45666 Federal Register / Vol. 79, No. 150 / Tuesday, August 5, 2014 / Proposed Rules 

DEPARTMENT OF DEFENSE 

48 CFR Parts 204, 209, 212, 225, and 

252 

RIN 0750–AI34 

Defense Federal Acquisition 

Regulation Supplement: State 

Sponsors of Terrorism (DFARS Case 

2014–D014) 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Proposed rule. 

SUMMARY: DoD is proposing to amend 

the Defense Federal Acquisition 

Regulation Supplement (DFARS) to 

clarify and relocate coverage relating to 

state sponsors of terrorism (as identified 

by the Department of State), add an 

explicit representation, and conform the 

terminology. 

DATES: Comment Date: Comments on 

the proposed rule should be submitted 

in writing to the address shown below 

on or before October 6, 2014, to be 

considered in the formation of a final 

rule. 

ADDRESSES: Submit comments 

identified by DFARS Case 2014–D014, 

using any of the following methods: 

Æ Regulations.gov: http://

www.regulations.gov. Submit comments 

via the Federal eRulemaking portal by 

entering ‘‘DFARS Case 201X–D0XX’’ 

under the heading ‘‘Enter keyword or 

ID’’ and selecting ‘‘Search.’’ Select the 

link ‘‘Submit a Comment’’ that 

corresponds with ‘‘DFARS Case 2014– 

D014.’’ Follow the instructions provided 

at the ‘‘Submit a Comment’’ screen. 

Please include your name, company 

name (if any), and ‘‘DFARS Case 2014– 

D014’’ on your attached document. 

Æ Email: osd.dfars@mail.mil. Include 

DFARS Case 2014–D014 in the subject 

line of the message. 

Æ Fax: 571–372–6094. 

Æ Mail: Defense Acquisition 

Regulations System, Attn: Ms. Amy 

Williams, OUSD(AT&L)DPAP/DARS, 

Room 3B941, 3060 Defense Pentagon, 

Washington, DC 20301–3060. 

Comments received generally will be 

posted without change to http://

www.regulations.gov, including any 

personal information provided. To 

confirm receipt of your comment(s), 

please check www.regulations.gov, 

approximately two to three days after 

submission to verify posting (except 

allow 30 days for posting of comments 

submitted by mail). 

FOR FURTHER INFORMATION CONTACT: Ms. 

Amy G. Williams, Defense Acquisition 

Regulations System, 

OUSD(AT&L)DPAP/DARS, Room 

3B941, 3060 Defense Pentagon, 

Washington, DC 20301–3060. 

Telephone 571–372–6106. 

SUPPLEMENTARY INFORMATION: 

I. Background 

10 U.S.C. 2327 requires a firm or a 

subsidiary of a firm that submits an offer 

in response to a DoD solicitation to 

disclose if the firm is owned or 

controlled by a foreign government of a 

country that the Secretary of State 

determines under section 6(j)(1)(A) of 

the Export Administration Act of 1979 

(50 App. U.S.C. 2405 (j)(1)(A)) has 

repeatedly provided support for acts of 

international terrorism. The statute 

further provides restrictions on entering 

into contracts or subcontracts with such 

firms. 

The Department of State identifies the 

countries identified as sponsoring 

terrorism on a list of ‘‘State Sponsors of 

Terrorism’’ available at http://www/

state.gov/ct/list/c14151.htm. 

The restrictions are currently 

implemented in the DFARS in subpart 

209.1, Responsible Prospective 

Contractors; subpart 209.4, Debarment, 

Suspension, and Ineligibility; and 

clauses 252.209–7001, Disclosure of 

Ownership or Control by the 

Government of a Terrorist Country; and 

252.209–7004, Subcontracting with 

Firms that are owned or controlled by 

the Government of a Terrorist Country. 

This rule is part of DoD’s 

retrospective plan, completed in August 

2011, under Executive Order 13563, 

‘‘Improving Regulation and Regulatory 

Review.’’ DoD’s full plan and updates 

can be accessed at: http://www.

regulations.gov/#!docketDetail;dct=

FR+PR+N+O+SR;rpp=10;po=0;D=DOD2011-OS-0036. 

II. Discussion and Analysis 

A. Clarification 

The prohibition, notification, and 

disclosure requirements have been 

amended to— 

• Be consistent with the disclosure 

requirements of current DFARS 

252.209–7001(e); and 

• Make clear in each case whether the 

term ‘‘subsidiary’’ refers to a subsidiary 

of the offeror, or whether the offeror 

itself is a subsidiary of another firm that 

owns or controls the offeror. 

B. Representation 

Although the solicitation provision 

252.209–7001, Disclosure of Ownership 

or Control by the Government of a 

Terrorist Country, is currently included 

in the annual representations and 

certifications in the System for Award 

Management (SAM), the provision does 

not actually contain an explicit 

representation. The nonstatutory 

certification was removed from the 

provision in the 1991 DFARS rewrite, 

due to an initiative to streamline the 

DFARS. However, the fact that an 

offeror fails to disclose any significant 

interest by the government of a country 

that is a state sponsor of terrorism is not 

equivalent to an explicit representation 

that there is no such interest. DoD is 

proposing to include an explicit 

representation in the relocated 

provision at 252.225–70XX, Disclosure 

of Ownership or Control by the 

Government of a Country that is a State 

Sponsor of Terrorism, that, unless the 

offeror submits with its offer the 

disclosure required in paragraph (d) of 

the provision, the offeror represents, by 

submission of its offer, that that the 

government of a country that is a state 

sponsor of terrorism does not own or 

control a significant interest in— 

1. The offeror; 

2. A subsidiary of the offeror; or 

3. Any other firm that owns or 

controls the offeror. 

If this representation is false, then an 

offeror can be held liable for a false 

statement if the offeror does not disclose 

the ownership or control by the 

government of a country that is a state 

sponsor of terrorism. 

C. Terminology 

In this proposed rule, the term 

‘‘terrorist country’’ has been replaced 

with the more accurate term ‘‘country 

that is a state sponsor of terrorism,’’ 

which is consistent with the 

terminology used by the Department of 

State and in section 1261(c)(2)(C) of the 

National Defense Authorization Act for 

Fiscal Year 2013 (Pub. L. 112–239). 

D. Location 

The text at 209.104–1(g)(i) and 

209.104–70(a) has been relocated to 

DFARS subpart 225.7 and the provision 

at 252.209–7001 has been relocated to 

252.225–70XX. Subpart 225.7, 

Prohibited Sources, is a better location 

because the prohibition is based on 

ownership or control of an offeror by the 

government of specified countries, 

rather than the responsibility of the 

individual offeror. Furthermore, DoD 

has included in DFARS 225.7 coverage 

of the restriction of acquisition of 

commercial satellite services from 

certain foreign entities (including 

restrictions relating to countries that are 

state sponsors of terrorism) (see DFARS 

Case 2014–D0). 

The coverage at 209.405–2 and 

209.409 is properly located in subpart 

209.4, Debarment, Suspension, and 


emcdonald on DSK67QTVN1PROD with PROPOSALS2
Federal Register / Vol. 79, No. 150 / Tuesday, August 5, 2014 / Proposed Rules 45667 

Ineligibility, because it relates to 

treatment of entities listed as ineligible 

in the Exclusion section of the System 

for Award Management (SAM). 

However, cross-references have been 

added between DFARS 209.405–2 and 

225.771. 

E. Applicability 

This rule does not change the 

applicability of the provision 252.209– 

7001 or the clause at 252.209–7004 to 

solicitations for an amount less than the 

simplified acquisition threshold or for 

the acquisition of commercial items. 

10 U.S.C. 2327(f) specifically excludes 

applicability of the statute to contracts 

for acquisitions less than $100,000 (now 

escalated to $150,000, in accordance 

with 41 U.S.C. 1908). 

The provision currently at DFARS 

252.209–7001 is included in the 

Exclusion section of SAM and is 

applicable to the acquisition of 

commercial items. Therefore, 

conforming changes are required at 

204.1202(2)(i), 212.201(f)(xi), and 

252.204–7007. 

The clause at 252.209–7004 is not 

prescribed for use in the acquisitions of 

commercial items. This clause 

implements paragraphs (d) and (e) of 10 

U.S.C. 2327, which were enacted in 

1997 (Pub. L. 105–85) (subsequent to the 

Federal Acquisition Streamlining Act of 

1994), and therefore were inapplicable 

to the acquisitions of commercial items 

and COTS items, unless a determination 

was made that it would not be in the 

best interest of the Government to 

exempt these acquisitions from 

applicability of the statute. 

The prescription for the solicitation 

provision 252.225–70XX has been 

slightly modified, to exclude 

applicability to acquisitions of 

commercial satellite services, which are 

covered by a separate provision (see 

DFARS Case 2014–D010). 

III. 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 a significant 

regulatory action and, therefore, was 

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. 

IV. Regulatory Flexibility Act 

DoD does not expect this rule to have 

a significant economic impact on a 

substantial number of small entities 

within the meaning of the Regulatory 

Flexibility Act, 5 U.S.C. 601, et seq., 

because this rule will only have an 

impact on a firm, or a subsidiary of a 

firm, in which the government of a 

country that is a state sponsor of 

terrorism has a significant interest. 

The number of domestic entities 

significantly impacted by this rule will 

be minimal, if any. 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.’’ Therefore, an initial 

regulatory flexibility analysis has not 

been performed. DoD invites comments 

from small business concerns and other 

interested parties on the expected 

impact of this rule on small entities. 

DoD will also consider comments 

from small entities concerning the 

existing regulations in subparts affected 

by this rule in accordance with 5 U.S.C. 

610. Interested parties must submit such 

comments separately and should cite 5 

U.S.C. 610 (DFARS Case 2014–D014), in 

correspondence. 

V. Paperwork Reduction Act 

The rule contains information 

collection requirements that require the 

approval of the Office of Management 

and Budget under the Paperwork 

Reduction Act (44 U.S.C. chapter 35); 

however, these changes to the DFARS 

do not impose additional information 

collection requirements to the 

paperwork burden previously approved 

under OMB Control Number 0704–0187, 

entitled ‘‘Information Collection in 

Support of the DoD Acquisition Process 

(Various Miscellaneous Requirements).’’ 

The burden in this clearance that is 

associated with the provision 252.209– 

7001, Disclosure of Ownership or 

Control by the Government of a 

Terrorist Country, is estimated at 1 

hour, because such disclosure occurs 

rarely, if ever. 10 U.S.C. prohibits award 

to a firm or a subsidiary of a firm if the 

government of country that is a state 

sponsor of terrorism has a significant 

interest in the firm or subsidiary, unless 

the Secretary of Defense grants a waiver. 

List of Subjects in 48 CFR Parts 204, 

209, 212, 225, and 252 

Government procurement. 

Amy G. Williams, 

Deputy, Defense Acquisition Regulations 

System. 

Therefore, 48 CFR parts 204, 209, 212, 

225, and 252 are proposed to be 

amended as follows: 

■ 1. The authority citation for parts 204, 

209, 212, 225, and 252 continues to read 

as follows: 

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

chapter 1. 

PART 204—ADMINISTRATIVE 

MATTERS 

■ 2. Amend section 204.1202 by— 

■ a. Removing paragraph (2)(i); 

■ b. Redesignating paragraphs (2)(ii) 

through (xi) as (2)(i) through (x), 

respectively; and 

■ c. Adding a new paragraph (2)(xi). 

204.1202 Solicitation provision. 

* * * * * 

(2) * * * 

(xi) 252.225–70XX, Disclosure of 

Ownership or Control by the 

Government of a Country that is a State 

Sponsor of Terrorism. 

* * * * * 

PART 209—CONTRACTOR 

QUALIFICATIONS 

209.104–1 [Amended] 

■ 3. Amend section 209.104–1 by— 

■ a. Removing paragraph (g)(i); and 

■ b. Redesignating paragraph (g)(ii) as 

(g)(i). 

■ 4. Amend section 209.104–70 by— 

■ a. Revising the section heading; 

■ b. Removing paragraph (a); and 

■ c. Removing the paragraph ‘‘(b)’’ 

designation from the remaining text. 

The revision reads as follows: 

209.104–70 Solicitation provision. 

* * * * * 

■ 5. Revise section 209.405–2 to read as 

follows: 

209.405–2 Restrictions on subcontracting. 

(a) The contracting officer shall not 

consent to any subcontract with a firm, 

or a subsidiary of a firm, that is 

identified by the Secretary of Defense in 

the Exclusions section of the System for 


emcdonald on DSK67QTVN1PROD with PROPOSALS2
45668 Federal Register / Vol. 79, No. 150 / Tuesday, August 5, 2014 / Proposed Rules 

Award Management as being owned or 

controlled by the government of a 

country that is a state sponsor of 

terrorism unless the agency head states 

in writing the compelling reasons for 

the subcontract. (See also 225.771.) 

■ 6. Revise section 209.409 to read as 

follows: 

209.409 Solicitation provision and 

contract clause. 

Use the clause at 252.209–7004, 

Subcontracting with Firms That Are 

Owned or Controlled by the 

Government of a Country that is a State 

Sponsor of Terrorism, in solicitations 

and contracts with a value of $150,000 

or more. 

PART 212—ACQUISITION OF 

COMMERCIAL ITEMS 

■ 7. Amend section 212.301 by— 

■ a. Removing paragraph (f)(xi); 

■ b. Redesignating paragraphs (f)(xii) 

through (xlviii) as (xi) through (xlvii); 

and 

■ c. Adding a new paragraph (f)(xlviii) 

to read as follows: 

212.301 Solicitation provisions and 

contract clauses for the acquisition of 

commercial items. 

(f) * * * 

(xlviii) Use the provision at 252.225– 

70XX, Disclosure of Ownership or 

Control by the Government of a Country 

that is a State Sponsor of Terrorism, as 

prescribed in 225.771–5, to comply with 

10 U.S.C. 2327(b). 

PART 225—FOREIGN ACQUISITION 

225.701 [Removed] 

■ 8. Remove section 225.701. 

■ 9. Add sections 225.771, 225.771–0, 

225.771–1, 225.771–2, 225.771–3, 

225.771–4, and 225.771–5 to subpart 

225.7 to read as follows. 

225.771 Prohibition on contracting or 

subcontracting with a firm that is owned or 

controlled by the government of a country 

that is a state sponsor of terrorism. 

225.771–0 Scope. 

This section implements 10 U.S.C. 

2327(b). 

225.771–1 Definition. 

‘‘State sponsor of terrorism,’’ as used 

in this section, is defined in the 

provision at 252.225–70XX, Disclosure 

of Ownership or Control by the 

Government of a Country that is a State 

Sponsor of Terrorism. 

225.771–2 Prohibition. 

(a) The contracting officer shall not 

award a contract of $150,000 or more to 

a firm when a foreign government that 

is a state sponsor of terrorism owns or 

controls, either directly or indirectly, a 

significant interest in— 

(i) The firm; 

(ii) A subsidiary of the firm; or 

(iii) Any other firm that owns or 

controls the firm. 

(b) For restrictions on subcontracting 

with a firm, or a subsidiary of a firm, 

that is identified by the Secretary of 

Defense as being owned or controlled by 

the government of a country that is a 

state sponsor of terrorism, see 209.405– 

2. 

225.771–3 Notification. 

Any disclosure that the government of 

a country that is a state sponsor of 

terrorism has a significant interest in an 

offeror, a subsidiary of an offeror, or any 

other firm that owns or controls an 

offeror shall be forwarded through 

agency channels to the address at PGI 

225.771–3. 

225.771–4 Waiver of prohibition. 

The prohibition in 225.771–2 may be 

waived if the Secretary of Defense 

determines that a waiver is not 

inconsistent with the national security 

objectives of the United States in 

accordance with 10 U.S.C. 2327(c). 

225.771–5 Solicitation provision. 

Use the provision at 252.225–70XX, 

Disclosure of Ownership or Control by 

the Government of a Country that is a 

State Sponsor of Terrorism, in 

solicitations, including solicitations 

using FAR part 12 procedures for the 

acquisition of commercial items (other 

than commercial satellite services), that 

are expected to result in contracts of 

$150,000 or more. If the solicitation 

includes the provision at FAR 52.204– 

7, do not separately list the provision 

252.225–70XX in the solicitation. 

PART 252—SOLICITATION 

PROVISIONS AND CONTRACT 

CLAUSES 

■ 10. Amend section 252.204–7007 by— 

■ a. Removing the clause date ‘‘(AUG 

2014)’’ and adding ‘‘(DATE)’’ in its 

place; 

■ b. Removing paragraph (d)(1)(i); 

■ c. Redesignating paragraphs (d)(1)(ii) 

through (v) as (d)(1)(i) through (iv); and 

■ d. Adding a new paragraph (d)(1)(v) to 

read as follows: 

252.204–7007 Alternate A, Annual 

Representations and Certifications. 

* * * * * 

(d)(1) * * * 

(v) 252.225–70XX, Disclosure of 

Ownership or Control by the 

Government of a Country that is a State 

Sponsor of Terrorism. Applies to all 

solicitations expected to result in 

contracts of $150,000 or more. 

* * * * * 

252.209–7001 [Removed and Reserved] 

■ 11. Remove and reserve section 

252.209–7001. 

252.209–7002 [Amended] 

■ 12. Amend the provision introductory 

text by removing ‘‘209.104–70(b)’’ and 

adding ‘‘209.104–70’’ in its place. 

■ 13. Amend section 252.209–7004 by— 

■ a. Revising the clause heading, clause 

title, and date; and 

■ b. Amending paragraphs (a) and (b) by 

removing ‘‘terrorist country’’ and adding 

‘‘country that is a state sponsor of 

terrorism’’ in both places. 

The revision reads as follows: 

252.209–7004 Subcontracting with Firms 

That Are Owned or Controlled by the 

Government of a Country that is a State 

Sponsor of Terrorism. 

* * * * * 

Subcontracting With Firms That Are 

Owned or Controlled by the 

Government of a Country That Is a 

State Sponsor of Terrorism (Date) 

* * * * * 

■ 14. Add a new section 252.225–70XX 

to read as follows: 

252.225–70XX Disclosure of Ownership or 

Control by the Government of a Country 

that is a State Sponsor of Terrorism. 

As prescribed in 225.771–5, use the 

following provision: 

Disclosure of Ownership or Control by 

the Government of a Country That Is a 

State Sponsor of Terrorism (Date) 

(a) Definitions. As used in this provision— 

Government of a country that is a state 

sponsor of terrorism includes the state and 

the government of a country that is a state 

sponsor of terrorism, as well as any political 

subdivision, agency, or instrumentality 

thereof. 

Significant interest means— 

(i) Ownership of or beneficial interest in 5 

percent or more of the firm’s or subsidiary’s 

securities. Beneficial interest includes 

holding 5 percent or more of any class of the 

firm’s securities in ‘‘nominee shares,’’ ‘‘street 

names,’’ or some other method of holding 

securities that does not disclose the 

beneficial owner; 

(ii) Holding a management position in the 

firm, such as a director or officer; 

(iii) Ability to control or influence the 

election, appointment, or tenure of directors 

or officers in the firm; 

(iv) Ownership of 10 percent or more of the 

assets of a firm such as equipment, buildings, 

real estate, or other tangible assets of the 

firm; or 

(v) Holding 50 percent or more of the 

indebtedness of a firm. 

State sponsor of terrorism means a country 

determined by the Secretary of State, under 


emcdonald on DSK67QTVN1PROD with PROPOSALS2
Federal Register / Vol. 79, No. 150 / Tuesday, August 5, 2014 / Proposed Rules 45669 

section 6(j)(1)(A) of the Export 

Administration Act of 1979 (50 U.S.C. App. 

2405(j)(1)(A)), to be a country the government 

of which has repeatedly provided support for 

acts of international terrorism. As of the date 

of this provision, state sponsors of terrorism 

include: Cuba, Iran, Sudan, and Syria. 

(b) Prohibition on award. In accordance 

with 10 U.S.C. 2327, unless a waiver is 

granted by the Secretary of Defense, no 

contract may be awarded to a firm if the 

government of a country that is a state 

sponsor of terrorism owns or controls a 

significant interest in— 

(1) The firm; 

(2) A subsidiary of the firm; or 

(3) Any other firm that owns or controls 

the firm. 

(c) Representation. Unless the Offeror 

submits with its offer the disclosure required 

in paragraph (d) of this provision, the Offeror 

represents, by submission of its offer, that the 

government of a country that is a state 

sponsor of terrorism does not own or control 

a significant interest in— 

(1) The Offeror; 

(2) A subsidiary of the Offeror; or 

(3) Any other firm that owns or controls 

the Offeror. 

(d) Disclosure. 

(1) The Offeror shall disclose in an 

attachment to its offer if the government of 

a country that is a state sponsor of terrorism 

owns or controls a significant interest in the 

Offeror; a subsidiary of the Offeror; or any 

other firm that owns or controls the Offeror. 

(2) The disclosure shall include— 

(i) Identification of each government 

holding a significant interest; and 

(ii) A description of the significant interest 

held by each government. 

(End of provision) 

[FR Doc. 2014–18206 Filed 8–4–14; 8:45 am] 

BILLING CODE 5001–06–P 


emcdonald on DSK67QTVN1PROD with PROPOSALS2