68376 Federal Register / Vol. 76, No. 214 / Friday, November 4, 2011 / Proposed Rules 

Signed: September 10, 2010. 

John J. Manfreda, 

Administrator. 

Approved: October 8, 2011. 

Timothy E. Skud, 

Deputy Assistant Secretary, Tax, Trade, and 

Tariff Policy. 

[FR Doc. 2011–28645 Filed 11–3–11; 8:45 am] 

BILLING CODE 4810–31–P 

DEPARTMENT OF DEFENSE 

Office of the Secretary 

32 CFR Part 165 

[DOD–2009–OS–0030/RIN 0790–AI45] 

Recoupment of Nonrecurring Costs 

(NCs) on Sales of U.S. Items 

AGENCY: Office of the Under Secretary of 

Defense (Comptroller)/Chief Financial 

Officer, DoD. 

ACTION: Proposed rule. 

SUMMARY: This rule updates policy, 

responsibilities, and procedures to 

conform with section 21(e)(1)(B) of 

Public Law 90–629, as amended, and 

section 9701 of title 31, United States 

Code (U.S.C.), for calculating and 

assessing NC recoupment charges on 

sales of items developed for or by the 

Department of Defense to non-U.S. 

Government customers. 

DATES: Comments must be received by 

January 3, 2012. 

ADDRESSES: You may submit comments, 

identified by docket number and/or RIN 

number and title, by any of the 

following methods: 

• Federal Rulemaking Portal: http://

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: Federal Docket Management 

System Office, 1160 Defense Pentagon, 

Room 3C843, Washington, DC 20301– 

1160. 

Instructions: All submissions received 

must include the agency name and 

docket number or Regulatory 

Information Number (RIN) for this 

Federal Register document. The general 

policy for comments and other 

submissions from members of the public 

is to make these submissions available 

for public viewing on the Internet at 

http://www.regulations.gov as they are 

received without change, including any 

personal identifiers or contact 

information. 

FOR FURTHER INFORMATION CONTACT: 

Claire Nelson, (703) 602–0250. 

SUPPLEMENTARY INFORMATION: 

Executive Order 12866, ‘‘Regulatory 

Planning and Review’’ and Executive 

Order 13563 ‘‘Improving Regulation 

and Regulatory Review’’ 

It has been certified that 32 CFR part 

165 does not: 

(1) Have an annual effect on the 

economy of $100 million or more or 

adversely affect in a material way the 

economy; a section of the economy; 

productivity; competition; jobs; the 

environment; public health or safety; or 

State, local, or Tribal governments or 

communities; 

(2) Create a serious inconsistency or 

otherwise interfere with an action taken 

or planned by another Agency; 

(3) Materially alter the budgetary 

impact of entitlements, grants, user fees, 

or loan programs, or the rights and 

obligations of recipients thereof; or 

(4) Raise novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in these Executive Orders. 

Sec. 202, Public Law 104–4, ‘‘Unfunded 

Mandates Reform Act’’ 

It has been certified that 32 CFR part 

165 does not contain a Federal mandate 

that may result in expenditure by State, 

local and Tribal governments, in 

aggregate, or by the private sector, of 

$100 million or more in any one year. 

Public Law 96–354, ‘‘Regulatory 

Flexibility Act’’ (5 U.S.C. 601) 

It has been certified that 32 CFR part 

165 is not subject to the Regulatory 

Flexibility Act (5 U.S.C. 601) because it 

would not if promulgated, have a 

significant economic impact on a 

substantial number of small entities. 

Public Law 96–511, ‘‘Paperwork 

Reduction Act’’ (44 U.S.C. Chapter 35) 

It has been certified that 32 CFR part 

165 does not impose reporting or 

recordkeeping requirements under the 

Paperwork Reduction Act of 1995. 

Executive Order 13132, ‘‘Federalism’’ 

It has been certified that 32 CFR part 

165 does not have federalism 

implications, as set forth in Executive 

Order 13132. This rule does not have 

substantial direct effects on: 

(1) The States; 

(2) The relationship between the 

National Government and the States; or 

(3) The distribution of power and 

responsibilities among the various 

levels of Government. 

List of Subjects in 32 CFR Part 165 

Armed forces, Arms and munitions, 

Government contracts. 

Accordingly 32 CFR part 165 is 

revised to read as follows: 

PART 165—RECOUPMENT OF 

NONRECURRING COSTS (NCS) ON 

SALES OF U.S. ITEMS 

Sec. 

165.1 Purpose. 

165.2 Applicability. 

165.3 Definitions. 

165.4 Policy. 

165.5 Responsibilities. 

165.6 Procedures. 

165.7 Waivers (including reductions). 

Authority: 31 U.S.C. 9701; 22 U.S.C. 

2761(e). 

§ 165.1 Purpose. 

This part updates policy, 

responsibilities, and procedures to 

conform with section 21(e)(1)(B) of 

Public Law 90–629, as amended, and 

section 9701 of title 31, United States 

Code (U.S.C.) for calculating and 

assessing NC recoupment charges on 

sales of items developed for or by the 

Department of Defense to non-U.S. 

Government customers. 

§ 165.2 Applicability. 

(a) This part applies to the Office of 

the Secretary of Defense, the Military 

Departments, the Office of the Chairman 

of the Joint Chiefs of Staff and the Joint 

Staff, the Combatant Commands, the 

Office of the Inspector General of the 

Department of Defense, the Defense 

Agencies, the DoD Field Activities, and 

all other organizational entities within 

the Department of Defense (hereafter 

referred to collectively as the ‘‘DoD 

Components’’). 

(b) This part does not apply to sales 

of excess property when accountability 

has been transferred to property 

disposal activities and the property is 

sold in open competition to the highest 

bidder. 

(c) The policies and procedures in 

this part apply to all sales on or after the 

effective date of this part, and supersede 

application thresholds and charges 

previously established. Previous 

application thresholds and charges 

continue to govern sales made prior to 

the applicable effective date of this part. 

Such previously established NC 

recoupment thresholds and charges 

shall be eliminated or revised in 

accordance with this part. 

§ 165.3 Definitions. 

Cost pool. Represents the total cost to 

be distributed across the specific 

number of units, normally the number 

of units produced plus those planned to 

be produced. The nonrecurring 

research, development, test, and 

evaluation cost pool comprises the costs 

described in definition for nonrecurring 

research, development, test and 


jlentini on DSK4TPTVN1PROD with PROPOSALS
Federal Register / Vol. 76, No. 214 / Friday, November 4, 2011 / Proposed Rules 68377 

1Available at http://www.acq.osd.mil/dpap/dars/ 

dfarspgi/current/index.html. 

2Available at http://www.defenselink.mil/

comptroller/fmr/. 

evaluation costs. The nonrecurring 

production cost pool comprises costs 

described in definition for nonrecurring 

production costs. 

Foreign military sale. A sale by the 

U.S. Government of defense items or 

defense services to a foreign government 

or international organization under 

authority of the Arms Export Control 

Act (AECA); section 21(e)(1)(B) of 

Public Law 90–629, as amended. Except 

as waived by Under Secretary of 

Defense for Policy (USD(P)), foreign 

military sales are the only sales subject 

to NC recoupment charges. 

Major defense equipment. Any item of 

significant military equipment on the 

United States Munitions List having a 

nonrecurring research, development, 

test, and evaluation cost of more than 50 

million dollars or a total production cost 

of more than 200 million dollars. The 

determination of whether an item meets 

the major defense equipment dollar 

threshold for research, development, 

test, and evaluation shall be based on 

DoD obligations recorded to the date the 

equipment is offered for sale. 

Production costs shall include costs 

incurred by the Department of Defense. 

Production costs for the foreign military 

sales program and known direct 

commercial sales production are 

excluded. 

Model. A basic alpha-numeric 

designation in a weapon system series; 

e.g., a ship hull series, equipment or 

system series, an airframe series, or a 

vehicle series. For example, the F5A 

and the F5F are different models in the 

same F–5 system series. 

Nonrecurring production costs. Those 

one-time costs incurred in support of 

previous production of the model 

specified and those costs specifically 

incurred in support of the total 

projected production run. Those NCs 

include DoD expenditures for 

preproduction engineering; special 

tooling; special test equipment; 

production engineering; product 

improvement; destructive testing; and 

pilot model production, testing, and 

evaluation. That includes costs of any 

engineering change proposals initiated 

before the date of calculations of the NC 

recoupment charge. Nonrecurring 

production costs do not include DoD 

expenditures for machine tools, capital 

equipment, or facilities for which 

contractor rental payments are made or 

waived in accordance with the Defense 

Federal Acquisition Regulation 

Supplement.1

Nonrecurring research, development, 

test and evaluation costs. Those costs 

funded by a research, development, test, 

and evaluation appropriation to develop 

or improve the product or technology 

under consideration either through 

contract or in-house DoD effort. This 

includes costs of any engineering 

change proposal started before the date 

of calculation of the NC recoupment 

charges as well as projections of such 

costs, to the extent additional effort 

applicable to the sale model or 

technology is necessary or planned. It 

does not include costs funded by either 

procurement or operation and 

maintenance appropriations. 

Pro rata recovery of NCs. An equal 

distribution (proration) of a pool of NCs 

to a specific number of units that benefit 

from the investment so that a DoD 

Component shall collect from a 

customer a fair (pro rata) share of the 

investment in the product being sold. 

The production quantity base used to 

determine the pro rata calculation of 

major defense equipment includes total 

production. 

Significant change in NCs 

recoupment charge. A significant 

change occurs as follows: 

a. A new calculation shows a change 

of 30 percent of the current system NC 

charge. 

b. The NC unit charge increases or 

decreases by 50,000 dollars or more. 

c. Where the potential for a 5 million 

dollar change in recoupment exists. 

The total collections may be estimated 

based on the projected sales quantities. 

A significant change occurs when 

potential collections increase or 

decrease by 5 million dollars. 

‘‘Special’’ research, development, test, 

and evaluation and nonrecurring 

production costs. Costs incurred under 

a foreign military sale at the request of, 

or for the benefit of, a foreign customer 

to develop a special feature or unique or 

joint requirement. Those costs must be 

paid by the customer as they are 

incurred. 

§ 165.4 Policy. 

It is DoD policy that: 

(a) The NC recoupment charge shall 

be imposed for sales of major defense 

equipment only as required by an Act of 

Congress (Section 21(e)(1)(B) of Public 

Law 90–629, as amended). The USD(P) 

may grant a waiver to recoupment 

charges in accordance with § 165.7 of 

this part. 

(b) The NC charges shall be based on 

the amount of the Department of 

Defense nonrecurring investment in an 

item. 

§ 165.5 Responsibilities. 

(a) Under Secretary of Defense 

(Comptroller)/Chief Financial Officer 

(USD(C)/CFO)) shall provide necessary 

financial management guidance. 

(b) The Under Secretary of Defense for 

Acquisition, Technology, and Logistics 

shall take appropriate action to revise 

the Defense Federal Acquisition 

Regulation Supplement in accordance 

with this part. 

(c) The USD(P) shall: 

(1) Monitor the application of this 

part. 

(2) Review and approve NC 

recoupment charges and NC 

recoupment charge waiver requests 

received from foreign countries and 

international organizations for foreign 

military sales. 

(3) Ensure publication of a listing of 

items developed for or by the 

Department of Defense to which NC 

recoupment charges are applicable. 

(4) USD(P) may grant a waiver to 

recoupment charges in accordance with 

§ 165.7 of this part. 

(d) The Secretaries of the Military 

Departments and the Directors of the 

Defense Agencies shall: 

(1) Determine the DoD nonrecurring 

investment in items developed for or by 

the Department of Defense and perform 

required pro rata calculations in 

accordance with this part and financial 

management guidance from USD(C)/ 

CFO when a military equipment asset 

type is considered a candidate for sale. 

(2) Validate and provide 

recommended charges to USD(P). 

Supporting documentation will be 

retained until the item has been 

eliminated from the NC recoupment 

charge listing. 

(3) Review approved NC recoupment 

charges on a biennial basis to determine 

if there has been a change in factors or 

assumptions used to compute a NC 

recoupment charge and, if there is a 

significant change in a NC recoupment 

charge, provide a recommended change 

to USD(P). 

(4) Collect charges on foreign military 

sales, in accordance with DoD 7000.14– 

R.2

(5) Deposit collections to accounts as 

prescribed by USD(C)/CFO. 

(6) Request guidance from USD(P), 

within 90 days of issue identification, if 

an issue concerning a recoupment 

charge cannot be resolved. 

§ 165.6 Procedures. 

(a) The NC recoupment charge to be 

reimbursed shall be a pro rata recovery 

of NCs for the applicable major defense 

equipment. Recovery of NC recoupment 

charges shall cease upon the recovery of 

total DoD costs. Such charges shall be 


jlentini on DSK4TPTVN1PROD with PROPOSALS
68378 Federal Register / Vol. 76, No. 214 / Friday, November 4, 2011 / Proposed Rules 

3Available at http://www.dsca.osd.mil/samm/. 

based on a ‘‘cost pool’’ as defined in 

§ 165.3 of this part. For a system that 

includes more than one component, a 

‘‘building block’’ approach (i.e., the sum 

of NC recoupment charges for 

individual components) shall be used to 

determine the NC recoupment charge 

for the sale of the entire system. 

(b) The NC recoupment charge shall 

not apply when a waiver for the specific 

customer/case has been approved by 

USD(P), in accordance with § 165.7 of 

this part, or when sales are financed 

with U.S. Government funds made 

available on a non-repayable basis. 

Approved revised NC recoupment 

charges shall not be applied 

retroactively to accepted foreign 

military sales agreements. 

(c) When major defense equipment is 

sold at a reduced price due to age or 

condition, the NC recoupment charge 

shall be reduced by the same percentage 

reduction. 

(d) The full amount of ‘‘special’’ 

research, development, test, and 

evaluation and nonrecurring production 

costs incurred for the benefit of 

particular customers shall be paid by 

those customers. However, when a 

subsequent purchaser requests the same 

specialized features that resulted from 

the added ‘‘special’’ research, 

development, test, and evaluation and 

nonrecurring production costs, a pro 

rata share of those costs may be paid by 

the subsequent purchaser and 

transferred to the original customer if 

those special NCs exceed 50 million 

dollars. The pro rata share may be a unit 

charge determined by the DoD 

Component as a result of distribution of 

the total costs divided by the total 

production. Such reimbursements shall 

not be collected after 10 years have 

elapsed since acceptance of the ‘‘Letter 

of Offer and Acceptance’’ DoD 5105.38– 

M,3 by the original customer, unless 

otherwise authorized by USD(P). The 

U.S. Government shall not be charged 

any NC recoupment charges if it adopts 

the features for its own use or provides 

equipment with such features under a 

U.S. grant aid or similar program. 

(e) For co-production, codevelopment and cooperative 

development, or cooperative production 

DoD agreements, the policy in this part 

shall determine the allocation basis for 

recouping from the third-party 

purchasers the investment costs of the 

participants. Such DoD agreements shall 

provide for the application of the 

policies in this part to sales to third 

parties by any of the parties to the 

agreement and for the distribution of 

recoupment among the parties to the 

agreement. 

§ 165.7 Waivers (including reductions). 

(a) Section 21(e)(10)(B) of Public Law 

90–629, as amended, requires the 

recoupment of a proportionate amount 

of NCs of major defense equipment from 

foreign military sales customers but 

Section 21(e)(2) authorizes 

consideration of reductions or waivers 

for particular sales which, if made, 

significantly advance U.S. Government 

interests and the furtherance of mutual 

defense treaties between the United 

States and certain countries. Waivers 

may also be authorized if imposition of 

a NC recoupment charge likely would 

result in the loss of the sale; or, in the 

case of a sale of major defense 

equipment that is also being procured 

for the use of the Armed Forces, result 

in savings to the United States on the 

cost of the equipment procured for the 

Armed Forces, through a resulting 

increase in the total quantity of 

equipment purchased from the source of 

the equipment causing a reduction in 

the unit cost of the equipment, 

substantially offsetting the revenue 

foregone by reason of waiving the 

charge. Any increase in a NC 

recoupment charge previously 

considered appropriate under Section 

21(e)(1)(B) may be waived if the 

increase results from a correction of an 

estimate (reasonable when made) of the 

production quantity base that was used 

for calculating the charge. 

(b) Requests for waivers should 

originate with the foreign government 

and shall provide information on the 

extent of standardization to be derived 

as a result of the waiver. 

(1) Blanket waiver requests should not 

be submitted and shall not be 

considered. The term ‘‘blanket waiver’’ 

refers to a NC recoupment charge waiver 

that is not related to a particular sale; for 

example, waivers for all sales to a 

country or all sales of a weapon system. 

(2) A waiver request shall not be 

considered for a sale that was accepted 

without a NC recoupment charge 

waiver, unless the acceptance was 

conditional on consideration of the 

waiver request. 

(3) Requests for waivers shall be 

processed expeditiously, and a decision 

normally made to either approve or 

disapprove the request within 60 days 

after receipt. A waiver in whole or in 

part of the recoupment charge or a 

denial of the request shall be provided 

in writing to the appropriate DoD 

Component. 

Dated: October 31, 2011. 

Aaron Siegel, 

Alternate OSD Federal Register Liaison 

Officer, Department of Defense. 

[FR Doc. 2011–28601 Filed 11–3–11; 8:45 am] 

BILLING CODE 5001–06–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R03–OAR–2011–0801; FRL–9487–4] 

Approval and Promulgation of Air 

Quality Implementation Plans; District 

of Columbia, Maryland, Virginia, and 

West Virginia; Determinations of 

Attainment of the 1997 Fine Particle 

Standard for the Metropolitan 

Washington and MartinsburgHagerstown Nonattainment Areas 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: EPA is proposing to make a 

determination that the Metropolitan 

Washington, District of ColumbiaMaryland-Virginia (DC-MD-VA) and 

Martinsburg-Hagerstown, West VirginiaMaryland (WV-MD) fine particle (PM2.5) 

nonattainment areas (hereafter referred 

to as ‘‘Areas’’) have attained the 1997 

annual PM2.5 National Ambient Air 

Quality Standard (NAAQS) by the 

applicable attainment date of April 5, 

2010. These determinations are based 

upon complete, quality-assured, and 

certified ambient air monitoring data for 

the 2007–2009 monitoring period. EPA 

is finding these Areas to be in 

attainment, in accordance with the 

requirements of the Clean Air Act 

(CAA). 

DATES: Written comments must be 

received on or before December 5, 2011. 

ADDRESSES: Submit your comments, 

identified by Docket ID Number EPA– 

R03–OAR–2011–0801 by one of the 

following methods: 

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

the on-line instructions for submitting 

comments. 

B. Email: fernandez.cristina@epa.gov. 

C. Mail: EPA–R03–OAR–2011–0801, 

Cristina Fernandez, Associate Director, 

Office of Air Quality 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. 


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