Source: https://www.federalregister.gov/documents/2009/08/17/E9-19647/revision-of-department-of-homeland-security-acquisition-regulation-restrictions-on-foreign
Timestamp: 2017-11-22 20:33:59
Document Index: 654074258

Matched Legal Cases: ['ART 3025', 'art 3025', 'arts 3025', 'art 3025', 'art 3052', 'art 25', 'art 25', 'art 25', 'art 25', 'arts 3015', 'art 3025', 'art 25', 'art 3052']

A Rule by the Homeland Security Department on 08/17/2009
74 FR 41346
41346-41351 (6 pages)
E9-19647
III. Discussion of Interim Rule
Applicability of International Agreements
CHAPTER 30—DEPARTMENT OF HOMELAND SECURITY
PART 3025—FOREIGN ACQUISITION
Subpart 3025.70—American Recovery and Reinvestment Act Restrictions on Foreign Acquisition
Requirement for Use of Certain Domestic Commodities (AUG 2009)
https://www.federalregister.gov/d/E9-19647 https://www.federalregister.gov/d/E9-19647
Start Preamble Start Printed Page 41346
Interim rule with requests for comments.
The Department of Homeland Security (DHS) is amending its Homeland Security Acquisition Regulation (HSAR) parts 3025 and 3052 to reflect a statutory change limiting the acquisition of products containing textiles from sources outside the United States.
Comment Date: Comments and related material submitted electronically must be submitted to the Federal eRulemaking Portal http://www.regulations.gov on or before September 16, 2009. Comments and related material submitted by mail must reach the Department of Homeland Security, Office of the Chief Procurement Officer, Acquisition Policy and Legislation Branch at the address shown below on or before September 16, 2009, to be considered in the formation of the final rule.
You may submit comments identified by DHS docket number DHS-2009-0081, using any one of the following methods:
(1) Via the Internet at the Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
We encourage you to participate in this rulemaking by submitting comments and related materials. Comments and related materials should be organized by HSAR Part, and indicate the specific section or sections of the interim rule that is being commented on. All comments received will be posted without change to http://www.regulations.gov, including any personal information provided. See ADDRESSES above for information on how to submit comments. If you submit comments by mail, please submit them in an unbound format, no larger than 81/2 by 11 inches, suitable for copying and electronic filing. You may submit comments either by mail or via the Internet as identified in the ADDRESSES section above; but to avoid duplication, DHS requests that you submit comments and materials by only one method. If you would like DHS to acknowledge receipt of comments submitted by mail, please enclose a self-addressed, stamped postcard or envelope. DHS will consider all comments and materials received during the comment period. We may change the final rule in view of them.
Viewing comments and documents: To view comments and read background documents related to this rulemaking, go to http://www.regulations.gov, type the docket number for this rulemaking, DHS-2009-0081, into the “Search Documents” field and click on “Go>>.” Individuals without Internet access can make alternate arrangements for viewing comments and documents related to this rulemaking by contacting DHS at the FOR FURTHER INFORMATION CONTACT information above.
The American Recovery and Reinvestment Act of 2009 (“Recovery Act”), Public Law 111-5, 123 Stat. 115, 165-166 (Feb. 17, 2009), contains restrictions on the Department's acquisition of certain foreign textile products. Specifically, the Recovery Act at section 604, codified as 6 U.S.C. 453b, limits the Department's acquisition of foreign textile products under DHS contract actions entered into on or after August 16, 2009, using funds appropriated or otherwise made available to DHS on or before February 17, 2009, the date of the Act. DHS may not use those funds for the procurement of certain clothing and other textile items directly related to the national security interests of the United States if such items are not domestically grown, reprocessed, reused, or produced.
Section 604 does, however, contain exceptions. The law requires DHS to apply these restrictions in a manner consistent with United States obligations under international agreements (such as free trade agreements and the World Trade Organization Agreement on Government Procurement). Moreover, restrictions on some of the covered textile items do not apply to commercial item acquisitions. Also, the Recovery Act's restriction on the Department's acquisition of covered foreign textiles does not apply to purchases for amounts not greater than the simplified acquisition threshold (SAT) (currently $100,000), when covered items of satisfactory quality and sufficient quantity cannot be procured as needed at United States market prices, when a covered item contains less than 10% non-compliant fibers, when the procurement is made by vessels in foreign waters, or for emergency procurements outside of the United States.
This interim rule makes amendments to the Homeland Security Acquisition Regulation (HSAR) to add solicitation provisions, contract clauses and related policy statements implementing these requirements and exceptions for certain DHS contracts, option exercises and orders.
This rulemaking revises 48 CFR part 3025, Foreign Acquisitions, and part 3052, Solicitation Provisions and Contract Clauses, to limit acquisition of covered items for certain DHS acquisitions above the simplified acquisition threshold, unless DHS determines that such items qualify for a statutory exception. The rulemaking also implements the aspect of the law that requires that the restriction be applied in a manner consistent with United States obligations under international agreements.
The “Buy American” restriction in Section 604 of the Recovery Act only covers items “directly related to the national security interests of the United States.” The Act does not further define this qualifying phrase and the related congressional committee reports shed no further light on the scope, boundaries, or intention behind the phrase itself. The House of Representatives Conference Report describes section 604 generally by stating: “The conferees include and modify a provision, as proposed by the House, related to the procurement of apparel and textile products by the Department of Homeland Security. This language is modeled after the Berry Amendment (10 U.S.C. 2533a), which Start Printed Page 41347has required the Department of Defense to purchase domestically-manufactured textiles and apparel.” H. Conf. Rep. No. 111-116, p. 438 (Feb 12, 2009). The Berry Amendment, however, does not employ the same “national security interests” phrase. Moreover, other Recovery Act acquisition restrictions, including section 1605 (which contemporaneously provided Government-wide restrictions on the use of Recovery Act funds to construct, alter, maintain, or repair public buildings or works unless all iron, steel, and manufactured goods that are used are produced in the United States) likewise do not contain this phrase.
Remarks from the floor of the House of Representatives concerning section 604 suggest deep concern “that we could have people crossing the border illegally wearing [U.S. Customs and Border Protection] or [Transportation Security Administration] uniforms manufactured in foreign countries.” 155 Cong. Rec. H620, H723 (Jan 28, 2009) (remarks of Committee on Homeland Security Chairman Hon. Bennie G. Thompson upon introduction of the Kissell amendment, which, with some adjustments, became section 604); cf. 153 Cong. Rec. H4646-H4655, H4651 (May 9, 2007) (remarks of Congressman Hayes, who in debate on a proposed, similarly worded amendment in the previous Congress said it “* * * provides the assurance that the Department of Homeland Security officials who work on the front lines of national security are the only people wearing these sensitive uniforms.”).
Many different and diverse statutes, regulations and executive orders define the expressions “national security” and “national security interests.” The most common of these, used in connection with classification of information and personnel and facilities security, defines these terms to mean pertaining to “the national defense or foreign relations of the United States.” See, e.g ., Executive Order 12958, section 6.1(y) (term defined for order on classified national security information); 10 U.S.C. 801(16) (term defined for purposes of the Code of Military Justice). Other statutes employ other usages and definitions for these terms, which, when standing alone or when used with other words, fit the context and purpose of the particular statute. See, e.g., 8 U.S.C. 1189(d)(2) (when used to determine threats posed by foreign terrorist organizations, “means the national defense, foreign relations, or economic interests of the United States”); 39 CFR 233.3 (when used with respect to authorizing the use of U.S. Postal mail covers, “protection of national security” means to protect the United States from actual or potential threats to its security by a foreign power or its agents, including an attack or other grave, hostile act; sabotage, or international terrorism; or clandestine intelligence activities, including commercial espionage).
DHS considered employing the most common definition of the expression—pertaining to the national defense or foreign relations of the United States—but, with the exception of possible isolated applications to the Coast Guard, found this definition imprecise and an awkward fit for DHS functions that acquire textiles because, in many instances, those DHS components are not designated by law as national defense or foreign relations agencies. DHS considered covering all items acquired by DHS as “directly related to the national security interests of the United States,” but ultimately rejected that approach because to do so would render the statutory words “directly related to national security interests of the United States” superfluous (i.e., omission of the qualifying phrase by lawmakers would have achieved the same result). DHS also notes that lawmakers are not reluctant to employ the expression “homeland security” to define the reach of a statute, and chose not do so in this instance. See, e.g., 6 U.S.C. 468 (“homeland security missions” of the Coast Guard defined), 6 U.S.C. 482 (“homeland security information” defined). Moreover, applying the expression to the entirety of textile items purchased by DHS, irrespective of function or use, would include any number of activities that, while worthwhile, would render the expression “national security interests” patently overbroad, equating it with any activity that contributes to the strength of the Nation by promoting the general welfare. See Cole v. Young, 351 U.S. 536, 544 (1956). In addition, the previously mentioned congressional floor remarks discussed the statute as principally pertaining to border and transportation security, with a potential for later expansion.
DHS thus defines items “directly related to national security interests” at 48 CFR 3025.7001(e) as items “intended for use in a Department of Homeland Security action protecting the nation from internal or external threats.” This definition includes the following elements:
“Intended for use”—if an item is not acquired with the intention of being used in a manner related to national security interests, it is not covered, regardless of its eventual actual use;
“Use in a DHS action”— if an item will not be used in a protective action performed by DHS, it is not covered (for example, drapes for a DHS action office would likely not qualify, but textile body armor likely would qualify);
“Protecting the nation from internal or external threats”—the intended DHS action must be a protective action (for example, patrolling the border is a protective action; parading for dignitaries is not).
So defined, the interim regulatory provisions capture only the relevant aspects of the Recovery Act “national security interests” requirement, and in a manner consonant with the known legislative intent and DHS functions. The expression captures items, among other items, used in actions by DHS components with border, transportation, and maritime security functions, and any other DHS component, where ready access by hostile foreign State, organized non-State, or criminal actors to the items, their manufacturing method, or supply chain, would pose a significant risk of circumvention or cooption of a DHS protective action.
Other provisions of the interim regulations reflect the Recovery Act's coverage of some textile items regardless of whether they are a commercial or a noncommercial item and other textile items only if they are noncommercial items. Interim 3025.7002-1(a)(1)-(2), consistent with sections 604(b) and (f), cover the following textile items regardless of whether they are commercial or noncommercial:
3025.7002-1(a)(1)—clothing and the materials and components thereof, other than sensors, electronics, or other items added to, and not normally associated with, clothing (and the materials and components thereof); or
3025.7002-1(a)(2)—tents, tarpaulins, covers, textile belts, bags, protective equipment (including but not limited to body armor), sleep systems, load carrying equipment (including but not limited to fieldpacks), textile marine equipment, parachutes, or bandages.
Interim 3025.7002-1(b), consistent with Recovery Act sections 604(b) and (f), only covers noncommercial textile items as follows:
3025.7002-1(b)—cotton and other natural fiber products, woven silk or woven silk blends, spun silk yarn for cartridge cloth, synthetic fabric or coated synthetic fabric (including all textile fibers and yarns that are for use in such fabrics), canvas products, or wool (whether in the form of fiber or yarn or contained in fabrics, materials, or manufactured articles); or any item of individual equipment manufactured Start Printed Page 41348from or containing such fibers, yarns, fabrics, or materials.
The interim regulations at 3025.7002-2 also reflect the circumstances wherein the Recovery Act excludes textile items from coverage or exempts covered items from the acquisition limitations; including,
Acquisitions at or below the simplified acquisition threshold (currently $100,000), as expressed and defined in the Federal Acquisition Regulation (FAR).
Acquisition of items not directly related to national security interests of the United States, as discussed above.
Acquisitions of any of the items otherwise covered by (HSAR) 48 CFR 3025.7002-1, if the Chief Procurement Officer determines, based on procedures described in the interim regulation, that the item grown, reprocessed, reused, or produced in the United States cannot be acquired as and when needed in a satisfactory quality and sufficient quantity at United States market prices.
Acquisitions of items listed as “nonavailable articles” in (FAR) 48 CFR 25.104, as provided in the “availability exception” at Recovery Act section 604(c).
Emergency acquisitions by activities located outside the United States, as stated in the Recovery Act.
Acquisitions by vessels in foreign waters, as stated in the Recovery Act.
Acquisitions of incidental amounts of cotton, other natural fibers, wool or other item covered by (HSAR) 48 CFR 3025.7002-1(a)-(b) incorporated in an end product. This is an amount for which the estimated value of the covered item is not more than 10 percent of the total price of the end product, as stated in the Recovery Act.
As discussed more fully below, acquisitions of textile items otherwise covered by (HSAR) 48 CFR 3025.7002-1(a)-(b) for which restricting a procurement of the items to those that have been grown, reprocessed, reused, or produced in the United States would be inconsistent with United States obligations under international agreements.
The Recovery Act at section 604(k) requires that DHS implement the section “consistent with United States obligations under international agreements.” This means that to the extent that DHS and its components are subject to the various United States bilateral and plurilateral free trade agreements (FTAs) and the WTO Government Procurement Agreement (GPA), DHS textile acquisitions must be consistent with those obligations.
The list of United States trade agreements relevant for procurement appear in the FAR at 48 CFR 25.400 (a) (1) and (2). The FAR at 48 CFR 25.003 lists the signatories to the various free trade agreements in the definition of “Free Trade Agreement country” and lists the signatories to the GPA in the definition of “World Trade Organization Government Procurement Agreement (WTO GPA) country.” Items from a Free Trade Agreement country or a WTO GPA country are “eligible products.”
The United States has no obligations with respect to DHS procurements under the U.S.-Oman Free Trade Agreement. Procurements by the Transportation Security Administration (TSA) are excluded from all United States obligations, except with respect to the North American Free Trade Agreement (NAFTA) and the U.S.-Chile Free Trade Agreement. Accordingly, for all DHS components, except TSA as noted above, the interim requirements of new (HSAR) 48 CFR 3025.225 would be inapplicable to items that are eligible products under (FAR) 49 CFR Subpart 25.4. This means that TSA, except with regard to products from Canada, Chile or Mexico, would not use (FAR) 48 CFR Subpart 25.4 in its procurements to exempt an item from a designated country from the requirements of the Act, but all other DHS components would do so.
The interim regulations provide that covered DHS components must apply (FAR) 48 CFR Subpart 25.4 to exempt eligible products from qualified countries if the procurement exceeds the GPA threshold or the relevant FTA threshold, noting that the Recovery Act foreign textiles acquisition limitation does not apply to procurements below the simplified acquisition threshold ($100,000). To the extent a procurement is for an eligible product from a country with a trade agreement threshold beneath the SAT (e.g., $67,826), the trade agreement and (FAR) 48 CFR Subpart 25.4 would apply to all procurements over the trade agreement threshold, and the requirements of HSAR 3025.70 would not apply.
The Recovery Act foreign textiles acquisition limitation applies to covered items from countries that are not GPA or FTA countries regardless of which DHS component makes the acquisition. The interim HSAR subpart applies for all DHS components if the country of origin for an item is not a WTO GPA country or a Free Trade Agreement country (see (FAR) 48 CFR 25.003 definitions). Under the interim regulations, DHS components cannot procure a covered textile item from a non-designated country unless one of the other Recovery Act exceptions applies to the acquisition. Even if such exception applies, however, the acquisition may still be covered by the Buy American Act.
The Federal Procurement Data System (FPDS) shows that during FY 2008, DHS awarded 1,283 contract actions for textile products totaling $74,132,846. Of the 322 businesses that received these awards, 249 (77%) were small businesses and 73 were identified as being “other than small business.” The total number of awards for products that originated in the United States was approximately 97% of the total number of awards. The total number of awards to small businesses for products that originated in the United States was approximately 98% (958 awards) of the total number of awards to small entities for textile products (981). FPDS data show only 23 awards were made to small businesses for textiles originating outside of the United States. Even if all of those awards for products that originated outside the United States would have been awarded to a small business that did not provide products originating in the United States, it would impact a very small proportion of awards to small businesses (2.3%). Also, based on this FPDS data, we estimate that these 23 awards were made to 12 unique small businesses. FPDS further informs us that the majority of these 23 awards made to 12 unique small businesses were made because of “domestic nonavailability.” As items determined to be unavailable in the United States are excluded from the scope of this rule, we estimate that fewer than 5 small businesses would have an award (or awards) impacted by this rule. Accordingly, the number and proportion of small entities potentially impacted by this rule are small and the amount of impact is not significant.
Based on this analysis, DHS does not believe this interim rule will have a significant economic impact on a Start Printed Page 41349substantial number of small entities and that, other than the alternative interpretations discussed above related to national security interests, there are no additional significant alternatives to the interim rule that would minimize the impact of the interim rule on small entities. There are also no relevant Federal rules that duplicate, overlap, or conflict with the interim rule. DHS will, however, consider comments from small entities concerning the affected HSAR parts 3015, 3016, 3025, and 3052. Interested parties should submit such comments separately and should cite 5 U.S.C. 601, et seq. (HSAR Case 2007-004) in the comments.
This interim rule is a significant regulatory action under section 3(f) of Executive Order 12866 and the Office of Management and Budget has reviewed it under that Order. An assessment of potential costs and benefits under section 6(a)(3) of that Order is included within the Small Entity Analysis, Section A., above.
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding the interim rule so that they can better evaluate its effects on them and participate in the rulemaking. Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by DHS employees, call 1-888-REG-FAIR (1-888-734-3247). The DHS will not retaliate against small entities that question or complain about this interim rule or any DHS policy.
The Paperwork Reduction Act (Pub. L. 104-13) does not apply because the interim rule contains no information collection requirements. Accordingly, the Department will not submit a change request for any burdens concerning this interim rule to the Office of Management and Budget under 44 U.S.C. 3501, et seq.
A determination has been made under the authority of the DHS Chief Procurement Officer that urgent and compelling reasons exist to promulgate this interim rule without prior opportunity for public comment. See 41 U.S.C. 418b(d); Department of Homeland Security Delegation No. 0700 (II.)(b). This action is necessary because the American Recovery and Reinvestment Act of 2009 became effective on enactment on February 17, 2009, and the DHS foreign textile acquisition limitations become applicable to contracts entered into after August 16, 2009. Timely compliance with the Act is not possible if a final rule is promulgated after a thirty-day public comment period. Moreover, without effective HSAR provisions in place by August 16, 2009, there is an increased risk of inconsistent application of the Recovery Act section 604 requirements and a potential lack of public understanding and transparency as to the processes and procedures for complying with the statute. Pursuant to Public Law 98-577 and FAR 1.501, however, the Department will consider public comments received in response to this interim rule in the formation of the final rule.
Accordingly, DHS amends (HSAR) 48 CFR chapter 30 as follows:
1. Add part 3025 to read as follows:
3025.7000
3025.7001
3025.7002
Restrictions on clothing, fabrics, and related items.
3025.7002-1
3025.7002-2
3025.7002-3
Specific application of trade agreements.
3025.7003
(a) “Commercial,” as applied to an item described in (HSAR) 48 CFR 3025.7002-1, means an item of supply, whether an end product or component, that meets the definition of “commercial item” set forth in (FAR) 48 CFR 2.101.
(b) “Component” means any item supplied to the Government as part of an end product or of another component.
(c) “End product” means supplies delivered under a line item of a contract.
(d) “Non-commercial,” as applied to an item described in (HSAR) 48 CFR 3025.7002-1, means an item of supply, whether an end product or component, that does not meet the definition of “commercial item” set forth in (FAR) 48 CFR 2.101.
(e) “Item directly related to national security interests” means an item intended for use in a Department of Homeland Security action protecting the nation from internal or external threats, including protecting the nation's borders, transportation system, maritime domain or critical infrastructure, as determined by the contracting officer.
(a) Commercial or non-commercial items—(1) Clothing and the materials and components thereof, other than sensors, electronics, or other items added to, and not normally associated with, clothing (and the materials and components thereof); or (2) Tents, tarpaulins, covers, textile belts, bags, protective equipment (such as body armor), sleep systems (sleeping bags), load carrying equipment (such as Start Printed Page 41350fieldpacks), textile marine equipment, parachutes or bandages.
(b) Non-commercial items—
(c) Acquisitions of any of the items otherwise covered by (HSAR) 48 CFR 3025.7002-1, if the Chief Procurement Officer determines that the item grown, reprocessed, reused, or produced in the United States cannot be acquired as and when needed in a satisfactory quality and sufficient quantity at United States market prices. When this exception is used—
(3) The supporting documentation for the CPO determination prepared by the DHS Component(s) shall include—
(a) For covered items entitled to non-discriminatory treatment under the World Trade Organization Agreement on Government Procurement (WTO GPA), or any Free Trade Agreement (FTA) listed in (FAR) 48 CFR Subpart 25.4, this subpart is applied as follows—
2. The authority citation for part 3052 continues to read as follows:
3. Add section 3052.225-70 to read as follows:
3052.225-70
Requirement for Use of Certain Domestic Commodities.
(2) “Component” means any item supplied to the Government as part of an end product or of another component.
(4) “Non-commercial,” as applied to an item described in subsections (b) or (c) of this clause, means an item of supply, whether an end product or component, that does not meet the definition of “commercial item” set forth in (FAR) 48 CFR 2.101.
(5) “Qualifying country” means a country with a memorandum of understanding or international agreement with the United States under which DHS procurement is covered.
(6) “United States” includes the possessions of the United States.
Start Printed Page 41351
(d) This clause does not apply—
[FR Doc. E9-19647 Filed 8-13-09; 8:45 am]