1396 Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 

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. 

2 Geographic codes were established to note, for 

every implementing agreement, the source, origin 

and nationality authorized for every good and 

service procurement transaction under that 

implementing agreement. 

PART 98—IMPORTATION OF CERTAIN 

ANIMAL EMBRYOS AND ANIMAL 

SEMEN 

■ 29. The authority citation for part 98 

continues to read as follows: 

Authority: 7 U.S.C. 1622 and 8301–8317; 

21 U.S.C. 136 and 136a; 31 U.S.C. 9701; 7 

CFR 2.22, 2.80, and 371.4. 

§ 98.3 [Amended] 

■ 30. In § 98.3, the introductory text is 

amended by removing the words ‘‘listed 

in § 94.1(a)(2)’’ and adding in their place 

‘‘listed under § 94.1(a)’’. 

§ 98.30 [Amended] 

■ 31. Section 98.30 is amended by 

removing the definition of APHISdefined European CSF region. 

§ 98.38 [Amended] 

■ 32. Section 98.38 is amended as 

follows: 

■ a. In the introductory text, by adding 

the words ‘‘, as defined in § 94.0 of this 

subchapter,’’ immediately after the 

words ‘‘APHIS-defined EU CSF region’’; 

and 

■ b. In paragraph (b)(1), by removing the 

words ‘‘in §§ 94.9(a) and 94.10(a) of this 

chapter as one’’ and adding in their 

place the words ‘‘under §§ 94.9(a) and 

94.10(a) of this chapter as a region’’. 

Done in Washington, DC, this 4th day of 

January 2012. 

Kevin Shea, 

Acting Administrator, Animal and Plant 

Health Inspection Service. 

[FR Doc. 2012–226 Filed 1–9–12; 8:45 am] 

BILLING CODE 3410–34–P 

AGENCY FOR INTERNATIONAL 

DEVELOPMENT 

22 CFR Part 228 

RIN 0412–AA70 

Procurement of Commodities and 

Services Financed by USAID Federal 

Program Funds. 

AGENCY: Agency for International 

Development (USAID). 

ACTION: Final rule. 

SUMMARY: This Final Rule revises 

USAID regulations to simplify 

implementation of the statutory 

requirement that Federal assistance, or 

program, 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 new 

code for procurements from the U.S., 

recipient country and developing 

countries as well as reflecting existing, 

special procurement authorities 

established by Congress; deleting the 

concept of ‘‘origin,’’ and simplifying the 

concepts of ‘‘source’’ and ‘‘nationality’’ 

to reflect better Congress’s directive to 

procure from the U.S., recipient or 

developing countries; and simplifying 

application of the statutory waiver 

authority in the FAA. 

DATES: Effective: February 6th, 2012. 

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 Final Rule 

Æ Purpose of the Rule 

Æ USAID Regulations Amended by This 

Rule 

Æ Summary of Changes to the Existing 

Rule 

• Part III. Responses to Comments Received 

on the Proposed Rule 

• Part IV. Regulatory Planning and Review: 

Findings and Certifications of Impact 

Assessment 

On August 19, 2011, USAID 

published in the Federal Register (76 

FR 51916) a Proposed Rule which 

substantially modified the current 

S/O/N regulation by establishing a 

single primary geographic (source) code, 

deleting the concept of ‘‘origin’’ from 

the rule, requiring recipients and 

contractors to document ‘‘availability 

for purchase’’ of commodities and 

services, and streamlining existing 

waiver procedures. The Agency 

provided a forty five day public 

comment period on the Proposed Rule, 

which ended Monday, October 3rd, 

2011. The Agency also offered the 

public the opportunity to submit 

comments by surface mail, email or fax. 

The publication of the Proposed Rule 

was the second step in a three step, 

public ‘‘notice and comment’’ 

rulemaking procedure. Previously on 

February 16, 2011, USAID published an 

‘‘Advanced Notice of Proposed 

Rulemaking’’ (ANPRM) in the Federal 

Register (76 FR 8961), proposing 

changes to the current regulation, 

soliciting suggestions and comments for 

such changes, and providing a forty five 

day comment period, which ended 

April 4, 2011. Comments received in 

response to the ANPRM were discussed 

and reflected in the publication of the 

Proposed Rule. USAID’s discussion of 

the comments received in response to 

the Proposed Rule, below at part III, and 

reflection of those comments in this 

‘‘Final Rule,’’ completes the public 

notice and comment rulemaking 

process. USAID also consulted with the 

relevant Congressional committees 

concerning revisions to the regulation. 

USAID received sixteen public 

comments in response to the Proposed 

Rule, all strongly in favor of substantial 

simplification of the regulation to keep 

pace with the globalization of the 

economy. Comments also urged revision 

of the proposed requirement for 

documentation of multiple, yearly sales 

as part of the definition of ‘‘available for 

purchase;’’ revisions to the 

‘‘nationality’’ proposed requirements to 

allow eligibility of foreign-owned (nongovernmental) development 

organizations employing a majority of 

U.S. or developing country staff ; and 

clarification of the waiver requirements. 

Comments received in response to the 

Proposed Rule are discussed and 

addressed in greater detail, below in 

part III, Responses to Comments 

Received on the Proposed Rule. 

I. Background 

Historically, the initial version of 

Section 604(a) provided that federal 

program 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 program 

funded procurements under the FAA. 

USAID also adapted the ‘‘principal 

geographic codes’’ 2 developed under 

the CIP to apply to all USAID financed, 

Federal program funded procurements, 

in part in order to address Congress’s 


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3Recipient countries are also called ‘‘cooperating 

countries’’ to distinguish them from recipients of 

grants. 4Prior to Public Law 102–391, FAA 604(a) stated, 

‘‘Funds made available under this chapter may be 

used for procurement outside the United States 

only if the President determines that such 

procurement will not result in adverse effects upon 

the economy of the United States or the industrial 

mobilization base, with special reference to any 

areas of labor surplus or to the net position of the 

United States in its balance of payments with the 

rest of the world, which outweigh the economic or 

other advantages to the United States of less costly 

procurement outside the United States, and only if 

the price of any commodity procured in bulk is 

lower than the market price prevailing in the 

United States at the time of procurement, adjusted 

for differences in the cost of transportation to 

destination, quality, and terms of payment.’’ 

concern that U.S. taxpayer funded 

foreign assistance not provide any direct 

benefits to the governments of 

communist countries during the Cold 

War. The practical result of these 

decisions was that all program funded 

procurement transactions financed by 

USAID were restricted to the source, 

origin and nationality geographic code 

specified for the implementing 

agreement. 

In 1993, Congress amended the FAA 

procurement authorities in Section 

604(a) to provide that federal program 

funds made available to USAID may be 

used for procurement from the U.S., the 

recipient country,3 or developing 

countries (but not advanced developing 

countries).4 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 principal geographic 

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. The costs of 

compliance with the complex 

regulation, and of the self-imposed 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. 

The overwhelming majority of 

comments received in response to the 

Proposed Rule (as well as suggestions in 

response to the ANPRM) endorse this 

revised approach of allowing 

procurements in the recipient and 

developing countries as well as the U.S., 

as a ‘‘very positive’’ and ‘‘very 

responsive’’ approach which is ‘‘long 

overdue’’ and will ‘‘eliminate many 

longstanding and problematic issues’’ 

with a current regulation that is ‘‘overly 

complex and difficult to implement.’’ 

Most commenters anticipated that the 

‘‘streamlining of the procurement 

process’’ will allow resources to go 

further and achieve greater results ‘‘at a 

time when aid and development 

communities are challenged to do more 

with fewer resources.’’ The overall tenor 

of all comments received was favorable, 

even highly so, to the proposed 

revisions. Some commenters 

commented that the revisions did not go 

as far as possible in terms of eliminating 

requirements and imposing internal 

deadlines on the time for processing 

waivers. All comments are discussed 

below at part III. 

II. The Final 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 federal program 

funds made available under the FAA 

may be used for procurement ‘‘in the 

United States, the recipient country, or 

developing countries.’’ The Final Rule 

also includes principal geographic 

codes that reflect existing, special 

procurement authorities for the 

Development Fund for Africa, 22 U.S.C. 

2293 et seq. (DFA) and New 

Independent States (NIS) 22 U.S.C. 

2295b, established by Congress. 

B. USAID Regulations Amended by This 

Rule 

The Final Rule amends in its entirety 

22 CFR part 228, Rules on Source, 

Origin and Nationality for Commodities 

and Services Financed by USAID. The 

Final Rule applies to all commodities 

and services procured under 

implementing instruments financed by 

USAID with program (sometimes called 

assistance) funds under the authority of 

the FAA. 

C. Summary of Changes to the Existing 

Rule 

The Final Rule revises the existing 

regulation to track more closely the 

statutory procurement authority 

provided under the FAA by establishing 

a new principal geographic code for 

procurements from the U.S., recipient 

country, and developing countries, as 

well as including in the Final Rule 

special principal geographic codes 

under the DFA and NIS authorities, 

above. The Final 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 

countries, or developing countries. 

Based on comments received, the Final 

Rule additionally deletes from the 

Proposed Rule a requirement for 

documentation of ‘‘multiple sales’’ 

under the definition of the statutory 

term ‘‘available for purchase,’’ and 

substitutes a prohibition that recipients 

and contractors do not engage vendors 

to circumvent the ‘‘source’’ provisions 

by ordering commodities otherwise ‘‘not 

available’’ in countries in the designated 

principal geographic code at the time of 

sale. This change achieves the same 

objective as that notified in the 

Proposed Rule but will impose fewer 

burdens on implementers with 

requirements that would have no 

practical effect on compliance. The 

Final Rule clarifies that waivers to 

permit procurements beyond the U.S., 

the recipient country, or developing 

countries will be to Code 935— any area 

or country but excluding ‘‘prohibited 

sources’’ (formerly referred to as 

‘‘foreign policy restricted countries’’), 

reflecting USAID’s agreement with 

comments that explicit reference be 

made to Code 935 as the code to which 

waivers will authorize procurement. 

USAID will maintain a list of prohibited 

sources which will be available in 

USAID’s Automated Directives System, 

ADS 310; as in the current rule, there is 

no waiver of the statutory prohibited 

sources prohibition. The Final Rule also 

raises the amount, from $5 million to 

$10 million, for which foreign-owned 

(non-governmental) local firms will be 

eligible for construction procurement 

because that amount has not been raised 

in over fifteen years, and confirms the 

current requirement that USAID 

determine that no capable U.S. 

construction company is operating in 

the cooperating/recipient country or, if 

there is such a company, that it is not 

interested in bidding for the proposed 

contract. Finally, the Final 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 


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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. This clarification more 

explicitly reflects past and current 

Agency practice. 

III. Responses to Comments Received 

on the Proposed Rule 

On August 19, 2011 USAID published 

in the Federal Register (76 FR 51916) a 

Proposed Rule for Procurement of 

Commodities and Services Financed by 

USAID. By October 3, 2011, the closing 

date for comments, USAID received 

sixteen (16) external comments, 

including comments from USAID 

partners that have received USAID 

funding, trade associations that 

represent them, and other interested 

parties. All of the comments were 

considered, and all relevant or 

substantial comments are discussed 

below. The following is a summary of 

comments by issue, and the Agency’s 

responses to those comments. 

A. General Comments 

All of the comments received were in 

favor of revision of USAID’s 

procurement regulations; the variation 

of opinion among commenters 

concerning how to revise the regulations 

is discussed below. Specific areas 

identified as significant improvement 

are improved procurement authorities 

in cooperating and developing 

countries, removal of the increasingly 

troublesome concept of ‘‘origin,’’ 

improved waiver procedures and overall 

clarification and simplification of the 

rule. 

Comment: Comments from some forprofit and non-profit USAID program 

implementing grantees and contractors 

urged USAID to revise procurement 

practices even more broadly, by 

requesting Congress to amend the 

procurement authorities in the FAA to 

untie aid completely. 

Response: While USAID consulted 

with the pertinent authorizing and 

appropriations Congressional committee 

staff concerning the revisions reflected 

in the Proposed Rule, amendments to 

the FAA are beyond the scope of this 

rulemaking process, and USAID has no 

plans to request statutory amendments 

to FAA procurement provisions at this 

time. 

Comment: Several comments lauded 

USAID for engaging in a public 

rulemaking process but urged USAID to 

avoid reliance on internal agency 

policies and eliminate or limit 

references to such policies, including 

USAID’s Automated Directive System 

(ADS). Those commenters indicated 

references should be to the USAID Web 

site so as to not give unwarranted 

regulatory credence to the ADS. 

Response: USAID shares the concern 

that reliance on additional sources of 

guidance concerning application of the 

source and nationality requirements 

may result in inconsistent application of 

the Final Rule. USAID has limited ADS 

references in the Final Rule to the 

minimum necessary to ensure the rule 

is in compliance with sometimes 

changing Congressional mandates, 

including those concerning prohibited 

sources and restricted commodities. 

Because the list of prohibited sources 

and restricted commodities is, at least in 

part, determined by foreign policy and 

consultations with Congress on annual 

appropriations, including non-binding 

committee reports and statements of 

managers, a minimal amount of 

flexibility in defining prohibited sources 

and restricted commodities is necessary 

for effective and efficient 

implementation of the Final Rule. 

Comment: While all comments 

supported the removal of the concept of 

‘‘origin’’ from the rule, some comments 

expressed concern that the requirement 

that recipients and contractors 

document that commodities be 

‘‘available for purchase’’ in a country 

reflected in the principal geographic 

code added back complication into 

USAID’s clarification and simplification 

of the rule. Others opined that the 

concept of a single ‘‘principal 

geographic code’’ did not reflect other 

statutory procurement authorities, such 

as those benefitting the Development 

Fund for Africa and New Independent 

States. 

Response: These concerns are 

addressed below in the comments on 

§ 228.01, Definitions, and § 228.03, 

Identification of the Principal 

Geographic Codes. 

Comment: Several commenters 

advised USAID to revise the 

procurement provisions ‘‘reserved’’ at 

22 CFR part 226, Administration of 

Assistance Awards to Nongovernmental Organizations. 

Response: USAID appreciates these 

comments, but they are outside the 

scope of this rule. Nonetheless, USAID 

recognizes the need to ensure 

consistency between this rule and 

related regulations and is in the process 

of reviewing and determining 

appropriate revisions to 22 CFR part 

226; ADS chapters 303, 310, 311, 312, 

and 221; and 48 CFR chapter 7 (the 

USAID Acquisition Regulation). Such 

changes will be made to conform to the 

Final Rule and are, therefore, logical 

outgrowths of the Final Rule. 

Comment: There is confusion as to 

what extent the prohibition on 

assistance to countries to which 

assistance is prohibited by law 

(simplified to ‘‘prohibited sources’’ in 

the Final Rule) extends to citizens of 

those countries as consultants/ 

independent contractors. 

Response: The Final Rule clarifies in 

§ 228.15 that citizens or permanent 

residents of countries which are 

prohibited sources are not eligible to 

provide commodities or services as an 

employee, individual contractor, or 

consultant under this rule. 

Comment: The term ‘‘goods’’ should 

be used in place of the term 

‘‘commodities’’ in the Final Rule, 

because the term ‘‘commodities’’ may 

create confusion due to its use in 

USAID’s food programs. 

Response: In order to align USAID’s 

rules for procurement completely with 

the Congressional mandate for 

‘‘Procurement’’ at Section 604(a) of the 

FAA, the Final Rule contains the same 

terminology as Section 604(a), including 

the statutory terms ‘‘recipient country’’ 

and ‘‘commodities.’’ The Final Rule 

includes alternative, more familiar 

terms such as ‘‘cooperating country’’ 

along with recipient country, and 

‘‘goods’’ along with commodities where 

suggested and appropriate, in order to 

clarify any confusion about terminology 

and application. 

B. Comments on Specific Provisions 

1. § 228.01 Definitions 

Comment: One commenter suggested 

lettering the definitions for easy 

reference. 

Response: USAID followed the 

alphabetical listing used in other parts 

of the Code of Federal Regulations, such 

as the Federal Acquisition Regulation at 

48 CFR part 1, in formatting this Final 

Rule. Listing each definition in 

alphabetical order without lettering 

them will simplify any future additions 

or deletions to this section. 

Comment: Regarding the definition in 

the Proposed Rule of ‘‘available for 

purchase,’’ many commenters expressed 

concern that the requirement for 

recipients and contractors to document 

multiple sales of a commodity or service 

by the supplier of the commodity or 

service in an authorized country during 

the past calendar year would create a 

compliance burden. In addition, 

commenters recommended increasing 

the de minimis exception to 

documentation requirements, in order to 

reduce the compliance burden. 

Response: The definition was 

intended to prevent ‘‘fly by night’’ 

vendors, either individual or 


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enterprises, and especially those 

subsidized by foreign governments, 

from establishing themselves as sources 

in countries within the principal 

geographic code designated in the 

implementing instrument, to take 

advantage of procurements funded by 

USAID. The definition was also 

intended to discourage recipients and 

contractors from engaging local 

suppliers to import commodities on 

their behalf for purposes of 

circumventing the source rules. 

USAID has responded to concerns 

about regulatory burden by removing 

the documentation of multiple sales 

requirement from the definition of 

‘‘available for purchase’’ in the Final 

Rule (consequently, the de minimis 

exception has not been amended, but 

deleted as well). Instead, USAID 

addresses the circumvention issue 

directly: Section 228.11, Source of 

commodities, now contains an express 

prohibition from engaging suppliers of 

commodities in an authorized country 

to import commodities from a country 

outside of the principal geographic 

codes for the purposes of circumventing 

the requirements of this rule, 

enforceable through disallowance by 

USAID of the cost of procurement of the 

subject commodity. USAID as a matter 

of course retains the usual right, at its 

discretion, to request additional 

information if it has questions about an 

allowable cost. USAID has also 

determined that the ‘‘fly by night 

vendor’’ issue can also be addressed 

under the nationality requirements of 

§ 228.12 and restrictions on eligibility of 

foreign government- owned enterprises 

in § 228.13, see discussion below. 

In response to comments received, the 

definition of ‘‘available for purchase’’ 

has also been amended to reflect the 

addition in the Final Rule of existing 

Code 935 (any area or country but 

excluding prohibited sources) in 

§ 228.03, ‘‘Identification of the Principal 

Geographic Codes,’’ by exempting Code 

935 procurements from the definition of 

‘‘available for purchase.’’ Code 935 is 

being retained to reflect the authorities 

for DFA and NIS, as well as to designate 

the source and nationality to which 

waivers under Subpart D will be made. 

Code 935 procurements are exempted 

from the definition of ‘‘available for 

purchase’’ because, as commenters 

noted, the source rules will not apply 

and no circumvention issues will arise 

when ‘‘any country or region’’ is the 

authorized principle geographic code 

under Code 935. 

Comment: One commenter pointed 

out that the Proposed Rule, § 228.15, 

Miscellaneous Service Transactions, 

contained a definition of ‘‘commission’’ 

more appropriately included in the 

definitions section, § 228.01. 

Response: The definition of 

‘‘commission’’ has been moved to 

§ 228.01, as have the definitions of 

‘‘long term lease’’ and ‘‘motor vehicles’’ 

previously included in the 

requirements, rather than definitions, 

section of the current regulation and the 

Proposed Rule. 

Comment: Commenters suggested 

non-substantive, slight clarifications/ 

grammatical improvements to the 

definitions of ‘‘developing countries,’’ 

‘‘implementing document,’’ and 

‘‘source’’ in the Proposed Rule. 

Response: The suggestions have been 

accepted, and the changes made in the 

Final Rule. Please note the term 

‘‘implementing document’’ has been 

slightly changed to ‘‘implementation 

instrument’’ in the Final Rule to 

correspond with Agency terminology in 

the ADS Glossary. 

Comment: Regarding the definition of 

‘‘nationality’’ in the Proposed Rule, one 

commenter suggested that not all 

countries’ immigration laws have the 

immigration status of ‘‘lawful 

permanent resident’’ as included in the 

definition of ‘‘nationality’’ in the 

Proposed Rule. 

Response: The concept of lawful 

permanent residency as part of the 

‘‘nationality’’ requirement has been 

amended to add ‘‘or equivalent 

immigration status to live and work on 

a continuing basis,’’ to address 

immigration law/status variances from 

country to country, while at the same 

time confirming that some form of 

continuing or permanent residency is 

necessary to satisfy the nationality 

requirement. 

Comment: Several commenters 

inquired whether sub recipients and 

subcontractors came within the scope of 

this regulation and the definition of 

‘‘recipients and contractors.’’ 

Response: The definition of 

‘‘recipients and contractors’’ has been 

amended to include sub recipients and 

subcontractors, which confirms that this 

rule applies to both. Please note that 

partner country governments are not 

subjects of this Final Rule, although 

USAID host country government 

contracting requirements do contain 

procurement provisions which are still 

applicable unless revised. 

Comment: Several commenters 

requested additional definitions. 

Response: USAID has added to 

§ 228.01 Definitions, a definition of 

‘‘Pharmaceuticals’’ and also of ‘‘Free 

Port or Bonded Warehouse’’ in response 

to requests for the same. 

Additional change: The Final Rule 

also simplifies the term in the Proposed 

Rule, ‘‘countries to which assistance is 

prohibited by law’’ by replacing it with 

the concept of ‘‘prohibited sources’’ 

adapted from the Federal Acquisition 

Regulation, 48 CFR part 1, and 

providing a USAID-specific definition at 

§ 228.01. Please note the definition 

includes countries which are subject to 

applicable sanctions administered by 

the U.S. Treasury Department’s Office of 

Foreign Assets Control, and other 

applicable executive branch restrictions. 

As in the Proposed Rule, USAID will 

provide a list of Prohibited Sources in 

ADS 310. 

2. § 228.02 Scope and Application 

Comment: Several commenters 

suggested that this section confirm that 

procurements with program income and 

under Title II Food Aid programs are 

not required to comply with 22 CFR part 

228 in its entirety. 

Response: The Final Rule includes 

specific exceptions from coverage of this 

regulation for procurements with 

program income and procurements 

funded by Title II food aid funds, as 

well as an additional sentence 

reaffirming the non-applicability of this 

regulation to the six exempted 

categories of procurements at § 228.02. 

The intent is to clarify that according to 

its terms, the statutory requirement of 

FAA 604(a) apply only to ‘‘[f]unds made 

available for assistance (emphasis 

added) under this Act’’ (the FAA). 

The Final Rule also includes two 

slight, non-substantive grammatical 

refinements to § 228.02. 

3. § 228.03 Identification of the 

Principal Geographic Codes 

Comment: Several implementing 

grantee and contractor commenters 

suggested that the establishment of one 

geographic code was an 

oversimplification of USAID’s 

procurement authorities. 

Response: The Proposed Rule 

attempted to mirror the specific 

language of USAID’s statutory 

procurement authority to procure in 

‘‘the United States, the recipient 

country, or developing countries,’’ FAA 

604(a), by establishing one principal 

geographic code to replace the many 

others developed over the years. The 

‘‘additional authorities and conditions’’ 

language in § 228.02, above, was 

intended to preserve 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. Section 2295b 

(reflected in the current regulation as 

Code 110), and Development Fund for 

Africa, 22 U.S.C. 2293 et seq. (reflected 


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in the current regulation as Code 935) 

However, due to the possibility of 

confusion, the Final Rule adds back 

Principal Geographic Codes 110 and 

935, as specified below in § 228.03. 

4. § 228.11 Source of Commodities 

Comments and response: as noted 

above in III.B., § 228.11 now contains a 

restriction on recipients and contractors 

engaging vendors to import 

commodities in circumvention of source 

and nationality requirements, in lieu of 

requirements in the Proposed Rule for 

documentation of multiple sales in past 

year, now deleted from the definition of 

‘‘available for purchase’’ in § 228.01 of 

the Final Rule. 

5. § 228.12 Nationality of Suppliers of 

Commodities and Services 

Comments: One commenter expressed 

opinions that by requiring both 

principal place of business in a country 

in the primary geographic code and 

requiring majority direct or beneficial 

ownership of for profit organizations by 

individuals who are citizens or lawful 

permanent residents of a country in the 

designated code, the regulation would 

result in the non-eligibility and 

exclusion of ‘‘a whole class of foreignowned development organizations even 

though such organizations have a 

substantial involvement in the United 

States, or developing country, 

economies.’’ 

Response: The nationality provision 

(along with the restrictions on eligibility 

of foreign government controlled 

enterprises, below) was intended to 

address the specter of ‘‘fly by night ’’ 

vendors from otherwise ineligible (not 

recipient or developing) third countries 

descending on a recipient or developing 

country, taking advantage of less 

rigorous citizenship or business 

establishment requirements, and 

undercutting U.S. or local vendors. In 

order to address commenter concerns 

about exclusion of legitimate foreign 

(but not foreign government) owned or 

controlled international development 

organizations, the nationality 

requirements for organizations have 

been simplified to require, as uniformly 

recommended by commenters (1) 

organization under the laws of a country 

in the principal geographic code 

designated in a implementing 

instrument; (2) conducting business as a 

‘‘going concern’’ (functioning business 

entity for the foreseeable future) in such 

country; and either (3) management by 

a governing body, the majority of whom 

are citizens or residents of such country 

or (4) employment of citizens or 

residents of such country in more than 

half of its permanent full time positions 

and half of its principal management 

positions. The criticized ‘‘majority 

direct ownership or beneficial 

ownership’’ requirement of the 

Proposed Rule has been deleted in its 

entirety; USAID anticipates that the 

majority management and employment 

requirements will discourage fly by 

night vendors while at the same time 

preserving the eligibility of foreignowned but U.S. or recipient/developing 

country benefitting, foreign assistance 

organizations. 

6. § 228.13 Foreign GovernmentOwned Organizations 

Comment: One commenter expressed 

concern that the Proposed Rule did not 

adequately distinguish between foreignowned commercial enterprises, which 

are not eligible for financing, and 

foreign entities, such as government 

ministries, but also educational, health 

care, and other public sector actors, 

which are appropriate and necessary 

partners for USAID. 

Response: The exclusions at § 228.13 

have been broadened in the Final Rule 

to preserve the eligibility of government 

education institutions, health care 

providers, and technical entities not 

formed primarily for a business or 

commercial purpose from the 

restrictions of this provision (similar to 

recent Millennium Challenge 

Corporation provisions on foreign 

government-owned enterprises). In 

addition, a statement is added to the 

second sentence of § 228.13 to 

emphasize that regional and local 

governments, along with national 

government ministries and agencies, are 

eligible partners for USAID financing. 

7. § 228.15 Nationality of Individuals 

Under Contracts or Subcontracts for 

Services 

Comment: Several commenters 

praised the revisions but inquired 

whether or not individual contractors 

were covered by § 228.15. 

Response: The Final Rule has been 

amended to clarify that individual 

contractors as well as consultants of 

recipients and contactors are eligible, 

and not subject to the eligibility 

requirements. However, as above, 

citizens or permanent residents of 

countries which are prohibited sources 

are not eligible for USAID financing 

under the Final Rule. 

8. § 228.17 Special Procurement Rules 

for Construction and Engineering 

Services 

Comment: Several commenters 

questioned how reasonable it is for 

recipients and contractors to determine 

which advanced developing countries 

have attained a competitive capacity in 

international markets for construction 

and engineering services. 

Response: § 228.17 has been amended 

to clarify in the Final Rule that USAID 

makes such determinations, and will 

make those determinations available 

through ADS 310. 

9. § 228.18 Long-Term Leases 

Comment: One commenter inquired 

whether or not a lease of 18 vehicles for 

10 days each at the same time would 

trigger the long term lease provisions. 

Response: § 228.18 has been amended 

in the Final Rule to move the definition 

of long term lease into the definitions 

section, § 228.01, and also to clarify that 

the source and nationality requirements 

of Subpart B are only triggered for 

repeat leases of single vehicles totaling 

180 days or more. 

10. § 228.19 Special Rules Requiring 

United States Manufacture or 

Procurement 

Comment: Several commenters 

suggested grammatical edits to clarify 

the title of this section, advocated for 

revisions of USAID’s ADS 312 on 

Eligibility of Commodities and 

Commodity Eligibility Listing, and also 

requested inclusion of a definition of 

‘‘pharmaceuticals’’ in the Final Rule. 

Response: Recommendations for 

grammatical edits were accepted and 

made, and definitions of ‘‘commodities’’ 

and ‘‘pharmaceuticals’’ have been added 

to § 228.01, Definitions, in the Final 

Rule. § 228.19(a), regarding Agriculture 

Commodities, has been revised to state 

that USAID provides a list of restricted 

agricultural commodities in ADS 312. 

Section 228.19(b) clarifies that financing 

transportation or driver services from an 

individual or commercial entity and not 

directly financing the purchase or lease 

of a vehicle, is subject to the nationality 

of suppliers requirements of § 228.12, 

not the restrictions on motor vehicle 

procurements. The provision on 

pharmaceuticals in § 228.19(c) has been 

revised to comply with ‘‘plain 

language’’ guidance for federal 

regulations. 

11. Subpart C—Conditions Governing 

the Eligibility of Commodity-Related 

Services for USAID Financing 

Comment: Four commenters 

suggested revision or elimination of 

provisions related to the Cargo 

Preference Act, 46 U.S.C. 55305 

(§ 228.21) and eight commenters 

suggested revision or elimination of 

provisions related to the Fly America 

Act, 49 U.S.C. App. 1517 (§ 228.22) in 

the Final Rule. 


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Response: USAID is participating in a 

separate interagency working group 

considering updates to Cargo Preference 

Act implementing guidance and 

regulations. Further action to update 

these implementing regulations, if any, 

will be subject to notice and comment, 

and will be published in the Federal 

Register by the Department of 

Transportation’s Maritime 

Administration. 

Currently, USAID does not plan to 

engage Congress concerning 

amendments to the Fly America Act, 

although the provisions of § 228.22 have 

been slightly revised to reflect that it 

applies only to transport of commodities 

under the Final Rule. 

12. Subpart D—Waivers 

Comments: The waiver provision of 

the proposed rule received a substantial 

number of comments from 

implementing grantee and contractor 

commenters as well as their advocacy 

groups. USAID received the following 

relevant and significant suggestions: (1) 

Deletion of the term ‘‘produced in’’ as 

part of the larger phrase, ‘‘not produced 

in and available for purchase in’’ as 

grounds for a waiver under 

§ 228.30(a)(1), due to concern the words 

‘‘produced in’’ were reintroducing the 

concept of ‘‘origin’’ otherwise deleted 

from the Proposed Rule; (2) clarification 

whether or not cost savings for 

procurement of a commodity could be 

grounds for a waiver to ‘‘promote 

efficiency in the use of United States 

foreign assistance resources’’; (3) 

assigning authority to approve waivers 

to USAID senior field staff, as is done 

with waivers for USAID branding and 

marking requirements, 22 CFR 226.91, 

and (4) imposing an internal time limit 

for USAID’s processing waivers, 

perhaps as short as 15 days. 

Responses: (1) While the term 

‘‘produced in and available for purchase 

in’’ is retained in the Final Rule because 

it tracks the statutory language at 

Section 604(a) of the FAA, a 

clarification has been added that the 

term as used in § 228.30(a)(1) will have 

the same meaning as the definition of 

‘‘available for purchase’’ in § 228.1, and 

thus not reintroduce inquiries into 

where a commodity has been 

‘‘produced’’ or the concept of ‘‘origin’’ 

through the backdoor of the waiver 

provision; (2) While a favorable price 

differential of 50% or greater may be 

grounds for approval of a waiver in 

order to promote efficiency in the use of 

foreign assistance resources, it would be 

subject to the discretion of the 

approving authority for the waiver; (3) 

Similarly to waiver approval authority 

for USAID branding and marking 

requirements, under USAID’s internal 

delegations of authority, waiver 

authority for source, nationality 

requirements currently is assigned to 

USAID’s most senior officials in field 

missions, as suggested; and (4) While 

USAID declines to impose time 

limitations on internal processing of 

waivers, USAID will be providing 

training on the Final Rule to USAID 

staff, and anticipates that the additional 

guidance on waivers provided in the 

Final Rule will result in expedited 

processing of waivers. USAID also 

expects that revisions to source and 

nationality requirements reflected in the 

Final Rule will obviate the need for 

many previously needed waivers. 

USAID has declined a suggestion to 

incorporate approved waivers into the 

Final Rule in order to preserve the 

distinction between the requirements of 

the rule and the special circumstances 

reflected in an approved waiver 

determination. 

C. Subpart E, Effective Date 

Comment: USAID received 

suggestions advocating for a delayed 

effective date due to the necessity to 

absorb changes made by the Final Rule, 

and one suggestion for a retroactive 

effective date due to the importance and 

benefit of changes made by the rule. 

Response: USAID has established an 

effective date of February 6th, 2012 in 

order to allow for training of USAID 

staff on the Final Rule, and also to 

prepare implementation guidance and 

ensure related agency policy which 

reflects the revisions to USAID 

procurement requirements established 

in the Final Rule. USAID has no plan to 

make the implementation date 

retroactive, a step that requires meeting 

stringent legal tests to overcome a 

presumption that new laws be applied 

prospectively. 

Because the effective date is specified 

in the section following the preamble 

Summary in publication of the Final 

Rule, Subpart E has been removed. If 

need be, USAID awards in effect at the 

time the Final Rule becomes effective 

that contain any non-Code 935 

geographic codes shall be modified to 

reflect the principal geographic codes 

established at § 228.03. All new awards 

after February 6, 2012 are subject to the 

Final Rule. 

IV. Regulatory Planning and Review: 

Findings and Certifications of Impact 

Assessment 

A. Executive Orders 12866 and 13563 

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. 

B. Congressional Review Act 

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. 

C. Regulatory Flexibility Act 

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 

Final Rule and has certified that its 

provisions would not have a significant 

economic impact on a substantial 

number of small entities. 

D. Paperwork Reduction Act 

There is no reporting or 

documentation or other information 

collection requirements under the Final 

Rule that require analysis under the 

Paperwork Reduction Act, 44 U.S.C. 

3501 et seq. 

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 and Proposed 

Rule, USAID revises 22 CFR part 228 to 

read as follows: 

PART 228—RULES FOR 

PROCUREMENT OF COMMODITIES 

AND SERVICES FINANCED BY USAID 

Sec. 

Subpart A—Definitions and Scope of This 

Part 

228.01 Definitions. 

228.02 Scope and application. 

228.03 Identification of the authorized 

principal geographic procurement codes. 


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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-controlled 

organizations. 

228.14 Construction procurement with 

foreign-owned local firms. 

228.15 Nationality of employees and 

individuals 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 

United States manufacture or 

procurement. 

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 their 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 

will make the list available in USAID’s 

Automated Directives System, ADS 310. 

This list will include determinations 

made under § 228.17 of this part. 

Available for purchase means for 

commodities, that the commodity is 

offered for sale in a country in the 

authorized principal geographic code at 

the time of purchase from the supplier, 

irrespective of the place of manufacture 

or production, unless it is a prohibited 

source country. If applicable, the 

commodity must also be able to be 

serviced, and, if warrantied, have a 

valid warranty. For services, available 

for purchase means the service is 

offered from a vendor which has 

complied with nationality and foreign 

government-owned organization 

requirements of this regulation, and is 

otherwise organized in a country in the 

authorized principal geographic code 

designated in an implementing 

instrument. This definition does not 

apply to procurements under the 

geographic Code 935, see § 228.03 of 

this part, because that geographic code 

is for any country or area except for 

prohibited source countries. 

Commission means 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. 

Commodities or goods means any 

material, article, supply, good, 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 lower middle 

income economies according to their 

gross national income per capita, and 

also includes 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 will 

make the list available in USAID’s 

Automated Directives System, ADS 310. 

Free Port or Bonded Warehouse is a 

special customs area with favorable 

customs regulations (or no customs 

duties and controls for transshipment). 

Implementing instrument means a 

binding relationship established 

between USAID and an outside party or 

parties to carry out USAID programs, by 

authorizing the use of USAID funds 

and/or nonfinancial resources for the 

procurement of services or commodities 

and/or commodity related services. 

Implementing instruments include 

specific conditions that apply to each 

such procurement. Examples of such 

instruments include contracts, grants, 

cooperating agreements, and 

interagency agreements. 

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. 

Long term lease means, for purposes 

of subpart B, a single lease of more than 

180 calendar days; or repetitive or 

intermittent leases under a single award 

within a one-year period, which 

cumulatively total more than 180 

calendar days. A single lease may 

consist of lease of one or more of the 

same type of commodity within the 

same lease term. 

Motor vehicles means 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-the-highway trucks (such 

as off-road dump trucks), boats, and 

other vehicles that are not designed for 

travel at normal road speeds (40 

kilometers per hour and above). 

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 (or 

equivalent immigration status to live 

and work on a continuing basis) of 

suppliers of commodities and services. 

Pharmaceutical means any substance 

intended for use in the diagnosis, cure, 

mitigation, treatment, or prevention of 

diseases in humans or animals; any 

substances (other than food) intended to 

affect the structure or any function of 

the body of humans or animals; and, 

any substance intended for use as a 

component in the above. The term 


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includes drugs, vitamins, oral 

rehydration salts, biologicals, and some 

in-vitro diagnostic reagents/test kits; but 

does not include devices or their 

components, parts, or accessories. 

Contraceptives, including condoms, are 

not included in this definition. 

Prohibited sources means countries to 

which assistance is prohibited by the 

annual appropriations acts of Congress 

or other statutes, or those subject to 

other executive branch restrictions, such 

as applicable sanctions administered by 

the U.S. Treasury Department’s Office of 

Foreign Assets Control. USAID 

maintains a list of prohibited sources, 

available in USAID’s Automated 

Directives System, ADS 310. 

Recipients and contractors. Recipient 

has the same meaning as defined in 22 

CFR 226.02, except that it shall include 

non-U.S. individuals, entities and 

organizations, as well as subrecipients. 

Contractors mean those entities which 

enter into a contract, as the term is 

defined in 48 CFR part 2, with the U.S. 

Government, and includes 

subcontractors. 

Services means 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, irrespective of the 

place of manufacture or production, 

unless it is a prohibited source country. 

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. 

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. 

USAID Principal Geographic Code 

means a USAID code which designates 

a country, a group of countries, or an 

otherwise defined area. The USAID 

principal geographic codes for purposes 

of procurement are described in 

§ 228.03 of this part. 

§ 228.02 Scope and application. 

This part is applicable to commodities 

and services procured under 

implementing instruments using 

Federal program funds made available 

for assistance under the Foreign 

Assistance Act of 1961, as amended, 22 

U.S.C. 2151 et seq. (FAA). The 

authorities and conditions applicable to 

the procurement of commodities or 

services shall be those in effect on the 

effective date of an implementing 

instrument for procurement of 

commodities or services. They include 

any directives, prohibitions, restrictions 

or other statutory and related 

requirements by the United States 

Congress that govern the Federal 

program funds appropriated to fund the 

specific procurement, including those 

on types of assistance and recipients of 

assistance. If additional authorities and 

conditions are otherwise provided by 

statute, regulation, or related 

administrative authorities, those 

authorities and conditions shall be 

incorporated in the implementing 

instrument and shall prevail in the 

event of any conflict with this part 228. 

This part is not applicable to 

(a) Procurements of commodities and 

services under General Services 

Administration (GSA) supply schedules; 

(b) Procurements with donated funds 

received under USAID’s gift authority, 

FAA section 635(d); 

(c) Procurements funded by cost share 

or program income as defined in 22 CFR 

226.24; 

(d) USAID Title II food programs, 

including monetization proceeds 

thereunder. 

(e) Procurements funded from any 

congressional appropriation authorized 

by any statute other than the FAA; 

(f) Procurements with non-program 

funds (such as operational expense 

account funds) made available under 

the FAA for any purpose other than 

assistance. 

§ 228.03 Identification of the authorized 

principal geographic procurement codes. 

(a) USAID has established principal 

geographic codes which are used by 

USAID in implementing instruments. 

This regulation establishes a 

presumptive authorized principal 

geographic code, Code 937, for 

procurement of commodities and 

services unless otherwise specified in 

the implementing instrument. Code 937 

is defined as the United States, the 

cooperating/recipient country, and 

developing countries other than 

advanced developing countries, and 

excluding prohibited sources. USAID 

maintains a list of developing countries, 

advanced developing countries, and 

prohibited sources, which will be 

available in USAID’s Automated 

Directives System, ADS 310. 

(b) For purposes of procurements 

under the authority of the Development 

Fund for Africa, 22 U.S.C. 2293 et seq.; 

for any waivers authorized under 

Subpart D of this regulation; and if 

otherwise designated in an 

implementing instrument, the 

authorized principal geographic code 

shall be Code 935, any area or country 

but excluding prohibited sources. 

(c) For purposes of procurements 

under the Support for Economic and 

Democratic Development of the 

Independent States of the Former Soviet 

Union, 22 U.S.C. 2295b, the authorized 

principal geographic codes are Code 937 

and Code 110 (New Independent 

States). 

(d) Additional principal geographic 

codes may be added to this section if 

authorized by Congress. 

Subpart B—Conditions Governing 

Source and Nationality of Commodity 

and Service Procurement Transactions 

for USAID Financing 

§ 228.10 Purpose. 

Sections 228.11 through 228.19 set 

forth the rules governing the eligible 

source of commodities and nationality 

of commodity and service suppliers for 

USAID Federal share financing under 

prime and subawards. These rules 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 Federal program funds 

appropriated under the Foreign 

Assistance Act of 1961, as amended, 

shall be Code 937 (unless Code 935 or 

110 are designated in the implementing 

instrument). Procurements of 

agricultural commodities, motor 

vehicles and pharmaceuticals must also 

comply with the special procurement 

rules in § 228.19 of this part. Recipients 

and contractors are prohibited from 

engaging suppliers of commodities in an 

authorized country to import 

commodities from a country outside of 

the authorized principal geographic 

codes for the purposes of circumventing 

the requirements of this rule. Any 

violation of this prohibition will result 

in the disallowance by USAID of the 

cost of the procurement of the subject 

commodity. 


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1404 Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 

§ 228.12 Nationality of suppliers of 

commodities and services. 

The suppliers of all commodities and 

services financed with federal program 

funds appropriated under the Foreign 

Assistance Act of 1961, as amended, 

shall: 

(a) If an individual, except as 

provided in § 228.15, be a citizen or 

lawful permanent resident (or 

equivalent immigration status to live 

and work on a continuing basis) of a 

country in Code 937 (or other principal 

geographic procurement code 

designated in an implementing 

instrument), 

(b) If an organization, 

(1) Be incorporated or legally 

organized under the laws of a country 

in Code 937 (or other principal 

geographic procurement code 

designated in an implementing 

instrument); 

(2) Must be operating as a going 

concern in a country in Code 937 (or 

other principal geographic procurement 

code designated in an implementing 

instrument), and either 

(3) Be managed by a governing body, 

the majority of whom are citizens or 

lawful permanent residents (or 

equivalent immigration status to live 

and work on a continuing basis) of 

countries in Code 937 (or other 

principal geographic procurement code 

designated in an implementing 

instrument), or 

(4) Employ citizens or lawful 

permanent residents (or equivalent 

immigration status to live and work on 

a continuing basis) of a country in Code 

937 (or other principal geographic 

procurement code designated in an 

implementing instrument), in more than 

half its permanent full-time positions 

and more than half of its principal 

management positions. 

§ 228.13 Foreign government-controlled 

organizations. 

Firms operated as commercial 

companies or other organizations or 

enterprises (including nonprofit 

organizations) in which foreign 

governments or their agents or agencies 

have a controlling interest are not 

eligible as suppliers of commodities and 

services, except if their eligibility has 

been established by a waiver approved 

by USAID in accordance with the 

provisions set forth in subpart D of this 

part. Government ministries or agencies 

of the cooperating/recipient country, 

including those at the regional and local 

levels, and government educational 

institutions, health care providers, and 

other technical entities of the 

cooperating/recipient country not 

formed primarily for commercial or 

business purposes, are eligible as 

suppliers of commodities and services. 

§ 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 

(owned or controlling interest by 

individuals not citizens or permanent 

residents, or equivalent immigration 

status, of the United States or the 

cooperating/recipient country) local 

firm will be eligible if it is determined 

by USAID to be an integral part of the 

local economy, see paragraph (b) of this 

section. 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 (or equivalent immigration 

status to live and work on a continuing 

basis) 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 and 

individuals under contracts or subcontracts 

for services. 

The rules set forth in §§ 228.10 

through 228.13 of this part do not apply 

to the employees of contractors, or 

individuals providing technical or 

professional services to recipients or 

contractors. However, such individuals 

must not be citizens or lawful 

permanent residents (or equivalent 

immigration status) of countries which 

are prohibited sources. 

§ 228.16 Miscellaneous service 

transactions. 

This section governs certain 

miscellaneous services. 

(a) Commissions. The nationality 

rules of this part do not apply to the 

payment of commissions by suppliers. 

(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, as 

defined in § 228.01, which USAID has 

determined to 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 a waiver to 

Code 935 under subpart D of this part. 

§ 228.18 Long-term leases. 

Any commodity obtained under a 

long-term lease agreement as defined in 

§ 228.01, including motor vehicles, is 

subject to the source and nationality 

requirements of this subpart B of this 

part, including the special procurement 

rules as set forth in § 228.19. 

§ 228.19 Special rules requiring United 

States manufacture or procurement. 

(a) Certain 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 

maintains a list of restricted agricultural 

commodities and related policies, 

which is available in USAID’s 

Automated Directives System, ADS 312. 

(b) Motor vehicles must be 

manufactured in the United States to be 

eligible for USAID financing (22 U.S.C. 

2396). 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. However, financing of 

transportation or driver services from an 

individual or commercial entity and not 

directly financing the purchase or lease 

of a vehicle, is subject to the 

requirements at § 228.12. Financing 

transportation or driver services means: 

(1) The vehicle is independently 

owned or leased by the hired driver or 

company; 

(2) The vehicle will be maintained by 

the individual or commercial entity and 

driven only by the hired driver(s); and 


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Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 1405 

(3) The vehicle is not directly leased, 

either as a separate line item in the 

contract separate from the cost of the 

driver’s services, or under a separate 

contract. 

(c) Under section 606(c) of the FAA, 

USAID cannot finance any 

pharmaceutical product that is 

manufactured outside of the United 

States if the pharmaceutical is covered 

by a valid U.S. patent, unless the U.S. 

patent holder expressly authorizes the 

manufacture of the pharmaceutical. 

Without such express authorization, the 

pharmaceutical must be purchased from 

the U.S. patent holder. In addition, 

USAID shall not finance noncontraceptive pharmaceuticals without 

prior written approval as provided in 

USAID’s Automated Directives System 

Chapter 312. Contraceptives may be 

financed in accordance with the 

procedures in ADS 312. 

Subpart C—Conditions Governing the 

Eligibility of Commodity-Related 

Services for USAID Financing 

§ 228.20 Purpose. 

Sections 228.21 through 228.24 of this 

part set forth the rules governing the 

eligibility of commodity-related 

services, both delivery services and 

incidental services, for USAID 

financing. These rules, except for 

§§ 228.21 and 228.22, 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 

transportation of commodities subject to 

this part. Subpart D of 22 CFR part 228 

does not apply to this provision. 

§ 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 prohibited sources as 

defined in § 228.01, and §§ 228.21 and 

228.22), in order to accomplish project 

or program objectives. For any waivers 

authorized, the principal geographic 

code shall be Code 935, any area or 

country but excluding prohibited 

sources. All waivers must be in writing, 

and where applicable, are limited to the 

term established by the waiver. All 

waiver decisions will be made solely on 

the basis of the following criteria: 

(a) Waivers to permit procurement 

outside of Code 937 or 110 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 937 or 

110, or; 

(2) It is important to permit 

procurement from a country not 

specified in Code 937 or 110 to meet 

unforeseen circumstances, or; 

(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. Such waivers 

may be approved on a regional, country 

or program basis. For purposes of 

paragraph (a)(1) of this section, 

‘‘produced in and available for purchase 

in’’ shall have the same meaning as the 

definition of ‘‘available for purchase’’ in 

§ 228.01. A waiver under paragraph 

(a)(1) may also be based on the fact that 

a commodity is not available for 

purchase in Code 937 or 110 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 must 

meet the requirements of § 228.19. 

(d) Any individual transaction not 

exceeding $25,000 (excluding those 

covered by special procurement rules in 

§ 228.19 and excluding procurements 

from prohibited sources) does not 

require a waiver and is hereby 

authorized. 

§ 228.31 Authority to approve waivers. 

The authority to approve waivers of 

established policies under this 

regulation is delegated within USAID. 

Recipients or contractors shall request 

any necessary waivers through the 

USAID agreement or contracting officer. 

Raj Shah, 

USAID Administrator. 

[FR Doc. 2011–33240 Filed 1–5–12; 4:15 pm] 

BILLING CODE P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 117 

[Docket No. USCG–2011–1160] 

Drawbridge Operation Regulation; Gulf 

Intracoastal Waterway, LA 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of temporary deviation 

from regulations. 

SUMMARY: The Commander, Eighth 

Coast Guard District, has issued a 

temporary deviation from the regulation 

governing the operation of the SR 384 

(Grand Lake) pontoon bridge across the 

Gulf Intracoastal Waterway, mile 231.4 

West of Harvey Locks, at Grand Lake, 

Cameron Parish, Louisiana. The 

deviation is necessary to allow for the 

safe movement of the increased 

vehicular traffic crossing the bridge due 

to another bridge in the area being 

temporarily removed from service. This 

deviation allows the bridge to remain 

closed to navigation during the morning 

and evening rush hours Monday 

through Saturday for three months. 

DATES: This deviation is effective from 

6:30 a.m. on Monday, January 9, 2012 

until 5 p.m. on Friday, March 30, 2012. 

ADDRESSES: Documents mentioned in 

this preamble as being available in the 

docket are part of docket USCG–2011– 

1160 and are available online by going 

to http://www.regulations.gov, inserting 

USCG–2011–1160 in the ‘‘Keyword’’ 

box and then clicking ‘‘Search’’. They 


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