 

commodity is shipped to the 

cooperating country, respectively, see 

22 CFR 228.01), given the difficulty of 

determining with specificity the origin 

and source of many commodities in an 

increasingly globalized economy? 

• Should the regulatory guidance 

concerning ‘‘nationality’’ (the place of 

incorporation, ownership, citizenship, 

residence, etc. of suppliers of USAIDfinanced goods and services) be 

modified, and if so, in what manner to 

improve efficacy of the rule, particularly 

as applied to suppliers of services and 

goods in the recipient country? 

• Should USAID modify the ‘‘special 

source rules,’’ FAA 604(b), (c), (e), (f), 

and (g), and reflected in 22 CFR 228.13, 

for procurement of agricultural 

commodities, vehicles or 

pharmaceuticals within limitations set 

forth in the FAA; and, if so, in what 

manner? 

• Should references in 22 CFR part 

228 to other statutory requirements, 

such as the Fly America Act (49 U.S.C. 

40118) be removed or changed? 

Specifically is it useful for USAID to 

include Agency-specific policy and 

procedures in 22 CFR part 228, when 

separate statutes and prevailing 

regulatory systems are already in place 

and publicly available from other 

sources? 

What difficulties do contractors and 

grantees encounter when requesting a 

waiver to procure in any country other 

than those in the approved geographic 

code for each USAID-funded agreement 

(contract or grant)? How can USAID’s 

waiver guidance be modified or 

improved for more clear and cost 

effective application of the statutory and 

regulatory waiver requirements? If 

commenters suggest modification, 

USAID requests specific proposals for 

what elements of 22 CFR part 228 

should be modified. 

USAID also sought comments in the 

ANPRM concerning the potential costs 

of modifying the existing regulation, 

and the potential, quantifiable efficiency 

benefits of modifying the regulation. 

USAID received twenty-one 

comments in response to the ANPRM, 

all strongly in favor of substantial 

simplification of the regulation to reflect 

the globalization of the economy. 

Comments also urged revision of the 

existing regulation due to the growing 

obsolescence of concepts like ‘‘origin’’ 

in the globalized economy; and stressed 

the difficulty of applying the geographic 

codes established in the current rule, 

and in particular, of finding United 

States ‘‘origin’’ commodities and 

services, as defined by the current 

regulation, for procurement in support 

of USAID funded aid programs. 

Comments received in response to the 

ANPRM are discussed and addressed in 

greater detail, below in ‘‘Background.’’ 

The proposed rule, below, reflects 

comments received in response to the 

ANPRM, and has been reviewed by the 

Office of Management and Budget’s 

Office of Information and Regulatory 

Affairs. The period for comments 

concerning the proposed rule has been 

established at forty-five (45) days, due to 

the high visibility of United States 

Government assistance programs in 

response to current and anticipated 

political, humanitarian and natural 

disaster crises, and the shortness and 

lack of complexity of the proposed rule. 

The initial version of the FAA 

procurement provision in Section 604(a) 

provided that funds made available 

under the FAA could be used for 

procurement outside the United States 

only if the President made a 

determination that such procurement 

would not have adverse effects upon the 

economy of the U.S., or that any such 

harm was outweighed by the benefits of 

‘‘less costly government procurement 

outside the United States.’’ USAID 

implemented this directive by adapting 

the concepts of ‘‘source, origin and 

nationality’’ developed under USAID’s 

commodity import program (CIP),1, to 

all its procurements under the FAA. 

USAID also adapted the ‘‘geographic 

source codes’’ developed under the CIP 

to apply to all USAID financed 

procurements, in part in order to 

address Congress’s concern that U.S. 

taxpayer funded foreign assistance not 

provide any direct benefits to the 

governments of communist countries 

during the Cold War. 

In 1993, Congress amended the FAA 

procurement authorities in Section 

604(a) to provide that funds made 

available to USAID may be used for 

procurement from the U.S., the recipient 

country, or developing countries (but 

not advanced developing countries). 

However, USAID did not change its 

procurement regulations to reflect the 

change in statutory procurement 

authorities, but instead self-imposed a 

policy to continue to follow the same 

limits on procurement in the recipient 

and developing countries as if the 1993 

statutory amendments had not occurred. 

The concepts of source, origin and 

nationality were maintained in USAID’s 

procurement regulations at 22 CFR part 

228, as were the geographic source 

codes, none of which captured in any 

single code Congress’s clear 1993 

directive to procure from the U.S., 

recipient country, or developing 

countries. 

Because of the end of the Cold War 

and the subsequent globalization of the 

economy, this approach has become 

increasingly difficult to administer and 

in some respects obsolete. In an era of 

tightening budgets, the costs of 

compliance with the now needlessly 

complex regulation, and of the selfimposed and unnecessary restrictions 

on procurement in recipient and 

developing countries means that the 

foreign assistance dollar does not go as 

far as it would with a more 

straightforward regulation that reflects 

the statutory authority to procure in the 

recipient country and other developing 

countries, in addition to the U.S. 

Comments received in response to the 

ANPRM detail the mounting 

inefficiencies and costs of the current 

regulation. Comments generally fell into 

the following categories: Strongly 

supportive of review and revision; 

eliminate the regulation entirely and 

rely instead on USAID’s statutory 

procurement authority (FAA Section 

604(a), above); replace the authorized 

geographic codes in the current 

regulation with a simpler approach; 

Geographic Code 000 (procure from 

United States source, origin and 

nationality) is not relevant in today’s 

globalized economy; adherence to Code 

000 slows implementation and costs 

resources better devoted to 

development; commodities of Code 000 

are ineffective in achieving 

development impact due to warranty 

and servicing problems abroad; services 

are frequently needed from non-Code 

000 suppliers abroad; source 

requirements should be eliminated; 

origin requirements should be 


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51918 Federal Register / Vol. 76, No. 161 / Friday, August 19, 2011 / Proposed Rules 

eliminated; and waiver procedures 

should be reduced and streamlined. 

There were also many specific 

recommendations about particular types 

of commodity procurements, such as 

modifying the regulations concerning 

procurement of used or leased 

commodities. While USAID did not 

receive any cost-specific data, several 

commenters estimated that the time for 

processing of waivers needed when 

Code 000 (United States) commodities 

and services were unavailable ranges 

from 10–90 days, depending on 

circumstances such as the length of time 

needed to complete a market survey, 

draft the waiver documents, and process 

the waiver according to implementing 

partner and USAID procedures. 

Several commenters made the point 

that because of the development of a 

world or globalized economy since the 

end of the Cold War, it is difficult to 

determine with any accuracy where a 

commodity is produced, due to the 

myriad sources of components that go 

into manufacture of many commodities 

and the movement overseas of the 

manufacturing operations of many U.S. 

producers (for example, one commenter 

commented that little if any computer 

hardware is manufactured in the United 

States). Other commodities, such as 

much information technology and office 

equipment, certain types of vehicles, 

and copiers, are not generally available 

from U.S. origin producers. Because of 

these challenges, USAID and its 

implementing partners are frequently 

required to process waivers to the 

current S/O/N requirements, costing 

(based on the data of one commenter) an 

average of 55 days delay and processing 

time per waiver. While USAID attempts 

to expedite such waivers, especially in 

response to natural or other foreign 

disasters requiring an emergency 

response, the waiver process can still 

slow USAID’s emergency responses. 

Other commenters note that because 

of their complexity (for example, the 

current regulation requires a ‘‘systems 

determination’’ to determine where the 

components that make up a system, 

rather than single commodity, are 

produced, as part of the determination 

of a commodity’s ‘‘origin’’), the 

regulations are sometimes 

inconsistently applied by USAID 

missions across the world. Additional 

concerns about the unavailability of 

servicing and repairs, spare parts, 

warranty enforcement, voltage and 

video format incompatibility, and 

suitability of some U.S. origin 

commodities for use in the 

underdeveloped economies and 

countries in which USAID works, when 

taken together present a critique of a 

regulation in need of revision and 

updating. 

Additional specific comments 

proposed revisions to the waiver 

provisions of the current regulation, and 

many advocated for increased local 

procurements as both good development 

and a spur for economic growth in 

underdeveloped countries. Several 

comments argued for revision of the 

restricted commodities provisions in the 

current regulation, and one urged a 

clarification that commodities from the 

General Service Administration supply 

schedule should be considered to be 

U.S. source commodities. USAID 

reviewed and considered all comments, 

which informed the proposed rule. 

II. The Proposed Rule 

A. Purpose of Rule 

The purpose of this rule is to bring 

USAID regulations into full alignment 

with section 604(a) of the Foreign 

Assistance Act of 1961, as amended, 

which directs that funds made available 

under the FAA may be used for 

procurement ‘‘in the United States, the 

recipient country, or developing 

countries.’’ 

B. USAID Regulations Amended by This 

Rule 

The proposed rule amends in its 

entirety 22 CFR part 228, Rules on 

Source, Origin and Nationality for 

Commodities and Services Financed by 

USAID. The proposed, amended rule 

applies to all commodities and services 

financed by USAID. 

C. Summary of Changes to the Existing 

Rule 

The proposed rule revises the existing 

regulation to track more closely the 

statutory procurement authority 

provided under the FAA by establishing 

a single code for procurements from the 

U.S., recipient country, and developing 

countries. The proposed rule also 

deletes the concept of ‘‘origin,’’ which is 

increasingly obsolete and difficult to 

apply in today’s globalized economy, 

and in place of the concept of ‘‘origin,’’ 

simplifies and strengthens the concepts 

of ‘‘source’’ and ‘‘nationality’’ in order 

to reflect better Congress’s directive to 

procure from the U.S., recipient or 

developing countries. Section 228.02 

preserves statutory procurement 

authority that augments FAA 604(a), 

such as Support for Economic and 

Democratic Development of the 

Independent States of the Former Soviet 

Union, 22 U.S.C. 2295b, and 

Development Fund for Africa, 22 U.S.C 

2293 et seq. The proposed rule clarifies 

that waivers to permit procurements 

beyond the United States, recipient, or 

developing countries will be to Code 

935—any area or country but excluding 

countries to which assistance is 

prohibited by law (such prohibited 

countries were formerly referred to as 

‘‘foreign policy restricted countries’’). 

USAID will maintain a list of countries 

to which assistance is prohibited by 

law, which will be available in USAID’s 

Automated Directives System, ADS 310. 

The proposed rule also proposes to raise 

the amount, from $5 million to $10 

million, for which foreign owned local 

firms will be eligible for construction 

procurement, 22 CFR 228.13, because 

that amount has not been raised in over 

fifteen years. Finally, the proposed rule 

also clarifies that case by case waivers 

can be approved by commodity or 

service type or category (for example, a 

category of medical equipment like 

diagnostic machinery, or of services like 

translation services), to obviate the need 

for repeat or serial waivers for the same 

type or category of commodity or 

service. 

D. Regulatory Planning and Review: 

Findings and Certifications of Impact 

Assessment 

Executive Orders 13563 and 12866 

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). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. This rule 

has been designated a ‘‘significant 

regulatory action’’ although not 

economically significant, under section 

3(f) of Executive Order 12866. 

Accordingly, the rule has been reviewed 

by the Office of Management and 

Budget. 

This rule is not a major rule under 5 

U.S.C. 804. However, in order to ensure 

compliance with Executive Branch 

rulemaking policy and priorities, this 

rule has been reviewed by the Office of 

Information and Regulatory Affairs of 

the Office of Management and Budget. 

Pursuant to requirements set forth in 

the Regulatory Flexibility Act (RFA) 

(5 U.S.C. 601 et seq.), USAID has 

considered the economic impact of the 

proposed rule and has determined that 

its provisions would not have a 

significant economic impact on a 

substantial number of small entities. 


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Federal Register / Vol. 76, No. 161 / Friday, August 19, 2011 / Proposed Rules 51919 

List of Subjects in 22 CFR Part 228 

Foreign aid, Procurement, USAID 

contractors, Grantees and nongovernmental recipients. 

For the reasons set forth above and 

based on the comments received in 

response to the ANPRM, USAID 

proposes to revise 22 CFR part 228 as 

follows: 

PART 228—RULES FOR 

PROCUREMENT OF COMMODITIES 

AND SERVICES FINANCED BY USAID 

Subpart A—Definitions and Scope of This 

Part 

Sec. 

228.01 Definitions. 

228.02 Scope and application. 

228.03 Identification of the principal 

geographic code. 

Subpart B—Conditions Governing Source 

and Nationality of Commodity and Service 

Procurement Transactions for USAID 

Financing 

228.10 Purpose. 

228.11 Source of commodities. 

228.12 Nationality of suppliers of 

commodities and services. 

228.13 Foreign government-owned 

organizations. 

228.14 Construction services from foreignowned local firms. 

228.15 Nationality of employees under 

contracts or subcontracts for services. 

228.16 Miscellaneous service transactions. 

228.17 Special procurement rules for 

construction and engineering services. 

228.18 Long-term leases. 

228.19 Special source rules requiring 

procurement from the United States. 

Subpart C—Conditions Governing the 

Eligibility of Commodity-Related Services 

for USAID Financing 

228.20 Purpose. 

228.21 Ocean transportation. 

228.22 Air transportation. 

228.23 Other delivery services. 

228.24 Incidental services. 

Subpart D—Waivers 

228.30 General. 

228.31 Authority to approve waivers. 

Authority: Sec. 621, Pub. L. 87–195, 75 

Stat. 445 (22 U.S.C. 2381), as amended, E.O. 

12163, Sept. 29, 1979, 44 FR 56673: 3 CFR 

1979 Comp., p. 435. 

Subpart A—Definitions and Scope of 

This Part 

§ 228.01 Definitions. 

As used in this part, the following 

terms shall have the following 

meanings: 

Advanced developing countries mean 

those countries that are categorized by 

the World Bank as upper middle income 

countries according to its gross national 

income per capita, except for those 

countries in which USAID provides 

assistance. USAID will maintain a list of 

advanced developing countries 

primarily based on the most recent 

World Bank determinations, and which 

will be available in USAID’s Automated 

Directives System, ADS 310. 

Available for purchase means that 

there have been documented, multiple 

sales of a commodity or service by the 

supplier of the commodity or service in 

an authorized country during the past 

calendar year. Additionally, for 

commodities, the commodity is located 

in such country at the time of purchase 

from the supplier, and if applicable, can 

be serviced, and if warrantied, has a 

warranty valid, in the recipient country. 

Recipients and contractors must 

document in their project files that the 

commodities and services to be 

procured are available for purchase 

according to the standards set forth in 

this definition. There is a de minimis 

exception to the documentation 

requirement for procurements in the 

amount of up to $5,000 per 

procurement, primarily intended for 

procurements of office supplies or other 

frequently recurring procurements. 

Commodity means any material, 

article, supply, goods, or equipment. 

Commodity-related services means 

delivery services and/or incidental 

services. 

Cooperating country or recipient 

country means the country receiving the 

USAID assistance subject to this part 

228, and includes all the countries 

receiving assistance under a regional 

program or project. 

Delivery means the transfer to, or for 

the account of, an importer of the right 

to possession of a commodity, or, with 

respect to a commodity-related service, 

the rendering to, or for the account of, 

an importer of any such service. 

Delivery service means any service 

customarily performed in a commercial 

export or import transaction which is 

necessary to affect a physical transfer of 

commodities to the cooperating/ 

recipient country. Examples of such 

services are the following: Export 

packing, local drayage in the source 

country (including waiting time at the 

dock), ocean and other freight, loading, 

heavy lift, wharfage, tollage, switching, 

dumping and trimming, lighterage, 

insurance, commodity inspection 

services, and services of a freight 

forwarder. ‘‘Delivery service’’ may also 

include work and materials necessary to 

meet USAID marking requirements. 

Developing countries means those 

countries that are categorized by the 

World Bank as low or middle income 

according to its gross national income 

per capita, and also including all 

countries to which USAID provides 

assistance. USAID will maintain a list of 

developing countries primarily based on 

the most recent World Bank 

determinations, and which will be 

available in USAID’s Automated 

Directives System, ADS 310. 

Implementing document means any 

document, such as a contract, grant, or 

letter of commitment issued by USAID, 

which authorizes the use of USAID 

funds for the procurement of services or 

commodities and/or commodity related 

services, and which specific conditions 

apply to such procurement. 

Incidental services means services 

such as installation, erection, 

maintenance, or upgrading of USAIDfinanced equipment, or the training of 

personnel in the maintenance, operation 

and use of such equipment, or similar 

services provided for the authorized 

disposition of such commodities. 

Mission means the USAID Mission, 

office or representative in a cooperating/ 

recipient country. Nationality refers to 

the place of legal organization, 

ownership, citizenship, or lawful 

permanent residence of suppliers of 

goods and services. 

Recipients and contractors. Recipient 

has the same meaning as defined in 22 

CFR 226.02. Contractors mean those 

entities which enter into a contract, as 

the term is defined in 48 CFR part 2, 

with the U.S. Government. 

Services mean the performance of 

identifiable tasks, rather than the 

delivery of an end item of supply. 

Source means the country from which 

a commodity is shipped to the 

cooperating/recipient country or the 

cooperating/recipient country itself if 

the commodity is located therein at the 

time of the purchase. Where, however, 

a commodity is shipped from a free port 

or bonded warehouse in the form in 

which received therein, ‘‘source’’ means 

the country from which the commodity 

was shipped to the free port or bonded 

warehouse. For a commodity to have a 

country as its source, it must also be 

available for purchase in that country. 

Supplier means any person or 

organization, governmental or 

otherwise, who furnishes services, 

commodities and/or commodity related 

services, including delivery or 

incidental services, financed by USAID. 

United States means the United States 

of America, any State(s) of the United 

States, the District of Columbia, and 

areas of U.S. associated sovereignty, 

including commonwealths, territories 

and possessions. 

USAID means the United States 

Agency for International Development 

or any successor agency, including 

when applicable, each USAID Mission 

or office abroad. 


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USAID Geographic Code means a 

code in the USAID Geographic Code 

Book which designates a country, a 

group of countries, or an otherwise 

defined area. The USAID geographic 

code for purposes of procurement is 

described in § 228.03 of this part. 

§ 228.02 Scope and application. 

(a) This part is applicable to 

commodities and services financed 

directly with program funds 

appropriated under the Foreign 

Assistance Act of 1961, as amended, 22 

U.S.C. 2151 et seq. If additional 

authorities and conditions that apply to 

a USAID-financed procurement are 

otherwise provided by statute, 

regulation, or related administrative 

authorities, those authorities and 

conditions shall be incorporated in the 

implementing document and shall 

prevail in the event of any conflict with 

this part 228. The authorities and 

conditions applicable to procurement of 

commodities or services shall be those 

in effect on the date of the issuance by 

USAID of an implementing document 

for procurement of commodities or 

services, and include any directives, 

prohibitions, restrictions or other 

statutory and related requirements by 

the United States Congress that govern 

the funds appropriated to fund the 

specific procurement, including those 

on types of assistance and recipients of 

assistance. 

(b) This part is not applicable to 

commodities purchased under General 

Services Administration (GSA) supply 

schedules. Nor is it applicable to 

procurements with donated funds 

received under USAID’s gift authority, 

Section 635(d), Foreign Assistance Act 

of 1961, as amended. 

§ 228.03 Identification of the principal 

geographic code. 

(a) The USAID Geographic Code Book 

sets forth the official description of all 

geographic codes used by USAID in 

authorizing or implementing 

documents, the principal codes of 

which are used to designate authorized 

source countries or areas. This 

regulation establishes one geographic 

code for procurement of commodities 

and services under implementing 

documents unless otherwise specified, 

the specific number of which is to be 

determined but hereafter referred to in 

this regulation as Code xxx for all 

USAID financed procurements. Code 

xxx is defined as the United States, the 

recipient country, and developing 

countries other than advanced 

developing countries and countries to 

which assistance is prohibited by law. 

USAID will maintain a list of advanced 

developing countries and a list of 

countries to which assistance is 

prohibited by law, which will be 

available in USAID’s Automated 

Directives System, ADS 310. 

(b) For purposes of any waivers 

authorized under subpart D of this part, 

the authorized procurement code shall 

be Code 935, any area or country but 

excluding those countries to which 

assistance is prohibited by law. 

Subpart B—Conditions Governing 

Source and Nationality of Commodity 

and Service Procurement Transactions 

for USAID Financing 

§ 228.10 Purpose. 

Sections 228.11 through 228.18 of this 

part set forth the rules governing the 

eligible source of commodities and 

nationality of commodity and service 

suppliers for USAID financing. The 

provisions in these sections may be 

waived in accordance with the 

provisions in subpart D of this part. 

§ 228.11 Source of commodities. 

The source of all commodities 

financed with program funds 

appropriated under the Foreign 

Assistance Act of 1961, as amended, 

shall be Code xxx. Certain commodities 

must also comply with the special 

procurement rules in § 228.18 of this 

part. 

§ 228.12 Nationality of suppliers of 

commodities and services. 

The suppliers of all commodities and 

services financed with program funds 

appropriated under the Foreign 

Assistance Act of 1961 shall: 

(a) If an individual, be a citizen or 

lawful permanent resident of a country 

in Code xxx, 

(b) If a for-profit organization, 

(1) Be organized under the laws of a 

country in Code xxx; 

(2) Have its principal place of 

business in a country in Code xxx; and 

(3) Be majority [directly] owned, or 

majority beneficially owned, by 

individuals who are citizens or lawful 

permanent residents of countries in 

Code xxx, or 

(c) If a not-for-profit organization 

performing as a contractor or 

subcontractor, 

(1) Be organized under the laws of a 

country in Code xxx; 

(2) Have its principal place of 

business in a country in Code xxx; and 

(3) Be managed by a governing body, 

the majority of whom are citizens or 

lawful permanent residents of countries 

in Code xxx. 

§ 228.13 Foreign government-owned 

organizations. 

Firms operated as commercial 

companies or other organizations 

(including nonprofit organizations other 

than public educational institutions) in 

which foreign governments or their 

agents or agencies have a controlling 

interest are not eligible for financing by 

USAID, including in a subcontractor or 

subgrantee capacity, except if their 

eligibility has been established by a 

waiver approved by USAID in 

accordance with the procedures set 

forth in Subpart D. Foreign government 

ministries or agencies are eligible for 

financing by USAID. 

§ 228.14 Construction procurement with 

foreign-owned local firms. 

(a) When the estimated cost of a 

contract for construction is $10 million 

or less and only local firms will be 

solicited, a local corporation or 

partnership which is a foreign-owned 

local firm will be eligible, see paragraph 

(b) of this section, if it is determined by 

USAID to be an integral part of the local 

economy. However, such a 

determination is contingent on first 

ascertaining that no United States 

construction company with the required 

capability is currently operating in the 

cooperating/recipient country or, if 

there is such a company, that it is not 

interested in bidding for the proposed 

contract. 

(b) A foreign-owned local firm is an 

integral part of the local economy 

provided: 

(1) It has done business in the 

cooperating/recipient country on a 

continuing basis for at least three years 

prior to the issuance date of invitations 

for bids or requests for proposals to be 

financed by USAID; 

(2) It has a demonstrated capability to 

undertake the proposed activity; 

(3) All, or substantially all, of its 

directors of local operations, senior staff 

and operating personnel are lawfully 

resident in the cooperating/recipient 

country; and 

(4) Most of its operating equipment 

and physical plant are in the 

cooperating/recipient country. 

§ 228.15 Nationality of employees under 

contracts or subcontracts for services. 

The rules set forth in §§ 228.10 

through 228.13 do not apply to the 

employees or individual technical or 

professional consultants providing 

personal services to recipients or 

contractors (consistent with the 

applicable cost principles for the type of 

organization). Citizens or lawful 

permanent residents of countries to 

which assistance is prohibited by law 


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are not eligible for USAID financing 

under this section. USAID will maintain 

a list of countries to which assistance is 

prohibited by law, which will be 

available in USAID’s Automated 

Directives System, ADS 310. 

§ 228.16 Miscellaneous service 

transactions. 

This section sets forth rules governing 

certain miscellaneous services. 

(a) Commissions. The nationality 

rules of this part do not apply to the 

payment of commissions by suppliers. 

A commission is defined as any 

payment or allowance by a supplier to 

any person for the contribution which 

that person has made to secure the sale 

or contract for the supplier or which 

that person makes to securing on a 

continuing basis similar sales or 

contracts for the supplier. 

(b) Bonds and guarantees. The 

nationality rules of this part do not 

apply to sureties, insurance companies 

or banks who issue bonds or guarantees 

under USAID-financed contracts. 

(c) Liability insurance under 

construction contracts. The nationality 

rules of this part do not apply to firms 

providing liability insurance under 

construction contracts. 

§ 228.17 Special procurement rules for 

construction and engineering services. 

Advanced developing countries 

which have attained a competitive 

capability in international markets for 

construction services or engineering 

services, are not eligible to furnish 

USAID-financed construction and 

engineering services unless approved to 

do so under the wavier provisions set 

forth under subpart D of this part. 

§ 228.18 Long-term leases. 

Any commodity obtained under a 

long-term lease agreement, including 

motor vehicles, is subject to the source 

and nationality requirements of this 

subpart B. For purposes of this subpart 

B, a long-term lease is defined as a 

single lease of more than 180 days, or 

repetitive or intermittent leases, 

including vehicle leases, under a single 

activity or program within a one-year 

period totaling more than 180 days, for 

the same type of commodity. 

§ 228.19 Special procurement rules 

requiring procurement from the United 

States. 

(a) Agricultural commodities and 

products thereof must be procured in 

the United States if the domestic price 

is less than parity, unless the 

commodity cannot reasonably be 

procured in the United States in 

fulfillment of the objectives of a 

particular assistance program under 

which such commodity procurement is 

to be financed. (22 U.S.C. 2354). USAID 

will maintain a list of affected 

agricultural commodities, which will be 

available in USAID’s Automated 

Directives System, ADS 310. 

(b) Motor vehicles must be 

manufactured in the United States to be 

eligible for USAID financing. Also, any 

vehicle to be financed by USAID under 

a long-term lease or where the sale is to 

be guaranteed by USAID must be 

manufactured in the United States. (22 

U.S.C. 2396). For purposes of this 

section, motor vehicles are defined as 

self-propelled vehicles with passenger 

carriage capacity, such as highway 

trucks, passenger cars and buses, 

motorcycles, scooters, motorized 

bicycles, ATVs and utility vehicles. 

Excluded from this definition are 

ambulances, snowmobiles, industrial 

vehicles for materials handling and 

earthmoving, such as lift trucks, 

tractors, graders, scrapers, off-thehighway trucks (such as off-road dump 

trucks), and other vehicles that are not 

designed for travel at normal road 

speeds (40 kilometers per hour and 

above). Procurement or leasing of motor 

vehicles must comply with United 

States law, see 22 U.S.C. 2396. 

(c) USAID shall not finance any 

pharmaceutical product manufactured 

outside the United States if the 

manufacture of such product in the 

United States would involve the use of, 

or be covered by, a valid patent of the 

United States, unless such manufacture 

is expressly authorized by the owner of 

such patent. (22 U.S.C. 2356). In 

addition, USAID shall not finance noncontraceptive pharmaceuticals without 

prior written approval as provided in 

USAID’s Automated Directives System 

Chapter 310. Contraceptives may be 

financed in accordance with the 

procedures in ADS 310. 

Subpart C—Conditions Governing the 

Eligibility of Commodity-Related 

Services for USAID Financing 

§ 228.20 Purpose. 

This subpart C governs the eligibility 

of commodity-related services, both 

delivery services and incidental 

services, for USAID financing. These 

rules, except for those in § 228.21, may 

be waived in accordance with the 

provisions in subpart D of this part. The 

rules on delivery services apply whether 

or not USAID is also financing the 

commodities being transported. In order 

to be identified and eligible as 

incidental services, such services must 

be connected with a USAID-financed 

commodity procurement. 

§ 228.21 Ocean transportation. 

When transporting commodities 

subject to the provisions of the Cargo 

Preference Act, 46 U.S.C. 55305, USAID 

will administer its programs in 

accordance with that act and its 

implementing regulations in 46 CFR 

part 381 (and any waivers applicable 

thereto). Subpart D of 22 CFR part 228 

does not apply to this provision. 

§ 228.22 Air transportation. 

The Fly America Act, Title 49 of the 

United States Code, Subtitle VII, Part A, 

subpart I, Chapter 401, 40118— 

Government-Financed Air 

Transportation, is applicable to all 

travel subject to this part. 

§ 228.23 Other delivery services. 

No source or nationality rules apply 

to other delivery services, such as 

export packing, loading, commodity 

inspection services, and services of a 

freight forwarder. Such services are 

eligible when provided as part of a 

commodity procurement financed by 

USAID. 

§ 228.24 Incidental services. 

Source and nationality rules do not 

apply to suppliers of incidental services 

specified in a purchase contract relating 

to equipment. 

Subpart D—Waivers 

§ 228.30 General. 

USAID may waive the rules contained 

in Subparts A, B and C of this part, 

except for those in § 228.21, in order to 

accomplish project or program 

objectives. All waivers must be in 

writing, and where applicable, are 

limited to the term established by the 

waiver. 

(a) Waivers to permit procurement 

outside of Code xxx must be based on 

a case by case determination that 

(1) The provision of assistance 

requires commodities or services of the 

type that are not produced in and 

available for purchase in Code xxx; 

(2) It is important to permit 

procurement from a country not 

specified in Code xxx to meet 

unforeseen circumstances; 

(3) To promote efficiency in the use 

of United States foreign assistance 

resources, including to avoid 

impairment of foreign assistance 

objectives 

(b) Case by case waivers under 

paragraph (a) of this section may be 

made on the basis of a commodity or 

service type or category, rather than 

processing repeat, individual waivers 

for an identical or substantially similar 

commodity or service. A waiver under 

paragraph (a)(1) of this section may be 


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51922 Federal Register / Vol. 76, No. 161 / Friday, August 19, 2011 / Proposed Rules 

based on a determination that the 

commodities or services are of a type 

not produced in and available for 

purchase in Code xxx and may also be 

based on a factual finding that a 

commodity is not mined or grown in 

Code xxx, or if produced, any 

substantial part of manufacturing, 

assembly or processing of a commodity 

takes place in a country other than in 

Code xxx. A waiver under paragraph 

(a)(1) of this section may also be based 

on the fact that a commodity is not 

available for purchase in Code xxx in 

sufficient, reasonable and available 

quantities or sufficient and reasonable 

quality that is fit for the intended 

purpose. 

(c) A waiver to authorize procurement 

from outside the United States of 

agricultural commodities, motor 

vehicles, and pharmaceuticals (see 

§ 228.18) must also meet the 

requirements established in USAID 

directives on commodity eligibility. 

USAID will maintain a list of current 

requirements for commodity eligibility, 

which will be available in USAID’s 

Automated Directives System, ADS 310. 

(d) Any individual transaction not 

exceeding $25,000 (excluding those 

covered by special procurement rules in 

§ 228.18) does not require a waiver. 

§ 228.31 Authority to approve waivers. 

The authority to approve waivers of 

established policies on source and 

nationality are delegated authorities 

within USAID. Contractors or recipients 

of assistance agreements shall request 

any necessary waivers through the 

USAID contracting or agreement officer. 

John R. Niemeyer, 

Office of the General Counsel. 

[FR Doc. 2011–20773 Filed 8–18–11; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–109006–11] 

RIN 1545–BK13 

Modifications of Certain Derivative 

Contracts; Correction 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Correction to notice of proposed 

rulemaking by cross-reference to 

temporary regulations. 

SUMMARY: This document contains 

corrections to a notice of proposed 

rulemaking by cross-reference to 

temporary regulations (REG–109006–11) 

relating to whether an exchange for 

purposes of § 1.1001–1(a) occurs for the 

nonassigning counterparty when there 

is an assignment of certain derivative 

contracts. It was published in the 

Federal Register on Friday, July 22, 

2011 (76 FR 43957). 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Andrea M. Hoffenson, (202) 622–3920 

(not a toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

The correction notice that is the 

subject of this document is under 

section 1001 of the Internal Revenue 

Code. 

Need for Correction 

As published, the notice of proposed 

rulemaking by cross-reference to 

temporary regulations (REG–109006–11) 

contains errors that may prove to be 

misleading and are in need of 

clarification. 

Correction of Publication 

Accordingly, the publication of the 

notice of proposed rulemaking by crossreference to temporary regulations 

(REG–109006–11), which was the 

subject of FR Doc. 2011–18531, is 

corrected as follows: 

1. On page 43957, column 2, in the 

preamble, under the caption FOR

FURTHER INFORMATION CONTACT:, second 

line, the language ‘‘Andrea Hoffenson, 

(202) 622–3920’’ is corrected to read 

‘‘Andrea M. Hoffenson, (202) 622– 

3920;’’. 

2. On page 43957, column 4, in the 

preamble, under the paragraph heading 

‘‘Drafting Information’’, third line, the 

language ‘‘Office of Associate Chief 

Council’’ is corrected to read ‘‘Office of 

Associate Chief Counsel’’. 

LaNita Van Dyke, 

Chief, Publications and Regulations Branch, 

Legal Processing Division, Associate Chief 

Counsel (Procedure and Administration). 

[FR Doc. 2011–21182 Filed 8–18–11; 8:45 am] 

BILLING CODE 4830–01–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R03–OAR–2011–0600; FRL–9453–3] 

Approval and Promulgation of Air 

Quality Implementation Plans; 

Maryland; Adoption of Plastic Parts 

and Business Machines Coating 

Standards 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: EPA is proposing to approve 

a State Implementation Plan (SIP) 

revision submitted by the State of 

Maryland (Maryland). This SIP revision 

includes amendments to the Code of 

Maryland (COMAR) 26.11.19.07, 

Volatile Organic Compounds from 

Specific Processes, Paper, Fabric, Film 

and Foil Coating, and adds new COMAR 

26.11.19.07–2, Plastic Parts and 

Business Machines Coating. Maryland’s 

SIP revision meets the requirement to 

adopt Reasonably Available Control 

Technology (RACT) for sources covered 

by EPA’s Control Techniques 

Guidelines (CTG) for Miscellaneous 

Metal and Plastic Parts Coatings and 

will help Maryland attain and maintain 

the National Ambient Air Quality 

Standard (NAAQS) for ozone. This 

action is being taken under the Clean 

Air Act (CAA). 

DATES: Written comments must be 

received on or before September 19, 

2011. 

ADDRESSES: Submit your comments, 

identified by Docket ID Number EPA– 

R03–OAR–2011–0600 by one of the 

following methods: 

A. http://www.regulations.gov. Follow 

the on-line instructions for submitting 

comments. 

B. E-mail: 

fernandez.cristina@epa.gov. 

C. Mail: EPA–R03–OAR–2011–0600, 

Cristina Fernandez, Associate Director, 

Office of Air Program Planning, 

Mailcode 3AP30, U.S. Environmental 

Protection Agency, Region III, 1650 

Arch Street, Philadelphia, Pennsylvania 

19103. 

D. Hand Delivery: At the previouslylisted EPA Region III address. Such 

deliveries are only accepted during the 

Docket’s normal hours of operation, and 

special arrangements should be made 

for deliveries of boxed information. 

Instructions: Direct your comments to 

Docket ID No. EPA–R03–OAR–2011– 

0600. EPA’s policy is that all comments 

received will be included in the public 

docket without change, and may be 


wreier-aviles on DSKDVH8Z91PROD with PROPOSALS