37626 Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations 

20301–3062. Telephone 703–602–8383; 

facsimile 703–602–7887. Please cite 

DFARS Case 2008–D035. 

SUPPLEMENTARY INFORMATION: 

A. Background 

The objective of Peer Reviews of 

solicitations and contracts is to ensure 

consistent policy implementation, to 

improve the quality of contracting 

processes, and to facilitate cross-sharing 

of best practices and lessons learned 

throughout DoD. This final rule 

specifies that the Office of the Director, 

Defense Procurement and Acquisition 

Policy, will organize teams of reviewers 

and will facilitate Peer Reviews for all 

solicitations valued at $1 billion or more 

and for all contracts for services valued 

at $1 billion or more. In addition, the 

rule requires the military departments, 

defense agencies, and DoD field 

activities to establish procedures for 

pre-award Peer Review of solicitations 

valued at less than $1 billion, and postaward Peer Review of contracts for 

services valued at less than $1 billion. 

This rule was not subject to Office of 

Management and Budget review under 

Executive Order 12866, dated 

September 30, 1993. 

B. Regulatory Flexibility Act 

This rule will not have a significant 

cost or administrative impact on 

contractors or offerors, or a significant 

effect beyond the internal operating 

procedures of DoD. Therefore, 

publication for public comment under 

41 U.S.C. 418b is not required. 

However, DoD will consider comments 

from small entities concerning the 

affected DFARS subparts in accordance 

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

should cite DFARS Case 2008–D035. 

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 201, 

207, 215, and 237 

Government procurement. 

Michele P. Peterson, 

Editor, Defense Acquisition Regulations 

System. 

■ Therefore, 48 CFR Parts 201, 207, 215, 

and 237 are amended as follows: 

■ 1. The authority citation for 48 CFR 

Parts 201, 207, 215, and 237 continues 

to read as follows: 

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

Chapter 1. 

PART 201—FEDERAL ACQUISITION 

REGULATIONS SYSTEM 

■ 2. Section 201.170 is added to read as 

follows: 

201.170 Peer Reviews. 

(a) Acquisitions valued at $1 billion or 

more. 

(1) The Office of the Director, Defense 

Procurement and Acquisition Policy, 

will organize teams of reviewers and 

facilitate Peer Reviews for solicitations 

and contracts valued at $1 billion or 

more, as follows: 

(i) Pre-award Peer Reviews will be 

conducted for all solicitations valued at 

$1 billion or more (including options). 

(ii) Post-award Peer Reviews will be 

conducted for all contracts for services 

valued at $1 billion or more (including 

options). 

(iii) Reviews will be conducted using 

the procedures at PGI 201.170. 

(2) To facilitate planning for Peer 

Reviews, the military departments, 

defense agencies, and DoD field 

activities shall provide a rolling annual 

forecast of acquisitions with an 

anticipated value of $1 billion or more 

(including options) at the end of each 

quarter (i.e., March 31; June 30; 

September 30; December 31), to the 

Deputy Director, Defense Procurement 

and Acquisition Policy (Contract Policy 

and International Contracting), 3060 

Defense Pentagon, Washington, DC 

20301–3060. 

(b) Acquisitions valued at less than $1 

billion. The military departments, 

defense agencies, and DoD field 

activities shall establish procedures 

for— 

(1) Pre-award Peer Reviews of 

solicitations valued at less than $1 

billion; and 

(2) Post-award Peer Reviews of 

contracts for services valued at less than 

$1 billion. 

PART 207—ACQUISITION PLANNING 

■ 3. Section 207.104 is added to read as 

follows: 

207.104 General procedures. 

In developing an acquisition plan, 

agency officials shall take into account 

the requirement for scheduling and 

conducting a Peer Review in accordance 

with 201.170. 

PART 215—CONTRACTING BY 

NEGOTIATION 

■ 4. Section 215.270 is added to read as 

follows: 

215.270 Peer Reviews. 

Agency officials shall conduct Peer 

Reviews in accordance with 201.170. 

PART 237—SERVICE CONTRACTING 

■ 5. Section 237.102 is amended by 

adding paragraph (e) to read as follows: 

237.102 Policy. 

* * * * * 

(e) Program officials shall obtain 

assistance from contracting officials 

through the Peer Review process at 

201.170. 

[FR Doc. E9–17953 Filed 7–28–09; 8:45 am] 

BILLING CODE 5001–08–P 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Parts 202, 212, 225, and 252 

RIN 0750–AF95 

Defense Federal Acquisition 

Regulation Supplement; Restriction on 

Acquisition of Specialty Metals 

(DFARS Case 2008–D003) 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Final rule. 

SUMMARY: DoD has issued a final rule 

amending the Defense Federal 

Acquisition Regulation Supplement 

(DFARS) to address statutory 

restrictions on the acquisition of 

specialty metals not melted or produced 

in the United States. The rule 

implements Section 842 of the National 

Defense Authorization Act for Fiscal 

Year 2007 and Sections 804 and 884 of 

the National Defense Authorization Act 

for Fiscal Year 2008. 

DATES: Effective Date: July 29, 2009. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Amy Williams, Defense Acquisition 

Regulations System, OUSD (AT&L) 

DPAP (DARS), IMD 3D139, 3062 

Defense Pentagon, Washington, DC 

20301–3062. Telephone 703–602–0328; 

facsimile 703–602–7887. Please cite 

DFARS Case 2008–D003. 

SUPPLEMENTARY INFORMATION: 

A. Background 

Section 842 of the National Defense 

Authorization Act for Fiscal Year 2007 

(Pub. L. 109–364) added new provisions 

at 10 U.S.C. 2533b, to address 

requirements for the purchase of 

specialty metals from domestic sources. 

Section 804 of the National Defense 

Authorization Act for Fiscal Year 2008 

(Pub. L. 110–181) made amendments to 

10 U.S.C. 2533b with regard to its 

applicability to commercial items, 


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electronic components, items containing 

minimal amounts of specialty metals, 

items necessary in the interest of 

national security, and items not 

available domestically in the required 

form. In addition, Section 884 of the 

National Defense Authorization Act for 

Fiscal Year 2008 added a requirement 

for DoD to publish a notice on the 

Federal Business Opportunities Web 

site before making a domestic 

nonavailability determination that 

would apply to more than one contract. 

DoD published a proposed rule at 73 

FR 42300 on July 21, 2008. Sixteen 

sources submitted comments on the 

proposed rule. A discussion of the 

comments is provided below. 

1. Definition of Commercially Available 

Off-the-Shelf (COTS) Item 

Comments: Five respondents stated 

that the definition of COTS item in the 

proposed rule was too broad, was 

inconsistent with the intent of Congress, 

and would allow modifications to occur 

at the next higher tier in the supply 

chain. One respondent stated that 

allowing modifications at the next 

higher tier in the supply chain would 

negatively affect the high performance 

magnet industry and would allow abuse 

of this exception. 

Several respondents were concerned 

that an item could be substantially 

modified by downstream contractors 

prior to delivery to the Government. 

One respondent recommended that DoD 

change the definition to state that 

anything contained in a COTS end item, 

as well as subcontracts for COTS 

subassemblies used in non-COTS end 

items, would be exempt, but nonexempted COTS items, such as mill 

products, forgings and castings, high 

performance magnets, and fasteners, 

that go directly into non-COTS end 

items or non-COTS assemblies would 

not be exempt. Another respondent 

requested that DoD allow only 

modifications that are incidental to 

installation, joining, or incorporation 

into the non-commercial end item. 

Some of these respondents cited 

language from the House Armed 

Services Committee report, which states 

that the exception for COTS items and 

components generally applies to items 

incorporated into non-commercial end 

items. The Committee report also states 

that, if a contractor is using COTS items 

with more substantial modifications, it 

must use the de minimis or commercial 

derivative military article exceptions. 

One respondent provided a few 

examples where the rule might lead to 

an increased use of foreign specialty 

metals and might allow substantial 

modification. In one example, a mill 

product in the form of bar or plate might 

be machined, rolled, and cut into a 

blank form by a subcontractor in Russia 

or China, but would still be considered 

a COTS item, and then might be used in 

military unique compressor blades. The 

blank would undergo substantial 

modification that altered the 

dimensions and metallurgy of the metal 

to meet military specifications before 

being offered to the Government. 

Several respondents wanted DoD to 

further clarify the difference between 

COTS and ‘‘commercially available’’ for 

suppliers to which the flowdown 

requirement applies. 

DoD Response: Section 804 of Public 

Law 110–181 clearly denies use of the 

COTS item exception for mill products 

and high performance magnets under 

any circumstances, and also for 

fasteners, castings, and forgings unless 

certain conditions are met. There is no 

reason for concern about the treatment 

of ‘‘blanks’’ as COTS items, because 10 

U.S.C. 2533b(h)(2)(A) specifically 

requires application of the restriction to 

contracts or subcontracts for the 

acquisition of specialty metals * * * 

that have not been incorporated into 

end items, subsystems, assemblies, or 

components. Blanks clearly fall into this 

category. Therefore, even if the blank is 

considered to be a COTS item, there 

would be no waiver of the specialty 

metals restrictions for the blank. The 

military-unique blade could not be 

made from a blank from China unless 

another exception applies. 

Other than those groupings of items 

specifically restricted, it is reasonable to 

view COTS items that are provided from 

the global supply chain to the next 

higher tier supplier, without any 

modifications, to be delivered to the 

Government by those suppliers without 

modification. If DoD were not to view 

such items in this way, these COTS 

suppliers would not be able to provide 

globally available COTS items to the 

Government without burdensome 

investigations to discover whether or 

not a particular item could be used. This 

would force COTS suppliers to track not 

only the sale of the particular COTS 

item, but also the eventual use of the 

COTS item to the end of the final 

assembly. Nowhere in the 

manufacturing or distribution chain of 

COTS items does such a rule exist, and 

it is unreasonable to require COTS 

suppliers to create one. The advantages 

to the taxpayer are evident. DoD’s 

maximum use of COTS items results in 

cheaper, faster, and sufficient 

availability of such items, at satisfactory 

quality. Additionally, most DoD 

production programs have specifically 

been designed and developed with a 

growing reliance on non-developmental 

items to reduce costs to the taxpayer, 

with great effort not to rely on unique 

DoD solutions wherever possible. This 

benefits DoD, and also the taxpayer, by 

providing a reliable source of items at 

reasonable prices. 

The rule provides a clear definition of 

COTS items. This definition is flowed 

down with the clause to subcontractors 

at all tiers. The definition contains two 

additional criteria for a COTS item 

beyond the requirement for the item to 

be a commercial item. 

Comments: Several respondents 

stated that the COTS definition was too 

restrictive. One respondent stated that it 

is wasteful and costly to require sub-tier 

COTS suppliers to provide COTS items 

without modification to the next higher 

tier. The respondent stated that, in some 

cases, the modifications that occur after 

the next higher tier must be 

incorporated in the assembly process 

earlier, which requires disassembling, 

testing, and then reassembling of the 

COTS item under the rule’s definition. 

The respondent stated that DoD should 

reconsider the need to accept the COTS 

items separately before allowing 

modifications, because it is wasteful and 

costly to require a serial approach. 

DoD Response: It is not possible to 

revise the rule as requested by these 

respondents and still be in compliance 

with the statutory definition of a COTS 

item and the statutory restrictions on 

the use of the COTS item exception. The 

law requires that a COTS item be offered 

to the Government without 

modification. 

2. Definition of Component 

Comments: One respondent noted 

that the language in DoD Class 

Deviation 2008–O0002 states that items 

that are not incorporated in the six 

major end items are not considered to be 

components. The deviation states that 

items such as test equipment and 

ground support equipment are excluded 

from specialty metals restrictions. The 

respondent found this language 

critically important. Although it may be 

possible to infer these exclusions, the 

respondent recommended adding this 

language from the deviation explicitly to 

the rule, especially since, prior to the 

creation of 10 U.S.C. 2533b, items such 

as test equipment and ground support 

equipment were required to be 

compliant with the specialty metal 

restrictions. 

DoD Response: According to the 

principles set forth at DFARS 201.301, 

the DFARS contains— 

(i) Requirements of law; 

(ii) DoD-wide policies; 

(iii) Delegations of FAR authorities; 


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(iv) Deviations from FAR 

requirements; and 

(v) 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. 

Relevant procedures, guidance, and 

information that do not meet these 

criteria are issued in the DFARS 

companion resource, Procedures, 

Guidance, and Information (PGI). 

Definition of the term ‘‘component’’ is 

a requirement of law. ‘‘Component’’ is 

explicitly defined in the rule as ‘‘any 

item supplied to the Government as part 

of an end item or of another 

component.’’ Therefore, any items that 

are not incorporated into any of the 

items listed in DFARS 225.7003–2(a) are 

not components of those items. Because 

test equipment, ground support 

equipment, and shipping containers are 

just examples of items that may not be 

components of the missile system, these 

items are listed as examples in PGI 

225.7003–2(a). 

3. Definition of Electronic Component 

The proposed rule defined ‘‘electronic 

component’’ as ‘‘an item that operates 

by controlling the flow of electrons or 

other electrically charged particles in 

circuits, using interconnections of 

electrical devices such as resistors, 

inductors, capacitors, diodes, switches, 

transistors, or integrated circuits. The 

term does not include structural or 

mechanical parts of an assembly 

containing an electronic component.’’ 

Comments: One respondent stated 

that the rule’s definition does a good job 

of defining the exclusion of the housing 

materials. Another respondent 

recommended use of the exact words 

from the Section 804 report, which 

stated that the term ‘‘electronic 

component’’ does not include any 

assembly, such as a radar, that 

incorporates structural or mechanical 

parts. 

DoD Response: DoD maintains its 

interpretation of the Congressional 

report language as stated in the rule. 

DoD interprets the report language as 

stating that the whole radar assembly, 

including the structural or mechanical 

parts, cannot be considered an 

electronic component and, therefore, 

cannot be exempted in its entirety from 

the specialty metals restrictions. This 

should not be interpreted to imply that 

none of the components within the 

radar assembly can be considered to be 

electronic components. Components 

that otherwise meet the definition of 

‘‘electronic component’’ within the 

radar assembly, other than structural 

and mechanical parts, are electronic 

components. 

Comments: One respondent stated 

that, because magnets control the flow 

of electrons and charged particles— 

Æ A high performance magnet could 

easily be interpreted as an electronic 

component; or 

Æ A larger assembly, comprised of 

many electrical devices as listed in the 

rule ‘‘interconnected’’ with one another, 

including high performance magnets, 

could be considered to be an electronic 

component. 

The respondent recommended 

clarification of the definition to avoid 

total exclusion of high performance 

magnets from the specialty metals 

restrictions, under the exception for 

electronic components. 

DoD Response: DoD concurs with this 

recommendation. While high 

performance magnets are almost always 

used in conjunction with electronic 

components, DoD concludes that the 

exception for electronic components 

should not exempt all high performance 

magnets from the specialty metals 

restrictions. Congressional intent on this 

point is clear, given the special 

treatment of high performance magnets 

in the COTS exception at 10 U.S.C. 

2533b(h)(2)(c) and the minimum 

content exception at 10 U.S.C. 

2533b(i)(2). Therefore, for purposes of 

this regulation, the definition of 

‘‘electronic component’’ has been 

clarified to specifically exclude high 

performance magnets. 

4. Definition of High Performance 

Magnet 

Comments: Three respondents had 

concerns on technical grounds with the 

rule’s definition of high performance 

magnets as permanent magnets that 

obtain a majority of their properties 

from rare earth materials. 

Æ One respondent stated that all 

alloying elements are important to 

magnetic properties and, since there is 

more cobalt than samarium in 

samarium-cobalt magnets, it is difficult 

to establish that a majority of the 

magnetic properties result from a 

magnet’s samarium content. 

Æ Several respondents stated that 

magnetic performance is not the only 

criterion used for defining high 

performance magnets. They also cited 

induction and coercivity as measures of 

magnetic properties and consider 

thermal properties of magnetic materials 

to be key measures of a magnet’s 

ultimate performance in an application. 

One respondent recommended that the 

rule’s definition provide a clear and 

objective meaning for the definition of 

high performance magnet—providing 

specific standards to be met. The 

respondent disagreed with DoD’s 

Background statement that magnets 

containing rare earth elements are 

technologically superior in magnetic 

performance to other types of magnets, 

because the technological superiority of 

one magnet over another is ultimately 

driven by the requirements of the 

application where it is used. The 

respondent also stated that, in addition 

to maximum energy product, parameters 

such as temperature stability, 

temperature range, resistance to 

demagnetization, corrosion resistance, 

mechanical toughness, and 

machinability contribute to the decision 

as to which type of magnet to use for a 

military application. 

These respondents were also 

concerned that limiting the definition to 

rare earth (such as samarium-cobalt) 

magnets and excluding alnico magnets 

would increase dependency on Chinese 

magnets and threaten national security. 

For example, one respondent expressed 

concern that, if alnico magnets are not 

included in the definition, alnico 

magnets that are COTS items will be 

exempt from the specialty metals 

restriction. 

Several respondents suggested that 

DoD use the definition from the 

Conference Report (H.R. 110–477), 

which provides that ‘‘high performance 

magnet’’ means permanent magnets 

containing 10 or more percent by weight 

of materials such as cobalt, samarium, 

or nickel. 

DoD Response: With regard to 

whether it is meaningful to define ‘‘high 

performance magnet’’ as a permanent 

magnet that obtains a majority of its 

magnetic properties from rare earth 

metals: Cobalt, iron, and nickel are the 

three primary ferromagnetic metals and, 

therefore, are present in most, if not all, 

permanent magnets. However, it is the 

very strong magneto-crystalline 

anisotropy (the property of being 

directionally dependent) of certain rare 

earth elements that produces the 

exceptional magnetic behavior in the 

materials to which they are added. The 

partially filled 4f electron subshells in 

rare earths lead to magnetic properties 

in a manner similar to the partially 

filled 3d electron subshells in transition 

elements such as cobalt, iron, and 

nickel. However, the magnetic moment 

of a rare earth material is typically an 

order of magnitude greater than that in 

a transition element; and rare earths 

exhibit a large anisotropy due to dipolar 

interactions. In summary, rare earths 

possess very unique electron structures 

that produce extreme anisotropy in their 

magnetic properties. 


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DoD technical experts have concluded 

that there is no industry standard 

definition for high performance 

magnets. However, magnet performance 

is measured using magnetic properties 

and temperature capability. 

Æ Magnetic properties are 

summarized using maximum energy 

product. DoD technical experts 

reviewed various references that place 

heavy emphasis on the maximum 

energy product of a magnet as ‘‘the 

figure of merit’’ by which permanentmagnet materials are judged. The greater 

the maximum energy product of a 

permanent magnetic material, the more 

powerful the magnet, and the smaller 

the volume (and typically the weight) of 

the magnet required for a given 

application. The maximum energy 

products for rare earth magnets are 

significantly higher than those for ferrite 

and alnico materials, thus supporting 

their designation as ‘‘high performance 

magnets.’’ 

Æ Temperature stability is measured 

using maximum operating and Curie 

temperatures (the temperature below 

which there is a spontaneous 

magnetization in the absence of an 

externally applied magnetic field). 

Although alnico magnetic materials 

rank well on maximum use temperature 

and Curie temperature, this does not 

overcome the substantially lower 

maximum energy product. 

The maximum energy product 

ranking of various magnetic materials 

and temperature stability measurements 

are as follows: 

Magnetic material 

Maximum energy product 

(kJ/m 3) 

Maximum energy product 

(MGOe) 

Max. use 

temp. (°C) 

Curie temp. 

(°C) 

Steel ................................................................................................................. < 2 low < 100 

Co-Steels ......................................................................................................... 1–8 < 1 100 

Ferrites ............................................................................................................. 8–32 1–4 300 450 

Alnico (AlNiCo) ................................................................................................ 11–72 1–9 550 860 

Samarium-Cobalt (SmCo5) .............................................................................. 130–210 16–25 300 750 

Samarium-Cobalt (Sm2Co17) ........................................................................... 160–260 20–32 550 825 

Neodymium-Iron-Boron (Nd2Fe14B) ................................................................. 200–450 25–50 150 315 

(Data from MMPA Standard No. 0100–00). 

Of today’s permanent magnets 

containing specialty metals, only 

samarium cobalt magnet materials 

possess the combination of properties 

necessary to be considered ‘‘high 

performance magnets.’’ The only other 

permanent magnets today that obtain a 

majority of their magnetic properties 

from rare earths are neodymium-ironboron magnets. Neodymium-iron-boron 

magnets are high performance magnets, 

but normally do not contain specialty 

metals. Ferrites are not high 

performance magnets (as was 

erroneously stated in the preamble to 

the proposed rule), nor do they contain 

specialty metals. 

Representatives from permanent 

magnet suppliers asserted in 

discussions with DoD engineers that 

alnico magnets possessed superior 

toughness and calibration sensitivity 

qualities, and those qualities supported 

designating alnico magnets as high 

performance magnets. DoD engineers 

considered, but ultimately did not 

accept, that rationale. 

Æ Mechanical strength and toughness 

generally are not employed as measures 

of merit for permanent magnets, because 

all permanent magnetic materials of 

interest (ferrites, rare-earths, and alnico) 

are hard and brittle. Section I, 

subsection 6.0, of Magnetic Materials 

Producers Association Standard No. 

0100–00, Standard Specifications for 

Permanent Magnet Materials, states that 

most permanent magnet materials lack 

ductility and are inherently brittle. Such 

materials should not be utilized as 

structural components in a circuit. 

Measurement of properties such as 

hardness and tensile strength are not 

feasible on commercial materials with 

these inherent characteristics. 

Therefore, specifications of these 

properties are not acceptable. 

Æ Finally, calibration sensitivity is an 

indication of precision but not of high 

performance. 

DoD technical experts agree that, in 

addition to maximum energy product, 

parameters such as temperature 

stability, temperature range, resistance 

to demagnetization, corrosion 

resistance, mechanical toughness, and 

machinability contribute to the decision 

as to which type of magnet to use for a 

military application. However, just 

because a particular magnetic material 

is most appropriate for a particular 

application does not mean that it is a 

high performance magnet. Not every 

application requires the use of a high 

performance magnet. 

Although DoD does not consider 

alnico magnets to be high performance 

magnets, regardless of the impact of this 

decision on the industry, DoD notes that 

representatives from permanent magnet 

suppliers further established in 

discussions with DoD technical experts 

that virtually all alnico and samarium 

cobalt magnets are made to unique 

customer specifications and are not 

COTS items. Accordingly, direct DoD 

purchase of such permanent magnets 

almost certainly would involve nonCOTS magnets, which must comply 

with specialty metals provisions, 

whether or not the magnets are judged 

to be high performance magnets. With 

respect to permanent magnets 

incorporated into COTS subsystems or 

end items, such magnets, whether COTS 

or non-COTS, high performance or not 

high performance, are by statute not 

required to utilize specialty metals 

melted or produced in the United 

States. Therefore, the definition of high 

performance magnet makes a difference 

only with regard to the 2 percent 

minimum content exception and has no 

significant impact on the use of alnico 

magnets for defense applications. 

To define ‘‘high performance 

magnets’’ as ‘‘permanent magnets 

containing 10 percent or more by weight 

of materials such as cobalt, samarium, 

or nickel’’ would be technically 

unsound and open-ended. Cobalt and 

nickel have been primary alloying 

elements for permanent magnet 

materials since exploration of these 

materials began over 100 years ago. By 

this unbounded definition, almost all 

magnets would be covered. 

Therefore, no change has been made 

to the definition of high performance 

magnet. 

Comments: One respondent 

recommended a single, consistent, and 

narrow definition for high performance 

magnets. This respondent stated that it 

should mean only magnets that contain 

samarium cobalt. The respondent stated 

that the proposed rule used inconsistent 

definitions in the clause at 252.225– 

70X2 (now 252.225–7009) and in 

section 4.d. of the Background of the 

proposed rule. According to the 

respondent, section 4.d. stated that the 

restriction on acquisition of specialty 


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metals only impacts the acquisition of 

samarium cobalt high performance 

magnets; this is inconsistent with the 

clause, which provides an expanded 

definition of a high performance magnet 

as a permanent magnet that obtains a 

majority of its magnetic properties from 

rare earth metals (such as samarium). 

DoD Response: There is no 

inconsistency between the preamble to 

the proposed rule and the definition in 

the clause. Section 4.d. of the preamble 

clearly stated that the proposed rule 

defined ‘‘high performance magnet’’ to 

mean a permanent magnet that obtains 

a majority of its magnetic properties 

from rare earth metals (such as 

samarium). It then explained that, 

although the definition of ‘‘high 

performance magnet’’ includes various 

types of permanent magnets, samarium 

cobalt magnets are the only high 

performance magnets composed of 

specialty metal. 

The definition of ‘‘high performance 

magnet’’ is independent of the 

restriction on specialty metals. 

Therefore, it would be inappropriate to 

exclude neodymium-iron-boron 

magnets from the definition of high 

performance magnet because they do 

not consist of a specialty metal and are 

not impacted by this rule. 

5. Definition of Produce 

Comments: Eight respondents 

expressed concern with the definition of 

‘‘produce’’ in the proposed rule. 

Æ Numerous respondents opposed the 

inclusion of any process other than 

melting, or its equivalent, in the 

definition of ‘‘produce,’’ especially as 

applied to armor plate. One respondent 

stated that gas atomization, sputtering, 

and powder consolidation are 

production processes; the respondent 

did not object to their inclusion in the 

definition of ‘‘produce,’’ but the 

respondent would object to finishing 

processes, such as rolling, annealing, 

quenching, or tempering in the United 

States as sufficient to constitute 

production of titanium products in the 

United States (these processes apply 

only to armor plate in the proposed 

definition). Likewise, another 

manufacturer of titanium agreed that gas 

atomization, sputtering, or 

consolidation from powder using nonmelt technology are the equivalent of 

production, but the definition should 

not be further expanded to secondary 

processes such as rolling and finishing 

processes. 

Æ One respondent stated that the 

definition is contrary to law, indicating 

that the 1973 Specialty Metals 

Amendment required that specialty 

metals be melted in the United States. 

The respondent cited court cases that 

recognize a reasonable basis in the law 

for the DoD requirement that all 

specialty metals be melted in the United 

States. 

Æ Various respondents stated that the 

words ‘‘melted or produced’’ in the 

statute were not intended to apply to 

secondary finishing processes such as 

quenching or tempering, which require 

a small percentage of the estimated 

investment for armor steel plate overall. 

Æ One respondent stated that the 

definition is inappropriate because the 

processes of high performance magnets 

are completely unaddressed in the 

definition. 

Æ Various respondents saw this as a 

dangerous precedent. Several 

respondents stated that the proposed 

rule’s definition would encourage the 

use of foreign metals while discouraging 

investment in domestic industry. One 

respondent stated that, without a return 

to the emphasis on melting, this rule 

will be used to circumvent the intent of 

the law, importing melted products 

including high performance magnets, 

and conducting late-stage low-value 

finishing processes, such as 

magnetization, which the respondent 

considers to be a minor operation 

requiring little skill. 

Æ Several respondents cited the 

additional restriction on armor plate in 

DFARS 252.225–7030, which requires 

armor plate to be melted and rolled in 

the United States. One respondent 

recommended that the rule define 

‘‘produce’’ as melted or an equivalent 

process. 

Æ While acknowledging DoD’s critical 

need for armor steel plate for Mine 

Resistant Ambush Protection (MRAP) 

vehicles, several respondents suggested 

that DoD use other exceptions in the 

law, such as the availability or national 

security exception to procure armor 

steel plate. Several respondents stated 

that there is sufficient domestic capacity 

of armor steel plate melted, rolled and 

quenched, and tempered in the United 

States to meet DoD’s demand. 

One respondent supported the 

inclusion of quenching and tempering 

in the definition of ‘‘produce.’’ This 

respondent stated that it converts slabs 

of alloy steel from Mexico to armored 

steel plates in the United States by 

altering the physical characteristics of 

the alloy steel through quenching and 

tempering. 

DoD Response: The law has never 

provided a definition of ‘‘produce’’ with 

regard to the requirement to acquire 

domestic specialty metals. The 1973 

DoD Appropriations Act (Pub. L. 92– 

570) added specialty metals to the 

annual Berry Amendment restrictions, 

requiring that restricted items be 

‘‘grown, reprocessed, reused, or 

produced in the United States.’’ The 

Secretary of Defense at that time 

(Melvin Laird), in a memorandum 

setting forth DoD planned 

implementation of this restriction, 

interpreted this requirement to mean 

‘‘melted’’ when applied to specialty 

metals, and the reasonableness of this 

interpretation was upheld in the courts. 

This does not mean that this is the only 

possible interpretation. When Congress 

created the new 10 U.S.C. 2533b, while 

following the Laird memo traditions in 

many respects, it reinstated ‘‘or 

produced,’’ allowing that melting was 

not the only acceptable process for 

creation of domestic specialty metal. 

According to DoD technical experts, 

quenching and tempering is not an 

insignificant process. Melting is only 

one stage in a multi-step process that is 

used to produce an item with properties 

that meet the requirements of an 

application, i.e., specifications. Melting 

for most metals accounts for about one 

third of the final price of a wrought 

product. Manufacturers have stated that 

the operations associated with forming 

and heat treating account for more than 

one-half of the price of a mill product 

such as plate. (The prices for mill 

products used by the military are 

typically higher than for commercial 

products due to more stringent military 

requirements.) Although alloying 

elements are added during ‘‘melting,’’ 

the primary casting (ingot, slab, bloom, 

etc.) does not possess the 

microstructures and/or phases that are 

required to produce desired properties. 

Using steel as an example, after primary 

casting, the metal is shaped and then 

heat treated to produce the desired 

properties in the final product. This is 

true for plate, wire, sheet, etc. Steel’s 

versatility is primarily due to its 

extraordinary response to heat 

treatment. Heat treatment is used to 

control the microstructure and thus the 

properties of the steel. Different ironcarbon phases form at critical 

temperatures, and it is the combination 

and concentration of these phases that 

produce the desired mechanical 

properties in the steel. DoD experts 

believe that heat treatment may be the 

single most important stage in metals 

processing for DoD applications. The 

final properties of the metal are 

determined by the heat treat schedule. 

This is true for most if not all metals and 

their alloys. Heat treatment results in a 

product with properties that meet the 

specified requirements. The 

specifications for a material typically 

include not just chemistry but also the 


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mechanical and physical properties as 

well as the condition of the product, i.e., 

surface finish, flatness, waviness. 

Forming and heat treatment processes 

are very important to producing an item 

that meets the requirements of an 

application. It is after heat treatment 

that the item possesses all of the 

attributes that are needed for the 

required application. 

The concern that magnetization can 

be considered production under this 

rule is unfounded. The definition of 

‘‘produce’’ has not been left to openended interpretation. It has narrowly 

specified what processes other than 

melting are included, and does not 

include magnetization. DoD does not 

see any impact on the high performance 

magnet industry from the definition of 

‘‘produce,’’ because tempering and 

quenching processes are specifically 

restricted to the production of steel 

plate, and gas atomization and 

sputtering are restricted to the 

production of titanium. 

DoD acknowledges the additional 

restriction on armor plate in DFARS 

252.225–7030, which requires that 

armor plate be melted and rolled in the 

United States. Therefore, any 

acquisition of armor plate by DoD must 

satisfy both statutory restrictions. 

DoD performed an industrial 

capabilities assessment in 2007 to 

support rapid production of the MRAP 

vehicles and other important defense 

programs relying on protective armor. 

The assessment found that availability 

of thin gauge MIL–A grade steel armor 

was the limiting factor in domestic 

production. The industrial capabilities 

assessment identified a total of four 

North American steel mills collectively 

capable of producing up to 12,000 tons 

per month of thin gauge armor steel 

plate. All four reported that quench and 

temper operations (not steel melting 

capacity or ingot/slab availability) were 

the limiting factor in their ability to 

produce the thin gauge armor needed to 

meet U.S. military demand. In contrast 

to the demonstrated maximum North 

American MIL–A grade thin gauge 

armor steel plate production capacity of 

12,000 tons per month, the American 

Iron and Steel Institute (via its Web site) 

asserts that domestic raw steel melt 

production per week is usually in 

excess of 2 million tons (8 million tons 

per month). To meet peak MRAP and 

other DoD requirements, the four mills 

made capital investments and process 

improvements that enabled a 100 

percent increase (to 24,000 tons per 

month) in thin gauge armor steel plate 

production capacity. However, two of 

the mills rely on ingot/slab melted 

outside the United States. If these mills 

had been excluded from participation, 

the sustained MRAP production rate 

would have been limited to about 600 

vehicles per month (instead of the 

actual sustained rate of 1,100 vehicles 

per month); and it would have taken 

twice as long to deploy MRAP vehicles 

into Iraq and Afghanistan. 

DoD also notes that the specialty steel 

industry does not object to the other 

expansions DoD provided in the 

definition of ‘‘produce,’’ such as gas 

atomization, sputtering of titanium, or 

titanium alloy powder. None of these 

processes are melting processes. It is 

inconsistent to accept some non-melt 

processes, but not others. 

DoD considered processing a 

domestic nonavailability determination 

under the nonavailability exception or 

the national security exception, but both 

avenues represented significant 

obstacles, and were rejected as 

unsuitable options. A national security 

exception requires that the contractor 

become compliant. The availability 

exception was determined to be 

impracticable, time-consuming, and 

inefficient. 

6. Exception for Electronic Components 

Comments: One respondent especially 

applauded DoD efforts to revise the 

domestic source exceptions for 

electronic components. Another 

respondent, while supporting DoD’s 

application of the electronic component 

exception, was concerned that, in 

practice, it will be applied by the supply 

chain more broadly than intended. For 

example, the respondent has seen the 

item applied to higher level electronic 

subsystems, consisting of dozens of subcomponents or elements such as 

alternators, pumps, and motors, which 

are not primarily ‘‘electronic 

components’’ like circuit cards or arrays 

of solid state devices. 

DoD Response: The definition of 

electronic component clearly excludes 

structural or mechanical parts of an 

assembly containing an electronic 

component. 

7. Exception for COTS Items 

Comments: One respondent 

applauded DoD’s efforts to revise the 

domestic source exceptions for COTS 

items. Another respondent stated that 

deconstruction of major equipment, 

such as green aircraft, should not be 

allowed under the COTS exception. In 

that instance, the respondent 

recommended use of the commercial 

derivative military article exception. 

DoD Response: DoD disagrees that 

green aircraft must be considered under 

the commercial derivative military 

article exception. Funding constraints 

on major defense programs require DoD 

to acquire items at best value. DoD uses 

a best value approach to competition, 

meaning that DoD sets the performance 

requirements, but does not dictate 

specifications. If a prime contractor 

chooses to start with a COTS end item 

in order to save development time and 

the costs associated with that 

development, that is a benefit of which 

DoD would like to take advantage. DoD 

does not think it is reasonable to force 

COTS suppliers of items to change their 

procurement systems for DoD if the 

items they provide to DoD prime 

contractors are truly COTS items at the 

point of purchase. 

Comments: Another respondent was 

concerned that the rule made the COTS 

exception inapplicable to large classes 

of COTS products unless they are 

incorporated into a higher level COTS 

end item, subsystem, assembly, or 

component. The respondent stated that 

the House Armed Services Committee 

endorsed a broader definition by stating 

that this exception applies to all COTS 

products incorporated in noncommercial end items. 

DoD Response: The law places certain 

restrictions on application of the COTS 

item exception to fasteners, high 

performance magnets, and castings and 

forgings, versus other COTS items. The 

rule implements these statutory 

restrictions. 

8. Exception for Fasteners—50 Percent 

Market-Basket Rule 

Comments: One respondent expressed 

support of the rule with respect to 

fasteners, stating that the rule would 

provide fastener manufacturers and 

distributors with the needed flexibilities 

to provide compliant fasteners and 

remain globally competitive. 

Several other respondents believed 

that the rule does not provide enough 

flexibility and should be streamlined. 

These respondents stated that— 

Æ The rule should be liberalized with 

respect to commercial item fasteners 

and should allow contractors to provide 

metals according to the new statute’s 

language regarding ‘‘melted or 

produced.’’ 

Æ It is a source of concern that the 

fastener exceptions apply to specialty 

metals melted domestically and do not 

appear to extend to specialty metals 

from qualifying countries. 

Æ The rule requires daunting 

recordkeeping and is difficult to 

enforce. 

Æ The rule is unclear with respect to 

whether the 50 percent applies to 

weight, volume, or dollars. 

Æ The law was flawed with respect to 

its intention to apply the Buy American 


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restriction to the component level of 

major defense projects and remains a 

primary obstacle to the completion of 

projects. 

Æ DoD should add a dollar threshold 

for applicability of the clause. 

DoD Response: Although the statute 

does not include ‘‘or produced’’ with 

regard to the specific exception for 

fasteners or the commercial derivative 

military article market-basket 

approaches, DoD interprets the statute 

to include ‘‘or produced.’’ For some 

titanium items, melting is not even part 

of the production process. This 

interpretation was reflected in section 

225.7003–3(b)(3) of the proposed rule. 

The words ‘‘or produced’’ were 

erroneously omitted from the 

corresponding contract clause in the 

proposed rule, but have been added in 

the final rule at 252.225–7009(c)(3). 

The statute specifically requires that 

the metals be domestically melted. It 

does not provide an exception for 

metals from qualifying countries in the 

market-basket approach provided for 

commercial fasteners. 

The rule applies the 50 percent 

fastener market-basket rule based on the 

precise language in the statute, while 

providing flexibility for prime 

contractors and sub-tier suppliers to 

develop their own certification process 

and to determine whether to apply the 

50 percent by weight, dollars, or 

volume. The responsibility for ensuring 

compliance rests with industry, 

specifically with the prime contractor to 

monitor compliance throughout its 

supply chain. 

It is the responsibility of DoD to 

implement the law as written. The law 

does not allow application of the 

simplified acquisition threshold 

exception beyond the prime contract 

level. 

9. Exception for Qualifying Countries 

Comments: One respondent stated 

that the qualifying country exception 

disfavors U.S. industry by allowing DoD 

to purchase products containing 

specialty metals that were melted in 

qualifying countries, while prohibiting 

U.S. manufacturers from doing the 

same. 

Another respondent stated that DoD 

should expand the definition of 

‘‘produce’’ in DFARS 252.225–70X2(a) 

(now 252.225–7009(a)) to eliminate the 

‘‘qualifying country’’ exception and to 

make explicit that the ‘‘qualifying 

country loophole’’ at DFARS 225.7003– 

3(b)(4) has been eliminated. The 

respondent suggested that the expanded 

scope of 10 U.S.C. 2533b, permitting the 

purchase of specialty metals or products 

containing specialty metals that are 

melted or produced in the United 

States, may be sufficiently broad to level 

the playing field between industry in 

the United States and in qualifying 

countries. 

DoD Response: A U.S. contractor or 

subcontractor may rely on the qualifying 

country exception to the extent that the 

contractor or subcontractor is buying an 

item containing specialty metals that is 

manufactured in a qualifying country. 

This exception to the restrictions of 10 

U.S.C. 2533b(a)(1) is provided at 10 

U.S.C. 2533b(d), where the acquisition 

furthers a reciprocal procurement 

agreement with a foreign government. 

An ‘‘uneven playing field’’ is created 

only with regard to use of specialty 

metals not melted or produced in the 

United States or a qualifying country. 

Items manufactured in a qualifying 

country can include specialty metals 

melted or produced in non-qualifying 

countries, whereas U.S. manufacturers 

cannot include metals melted or 

produced in a non-qualifying country, 

unless another exception applies. 

Except when using the market-basket 

approach for fasteners or commercial 

derivative military article, the only 

instance where a U.S. prime contractor 

cannot use the qualifying country 

exception to purchase specialty metals 

melted or produced in a qualifying 

country is when the acquisition is 

subject to the restriction at 10 U.S.C. 

2533b(a)(2) (i.e., the acquisition of the 

specialty metal, such as raw bar stock, 

is to be provided to the Government as 

the end product), in which case DoD 

also cannot directly acquire such items 

using the qualifying country exception. 

This is because the exception for 

qualifying countries does not apply to 

the restriction at 10 U.S.C. 2533b(a)(2). 

There is nothing in the definition of 

‘‘produce’’ that applies to the qualifying 

country exception. However, the words 

‘‘or produced’’ were erroneously 

omitted from the qualifying country 

exception in section 225.7003–3(b)(4) of 

the proposed rule. This omission has 

been corrected in the final rule. 

10. Domestic Nonavailability 

Determinations (DNADs) 

Comments: Various respondents 

stated that the final rule should allow 

reliance on the Fastener DNAD, 

approved by the Under Secretary of 

Defense (Acquisition, Technology, and 

Logistics) on April 10, 2007, in cases 

where a supplier, at any tier, procured 

fasteners prior to July 26, 2008, even if 

the DoD contract is awarded after that 

date. One respondent stated that many 

contractors purchased fasteners 

pursuant to the DNAD in good faith in 

order to fulfill existing and anticipated 

contracts and contract modifications. 

The respondents stated that this 

approach would allow use of current 

inventories without the need to 

segregate and track separately while 

ensuring no interruption in supply to 

DoD. 

DoD Response: The Fastener DNAD, 

along with three other broad DNADs 

approved by the Under Secretary of 

Defense (Acquisition, Technology, and 

Logistics) expired for use on new 

contracts after July 26, 2008, in 

accordance with DoD Class Deviation 

2008–O0002 dated January 29, 2008. 

The decision to cancel these DNADs 

was based on the requirement in Section 

804(h) of the Fiscal Year 2008 National 

Defense Authorization Act that, by July 

26, 2008, any domestic nonavailability 

determination made under 10 U.S.C. 

2533b must be reviewed and amended 

as necessary to comply with the changes 

made by Section 804. 

DoD performed market research and 

found sufficient quantity and 

satisfactory quality of fasteners of all 

types available that complied with the 

new exception. 

Additionally, in discussions with 

industry associations, DoD found 

consensus that Section 804 provided 

enough flexibilities, as noted in the 

comments received to this rule, 

including the fastener exception based 

on a commingling approach, the COTS 

item exception applicable to fasteners 

delivered in COTS items, the 

commercial derivative military article 

exception, and the minimum content 

exception, to suggest that the previous 

high concern regarding fasteners was no 

longer an issue. DoD asked industry to 

identify any items that were not 

available, but none were identified. 

Therefore, a determination was made to 

allow reliance on the DNADs until the 

expiration of the time period specified 

in the statute. DoD sees no evidence to 

delay the expiration of the fastener 

DNAD. Any contract awarded prior to 

July 26, 2008, that relied on the fastener 

DNAD can continue to rely upon it until 

the contract is complete. 

DoD notes that, based on the new 

definition of ‘‘required form’’ provided 

in Section 804, it is more difficult to 

justify nonavailability of an item such as 

a fastener, since the nonavailability of 

the specialty metal itself must be 

justified. Unless a fastener manufacturer 

or distributor can confirm the 

nonavailability of a specialty metal, a 

DNAD can no longer be approved under 

this exception. 

11. Fair and Reasonable Price Criterion 

Comments: Two respondents stated 

that the ‘‘fair and reasonable price’’ 


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criterion, included in section 225.7003– 

3(b)(5) of the proposed rule, was not 

supported by the statute; has the 

potential of distorting the market place; 

and was not the intent of Congress, 

because Congress eliminated the price 

criterion from the statute in the Fiscal 

Year 2007 National Defense 

Authorization Act. 

DoD Response: DoD recognizes that 

the language in the availability 

exception at 10 U.S.C. 2533b(b) does not 

address price reasonableness; however, 

this does not eliminate the need for DoD 

to make fiscally prudent decisions. 

Section 15.402 of the Federal 

Acquisition Regulation establishes a 

fundamental requirement for the 

Government to purchase supplies at fair 

and reasonable prices. In the event that 

DoD found itself in a position where the 

cost of acquiring domestic specialty 

metal was deemed to be excessive when 

compared with the alternative, and all 

reasonable alternatives were researched 

and found to be unacceptable 

technically or otherwise, the fair and 

reasonable price criterion at 225.7003– 

3(b)(5) reminds contracting officers of 

their responsibility to be prudent with 

taxpayer money. This DFARS policy is 

provided with the understanding that 

some additional cost may be necessary 

when acquiring domestic specialty 

metals versus foreign; however, DoD 

cannot ignore its fiduciary 

responsibility entirely. 

12. Minimum Content Exception 

Comments: One respondent noted 

appreciation for the recognition of the 

specialty metals minimum content 

exception. Another respondent was 

concerned that determining whether the 

minimum content exception in the 

proposed rule at 225.7003–3(b)(6) and 

252.225–70X2(c)(6) (now 252.225– 

7009(c)(6)) applies will be a timeconsuming process. The respondent 

requested detailed guidance on how 

companies should determine whether 

they qualify for this exception. Several 

respondents believed that the proposed 

rule was unclear with respect to 

flowdown of the minimum content 

requirement. 

DoD Response: DoD concurs that 

implementation of the exception will be 

difficult. Therefore, the rule allows 

contractors to make a good faith 

estimate. DoD considers it preferable to 

provide contractors the flexibility to 

develop the methodology best suited to 

their own processes. The proposed rule 

provided for optional inclusion of the 

clause at 252.225–70X2 (now 252.225– 

7009) in subcontracts. The final rule 

requires contractors to include the 

substance of the clause in subcontracts 

for items containing specialty metals, to 

the extent necessary to ensure 

compliance of the end products that the 

contractor will deliver to the 

Government. Since the prime contractor 

is ultimately responsible for compliance 

with the specialty metals restriction, the 

language in the final rule was 

constructed to allow the prime 

contractor flexibility in applying and 

controlling the minimum content 

exception. The prime contractor may 

need to retain control of the application 

of the 2 percent threshold in the event 

some sub-tier parts exceed that 

threshold. Alternatively, the prime 

contractor may choose to flow down 

control of this exception to every level 

in its supply chain so that no supplier 

can exceed the 2 percent threshold. 

Regardless of which path the prime 

contractor chooses, the end product 

cannot exceed the 2 percent minimum 

content threshold at the end product 

level when relying on that exception. 

Comments: Several respondents 

recommended the following changes for 

consistency with the language at 10 

U.S.C. 2533b(i): 

Æ Revision of the initial phrase of the 

exception, from ‘‘A minimal amount of 

otherwise noncompliant specialty 

metals * * *.’’ to ‘‘Items containing a 

minimal amount of otherwise 

noncompliant specialty metals * * *’’ 

Æ Revision of the statement ‘‘This 

exception does not apply to the 

specialty metals in high performance 

magnets’’ to ‘‘This exception does not 

apply to high performance magnets 

containing specialty metals.’’ 

In addition, these respondents 

recommended revision of the 

parenthetical at 225.7003–6(b)(6), from 

‘‘(* * * specialty metals not melted or 

produced in the United States, that 

* * *)’’ to ‘‘(* * * specialty metals not 

melted or produced in the United 

States, an outlying area, or a qualifying 

country, that * * *)’’ for consistency 

with the wording at 252.225–70X2(c)(6) 

(now 252.225–7009(c)(6)). 

DoD Response: DoD has revised the 

exceptions at 225.7003–3(b)(6) and 

252.225–7009(c)(6) to begin with the 

phrase ‘‘End items containing a minimal 

amount of otherwise noncompliant 

specialty metals * * *.’’ The law makes 

it clear that the exception is for an item 

to be delivered to DoD. The 2 percent 

minimum content threshold is based on 

the total specialty metal in the end item. 

In addition, DoD has revised the 

statement regarding high performance 

magnets at 225.7003–3(b)(6) and 

252.225–7009(c)(6) to read ‘‘This 

exception does not apply to high 

performance magnets containing 

specialty metals.’’ 

DoD did not adopt the 

recommendation to revise the wording 

at 225.7003–3(b)(6) to address outlying 

areas and qualifying countries. The term 

‘‘United States,’’ as used within DFARS 

Part 225, includes outlying areas, in 

accordance with the definition of 

‘‘United States’’ at FAR 25.003. Further, 

at 225.7003–3, specialty metals melted 

or produced in a qualifying country is 

an exception covered in paragraph 

(b)(4); whereas in the clause at 252.225– 

7009, the exception for specialty metals 

melted or produced in a qualifying 

country has been built into the 

restriction in paragraph (b). 

13. Commercial Derivative Military 

Article Market-Basket Approach 

Comments: Two respondents found 

the implementation of the commercial 

derivative military article exception 

impractical or unclear. One respondent 

requested additional guidance in either 

DFARS or the PGI on how to apply the 

50 percent and 120 percent thresholds. 

Another respondent recommended 

alternative language for the regulation 

and the clause, because it was unlikely 

that a prime contractor and all of its 

subcontractors would or could enter 

into the agreements required by this 

provision due to the complexity and 

number of subcontractors involved on 

these major systems. The following is 

the recommended alternative language: 

DFARS 225.7003–3(c)(1)(i): ‘‘The 

offeror must demonstrate that a 

sufficient quantity of domestic specialty 

metals has been or will be purchased by 

the combination of offeror and 

subcontracts as provided in offeror’s 

certification’’. 

DFARS 252.225–70X3(c) (now 

252.225–7010)(c)): ‘‘The offeror and its 

subcontractor(s) will demonstrate that 

individually or collectively they have 

entered into agreements to purchase an 

amount of domestic metals.’’ 

DoD Response: DoD has revised the 

commercial derivative military article 

exception based on the respondents’ 

recommendations. However, DoD has 

retained the requirement for the offeror 

to certify that the offeror and its 

subcontractor(s) will enter into a 

contractual agreement or agreements to 

purchase a sufficient quantity of 

domestically melted or produced 

specialty metal, consistent with 10 

U.S.C. 2533b(j)(1)(B). The rule does not 

include specific procedures for 

application of this exception, to provide 

maximum flexibility for prime 

contractors. 


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14. National Security Waiver and OneTime Waiver 

One respondent stated appreciation 

for the national security waiver and 

codification of the one-time waiver. 

15. Contingency Operations 

10 U.S.C. 2533b(c) contains an 

exception to the specialty metals 

restrictions for procurements outside 

the United States in support of combat 

or contingency operations. The 

proposed rule implemented this 

exception as two separate exceptions 

for— 

Æ Acquisitions outside the United 

States in support of combat operations; 

and 

Æ Acquisitions in support of 

contingency operations. 

Comments: One respondent 

considered this interpretation of the law 

to be grammatically incorrect and in 

conflict with the underlying logic of the 

exception. The respondent stated that— 

Æ Grammatically, the prepositional 

phrase ‘‘outside the United States’’ 

contained in the statute follows 

immediately after the noun 

‘‘procurement’’ and so modifies the 

noun with respect to both of the 

subsequent prepositional phrases. 

Æ The logic of the exception is to 

make it easier for DoD to acquire 

supplies locally when it is operating 

outside the United States. The same 

logic would not support an exception 

for contingency operations conducted in 

the United States. 

DoD Response: While acknowledging 

that grammatically the law could be 

read as recommended by the 

respondent, DoD notes that the 

exceptions for acquisitions outside the 

United States in support of combat 

operations and acquisitions in support 

of contingency operations are preexisting exceptions implemented at 

DFARS 225.7002–2(d) and (f)(1). These 

exceptions are consistent with the 

exception at 10 U.S.C. 2533a(d)(1) 

which, prior to the establishment of 10 

U.S.C. 2533b, applied to specialty 

metals as well as food and hand or 

measuring tools, and was worded as 

follows: ‘‘Procurements outside the 

United States in support of combat 

operations or procurements of any item 

listed in subsection (b)(1)(A) [food], 

(b)(2) [specialty metals], or (b)(3) [hand 

or measuring tools] in support of 

contingency operations.’’ Although the 

new exception for specialty metals at 10 

U.S.C. 2533b does not repeat the words 

‘‘procurements of’’, there is no 

indication of any intent by Congress to 

change the exception for contingencies 

to apply only outside the United States. 

Urgent requirements for contingency 

operations exist both inside and outside 

the United States. 

16. Prescription for Clause at DFARS 

252.225–7009, Restriction on 

Acquisition of Certain Articles 

Containing Specialty Metals 

Comments: One respondent 

questioned why the clause prescription 

limits the exceptions to use of the clause 

to those specified at 225.7003–3(a) and 

(d), rather than all exceptions in 

225.7003–3(a) through (d). 

Another respondent stated that the 

clause should not be included in 

contracts for electronic components, 

since the Defense Priorities and 

Allocations System (DPAS) rating DO– 

A7 applies to orders for electronic and 

communications equipment. 

DoD Response: DoD concluded that 

the exceptions at 225.7003–3(a) and (d) 

describe situations that would apply to 

the entire acquisition; therefore, 

inclusion of the clause would be 

unnecessary. The exceptions in 

paragraph 225.7003–3(b) are more likely 

to apply only to certain items or 

components of items within an 

acquisition. Electronic or 

communications equipment would 

likely include parts that were not 

covered by the narrow definition of 

electronic component at 252.225–7009; 

therefore, the clause would be 

applicable to those parts. With regard to 

exclusion of the clause from all 

contracts rated DO–A7, there is no 

statutory basis for such as exception. 

The clause at 252.225–7009 is 

applicable to acquisitions that use the 

exception at 225.7003–3(c) for 

commercial derivative military articles, 

as the procedures for use of this 

exception are addressed within the 

clause in paragraph (d). 

17. Flowdown of the Clause at 252.225– 

70X2 (Now 252.225–7009) 

Paragraph (e) of the clause at 252.225– 

70X2 in the proposed rule permitted, 

but did not require, inclusion of the 

clause in subcontracts for items 

containing specialty metals. 

Comments: A number of respondents 

were concerned with the lack of 

mandatory flowdown of the clause to 

subcontracts. 

Æ One respondent stated that the lack 

of mandatory flowdown would 

essentially remove the requirements of 

the specialty metals provisions for high 

performance magnets, due to the fact 

that high performance magnets are 

typically supplies in tier three to tier 

six. 

Æ One respondent stated that, while 

prime contractors generally prefer 

flexibility in their subcontracts, in this 

instance, it is preferable to have a 

mandatory flowdown to help all parties 

comply and ensure greater consistency. 

Æ Another respondent stated that 

subcontractors may refuse to accept the 

clause since flowdown is not 

mandatory. 

Æ One respondent found it unclear as 

to when the clause is to be included in 

subcontracts. This respondent stated 

that if the prime contractor is delivering 

an item that meets an exception in 

paragraph (c)(1) of the clause, the clause 

should not be required in subcontracts 

with lower tier subcontractors. 

Æ One respondent recommended that 

the clause only flow down to 

subcontracts for components exceeding 

a certain dollar value. 

DoD Response: It is incorrect to 

assume that the specialty metals 

requirements will not apply to high 

performance magnets at lower tiers if 

the clause does not flow down to 

subcontracts. It is always the 

responsibility of the prime contractor to 

comply with the requirements imposed 

by the Government in the contract. 

However, DoD has reworded paragraph 

(e) of the clause at 252.225–7009 to 

make it clear that flowdown is required 

to the extent necessary to comply with 

contract requirements. In addition, 

paragraph (e) has been amended to 

direct the contractor to modify 

paragraph (c)(6) of the clause as 

necessary for subcontracts, to facilitate 

management of the 2 percent minimum 

content exception addressed in 

paragraph (c)(6). Only the contractor can 

determine the application of the 2 

percent minimum content exception, 

because it applies to the end product. 

Therefore, the contractor will determine 

what percentage a subcontractor must 

meet to satisfy contract requirements. 

Likewise, if the contractor, or a 

subcontractor, is providing an item that 

meets an exception in (c)(1) (e.g., 

manufactured in a qualifying country), 

the clause should not be flowed down 

beyond that point. Lower tier 

subcontractors would not need to 

comply if a higher tier subcontractor 

was going to use their items in a product 

manufactured in a qualifying country. 

Therefore, in such circumstances, the 

contractor or subcontractor does not 

need to flow down the clause to meet 

the contractual requirement and should 

not do so. 

Limiting flowdown to components 

that exceed a certain dollar threshold 

would not meet the statutory 

requirement, which specifies 

application to all components of any of 

the 6 major product categories. 


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18. Contractor Reporting Requirement 

Comments: Four respondents 

described the proposed implementation 

of the statutory reporting requirement at 

225.7003–3(b)(2)(iii) and 252.225–70X4 

(now 252.225–7029) as unnecessary and 

burdensome and suggested deletion or 

simplification. The respondents stated 

the following: 

Æ The information is already 

available to DoD and any unavailable 

data needed can be obtained through an 

industry survey. 

Æ A dollar threshold should be 

provided to make it more manageable, 

such as an exemption for items with a 

unit cost of less than $100. 

Æ It is unclear whether commercial 

fasteners acquired under the rules of 

DoD Class Deviation 2008–O0002 are 

excluded. 

Æ The contract-by-contract reporting 

requirement should be eliminated. 

Æ The statute does not require 

reporting of the dollar value of the noncommercial item or the dollar value of 

the COTS item to which the exception 

applies. 

Æ The statute does not require 

reporting the NAICS code. 

Æ The rule should clarify that the 

reporting requirement applies only to 

prime contractors, because fastener 

manufacturers and distributors would 

not know whether the fastener was 

going to be provided in a COTS item 

(and therefore would be excepted), or 

whether it would be provided directly 

into a noncommercial end item. 

One respondent pointed out that the 

Federal Register notice was incorrect in 

stating that the law required reporting of 

information regarding the acquisition of 

noncommercial end items incorporating 

COTS items containing non-domestic 

specialty metal. The respondent stated 

that neither the statute, nor the 

proposed DFARS text, require the 

reporting of the type of specialty metal 

in COTS items incorporated into a nonCOTS end item (i.e., no requirement to 

identify only those COTS items with 

non-domestic specialty metal). 

DoD Response: The intent of the 

clause at 252.225–7029 is to obtain 

information on COTS items 

incorporated into noncommercial end 

products, only if those COTS items were 

acquired using the exception authority 

provided at 10 U.S.C. 2533b(h) (as 

implemented in paragraph (c)(2) of the 

clause at DFARS 252.225–7009). It 

would not be necessary to use this 

exception if a COTS item is known to 

contain specialty metals melted or 

produced in the United States. 

However, the exception could be used if 

the source of the specialty metals in a 

COTS item is known to be non-domestic 

or is unknown. 

The report required by the clause at 

252.225–7029 is designed to collect 

consistent data on the description of the 

types of items being acquired as COTS 

items under the exception in paragraph 

(c)(2) of the clause at DFARS 252.225– 

7009. To alleviate the burden on prime 

contractors, who are ultimately 

responsible for reporting this 

information to DoD, and to ensure 

consistency in the data reported, a point 

and click reporting tool is provided for 

reporting this data at: http:// 

www.acwq.osd.mil/dpap/cpic/ic/ 

restrictions_on_specialty_metals_10_usc

_2533b.html. 

DoD cannot eliminate the contractor 

reporting requirement, because DoD has 

no other way to obtain meaningful 

information to prepare the report to 

Congress required by Section 804(i) of 

Public Law 110–181. An industry 

survey is not possible in the time 

allowed for this report. 

After reviewing the comments, DoD 

has amended the reporting requirement 

as follows: 

Æ Inclusion of a threshold of $100 per 

item value. Although the statute does 

not provide a dollar threshold, inclusion 

of a threshold eliminating the 

requirement to report COTS items of 

$100 or less appears to be a reasonable 

interpretation of the requirement. 

Æ Clarification that commercial 

fasteners acquired under a domestic 

non-availability determination, or any 

exception other than COTS, need not be 

reported. 

Æ Elimination of the collection of the 

information on a contract-by-contract 

basis. 

Æ Elimination of the requirement for 

contractors to provide dollar values, 

recognizing that this requirement was 

not specified by statute and could be a 

burden to contractors and 

subcontractors. 

DoD did not eliminate the use of 

NAICS codes, as their use permits 

organization of the data and allows DoD 

to provide a point-and-click Web 

reporting system that requires the 

contractor to make limited choices from 

a menu of finite options. 

DoD agrees that the prime contractor 

is responsible for this reporting 

requirement. This is clear in that the 

clause at 252.225–7029 does not include 

any flowdown requirement. The report 

applies to any COTS items incorporated 

in non-commercial items when the 

COTS exception was relied upon. 

Implicit in this requirement is the prime 

contractor’s responsibility to work with 

its supply chain as necessary to 

determine which items are relying on 

this exception. 

19. Internal DoD Reporting Requirement 

Comment: One respondent opposed 

the requirement for DoD buying 

activities to report use of the exception 

for COTS end items valued at $5 million 

or more per COTS item. 

DoD Response: DoD wants to ensure 

that the COTS item exception is used 

only where appropriate and, therefore, 

has adopted this internal reporting 

requirement to monitor its use. 

20. Procedures, Guidance, and 

Information (PGI) 

Comment: One respondent stated that 

the PGI sections that accompany 

proposed rules should be published, 

even though the PGI does not require 

public comment. 

DoD Response: The draft PGI coverage 

associated with a proposed rule is 

available in the corresponding change 

notice published on the DPAP Web site 

at http://www.acq.osd.mil/dpap/dars/ 

change_notices.html. 

Note: The amendments to the clause at 

252.212–7001, that add 252.247–7003 and 

revise the dates of 252.225–7021 and 

252.225–7036, are shown with the 

amendments to this rule for administrative 

purposes only. The addition of 252.247–7003 

to 252.212–7001 is part of the interim rule for 

DFARS Case 2008–D040 published elsewhere 

in this edition of the Federal Register. The 

revision of the dates of 252.225–7021 and 

252.225–7036 is part of the interim rule for 

DFARS Case 2008–D046 also published 

elsewhere in this edition of the Federal 

Register. Revision of the date of 252.225– 

7036, Alternate I, is a result of a DFARS 

technical amendment published elsewhere in 

this edition of the Federal Register. 

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 has prepared a final regulatory 

flexibility analysis consistent with 5 

U.S.C. 604. A copy of the analysis may 

be obtained from the point of contact 

specified herein. The analysis is 

summarized as follows: 

This final rule amends the Defense 

Federal Acquisition Regulation 

Supplement to implement 10 U.S.C. 

2533b, as established by Section 842 of 

the National Defense Authorization Act 

for Fiscal Year 2007 (Pub. L. 109–364) 

and Sections 804 and 884 of the 

National Defense Authorization Act for 

Fiscal Year 2008 (Pub. L. 110–181). 10 

U.S.C. 2533b places restrictions on DoD 

acquisition of specialty metals not 

melted or produced in the United 

States. Two respondents disagreed with 


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the statement in the Initial Regulatory 

Flexibility Analysis that producers of 

specialty metals are generally large 

businesses. One of the two respondents 

stated that specialty metals 

manufacturers are often small 

businesses that are employee or family 

owned. The second respondent stated 

that ‘‘our entire industry employs less 

than 600 people, yet it remains a 

competitive and critical member of the 

DoD supply-chain.’’ However, these 

respondents are magnet producers, not 

specialty metals producers. According 

to information available to DoD, most 

specialty metals producers are large 

businesses. There is a high 

capitalization requirement to establish a 

business that can melt or produce 

specialty metals. The small business 

size standard for primary metal 

manufacturing ranges from 500 to 1,000 

employees. All the specialty metals 

producers reviewed by DoD had more 

than 1,000 employees. The rule 

provides special protection for high 

performance magnets containing 

domestic specialty metals, as provided 

in the law. 

C. Paperwork Reduction Act 

The provision at 252.225–7010, 

Commercial Derivative Military 

Article—Specialty Metals Compliance 

Certificate, and the clause at 252.225– 

7029, Reporting of Commercially 

Available Off-the-Shelf Items that 

Contain Specialty Metals and are 

Incorporated into Noncommercial End 

Items, contain new information 

collection requirements. The Office of 

Management and Budget has approved 

the information collection requirements 

for use through June 30, 2012, under 

Control Number 0704–0459. 

List of Subjects in 48 CFR Parts 202, 

212, 225, and 252 

Government procurement. 

Michele P. Peterson, 

Editor, Defense Acquisition Regulations 

System. 

■ Therefore, 48 CFR Parts 202, 212, 225, 

and 252 are amended as follows: 

■ 1. The authority citation for 48 CFR 

Parts 202, 212, 225, and 252 continues 

to read as follows: 

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

Chapter 1. 

PART 202—DEFINITIONS OF WORDS 

AND TERMS 

202.101 [Amended] 

■ 2. Section 202.101 is amended by 

removing the definition of 

‘‘Commercially available off-the-shelf 

item’’. 

PART 212—ACQUISITION OF 

COMMERCIAL ITEMS 

■ 3. Section 212.301 is amended by 

adding paragraph (f)(xiii) to read as 

follows: 

212.301 Solicitation provisions and 

contract clauses for the acquisition of 

commercial items. 

(f) * * * 

(xiii) Use the provision at 252.225– 

7010, Commercial Derivative Military 

Article—Specialty Metals Compliance 

Certificate, as prescribed in 225.7003– 

5(b). 

■ 4. Section 212.570 is revised to read 

as follows: 

212.570 Applicability of certain laws to 

contracts and subcontracts for the 

acquisition of commercially available offthe-shelf items. 

Paragraph (a)(1) of 10 U.S.C. 2533b, 

Requirement to buy strategic materials 

critical to national security from 

American sources, is not applicable to 

contracts and subcontracts for the 

acquisition of commercially available 

off-the-shelf items, except as provided at 

225.7003–3(b)(2)(i). 

PART 225—FOREIGN ACQUISITION 

■ 5. Section 225.7001 is amended by 

revising paragraph (b) and removing 

paragraph (d). The revised text reads as 

follows: 

225.7001 Definitions. 

* * * * * 

(b) Component is defined in the 

clauses at 252.225–7009, Restriction on 

Acquisition of Certain Articles 

Containing Specialty Metals; 252.225– 

7012, Preference for Certain Domestic 

Commodities; and 252.225–7016, 

Restriction on Acquisition of Ball and 

Roller Bearings. 

* * * * * 

■ 6. Section 225.7002 is added to read 

as follows: 

225.7002 Restrictions on food, clothing, 

fabrics, and hand or measuring tools. 

225.7002–1 [Amended] 

■ 7. Section 225.7002–1 is amended by 

removing paragraph (b) and 

redesignating paragraph (c) as paragraph 

(b). 

■ 8. Section 225.7002–2 is amended as 

follows: 

■ a. In paragraph (b), in the first 

sentence, by removing ‘‘or (b)’’; 

■ b. By adding paragraph (b)(1)(v); 

■ c. By revising paragraphs (b)(3) and 

(b)(4); 

■ d. By removing paragraph (b)(5); 

■ e. In paragraph (f) introductory text, 

by removing ‘‘, specialty metals,’’; 

■ f. By removing paragraphs (m) and (n); 

■ g. By redesignating paragraphs (o) and 

(p) as paragraphs (m) and (n) 

respectively; and 

■ h. By removing paragraph (q). The 

added and revised text reads as follows: 

225.7002–2 Exceptions. 

* * * * * 

(b) * * * 

(1) * * * 

(v) The Director of the Defense 

Logistics Agency. 

* * * * * 

(3) Defense agencies other than the 

Defense Logistics Agency shall follow 

the procedures at PGI 225.7002–2(b)(3) 

when submitting a request for a 

domestic nonavailability determination. 

(4) Follow the procedures at PGI 

225.7002–2(b)(4) for reciprocal use of 

domestic nonavailability 

determinations. 

* * * * * 

225.7002–3 [Amended] 

■ 9. Section 225.7002–3 is amended by 

removing paragraph (b) and 

redesignating paragraph (c) as paragraph 

(b). 

■ 10. Section 225.7003 is revised to read 

as follows: 

225.7003 Restrictions on acquisition of 

specialty metals. 

■ 11. Sections 225.7003–1 through 

225.7003–5 are added to read as follows: 

225.7003–1 Definitions. 

As used in this section— 

(a) Assembly, commercial derivative 

military article, commercially available 

off-the-shelf item, component, electronic 

component, end item, high performance 

magnet, required form, and subsystem 

are defined in the clause at 252.225– 

7009, Restriction on Acquisition of 

Certain Articles Containing Specialty 

Metals. 

(b) Automotive item— 

(1) Means a self-propelled military 

transport tactical vehicle, primarily 

intended for use by military personnel 

or for carrying cargo, such as— 

(i) A high-mobility multipurpose 

wheeled vehicle; 

(ii) An armored personnel carrier; or 

(iii) A troop/cargo-carrying truckcar, 

truck, or van; and 

(2) Does not include— 

(i) A commercially available off-theshelf vehicle; or 

(ii) Construction equipment (such as 

bulldozers, excavators, lifts, or loaders) 

or other self-propelled equipment (such 

as cranes or aircraft ground support 

equipment). 

(c) Produce and specialty metal are 

defined in the clauses at 252.225–7008, 


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Restriction on Acquisition of Specialty 

Metals, and 252.225–7009, Restriction 

on Acquisition of Certain Articles 

Containing Specialty Metals. 

225.7003–2 Restrictions. 

The following restrictions implement 

10 U.S.C. 2533b. Except as provided in 

225.7003–3— 

(a) Do not acquire the following items, 

or any components of the following 

items, unless any specialty metals 

contained in the items or components 

are melted or produced in the United 

States (also see guidance at PGI 

225.7003–2(a)): 

(1) Aircraft. 

(2) Missile or space systems. 

(3) Ships. 

(4) Tank or automotive items. 

(5) Weapon systems. 

(6) Ammunition. 

(b) Do not acquire a specialty metal 

(e.g., raw stock, including bar, billet, 

slab, wire, plate, and sheet; castings; 

and forgings) as an end item, unless the 

specialty metal is melted or produced in 

the United States. This restriction 

applies to specialty metal acquired by a 

contractor for delivery to DoD as an end 

item, in addition to specialty metal 

acquired by DoD directly from the entity 

that melted or produced the specialty 

metal. 

225.7003–3 Exceptions. 

Procedures for submitting requests to 

the Under Secretary of Defense 

(Acquisition, Technology, and Logistics) 

(USD(AT&L)) for a determination or 

approval as required in paragraph (b)(5), 

(c), or (d) of this subsection are at PGI 

225.7003–3. 

(a) Acquisitions in the following 

categories are not subject to the 

restrictions in 225.7003–2: 

(1) Acquisitions at or below the 

simplified acquisition threshold. 

(2) Acquisitions outside the United 

States in support of combat operations. 

(3) Acquisitions in support of 

contingency operations. 

(4) Acquisitions for which the use of 

other than competitive procedures has 

been approved on the basis of unusual 

and compelling urgency in accordance 

with FAR 6.302–2. 

(5) Acquisitions of items specifically 

for commissary resale. 

(6) Acquisitions of items for test and 

evaluation under the foreign 

comparative testing program (10 U.S.C. 

2350a(g)). However, this exception does 

not apply to any acquisitions under 

follow-on production contracts. 

(b) One or more of the following 

exceptions may apply to an end item or 

component that includes any of the 

following, under a prime contract or 

subcontract at any tier. The restrictions 

in 225.7003–2 do not apply to the 

following: 

(1) Electronic components, unless the 

Secretary of Defense, upon the 

recommendation of the Strategic 

Materials Protection Board pursuant to 

10 U.S.C. 187, determines that the 

domestic availability of a particular 

electronic component is critical to 

national security. 

(2)(i) Commercially available off-theshelf (COTS) items containing specialty 

metals, except the restrictions do apply 

to contracts or subcontracts for the 

acquisition of— 

(A) Specialty metal mill products, 

such as bar, billet, slab, wire, plate, and 

sheet, that have not been incorporated 

into end items, subsystems, assemblies, 

or components. Specialty metal supply 

contracts issued by COTS producers are 

not subcontracts for the purposes of this 

exception; 

(B) Forgings or castings of specialty 

metals, unless the forgings or castings 

are incorporated into COTS end items, 

subsystems, or assemblies; 

(C) Commercially available high 

performance magnets that contain 

specialty metal, unless such high 

performance magnets are incorporated 

into COTS end items or subsystems (see 

PGI 225.7003–3(b)(6) for a table of 

applicability of specialty metals 

restrictions to magnets); and 

(D) COTS fasteners, unless— 

(1) The fasteners are incorporated into 

COTS end items, subsystems, or 

assemblies; or 

(2) The fasteners qualify for the 

commercial item exception in paragraph 

(b)(3) of this subsection. 

(ii) If this exception is used for an 

acquisition of COTS end items valued at 

$5 million or more per item, the 

acquiring department or agency shall 

submit an annual report to the Director, 

Defense Procurement and Acquisition 

Policy, in accordance with the 

procedures at PGI 225.7003–3(b)(2). 

(iii) During fiscal year 2009, 

contractors are required to report use of 

this exception to acquire COTS items 

containing specialty metal that are 

incorporated into a noncommercial end 

item (see 252.225–7029). 

(3) Fasteners that are commercial 

items and are acquired under a contract 

or subcontract with a manufacturer of 

such fasteners, if the manufacturer has 

certified that it will purchase, during 

the relevant calendar year, an amount of 

domestically melted or produced 

specialty metal, in the required form, for 

use in the production of fasteners for 

sale to DoD and other customers, that is 

not less than 50 percent of the total 

amount of the specialty metal that the 

manufacturer will purchase to carry out 

the production of such fasteners for all 

customers. 

(4) Items listed in 225.7003–2(a), 

manufactured in a qualifying country or 

containing specialty metals melted or 

produced in a qualifying country. 

(5) Specialty metal in any of the items 

listed in 225.7003–2 if the USD(AT&L), 

or an official authorized in accordance 

with paragraph (b)(5)(i) of this 

subsection, determines that specialty 

metal melted or produced in the United 

States cannot be acquired as and when 

needed at a fair and reasonable price in 

a satisfactory quality, a sufficient 

quantity, and the required form (i.e., a 

domestic nonavailability 

determination). See guidance in PGI 

225.7003–3(b)(5). 

(i) The Secretary of the military 

department concerned is authorized, 

without power of redelegation, to make 

a domestic nonavailability 

determination that applies to only one 

contract. 

The supporting documentation for the 

determination shall include— 

(A) An analysis of alternatives that 

would not require a domestic 

nonavailability determination; and 

(B) Written documentation by the 

requiring activity, with specificity, why 

such alternatives are unacceptable. 

(ii) A domestic nonavailability 

determination that applies to more than 

one contract (i.e., a class domestic 

nonavailability determination), requires 

the approval of the USD(AT&L). 

(A) At least 30 days before making a 

domestic nonavailability determination 

that would apply to more than one 

contract, the USD(AT&L) will, to the 

maximum extent practicable, and in a 

manner consistent with the protection 

of national security and confidential 

business information— 

(1) Publish a notice on the Federal 

Business Opportunities Web site 

(http://www.FedBizOpps.gov or any 

successor site) of the intent to make the 

domestic nonavailability determination; 

and 

(2) Solicit information relevant to 

such notice from interested parties, 

including producers of specialty metal 

mill products. 

(B) The USD(AT&L)— 

(1) Will take into consideration all 

information submitted in response to 

the notice in making a class domestic 

nonavailability determination; 

(2) May consider other relevant 

information that cannot be made part of 

the public record consistent with the 

protection of national security 

information and confidential business 

information; and 


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(3) Will ensure that any such 

domestic nonavailability determination 

and the rationale for the determination 

are made publicly available to the 

maximum extent consistent with the 

protection of national security and 

confidential business information. 

(6) End items containing a minimal 

amount of otherwise noncompliant 

specialty metals (i.e., specialty metals 

not melted or produced in the United 

States that are not covered by another 

exception listed in this paragraph (b)), if 

the total weight of noncompliant 

specialty metal does not exceed 2 

percent of the total weight of all 

specialty metal in the end item. This 

exception does not apply to high 

performance magnets containing 

specialty metals. See PGI 225.7003– 

3(b)(6) for a table of applicability of 

specialty metals restrictions to magnets. 

(c) Compliance for commercial 

derivative military articles. The 

restrictions at 225.7003–2(a) do not 

apply to an item acquired under a prime 

contract if— 

(1) The offeror has certified, and 

subsequently demonstrates, that the 

offeror and its subcontractor(s) will 

individually or collectively enter into a 

contractual agreement or agreements to 

purchase a sufficient quantity of 

domestically melted or produced 

specialty metal in accordance with the 

provision at 252.225–7010; and 

(2) The USD(AT&L), or the Secretary 

of the military department concerned, 

determines that the item is a 

commercial derivative military article 

(defense agencies see procedures at PGI 

225.7003–3). The contracting officer 

shall submit the offeror’s certification 

and a request for a determination to the 

appropriate official, through agency 

channels, and shall notify the offeror 

when a decision has been made. 

(d) National security waiver. The 

USD(AT&L) may waive the restrictions 

at 225.7003–2 if the USD(AT&L) 

determines in writing that acceptance of 

the item is necessary to the national 

security interests of the United States 

(see procedures at PGI 225.7003–3). 

This authority may not be delegated. 

(1) The written determination of the 

USD(AT&L)— 

(i) Shall specify the quantity of end 

items to which the national security 

waiver applies; 

(ii) Shall specify the time period over 

which the national security waiver 

applies; and 

(iii) Shall be provided to the 

congressional defense committees 

before the determination is executed, 

except that in the case of an urgent 

national security requirement, the 

determination may be provided to the 

congressional defense committees up to 

7 days after it is executed. 

(2) After making such a 

determination, the USD(AT&L) will— 

(i) Ensure that the contractor or 

subcontractor responsible for the 

noncompliant specialty metal develops 

and implements an effective plan to 

ensure future compliance; and 

(ii) Determine whether or not the 

noncompliance was knowing and 

willful. If the USD(AT&L) determines 

that the noncompliance was knowing 

and willful, the appropriate debarring 

and suspending official shall consider 

suspending or debarring the contractor 

or subcontractor until such time as the 

contractor or subcontractor has 

effectively addressed the issues that led 

to the noncompliance. 

(3) Because national security waivers 

will only be granted when the 

acquisition in question is necessary to 

the national security interests of the 

United States, the requirement for a 

plan will be applied as a condition 

subsequent, and not a condition 

precedent, to the granting of a waiver. 

225.7003–4 One-time waiver. 

DoD may accept articles containing 

specialty metals that are not in 

compliance with the specialty metals 

clause of the contract if— 

(a) Final acceptance takes place before 

September 30, 2010; 

(b) The specialty metals were 

incorporated into items (whether end 

items or components) produced, 

manufactured, or assembled in the 

United States before October 17, 2006; 

(c) The contracting officer determines 

in writing that— 

(1) It would not be practical or 

economical to remove or replace the 

specialty metals incorporated in such 

items or to substitute items containing 

compliant materials; 

(2) The contractor and any 

subcontractor responsible for providing 

items containing non-compliant 

specialty metals have in place an 

effective plan to ensure compliance 

with the specialty metals clause of the 

contract for future items produced, 

manufactured, or assembled in the 

United States; and 

(3) The non-compliance was not 

knowing or willful; 

(d) The determination is approved 

by— 

(1) The USD(AT&L); or 

(2) The service acquisition executive 

of the military department concerned; 

and 

(e) Not later than 15 days after 

approval of the determination, the 

contracting officer posts a notice on the 

Federal Business Opportunities Web 

site at http://www.FedBizOpps.gov, 

stating that a waiver for the contract has 

been granted under Section 842(b) of the 

National Defense Authorization Act for 

Fiscal Year 2007 (Pub. L. 109–364). 

225.7003–5 Solicitation provision and 

contract clauses. 

(a) Unless the acquisition is wholly 

exempt from the specialty metals 

restrictions at 225.7003–2 because the 

acquisition is covered by an exception 

in 225.7003–3(a) or (d) (but see 

paragraph (d) of this subsection)— 

(1) Use the clause at 252.225–7008, 

Restriction on Acquisition of Specialty 

Metals, in solicitations and contracts 

that— 

(i) Exceed the simplified acquisition 

threshold; and 

(ii) Require the delivery of specialty 

metals as end items. 

(2) Use the clause at 252.225–7009, 

Restriction on Acquisition of Certain 

Articles Containing Specialty Metals, in 

solicitations and contracts that— 

(i) Exceed the simplified acquisition 

threshold; and 

(ii) Require delivery of any of the 

following items, or components of the 

following items, if such items or 

components contain specialty metal: 

(A) Aircraft. 

(B) Missile or space systems. 

(C) Ships. 

(D) Tank or automotive items. 

(E) Weapon systems. 

(F) Ammunition. 

(b) Use the provision at 252.225–7010, 

Commercial Derivative Military 

Article—Specialty Metals Compliance 

Certificate, in solicitations— 

(1) That contain the clause at 

252.225–7009; and 

(2) For which the contracting officer 

anticipates that one or more offers of 

commercial derivative military articles 

may be received. 

(c) Use the clause at 252.225–7029, 

Reporting of Commercially Available 

Off-the-Shelf Items that Contain 

Specialty Metals and are Incorporated 

into Noncommercial End Items, in 

solicitations and contracts that— 

(1) Contain the clause at 252.225– 

7009; 

(2) Are for the acquisition of 

noncommercial end items; and 

(3) Are awarded in fiscal year 2009. 

(d) If an agency cannot reasonably 

determine at time of acquisition 

whether some or all of the items will be 

used in support of combat operations or 

in support of contingency operations, 

the contracting officer should not rely 

on the exception at 225.7003–3(a)(2) or 

(3), but should include the appropriate 

specialty metals clause or provision in 

the solicitation and contract. 


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(e) If the solicitation and contract 

require delivery of a variety of contract 

line items containing specialty metals, 

but only some of the items are subject 

to domestic specialty metals 

restrictions, identify in the Schedule 

those items that are subject to the 

restrictions. 

225.7004–4 [Amended] 

■ 12. Section 225.7004–4 is amended by 

removing ‘‘225.7003’’ and adding in its 

place ‘‘225.7008’’. 

225.7005–3 [Amended] 

■ 13. Section 225.7005–3 is amended by 

removing ‘‘225.7003’’ and adding in its 

place ‘‘225.7008’’. 

225.7006–3 [Amended] 

■ 14. Section 225.7006–3 is amended in 

paragraph (a), and in the second 

sentence of paragraph (b), by removing 

‘‘225.7003’’ and adding in its place 

‘‘225.7008’’. 

■ 15. Section 225.7008 is added to read 

as follows: 

225.7008 Waiver of restrictions of 10 

U.S.C. 2534. 

(a) When 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: 

(1)(i) The Under Secretary of Defense 

(Acquisition, Technology, and Logistics) 

(USD(AT&L)), without power of 

delegation, may waive a restriction for 

a particular item for a particular foreign 

country upon determination that— 

(A) United States producers of the 

item would not be jeopardized by 

competition from a foreign country, and 

that country does not discriminate 

against defense items produced in the 

United States to a greater degree than 

the United States discriminates against 

defense items produced in that country; 

or 

(B) Application of the restriction 

would impede cooperative programs 

entered into between DoD and a foreign 

country, or would impede the reciprocal 

procurement of defense items under a 

memorandum of understanding 

providing for reciprocal procurement of 

defense items under 225.872, and that 

country does not discriminate against 

defense items produced in the United 

States to a greater degree than the 

United States discriminates against 

defense items produced in that country. 

(ii) A notice of the determination to 

exercise the waiver authority shall be 

published in the Federal Register and 

submitted to the congressional defense 

committees at least 15 days before the 

effective date of the waiver. 

(iii) The effective period of the waiver 

shall not exceed 1 year. 

(iv) For contracts entered into prior to 

the effective date of a waiver, provided 

adequate consideration is received to 

modify the contract, the waiver shall be 

applied as directed or authorized in the 

waiver to— 

(A) Subcontracts entered into on or 

after the effective date of the waiver; 

and 

(B) Options for the procurement of 

items that are exercised after the 

effective date of the waiver, if the option 

prices are adjusted for any reason other 

than the application of the waiver. 

(2) The head of the contracting 

activity may waive a restriction on a 

case-by-case basis upon execution of a 

determination and findings that any of 

the following applies: 

(i) The restriction would cause 

unreasonable delays. 

(ii) Satisfactory quality items 

manufactured in the United States or 

Canada are not available. 

(iii) Application of the restriction 

would result in the existence of only 

one source for the item in the United 

States or Canada. 

(iv) Application of the restriction is 

not in the national security interests of 

the United States. 

(v) Application of the restriction 

would adversely affect a U.S. company. 

(3) A restriction is waived when it 

would cause unreasonable costs. The 

cost of an item of U.S. or Canadian 

origin is unreasonable if it exceeds 150 

percent of the offered price, inclusive of 

duty, of items that are not of U.S. or 

Canadian origin. 

(b) In accordance with the provisions 

of paragraphs (a)(1)(i) through (iii) of 

this section, the USD(AT&L) has waived 

the restrictions of 10 U.S.C. 2534(a) for 

certain items manufactured in the 

United Kingdom, including air circuit 

breakers for naval vessels (see 

225.7006). This waiver applies to— 

(1) Procurements under solicitations 

issued on or after August 4, 1998; and 

(2) Subcontracts and options under 

contracts entered into prior to August 4, 

1998, under the conditions described in 

paragraph (a)(1)(iv) of this section. 

PART 252—SOLICITATION 

PROVISIONS AND CONTRACT 

CLAUSES 

■ 16. Section 252.212–7001 is amended 

as follows: 

■ a. By revising the clause date to read 

‘‘(JUL 2009)’’; 

■ b. By removing paragraph (b)(7); 

■ c. By redesignating paragraphs (b)(6), 

(b)(8) through (20), (b)(21), and (b)(22), 

as paragraphs (b)(8), (b)(9) through (21), 

(b)(23), and (b)(24), respectively; 

■ d. By adding new paragraphs (b)(6), 

(b)(7), and (b)(22); 

■ e. In newly designated paragraph 

(b)(11) by removing ‘‘(NOV 2008)’’ and 

adding in its place ‘‘(JUL 2009)’’; 

■ f. In newly designated paragraph 

(b)(14)(i) by removing ‘‘(JAN 2009)’’ and 

adding in its place ‘‘(JUL 2009)’’; 

■ g. In newly designated paragraph 

(b)(14)(ii) by removing ‘‘(OCT 2006)’’ 

and adding in its place ‘‘(JUL 2009)’’; 

■ h. By removing paragraph (c)(1); 

■ i. By redesignating paragraph (c)(2) as 

paragraph (c)(1); and 

■ j. By adding a new paragraph (c)(2) to 

read as follows: 

252.212–7001 Contract Terms and 

Conditions Required to Implement Statutes 

or Executive Orders Applicable to Defense 

Acquisitions of Commercial Items. 

* * * * * 

(b) * * * 

(6) lll 252.225–7008, Restriction 

on Acquisition of Specialty Metals (JUL 

2009) (10 U.S.C. 2533b). 

(7) lll 252.225–7009, Restriction 

on Acquisition of Certain Articles 

Containing Specialty Metals (JUL 2009) 

(10 U.S.C. 2533b). 

* * * * * 

(22) lll 252.247–7003, PassThrough of Motor Carrier Fuel 

Surcharge Adjustment to the Cost Bearer 

(JUL 2009) (Section 884 of Public Law 

110–417). 

* * * * * 

(c) * * * 

(2) 252.247–7003, Pass-Through of 

Motor Carrier Fuel Surcharge 

Adjustment to the Cost Bearer (JUL 

2009) (Section 884 of Public Law 110– 

417). 

* * * * * 

■ 17. Sections 252.225–7008, 252.225– 

7009, and 252.225–7010 are added to 

read as follows: 

252.225–7008 Restriction on Acquisition 

of Specialty Metals. 

As prescribed in 225.7003–5(a)(1), use 

the following clause: 

RESTRICTION ON ACQUISITION OF 

SPECIALTY METALS (JUL 2009) 

(a) Definitions. As used in this clause— 

(1) Alloy means a metal consisting of a 

mixture of a basic metallic element and one 

or more metallic, or non-metallic, alloying 

elements. 

(i) For alloys named by a single metallic 

element (e.g., titanium alloy), it means that 

the alloy contains 50 percent or more of the 

named metal (by mass). 

(ii) If two metals are specified in the name 

(e.g., nickel-iron alloy), those metals are the 

two predominant elements in the alloy, and 

together they constitute 50 percent or more 

of the alloy (by mass). 

(2) Produce means the application of forces 

or processes to a specialty metal to create the 


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desired physical properties through 

quenching or tempering of steel plate, gas 

atomization or sputtering of titanium, or final 

consolidation of non-melt derived titanium 

powder or titanium alloy powder. 

(3) Specialty metal means— 

(i) Steel— 

(A) With a maximum alloy content 

exceeding one or more of the following 

limits: Manganese, 1.65 percent; silicon, 0.60 

percent; or copper, 0.60 percent; or 

(B) Containing more than 0.25 percent of 

any of the following elements: Aluminum, 

chromium, cobalt, molybdenum, nickel, 

niobium (columbium), titanium, tungsten, or 

vanadium; 

(ii) Metal alloys consisting of— 

(A) Nickel or iron-nickel alloys that 

contain a total of alloying metals other than 

nickel and iron in excess of 10 percent; or 

(B) Cobalt alloys that contain a total of 

alloying metals other than cobalt and iron in 

excess of 10 percent; 

(iii) Titanium and titanium alloys; or 

(iv) Zirconium and zirconium alloys. 

(4) Steel means an iron alloy that includes 

between .02 and 2 percent carbon and may 

include other elements. 

(b) Any specialty metal delivered under 

this contract shall be melted or produced in 

the United States or its outlying areas. 

(End of clause) 

252.225–7009 Restriction on Acquisition 

of Certain Articles Containing Specialty 

Metals. 

As prescribed in 225.7003–5(a)(2), use 

the following clause: 

Restriction on Acquisition of Certain 

Articles Containing Specialty Metals 

(Jul 2009) 

(a) Definitions. As used in this clause— 

(1) Alloy means a metal consisting of a 

mixture of a basic metallic element and one 

or more metallic, or non-metallic, alloying 

elements. 

(i) For alloys named by a single metallic 

element (e.g., titanium alloy), it means that 

the alloy contains 50 percent or more of the 

named metal (by mass). 

(ii) If two metals are specified in the name 

(e.g., nickel-iron alloy), those metals are the 

two predominant elements in the alloy, and 

together they constitute 50 percent or more 

of the alloy (by mass). 

(2) Assembly means an item forming a 

portion of a system or subsystem that— 

(i) Can be provisioned and replaced as an 

entity; and 

(ii) Incorporates multiple, replaceable 

parts. 

(3) Commercial derivative military article 

means an item acquired by the Department 

of Defense that is or will be produced using 

the same production facilities, a common 

supply chain, and the same or similar 

production processes that are used for the 

production of articles predominantly used by 

the general public or by nongovernmental 

entities for purposes other than governmental 

purposes. 

(4) Commercially available off-the-shelf 

item— 

(i) Means any item of supply that is— 

(A) A commercial item (as defined in 

paragraph (1) of the definition of 

‘‘commercial item’’ in section 2.101 of the 

Federal Acquisition Regulation); 

(B) Sold in substantial quantities in the 

commercial marketplace; and 

(C) Offered to the Government, under this 

contract or a subcontract at any tier, without 

modification, in the same form in which it 

is sold in the commercial marketplace; and 

(ii) Does not include bulk cargo, as defined 

in section 3 of the Shipping Act of 1984 (46 

U.S.C. App 1702), such as agricultural 

products and petroleum products. 

(5) Component means any item supplied to 

the Government as part of an end item or of 

another component. 

(6) Electronic component means an item 

that operates by controlling the flow of 

electrons or other electrically charged 

particles in circuits, using interconnections 

of electrical devices such as resistors, 

inductors, capacitors, diodes, switches, 

transistors, or integrated circuits. The term 

does not include structural or mechanical 

parts of an assembly containing an electronic 

component, and does not include any high 

performance magnets that may be used in the 

electronic component. 

(7) End item means the final production 

product when assembled or completed and 

ready for delivery under a line item of this 

contract. 

(8) High performance magnet means a 

permanent magnet that obtains a majority of 

its magnetic properties from rare earth metals 

(such as samarium). 

(9) Produce means the application of forces 

or processes to a specialty metal to create the 

desired physical properties through 

quenching or tempering of steel plate, gas 

atomization or sputtering of titanium, or final 

consolidation of non-melt derived titanium 

powder or titanium alloy powder. 

(10) Qualifying country means any country 

listed in section 225.003(9) of the Defense 

Federal Acquisition Regulation Supplement 

(DFARS). 

(11) Required form means in the form of 

mill product, such as bar, billet, wire, slab, 

plate, or sheet, and in the grade appropriate 

for the production of— 

(i) A finished end item to be delivered to 

the Government under this contract; or 

(ii) A finished component assembled into 

an end item to be delivered to the 

Government under this contract. 

(12) Specialty metal means— 

(i) Steel— 

(A) With a maximum alloy content 

exceeding one or more of the following 

limits: Manganese, 1.65 percent; silicon, 0.60 

percent; or copper, 0.60 percent; or 

(B) Containing more than 0.25 percent of 

any of the following elements: Aluminum, 

chromium, cobalt, molybdenum, nickel, 

niobium (columbium), titanium, tungsten, or 

vanadium; 

(ii) Metal alloys consisting of— 

(A) Nickel or iron-nickel alloys that 

contain a total of alloying metals other than 

nickel and iron in excess of 10 percent; or 

(B) Cobalt alloys that contain a total of 

alloying metals other than cobalt and iron in 

excess of 10 percent; 

(iii) Titanium and titanium alloys; or 

(iv) Zirconium and zirconium alloys. 

(13) Steel means an iron alloy that includes 

between .02 and 2 percent carbon and may 

include other elements. 

(14) Subsystem means a functional 

grouping of items that combine to perform a 

major function within an end item, such as 

electrical power, attitude control, and 

propulsion. 

(b) Restriction. Except as provided in 

paragraph (c) of this clause, any specialty 

metals incorporated in items delivered under 

this contract shall be melted or produced in 

the United States, its outlying areas, or a 

qualifying country. 

(c) Exceptions. The restriction in paragraph 

(b) of this clause does not apply to— 

(1) Electronic components. 

(2)(i) Commercially available off-the-shelf 

(COTS) items, other than— 

(A) Specialty metal mill products, such as 

bar, billet, slab, wire, plate, or sheet, that 

have not been incorporated into COTS end 

items, subsystems, assemblies, or 

components; 

(B) Forgings or castings of specialty metals, 

unless the forgings or castings are 

incorporated into COTS end items, 

subsystems, or assemblies; 

(C) Commercially available high 

performance magnets that contain specialty 

metal, unless such high performance magnets 

are incorporated into COTS end items or 

subsystems; and 

(D) COTS fasteners, unless— 

(1) The fasteners are incorporated into 

COTS end items, subsystems, assemblies, or 

components; or 

(2) The fasteners qualify for the 

commercial item exception in paragraph 

(c)(3) of this clause. 

(ii) A COTS item is considered to be 

‘‘without modification’’ if it is not modified 

prior to contractual acceptance by the next 

higher tier in the supply chain. 

(A) Specialty metals in a COTS item that 

was accepted without modification by the 

next higher tier are excepted from the 

restriction in paragraph (b) of this clause, and 

remain excepted, even if a piece of the COTS 

item subsequently is removed (e.g., the end 

is removed from a COTS screw or an extra 

hole is drilled in a COTS bracket). 

(B) Specialty metals that were not 

contained in a COTS item upon acceptance, 

but are added to the COTS item after 

acceptance, are subject to the restriction in 

paragraph (b) of this clause (e.g., a special 

reinforced handle made of specialty metal is 

added to a COTS item). 

(C) If two or more COTS items are 

combined in such a way that the resultant 

item is not a COTS item, only the specialty 

metals involved in joining the COTS items 

together are subject to the restriction in 

paragraph (b) of this clause (e.g., a COTS 

aircraft is outfitted with a COTS engine that 

is not the COTS engine normally provided 

with the aircraft). 

(D) For COTS items that are normally sold 

in the commercial marketplace with various 

options, items that include such options are 

also COTS items. However, if a COTS item 

is offered to the Government with an option 

that is not normally offered in the 

commercial marketplace, that option is 


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subject to the restriction in paragraph (b) of 

this clause (e.g.—An aircraft is normally sold 

to the public with an option for installation 

kits. The Department of Defense requests a 

military-unique kit. The aircraft is still a 

COTS item, but the military-unique kit is not 

a COTS item and must comply with the 

restriction in paragraph (b) of this clause 

unless another exception applies). 

(3) Fasteners that are commercial items, if 

the manufacturer of the fasteners certifies it 

will purchase, during the relevant calendar 

year, an amount of domestically melted or 

produced specialty metal, in the required 

form, for use in the production of fasteners 

for sale to the Department of Defense and 

other customers, that is not less than 50 

percent of the total amount of the specialty 

metal that it will purchase to carry out the 

production of such fasteners for all 

customers. 

(4) Items manufactured in a qualifying 

country. 

(5) Specialty metals for which the 

Government has determined in accordance 

with DFARS 225.7003–3 that specialty metal 

melted or produced in the United States, its 

outlying areas, or a qualifying country cannot 

be acquired as and when needed in— 

(i) A satisfactory quality; 

(ii) A sufficient quantity; and 

(iii) The required form. 

(6) End items containing a minimal amount 

of otherwise noncompliant specialty metals 

(i.e., specialty metals not melted or produced 

in the United States, an outlying area, or a 

qualifying country, that are not covered by 

one of the other exceptions in this paragraph 

(c)), if the total weight of such noncompliant 

metals does not exceed 2 percent of the total 

weight of all specialty metals in the end item, 

as estimated in good faith by the Contractor. 

This exception does not apply to high 

performance magnets containing specialty 

metals. 

(d) Compliance for commercial derivative 

military articles. 

(1) As an alternative to the compliance 

required in paragraph (b) of this clause, the 

Contractor may purchase an amount of 

domestically melted or produced specialty 

metals in the required form, for use during 

the period of contract performance in the 

production of the commercial derivative 

military article and the related commercial 

article, if— 

(i) The Contracting Officer has notified the 

Contractor of the items to be delivered under 

this contract that have been determined by 

the Government to meet the definition of 

‘‘commercial derivative military article’’; and 

(ii) For each item that has been determined 

by the Government to meet the definition of 

‘‘commercial derivative military article,’’ the 

Contractor has certified, as specified in the 

provision of the solicitation entitled 

‘‘Commercial Derivative Military Article— 

Specialty Metals Compliance Certificate’’ 

(DFARS 252.225–7010), that the Contractor 

and its subcontractor(s) will enter into a 

contractual agreement or agreements to 

purchase an amount of domestically melted 

or produced specialty metal in the required 

form, for use during the period of contract 

performance in the production of each 

commercial derivative military article and 

the related commercial article, that is not less 

than the Contractor’s good faith estimate of 

the greater of— 

(A) An amount equivalent to 120 percent 

of the amount of specialty metal that is 

required to carry out the production of the 

commercial derivative military article 

(including the work performed under each 

subcontract); or 

(B) An amount equivalent to 50 percent of 

the amount of specialty metal that will be 

purchased by the Contractor and its 

subcontractors for use during such period in 

the production of the commercial derivative 

military article and the related commercial 

article. 

(2) For the purposes of this alternative, the 

amount of specialty metal that is required to 

carry out production of the commercial 

derivative military article includes specialty 

metal contained in any item, including COTS 

items. 

(e) Subcontracts. The Contractor shall 

insert the substance of this clause in 

subcontracts for items containing specialty 

metals, to the extent necessary to ensure 

compliance of the end products that the 

Contractor will deliver to the Government. 

When inserting the substance of this clause 

in subcontracts, the Contractor shall— 

(1) Modify paragraph (c)(6) of this clause 

as necessary to facilitate management of the 

minimal content exception; 

(2) Exclude paragraph (d) of this clause; 

and 

(3) Include this paragraph (e). 

(End of clause) 

252.225–7010 Commercial Derivative 

Military Article—Specialty Metals 

Compliance Certificate. 

As prescribed in 225.7003–5(b), use 

the following provision: 

Commercial Derivative Military 

Article—Specialty Metals Compliance 

Certificate (Jul 2009) 

(a) Definitions. Commercial derivative 

military article, commercially available offthe-shelf item, produce, required form, and 

specialty metal, as used in this provision, 

have the meanings given in the clause of this 

solicitation entitled ‘‘Restriction on 

Acquisition of Certain Articles Containing 

Specialty Metals’’ (DFARS 252.225–7009). 

(b) The offeror shall list in this paragraph 

any commercial derivative military articles it 

intends to deliver under any contract 

resulting from this solicitation using the 

alternative compliance for commercial 

derivative military articles, as specified in 

paragraph (d) of the clause of this solicitation 

entitled ‘‘Restriction on Acquisition of 

Certain Articles Containing Specialty Metals’’ 

(DFARS 252.225–7009). The offeror’s 

designation of an item as a ‘‘commercial 

derivative military article’’ will be subject to 

Government review and approval. 

lllllllllllllllllllll

lllllllllllllllllllll

(c) If the offeror has listed any commercial 

derivative military articles in paragraph (b) of 

this provision, the offeror certifies that, if 

awarded a contract as a result of this 

solicitation, and if the Government approves 

the designation of the listed item(s) as 

commercial derivative military articles, the 

offeror and its subcontractor(s) will 

demonstrate that individually or collectively 

they have entered into a contractual 

agreement or agreements to purchase an 

amount of domestically melted or produced 

specialty metal in the required form, for use 

during the period of contract performance in 

the production of each commercial derivative 

military article and the related commercial 

article, that is not less than the Contractor’s 

good faith estimate of the greater of— 

(1) An amount equivalent to 120 percent of 

the amount of specialty metal that is required 

to carry out the production of the commercial 

derivative military article (including the 

work performed under each subcontract); or 

(2) An amount equivalent to 50 percent of 

the amount of specialty metal that will be 

purchased by the Contractor and its 

subcontractors for use during such period in 

the production of the commercial derivative 

military article and the related commercial 

article. 

(d) For the purposes of this provision, the 

amount of specialty metal that is required to 

carry out the production of the commercial 

derivative military article includes specialty 

metal contained in any item, including 

commercially available off-the-shelf items, 

incorporated into such commercial derivative 

military articles. 

(End of provision) 

252.225–7014 [Removed and Reserved] 

■ 18. Section 252.225–7014 is removed 

and reserved. 

252.225–7015 [Amended] 

■ 19. Section 252.225–7015 is amended 

in the introductory text by removing 

‘‘225.7002–3(c)’’ and adding in its place 

‘‘225.7002–3(b)’’. 

■ 20. Section 252.225–7029 is added to 

read as follows: 

252.225–7029 Reporting of Commercially 

Available Off-the-Shelf Items that Contain 

Specialty Metals and are Incorporated into 

Noncommercial End Items. 

As prescribed in 225.7003–5(c), use 

the following clause: 

Reporting of Commercially Available 

Off-the-Shelf Items that Contain 

Specialty Metals and Are Incorporated 

Into Noncommercial End Items (Jul 

2009) 

(a) Definitions. Commercially available offthe-shelf item, and specialty metal, as used 

in this clause, have the meanings given in the 

clause of this solicitation entitled 

‘‘Restriction on Acquisition of Certain 

Articles Containing Specialty Metals’’ 

(DFARS 252.225–7009). 

(b) If the exception in paragraph (c)(2) of 

the clause at DFARS 252.225–7009, 

Restriction on Acquisition of Certain Articles 

Containing Specialty Metals, is used for a 

commercially available off-the-shelf (COTS) 

item, valued at more than $100 per item, to 

be incorporated into a noncommercial end 


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item to be delivered under this contract, the 

Contractor shall— 

(1) Follow the instructions on the Defense 

Procurement and Acquisition Policy Web site 

at http://www.acq.osd.mil/dpap/cpic/ic/ 

restrictions_on_specialty_metals_10_usc_

2533b.html to report information required by 

the contract as follows: 

Contract awarded Report by 

Before July 31, 2009 August 31, 2009. 

August 1–31, 2009 ... September 30, 2009. 

September 1–30, 

2009.

October 31, 2009. 

(2) In accordance with the procedures 

specified at the Web site, provide the 

following information: 

(i) Company Name. 

(ii) Product category of acquisition (i.e., 

Aircraft, Missiles and Space Systems, Ships, 

Tank—Automotive, Weapon Systems, or 

Ammunition). 

(iii) The 6-digit North American Industry 

Classification System (NAICS) code of the 

COTS item, contained in the non-commercial 

deliverable item, to which the exception 

applies. 

(c) The Contractor shall not report COTS 

items that are incorporated into the end 

product under an exception other than 

paragraph (c)(2) of the clause at DFARS 

252.225–7009, such as electronic 

components, commercial item fasteners, 

qualifying country, non-availability, or 

minimal amounts of specialty metal. 

(End of clause) 

[FR Doc. E9–17967 Filed 7–28–09; 8:45 am] 

BILLING CODE 5001–08–P 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Parts 202 and 252 

Defense Federal Acquisition 

Regulation Supplement; Technical 

Amendments 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Final rule. 

SUMMARY: DoD is making technical 

amendments to the Defense Federal 

Acquisition Regulation Supplement 

(DFARS) to update the list of Air Force 

contracting activities and paragraph 

numbering. 

DATES: Effective Date: July 29, 2009. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Michele Peterson, Defense Acquisition 

Regulations System, OUSD (AT&L) 

DPAP (DARS), IMD 3D139, 3062 

Defense Pentagon, Washington, DC 

20301–3062. Telephone 703–602–0311; 

facsimile 703–602–7887. 

SUPPLEMENTARY INFORMATION: This final 

rule amends DFARS text as follows: 

Æ 202.101. Updates the list of Air 

Force contracting activities. 

Æ 252.225–7036. Updates a paragraph 

designation in Alternate I for 

consistency with the corresponding 

paragraph in the basic clause. 

List of Subjects in 48 CFR Parts 202 and 

252 

Government procurement. 

Michele P. Peterson, 

Editor, Defense Acquisition Regulations 

System. 

■ Therefore, 48 CFR parts 202 and 252 

are amended as follows: 

■ 1. The authority citation for 48 CFR 

parts 202 and 252 continues to read as 

follows: 

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

Chapter 1. 

PART 202—DEFINITIONS OF WORDS 

AND TERMS 

■ 2. Section 202.101 is amended in the 

definition of ‘‘Contracting activity’’ by 

revising the list with the heading ‘‘AIR 

FORCE’’ to read as follows: 

202.101 Definitions. 

* * * * * 

Contracting activity * * * 

AIR FORCE 

Office of the Assistant Secretary of the 

Air Force (Acquisition) 

Office of the Deputy Assistant Secretary 

(Contracting) 

Air Force Materiel Command 

Air Force Reserve Command 

Air Combat Command 

Air Mobility Command 

Air Education and Training Command 

Pacific Air Forces 

United States Air Forces in Europe 

Air Force Space Command 

Air Force District of Washington 

Air Force Operational Test & Evaluation 

Center 

Air Force Special Operations Command 

United States Air Force Academy 

Aeronautical Systems Center 

Air Armament Center 

Electronic Systems Center 

Space and Missile Systems Center 

* * * * * 

PART 252—SOLICITATION 

PROVISIONS AND CONTRACT 

CLAUSES 

252.225–7036 [Amended] 

■ 3. Section 252.225–7036 is amended 

as follows: 

■ a. By revising the Alternate I date to 

read ‘‘(JUL 2009)’’; 

■ b. In Alternate I introductory text by 

removing ‘‘(a)(4) and (c) for paragraphs 

(a)(4)’’ and adding in its place ‘‘(a)(8) 

and (c) for paragraphs (a)(8)’’; and 

■ c. In Alternate I by redesignating 

paragraph (a)(4) as paragraph (a)(8). 

[FR Doc. E9–17948 Filed 7–28–09; 8:45 am] 

BILLING CODE 5001–08–P 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Parts 204 and 217 

RIN 0750–AG05 

Defense Federal Acquisition 

Regulation Supplement; Clarification 

of Central Contractor Registration and 

Procurement Instrument Identification 

Data Requirements (DFARS Case 

2008–D010) 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Final rule. 

SUMMARY: DoD has issued a final rule 

amending the Defense Federal 

Acquisition Regulation Supplement 

(DFARS) to address requirements for 

ensuring the accuracy of contractor 

information in the Central Contractor 

Registration (CCR) database and in 

contract documents. Additionally, the 

rule clarifies requirements for proper 

assignment of procurement instrument 

identification numbers. 

DATES: Effective Date: July 29, 2009. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Julian Thrash, Defense Acquisition 

Regulations System, OUSD (AT&L) 

DPAP (DARS), IMD 3D139, 3062 

Defense Pentagon, Washington, DC 

20301–3062. Telephone 703–602–0310; 

facsimile 703–602–7887. Please cite 

DFARS Case 2008–D010. 

SUPPLEMENTARY INFORMATION: 

A. Background 

This final rule reinforces 

requirements for use and maintenance 

of accurate contractor information, to 

permit proper identification and 

tracking of contract data through DoD’s 

business processes. The DFARS changes 

address requirements for— 

Æ Ensuring that contract documents 

contain contractor information that is 

accurate and consistent with the 

information in the CCR database; and 

Æ Proper assignment of procurement 

instrument identification numbers. 

DoD published a proposed rule at 73 

FR 62239 on October 20, 2008. Three 


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