`[Federal Register Volume 62, Number 174 (Tuesday, September 9, 1997)]
[Proposed Rules]
[Pages 47407-47411]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23656]


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DEPARTMENT OF DEFENSE

48 CFR Parts 212, 225, and 252

[DFARS Case 7-D022


Defense Federal Acquisition Regulation Supplement; Buy American 
Act Exception for Information Technology Products

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for comments.

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SUMMARY: The Director of Defense Procurement is proposing to amend the 
Defense Federal Acquisition Regulation Supplement (DFARS) to implement 
the determination by the Under Secretary of Defense (Acquisition & 
Technology) that it is not in the public interest to apply the 
restrictions of the Buy American Act to U.S. made information 
technology products, in acquisition subject to the Trade Agreements 
Act.

DATES: Comment date: Comments on the proposed rule should be submitted 
in writing to the address shown below on or before November 10, 1997, 
to be considered in the formulation of the final rule.

ADDRESSES: Interested parties should submit written comments to: 
Defense Acquisition Regulations Council, Attn: Ms. Amy Williams, PDUSD 
(A&T) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-
3062. Telefax number (703) 602-0350. Please cite DFARS Case 97-D022 in 
all correspondence related to this issue.

FOR FURTHER INFORMATION CONTACT:
Ms. Amy Williams, (703) 602-0131.

SUPPLEMENTARY INFORMATION:

Background

    This proposed rule adds a provision at DFARS 252.225-7020, Trade 
Agreements Certificate, and a clause at DFARS 252.225-7021, Trade 
Agreements, and makes other necessary amendments in DFARS Parts 212 and 
225 to implement the determination, signed by the Under Secretary of 
Defense (Acquisition & Technology) (USD (A&T)) on May 16, 1997, that it 
is not in the public interest, in acquisitions subject to the Trade 
Agreements Act, to apply the restrictions of the Buy American Act to 
U.S. made information technology products in Federal Supply Group 70 or 
74. Federal Supply Group 70 includes general purpose automatic data 
processing equipment, software (including firmware), supplies, and 
support equipment. Federal Supply Group 74 includes office machines and 
visible record equipment.
    In the determination and finding, USD (A&T) explains how the 
different rules of origin under the Trade Agreements Act and the Buy 
American Act result in evaluating products substantially transformed in 
the United States less favorably than if the product were substantially 
transformed in an eligible country. UDS (A&T) also finds that the 
different rules of origin place a disproportionately burdensome 
recordkeeping requirement on United States firms offering information 
technology products. Because manufacturers of information technology 
products commonly use worldwide sources for components, requiring 
manufacturers to distinguish between foreign and domestic components 
represents a significant deterrent to the acquisition of both 
commercial and state-of-the-art information technology products by DoD.
    Regarding the certification requirements of this rule, for 
acquisition of information technology products subject to the Trade 
Agreements Act, the certification requirement in paragraph (c) of the 
proposed provision at 252.225-7020, Trade Agreements Certificate, 
replaces and simplifies the existing certification requirement in 
paragraph (c) of the provision at DFARS 252.225-7006, Buy American 
Act--Trade Agreements--Balance of Payments Program Certificate. 
Therefore, for the purposes of Section 29 of the Office of Federal 
Procurement Policy Act (41 U.S.C. 425), this rule does not impose a new 
certification requirement.

B. Regulatory Flexibility Act

    This rule may 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. An Initial Regulatory 
Flexibility Analysis has been prepared and is summarized as follows: 
The rule will apply to all offerors/contractors offering information 
technology products in Federal Supply Group 70 or 74 to DoD, in 
acquisitions valued at $190,000 or more. The rule will particularly 
benefit offerors of U.S. made information technology end products that 
do not qualify as domestic end products. However, suppliers of domestic 
information technology products will also benefit to the extent that 
they no longer need to track the source of components. The rule will 
also affect suppliers of components for such information technology 
products, to the extent that suppliers of domestic components may face 
increased competition from suppliers of foreign components.
    With regard to the provision at 252.225-7003, Information for Duty-
Free Entry Evaluation, the rule will have a positive impact on small 
entities, because the rule prescribes use of the provision in 
solicitation that include the clause FAR 52.225-10, Duty-Free Entry, 
rather than all solicitations that include the clause at 252.225-7001, 
Buy American Act and Balance of Payments Program. This will reduce the 
number of respondents by about 100,000, of which it is estimated that 
35 percent may be small businesses, as it is generally the acquisitions 
of less than $100,000 that will no longer include the provision. In 
addition, responses to the questions in paragraph (b) of the provision 
are no longer required for eligible products under a trade agreement, 
or for nonqualifying country components of domestic end products (U.S. 
made end products if Alternate I is used) unless the offeror plans to 
request duty-free entry.
    A copy of the Initial Regulatory Flexibility Analysis may be 
obtained from the address specified herein. Comments are invited from 
small businesses and other interested parties. Comments from small 
entities concerning the affected DFARS subparts also will be considered 
in accordance with 5 U.S.C. 610. Such comments should be submitted 
separately and should cite DFARS Case 97-D022 in correspondence.

C. Paperwork Reduction Act

    This rule will result in a reduction of paperwork burden on 
offerors. The existing certification requirement at DFARS 252.225-7006, 
Buy American Act-Trade Agreements-Balance of Payments Program 
Certificate, has an approved information collection requirement under 
Office of Management and Budget (OMB) Clearance Number 0704-0259. This 
rule creates a certificate for use when the Trade Agreements Act, but 
neither the Buy American Act nor the Balance of Payments Program, 
applies. This

[[Page 47408]]

certificate is shorter than the Buy American Act-Trade Agreements-
Balance of Payments Program Certificate and, therefore, reduces the 
burden on offerors.
    In addition, the information collection requirements contained in 
the clause at DFARS 252.225-7003, Information for Duty-Free Entry 
Evaluation, are approved under OMB Clearance Number 0704-0187. It is 
estimated that by narrowing the clause prescription, limiting the 
requirement to respond when supplying domestic end products, and 
providing an alternate applicable to acquisitions of information 
technology products subject to the Trade Agreements Act, the amendments 
in this rule will result in an annual reduction of more than 486,000 
hours in the paperwork burden.

List of Subjects in 48 CFR Part 212, 225, and 252

    Government procurement.
Michele P. Peterson,
Executive Editor Defense Acquisition Regulations Council.
    Therefore, 48 CFR Part 212, 225, and 252 are proposed to be amended 
as follows:
    1. The authority citation for 48 CFR Parts 212, 225, and 252 
continues to read as follows:

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

PART 212--ACQUISITION OF COMMERCIAL ITEMS

    2. Section 212.301 is amended by redesignating paragraph (f)(i)(C) 
as (f)(i)(D), and by adding a new paragraph (f)(i)(C) to read as 
follows:


212.301   Solicitation provisions and contract clauses for the 
acquisition of commercial items.

    (f)(i) * * *
    (C) 252.225-7020, Trade Agreements Certificate.
* * * * *

PART 225--FOREIGN ACQUISITION

    3. Section 225.000-70 is amended by revising paragraph (m) to read 
as follows:


225.000-70   Definitions.

* * * * *
    (m) U.S. made end product is defined in the clauses at 252.225-
7007, Buy American Act-Trade Agreements-Balance of Payments Program, 
and 252.225-7021, Trade Agreements.
    4. Section 225.000-71 is amended by revising paragraph (c)(2) to 
read as follows:


225.000-71   General guidelines.

* * * * *
    (c) * * *
    (2) If the product is an eligible product under subpart 225.4, 
evaluate the offer under FAR 25.402, 225.105, and 225.402.
* * * * *
    5. Section 225.102 is amended by revising paragraph (a)(3)(A), 
redesignating paragraphs (a)(3)(B) and (a)(3)(C) as paragraphs 
(a)(3)(C) and (a)(3)(D) respectively, and by adding a new paragraph 
(a)(3)(B) to read as follows:


225.102   Policy.

    (a) * * *
    (3)(A) Specific public interest exceptions for DoD for certain 
countries are in 225.872.
    (B) The Under Secretary of Defense (Acquisition & Technology) has 
determined that, for procurements subject to the Trade Agreements Act, 
it is inconsistent with the public interest to apply the Buy American 
Act to information technology products in Federal Supply Group 70 or 74 
that are substantially transformed in the United States.
* * * * *
    6. Section 225.105 is amended by revising the introductory text and 
paragraphs (1), (2), and (3) to read as follows:


225.105   Evaluating offers.

    Use the following procedures instead of those in FAR 25.105. These 
evaluation procedures do not apply to acquisitions of information 
technology end products in Federal Supply Group 70 or 74 that are 
subject to the Trade Agreements Act.
    (1) Treat offers of eligible products under acquisitions subject to 
trade agreements as qualifying country offers. Treat all other offers, 
except domestic offers, as nonqualifying country offers (see Example 4 
in Table 25-1, Evaluation).
    (2) Except as provided in paragraph (3) of this section, evaluate 
offers by adding a 50 percent factor to the price (including duty) of 
each nonqualifying country offer (see Example 1 in Table 25-1, 
Evaluation).
    (i) Nonqualifying country offers include duty in the offered price. 
When applying the factor, evaluate based on the inclusion of duty, 
whether or not duty is to be exempted. If award is made on the 
nonqualifying country offer and duty is to be exempted through 
inclusion of the clause at FAR 52.225-10, Duty-Free Entry, award at the 
offered price minus the amount of duty identified in the provision at 
252.225-7003, Information for Duty-Free Entry Evaluation. See Example 
1, Alternate II, in Table 25-1, Evaluation.
    (ii) When a nonqualifying country offer includes more than one line 
item, apply the 50 percent factor--
    (A) On an item-by-item basis; or
    (B) On a group of items, if the solicitation specifically provides 
for award on a group basis.
    (3) When application of the factor would not result in the award of 
a domestic end product, i.e., when no domestic offers are received (see 
Example 3 of Table 25-1, Evaluation) or when a qualifying country offer 
is lower than the domestic offer (see Example 2 of Table 25-1, 
Evaluation), evaluate nonqualifying country offers without the 50 
percent factor.
    (i) If duty is to be exempted through inclusion of the clause at 
FAR 52.225-10, Duty-Free Entry, evaluate the nonqualifying country 
offer exclusive of duty by reducing the offered price by the amount of 
duty identified in the clause at 252.225-7003, Information for Duty-
Free Entry Evaluation (see Examples 2 and 3, Alternate II, of Table 25-
1, Evaluation). If award is made on the nonqualifying country offer, 
award at the offered price minus duty.
    (ii) If duty is not to be exempted, evaluate the nonqualifying 
country offer inclusive of duty (see Examples 2 and 3, Alternate I, of 
Table 25-1, Evaluation).
* * * *
    7. Section 225.109 is amended by revising paragraphs (a) and (d)(i) 
to read as follows:


Sec. 225.109  Solicitation provisions and contract clauses.

    (a) Use the provision at 252.225-7000, Buy American Act-Balance of 
Payments Program Certificate, instead of the provisions at FAR 52.225-
1, Buy American Certificate, and FAR 52.225-6, Balance of Payments 
Program Certificate. Use the provision in any solicitation which 
includes the clause at 252.225-7001, Buy American Act and Balance of 
Payments Program, unless the solicitation includes either the clause at 
252.225-7007, Buy American Act-Trade Agreements-Balance of Payments 
Program, or the clause at 252.225-7036, North American Free Trade 
Agreement Implementation Act.
* * * * *
    (d) * * *
    (i) Do not use the clause if an exception to the Buy American Act 
or Balance of Payments Program is known to apply. Do not use the clause 
when the clause at 252.225-7021, Trade Agreements, is used.
* * * * *
    8. Section 225.109-70 is revised to read as follows:

[[Page 47409]]

Sec. 225.109-70  Additional provisions and clauses.

    (a) Use the clause at 252.225-7002, Qualifying Country Sources as 
Subcontractors, in all solicitations and contracts that include the 
clause at 252.225-7001, Buy American Act and Balance of Payments 
Program, or the clause at 252.225-7021, Trade Agreements.
    (b) When only domestic ends products are acceptable, the 
solicitation must make a statement to that effect.
    9. Section 225.302 is amended by revising paragraphs (a)(iii) and 
(a)(iv), and by adding a new paragraph (a)(v) to read as follows:


Sec. 225.302  Policy.

    (a) * * *
    (iii) Do not apply to qualifying end products;
    (iv) Do not apply to articles, materials, or supplies produced or 
manufactured in Panama when purchased by and for the use of U.S. forces 
in Panama; and
    (v) For acquisitions subject to the Trade Agreements Act, do not 
apply to information technology products in Federal Supply Group 70 or 
74 that are substantially transformed in the United States.
* * * * *
    10. Section 225.402 is amended by revising paragraph (a)(1) to read 
as follows:


Sec. 225.402  Policy.

    (a) * * *
    (1) See 225.105 for evaluation of eligible products and U.S. made 
end products, except when acquiring information technology end products 
in Federal Supply Group 70 or 74 that are subject to the Trade 
Agreements Act.
* * * * *
    11. Section 225.408 is amended by revising paragraphs (a)(1) and 
(a)(2), by redesignating paragraphs (a)(3) and (a)(4) as paragraphs 
(a)(5) and (a)(6) respectively, and by adding new paragraphs (a)(3) and 
(a)(4) to read as follows:


Sec. 225.408  Solicitation provisions and contract clauses.

    (a)(1) Use the provision at 252.225-7006, Buy American Act-Trade 
Agreements-Balance of Payments Program Certificate, instead of the 
provision at FAR 52.225-8, Buy American Act-Trade Agreements-Balance of 
Payments Program Certificate, in all solicitations that include the 
clause at 252.225-7007, Buy American Act-Trade Agreements-Balance of 
Payments Program.
    (2) Except as provided in 225.408(a)(4), use the clause at 252.225-
7007, Buy American Act-Trade Agreements-Balance of Payments Program, 
instead of the clause at FAR 52.225-9, Buy American Act-Trade 
Agreements-Balance of Payments Program. The clause need not be used 
where purchase from foreign sources is restricted (see 
225.403(d)(1)(B)). The clause may be used where the contracting officer 
anticipates a waiver of the restriction. For procurements by the U.S. 
Army Corps of Engineers, use the clause with its Alternate I.
    (3) Use the provision at 252.225-7020, Trade Agreements 
Certificate, in all solicitations that include the clause at 252.225-
7021, Trade Agreements.
    (4) Use the clause at 252.225-7021, Trade Agreements, instead of 
the clause at FAR 52.225-9, Buy American Act--Trade Agreements--Balance 
of Payments Program, when acquiring information technology products in 
Federal Supply Group 70 or 74. For procurements by the U.S. Army Corps 
of Engineers, use the clause with its Alternate I.
* * * * *
    12. Section 225.603 is amended by revising paragraph (5) to read as 
follows:


225.603  Procedures.

* * * * *
    (5) Exclude from the evaluation of domestic end products, or 
information technology end products in Federal Supply Group 70 or 74 in 
acquisitions subject to the Trade Agreements Act, any duty for 
nonqualifying country components listed in the provision at 252.225-
7003, Information for Duty-Free Entry Evaluation, for which duty-free 
entry will be granted. Except for acquisitions of information 
technology end products in Federal Supply Group 70 or 74 subject to the 
Trade Agreements Act, apply the evaluation procedures for the Buy 
American Act in accordance with 225.105.
* * * * *
    13. Section 225.605-70 is amended by adding paragraph (e) to read 
as follows:


225.605-70  Additional solicitation provisions and contract clauses.

* * * * *
    (e) Use the provision at 252.225-7003, Information for Duty-Free 
Entry Evaluation, in all solicitations that include the clause at FAR 
52.225-10, Duty-Free Entry. Use the provision with its Alternate I when 
the clause at 252.225-7021, Trade Agreements, is used.
    14. Section 225.872-4 is amended by revising the introductory text 
of paragraph (c) to read as follows:


225.872-4  Evaluation of offers.

* * * * *
    (c) Evaluate offers of end products from the qualifying country 
sources in 225.872-1(b) without application of the 50 percent Buy 
American Act or Balance of Payments Program evaluation factor. If the 
offer, as evaluated, is low or otherwise eligible for award, the 
contracting officer shall request an exemption of the Buy American Act/
Balance of Payments Program as inconsistent with the public interest, 
unless another exception such as the Trade Agreements Act applies.
* * * * *

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    15. Section 252.212-7001 is amended by revising the clause date; in 
paragraph (b) by removing the entry ``____ 252.225-7007 Trade 
Agreements (10 U.S.C. 2502-2582)''; and in paragraph (b) by adding 
entries, in numerical order, to read as follows:


252.212-7001  Contract terms and conditions required to implement 
statutes or Executive Orders applicable to Defense acquisitions of 
commercial items.

* * * * *

Contract Terms and Conditions Required to implement statutes or 
Executive Orders Applicable to Defense Acquisitions of Commercial Items 
(______ 19____)

* * * * *
    (b) * * *
    ________ 252.225-7007 Buy American Act--Trade Agreements--Balance 
of Payments Programs.
    (________ Alternate I) (41 U.S.C. 10a-10d, 19 U.S.C. 2501-2518, 
and 19 U.S.C. 3301 note)
* * * * *
    ________ 252.225-7021 Trade Agreements
    (________ Alternate I) (19 U.S.C. 2501-2518 and 19 U.S.C. 3301 
note)
* * * * *
    16. Section 252.225-7003 is amended by revising the introductory 
text, the clause date, and paragraph (a); by removing paragraph (d); 
and by adding Alternate I. The revised and added text reads as follows:


252.225-7003   Information for duty-free entry evaluation.

    As prescribed in 225.605-70(e), use the following provision:

Information for Duty-Free Entry Evaluation (xxx 19xx)

    (a) Does the offeror propose to furnish--
    (1) A domestic end product with nonqualifying country components 
for which the offeror requests duty-free entry; or

[[Page 47410]]

    (2) A foreign end product consisting of end items, components, 
or material of foreign origin other than those that will be accorded 
duty-free entry as qualifying country end products or components, or 
eligible products under a trade agreement?
Yes (  )
No (  )
* * * * *
    ALTERNATE I (xxx 19xx). As prescribed in 225.605-70(e), 
substitute the following paragraph (a) for paragraph (a) of the 
basic clause:
    (a) Does the offeror propose to furnish a U.S. made end product 
with nonqualifying country components for which the offeror requests 
duty-free entry?
Yes (  )
No (  )

    17. Section 252.225-7007 is amended by revising the section 
heading, and the clause title and date to read as follows:


252.225-7007   Buy American Act--Trade agreements--Balance of payments 
program.

* * * * *

Buy American Act--Trade Agreements--Balance of Payments Program

(xxx 19xx)
* * * * *
    18. Section 252.225-7020 is added to read as follows:


252.225-7020   Trade Agreements certificate.

    As prescribed in 225.408(a)(3), use the following provision:

Trade Agreements Certificate (xxx 19xx)

    (a) Definitions.
    ``Caribbean Basin country end product,'' ``designated country 
end product,'' ``NAFTA country end product,'' ``nondesignated 
country end product,'' ``qualifying country end product,'' and 
``U.S. made end product'' have the meanings given in the Trade 
Agreements clause of this solicitation.
    (b) Evaluation.
    Offers will be evaluated in accordance with the policies and 
procedures of Part 225 of the Defense Federal Acquisition Regulation 
Supplement. Offers of foreign end products that are not U.S. made, 
qualifying country, designated country, Caribbean Basin country, or 
NAFTA country end products will not be considered for award, unless 
the Contracting Officer determines that there are no offers of such 
end products; or the offers of such end products are insufficient to 
fulfill the requirements; or a national interest exception to the 
Trade Agreements Act is granted.
    (c) Certifications.
    (1) The Offeror certifies that each end product to be delivered 
under this contract, except those listed in paragraph (c)(2) of this 
provision, is a U.S. made, qualifying country, designated country, 
Caribbean Basin country, or NAFTA country end product.
    (2) The following supplies are other nondesignated country end 
products:
(insert line item number)
----------------------------------------------------------------------

(insert country of origin)
----------------------------------------------------------------------

(End of provision)
    19. Section 252.225-7021 is added to read as follows:


252.225-7021   Trade Agreements.

    As prescribed in 225.408(a)(4), insert the following clause:

Trade Agreements (xxx 19xx)

    (a) Definitions.
    As used in this clause--
    (1) Caribbean Basin country means--

Antigua and Barbuda
Aruba
Bahamas
Barbados
Belize
British Virgin Islands
Costa Rica
Dominica
Dominican Republic
El Salvador
Grenada
Guatemala
Guyana
Haiti
Honduras
Jamaica
Montserrat
Netherlands Antilles
Nicaragua
Panama
St. Kitts-Nevis
St. Lucia
St. Vincent and the Grenadines
Trinidad and Tobago
    (2) Caribbean Basin country end product.--
    (i) Means an article that--
    (A) Is wholly the growth, product, or manufacture of a Caribbean 
Basin country; or
    (B) In the case of an article that consists in whole or in part 
of materials from another country or instrumentality, has been 
substantially transformed in a Caribbean Basin country 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 so 
transformed. The term refers to a product offered for purchase under 
a supply contract, but for purposes of calculating the value of the 
end product includes services (except transportation services) 
incidental to its supply, provided that the value of those 
incidental services does not exceed the value of the product itself.
    (ii) Excludes products, other than petroleum and any product 
derived from petroleum, that are not granted duty-free treatment 
under the Caribbean Basin Economic Recovery Act (19 U.S.C. 2703(b)). 
These exclusions presently consist of--
    (A) Textiles and apparel articles that are subject to textile 
agreements;
    (B) Footwear, handbags, luggage, flat goods, work gloves, and 
leather wearing apparel not designated as eligible articles for the 
purpose of the Generalized System of Preferences under Title V of 
the Trade Act of 1974;
    (C) Tuna, prepared or preserved in any manner in airtight 
containers; and
    (D) Watches and watch parts (including cases, bracelets, and 
straps) of whatever type, including, but not limited to, mechanical, 
quartz digital, or quartz analog, if such watches or watch parts 
contain any material that is the product of any country to which 
Harmonized Tariff Schedule column 2 rates of duty apply.
    (3) Components means those articles, materials, and supplies 
directly incorporated into end products.
    (4) Designated country means--
Aruba
Austria
Bangladesh
Belgium
Benin
Bhutan
Botswana
Burkina Faso
Burundi
Canada
Cape Verde
Central African Republic
Chad
Comoros
Denmark
Djibouti
Equatorial Guinea
Finland
France
Gambia
Germany
Greece
Guinea
Guinea-Bissau
Haiti
Hong Kong
Ireland
Israel
Italy
Japan
Kiribati
Lesotho
Liechtenstein
Luxembourg
Malawi
Maldives
Mali
Mozambique
Nepal
Netherlands
Niger
Norway
Portugal
Republic of Korea
Rwanda
Sao Tome and Principe
Sierra Leone
Singapore
Somalia
Spain
Sweden
Switzerland
Tanzania U.R.
Togo
Tuvalu
Uganda
United Kingdom
Vanuatu
Western Samoa
Yemen
    (5) Designated country end product means an article that--
    (i) Is wholly the growth, product, or manufacture of the 
designated country; or

[[Page 47411]]

    (ii) In the case of an article that consists in whole or in part 
of materials from another country or instrumentality, has been 
substantially transformed in a designated country 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 so 
transformed. The term refers to a product offered for purchase under 
a supply contract, but for purposes of calculating the value of the 
end product includes services (except transportation services) 
incidental to its supply, provided that the value of those 
incidental services does not exceed the value of the product itself.
    (6) End product means those articles, materials, and supplies to 
be acquired for public use under the contract. For this contract, 
the end products are the line items to be delivered to the 
Government (including supplies to be acquired by the Government for 
public use in connection with service contracts, but excluding 
installation and other services to be performed after delivery).
    (7) NAFTA country end product means an article that--
    (i) Is wholly the growth, product, or manufacture of the NAFTA 
country; or
    (ii) In the case of an article that consists in whole or in part 
of materials from another country or instrumentality, has been 
substantially transformed in a NAFTA country 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 so 
transformed. The term refers to a product offered for purchase under 
a supply contract, but for purposes of calculating the value of the 
end product includes services (except transportation services) 
incidental to its supply, provided that the value of those 
incidental services does not exceed the value of the product itself.
    (8) Nondesignated country end product means any end product that 
is not a U.S. made end product or a designated country end product.
    (9) North American Free Trade Agreement (NAFTA) country means 
Canada or Mexico.
    (10) Qualifying country means any country set forth in 
subsection 225.872-1 of the Defense Federal Acquisition Regulation 
(FAR) Supplement.
    (11) Qualifying country end product means--
    (i) An unmanufactured end product mined or produced in a 
qualifying country; or
    (ii) An end product manufactured in a qualifying country if the 
cost of the components mined, produced, or manufactured in the 
qualifying country and its components mined, produced, or 
manufactured in the United States exceeds 50 percent of the cost of 
all its components.
    (12) United States means the United States, its possessions, 
Puerto Rico, and any other place subject to its jurisdiction, but 
does not include leased bases or trust territories.
    (13) U.S. made end product means an article that--
    (i) Is wholly the growth, product, or manufacture of the United 
States; or
    (ii) In the case of an article that consists in whole or in part 
of materials from another country or instrumentality, has been 
substantially transformed in the United States 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 so 
transformed.
    (b) Unless otherwise specified, the Trade Agreements Act of 1979 
(19 U.S.C. 2501 et seq.), the North American Free Trade Agreement 
Implementation Act of 1993 (19 U.S.C. 3301 note), and the Caribbean 
Basin Initiative apply to all items in the Schedule.
    (c) (1) The Contractor agrees to deliver under this contract 
only U.S. made, qualifying country, designated country, Caribbean 
Basin country, or NAFTA country end products unless, in its offer, 
it specified delivery of other nondesignated country end products in 
the Trade Agreements Certificate provision of the solicitation.
    (2) The Contractor may not supply a nondesignated country end 
product other than a qualifying country end product, a Caribbean 
Basin country end product, or a NAFTA country end product, unless--
    (i) The Contracting Officer has determined that offers of U.S. 
made end products or qualifying, designated, Caribbean Basin, or 
NAFTA country end products from responsive, responsible offerors are 
either not received or are insufficient to fill the Government's 
requirements; or
    (ii) A national interest waiver has been granted under section 
302 of the Trade Agreements Act of 1979 (see FAR 25.402(c)).
    (d) The offered price of end products listed under paragraph 
(c)(2) of the Trade Agreements Certificate provision of the 
solicitation must include all applicable duty, whether or not a 
duty-free entry certificate will be granted. The offered price of 
qualifying country, designated country, Caribbean Basin country, or 
NAFTA country end products for line items subject to the Trade 
Agreements Act, or the North American Free Trade Agreement 
Implementation Act, should not include custom fees or duty. The 
offered price of U.S. made end products should not include duty for 
qualifying country components.

(End of clause)

    ALTERNATIVE I (XXX 19XX). As described in 225.408(a)(4), delete 
Singapore from the list of designated countries in paragraph (a)(4) 
of the basic clause.


252.225-7035  [Amended]

    20. Section 252.225-7035 is amended in the introductory text by 
revising the reference ``225.408(a)(3)'' to read ``225.408(a)(5)''.


252.225-7036  [Amended]

    21. Section 252.225-7036 is amended in the introductory text by 
revising the reference ``225.408(a)(4)'' to read ``225.408(a)(6)''.

[FR Doc. 97-23656 Filed 9-8-97; 8:45 am]
BILLING CODE 5000-04-M`