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[Federal Register Volume 76, Number 32 (Wednesday, February 16, 2011)]
[Proposed Rules]
[Pages 8961-8962]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-3401]

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AGENCY FOR INTERNATIONAL DEVELOPMENT

22 CFR Part 228

RIN 0412-AA70

Rules on Source, Origin and Nationality for Commodities and 
Services Financed by USAID

AGENCY: United States Agency for International Development (USAID).

ACTION: Advanced notice of proposed rulemaking.

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SUMMARY: The purpose of this notice is to solicit comments on whether 
changes are needed to USAID's rules on Source, Origin, and Nationality 
(S/O/N). This solicitation is in furtherance of a USAID initiative to 
review and if necessary, revise these rules in order to reduce the 
burden of procurement processes for USAID and contractors and grantees 
implementing USAID-funded development assistance activities and 
programs. In particular, USAID wishes to simplify Agency S/O/N 
procedures as implemented in our regulations and align them more 
closely with statutory procurement authorities.

DATES: Please submit comments no later than April 4, 2011.

ADDRESSES: You may submit comments, identified by RIN number 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, 1300 Pennsylvania Ave., NW., Washington DC 20523, 
Attention: John Niemeyer, Esq.
    Instructions: All submissions received must include the Agency name 
and docket number or Regulatory Information Number (RIN) 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. For 
further instructions on submitting comments, see the SUPPLEMENTARY 
INFORMATION section of this document.
    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 as it determines how to revise its 
S/O/N regulation and will publish any proposed changes to this 
regulation for public comment under a separate publication in the 
Federal Register.

FOR FURTHER INFORMATION CONTACT: John Niemeyer, Esq. Telephone: 202-
712-5053, E-mail: jniemeyer@usaid.gov.

SUPPLEMENTARY INFORMATION:

1. Background

    Currently, USAID implements the statutory procurement directives in 
Section 604(a) of the Foreign Assistance Act of 1961 (FAA), as amended, 
through the creation and application of ``principal geographic codes'' 
found at 22 CFR 228.03 and the related concepts of ``source,'' 
``origin'' and ``nationality'' as defined or described in 22 CFR 228. 
Geographic codes set forth at USAID's Automated Directives System (ADS) 
Chapter 260 identify geographic entities--countries, territories, 
organizations, regions, and sub-regions--and program activities 
associated with geographic entities. They are established and used by 
USAID for administrative purposes, including determining the source, 
origin, and nationality of commodities and services financed by USAID. 
Section 604(a) of the FAA allows for procurement of program-funded 
goods and services only in the United States, the recipient country, or 
developing countries (excluding advanced developing countries); 
however, no single geographic code reflects this statutory directive. 
USAID employees as well as USAID-funded contractors and grantees, spend 
a substantial amount of time and resources interpreting, applying, and 
when necessary and appropriate, seeking waivers from the application of 
the current codes and related rules. This extensive process results in 
significant use of resources, and at times, uncertainty across USAID in 
application of 22 CFR Part 228. In light of these issues, USAID is 
inquiring whether or not geographic codes developed before the current 
era of globalized manufacturing processes and which usually limit 
procurements to one country are still relevant and effective in today's 
globalized economy. In addition, USAID is concerned with the cost of 
compliance with the current geographic code requirements. Anecdotal 
evidence suggests that the current system of authorizing a specific 
geographic code for particular procurements creates delays in 
implementation of sometimes urgently needed assistance. In situations 
where procurement from the one designated geographic code may not be 
possible, a waiver may be required to implement the project 
effectively, adding to the cost and detracting from the effectiveness 
of implementation. For example, one USAID contractor estimates the 
average time to process a waiver request for its programs at 55 days. 
Because the cost of the resources expended in these efforts means fewer 
resources available for project implementation and foreign assistance, 
USAID is considering revising the S/O/N regulation to simplify it, to 
be more consistent with the underlying statutory requirements of 
Section 604(a) of the FAA, and to streamline the related implementation 
procedures.
    Any issues in this rulemaking that relate to cargo preference will 
be covered by the comprehensive rulemaking that is being developed to 
govern the Maritime Administration's cargo preference program.

2. Questions

    USAID invites comments and suggestions on the existing source, 
origin, and nationality rules in 22 CFR Part 228. In particular:
    [dec221] 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?
    [dec221] Should the regulatory guidance concerning ``nationality'' 
(the place of incorporation, ownership, citizenship, residence, etc. of 
suppliers of USAID-funded goods and services) be modified,

[[Page 8962]]

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?
    [dec221] 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?
    [dec221] 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?
    [dec221] 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 the 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 requests commenters to provide information and supporting data 
related to:
     The potential costs of modifying the existing regulatory 
language noted above.
     The potential quantifiable efficiency benefits of 
modifying the regulatory language noted above.
    Revisions to this regulation will have an impact on related 
provisions in the 48 CFR 7 Agency for International Development 
Acquisition Regulation (AIDAR) and various chapters in USAID's 
Automated Directives System (ADS), including but not limited to ADS 
chapters 303, 310, and 311 (the ADS is accessible at http://www.usaid.gov/policy/ads/).

    Dated: February 1, 2011.
John Niemeyer,
Assistant General Counsel, USAID.
[FR Doc. 2011-3401 Filed 2-11-11; 4:15 pm]
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