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[Federal Register Volume 76, Number 192 (Tuesday, October 4, 2011)]
[Rules and Regulations]
[Pages 61282-61284]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-25234]

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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Part 252

RIN 0750-AH21

Defense Federal Acquisition Regulation Supplement; Definition of 
``Qualifying Country End Product'' (DFARS Case 2011-D028)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Final rule.

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SUMMARY: DoD is issuing a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to revise the definition of 
``qualifying country end product.'' This final rule eliminates the 
component test for qualifying country end products that are 
commercially available off-the-shelf items.

DATES: Effective date: October 4, 2011.

FOR FURTHER INFORMATION CONTACT: Amy G. Williams, telephone 703-602-
0328.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD published a proposed rule in the Federal Register at 76 FR 
32845 on June 6, 2011, to amend the definition of qualifying country 
end product. One comment was received in response to the proposed rule.

II. Discussion and Analysis of Public Comment

    Comment: The respondent stated that we need to define 
``commercially available off-the-shelf item'' or reference the 
definition in the FAR, because there is nothing that says that the 
definitions in the FAR necessarily apply to the DFARS.
    Response: The DFARS implements and supplements the FAR (see FAR 
subpart 1.3). Unless the DFARS specifically makes a statement to the 
contrary, everything in the FAR is the basis upon which the DFARS is 
built. No change to the rule is necessary on the basis of this comment.

III. Other Changes

    As a technical update, the more recent definition of ``qualifying 
country'' in 225.003 is incorporated in two of the clauses changed by 
the final rule, rather than citing to the list of qualifying countries 
at 225.872-1. This has no practical impact, because the two lists 
contain the same countries. The definition was added to DFARS 225.003 
to reduce confusion, because the list at DFARS 225.872-1 is split into 
two paragraphs, (a) and (b), which sometimes leads to misinterpretation 
of the status of countries that are listed in paragraph (b).

IV. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 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). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993. This rule is not a major rule 
under 5 U.S.C. 804.

V. Regulatory Flexibility Act

    DoD certifies that this rule will not have a significant impact on 
a substantial number of small entities within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the rule 
only affects manufacturers of COTS items in qualifying countries, 
removing an administrative burden for the qualifying country 
manufacturer and the Government personnel acquiring the items. No 
domestic entities will be impacted by this rule. For the definition of 
``small business,'' the Regulatory Flexibility Act refers to the Small 
Business Act, which in turn allows the U.S. Small Business 
Administration (SBA) Administrator to specify detailed definitions or 
standards (5 U..S.C 601(3) and 15 U.S.C. 632(a)). The SBA regulations 
at 13 CFR 121.105 discuss who is a small business: ``(a)(1) Except for 
small agricultural cooperatives, a business concern eligible for 
assistance from SBA as a small business is a business entity organized 
for profit, with a place of business located in the United States, and 
which operates primarily within the United States or which makes a 
significant contribution to the U.S. economy through payment of taxes 
or use of American products, materials or labor.''
    The comparable change has already been enacted for the benefit of 
U.S. manufacturers of COTS items.

VI. Paperwork Reduction Act

    The rule does not impose any information collection requirements 
that require the approval of the Office of Management and Budget under 
44 U.S.C. (chapter 35).

List of Subjects in 48 CFR Part 252

    Government procurement.

Ynette R. Shelkin,
Editor, Defense Acquisition Regulations System.
    Therefore, 48 CFR part 252 is amended as follows:

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
1. The authority citation for 48 CFR part 252 continues to read as 
follows:

    Authority:  41 U.S.C. 1303 and 48 CFR chapter 1.

252.212-7001  [Amended]

0
2. Amend section 252.212-7001 as follows:
0
a. Remove the clause date ``(SEP 2011)'' and add in its place ``(OCT 
2011)'';
0
b. In paragraph (b)(6)(i), remove the clause date ``(JAN 2009)'' and 
add in its place ``(OCT 2011)'' and in paragraph (b)(6)(ii), remove the 
clause date ``(DEC 2010)'' and add in its place ``(OCT 2011)'';
0
c. In paragraph (b)(12)(i), remove the clause date ``(JUN 2011)'' and 
add in its place ``(OCT 2011)'', in paragraph (b)(12)(ii), remove the 
clause date ``(SEP 2008)'' and add in its place ``(OCT 2011)'', and in 
paragraph (b)(12)(iii), remove the clause date ``(DEC 2010)'' and add 
in its place ``(OCT 2011)''; and
0
d. In paragraph (b)(15)(i), remove the clause date ``(DEC 2010)'' and 
add in its

[[Page 61283]]

place ``(OCT 2011)'', in paragraph (b)(15)(ii), remove the clause date 
``(JUL 2009)'' and add in its place ``(OCT 2011)'', and in paragraphs 
(b)(15)(iii) and (b)(15)(iv), remove the clause date ``(DEC 2010)'' and 
add in its place ``(OCT 2011)''.

0
3. Amend section 252.225-7001 as follows:
0
a. Remove the clause date ``(SEP 2011)'' and add in its place ``(OCT 
2011)'';
0
b. In paragraph (a), remove the number preceding each definition and 
revise the definitions for ``Qualifying country'' and ``Qualifying 
country end product;
0
c. In Alternate I, remove the clause date ``(DEC 2010)'' and add in its 
place ``(OCT 2011)'' and in paragraph (a), remove the numbers preceding 
each definition.

252.225-7001  Buy American Act and Balance of Payments Program.

* * * * *
    (a) * * *
    Qualifying country means a country with a reciprocal defense 
procurement memorandum of understanding or international agreement with 
the United States in which both countries agree to remove barriers to 
purchases of supplies produced in the other country or services 
performed by sources of the other country, and the memorandum or 
agreement complies, where applicable, with the requirements of section 
36 of the Arms Export Control Act (22 U.S.C. 2776) and with 10 U.S.C. 
2457. Accordingly, the following are qualifying countries:

Australia, Austria, Belgium, Canada, Denmark, Egypt, Finland, France, 
Germany, Greece, Israel, Italy, Luxembourg, Netherlands, Norway, 
Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom of Great 
Britain and Northern Ireland.
* * * * *
    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--
    (A) The cost of the following types of components exceeds 50 
percent of the cost of all its components:
    (1) Components mined, produced, or manufactured in a qualifying 
country.
    (2) Components mined, produced, or manufactured in the United 
States.
    (3) Components of foreign origin of a class or kind for which the 
Government has determined that sufficient and reasonably available 
commercial quantities of a satisfactory quality are not mined, 
produced, or manufactured in the United States; or
    (B) The end product is a COTS item.
* * * * *

0
4. Amend section 252.225-7021 as follows:
0
a. Remove the clause date ``(JUN 2011)'' and add in its place ``(OCT 
2011)'';
0
b. In paragraph (a), remove the number preceding each definition, add 
in alphabetical order the definition for ``Commercially available off-
the-shelf (COTS) item'', and revise the definitions for ``Qualifying 
country'' and ``Qualifying country end product;
0
c. In Alternate I, revise the clause date, revise the introductory 
text, and, in paragraph (a), remove the number preceding the 
definition;
    d. In Alternate II, remove the clause date ``(DEC 2010)'' and add 
in its place ``(OCT 2011)'' and, in paragraph (a), remove the numbers 
preceding the definitions.

252.225-7021  Trade Agreements.

* * * * *
    (a) * * *
    Commercially available off-the-shelf (COTS) item. (i) Means any 
item of supply (including construction material) that is--
    (A) A commercial item (as defined in paragraph (1) of the 
definition of ``commercial item'' in section 2.101 of the Federal 
Acquisition Regulation);
    (B) Sold in substantial quantities in the commercial marketplace; 
and
    (C) Offered to the Government, under a contract or subcontract at 
any tier, without modification, in the same form in which it is sold in 
the commercial marketplace; and
    (ii) Does not include bulk cargo, as defined in section 4 of the 
Shipping Act of 1984 (46 U.S.C. 40102), such as agricultural products 
and petroleum products.
* * * * *
    Qualifying country means a country with a reciprocal defense 
procurement memorandum of understanding or international agreement with 
the United States in which both countries agree to remove barriers to 
purchases of supplies produced in the other country or services 
performed by sources of the other country, and the memorandum or 
agreement complies, where applicable, with the requirements of section 
36 of the Arms Export Control Act (22 U.S.C. 2776) and with 10 U.S.C. 
2457. Accordingly, the following are qualifying countries:

Australia, Austria, Belgium, Canada, Denmark, Egypt, Finland, France, 
Germany, Greece, Israel, Italy, Luxembourg, Netherlands, Norway, 
Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom of Great 
Britain and Northern Ireland.
    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--
    (A) The cost of the following types of components exceeds 50 
percent of the cost of all its components:
    (1) Components mined, produced, or manufactured in a qualifying 
country.
    (2) Components mined, produced, or manufactured in the United 
States.
    (3) Components of foreign origin of a class or kind for which the 
Government has determined that sufficient and reasonably available 
commercial quantities of a satisfactory quality are not mined, 
produced, or manufactured in the United States; or
    (B) The end product is a COTS item.
* * * * *

ALTERNATE I (OCT 2011)

    As prescribed in 225.1101(6)(ii), add the following definition to 
paragraph (a) of the basic clause and substitute the following 
paragraph (c) for paragraph (c) of the basic clause:
* * * * *

0
5. Amend section 252.225-7036 as follows:
0
a. Remove the clause date ``(DEC 2010)'' and add in its place ``(OCT 
2011)'';
0
b. In paragraph (a), remove the numbers preceding the definitions and 
revise the definition for ``Qualifying country end product'';
0
c. In Alternate I, revise the clause date, revise the introductory 
text, and, in paragraph (a), remove the number preceding the 
definition; and
0
d. In Alternates II and III, remove the clause date ``(DEC 2010)'' and 
add in its place ``(OCT 2011)'' and in paragraph (a), remove the 
numbers preceding the definitions.

252.225-7036  Buy American Act--Free Trade Agreements--Balance of 
Payments Program.

* * * * *
    (a) * * *
    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--

[[Page 61284]]

    (A) The cost of the following types of components exceeds 50 
percent of the cost of all its components:
    (1) Components mined, produced, or manufactured in a qualifying 
country.
    (2) Components mined, produced, or manufactured in the United 
States.
    (3) Components of foreign origin of a class or kind for which the 
Government has determined that sufficient and reasonably available 
commercial quantities of a satisfactory quality are not mined, 
produced, or manufactured in the United States; or
    (B) The end product is a COTS item.
* * * * *

ALTERNATE I (OCT 2011)

    As prescribed in 225.1101(11)(i)(B), add the following definition 
to paragraph (a) and substitute the following paragraph (c) for 
paragraph (c) of the basic clause:
* * * * *

[FR Doc. 2011-25234 Filed 10-3-11; 8:45 am]
BILLING CODE 5001-06-P
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