[Federal Register Volume 74, Number 10 (Thursday, January 15, 2009)]
[Rules and Regulations]
[Pages 2422-2424]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-669]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Part 252

RIN 0750-AG12


Defense Federal Acquisition Regulation Supplement; Statutory 
Waiver for Commercially Available Off-the-Shelf Items (DFARS Case 2008-
D009)

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

ACTION: Interim rule with request for comments.

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SUMMARY: DoD has issued an interim rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement a determination 
made by the Administrator for Federal Procurement Policy, that the Buy 
American Act ``component test'' is inapplicable to acquisitions of 
commercially available off-the-shelf items. The rule is consistent with 
changes made to the Federal Acquisition Regulation.

DATES: Effective date: January 15, 2009.
    Comment date: Comments on the interim rule should be submitted in 
writing to the address shown below on or before March 16, 2009, to be 
considered in the formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2008-D009, 
using any of the following methods:
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> E-mail: <a href="/cdn-cgi/l/email-protection#87e3e1e6f5f4c7e8f4e3a9eaeeeb"><span class="__cf_email__" data-cfemail="9bfffdfae9e8dbf4e8ffb5f6f2f7">[email protected]</span></a>. Include DFARS Case 2008-D009 in the 
subject line of the message.
    <bullet> Fax: 703-602-7887.
    <bullet> Mail: Defense Acquisition Regulations System, Attn: Ms. 
Amy Williams, OUSD (AT&L) DPAP (DARS), IMD 3D139, 3062 Defense 
Pentagon, Washington, DC 20301-3062.
    <bullet> Hand Delivery/Courier: Defense Acquisition Regulations 
System, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 
22202-3402.
    Comments received generally will be posted without change to http://www.regulations.gov, including any personal information provided.

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

SUPPLEMENTARY INFORMATION:

A. Background

    This interim rule amends DFARS provisions and clauses addressing 
the Buy American Act/Balance of Payments Program to implement a 
determination made by the Administrator for Federal Procurement Policy, 
on February 14, 2008, regarding laws applicable to the acquisition of 
commercially available off-the-shelf (COTS) items. The determination 
included a partial waiver of the Buy American Act (41 U.S.C. 10a and 
10b), limited to the Act's domestic component test. The waiver allows a 
COTS item to be treated as a domestic end product if it is manufactured 
in the United States, without tracking the origin of the item's 
components. Changes were made to the Federal Acquisition Regulation in 
Federal Acquisition Circular 2005-30 to implement the Administrator's 
determination. This interim rule makes corresponding changes to the 
DFARS.
    This rule was not subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993.

B. 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. Although the rule 
eliminates requirements for suppliers of U.S.-made items to track the 
origin of the item's components, the economic impact is not expected to 
be substantial. DoD has already waived the component test for U.S.-made 
items in acquisitions that are subject to the World Trade Organization 
Government Procurement Agreement (DFARS 225.103(a)(i)(B)). 
Additionally, contractors generally pass on the costs of such 
administrative requirements to the Government. Therefore, DoD has not 
performed an initial regulatory flexibility analysis. DoD invites 
comments from small businesses and other interested parties. DoD also 
will consider comments from small entities concerning the affected 
DFARS subparts in accordance with 5 U.S.C. 610. Such comments should be 
submitted separately and should cite DFARS Case 2008-D009.

C. Paperwork Reduction Act

    This rule will result in a reduction of the information collection 
requirements previously approved under Office of Management and Budget 
Control Number 0704-0229, DFARS part 225 and associated clauses. DoD 
anticipates a 5 percent reduction in the burden hours associated with 
the provisions at DFARS 252.225-7000 and 252.225-7035, from 34,875 to 
33,130 hours, because offerors of U.S.-made items with foreign 
components will no longer need to respond to these provisions.

D. Determination To Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense that urgent and compelling reasons exist to publish an 
interim rule prior to affording the public an opportunity to comment. 
This interim rule implements a determination made by the Administrator 
for Federal Procurement Policy on February 14, 2008, in accordance with 
41 U.S.C. 431, that the Buy American Act domestic component test is 
inapplicable to acquisitions of COTS items. The rule will permit a COTS 
item to be treated as a domestic end product if it is manufactured in 
the United States, without the need to track the origin of the item's 
components. The rule will reduce administrative burdens for suppliers 
of COTS items and is

[[Page 2423]]

consistent with changes made to the Federal Acquisition Regulation. 
Comments received in response to this interim rule will be considered 
in the formation of the final rule.

List of Subjects in 48 CFR Part 252

    Government procurement.

Michele P. Peterson,
Editor, Defense Acquisition Regulations System.

0
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. 421 and 48 CFR Chapter 1.


0
2. Section 252.225-7000 is amended by revising the clause date and 
paragraphs (a), (c)(1)(ii), and (c)(3) to read as follows:


252.225-7000  Buy American Act--Balance of Payments Program 
Certificate.

* * * * *
BUY AMERICAN ACT--BALANCE OF PAYMENTS PROGRAM CERTIFICATE (JAN 2009)
    (a) Definitions. Commercially available off-the-shelf (COTS) 
item, domestic end product, foreign end product, qualifying country, 
qualifying country end product, and United States have the meanings 
given in the Buy American Act and Balance of Payments Program clause 
of this solicitation.
* * * * *
    (c) * * *
    (1) * * *
    (ii) For end products other than COTS items, components of 
unknown origin are considered to have been mined, produced, or 
manufactured outside the United States or a qualifying country.
* * * * *
    (3) The following end products are other foreign end products, 
including end products manufactured in the United States that do not 
qualify as domestic end products, i.e., an end product that is not a 
COTS item and does not meet the component test in paragraph (ii) of 
the definition of ``domestic end product'':

(Line Item Number)-----------------------------------------------------

(Country of Origin (If known))-----------------------------------------

0
3. Section 252.225-7001 is amended as follows:
0
a. By revising the clause date;
0
b. By redesignating paragraphs (a)(1) through (8) as paragraphs (a)(2) 
through (9) respectively;
0
c. By adding a new paragraph (a)(1);
0
d. By revising newly designated paragraph (a)(3)(ii); and

0
e. By revising paragraph (b) to read as follows:


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

* * * * *
BUY AMERICAN ACT AND BALANCE OF PAYMENTS PROGRAM (JAN 2009)
    (a) * * *
    (1) 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 3 of the 
Shipping Act of 1984 (46 U.S.C. 40102), such as agricultural 
products and petroleum products.
* * * * *
    (3) * * *
    (ii) An end product manufactured in the United States if--
    (A) The cost of its qualifying country components and its 
components that are mined, produced, or manufactured in the United 
States exceeds 50 percent of the cost of all its components. The 
cost of components includes transportation costs to the place of 
incorporation into the end product and U.S. duty (whether or not a 
duty-free entry certificate is issued). Scrap generated, collected, 
and prepared for processing in the United States is considered 
domestic. A component is considered to have been mined, produced, or 
manufactured in the United States (regardless of its source in fact) 
if the end product in which it is incorporated is manufactured in 
the United States and the component is of a class or kind for which 
the Government has determined that--
    (1) Sufficient and reasonably available commercial quantities of 
a satisfactory quality are not mined, produced, or manufactured in 
the United States; or
    (2) It is inconsistent with the public interest to apply the 
restrictions of the Buy American Act; or
    (B) The end product is a COTS item.
* * * * *
    (b) This clause implements the Buy American Act (41 U.S.C. 
Section 10a-d). In accordance with 41 U.S.C. 431, the component test 
of the Buy American Act is waived for an end product that is a COTS 
item (see section 12.505(a)(1) of the Federal Acquisition 
Regulation). Unless otherwise specified, this clause applies to all 
line items in the contract.

* * * * *

0
4. Section 252.225-7035 is amended by revising the clause date and 
paragraphs (a) and (c)(2)(iii) to read as follows:


252.225-7035  Buy American Act--Free Trade Agreements--Balance of 
Payments Program Certificate.

* * * * *
BUY AMERICAN ACT--FREE TRADE AGREEMENTS--BALANCE OF PAYMENTS PROGRAM 
CERTIFICATE (JAN 2009)
    (a) Definitions. Bahrainian end product, commercially available 
off-the-shelf (COTS) item, domestic end product, Free Trade 
Agreement country, Free Trade Agreement country end product, foreign 
end product, Moroccan end product, qualifying country end product, 
and United States have the meanings given in the Buy American Act--
Free Trade Agreements--Balance of Payments Program clause of this 
solicitation.
* * * * *
    (c) * * *
    (2) * * *
    (iii) The following supplies are other foreign end products, 
including end products manufactured in the United States that do not 
qualify as domestic end products, i.e., an end product that is not a 
COTS item and does not meet the component test in paragraph (ii) of 
the definition of ``domestic end product'':

(Line Item Number)-----------------------------------------------------

(Country of Origin (If known))-----------------------------------------
* * * * *

0
5. Section 252.225-7036 is amended as follows:

0
a. By revising the clause date;
0
b. By redesignating paragraphs (a)(2) through (12) as paragraphs (a)(3) 
through (13) respectively;
0
c. By adding a new paragraph (a)(2); and
0
d. By revising newly designated paragraph (a)(4)(ii) to read as 
follows:


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

* * * * *
BUY AMERICAN ACT--FREE TRADE AGREEMENTS--BALANCE OF PAYMENTS PROGRAM 
(JAN 2009)
    (a) * * *
    (2) 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 3 of the 
Shipping Act of 1984 (46 U.S.C. 40102), such as agricultural 
products and petroleum products.
* * * * *

[[Page 2424]]

    (4) * * *
    (ii) An end product manufactured in the United States if--
    (A) The cost of its qualifying country components and its 
components that are mined, produced, or manufactured in the United 
States exceeds 50 percent of the cost of all its components. The 
cost of components includes transportation costs to the place of 
incorporation into the end product and U.S. duty (whether or not a 
duty-free entry certificate is issued). Scrap generated, collected, 
and prepared for processing in the United States is considered 
domestic. A component is considered to have been mined, produced, or 
manufactured in the United States (regardless of its source in fact) 
if the end product in which it is incorporated is manufactured in 
the United States and the component is of a class or kind for which 
the Government has determined that--
    (1) Sufficient and reasonably available commercial quantities of 
a satisfactory quality are not mined, produced, or manufactured in 
the United States; or
    (2) It is inconsistent with the public interest to apply the 
restrictions of the Buy American Act; or
    (B) The end product is a COTS item.
* * * * *


0
6. Section 252.225-7044 is amended as follows:
0
a. By revising the clause date; and
0
b. In paragraph (a), by adding, in alphabetical order, a definition of 
``Commercially available off-the-shelf (COTS) item'', and by revising 
the definition of ``Domestic construction material'' to read as 
follows:


252.225-7044  Balance of Payments Program--Construction Material.

* * * * *
BALANCE OF PAYMENTS PROGRAM--CONSTRUCTION MATERIAL (JAN 2009)
    (a) * * *
    Commercially available off-the-shelf (COTS) item--
    (1) Means any item of supply (including construction material) 
that is--
    (i) A commercial item (as defined in paragraph (1) of the 
definition of ``commercial item'' in section 2.101 of the Federal 
Acquisition Regulation);
    (ii) Sold in substantial quantities in the commercial 
marketplace; and
    (iii) 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
    (2) Does not include bulk cargo, as defined in section 3 of the 
Shipping Act of 1984 (46 U.S.C. 40102), such as agricultural 
products and petroleum products.
* * * * *
    Domestic construction material means--
    (1) An unmanufactured construction material mined or produced in 
the United States; or
    (2) A construction material manufactured in the United States, 
if--
    (i) The cost of its components mined, produced, or manufactured 
in the United States exceeds 50 percent of the cost of all its 
components. Components of foreign origin of the same class or kind 
for which nonavailability determinations have been made are treated 
as domestic; or
    (ii) The construction material is a COTS item.
* * * * *

0
7. Section 252.225-7045 is amended as follows:
0
a. By revising the clause date; and
0
b. In paragraph (a), by adding, in alphabetical order, a definition of 
``Commercially available off-the-shelf (COTS) item'', and by revising 
the definition of ``Domestic construction material'' to read as 
follows:


252.225-7045  Balance of Payments Program--Construction Material Under 
Trade Agreements.

* * * * *
BALANCE OF PAYMENTS PROGRAM--CONSTRUCTION MATERIAL UNDER TRADE 
AGREEMENTS (JAN 2009)
    (a) * * *
    Commercially available off-the-shelf (COTS) item--
    (1) Means any item of supply (including construction material) 
that is--
    (i) A commercial item (as defined in paragraph (1) of the 
definition of ``commercial item'' in section 2.101 of the Federal 
Acquisition Regulation);
    (ii) Sold in substantial quantities in the commercial 
marketplace; and
    (iii) 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
    (2) Does not include bulk cargo, as defined in section 3 of the 
Shipping Act of 1984 (46 U.S.C. 40102), such as agricultural 
products and petroleum products.
* * * * *
    Domestic construction material means--
    (1) An unmanufactured construction material mined or produced in 
the United States; or
    (2) A construction material manufactured in the United States, 
if--
    (i) The cost of its components mined, produced, or manufactured 
in the United States exceeds 50 percent of the cost of all its 
components. Components of foreign origin of the same class or kind 
for which nonavailability determinations have been made are treated 
as domestic; or
    (ii) The construction material is a COTS item.
* * * * *

[FR Doc. E9-669 Filed 1-14-09; 8:45 am]
BILLING CODE 5001-08-P


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