[Federal Register Volume 70, Number 176 (Tuesday, September 13, 2005)]
[Rules and Regulations]
[Pages 53955-53969]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-18025]



[[Page 53955]]

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DEPARTMENT OF DEFENSE

48 CFR Parts 211, 212, and 252

[DFARS Case 2004-D011]


Defense Federal Acquisition Regulation Supplement; Radio 
Frequency Identification

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

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SUMMARY: DoD has issued a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to add policy pertaining to 
package marking with passive radio frequency identification (RFID) 
tags. The rule requires contractors to affix passive RFID tags at the 
case and palletized unit load levels when shipping packaged operational 
rations, clothing, individual equipment, tools, personal demand items, 
or weapon system repair parts, to the Defense Distribution Depot in 
Susquehanna, PA, or the Defense Distribution Depot in San Joaquin, CA.

EFFECTIVE DATE: November 14, 2005.

FOR FURTHER INFORMATION CONTACT: Ms. Michele Peterson, Defense 
Acquisition Regulations Council, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 
Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0311; 
facsimile (703) 602-0350. Please cite DFARS Case 2004-D011.

SUPPLEMENTARY INFORMATION:

A. Background

    This final rule contains requirements for contractors to affix 
passive RFID tags at the case and palletized unit load levels. The rule 
requires that specified commodities delivered to specified DoD 
locations be tagged with a readable passive RFID tag. The data encoding 
schemes that contractors may write to the tags are identified in the 
contract clause and are also located at http://www.dodrfid.org/tagdata.htm. In addition, contractors must send an advance shipment 
notice in accordance with the procedures at http://www.dodrfid.org/asn.htm, to provide the association between the unique identification 
encoded on the passive tag(s) and the product information at the 
applicable case and palletized unit load levels.
    DoD published a proposed rule at 70 FR 20726 on April 21, 2005, and 
a correction to that rule at 70 FR 21729 on April 27, 2005. Thirty-
three sources submitted comments on the proposed rule. As a result of 
these comments, the final rule contains additional changes that clarify 
the shipment locations, the definitions of ``exterior container'' and 
``palletized unit load,'' and the requirements for ensuring that data 
encoded on each RFID tag are unique. An analysis of the comments is 
provided below.
    1. Comment: Electronic submission of the advance shipment notice 
(ASN) SHALL be via Wide Area Work Flow (WAWF) per the DoD Suppliers 
Passive Information Guide, Version 7.0. Other means of ASN is not 
acceptable. We have been harping our contractors to get on board with 
WAWF. Version 3.0.7 contains a tab for RFID data entry.
    DoD Response: The current system for ASN submittal is WAWF.
    2. Comment: Classes of supply do NOT address raw materials, i.e. 
steel rods/bars/non-machined casings, etc., that are packed into 
shipping containers. Reusable containers, i.e., Hardigg Containers, are 
not addressed. What do contractors do when they have a contract for raw 
steel bars or containers that are packed in wood boxes or fiberboard 
containers for shipment?
    DoD Response: Classes of supply definitions are normally used in 
support of warfighter requirements, since these are the types of 
materiel items normally ordered, stocked, and issued from DoD wholesale 
supply activities to support warfighter needs. If there is a future 
requirement for the tagging of raw materials for shipment to DoD 
industrial activities, these requirements will be identified in future 
DoD policy and DFARS issuances. Reusable containers such as Hardigg 
containers are individual items when requisitioned--as such they can be 
tagged if these items are components of DoD material such as tool sets. 
As the technology matures and the DoD implementation progresses, future 
DoD issuances may contain a requirement for tagging at individual item 
level.
    3. Comment: The DFARS states contractors MAY only need to change 
their printer because MSL software is available that will print the MSL 
with embedded RFID. This is fine for a shipping container or palletized 
unit load, but what about the exterior containers on the pallet? They 
need the passive tag, as well as the pallet.
    DoD Response: The exterior containers do have to be affixed with 
passive RFID tags, but an MSL may or may not be required and should be 
affixed per the instructions contained in MIL-STD-129. A supplier could 
use the same printer that prints their MSL tags to meet this 
requirement or affix a blank label or an RFID tag itself.
    4. Comment: Small businesses will go out of business. There are 
many contractors, ``10 percenters'' as we call them, which work out of 
their homes. The cost of implementing RFID will put them out. Material 
costs to the Government will skyrocket. How are we addressing small 
businesses?
    DoD Response: DoD is implementing this through new contracts thus 
allowing for the supplier to include the cost of compliance in the 
contract, recognizing there may be a temporary cost burden until 
contract payment. With respect to training, DoD has partnered with the 
Procurement Technical Assistance Centers (PTAC) to provide training to 
DoD small businesses. There are a variety of compliance options, which 
range in cost. You may also use a 3rd party provider to meet the 
requirement. Please reference the Web site, http://www.dodrfid.org, for 
more information.
    5. Comment: Need to point out that to use EPC data construct will 
require the contractor to pay a royalty/membership fee to EPC, whereas 
using DoD data construct is free.
    DoD Response: Noted.
    6. Comment: Contractors electing to use a packaging house still 
need an interrogator to verify to the QAR the data is present. In 
addition, contractors using a packaging house shall inform the packager 
of the data to be encoded in the tags.
    DoD Response: Suppliers can outsource the function of tag 
verification to the tag manufacturer; however, the requirement in the 
contract is still with the supplier. Suppliers who purchase pre-encoded 
tags do need to know the hexadecimal representation of the RFID tag 
number in order to transmit it to WAWF. This information will most 
often need to be printed in human-readable format on the tag or can be 
captured through an RFID reader or bar code scanner (if a bar code is 
present).
    7. Comment: Is the area of safety and homeland security addressed 
regarding the use of RFID tags?
    DoD Response: The passive RFID technology that DoD is acquiring is 
commercially available technology and requires FCC approval for 
production, sale, and use in the United States when used in accordance 
with manufacturer's instructions. The DoD plans to conduct appropriate 
testing to ensure that the technology is safe for use around munitions 
and fuel prior to use around these materials. The DoD is working 
closely with the DHS to ensure that the technology and standards are 
compatible and adaptable.
    8. Comment: Can the labels be tracked by the enemy or an outside 
concerned source?

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    DoD Response: Any commercially available EPC compatible reader can 
read the current version of the encoding on the current passive EPC 
compatible RFID tag. It is important to note that the only information 
on the tag is a purely binary serialization of the tag that has no 
intelligence. The intelligence (data) relating to the contents of a 
shipment is in the DoD logistics information systems behind the DoD 
firewall. As RFID security risks are identified, DoD will continue to 
review these issues from both an information assurance and operational 
security standpoint.
    9. Comment: Has there been a cost study done on the implementation 
of this requirement? And if so who bares the cost? Future contract 
winners, Government, etc?
    DoD Response: The DoD has completed a regulatory flexibility 
analysis that is available for review at http://www.dodrfid.org/regflex.htm. DoD is implementing this requirement in new contracts 
according to the Supplier Implementation Guide. This will allow 
suppliers to negotiate the cost of compliance into the new contract.
    10. Comment: Would it not be better to limit the use to only 
commercial application items?
    DoD Response: One of the DoD goals in adopting this technology is 
to achieve a higher level of interoperability with our commercial 
partners in the supply chain. This technology is simply a faster, 
better way to acquire data for logistics and financial systems. RFID 
will be a benefit for all items DoD manages, and the utilization of 
RFID will facilitate accurate, hands-free data capture, in support of 
business processes in an integrated DoD supply chain enterprise as an 
integral part of a comprehensive suite of Automatic Identification 
Technology (AIT).
    11. Comment: I find some of your definitions to be confusing.
    DoD Response: Noted. Please see comments 12-17 for further 
clarification of your questions.
    12. Comment: Delete the term ``Case'' and substitute ``Exterior 
Pack: Package or container containing a single item or a number of unit 
packs or intermediate packs ready for shipment and storage.''
    DoD Response: The term ``Case'' is used to provide a common term of 
reference for both commercial and DoD activities.
    13. Comment: You can delete ``Exterior container'' if you use the 
STANAG 4279 definition of: ``Exterior Pack: Package or container 
containing a single item or a number of unit packs or intermediate 
packs ready for shipment and storage.'' This is also referred to as the 
NATO Glossary of Packaging Terms and Definitions, AAP-23 (Edition 2).
    DoD Response: The definition used in the DFARS rule is as extracted 
verbatim from MIL-STD-129.
    14. Comment: If not, I think you need to change the last sentence 
of the Exterior Container definition to read: ``An exterior container 
may or may not be used as a shipping container.'' This is the correct 
term used in MIL-STD-129.
    DoD Response: The DFARS rule definition has been changed to read as 
defined in MIL-STD-129.
    15. Comment: Delete the last sentence of the definition of 
Palletized Unit Load: ``A palletized load is not considered to be a 
shipping container.'' The respondent does not see any reason for this 
statement and it is not part of the definition.
    DoD Response: The definition used in the DFARS rule is as extracted 
verbatim from MIL-STD-129.
    16. Comment: The shipping container is separately defined and for 
all practical purposes is the same thing as the exterior container. I 
think you confuse things by saying it is defined as an exterior 
container. The STANAG defines ``Shipping container/A container which 
meets minimum carrier regulations and is of sufficient strength by 
reason of material, design, and construction to be shipped safely 
without further packing.'' I think this is the term you are looking for 
and would delete case and exterior pack/exterior container because it 
is too confusing.
    DoD Response: The definition used in the DFARS rule is as extracted 
verbatim from MIL-STD-129.
    17. Comment: As I understand what you are looking for you want the 
following: a. One passive RFID tag on either the palletized unit load 
or on the shipping container b. on all shipments to Susquehanna, PA 
and/or San Joaquin, CA. The way you have it written it could be for 
depot storage or for export shipment out of the CCP or for local 
consumption in a depot repair program. If that is the intent, I think 
you should also include Red River Army Depot (RRAD) because TACOM has 
many items that we also ship to RRAD as one of our three primary depots 
for storage. However, if the intent was to speed customer delivery 
times in the E2E distribution thru the Container Consolidation Point, 
then I think you need to be clearer in your identification of the 
``ship to'' address.
    DoD Response: The initial intent was to have selected classes/types 
of material tagged for shipment to the major DLA receiving points at 
San Joaquin and Susquehanna, since these two locations receive the 
majority of the material inbound to the DLA. As the phased DoD 
implementation plan for passive RFID continues, we will expand both the 
types of material as well as the specific DoD receiving activities for 
RFID tagged material--to include industrial/depot activities, like Red 
River Army Depot. The specific ``ship to'' addresses have been posted 
to the Web site, http://www.dodrfid.org.
    18. Comment: A respondent suggested the use of an RFID application 
to track warranty and other product information pertaining to purchases 
made by DoD.
    DoD Response: The current focus of DoD's RFID program is on the use 
of RFID within the supply chain. Future uses of this technology will 
continue to be explored.
    19. Comment: During an RFID brief, a question arose. Some defense 
contractors ``ship in place'' meaning their invoice is paid but the 
material remains at their facility until the customer requests it. 
Since the invoice is signed by an authorized Government Representative, 
i.e. QAR, the material becomes Government property. When the customer 
requests the material, a DD Form 1149 is processed and material shipped 
to the using activity. Question: At what point will RFID tags be placed 
on the shipping containers and/or pallets? Transmission of the data via 
WAWF will do no good as the material has not left the facility and 
contractors expect to be paid. Will the DFARS address ``Ship In Place'' 
shipments?
    DoD Response: In this situation, WAWF will allow for two 
transactions. The initial WAWF transaction for ``in-place'' receipt/
acceptance of the material (invoice signature by the QAR) and 
subsequent payment via DFAS will not require the specific RFID 
information. The appropriate RFID tag should be encoded and placed on 
the shipment (case and/or palletized unit load) when the shipment is 
prepared for movement to the ultimate consignee. When the material is 
shipped to a DoD activity, the RFID tag is put on the second 
transaction (Advance Shipment Notice) to facilitate receipt and input 
to WAWF and to close out documents in the appropriate system. These 
specifics should be detailed in the supplier contract.
    20. Comment: Seeking clarification of the following: Page 20728 of 
the Federal Register/Vol. 70, No. 76/Thursday, April 21, 2005/Proposed 
Rules PART 252.211-7XXX in middle of the right hand column on this page 
the last sentence under ``Exterior container''. It states, ``An 
exterior container may not be used as a shipping container.'' Please 
advise what is the intent of this

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sentence. If a wood crate happens to be the exterior container and it 
holds both unit and intermediate containers, why can it not be 
classified as an exterior container?
    DoD Response: The DFARS rule will be clarified and the sentence 
will be changed to read ``An exterior container may or may not be used 
as a shipping container,'' as per MIL-STD-129.
    21. Comment: Seeking clarification of the following: Page 20728 of 
the Federal Register/Vol. 70, No. 76/Thursday, April 21, 2005/Proposed 
Rules PART 252.211-7XXX. In the next paragraph, ``Palletized unit 
load'' states, ``A palletized load is not considered to be a shipping 
container''. Why is it not to be considered a shipping container? I 
realize it may not be enclosed, and not possibly suitable for stacking, 
however it is still the ``container'' on which the items are being 
shipped.
    DoD Response: The definition used in the DFARS rule is as extracted 
verbatim from MIL-STD-129. A palletized unit load can be shipped as is, 
but is not considered a ``shipping container.'' in accordance with 
definitions in MIL-STD-129. Palletized unit load has its own 
definition.
    22. Comment: Seeking clarification of the following: Page 20728 of 
the Federal Register/Vol. 70, No. 76/Thursday, April 21, 2005/Proposed 
Rules PART 252.211-7XXX. The next paragraph starting with, ``Passive 
RFID tag'' indicates that (1) EPC Class 0 passive RFID tags that meet 
the EPCglobal Class 0 specification are acceptable. I understood that 
an amendment was being issued that no Class 0 passive RFID tags were 
going to be acceptable for military shipments. Please advise.
    DoD Response: DoD allows the use of either EPC-compliant Class 0 or 
Class 1 passive RFID tags.
    23. Comment: Seeking clarification of the following: Page 20729 of 
the Federal Register/Vol. 70, No. 76/Thursday, April 21, 2005/Proposed 
Rules, second column, eighth line down, the word ``paragraph'' should 
have the actual paragraph reference placed beside it. Clarification of 
these concerns would be appreciated.
    DoD Response: This reference will be inserted upon completion of 
the final rule.
    24. Comment: The contract clause (252.211-7XXX) requires in para. 
(c)(2) that each tag is readable * * * Please clarify what this means 
because there are conflicting understanding being presented to the 
vendors. Some government presenters are saying that most small 
businesses will only need to use approved labels to place on containers 
to comply. Others are saying that this requires a business to invest in 
expensive systems to meet this requirement (min. cost is $25,000). This 
is a significant issue for small business. If the latter is what is 
meant then not only the DoD, but Federal Agencies will lose most of the 
small businesses because this is a sizable investment for limited 
application and another reason not to do business with the Government.
    DoD Response: The tag has to be readable by an RFID reader at the 
point it is shipped to the DoD. This does not require a $25,000 
investment. A supplier can buy an RFID reader, for approximately 
$2,000, which verifies that the tag can be read. If a supplier is using 
an RFID-enabled printer, the printer will verify that the tag can be 
read. If a supplier buys pre-encoded tags and has no way to verify the 
tag readability at the point of shipment, they need to work with the 
tag manufacturer to ensure that the tags can be read. As for 
investments for small business, the DoD will negotiate these costs with 
suppliers at the time of contract.
    25. Comment: Also, reference is made to two consolidation points 
that require RFID tags. Are these locations also known as Tobyhanna, 
PA, and Tracey, CA? If so, then this needs to be clarified because many 
government vendors do not associate the two as being the same.
    DoD Response: The Defense Distribution Center Susquehanna, PA 
(DDSP) is not the same as Tobyhanna. The Defense Distribution Center 
San Joaquin, CA (DDJC) is located in Tracy, CA, but there are several 
facilities in Tracy. The specific shipping locations for this 
requirement are identified at the Web site, http://www.dodrfid.org.
    26. Comment: A respondent commented on the potential use of ``The 
AIM RFID Mark<SUP>TM</SUP>!'' on material that is tagged with an RFID 
tag to provide a visual indicator of RFID enabled labels.
    DoD Response: The current version of the MIL-STD-129 does not 
require that the RFID tag be integrated with either a commercial or 
Military Shipping Label (MSL), but indicates in paragraph 4.9.2 that: 
``The passive RFID tag may be integrated with the military or 
commercial shipping label (RFID-enabled address label) or they may be 
placed in separate locations on the shipment.'' As the DoD RFID 
initiative progresses and additional suppliers ship tagged material to 
the DoD receiving points, the Department will work with organizations 
such as EPCglobal and AIM to determine the most suitable marking 
requirement to indicate RFID enabled labels--this requirement will then 
be included in a future update of the MIL-STD-129.
    27. Comment: A respondent commented on the process of 
reconditioning shipping containers and reusing them within the supply 
chain before the shipping container is sent for recycling as scrap. 
There is a concern that RFID tags attached to these containers would 
not survive the reconditioning process and may litter the drum lines, 
conveyers, furnaces, paint booths, and wash basins. They could also end 
up in wastewater discharged to public sewer systems, or in solid waste 
streams sent to a municipal landfill.
    DoD Response: The DoD makes every effort to ensure that materials 
and appropriate types of packaging are reconditioned and re-used when 
and where possible prior to recycling and disposal of these materials 
and packaging when they are no longer economical to recondition or 
repair for continued use. The DFARS rule does not require RFID tagging 
on the types of commodities and materials that would normally be 
shipped or delivered in fiber/plastic/metal drums or intermediate bulk 
containers (IBCs). As the DoD RFID initiative expands to potentially 
include these types of materials and associated shipping containers, 
future updates to the DFARS may include requirements such as 
appropriate directions for reconditioning, re-use, recycling, and 
disposal of packaging and containers.
    28. Comment: There appears to be a major conflict between DoD's 
proposed use of the advance shipping notice and how the Defense 
Commissary Agency (DeCA) mandates the use of the Advance Shipping 
Notice. Currently DeCA requires all shipments under a Frequent Delivery 
Contract to have an ASN provided with specific data fields which is 
used as a receiving document. The DeCA ASN does not require nor accept 
a price because the third party doing the delivery each day does not 
have access to the price the supplier is charging. It appears DoD and 
DeCA are using two different types of contracts to obtain supplies. DoD 
is basing their RFID program on supporting a supply depot with a price 
that calls for a specific number of units to be delivered at a specific 
time. DeCA has a multiple delivery order with the quantities based on 
customer demand with deliveries to be made daily. The regulation and 
DoD standard for RFID require an ASN to be sent to DoD. Right now an 
ASN is sent to DeCA that serves a multiple of functions and gives the 
user all the information they need to receive the product and reconcile 
the delivery. The DoD RFID initiative is adding unnecessary workload to 
industry

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because they are also asking for an ASN (with different information) 
that doesn't tie into DeCA's system. This means two ASN's would have to 
be sent, which seems an unnecessary burden on industry and was not 
included in the DoD's calculations to determine the cost to small 
business. The way the regulation is written it will be almost 
impossible to do business with DeCA and still meet the DoD 
requirements. It is estimated that it will increase the cost of goods 
to DeCA in the range of 15-18% providing we can have more time to 
implement RFID. If we are held to the DoD January 2007 mandate, we 
expect prices would increase in the 25-30% range because we would be 
using a third party to do the RFID tags. We believe that brand name 
items are quite different than the ``specification'' products being 
purchased for the depots. We feel RFID tags for brand name items for 
military resale should not be given an exemption until 2010 when RFID 
tags should be commonplace. It doesn't make a lot of sense why DeCA's 
customers, who are the ones paying for the items, should be forced to 
pay for technology that is still in the very early stages of 
development.
    DoD Response: The requirements for DeCA's internal implementation 
are currently under review and are not within the scope of the current 
DFARS rule.
    29. Comment: Thank you for the opportunity to comment upon the 
DEPARTMENT OF DEFENSE Defense Federal Acquisition Regulation 
Supplement; Radio Frequency Identification. There are a number of 
general and specific comments regarding the attached.
    DoD Response: See comment numbers 30-38 for clarification.
    30. Comment: It would be useful to clarify the chronological 
sequence of the several E publications on RFID published by the DoD. 
The attachment forwarded under cover of the Reference does not appear 
to note or recognize previous publications. In particular, the defining 
document must remain The Under Secretary of Defense's Memorandum dated 
30 Jul 2004 and the associated Business Rule of the same date. These 
increasingly are difficult to align and reconcile with the DoD RFID 
Home Page and the Supplier Implementation Plan and the Suppliers' 
Passive RFID Info Guide of Aug 31 2004.
    DoD Response: Documents located at http://www.dodrfid.org are 
supplemental to and supportive of the DoD RFID policy released on 30 
Jul 2004.
    31. Comment: There is a need to clarify the linkage between the 
DFARS and the DoD policy. There needs to be a clearly articulated 
account of how amendment of the former document will be transferred to 
the latter.
    DoD Response: The DFARS rule will serve as the standard contract 
language for incorporating passive RFID requirements in accordance with 
the DoD RFID policy.
    32. Comment: To provide transparency, it is requested that a 
reference document of those companies that contributed to the document 
and whether their representations have been actioned or not is 
required. There is a concern that many RR comments of the related issue 
of UID DFAR and UID Policy have been received or actioned by the 
appropriate desk officers for staffing comments. The proposed schedule 
of staffing events would also be helpful to keep all respondents aware 
of the forthcoming critical milestones.
    DoD Response: All comments submitted in response to this DFARS rule 
are taken into careful consideration, actioned and responded to 
appropriately by the appropriate offices. All comments and Departmental 
responses will be included with the final publication of the DFARS rule 
in the Federal Register.
    33. Comment: It is suggested that palletized loads should be 
differentiated between air pallets and surface palletized loads, terms 
used by the military customer.
    DoD Response: An ``air pallet'' is normally referred to as a 
``463L'' or ``463L System'' pallet and does not require the application 
of a passive RFID tag. 463L pallets require the use of active RFID tags 
per the DoD RFID Policy `` the use of which is not the subject of this 
DFARS rule. ``Surface palletized loads'' that you note are in fact 
covered by the MIL-STD-129 definition for palletized unit load as 
identified in the current rule as: ``Palletized unit load means a MIL-
STD-129 defined quantity of items, packed or unpacked, arranged on a 
pallet in a specified manner and secured, strapped, or fastened on the 
pallet so that the whole palletized load is handled as a single unit. A 
palletized load is not considered to be a shipping container.''
    34. Comment: Please confirm within the DFARS that the financial 
thresholds are in place or are not applicable, as seen with DoD UID 
policy.
    DoD Response: The UID Financial thresholds are not applicable to 
the RFID policy. Therefore, this DFARS rule is purposefully silent on 
this issue to avoid confusion.
    35. Comment: It is requested that a clause is inserted that reads: 
``DoD recognizes and accepts that Suppliers' RFID Implementation Costs 
will be regarded as allowable costs under the FAR''.
    DoD Response: No blanket statement will be added. These costs must 
be individually negotiated with the contracting officers to ensure only 
minimum costs needed to comply are allowable under the contract.
    36. Comment: MIL-STD-129 is referred to several times throughout 
the DFARS. Given the amount of amendments, for clarity, the latest 
version should be included as a reference at the outset of the 
document.
    DoD Response: The MIL-STD-129 is referenced elsewhere in the DFARS 
for the marking and labeling of shipments to and within the DoD. The 
current version of the MIL-STD-129 is available at www.dodrfid.org.
    37. Comment: Class IX definition has been altered and omits Weapon 
Systems? Is this correct as the previous definition of Weapons Systems 
and Repair parts and Components was more complete and informative. It 
should also be confirmed that complete assemblies and the breakdown 
modules and spare parts are included in this category.
    DoD Response: The following definition used in the rule is a 
verbatim extract from the DoD 4140.1-R DoD Supply Chain Materiel 
Management Regulation of May 23, 2003.
    ``Class IX. Repair parts and components including kits, assemblies 
and subassemblies, reparable and consumable items required for 
maintenance support of all equipment, excluding medical-peculiar repair 
parts.''
    This definition includes complete assemblies (less major end 
items), breakdown modules, and spares.
    38. Comment: The increase in RFID shipping destinations should be 
highlighted in that by 2006 there are 34 locations and by 1 Jan 2007 to 
all DoD locations.
    DoD Response: The Supplier Implementation Plan for 2006 and 2007 
are not within the scope of the current DFARS rule.
    39. Comment: The respondent commented on the small number of 
examples that were referenced in the Regulatory Flexibility Analysis 
concerning the impact of RFID tags on the recycling industry as well as 
the fact there will be an impact on the recycling community whether or 
not DoD is involved.
    DoD Response: As noted in the comment, at the time of publication 
of the Regulatory Flexibility Analysis, there was little discussion and 
testing being done in the recycling industry

[[Page 53959]]

concerning the impact of RFID. The document provided what little 
information was available. As the recycling community completes testing 
and publishes reports, DoD will review those publications and work to 
take the concerns into consideration as RFID technology expands within 
DoD. Additionally, it is important to note for the pallet industry that 
the RFID tags will be placed on the shrink wrap surrounding the 
palletized unit load and not attached directly to the pallet.
    40. Comment: A respondent suggested that DoD make small businesses 
aware of its service to offer recycled RFID tags, which sell at a lower 
cost. The respondent also recommends that requirements be incorporated 
into the DFARS so that companies can reprogram salvaged RFID tags.
    DoD Response: The DoD has not yet developed tag recycling plans or 
a validated procedure for offering recycled tags for purchase through 
the excess property disposal process.
    41. Comment: A respondent has concerns over the ability of 
Materials Recovery Facilities to create a product to the specifications 
of the customer as the number of RFID tags increases. The respondent 
urges careful consideration of the results of a study being conducted 
in the paper industry.
    DoD Response: The DoD will continue to monitor industry testing of 
recycling processes containing RFID tags or tag fragments. As the 
results of these tests become known, DoD RFID policy will be amended as 
required.
    42. Comment: I believe the impact analysis completed by the 
Department of Defense understates the cost to industry to implement 
RFID. It appears the analysis only focused on shipments to DoD 
distribution centers and virtually ignored shipments made to the 
Defense Commissary Agency. Based on an average case cost of $25, 
industry's annual cost for implementing RFID for DeCA could be in 
excess of $100,000,000 for RFID tags alone. The indications are the 
cost for application and administration could equal the cost of the tag 
which could mean an annual reoccurring cost of $200,000,000 per year to 
meet DoD's RFID mandate. We have been to a meeting held by DoD about 
RFID and there is a lot of expense setting up an RFID program. I 
realize DoD is pushing us to use third party providers to meet their 
deadlines but that just increases the cost for RFID even more and 
creates a substantial hardship on small business. Most of the small 
business people who I have talked with don't have any idea about the 
RFID mandate and don't have any plans to implement RFID technology into 
their business until things become settled down and costs are more 
reasonable. The analysis done by DoD doesn't really address this issue 
and seemed to ignore the entire issue of how much it really costs to 
implement RFID for a small business. We all recognize RFID is going to 
become part of the normal business process just as UPC's and scanable 
bar codes did in years past. The problem is the Department of Defense 
is mandating technology that is still being developed and is going to 
take time to implement. If the mandate for RFID applies for every item 
DoD purchases, DoD's orders will have to be treated differently. This 
means DoD is going to pay a much higher price than anyone else. As a 
taxpayer, that does not make a lot of sense for brand name items sold 
to the commissary, especially since the cost is going to be passed on 
to our military people which means they will have to spend more money 
for food. Instead of mandating specific dates for brand name items that 
are sold commercially, why don't you revise the FAR to defer the 
implementation of RFID technology for brand name items until it is a 
common industry practice. Based on how long it took for UPC's and bar 
codes to be implemented, it might be quite a few more years before RFID 
is part of the common landscape. Establishing a mandate for brand name 
items just doesn't make sense. No other retailer, including Wal-Mart, 
has established a hard and fast mandate date for 100% compliance from 
every supplier. It seems to me you need to look at mainstreaming with 
the rest of industry so you don't have to pay a premium to get 
something we will be doing in time.
    DoD Response: DoD is aware of the concerns of shipment requirements 
for DeCA and is currently reviewing the internal implementation plan 
for DeCA. In the regulatory flexibility analysis (www.dodrfid.org/regflex.htm), DoD provided several options as well as estimated costs 
for small businesses to comply with the RFID policy. Additionally, DoD 
has been working with the Procurement Technical Assistance Centers 
(PTAC) to educate them on RFID technology and the RFID policy so that 
small businesses may seek assistance from them with regard to the RFID 
policy and compliance.
    43. Comment: DoD wants to mandate RFID and the use of advance 
shipping notices. While this might make sense for ``spec'' items going 
to distribution centers, it doesn't make any sense for the products we 
sell to the commissary system. Why in the world does DoD want to 
include these type of products as part of their RFID mandate? Does it 
make good business sense when the majority of retailers who are buying 
the same item are just now beginning to test RFID technology and it 
will be many, many years before they are even thinking about getting 
the key suppliers on the program. Products purchased for resale should 
be excluded from DoD's RFID mandate. We already are sending ASN's to 
the commissaries with more information than what DoD wants, the 
commissary system doesn't have anything in place right now to use the 
technology even if we put tags on the cases, and the military families 
are going to be paying a much higher price just so every item will have 
an RFID tag. Some of the items we sell to the commissary are sold as 
eaches, e.g., soft drinks and snacks. Based on the RFID mandate, each 
of these items would require an RFID tag which would be more than the 
cost of the product. Considering the fact the item is consumed within 
hours after purchase, if not on the way home, what is the benefit? More 
importantly, what person is going buy our products if the price 
everywhere else is half the price (because they don't have an RFID 
tag). I would like to suggest the following changes be considered: (1) 
Items purchased by the commissary and exchanges should be excluded from 
the RFID mandate in the FAR as you did for other types of products. (2) 
At the very minimum the date for implementing RFID technology for the 
commissary and exchanges should be consistent with all the other 
retailers which could be 2010 or beyond. (3) You revision the current 
provision so the contracting officer can exclude items based on the 
cost of the product. A 100% mandate for all items is going to be 
difficult. (4) If RFID is mandated for the commissary and exchanges, 
the advance shipping notice requirement be revised to allow the 
commissary and exchange to receive the ASN directly instead of going to 
DoD's network and the map for the ASN be determined by the commissary 
and exchange service.
    DoD Response: The requirements for DeCA's internal implementation 
are currently under review and are not within the scope of the current 
DFARS rule.
    44. Comment: Recommend the following clarifications on the case and 
pallet definitions: Case: A single package or container that contains a 
pre-determined quantity of a specific item or multiple items associated 
with an order packaged together. The RFID tag applied to the single 
unit will associate the EPC code to the list of items inside the case. 
Pallet: A carrier, skid or other portable platform that contains 
multiple cases that is distributed as a unit. The

[[Page 53960]]

RFID tag affixed to the pallet will associate the EPC code to the case 
RFID tags contained on the palletized unit.
    DoD Response: The definition used in the DFARS rule is as extracted 
verbatim from MIL-STD-129.
    45. Comment: The respondent expressed concern over the ability to 
meet the requirements of the ASN. Specifically the fact that the 
current system running within their company does not account for all of 
the data in the ASN nor is all of the ASN data RFID tag data, 
additionally the WAWF requires reporting of items at the catalog part 
number level where they may pick at the pickable level. Requests 
clarification to allow data submitted at the pickable level.
    DoD Response: The benefit of an ASN lies in the positioning of 
shipment data into a receiving information system prior to the actual 
arrival of the corresponding shipment--thus providing the receiving 
organization with ``actionable information'' to make delivery changes 
or other key business decisions. The data contained on the ASN is 
necessary for processing in the DoD enterprise. Each catalog number 
(read as CLIN) will likely have more than one RFID tag associated with 
it and the quantity may differ from the order quantity. This is 
perfectly allowable for a CLIN to have multiple RFID tags within WAWF. 
The mapping calls for the tag to associate with that portion of the 
CLIN quantity shipped in the carton. For additional information and 
instruction of how to construct this transaction, visit https://wawf.eb.mil and contact DISA Customer Service.
    46. Comment: The respondent comments that DoD orders are not 
received via EDI, which would make sending an EDI MIRR to DoD much 
easier. The respondent suggests converting order to EDI submissions 
only.
    DoD Response: This rule does not identify the method for order 
transmission.
    47. Comment: The respondent noted that in WAWF today an entire ASN 
MIRR will be rejected if any required field value is not what is 
expected. This rejection may prevent the ASN from being received prior 
to the receipt of material. The respondent suggests rejecting only the 
affected lines.
    DoD Response: We acknowledge that this scenario could occur and we 
will work with the WAWF personnel to examine this issue.
    48. Comment: The respondent commented that in some contracts DoD 
specifies the line numbers for vendor products, which in the creation 
of the ASN could be a problem because those numbers are not the same as 
the vendors''. The respondent suggests the use of common line numbers 
that are designated by the vendor.
    DoD Response: This is outside of the scope of the DoD RFID DFARS 
rule. However, CLINS are normally designated by the contracting agency 
at the time of contracting.
    49. Comment: The respondent brings attention to the fact that not 
all pharmaceuticals are distributed directly from a manufacturer to the 
DoD; distribution may occur through a pharmaceutical distribution 
entity. With the addition of RFID technology, there may be a change in 
the distribution, forcing manufacturers to become enabled to send an 
ASN. It is suggested that more time is needed to research and clearly 
understand the content of the ASN requirements.
    DoD Response: Pharmaceutical materials are not within the scope of 
this DFARS rule--thus providing more time to research and understand 
the ASN requirements.
    50. Comment: The respondent commented that there is still a need to 
study the long-term effects of RF, specifically on medical products. 
The respondent proposes more guidance on the effects on medical 
products, environment, and other areas that use this technology, 
including the handling of this material in the supply chain.
    DoD Response: Medical products are not within the scope of this 
DFARS rule. The DoD is working closely with and intends to follow the 
lead of the Food & Drug Administration (FDA) on the use of RFID on 
pharmaceutical items--particularly biologics and medical items.
    51. Comment: The respondent recommended providing guidance on the 
ability and method to recycle RFID tags.
    DoD Response: The DoD would handle packaging and pallet material 
containing RFID tags using similar procedures as are currently used. 
Additional analysis is continuing in order to review the impacts of 
RFID tag materials in the various recycling waste streams.
    52. Comment: Readability distance may vary based on equipment used, 
type of material and other factors that affect RF. MIL-STD-129 has 
defined requirements for the placement of tags on the pallet and case. 
This requirement may not be met for certain types of materials, 
liquids, metals, etc. We recommend the DoD make allowances for tag 
placement that best suits the material being tagged. MIL-STD-129 also 
states a requirement for the tag to be readable at the time of 
shipment. Guidance is needed if the tag is damaged in transit or just 
simply not readable at the time of receipt.
    DoD Response: As the implementation of the DoD RFID program 
continues, the need for inclusion of these requirements in the MIL-STD-
129 will be reviewed.
    53. Comment: The destruction of the RFID label after product 
delivery is a concern. Clear guidance has not been given on killing 
tags to ensure they do not resurface or are used to transport material 
other than the intended product. There needs to be assurance for when 
shipping materials are recycled or discarded, that previously assigned 
RFID information not be mistakenly re-used to identify another shipment 
of configuration of materials. An understanding of the DoD approach to 
handling passive RFID tags would be needed to assure systems support 
the intended post-use handling of the tags.
    DoD Response: As the implementation of the DoD RFID program 
continues, additional procedures will be reviewed to preclude re-use of 
RFID tags and the potential for mis-labeling or false identification of 
materials.
    54. Comment: It is not clearly outlined if (or which) 
pharmaceutical drug product(s) may require UID numbers affixed to the 
unit containers (bottles of tablets, solution, capsules, etc). The 
addition of an RFID tag on a small bottle containing serialized 
identifier would be difficult at a local distribution center and may 
need consideration at the manufacturer.
    DoD Response: The requirement for RFID tagging of UID item 
packaging is a future requirement and not included in the scope of this 
DFARS rule.
    55. Comment: Clear understanding of pharmaceutical product flow 
from the product manufacturer, to an authorized pharmaceutical 
distribution center, and finally to a DoD depot or warehouse must be 
considered in order to manage the impact of RFID tagging of cases and 
pallets when product is not directly shipped to DoD and manufacturers 
regarding RFID tagging needs. The responsibility of providing ASN's and 
case/pallet RFID tags would reside with the pharmaceutical distribution 
entity. Original packaging of cases and pallets from the manufacturer 
may change at the DC since these deliveries are not dedicated for DoD 
orders but are stocking orders for multiple customers.
    DoD Response: Noted. The responsibility for providing case and 
pallet RFID tags in addition to the correct ASN resides with the 
contract holder.

[[Page 53961]]

    56. Comment: Very limited guidance has been made available 
regarding the impact analysis requirements for pharmaceutical and 
medical materials (products). It is currently understood from FDA 
guidance that biological pharmaceutical materials are not to be 
included in RFID pilot studies until further regulatory review is 
completed and further guidance is provided. Would the DoD guidance 
provide similar concerns?
    DoD Response: Pharmaceuticals are not included within the scope of 
the current DFARS rule. However, DoD is working closely with the FDA on 
the future use of RFID on pharmaceutical items--particularly biologics 
and medical items.
    57. Comment: A respondent commented on the need for DoD to only 
adopt a RFID-use mandate if RFID technologies will not have a negative 
impact on recycling for any container, package, or pallet producer or 
any industry utilizing recycled containers or pallets to produce other 
products. Additionally, this respondent urges the Department to 
carefully analyze the use of RFID tags for each type of container under 
consideration.
    DoD Response: As the DoD RFID effort progresses, the Department 
will remain cognizant of this and other industry association's concerns 
surrounding the use of RFID on particular materials used in shipping 
items throughout the supply chain. Additional analysis is continuing in 
order to review the impacts of RFID tag materials in the various 
recycling waste streams.
    58. Comment: The 30 Jul 2004 OUSD(AT&L) memo ``Radio Frequency 
Identification (RFID) Policy'', discussed over-arching DoD-wide 
implementation of RFID into the supply chain system. When the proposed 
rule was published in April, it confused program managers and 
contracting functionals because the proposed DFARS changes only covered 
limited types of commodities being shipped to only two depots. We 
thought the DFARS proposed rule would take into account the more 
expansive application of RFID within DoD as expressed in the various 
RFID policy memos. We can only assume the proposed rule represents just 
the first phase of RFID application, and subsequent DFARS changes will 
expand RFID application.
    DoD Response: This DFARS rule covers the commodities and locations 
for 2005, additional DFARS updates/rules will be used to provide the 
locations and commodities for 2006 and 2007.
    59. Comment: The respondent has followed the development and 
testing of RFID tags for the typical ``supermarket'' food products. It 
would seem to them, and they believe this is a view shared by most in 
the wholesale food industry, that feasibility and affordability of RFID 
tags for the food industry is at least 3 years down the road. Even Wal 
Mart seems to have backed down with their RFID initiative. It is 
important to recognize that profit margins in the food business are 
measured in pennies. This is a factor that puts great emphasis on the 
cost of RFID tags. RFID makes a great deal of sense for highly 
sensitive or costly items that the DoD or other government agencies are 
attempting to control. It would seem that tracking cases of peas, corn, 
cereal, etc., would be rather low on the priority list vs. other costly 
or sensitive items. The respondent strongly recommends consideration 
that application of RFID tags to food related products be deferred 
until technological challenges are resolved and the cost of RFID tags 
become reasonable. Implementing requirements to support RFID tags at 
these early stages might result in limitations or elimination of the 
ability of small business to sell to the government--a result that 
would be contrary to federal procurement guidelines or could result in 
the need for notable cost increases for the food products supplied to 
the various government agencies.
    DoD Response: Consumer products and typical ``supermarket'' food 
products are not included within the scope of the current DFARS rule. 
The DoD is reviewing future requirements for consumer products and 
typical ``supermarket'' food products for phasing into the DoD RFID 
implementation.
    60. Comment: The respondent recommends that DoD reexamine its use 
of the Ship Notice/Manifest (ASC X12 856 Transaction Set). There are 
numerous inconsistencies between the use within DoD and the primary 
users of EPC. A. Background: In addition, contractors must send an 
advance shipment notice in accordance with the procedures at http://www.dodrfid.org/asn.htm, to provide the association between the unique 
identification encoded on the passive tag(s) and the product 
information at the applicable case and palletized unit load levels. B. 
Regulatory Flexibility Act: ] 2 ``The proposed rule will also require 
contractors to provide an electronic advance shipment notice in 
accordance with the procedures at http://www.dodrfid.org/asn.htm, to 
associate RFID tag data with the corresponding shipment. 252.211-7XXX 
Radio Frequency Identification. As prescribed in 211.275-3, use the 
following clause: Radio Frequency Identification (XXX 2005)(e) 
Receiving report. The Contractor shall electronically submit advance 
shipment notice(s) with the RFID tag identification (specified in 
paragraph (d) of this clause) in advance of the shipment in accordance 
with the procedures at http://www.dodrfid.org/asn.htm. The specifics 
for the Advance Shipment Notice (this terminology is incorrect). The 
correct title for the X12 856 transaction set is ``Ship Notice/
Manifest.'' The specific reference from the Web page about is 856--
Pack-- Update--WAWF-- 4010--EDI--Detail.doc, Version 3.0.7, March 2005. 
Contemporary versions of X12 (5020) and many previous versions declared 
REF01 (Data element 128) as having a minimum size of two characters and 
a maximum size of 3. As far back as X12 (4010) we find the value 
``TPN'' to indicate ``transponder number.'' Wal-Mart Implementation 
Guidelines for EDI state, ``Future documents that will support EPC 
information <bullet> 856--Ship Notice.'' The 856 transaction set has 
two primary schemes, one which employs the CLD/REF loop (Loop ID--CLD) 
and the other employs a Marks and Numbers segment (MAN). The retail 
segment (the model for EPC) employs the MAN segments. Organizations 
shipping to retail distributors and sales points will need to employ a 
different scheme for DoD than for retailers. DoD is ``way ahead of the 
curve'' with regard to EPC implementation and then tying that 
implementation to EDI. There are numerous issues that are currently 
unresolved (as mentioned above) and DoD must be prepared to re-
implement its EPC/EDI usage once the details have been sorted out by 
industry. Does DoD intend only to permit Version 4010 of the ASC X12 
standards? Will future implementations require Small to Medium 
Enterprises (SMEs) to then redesign their systems? A Ship Notice/
Manifest transaction provides no benefit for the SME. DoD should 
identify the frequency of anticipated changes in these rules.
    DoD Response: DoD follows Federal Implementation Conventions for 
all X12 transaction sets. In some cases, that may result in a different 
transaction set than the commercial transaction set, however we will 
continue to use the Federal Implementation Conventions for X12 
transaction sets.
    61. Comment: Additional--The requirement of EPC tags in general and 
Class 0 and 1, specifically. The DoD requirement for Generation 2 
passive RFID tags preceded the submission by

[[Page 53962]]

EPCglobal of the Generation 2 specification to ISO for standardization. 
In the interest of RFID harmonization with international allies, tag 
compliance with JTC1 ISO/IEC 18000-6c should supersede Generation 2 
compliance once ISO 18000-6c is issued. 252.211-7XXX Radio Frequency 
Identification. As prescribed in 211.275-3, use the following clause: 
Radio Frequency Identification (XXX 2005) 2(d) Data syntax and 
standards. The Contractor shall use one or more of the following data 
constructs, depending upon the type of passive RFID tag being used in 
accordance with the tag construct details located at http://www.dodrfid.org/tagdata.htm (version in effect as of the date of the 
solicitation): 2(a) Definitions Passive RFID tag means a tag that 
reflects energy from the reader/interrogator or that receives and 
temporarily stores a small amount of energy from the reader/
interrogator signal in order to generate the tag response. Acceptable 
tags are--(1) EPC Class 0 passive RFID tags that meet the EPCglobal 
Class 0 specification; (2) EPC Class 1 passive RFID tags that meet the 
EPCglobal Class 1 specification; and (3) EPC UHF Generation 2 passive 
RFID tags that meet the EPCglobal UHF Generation 2 specification. It is 
not believed that the tags being sold to DoD meet the requirements of 
the EPC Class 0 or Class 1 specifications and that it is a serious 
error to say that they do. The only EPC tag having a viable 
specification is that of UHF Generation 2. Properly, DoD should be 
referencing ISO standards, in the case of RFID ISO/IEC 18000; and for 
passive technology operating in the 860-960 MHz range: ISO/IEC 18000, 
Part 6c. Such reference would be internationally viable, would include 
the UHF Gen2 standard currently referenced and would provide room for 
growth. Not referencing ISO standards is a serious mistake. If ISO 
standards are not going to be referenced, only UHFGen2 tags should be 
called out.
    DoD Response: The DoD opted to embrace EPC specifications for Class 
0 and Class 1 readers and tags in order to quickly adopt technology 
that enhances interoperability with our industry supplier base. At this 
time, DoD only accepts EPC compliant Class 0 and Class 1 tags. As the 
UHF Gen 2 specification is ratified and becomes part of the appropriate 
ISO standard, the DoD policy documentation will be updated to reflect 
this new standard.
    62. Comment: The definitions of ``palletized unit load'' and 
``shipping containers'' as indicated in the section 252.211-7XXX are 
acceptable according to the practices in handling corrugated and solid 
board containers.
    DoD Response: Noted.
    63. Comment: Assessing the possible impact, if any, on the 
environment and materials recycling, including corrugated containers. 
The Fibre Box Association (FBA) has considered for some time the 
potential impact of the passive RFID tags and antenna in the recycling 
stream that would impact the manufacturing location where the recovered 
corrugated material is processed, as well as the characteristics in the 
product itself containing a high percentage of recycled fiber content. 
As RFID tags come into widespread use, either from DoD requirements or 
other commercial and industrial organizations, an increasing number of 
these devices will enter the recycling stream. Corrugated containers 
are recovered and recycled at a level above 70%, the highest recycling 
rate for a defined article and very much in competition with aluminum 
cans for the top spot. Two systems were assessed for environmental and 
product safety considerations based on FBA's research of leading 
innovators and other analyses, identifying potential front-runners in 
the long term. The current RFID construction essentially consists of a 
small integrated circuit and an antenna that is either in foil form 
(copper) or printed with conductive silver ink. Thus the antennae are 
potential sources of metals that could be mobilized during the re-
pulping, fiber treatment and manufacturing processes at the recycling 
mill. The impacts could be in different solid and aqueous releases from 
the mill, as well as the presence of these metals in the product 
itself. The FBA commissioned the technical arm of the forest and paper 
industry, the National Council for Air and Stream Improvement (NCASI), 
to perform a study to assess the potential impact of these two 
forerunner RFID antennas in the recycling stream. In the case of the 
foil antenna, the results of the study indicate the tag maintains its 
integrity in the re-pulping process due to the fact that this type of 
RFID tag is typically enclosed in a plastic laminate, which is then 
adhered to the container. The hydrapulper cleaning system separates 
these tags out at a 99%+ level. Such complete separation prevents any 
mobilization of the copper metal and allows the tags to be easily and 
safely disposed. The printed silver ink antenna is a more complex 
situation because it indeed mobilizes. In order to accurately ascertain 
the partition of silver among the different vectors--solid waste, 
effluent discharges and the product itself--a detailed trial was 
conducted in a pilot paper machine and fiber cleaning system at Western 
Michigan University in Kalamazoo, Michigan. This study and the 
subsequent analysis of samples collected from the different vectors, as 
well as testing for movement potential of silver from the corrugated 
packaging into food, has been recently completed. The study results 
indicate the following:
    <bullet> The silver had a high tendency to remain in the fiber 
substrate of the paperboard.
    <bullet> Silver extractions of the finished pilot plant paperboard 
samples revealed a high resistance of the silver to movement outside 
the substrate.
    <bullet> Silver concentration in effluent, solid waste and product 
streams are well below the identified regulatory thresholds.
    DoD Response: DoD appreciates this valuable information with regard 
to the studies completed on recycling RFID tags on corrugated 
containers. DoD will continue to solicit and accept all research, 
studies, and analyses that document the impact of RFID tags to our 
environment and recycling industries worldwide.
    64. Comment: It is the recommendation of the AIM RFID Experts Group 
(REG) that the definitions employed for common industry terms follow 
the definitions internationally accepted for those terms. There is 
incompatibility between the definition in the DFARS Case 2004-D011, 
MIL-STD-129P, and the intended use of RFID within DoD. What follows are 
the terms and definitions employed by the documents in question. 
211.275-2 Policy. Radio frequency identification (RFID), in the form of 
a passive RFID tag, is required for individual cases and palletized 
unit loads. Palletized unit load means a MIL-STD-129 defined quantity 
of items, packed or unpacked, arranged on a pallet in a specified 
manner and secured, strapped, or fastened on the pallet so that the 
whole palletized load is handled as a single unit. A palletized load is 
not considered to be a shipping container. [DFARS Case 2004-D011, ``As 
prescribed in 211.275-3, use the following clause:''] Case: It is 
either an exterior container within a palletized unit load or it is an 
individual shipping container. [MIL-STD-129P c3, definition 3.3.1] 
Palletized unit load: A quantity of items, packed or unpacked, arranged 
on a pallet in a specified manner and secured, strapped, or fastened on 
the pallet so that the whole palletized load is handled as a single 
unit. A palletized or skidded load is not considered to be a shipping 
container. A loaded 463L System pallet is not considered to be a 
palletized unit load. Refer to the

[[Page 53963]]

Defense Transportation Regulation, DoD 4500.9-R, Part II, Chapter 203 
for marking of 463L System pallets. [MIL-STD-129P c3, definition 3.27] 
International standards: International standards exists for these and 
constituent terms. DoD claims to use commercial standards. The most 
pervasive commercial standards are those of ISO. The DFARS case (and 
MIL-STD-129) need to reference the terms as employed in ISO standards. 
Pallet: Rigid horizontal platform of minimum height, compatible with 
handling by pallet trucks and/or forklift trucks and other appropriate 
handling equipment, used as a base for assembling, stacking, storing, 
handling, transporting, or display of goods and loads [ISO DIS 455, 
Pallets for materials handling--Vocabulary, definition 2.1]; packaging 
(product) product made of any material of any nature to be used for the 
containment, protection, handling, delivery storage, transport and 
presentation of goods, from raw material to processed goods, from the 
producer to the user or consumer, including processor, assembler or 
other intermediary [ISO DIS 21067, Packaging--Vocabulary, definition 
2.1.1]; transport packaging: Packaging (2.1.1) designed to contain one 
or more articles or packages or bulk material for the purposes of 
transport, handling and/or distribution [ISO DIS 21067, Packaging--
Vocabulary, definition 2.2.4]; unit load/unitized load: Single item or 
assembly of items designed to enable these to be handled as a single 
entity [ISO DIS 21067, Packaging--Vocabulary, definition 2.3.18]; box: 
Packaging with rectangular or polygonal sides usually completely 
enclosing the contents. Note: The sides may contain apertures for 
handling or ventilation. [ISO DIS 21067, Packaging--Vocabulary, 
definition 2.3.7]; case: non-specific term for a transport packaging, 
often used to refer to a box [ISO DIS 21067, Packaging--Vocabulary, 
definition 2.3.9].
    DoD Response: These recommendations will be reviewed for possible 
inclusion in a future update to the MIL-STD-129. The definitions will 
remain consistent with MIL-STD-129.
    65. Comment: Evidence: The environmental impact of utilizing 
Passive RFID tags to track and identify DoD material is being assessed 
in the same order that RFID tags will appear in significant quantities 
on DoD material. Since the DoD Passive RFID Mandate (as well as private 
sector mandates) is first targeted to unit loads/pallets and cases, 
data accumulation and studies that need to occur have first focused on 
carton board and corrugate. 4.1 Corrugate Evidence: Foil antenna made 
of Aluminum or Copper, irrespective of being on plastic substrate, will 
not taint the corrugate/carton board recycle stream. Because these tags 
remain intact, they are removed with staples, etc., in the first 
filtration after repulping with no carry over. The addition of RFID 
tags to the first repulping filtrate does not significantly alter the 
percentage constituent makeup of the first repulping filtrate, (10%). 
Present waste disposal for the first repulping filtrate is deemed 
acceptable in the future for the first repulping filtrate with RFID 
tags. Printed silver based antennas are undergoing pilot testing to 
insure no negative environmental impact occurs. There is some concern 
that residual silver may pass through. The underlying reason is that 
printed antennas do not have the same structural integrity to remain 
intact to allow simple filtration to be the means of removal. Since a 
significant portion of RFID tags are foil/plastic substrate based, the 
most conservative approach would be for DoD to utilize foil/plastic 
substrate based tags until completion of the printed antenna pilot 
tests. 4.2 Pallet Evidence: No studies have been initiated for 
environmental impact on pallets because a general assessment indicates 
no need due to the following: Pallets are either reused repeatedly for 
many turns with no subsequent environmental impact; Tags on pallets are 
reused or manually removed allowing the tags to be separated before 
disposal; Pallets are repaired and reused with no subsequent 
environmental impact from tags; Pallets are disposed of via grinding 
where antenna metal would constitute .4ppm. Final uses of ground 
pallets are fuel, mulch, and filler for plastic; Total pallet tags will 
be fewer than case tags by factors between 20 and 100.
    DoD Response: DoD appreciates this valuable information and 
analysis concerning the recycling impacts of RFID tags on packaging 
materials. DoD will continue to solicit and accept all research, 
studies, and analyses that document the impact of RFID tags to our 
environment and recycling industries worldwide. As a note, the tags 
placed on pallets will be placed on the shrink wrap not directly 
applied to the pallet itself.
    66. Comment: Reference AIM REF Term of Reference 5R (RFID and 
recycling); 5. Mitigating Action Plans: For Use Cases and waste streams 
that are several years from having large number of RFID tags involved, 
assessments are in different stages of completion. However, all should 
be finalized before RFID becomes significant in each area. As well 
there are initiatives under way that take the introduction of RFID well 
beyond minimizing impact on existing processes to more net positive 
impacts. Both are outlined below: 5.1 Printed Silver Based Tags on 
Corrugate: The impact of introducing large numbers of printed silver 
based RFID tags into the corrugate/carton board recycle stream is in 
the final stages of study by the Fibre Box Association (FBA) and 
Confederation of European Paper Industries (CEPI), the U.S. and 
European trade associations respectively for the corrugate/carton 
board/paper sector. As well, several suppliers of silver based printing 
inks have studies underway. All those doing studies, ink suppliers, 
FBA, and CEPI plan to submit study results to OMB as soon as complete 
in the near future. 5.2 Existing Waste Streams: Impact data is not yet 
available for plastics, glass or metal. However, the same successful 
approach that is in final stages of completion for corrugate will be 
undertaken. The following have been engaged to provide guidelines for 
RFID use to minimize environmental impact:

------------------------------------------------------------------------
 Waste stream trade association guideline            Completion
------------------------------------------------------------------------
Plastics Society of Plastic Engineers       1st Qtr 07.
 (SPE).
Society of Plastics Industry (SPI)........
Glass Packaging Institute (GPI)...........  1st Qtr 07.
Steel TBD.................................  4th Qtr 07.
Aluminum TBD..............................  4th Qtr 07.
------------------------------------------------------------------------

5.3 Reusable Assets: An EPC Global Work Group led by CHEP (a global 
pallet pool owner) is defining tag and data needs to ensure Reusable 
Assets are tagged with long life tags for both the Asset GRAI and the 
contents' EPC. Target completion for a standard is November 2005. 5.4 
Tag Reuse: A mechanism to minimize the impact or RFID tags is Reuse. At 
least one commercial activity is underway to pilot and validate the 
technical and economic viability of Tag Reuse. ASADA will be running a 
pilot in conjunction with a recycle corrugate mill to validate the 
economics. Key to tag reuse is the tag issuing entity must use password 
alterable EPC numbering so the tag can be reused. Assuming technical 
and economic viability is validated in the pilot, tag reuse will be in 
place by Q2'06. 5.5 Recycle Process ID: AIM will petition ISO to 
reserve 8 bits in RFID tag protocols to carry EPA recognized processes 
for recycling. The ISO submission will be August 1, 2005. 5.6 
Constituent Reduction: Constituent/Metal Antenna, Silicon IC, 
Substrate, Adhesives) Reduction for Passive RFID

[[Page 53964]]

Tags is the primary R&D focus of all RFID Tag Suppliers. The underlying 
economic requirement for massive adoption of RFID in the private sector 
is tag cost reduction. Tag cost is based almost entirely on constituent 
cost with the cost of the main tag constituents essentially being 
equivalent. Therefore, tag constituent contents will drop 
proportionally with price, i.e., proportional in the drop from mid 
twenty cents to sub ten cents, over the next 5 years. Discussion: Given 
the above evidence and action plans to create additional evidence, the 
net environmental result of mandated RFID adoption is presented below 
against the long established strategy of environmental responsibility--
Recycle, Reuse, Reduce: Recycle: Existing waste stream recycling at a 
minimum will be unaffected. More likely waste stream recycling will 
have significantly improved efficiency because mixed stream solid waste 
separation will become automated. Valuable components of RFID tags will 
be retrieved; Reuse: More reusable assets such as totes and pallets 
will be used because their location and renting partner will be real-
time; Re-shipper corrugate cases will be utilized more; An 
infrastructure will be established to reuse hardened RFID tags; Reduce: 
Natural economic forces will significantly reduce RFID tag constituent 
content.
    DoD Response: DoD appreciates this valuable information and 
analysis provided concerning the recycling impacts of RFID tags on 
packaging materials. DoD will continue to solicit and accept all 
research, studies, and analyses that document the impact of RFID tags 
to our environment and recycling industries worldwide.
    67. Comment: (Item 1): Paragraph (b)(1)(ii) of the proposed clause 
252.211-7XXX currently references shipment receiving sites Susquehanna 
PA and San Joaquin CA. Recommendation: We suggest removing reference in 
the clause to specific DLA receiving facilities, to point back to the 
contract for delivery site instruction. Please revise clause language 
to read: ``(ii) Are being shipped as defined within section D 
(Delivery) or as defined elsewhere within the contract.''
    DoD Response: The two specific sites are provided as guidance so 
that contracting officers will know what locations to include in 
section D of contracts.
    68. Comment: (Item 2): Regarding the meaning of Unique as defined 
in the proposed clause 252.211-7XXX, we recommend adding the words 
``and all'' as underlined below to ensure that the meaning of the word 
unique is not misunderstood. (c) The Contractor shall ensure that--(1) 
The data encoded on each passive RFID tag are unique (i.e., the binary 
number is never repeated on any and all contracts) and conforms to the 
requirements in paragraph (d) of this clause;
    DoD Response: Agree. This change has been made in the final rule.
    69. Comment: (Item 3): Subparagraph (e) of the proposed clause 
252.211-7 XXX, ``Receiving report'' provides a URL connection for 
instructions on Advance ship notification. Data found within URL Web 
sites are subject to random modification and change. Recommendation: We 
recommend the URL reference be replaced with either a reference to the 
ASN process found within MIL-STD-129 or as delineated within the 
contract.
    DoD Response: While the content posted to the URL (http://www.dodrfid.org/asn.htm) is subject to modification, the version of the 
information posted to the URL in effect at the date of solicitation is 
binding.
    70. Comment: Supplemental recommendation: Often the prime 
contractor will ship on multiple contracts adding to the level of 
complexity. It would be beneficial to add language to the proposed 
clause to encourage the use of the Single Process Initiative (SPI) 
where practicable.
    DoD Response: Noted.
    71. Comment: The respondent commented on the use of RFID tags in 
recycled materials and referred the reader to comments submitted by the 
Fibre Box Association with regard to a study being completed on RFID 
tags in recycling.
    DoD Response: Noted.
    72. Comment: The respondent expressed concern over the potential 
adverse impacts that RFID tags may have on their manufacturing 
processes when scrap material that has been manufactured into raw 
material are utilized to make new basic materials. The respondent 
recommends using a technique, in the future, for product design that 
takes recycling into account as the product is developed. Additionally, 
the respondent urges DoD to reconsider the timing of the policy until 
additional data can be derived relative to the impact of tags on the 
recycling supply chain.
    DoD Response: It has been noted in comments from other industry 
associations that have commissioned studies on RFID tags (with both 
copper and silver antennas) that foil antennas can be sorted out at a 
99%+ level, and printed silver ink antenna had a high resistance to 
move outside the substrate and the silver remains in the fiber 
substrate of the paperboard, additionally, the silver concentrate in 
the solid waste and product streams are well below regulatory 
thresholds. The DoD will continue to monitor industry testing of 
recycling processes containing RFID tags or tag fragments. As the 
results of these tests become known, DoD RFID policy will be amended as 
required.
    73. Comment: Reaching End-to-End supply chain visibility. End-to-
End visibility is achieved through system integration across the supply 
chain--RFID merely simplifies asset identification.
    [cir] Recommendation: Harmonizing current disparate information 
systems could greatly improve supply chain visibility using today's bar 
codes.
    DoD Response: Noted. The DoD is using barcode technology and RFID 
technology as well as other complementary AIT in addition to systems 
integration efforts to achieve End-to-End supply chain visibility.
    74. Comment: Accuracy of the cost burden estimate
    [cir] The IBM/AT Kearney study, ``A Balanced Perspective: EPC/RFID 
Implementation in the CPG Industry'' demonstrates most CPG categories 
have a negative 10-year Net Present Value Business Case.
    [cir] IBM/ATK study shows product category dynamics significantly 
influences Return On Investment.
    [cir] Costs to CPG manufacturers for RFID Implementation far exceed 
the initial DoD estimates.
    [cir] Manufacturers receive virtually no benefits from RFID unless 
real-time product movement is shared by the DoD.
    [cir] Recommendation: Pursue RFID programs on product categories 
with sufficient ROI to justify the extensive additional costs.
    DoD Response: Our in-depth analysis indicates that CPG items are 
not typically shipped to DDSP and DDJC and therefore are not included 
within the scope of the current DFARS rule. The DoD is reviewing future 
requirements for specific classes of supplies and commodities to phase 
into the DoD RFID implementation.
    75. Comment: Technology Issues.
    [cir] Tag read rates on many CPG products remains low, both in test 
labs and in pilots.
    [cir] Tag quality is uneven, resulting in additional costs to 
manufacturers.
    [cir] Tag Application devices do not, for high volume 
manufacturers, operate at manufacturing line speeds, resulting in 
inefficiencies.

[[Page 53965]]

    [cir] Recommendation: Pursue case-level RFID program on mission 
critical products.
    DoD Response: Our in-depth analysis indicates that CPG items are 
not typically shipped to DDSP and DDJC and therefore are not included 
within the scope of the current DFARS rule. The DoD is reviewing future 
requirements for specific classes of supplies and commodities to phase 
into the DoD RFID implementation. The tag quality issue is being 
addressed by various organizations. There is no current standard for 
tag quality and this issue is being addressed by various industry 
organizations. The DoD will monitor any issue recommendations or 
resolutions for possible inclusion in future updates.
    76. Comment: Tag location.
    [cir] RFID technical limitations may render tag unreadable based on 
DoD specs.
    [cir] Recommendation: Remove restriction on tag placement for CPG 
companies and allow placement based on maximum tag read rates.
    DoD Response: Our in-depth analysis indicates that CPG items are 
not typically shipped to DDSP and DDJC and therefore are not included 
within the scope of the current DFARS rule. The MIL-STD-129 contains 
recommended tag placement location, but can be adjusted to get maximum 
tag read rates.
    77. Comment: Advanced Ship Notification.
    [cir] ASNs, when used properly, can provide many of the same 
benefits as RFID.
    [cir] Recommendation: Aggressively pursue pallet level ASN 
implementations within the DoD supply chain.
    DoD Response: The pallet is in the ASN, just not the only thing in 
the ASN. The benefit of an ASN lies in the positioning of shipment data 
into a receiving information system prior to the actual arrival of the 
corresponding shipment--thus providing the receiving organization with 
``actionable information'' to make delivery changes or other key 
business decisions. RFID is a technology that improves the ability of 
users in supply chains to rapidly identify, record, and process items, 
shipments, or both. The use of an ASN with RFID technology facilitates 
the positioning of shipment data into a receiving information system 
and allows the immediate ``hands off'' receipt, via RFID, of that item 
into inventory upon the arrival of the actual shipment--thus speeding 
up product availability for the customer as well as invoice close-out 
and payment.
    78. Comment: We believe that the DoD should consider a more 
targeted approach on high value categories that can generate a positive 
ROI, and avoid low cost/low value CPG products. Recommendation: Pursue 
case-level RFID tagging for mission critical products (i.e., CPG 
products not included) that current technology limitations can support. 
Continue to evaluate pallet-level RFID programs for CPG products and 
pursue implementation when and if RFID technology and costs warrant. 
Look at ways to leverage existing technologies like bar codes and ASNs 
on lower cost CPG products.
    DoD Response: Our in-depth analysis indicates that CPG items are 
not typically shipped to DDSP and DDJC and therefore are not included 
within the scope of the current DFARS rule. The DoD implementation is 
already pursuing case and pallet level tagging for mission critical 
products and is reviewing future requirements for specific classes of 
supplies and commodities to phase into the DoD RFID implementation.
    79. Comment: Initial Regulatory Flexibility Analysis of Passive 
RFID Version 1.2, March 2005--Specific Comments.
    We have reviewed the DoD's Initial Regulatory Flexibility Analysis 
of Passive RFID and would like to highlight a number of items for 
consideration: Section 1.5: The repeated references to a ``nested'' 
parent child relationship with EPC case tags and pallet tags is not a 
capability that exists broadly today amongst CPG manufacturers. All of 
the limited customer pilots at this point do not require the case level 
EPC serial numbers to be sent with the ASN.
    DoD Response: Our in-depth analysis indicates that CPG items are 
not typically shipped to DDSP and DDJC and therefore are not included 
within the scope of the current DFARS rule. The current ASN structure 
for suppliers allows for a ``nested'' parent-child relationship between 
the pallet and case tags. See comments 81-87 for further clarification. 
The benefit of an ASN lies in the positioning of shipment data into a 
receiving information system prior to the actual arrival of the 
corresponding shipment--thus providing the receiving organization with 
``actionable information'' to make delivery changes or other key 
business decisions. RFID is a technology that improves the ability of 
users in supply chains to rapidly identify, record, and process items, 
shipments, or both. The use of an ASN with RFID technology facilitates 
the positioning of shipment data into a receiving information system 
and allows the immediate ``hands off'' receipt, via RFID, of that item 
into inventory upon the arrival of the actual shipment--thus speeding 
up product availability for the customer as well as invoice close-out 
and payment.
    80. Comment: Section 3.2: The reference to the requirement of 
linear bar codes to access external databases is also a requirement 
with the current 96 bit passive RFID tags being used in the CPG 
industry. To obtain any details on the serialization on the tag would 
require querying an external database.
    DoD Response: Noted.
    81. Comment: Section 3.3: We agree that the two most logical 
choices to enable enhanced visibility in the DoD supply chain are bar 
codes and passive RFID tags. The idea that no human intervention is 
required on RFID tags is not correct for RF unfriendly products. Many 
food products in the CPG industry contain metals, liquids, and 
metalized films which prohibit these cases from being read in a typical 
pallet configuration. Since the capability does not broadly exist to 
send the serialization as part of an ASN, pallets would need to be 
broken down and cases passed individually in front of a reader in order 
to get 100% case level reads.
    DoD Response: The inability to achieve 100% case level read rates 
does not relieve a shipper of the requirement to send the appropriate 
ASN with the tag serialization as part of the ASN. The nested parent 
child relationship between pallet and case tags inherent in the ASN 
will negate the need to obtain 100% case level tag reads.
    82. Comment: Section 3.3.1: EPCglobal sees both bar codes and RFID 
technologies co-existing for years. This supports a more targeted 
approach of using bar codes on low-value products and RFID on high-
value and high-importance items.
    DoD Response: The DoD concurs with the EPCglobal outlook and plans 
to continue the use of both linear bar codes and two dimensional 
symbology in the suite of applicable supply chain technologies.
    83. Comment: Section 4.4: Passive RFID is still unproven in harsh 
environments, specifically where refrigeration and freezing are 
involved due to condensation. Additionally, although referenced in this 
document, dynamic multi-block read and write capability is not 
available in the current 96 bit tags. The specifications are also 
moving to ``locked'' tags which secure the data written by 
manufacturers.
    DoD Response: Our in-depth analysis indicates that CPG items are 
not

[[Page 53966]]

typically shipped to DDSP and DDJC and therefore are not included 
within the scope of the current DFARS rule. The DoD is reviewing future 
requirements for specific classes of supplies and commodities to phase 
into the DoD RFID implementation.
    84. Comment: Section 5.1: Adoption rates are much slower that 
originally estimated, highlighted by the information shared earlier 
from the AMR Research report.
    DoD Response: The Regulatory Flexibility Analysis has been updated 
to include the most recent adoption rates from the most recent 2005 AMR 
report.
    85. Comment: Cost & Benefit Analysis--True Impact To Suppliers 
Section 6.4: There are a number of items in the benefit and cost 
analysis that do not accurately reflect the true cost impact to 
suppliers of meeting the proposed DoD RFID tagging requirements. 
Industry data concurs that there will be incremental costs of managing 
separate inventories of tagged and non-tagged products. Depending on 
the levels of automation, these costs can range from $0.75 to $2.00 per 
case in a postproduction ``slap and ship'' environment. Additionally, 
many of the research and development (RFID labs), infrastructure, 
software, middleware, material handling equipment, etc. are not 
included in the economics. The economic examples listed around a $4,000 
printer and a $0.50 tag are highly simplistic and do not reflect the 
true costs of an enterprise implementation of RFID. Individual company 
business cases show these costs can be as high as tens of millions of 
dollars, not to mention reoccurring tag costs.
    DoD Response: Noted. Those costs included in the cost analysis were 
not intended to reflect the true cost of an enterprise implementation 
of RFID. These costs were provided as examples of how a business, 
particularly a small or medium sized business, can comply with the RFID 
policy without spending millions of dollars.
    86. Comment: Company background: SUPERVALU is the nation's largest 
publicly held food wholesaler in the United States. We are a Fortune 
500 company which had last year sales of $19.5 billion as both a 
grocery retailer and wholesaler. SUPERVALU has been following both Wal-
Mart's and DoD's RFID initiatives. Publicly we are opposed to the 
mandate to DeCA to implement RFID by January 1, 2007 for several 
reasons: 1. RFID is still not a proven technology ready for a 
production roll out across the grocery industry. Most food 
manufacturers and grocery companies involved are only in pilot mode and 
are running into many challenges today.
    2. Currently RFID does not work well on ``mixed'' pallets (e.g., 
70-120 cases on a pallet that may represent 50-120 different products) 
that a DeCA commissary (or grocery) receives from their distributors 
due to the high error rate for mixed pallets. While Wal-Mart is often 
cited for mandating RFID requirements, Wal-Mart is using RFID on full 
pallets of one product not multiple, different products.
    3. Error rates on ``mixed'' pallets are even higher when foil and 
liquids are on the same pallet as they obscure the RFID signal.
    4. There is no, or little, ROI at this point in time given the cost 
of the EPC tags compared to the average case value especially with such 
a high error rate. An investment in RFID hardware today is considered 
``throw away'' as the technology is still maturing. For example, 
frequent changes are necessary to resolve many of the readability 
issues that are occurring in today's pilots.
    5. Finally, attaching RFID tags for groceries going to a commissary 
is not the intent of ``End to End Warfighter Support Initiative'' (i.e. 
implementing RFID to speed products and supplies to the ``war 
fighters'' in combat zones).
    We also have concerns over who should tag the product when a 
distributor supplies the product to DeCA. Will manufacturers have to 
incur the expense of having to tag products going to a distributor, 
when only a small percentage of the items would be shipped to DeCA? On 
the other hand if manufacturers refuse to tag the product, will the 
distributor be required to add the tags? If so, who will pay this 
expense?
    Recommendation: Due to the technology infancy of RFID, the high 
cost of implementing RFID for low value goods (e.g. groceries), and 
that adding RFID tags for grocery products going to a commissary have 
no impact on the End to End Warfighter Support Initiative, that in 
January 2007, DoD review RFID technology to:
    1. Determine if it is mature enough and being used in the grocery 
industry.
    2. If there is a ROI on implementing RFID down to the case level.
    3. And if technology is mature, to establish an implementation 
date, or if technology is not mature to establish another review date 
both preferably 18-24 months out.
    DoD Response: Our in-depth analysis indicates that CPG items are 
not typically shipped to DDSP and DDJC and therefore are not included 
within the scope of the current DFARS rule. The DoD is reviewing future 
requirements for specific classes of supplies and commodities to phase 
into the DoD RFID implementation.
    87. Comment: Hewlett-Packard (HP) finds that the Advance Shipment 
Notice (ASN) information requirements in the current state have 
seriously significant impact. There are two interconnected areas of 
concern: (a) Lack of industry standards: Current standards for ASN 
messaging have not yet caught up to include RFID standard information 
sets. HP understands that ANSI standards, designed to include 
extensions for EPC data, are underway but have not yet been proposed 
nor approved. Using requirements unique to DoD, or immature 
requirements that must soon be changed, causes unreasonable investment 
to be made by suppliers wishing to conform to the requirements. (b) 
Multiple implementations: Due to the large and diverse nature of HP 
products, geographies and organizations, multiple implementations would 
be required. This multiplies the investment burden. This is, of course, 
at HP's discretion--however, the combination of multiple 
implementations due to evolving standards (a) makes the investment 
burden excessively large. Recommendation: Have ASN notifications be 
optional until industry standards can be completed and folded in to the 
DoD requirements.
    DoD Response: The Department intends to maintain the requirement 
for ASNs as a mandatory component of the DFARS rule. RFID is a 
technology that improves the ability of users in supply chains to 
rapidly identify, record, and process items, shipments, or both. The 
use of an ASN with RFID technology facilitates the positioning of 
shipment data into a receiving information system and allows the 
immediate ``hands off'' receipt, via RFID, of that item into inventory 
upon the arrival of the actual shipment--thus speeding up product 
availability for the customer as well as invoice close-out and payment.
    88. Comment: The respondent finds that the implied label placement 
specifications for case labels are overly restrictive, and may have 
seriously significant impact. As stated, the DoD specification 
requires: ``The passive RFID tag should be placed on the 
identification-marked side and right of center on a vertical face * * 
*.'' Product cases are often heavily printed, and have limited, 
designated areas for labels. The respondent intends to use integrated 
address/RFID labels, and has only moderate concern about the 
restrictions for location of labels on the vertical surface of the 
case. The respondent has serious concerns about

[[Page 53967]]

the designation of ``side'' versus ``end'' of cases. The respondent's 
standard product design currently has address placement on the ``end'' 
of cases. Changing address label placement in product design is 
impractical and costly. RFID readers and antennae can be placed 
appropriately to handle either location.
    Recommendation: Allow either side or end placement of address 
labels, without qualification.
    DoD Response: The MIL-STD-129 contains recommended tag placement 
location, but can be adjusted to get maximum tag read rates.
    89. Comment: The respondent recognizes the likelihood of forklift 
mounted RFID readers in the near future. Industry standards have not 
yet addressed the issue of pallet tag location, however it seems likely 
that the combination of partial pallets and the mechanical 
characteristics of forklifts will likely influence industry standards 
to have a lower end range, such as 40 cm above the floor.
    Recommendation: Modify lower end range of pallet tag location 
specification to 40 cm.
    DoD Response: The MIL-STD-129 contains recommended tag placement 
location, but can be adjusted to get maximum tag read rates.
    90. Comment: The respondent is concerned about the effects that 
future RFID tag technology might have in the processes of recovering 
different paper grades for recycling, when the paper products are 
affixed with RFID tags. The respondent recommends a collaborative 
effort with DoD to avoid incorrectly applying data from one segment of 
the recycling industry to recycled paperboard.
    DoD Response: Noted. We have added additional information from 
other segments of the recycling industry to the Regulatory Flexibility 
Analysis to give a more balanced view of the industry as a whole. We 
look forward to continued work with industry associations as the RFID 
effort moves forward.
    91. Comment: The respondent presented its opposition on requiring 
contractors to affix RFID tags at the case and palletized unit load 
levels when shipping certain purchased supplies and equipment until 
further information presents itself; outlining the full economic and 
environmental impacts of RFID tags on the recycling industry. The 
respondent recommends that DoD proceed cautiously. The RFID tags may 
have the potential to contaminate large quantities of currently 
recyclable material due to its heavy metals content. Moreover, small 
chips or pieces of metal slipping through the screening process during 
the cleaning and screening process could be a potential problem for 
paperboard packaging that comes into contact with food or 
pharmaceuticals. Metals are prohibited in paperboard that will come 
into contact with food or pharmaceuticals. Additional concerns are that 
metals in the RFID tags that would be contaminants in the steelmaking 
process, such as copper, could end up going up the stack as air 
emissions or stay in the product. The metals constituents of the RFID 
tags will be contaminants for PET, HDPE, and especially glass when 
concentrated. The DoD should either fund studies or seek partnerships 
with other federal agencies with knowledge of the recycling industry to 
determine the financial impacts of this decision on the recycling 
industry and whether making this policy change would make sense from an 
environmental standpoint before making any final decision.
    DoD Response: It has been noted in comments from other industry 
associations that have commissioned studies on RFID tags (with both 
copper and silver antennas) that foil antennas can be sorted out at a 
99%+ level, and printed silver ink antenna had a high resistance to 
move outside the substrate and the silver remains in the fiber 
substrate of the paperboard, additionally, the silver concentrate in 
the solid waste and product streams are well below regulatory 
thresholds. The DoD will continue to monitor industry testing of 
recycling processes containing RFID tags or tag fragments. As the 
results of these tests become known, DoD RFID Policy will be amended as 
required.
    92. Comment: The respondent commented on the current RFID 
environment, technology and the work being done to ensure 
interoperability.
    DoD Response: Noted.
    93. Comment: The respondent commented on preliminary results from a 
study completed on the recycling of RFID tags which are attached to 
corrugated products. This study included crystalline connected copper 
and aluminum as well as printed antennae. The study indicated that 
existing process technologies in paper and board mills are capable of 
satisfactorily dealing with the crystalline connected antennae. More 
research is needed to determine if process changes are required for 
printed antennae
    DoD Response: DoD appreciates this valuable input. DoD will 
continue to solicit and accept all research, studies, and analyses that 
document the impact of RFID tags to our environment and recycling 
industries worldwide.
    This rule was subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

    This final rule may have an impact on a substantial number of small 
entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 
601, et seq. DoD has prepared a final regulatory flexibility analysis, 
available at http://www.dodrfid.org/regflex.htm. The analysis is 
summarized as follows:
    This rule adds requirements for DoD contractors supplying materiel 
to the Department to affix passive RFID tags at the case and palletized 
unit load levels for specified commodities delivered to specified DoD 
locations. To create an automated and sophisticated end-to-end supply 
chain, DoD is dependent upon initiating the technology at the point of 
origin, the DoD commercial suppliers. Without the assistance of the DoD 
supplier base to begin populating the DoD supply chain with passive 
RFID tags, a fully integrated, highly visible, automated end-to-end 
supply chain is untenable. DoD contractors are presently required to 
print and affix military shipping labels to packages delivered to DoD. 
Options to comply with the requirements of the rule can be as simple as 
replacing existing military shipping label printers with RFID-enabled 
printers. This will allow DoD contractors to print military shipping 
labels with embedded RFID tags. The regulatory flexibility analysis 
also details other options and approximate costs to comply. The rule 
also requires contractors to provide an electronic advance shipment 
notice in accordance with the procedures at http://www.dodrfid.org/asn.htm, to associate RFID tag data with the corresponding shipment. 
The objective of the rule is to improve visibility of DoD assets in the 
supply chain, increase accuracy of shipments and receipts, and reduce 
the number of logistic ``touch points'' in order to decrease the amount 
of time it takes to deliver material to the warfighter. The rule does 
not duplicate, overlap, or conflict with any other Federal rules. DoD 
considered all public comments in developing the final rule.

C. Paperwork Reduction Act

    This final rule contains a new information collection requirement. 
The Office of Management and Budget has approved the information 
collection for use through September 30, 2008, under Control Number 
0704-0434.

[[Page 53968]]

List of Subjects in 48 CFR Parts 211, 212, and 252

    Government procurement.

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

0
Therefore, 48 CFR Parts 211, 212, and 252 are amended as follows:
0
1. The authority citation for 48 CFR Parts 211, 212, and 252 continues 
to read as follows:

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

PART 211--DESCRIBING AGENCY NEEDS

0
2. Sections 211.275 through 211.275-3 are added to read as follows:


211.275  Radio frequency identification.


211.275-1  Definitions.

    Bulk commodities, case, palletized unit load, passive RFID tag, and 
radio frequency identification are defined in the clause at 252.211-
7006, Radio Frequency Identification.


211.275-2  Policy.

    Radio frequency identification (RFID), in the form of a passive 
RFID tag, is required for individual cases and palletized unit loads 
that--
    (a) Contain items in any of the following classes of supply, as 
defined in DoD 4140.1-R, DoD Supply Chain Materiel Management 
Regulation, AP1.1.11, except that bulk commodities are excluded from 
this requirement:
    (1) Subclass of Class I--Packaged operational rations.
    (2) Class II--Clothing, individual equipment, tentage, 
organizational tool kits, hand tools, and administrative and 
housekeeping supplies and equipment.
    (3) Class VI--Personal demand items (non-military sales items).
    (4) Class IX--Repair parts and components including kits, 
assemblies and subassemblies, reparable and consumable items required 
for maintenance support of all equipment, excluding medical-peculiar 
repair parts; and
    (b) Will be shipped to one of the following locations:
    (1) Defense Distribution Depot, Susquehanna, PA: DoDAAC W25G1U or 
SW3124.
    (2) Defense Distribution Depot, San Joaquin, CA: DoDAAC W62G2T or 
SW3224.


211.275-3  Contract clause.

    Use the clause at 252.211-7006, Radio Frequency Identification, in 
solicitations and contracts that will require shipment of items meeting 
the criteria at 211.275-2.

PART 212--ACQUISITION OF COMMERCIAL ITEMS

0
3. Section 212.301 is amended by removing paragraph (3) introductory 
text and paragraphs (3)(i) through (iii) and adding paragraph (f)(ix) 
at the end of the section to read as follows:


212.301  Solicitation provisions and contract clauses for the 
acquisition of commercial items.

* * * * *
    (f) * * *
    (ix) Use the clause at 252.211-7006, Radio Frequency 
Identification, as prescribed in 211.275-3.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
4. Section 252.211-7006 is added to read as follows:


252.211-7006  Radio Frequency Identification.

    As prescribed in 211.275-3, use the following clause:
Radio Frequency Identification (Nov 2005)
    (a) Definitions. As used in this clause--
    Advance shipment notice means an electronic notification used to 
list the contents of a shipment of goods as well as additional 
information relating to the shipment, such as order information, 
product description, physical characteristics, type of packaging, 
marking, carrier information, and configuration of goods within the 
transportation equipment.
    Bulk commodities means the following commodities, when shipped 
in rail tank cars, tanker trucks, trailers, other bulk wheeled 
conveyances, or pipelines:
    (1) Sand.
    (2) Gravel.
    (3) Bulk liquids (water, chemicals, or petroleum products).
    (4) Ready-mix concrete or similar construction materials.
    (5) Coal or combustibles such as firewood.
    (6) Agricultural products such as seeds, grains, or animal feed.
    Case means either a MIL-STD-129 defined exterior container 
within a palletized unit load or a MIL-STD-129 defined individual 
shipping container.
    Electronic Product Code\TM\ (EPC) means an identification scheme 
for universally identifying physical objects via RFID tags and other 
means. The standardized EPC data consists of an EPC (or EPC 
identifier) that uniquely identifies an individual object, as well 
as an optional filter value when judged to be necessary to enable 
effective and efficient reading of the EPC tags. In addition to this 
standardized data, certain classes of EPC tags will allow user-
defined data. The EPC tag data standards will define the length and 
position of this data, without defining its content.
    EPCglobal\TM\ means a joint venture between EAN International 
and the Uniform Code Council to establish and support the EPC 
network as the global standard for immediate, automatic, and 
accurate identification of any item in the supply chain of any 
company, in any industry, anywhere in the world.
    Exterior container means a MIL-STD-129 defined container, 
bundle, or assembly that is sufficient by reason of material, 
design, and construction to protect unit packs and intermediate 
containers and their contents during shipment and storage. It can be 
a unit pack or a container with a combination of unit packs or 
intermediate containers. An exterior container may or may not be 
used as a shipping container.
    Palletized unit load means a MIL-STD-129 defined quantity of 
items, packed or unpacked, arranged on a pallet in a specified 
manner and secured, strapped, or fastened on the pallet so that the 
whole palletized load is handled as a single unit. A palletized or 
skidded load is not considered to be a shipping container. A loaded 
463L System pallet is not considered to be a palletized unit load. 
Refer to the Defense Transportation Regulation, DoD 4500.9-R, Part 
II, Chapter 203, for marking of 463L System pallets.
    Passive RFID tag means a tag that reflects energy from the 
reader/interrogator or that receives and temporarily stores a small 
amount of energy from the reader/interrogator signal in order to 
generate the tag response. Acceptable tags are--
    (1) EPC Class 0 passive RFID tags that meet the EPCglobal Class 
0 specification; and
    (2) EPC Class 1 passive RFID tags that meet the EPCglobal Class 
1 specification.
    Radio Frequency Identification (RFID) means an automatic 
identification and data capture technology comprising one or more 
reader/interrogators and one or more radio frequency transponders in 
which data transfer is achieved by means of suitably modulated 
inductive or radiating electromagnetic carriers.
    Shipping container means a MIL-STD-129 defined exterior 
container that meets carrier regulations and is of sufficient 
strength, by reason of material, design, and construction, to be 
shipped safely without further packing (e.g., wooden boxes or 
crates, fiber and metal drums, and corrugated and solid fiberboard 
boxes).
    (b)(1) Except as provided in paragraph (b)(2) of this clause, 
the Contractor shall affix passive RFID tags, at the case and 
palletized unit load packaging levels, for shipments of items that--
    (i) Are in any of the following classes of supply, as defined in 
DoD 4140.1-R, DoD Supply Chain Materiel Management Regulation, 
AP1.1.11:
    (A) Subclass of Class I--Packaged operational rations.
    (B) Class II--Clothing, individual equipment, tentage, 
organizational tool kits, hand tools, and administrative and 
housekeeping supplies and equipment.
    (C) Class VI--Personal demand items (non-military sales items).
    (D) Class IX--Repair parts and components including kits, 
assemblies and subassemblies,

[[Page 53969]]

reparable and consumable items required for maintenance support of 
all equipment, excluding medical-peculiar repair parts; and
    (ii) Are being shipped to--
    (A) Defense Distribution Depot, Susquehanna, PA: DoDAAC W25G1U 
or SW3124; or
    (B) Defense Distribution Depot, San Joaquin, CA: DoDAAC W62G2T 
or SW3224.
    (2) Bulk commodities are excluded from the requirements of 
paragraph (b)(1) of this clause.
    (c) The Contractor shall ensure that--
    (1) The data encoded on each passive RFID tag are unique (i.e., 
the binary number is never repeated on any and all contracts) and 
conforms to the requirements in paragraph (d) of this clause;
    (2) Each passive tag is readable at the time of shipment in 
accordance with MIL-STD-129 (Section 4.9.1.1) readability 
performance requirements; and
    (3) The passive tag is affixed at the appropriate location on 
the specific level of packaging, in accordance with MIL-STD-129 
(Section 4.9.2) tag placement specifications.
    (d) Data syntax and standards. The Contractor shall use one or 
more of the following data constructs to write the RFID tag 
identification to the passive tag, depending upon the type of 
passive RFID tag being used in accordance with the tag construct 
details located at http://www.dodrfid.org/tagdata.htm (version in 
effect as of the date of the solicitation):
    (1) Class 0, 64 Bit Tag--EPCglobal Serialized Global Trade Item 
Number (SGTIN), Global Returnable Asset Identifier (GRAI), Global 
Individual Asset Identifier (GIAI), or Serialized Shipment Container 
Code (SSCC).
    (2) Class 0, 64 Bit Tag--DoD Tag Construct.
    (3) Class 1, 64 Bit Tag--EPCglobal SGTIN, GRAI, GIAI, or SSCC.
    (4) Class 1, 64 Bit Tag--DoD Tag Construct.
    (5) Class 0, 96 Bit Tag--EPCglobal SGTIN, GRAI, GIAI, or SSCC.
    (6) Class 0, 96 Bit Tag--DoD Tag Construct.
    (7) Class 1, 96 Bit Tag--EPCglobal SGTIN, GRAI, GIAI, or SSCC.
    (8) Class 1, 96 Bit Tag--DoD Tag Construct.
    (e) Receiving report. The Contractor shall electronically submit 
advance shipment notice(s) with the RFID tag identification 
(specified in paragraph (d) of this clause) in advance of the 
shipment in accordance with the procedures at http://www.dodrfid.org/asn.htm.

(End of Clause)

[FR Doc. 05-18025 Filed 9-12-05; 8:45 am]
BILLING CODE 5001-08-P