11142 Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Proposed Rules

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List of Subjects in 40 CFR Part 92

Environmental protection, Air

pollution control, Railroads, Reporting

and recordkeeping requirements.

Dated: March 3, 1997.

Mary D. Nichols,

Assistant Administrator for Air and

Radiation.

[FR Doc. 97–6210 Filed 3–10–97; 8:45 am]

BILLING CODE 6560–50–P

DEPARTMENT OF DEFENSE

48 CFR Parts 225, 242, and 252

[DFARS Case 96–D020]

Defense Federal Acquisition

Regulation Supplement; Duty-Free

Entry

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for

comment.

SUMMARY: The Director of Defense

Procurement is proposing to amend the

Defense Federal Acquisition Regulation

Supplement (DFARS) to clarify

guidance regarding duty-free entry of

supplies and implementation of the

North American Free Trade Agreement

(NAFTA).

DATES: Comment date: Comments on the

proposed rule should be submitted in

writing to the address shown below on

or before May 12, 1997, to be considered

in the formulation of the final rule.

ADDRESSES: Interested parties should

submit written comments to: Defense

Acquisition Regulations Council, Attn:

Ms. Amy Williams, PDUSD

(A&T)DP(DAR), IMD 3D139, 3062

Defense Pentagon, Washington, DC

20301–3062. Telefax number (703) 602–

0350. Please cite DFARS Case 96–D020

in all correspondence related to this

issue.

FOR FURTHER INFORMATION CONTACT:

Ms. Amy Williams (703) 602–0131.

SUPPLEMENTARY INFORMATION:

A. Background

This proposed rule does not

constitute a change in policy. It is

intended to clarify and consistently

apply the existing policy regarding

duty-free entry of supplies under DoD

contracts. DoD generally waives duty on

defense supplies (end products or

components) from qualifying countries;

on eligible products subject to the Trade

Agreements Act or the North American

Free Trade Agreement; and on other

foreign supplies if the cost of processing

the duty-free entry certificates will not

exceed the amount of duty that would

be paid. This proposed rule more

accurately focuses the prescriptions for

use of duty-free entry clauses; limits the

required listing of supplies under the

clause at 252.225–7008, Supplies to be

Accorded Duty-Free Entry, to foreign

end products that are neither qualifying

country supplies nor eligible end

products; adds an Alternate I to the

clause at 252.225–7035, Buy American

Act-North American Free Trade

Agreement Implementation Act-Balance

of Payments Program Certificate, for

contracts under $50,000, and expands

Alternate I of the clause at 252.225–

7036, North American Free Trade

Agreement Implementation Act, to

clarify that, when under $50,000, the

offered price of Mexican end products

must include any applicable duty;

expands the clause at 252.225–7037,

Duty-Free Entry-Eligible End Products,

to cover all eligible end products, not

only NAFTA country supplies; and

clarifies that notification to the

Commander, Defense Contract

Management Command, is not required

in those instances where shipments are

consigned to a contractor’s plant and no

duty-free entry certificate is required.

B. Regulatory Flexibility Act

This proposed rule is not expected 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 it does not constitute a change

in policy but is a clarification of

implementing procedures pertaining to

duty-free entry of supplies and the

North American Free Trade Agreement.

Comments are invited from small

businesses and other interested parties.

Comments from small entities

concerning the affected DFARS subparts

also will be considered in accordance

with 5 U.S.C. 610. Such comments

should be submitted separately and

should cite DFARS Case 96–D020 in

correspondence.
Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Proposed Rules 11143

C. Paperwork Reduction Act

This proposed rule does not impose

any new information collection

requirements that require the approval

of the Office of Management and Budget

(OMB) under 44 U.S.C. 3501, et seq. The

information collection requirements

contained in the clause at DFARS

252.225–7003 are approved under OMB

Clearance Number 0704–0187; the other

information collection requirements

contained in DFARS Part 225 and the

associated clauses in Part 252 are

approved under OMB Clearance

Number 0704–0229. It is estimated that

the clarifying amendments proposed in

this rule will result in a reduction of

486,000 hours in the paperwork burden

approved under OMB Clearance

Number 0704–0187, and a reduction of

8,200 hours in the paperwork burden

approved under OMB Clearance

Number 0704–0229.

List of Subjects in 48 CFR Parts 225,

242, and 252

Government procurement.

Michele P. Peterson,

Executive Editor, Defense Acquisition

Regulations Council.

Therefore, 48 CFR Parts 225, 242, and

252 are proposed to be amended as

follows:

1. The authority citation for 48 CFR

Parts 225, 242, and 252 continues to

read as follows:

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

Chapter 1.

PART 225—FOREIGN ACQUISITION

2. Section 225.105 is amended by

revising the introductory text; by

removing paragraph (3); by

redesignating paragraphs (1) AND (2) as

paragraphs (2) and (3), respectively; by

adding a new paragraph (1); by revising

newly designated paragraphs (2) and (3)

in the introductory text; by revising

newly designated paragraph (3) (ii); and

by revising Examples 2 and 3 of Table

25–1 to read as follows:

225.105 Evaluating offers.

Use the following procedures instead

of those in FAR 25.105. For additional

procedures relating to evaluation of

offers, see 225.303(b) Balance of

Payments Program), 225.603 (customs

and duties), and 225.872–4 (qualifying

country sources).

(1) Treat offers of eligible end

products under acquisitions subject to

the Trade Agreements Act or NAFTA as

if they were qualifying country offers.

As used in this section, the term

‘‘nonqualifying country offer’’ also may

apply to an offer that is not an eligible

offer under a trade agreement (see

Example 4 of Table 25–1, Evaluation).

(2) Except as provided in paragraph

(3) of this section, evaluate offers by

adding a 50 percent factor to the price

(including duty) of each nonqualifying

country offer (see Example 1 of Table

25–1, Evaluation).

* * * * *

(3) When application of the factor

would not result in the award of a

domestic end product, i.e., when no

domestic offers are received (see

Example 3 of Table 25–1, Evaluation) or

when a qualifying country offer is lower

than the domestic offer (see Example 2

of Table 25–1, Evaluation), evaluate

nonqualifying country offers without

the 50 percent factor.

* * * * *

(ii) If duty is not to be exempted,

evaluate the nonqualifying country offer

inclusive of duty. (See Examples 2 and

3, Alternate I, of Table 25–1,

Evaluation.)

* * * * *

TABLE 25–1.—EVALUATION

EXAMPLE 2

Alternate I: Duty Not Exempted for Nonqualifying Country Offers:

Nonqualifying Country Offer (including $100 duty) ................................................................................................................... $6,000

Domestic Offer ........................................................................................................................................................................... 8,500

Qualifying Country Offer ............................................................................................................................................................ 7,800

Award on Nonqualifying Country Offer. Since the qualifying country offer is lower than the domestic offer, the nonqualifying country offer is

evaluated without the factor. Since duty is not being exempted for nonqualifying country offers, the offer is evaluated and award is made at the

price inclusive of duty ($6,000).

Alternate II: Duty Exempted:

Nonqualifying Country Offer ...................................................................................................................................................... $880,500

Domestic Offer ........................................................................................................................................................................... 950,000

Qualifying Country Offer ............................................................................................................................................................ 880,000

Award on Nonqualifying Country Offer. Again, the qualifying country offer is lower than the domestic offer. The nonqualifying country offer is,

therefore, evaluated without the factor. Since duty is being exempted for nonqualifying country offers, the duty identified by the offeror is subtracted from the offered price, which is evaluated and awarded at $879,500.

EXAMPLE 3

Alternate I: Duty Not Exempted for Nonqualifying Country Offers:

Nonqualifying Country Offer (including $150 duty) ................................................................................................................... $9,600

Qualifying Country Offer ............................................................................................................................................................ 9,500

Award on Qualifying Country Offer. Since no domestic offers are received, the nonqualifying country offer is evaluated without the evaluation

factor. Since duty is not being exempted and would be paid by the Government, the nonqualifying country offer is evaluated inclusive of duty.

Alternate II: Duty Exempted:

Nonqualifying Country Offer (including $1,000 duty) ................................................................................................................ $880,500

Qualifying Country Offer ............................................................................................................................................................ 880,000

Award on Nonqualifying Country Offer. Since no domestic offers are received, the nonqualifying country offer is evaluated without the evaluation factor. Since duty is being exempted, duty is subtracted from the nonqualifying country offer, which is evaluated and awarded at $879,500.

225.109–70 [Amended]

3. Section 225.109–70 is amended by

removing paragraph (b) and by

redesignating paragraph (c) as paragraph

(b).

4. Section 225.408 is amended by

redesignating paragraph (a)(3) as
11144 Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Proposed Rules

paragraph (a)(3)(A), and by adding

paragraph (a)(3)(B) to read as follows:

225.408 Solicitation provisions and

contract clauses.

(a) * * *

(3) * * *

(B)(i) Use the basic provision when

the basic clause at 252.225–7036 is

used.

(ii) Use the provision with its

Alternate I when the clause at 252.225–

7036 is used with its Alternate I.

* * * * *

5. Section 225.602 is amended by

revising the introductory text of

paragraph (3) to read as follows:

225.602 [Amended]

* * * * *

(3) Unless the supplies are entitled to

duty-free treatment under a special

category in the Harmonized Tariff

Schedule of the United States (e.g., the

Caribbean Basin Economic Recovery Act

or NAFTA), or unless the supplies

already have entered into the customs

territory of the United States and duty

already has been paid, DOD will issue

duty-free entry certificates for—

* * * * *

6. Section 225.603 is amended by

redesignating the text preceding

paragraph (b) as paragraph (a), and by

revising it to read as follows:

225.603 Procedures.

(a) General.

(i) Preaward.

(A) Unless duty was paid prior to

submission of the offer, an offer of

domestic end products with no

nonqualifying country components, an

offer of qualifying country end products,

or an offer of eligible products under the

Trade Agreements Act or NAFTA,

should not include duty.

(B) Offers of U.S. made end products

with nonqualifying country

components, and offers that are neither

qualifying country offers not offers of

eligible products under a trade

agreement, should contain applicable

duty.

(C) Apply the evaluation procedures

for the Buy American Act in accordance

with 225.105.

(ii) Award. Exclude duty from the

contract price for supplies (end

products or components) that are to be

accorded duty-free entry. If duty-free

entry is granted to the successful offeror

in accordance with the clause at FAR

52.225–10, Duty-free Entry, and the

clause at 252.225–7003, Information for

Duty-Free Entry Evaluation, request that

the offeror provide the list of foreign

supplies that are subject to such dutyfree entry, and list such supplies in the

contract clause at 252.225–7008,

Supplies to be Accorded Duty FreeEntry.

(iii) Postward.

(A) Issue duty-free entry certificates

for all qualifying country supplies in

accordance with the policy at

225.602(3)(i) and the clause at 252.225–

7009, Duty-Free Entry-Qualifying

Country Supplies (End Products and

Components); for all eligible products

subject to trade agreements in

accordance with the policy at

225.602(3)(ii) and the clause at 252.225–

7037, Duty-Free Entry-Eligible End

Products; and for other foreign supplies

in accordance with the policy at

225.602(3)(iii) on contracts containing

the clause at FAR 52.225–10, Duty-Free

Entry, or (following to the extent

practicable the procedures required by

the clause at FAR 52.225–10, Duty-Free

Entry, and the clause 252.225–7010,

Duty-Free Entry-Additional Provisions)

on other contracts—

(1) That fall within one of the

following categories:

(i) Direct purchases of foreign

supplies under a DOD prime contract,

whether title passes at point of origin or

at destination in the United States;

provided the contract states that the

final price is exclusive of duty.

(ii) Purchases of foreign supplies by a

domestic prime contractor under a costreimbursement type contract or by a

cost-reimbursement type subcontractor

(where no fixed-price prime or fixedprice subcontract intervenue between

the purchaser and the Government),

whether title passes at point of origin or

at destination in the United States. If a

fixed-price prime or fixed-price

subcontract intervenes, follow the

criteria stated in paragraph (a)(iii)(A)(1)

(iii) of this section.

(iii) Purchases of foreign supplies by

a fixed-price domestic prime contractor,

a fixed-price subcontractor, or a costtype subcontractor where a fixed-price

prime contract or fixed-price

subcontract interevenes; provided the

fixed-price prime contract and, where

applicable, fixed-price subcontract

prices are, or are amended to be,

exclusive of duty;

(2) For which the supplies so

purchased will be delivered to the

Government or incorporated in

Government-owned property or in an

end product to be furnished to the

Government; and duty will be paid if

such supplies or any portion thereof are

used for other than the performance of

the Government contract or disposed of

other than for the benefit of the

Government in accordance with the

contract terms; and

(3) For which such acquisition abroad

is authorized by the terms of the

contract, the subcontract, or by the

contracting officer.

(B) Under a fixed-price contract,

negotiate an equitable reduction in the

contract price if duty-free entry is

granted for any nonqualifying country

component not listed in the Schedule as

duty-free, even if contract award was

based on furnishing a domestic

component or a qualifying country

component.

* * * * *

7. Section 225.605–70 is revised to

read as follows:

225.605–70 Additional solicitation

provisions and contract clauses.

(a) Use the clause at 252.225–7009,

Duty-Free Entry-Qualifying Country

Supplies (End Products and

Components), in solicitations and

contracts for supplies and in

solicitations and contracts for services

involving the furnishing of supplies,

except for solicitations and contracts for

supplies for exclusive use outside the

United States.

(b) Use the clause at 252.225–7037,

Duty-Free-Entry Eligible End Products,

in solicitations and contracts for

supplies and services when the clause at

252.225–7007, Trade Agreements, or the

clause at 252.225–7036, North American

Free Trade Agreement Implementation

Act, is used.

(c) Use the clause at 252.225–7010,

Duty-Free Entry-Additional Provisions,

in solicitations and contracts that

include the clause at FAR 52.225–10,

Duty-Free Entry.

(d) Use the provision at 252.225–

7003, Information for Duty-Free Entry

Evaluation, in solicitations that include

the clause at FAR 52.225–10, Duty-Free

Entry.

(e) Use the clause at 252.225–7008,

Supplies to be Accorded Duty-Free

Entry, in solicitations and contracts that

provide for duty-free entry and that

include the clause at FAR 52.225–10,

Duty-Free Entry.

PART 242—CONTRACT

ADMINISTRATION

8. Section 242.302 is amended by

revising paragraph (a)(19) to read as

follows:

242.302 Contract administration functions.

(a) * * *

(19) Also negotiate and issue contract

modifications reducing contract prices

in connection with the provisions of

paragraph (b) of the clause at FAR

52.225–10, Duty-Free Entry.

* * * * *
Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Proposed Rules 11145

PART 252—SOLICITATION

PROVISIONS AND CONTRACT

CLAUSES

9. Section 252.212–7001 is amended

in paragraph (b) of the clause by

revising the entries ‘‘252.225–7001’’ and

‘‘252.225–7036’’ to read as follows:

252.212–7001 Contract terms and

conditions required to implement statutes

or Executive Orders applicable to Defense

acquisitions of commercial items.

* * * * *

(b) * * *

llll252.225–7001 Buy American Act

and Balance of Payments Program (41

U.S.C. 10a–10d, E.O. 10582).

* * * * *

llll252.225–7036 North American Free

Trade Agreement Implementation Act

(19 U.S.C. 3301 note). (ll Alternate I)

* * * * *

10. Section 252.225–7001 is amended

by revising in the clause the first

sentence of paragraph (c), and by

revising paragraph (d) to read as

follows:

252.225–7001 Buy American Act and

Balance of Payments Program.

* * * * *

(c) The Contractor agrees that it will

deliver only domestic end products unless,

in its offer, it specified delivery of other end

products in the Buy American Act—Balance

of Payments Program Certificate, the Buy

American Act—Trade Agreements—Balance

of Payments Program Certificate, or the Buy

American Act—North American Free Trade

Agreement Implementation Act—Balance of

Payments Program Certificate. * * *

(d) The offered price of qualifying country

end products should not include custom fees

or duty. The offered price of nonqualifying

country end products, and products

manufactured in the United States that

contain nonqualifying country components,

must include all applicable duty. The award

price will not include duty for end products

or components that are to be accorded dutyfree entry. Generally, when the Buy

American Act is applicable, each

nonqualifying country offer is adjusted for its

purpose of evaluation by adding 50 percent

of the offer, inclusive of duty.

(End of clause)

11. Section 252.225–7003 is amended

by revising the introductory text; by

revising the clause in paragraph (a) and

by removing paragraph (d). The revised

text reads as follows:

252.225–7003 Information for duty-free

entry evaluation.

As prescribed in 252.605–70(d), use

the following provision:

* * * * *

(a) Is the offer based on furnishing any

supplies (i.e., end items, components, or

material) of foreign origin other than those

for which duty-free entry is to be accorded

pursuant to the Duty-Free Entry-Qualifying

Country Supplies (End Products and

Components) clause or, if applicable, the

Duty-Free Entry-Eligible End Products clause

of this solicitation?

Yes ( ) No ( )

* * * * *

12. Section 252.225–7007 is amended

by revising paragraph (d) of the clause

to read as follows:

252.225–7007 Trade Agreements.

* * * * *

(d) the offered price of qualifying country

end products and the offered price of

designated country end products, NAFTA

country end products, and Caribbean Basin

country end products for line items subject

to the Trade Agreements Act, or the North

American Free Trade Agreement

Implementation Act, should not include

custom fees or duty. The offered price of end

products listed under paragraph (c)(2)(vi) of

the Buy American Act-Trade AgreementsBalanced of Payments Program Certificate

provision of the solicitation, or the offered

price of U.S. made end products that contain

nonqualifying country components, must

include all applicable duty. The award price

will not include duty for end products or

components that are to be accorded duty-free

entry. Generally, each offer of a U.S. made

end product that does not meet the definition

of ‘‘domestic end product’’ is adjusted for the

purpose of evaluation by adding 50 percent

of the offered price, inclusive of duty.

(End of clause)

13. Section 252.225–7008 is revised to

read as follows:

252.225–7008 Supplies to be accorded

duty-free entry.

As prescribed in 225.605–70(e), use

the following clause:

Supplies To Be Accorded Duty-Free Entry

In accordance with paragraph (b) of the

Duty-Free Entry clause of this contract, in

addition to duty-free entry for all qualifying

country supplies (end products and

components) and all eligible end products

subject to applicable trade agreements (if this

contract contains the Trade Agreements

clause or the North American Free Trade

Agreement Implementation Act clause), the

following foreign end products that are

neither qualifying country end products nor

eligible end products under a trade

agreement, and the following nonqualifying

country components, are accorded duty-free

entry:

lllllllllllllllllllll

lllllllllllllllllllll

lllllllllllllllllllll

(End of clause)

14. Section 252.225–7009 is amended

by revising the section title,

introductory text, clause title, and

paragraphs (b), (c)(f)(2)(iv), (f)(2)(vii),

and (g)(1) to read as follows:

252.225–7009 Duty-free entry-qualifying

country supplies (end products and

components).

As prescribed in 225.605–70(a), use

the following clause:

Duty-Free Entry—Qualifying Country

Supplies (End Products and Components)

(a) * * *

(b) The requirements of this clause apply

to this contract and subcontracts, including

purchase orders, that involve supplies to be

accorded duty-free entry whether placed—

(1) Directly with a foreign concern as a

prime contract; or

(2) As a subcontract or purchase order

under a contract placed with a domestic

concern.

(c) Except as otherwise approved by the

Contracting Officer, or unless supplies were

imported into the United States before the

date of this contract or, in the case of

supplies imported by a first or lower tier

subcontractor, before the date of the

subcontract, no amount is or will be included

in the contract price for duty for—

(1) End items that are qualifying country

end products; or

(2) Components (including, without

limitation, raw materials and intermediate

assemblies) produced or made in qualifying

countries, that are to be incorporated in the

end item to be delivered under this contract,

provided that the end items are

manufactured in the United States or in a

qualifying country.

* * * * *

(f) * * *

(2) * * *

(iv)(A) For direct shipments to a U.S.

military installation, the notation: ‘‘UNITED

STATES GOVERNMENT, DEPARTMENT OF

DEFENSE Duty-Free Entry to be claimed

pursuant to Section XXII, Chapter 98,

Subchapter VIII, Item 9808.00.30 of the

Harmonized Tariff Schedule of the United

States. Upon arrival of shipment at the

appropriate port of entry, District Director of

Customs, please release shipment under 19

CFR part 142, and notify Commander,

Defense Contract Management Command

(DCMC) New York, ATTN: Customs Team,

DCMDN–GNIC, 207 New York Avenue,

Staten Island, New York 10305–5013, for

execution of Customs Forms 7501, 7501A, or

7506 and any required duty-free entry

certificates.’’

(B) in cases where the shipment will be

consigned to other than a military

installation, e.g., a domestic contractor’s

plant, the shipping document notation shall

be altered to insert the name and address of

the contractor, agent, or broker who will

notify Commander, Defense Contract

Management Command (DCMC), New York,

for execution of the duty-free certificate.

* * * * *

(vii) Activity address number of the

contract administration office actually

administering the prime contract, e.g., for

DCMC Dayton, S3605A.

(g) * * *

(1) Except for shipments consigned to a

military installation, the Contractor shall

prepare, or authorize an agent to prepare, any
11146 Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Proposed Rules

customs forms required for the entry of

foreign supplies in connection with DOD

contacts into the United States, its

possessions, or Puerto Rico. Submit the

completed customs forms to the District

Director of Customs with a copy to DCMC NY

for execution of any required duty-free entry

certificates. Shipments consigned directly to

a military installation will be released in

accordance with 10.101 and 10.102 of the

U.S. Custom regulations.

* * * * *

252.225–7010 [Amended]

15. Section 252.225–7010 is amended

in the introductory text by revising

‘‘225.605–70(d)’’ to read ‘‘225.605–

70(c)’’; in the first sentence of paragraph

(e) introductory text of the clause by

revising ‘‘Defense Contract Management

Area Operations (DCMAO)’’ to read

‘‘Defense Contract Management

Command (DCMC)’’; in paragraph (e)(3)

by revising ‘‘DCMAO’’ to read ‘‘DCMC’’

and by revising ‘‘DLA8DP’’ to read

‘‘S3605A’’; and in the second sentence

of paragraph (f) by revising ‘‘DCMAO’’

to read ‘‘DCMC’’.

16. Section 252.225–7035 is amended

by revising in the clause paragraphs (a),

(b), and (c)(2); and by adding Alternate

I to read as follows:

252.225–7035 Buy American Act—North

American Free Trade Agreement

Implementation Act—Balance of Payments

Program Certificate.

* * * * *

(a) Definitions. ‘‘Domestic end product,’’

‘‘foreign end product,’’ ‘‘NAFTA country end

product,’’ and ‘‘qualifying country end

product’’ have the meanings given in the

North American Free Trade Agreement

Implementation Act or Buy American Act

and Balance of Payments Program clauses of

this solicitation.

(b) Evaluation. Offers will be evaluated in

accordance with the policies and procedures

of Part 225 of the Defense Federal

Acquisition Regulation Supplement. For line

items subject to NAFTA, offers of qualifying

country end products or NAFTA country end

products will be evaluated without regard to

the restrictions of the Buy American Act or

the Balance of Payments Program.

(c) * * *

(2) The offeror must identify all end

products that are not domestic end products.

(i) The offeror certifies that the following

supplies are qualifying country (except

Canada) end products:

(insert line item number)

(insert country of origin)

(ii) The offeror certifies that the following

supplies qualify as NAFTA country end

products:

(insert line item number)

(insert country of origin)

(iii) The following supplies are other

foreign end products:

(insert line item number)

(insert country of origin)

(End of provision)

Alternate I

As prescribed in 225.408(a)(3)(B)(ii),

substitute the phrase ‘‘Canadian end

product’’ for the phrase ‘‘NAFTA country

end product’’ in paragraph (a); and substitute

the phrase ‘‘Canadian end products’’ for the

phrase ‘‘NAFTA country end products’’ in

paragraphs (b) and (c)(2)(ii) of the basic

clause.

17. Section 252.225–7036 is revised to

read as follows:

252.225–7036 North American Free Trade

Agreement Implementation Act.

North American Free Trade Agreement

Implementation Act

(a) Definitions.

(1) ‘‘Components,’’ ‘‘domestic end

product,’’ ‘‘end product,’’ ‘‘nonqualifying

country,’’ ‘‘qualifying country,’’ and

‘‘qualifying country end product’’ have the

meanings given in the Buy American Act and

Balance of Payments Program clause of this

contract.

(2) ‘‘Foreign end product’’ means an end

product other than a domestic end product.

(3) ‘‘North American Free Trade Agreement

(NAFTA) country’’ means Canada or Mexico.

(4) ‘‘NAFTA country end product’’ means

an article that—

(i) Is wholly the growth, product, or

manufacture of a NAFTA country; or

(ii) Has, in the case of an article which

consists in whole or in part of materials from

another country or instrumentality, been

substantially transformed in a NAFTA

country into a new and different article of

commerce with a name, character, or use

distinct from that of the article or articles

from which it was transformed. The term

refers to a product offered for purchase under

a supply contract, but for purposes of

calculating the value of the end product

includes services (except transportation

services) incidental to its supply, provided

that the value of those incidental services

does not exceed the value of the product

itself.

(b) The Contracting Officer has determined

that the North American Free Trade

Agreement Implementation Act of 1993

applies to this acquisition. Unless otherwise

specified, NAFTA applies to all items in the

Schedule.

(c) The Contractor agrees to deliver under

this contract only domestic end products

unless, in its offer, it specified delivery of

qualifying country, NAFTA country, or other

foreign end products in the Buy American

Act—North American Free Trade Agreement

Implementation Act—Balance of Payments

Program Certificate provision. An offer

certifying that a qualifying country end

product or a NAFTA country end product

will be supplied requires the Contractor to

supply a qualifying country end product or

a NAFTA country end product, whichever is

certified, or, at the Contractor’s option, a

domestic end product.

(d) The offered price of qualifying country

end products, or NAFTA country end

products for line items subject to the North

American Free Trade Agreement

Implementation Act, should not include

custom fees on duty. The offered price of

foreign end products listed under paragraph

(c)(2)(iii) of the Buy American Act—North

American Free Trade Agreement

Implementation Act—Balance of Payments

Program Certificate provision of the

solicitation, or the offered price of domestic

end products that contain nonqualifying

country components, must include all

applicable duty. The award price will not

include duty for end products or components

that are to be accorded duty-free entry.

Generally, each foreign end product listed

under paragraph (c)(2)(iii) of the Buy

American Act—North American Free Trade

Agreement Implementation Act—Balance of

Payments Program Certificate provision of

the solicitation is adjusted for the purpose of

evaluation by adding 50 percent of the

offered price, inclusive of duty.

(End of clause)

Alternate I

As prescribed in 225.408(a)(4)(B)(ii),

substitute the following paragraphs (a)(4), (c),

and (d) for paragraphs (a)(4), (c), and (d) of

the basic clause:

(a)(4) ‘‘Canadian end product’’ means an

article that—

(i) Is wholly the growth, product, or

manufacture of Canada; or

(ii) Has, in the case of an article which

consists in whole or in part of materials from

another country or instrumentality, been

substantially transformed in Canada into a

new and different article of commerce with

a name, character, or use distinct from that

of the article or articles from which it was

transformed. The term refers to a product

offered for purchase under a supply contract,

but for purposes of calculating the value of

the end product includes services (except

transportation services) incidental to its

supply, provided that the value of those

incidental services does not exceed that of

the product itself.

(b) The Contractor agrees to deliver under

this contract only domestic end products

unless, in its offer, it specified delivery of

qualifying country, Canadian, or other

foreign end products in the Buy American

Act—North American Free Trade Agreement

Implementation Act—Balance of Payments

Program Certificate provision. An offer

certifying that a qualifying country end

product or a Canadian end product will be

supplied requires the Contractor to supply a

qualifying country end product or a Canadian

end product, whichever is certified, or, at the

Contractor’s option, a domestic end product.

(c) The offered price of qualifying country

end products, or Canadian end products for

line items subject to the North American Free

Trade Agreement Implementation Act,

should not include custom fees or duty. The

offered price of foreign end products listed

under paragraph (c)(2)(iii) of the Buy

American Act—North American Free Trade

Agreement Implementation Act—Balance of

Payments Program Certificate provision of

the solicitation, or the offered price of

domestic end products that contain

nonqualifying country components, must

include all applicable duty. The award price

will not include duty for end products or

components that are to be accorded duty-free

entry. Generally, each foreign end product
Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Proposed Rules 11147

listed under paragraph (c)(2)(iii) of the Buy

American Act—North American Free Trade

Agreement Implementation Act—Balance of

Payments Program Certificate provision of

the solicitation is adjusted for the purpose of

evaluation by adding 50 percent of the

offered price, inclusive of duty.

18. Section 252.225–7037 is revised as

follows:

252.225–7037 Duty-free entry-eligible end

products.

As prescribed in 225.605–70(b), use

the following clause:

Duty-Free Entry-Eligible End Products

(a) Definitions.

‘‘Eligible end product,’’ as used in this

clause, means—

(1) ‘‘Designated country end products,’’

‘‘Caribbean Basin country end product,’’ or

‘‘NAFTA country end product,’’ as defined in

the Trade Agreements clause of this contract;

(2) ‘‘NAFTA country end product,’’ as

defined in the North American Free Trade

Agreement Implementation Act clause of this

contract; or

(3) ‘‘Canadian end product,’’ as defined in

the North American Free Trade Agreement

Implementation Act, Alternate I, clause of

this contract.

(b) The requirements of this clause apply

to this contract and subcontracts, including

purchase orders, that involve delivery of

eligible end products to be accorded dutyfree entry whether placed—

(1) Directly with a foreign concern as a

prime contract; or

(2) As a subcontract or purchase order

under a contract placed with a domestic

concern.

(c) Except as otherwise approved by the

Contracting Officer, no amount is or will be

included in the contract price for duty for

eligible end products.

(d) The Contractor warrants that—

(1) All eligible end products, for which

duty-free entry is to be claimed under this

clause, are intended to be delivered to the

Government; and

(2) The Contractor will pay any applicable

duty to the extent that such eligible end

products, or any portion thereof (if not scrap

or salvage) are diverted to nongovernmental

use, other than as a result of a competitive

sale made, directed, or authorized by the

Contracting Officer.

(e) The Government agrees to execute dutyfree entry certificates and to afford such

assistance as appropriate to obtain the dutyfree entry of eligible end products for which

the shipping documents bear the notation

specified in paragraph (f) of this clause,

except as the Contractor may otherwise agree.

(f) All shipping documents submitted to

Customs, covering eligible end products for

which duty-free entry certificates are to be

issued under this clause, shall—

(1) Consign the shipments to the

appropriate—

(i) Military department in care of the

Contractor, including the Contractor’s

delivery address; or

(ii) Military installation; and

(2) Include the following information:

(i) Prime contract number, and delivery

order if applicable.

(ii) Number of the subcontract/purchase

order for foreign supplies if applicable.

(iii) Identification of carrier.

(iv) (A) For direct shipments to a U.S.

military installation, the notation: ‘‘UNITED

STATES GOVERNMENT, DEPARTMENT OF

DEFENSE Duty-Free Entry to be claimed

pursuant to Section XXII, Chapter 98,

Subchapter VIII, Item 9808.00.30 of the

Harmonized Tariff Schedule of the United

States. Upon arrival of shipment at the

appropriate port of entry, District Director of

Customs, please release shipment under 19

CFR part 142, and notify Commander,

Defense Contract Management Command

(DCMC) New York, ATTN: Customs Team,

DCMDN–GNIC, 207 New York Avenue,

Staten Island, New York 10305–5013, for

execution of Customs Forms 7501, 7501A, or

7506 and any required duty-free entry

certificates.’’

(B) In cases where the shipment will be

consigned to other than a military

installation, e.g., a domestic contractor’s

plant, the shipping document notation shall

be altered to insert the name and address of

the contractor, agent, or broker who will

notify Commander, DCMC, NY, for execution

of the duty-free certificate. (Note: In those

instances where the shipment will be

consigned to a contractor’s plant and no

duty-free entry certificate is required, the

contractor or its agent shall claim duty-free

entry under NAFTA or other trade agreement

and shall comply with the U.S. Customs

Service requirements. No notification to

Commander, DCMC, NY, is required).

(v) Gross weight in pounds (if freight is

based on space tonnage, state cubic feet in

addition to gross shipping weight).

(vi) Estimated value in U.S. dollars.

(vii) Activity address number of the

contract administration office actually

administering the prime contract, e.g., for

DCMC Dayton, S3605A.

(g) Preparation of customs forms.

(1) Except for shipments consigned to a

military installation, the Contractor shall

prepare, or authorize an agent to prepare, any

customs forms required for the entry of

eligible end products in connection with

DOD contracts into the United States, its

possessions, or Puerto Rico. Submit the

completed customs forms to the District

Director of Customs with a copy to DCMC NY

for execution of any required duty-free entry

certificates. Shipments consigned directly to

a military installation will be released in

accordance with 10.101 and 10.102 of the

U.S. Customs regulations.

(2) For shipments containing both supplies

which are to be accorded duty-free entry and

supplies which are not, the Contractor shall

identify on the customs forms those items

that are eligible for duty-free entry.

(h) The Contractor agrees—

(1) To prepare (if this contract is placed

directly with a foreign supplier), or to

instruct the foreign supplier to prepare, a

sufficient number of copies of the bill of

lading (or other shipping document) so that

at least two of the copies accompanying the

shipment will be available for use by the

District Director of Customs at the port of

entry;

(2) To consign the shipment as specified in

paragraph (f) of this clause; and

(3) To mark on the exterior of all

packages—

(i) ‘‘UNITED STATES GOVERNMENT,

DEPARTMENT OF DEFENSE;’’ and

(ii) The activity address number of the

contract administration office actually

administering the prime contract.

(i) The Contractor agrees to notify the

Contracting Officer administering the prime

contract in writing of any purchase under the

contract of eligible end products to be

accorded duty-free entry that are to be

imported into the United States for delivery

to the Government or for incorporation in

end items to be delivered to the Government.

The notice shall be furnished to the contract

administration office immediately upon

award to the eligible country supplier. The

notice shall contain—

(1) Prime contractor’s name, address, and

CAGE code;

(2) Prime contract number, and delivery

order number if applicable;

(3) Total dollar value of the prime contract

or delivery order;

(4) Expiration date of the prime contract or

delivery order;

(5) Foreign supplier’s name and address;

(6) Number of the subcontract/purchase

order for eligible and products;

(7) Total dollar value of the subcontract for

eligible end products;

(8) Expiration date of the subcontract for

eligible and products;

(9) List of the items purchased;

(10) An agreement by the Contractor that

any applicable duty shall be paid by the

Contractor to the extent that such eligible end

products are diverted to nongovernmental

use other than as a result of a competitive

sale made, directed, or authorized by the

Contracting Officer; and

(11) The scheduled delivery date(s).

(End of clause)

[FR Doc. 97–5992 Filed 3–10–97; 8:45 am]

BILLING CODE 5000–04–M