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###### Department of Defense

          - 48 CFR Parts 225 and 252
          - [DFARS Case 2003-D008]

# AGENCY:

Department of Defense (DoD).

# ACTION:

Final rule.

# SUMMARY:

DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to update text pertaining to the acquisition of supplies and services from foreign sources. This rule is a result of a transformation initiative undertaken by DoD to dramatically change the purpose and content of the DFARS.

# DATES:

*Effective Date:*                         December 9, 2005.                    

# FOR FURTHER INFORMATION CONTACT:

                        Ms. Amy Williams, Defense Acquisition Regulations System,                               ( print page 73154)                            OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0328; facsimile (703) 602-0350. Please cite DFARS Case 2003-D008.                    

# SUPPLEMENTARY INFORMATION:

## A. Background

                    DFARS Transformation is a major DoD initiative to dramatically change the purpose and content of the DFARS. The objective is to improve the efficiency and effectiveness of the acquisition process, while allowing the acquisition workforce the flexibility to innovate. The transformed DFARS will contain only requirements of law, DoD-wide policies, delegations of FAR authorities, deviations from FAR requirements, and policies/procedures that have a significant effect beyond the internal operating procedures of DoD or a significant cost or administrative impact on contractors or offerors. Additional information on the DFARS Transformation initiative is available at                     *http://www.acq.osd.mil/​dpap/​dars/​dfars/​transformation/​index.htm*.                

This final rule is a result of the DFARS Transformation Initiative. The DFARS changes include—
    - Deletion of redundant or unnecessary text at 225.000, 225.171, 225.871-1(b), 225.7301(a)(1) through (3), and 225.7306.
    - Deletion of text at 225.001, 225.504, 225.802, 225.870-1(d), 225.870-5, 225.870-7, 225.871-5(c), 225.872-4, 225.872-5, 225.872-6(c), 225.873-2, 225.902, 225.903, 225.7301, and 225.7302 containing internal DoD procedures, guidance, or information. This text has been relocated to the new DFARS companion resource, Procedures, Guidance, and Information (PGI), available at http://www.acq.osd.mil/​dpap/​dars/​pgi .                
    - Clarification of DFARS text as follows:
    - 225.401-70—Addition of a statutory reference and amendment of the section heading.
    - 225.408—Clarification that the exception from FAR 25.408(a)(4) for overseas acquisitions applies only to the requirement for submission of offers in U.S. dollars.
    - 225.701—Expansion of the cross-reference to restrictions on contracting with firms owned or controlled by foreign governments that support terrorism (from 209.104-1(g)(i) to 209.104-1(g)).
    - 225.871-6—Clarification that property that is jointly acquired by the members of a NATO cooperative project may be disposed of in accordance with the terms of the cooperative project agreement, without regard to any laws of the United States applicable to the disposal of property owned by the United States.
    - 225.7003—Clarification that the waiver procedures in 225.7003 apply only if specifically authorized by reference elsewhere in Subpart 225.70.
    - 225.7303-2(a)(3) and (redesignated) 225.7306—Addition of cross-references.
    - 225.7501(a)(2)(iii)—Deletion of a reference to DoD Directive, 4120.3, Defense Standardization and Specification Program, which was cancelled in 1991.

DoD published a proposed rule at 70 FR 14625 on March 23, 2005. DoD received no comments on the proposed rule. Therefore, DoD has adopted the proposed rule as a final rule, with an additional change at 225.7301 to reflect the text added to 225.7301 in the interim rule published at 70 FR 57191 on September 30, 2005. Also, the text proposed for addition to 225.802-70(c) has been excluded from this final rule, as this text was added to 225.7401(b) in the final rule published at 70 FR 23790 on May 5, 2005.

This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

## B. Regulatory Flexibility Act

                    DoD certifies that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601,                     *et seq.*, because the rule updates, streamlines, and clarifies DFARS text, but makes no significant change to DoD contracting policy.                

## C. Paperwork Reduction Act

                    The Paperwork Reduction Act does not apply because the rule does not impose any information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501,                     *et seq.*

# List of Subjects in 48 CFR Parts 225 and 252

      - Government procurement

Michele P. Peterson,

Editor, Defense Acquisition Regulations System.

Therefore, 48 CFR parts 225 and 252 are amended as follows:

1. The authority citation for 48 CFR parts 225 and 252 continues to read as follows:

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

# PART 225—FOREIGN ACQUISITION

225.000 

2. Section 225.000 is removed. 

3. Section 225.001 is revised to read as follows: 

225.001 

For guidance on evaluating offers of foreign end products, see PGI 225.001.

225.171 

4. Section 225.171 is removed. 

5. Section 225.401-70 is amended by revising the section heading and the last sentence of the introductory text to read as follows: 

225.401-70 

* * * However, 225.003 expands the definition of Caribbean Basin country end products to include petroleum and any product derived from petroleum, in accordance with Section 8094 of Pub. L. 103-139.

* * * * *

6. Section 225.408 is revised to read as follows: 

225.408 

(a)(4) The requirements of FAR 25.408(a)(4), on submission of offers in U.S. dollars, do not apply to overseas acquisitions or to Defense Energy Support Center post, camp, or station overseas requirements.

7. Section 225.504 is revised to read as follows: 

225.504 

For examples that illustrate the evaluation procedures in 225.502(c)(ii), see PGI 225.504.

8. Section 225.701 is revised to read as follows: 

225.701 

See 209.104-1(g) for restrictions on contracting with firms owned or controlled by foreign governments.

9. Section 225.802 is revised to read as follows: 

225.802 

(b) Information on memoranda of understanding and other international agreements is available at PGI 225.802(b).

10. Section 225.870-1 is amended by revising paragraph (d) and removing paragraph (e). The revised text reads as follows: 

225.870-1 

* * * * *

                            (d) For additional information on production rights, data, and information; services provided by                                   ( print page 73155)                                Canadian Commercial Corporation; audit; and inspection, see PGI 225.870-1(d).                        

11. Section 225.870-5 is revised to read as follows: 

225.870-5 

Follow the contract administration procedures at PGI 225.870-5.

12. Section 225.870-7 is revised to read as follows: 

225.870-7 

For information on the acceptance of Canadian supplies, see PGI 225.870-7.

13. Section 225.871 is revised to read as follows: 

225.871 

14. Section 225.871-1 is revised to read as follows: 

225.871-1 

This section implements 22 U.S.C. 2767 and 10 U.S.C. 2350b.

15. Section 225.871-5 is amended by revising paragraph (b) and removing paragraph (c). The revised text reads as follows: 

225.871-5 

* * * * *

(b) In some instances, it may not be feasible to name specific subcontractors at the time the agreement is concluded. However, the agreement shall clearly state the general provisions for work sharing at the prime and subcontract level. For additional information on cooperative project agreements, see PGI 225.871-5.

16. Section 225.871-6 is revised to read as follows: 

225.871-6 

Dispose of property that is jointly acquired by the members of a cooperative project under the procedures established in the agreement or in a manner consistent with the terms of the agreement, without regard to any laws of the United States applicable to the disposal of property owned by the United States.

17. Section 225.872-4 is revised to read as follows: 

225.872-4 

If the offer of an end product from a qualifying country source listed in 225.872-1(b), as evaluated, is low or otherwise eligible for award, prepare a determination and findings exempting the acquisition from the Buy American Act and the Balance of Payments Program as inconsistent with the public interest, unless another exception such as the Trade Agreements Act applies. Follow the procedures at PGI 225.872-4.

18. Section 225.872-5 is amended by revising paragraphs (b) and (c) and by removing paragraph (d). The revised text reads as follows: 

225.872-5 

* * * * *

(b) Follow the contract administration procedures at PGI 225.872-5(b).

(c) Information on quality assurance delegations to foreign governments is in Subpart 246.4, Government Contract Quality Assurance.

19. Section 225.872-6 is amended by revising paragraph (c) to read as follows: 

225.872-6 

* * * * *

(c) Handle requests for audits in qualifying countries in accordance with 215.404-2(c), but follow the additional procedures at PGI 225.872-6(c).

20. Section 225.873-2 is revised to read as follows: 

225.873-2 

When an offeror or a contractor identifies a levy included in an offered or contract price, follow the procedures at PGI 225.873-2.

21. Sections 225.902 and 225.903 are revised to read as follows: 

225.902 

Follow the entry and release procedures at PGI 225.902.

225.903 

(b)(i) For an explanation of the term “supplies,” see PGI 225.903(b)(i).

(ii) The duty-free certificate shall be printed, stamped, or typed on the face of, or attached to, Customs Form 7501. A duly designated officer or civilian official of the appropriate department or agency shall execute the certificate in the format provided at PGI 225.903(b)(ii).

22. Section 225.7003 is amended in paragraph (a) by revising the introductory text to read as follows: 

225.7003 

10 U.S.C. 2534

(a) The waiver procedures of this section apply only if specifically authorized by reference elsewhere in this subpart. The restrictions on certain foreign purchases under 10 U.S.C. 2534(a) may be waived as follows:

* * * * *

23. Sections 225.7301 and 225.7302 are revised to read as follows: 

225.7301 

(a) The U.S. Government sells defense articles and services to foreign governments or international organizations through FMS agreements. The agreement is documented in a Letter of Offer and Acceptance (LOA) (see DoD 5105.38-M, Security Assistance Management Manual).

(b) Conduct FMS acquisitions under the same acquisition and contract management procedures used for other defense acquisitions.

(c) Follow the additional procedures at PGI 225.7301(c) for preparation of solicitations and contracts that include FMS requirements.

(d) See 229.170 for policy on contracts financed under U.S. assistance programs that involve payment of foreign country value added taxes or customs duties.

225.7302 

For guidance on the role of the contracting officer in FMS programs that will require an acquisition, see PGI 225.7302.

24. Section 225.7303-2 is amended in paragraph (a)(3) by revising the introductory text to read as follows: 

225.7303-2 

(a) * * *

(3) Offset costs (also see 225.7306).

* * * * *

225.7303-4 

25. Section 225.7303-4 is amended in paragraph (b)(1) by revising the last parenthetical to read “(see 225.7307(a))”. 

225.7306 

26. Section 225.7306 is removed. 

225.7307 and 225.7308 

27. Sections 225.7307 and 225.7308 are redesignated as sections 225.7306 and 225.7307, respectively. 

28. Newly designated section 225.7306 is revised to read as follows: 

225.7306 

In accordance with the Presidential policy statement of April 16, 1990, DoD does not encourage, enter into, or commit U.S. firms to FMS offset arrangements. The decision whether to engage in offsets, and the responsibility for negotiating and implementing offset arrangements, resides with the companies involved. (Also see 225.7303-2(a)(3).)

29. Section 225.7501 is amended by revising paragraph (a)(2)(iii) to read as follows: 

225.7501 

* * * * *

                            (a) * * *                                  ( print page 73156)    

(2) * * *

(iii) A spare part for foreign-manufactured vehicles, equipment, machinery, or systems, provided the acquisition is restricted to the original manufacturer or its supplier;

* * * * *

# PART 252—SOLICITATION PROVISIONS AND CONTRACT CLAUSES

252.225-7027 and 252.225-7028 

30. Sections 252.225-7027 and 252.225-7028 are amended in the introductory text by removing “225.7308” and adding in its place “225.7307”. 

[FR Doc. 05-23721 Filed 12-8-05; 8:45 am]

BILLING CODE 5001-08-P