Source: http://ussuperalloys.com/topics/specialty_metals_national_security
Timestamp: 2019-03-23 12:29:35
Document Index: 102767000

Matched Legal Cases: ['§2533', '§2533', '§823', '§139', '§2501', '§2533', '§2533']

Specialty Metals National Security | US Superalloys
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This memorandum summarizes the regulatory concerns applicable to the export of specialty steel and specialty metals products.
What are “Specialty Metals”?
“Specialty metal” defined as:
w/alloy content exceeding 1.65% manganese, 0.6% silicon or copper
w/alloy content exceeding 0.25% aluminum, chromium, cobalt, niobium, molybdenum, nickel, titanium, tungsten, or vanadium
Metal alloys of nickel, iron-nickel, and cobalt base alloys containing other alloying metals (except iron) above 10%
Zirconium & zirconium base alloys
Military Applications (F-22A)
VSMPO-Avisma is the largest supplier of aerospace titanium
Formerly 77% owned by Rostec (parent of Rosoboronexport), today is:
25% Rostec
50.02% Nordcom (25% Gazprombank / 75% VSMPO-Avisma management)
STEM & Industry Investment
Since 2010, U.S. titanium companies have invested more than $1 billion in capital improvements and research & development
Titanium industry is strongly supportive of National Network for Manufacturing Innovation (NNMI) projects:
National Additive Manufacturing Innovation (NAMI)
Lightweight and Modern Metals Manufacturing Innovation (LM3I)
Digital Manufacturing & Design Innovation (DMDI)
The titanium industry is pursuing advanced 3-D printing and laser sintering of complex, low-volume parts to reduce cost
Source: Form 10-K for FY2012 for RTI International Metals, Precision Castparts Corp., and Allegheny Technologies, Inc.
Specialty Metals History
1941 – 1994: Berry Amendment introduced, requiring acquisition of certain items from domestic sources; reintroduced in annual defense appropriations bills until made permanent in P.L. 103-139
FY1973 Defense Appropriations Act: specialty metals added to the Berry Amendment; subsequent SECDEF Melvin Laird Memo serves as foundation for today’s specialty metals clause
“Rather it is clear that its purpose is to afford reasonable protection to the specialty metals industry to help preserve our domestic production capacity to satisfy mobilization requirements, without forcing a massive disruption of our existing procurement methods and programs.”
FY2007 NDAA: Berry Amendment & Specialty Metals split (10 U.S.C. §2533a & 10 U.S.C. §2533b)
FY2008 NDAA: 2% de minimis and COTS exceptions added, National Security waiver added, market basket / co-mingling allowed
DFARS Final Rule (FR Vol. 74, No. 144; 7/29/2009): DoD interprets “produce” to include quenching & tempering of armor plate
FY2011 NDAA §823: Congress requires DoD to review its rule, taking into consideration Congressional intent
FY2013 NDAA House Report: requires a GAO report on “Factors Affecting U.S. Titanium Aircraft Component Manufacturers’ Market Share of DoD Business”
F-35 National Security Waivers (Nov. 2012): AT&L issues first waiver for non-compliant Japanese specialty metals based on schedule delay (4 years) and requalification cost ($6M); 3 domestic / qualified firms currently supply the same specialty metal to DoD
F-35 National Security Waivers (Dec. 2012): AT&L amends first waiver to include non-compliant specialty metals from China
DFARS Final Rule (FR Vol. 78, No. 60; 3/28/2013): DoD redefines “produce” as atomization, sputtering, or final consolidation of non-melt derived powders
F-35 National Security Waivers (Apr. 2012): AT&L issues second waiver for non-compliant specialty metal of unknown origin and provides a second amendment to the first waiver to cover additional non-compliant specialty metals from China
F-35 National Security Waivers (Jun. 2012): HASC requires GAO investigation of National Security Waivers; AT&L and PEO-JSF acknowledge waiver issue in written testimony to SASC
Ongoing Compliance Concerns
Lack of transparency on the issuance of and justification for National Security Waivers
Concerns about “supply chain remediation” efforts and follow-up with small business suppliers
Waivers based on end items
Use of National Security Waiver despite domestic capabilities
GAO Analysis – Titanium
Cost to DoD:
“Officials from prime contractors and aircraft component manufacturers told us that price differences have not been large enough to have a significant impact on the cost of a DoD aircraft.”
“According to industry officials, DoD aircraft and engine prime contractors leverage their buying power by arranging long term agreements with titanium producers to ensure titanium availability and pre-negotiated prices.”
“Industry officials noted that U.S. produced titanium has been competitively priced relative to foreign produced titanium.”
“Industry officials told us that prime contractors’ long term agreements, prime contractors’ approval of titanium producers, and industry consolidation—rather than titanium price—are major factors affecting the ability of U.S. aircraft component manufacturers to compete for DoD contracts.”
Source: GAO, Factors Affecting U.S. Titanium Aircraft Component Manufacturers’ Market Share of DoD Business
Additional Statutory Guidance
10 U.S.C. §139(b):
DASD-Manufacturing & Industrial Base Policy shall be the principal advisor to Office of AT&L for—
Ensuring policies of the Department of Defense for developing and maintaining the defense industrial base of the United States and ensuring a secure supply of materials critical to national security.
10 U.S.C. §2501:
SECDEF shall develop a strategy to ensure the national technology and industrial base is capable of—
Ensuring reliable sources of materials critical to national security, such as specialty metals, armor plate, and rare earth elements
Protecting the Integrity of the Specialty Metals Clause
Reuters (3 Jan. 2014) report of national security waivers for F-35
Reuters (10 Mar. 2014) report of Chinese parts in F-16, B-1B, SM-3
National security waiver process needs transparency to maintain the carefully crafted balance between suppliers and customers
Specialty metals are unique, long lead-time materials that are critical to national security
§2533b is the result of a healthy paradigm shift among producers of specialty metals, prime contractors, and DoD
GAO’s investigation demonstrates that the specialty metals statute has no significant impact on competitiveness or DoD weapon system cost
Key acquisition and industrial base offices of OSD have responsibility for ensuring reliable supply of specialty metals
Ensure transparency of future national security waivers
The existing balance struck by §2533b ought to be maintained to ensure a vibrant national security industrial base