[Federal Register Volume 59, Number 194 (Friday, October 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24773]


[[Page Unknown]]

[Federal Register: October 7, 1994]


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DEPARTMENT OF DEFENSE
48 CFR Parts 209, 225, and 252

 

Defense Federal Acquisition Regulation Supplement; Award to 
Foreign Controlled Contractors

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

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SUMMARY: The Director of Defense Procurement has issued a final rule 
amending the Defense Federal Acquisition Regulation Supplement (DFARS) 
to implement a statutory prohibition against award of a DoD contract 
under a national security program to an entity controlled by a foreign 
government.

DATES: Effective date: September 29, 1994.

FOR FURTHER INFORMATION CONTACT:
Ms. Michele Peterson, (703) 604-5929.

SUPPLEMENTARY INFORMATION:

A. Background

    This amends and finalizes an interim rule published as Item VII of 
DAC 91-5, at 58 FR 28458, on May 13, 1993, that implemented 10 U.S.C. 
2536. 10 U.S.C. 2536 prohibits award of a DoD contract under a national 
security program to an entity controlled by a foreign government, if 
access to proscribed information is required to perform the contract.
    Section 842 of the National Defense Authorization Act for Fiscal 
Year 1994 (Pub. L. 103-160) amended 10 U.S.C. 2536 by revising the 
definition of ``entity controlled by a foreign government'' to exclude 
organizations and corporations that are owned, but are not controlled, 
either directly or indirectly, by a foreign government if the ownership 
of the organization or corporation by the foreign government was 
effective before October 23, 1992.
    This final rule differs from the interim rule in that it (1) 
revises the definition of ``entity controlled by a foreign government'' 
as required by Section 842 of Public Law 103-160; (2) revises the 
definition of ``effectively owned or controlled'' for clarity; (3) 
revises the definition of ``foreign government'' for consistency with 
the regulations of the Treasury Department Office of Foreign Assets 
Control at 31 CFR Ch. V; and (4) contains minor clarifying revisions.

B. Regulatory Flexibility Act

    The Department of Defense certifies that this final rule will not 
have a significant economic impact on a substantial number of small 
entities under the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
because the rule only applies to a small number of contracts and 
companies. No comments were received on the impact of this rule on 
small entities during the public comment period.

C. Paperwork Reduction Act

    The Paperwork Reduction Act applies. The information collection 
requirement in this final rule is approved through December 31, 1996, 
under OMB Control Number 0704-0353.

List of Subjects in 48 CFR Parts 209, 225, and 252

    Government procurement.
Claudia L. Naugle,
Deputy Director, Defense Acquisition Regulations Council.

    Accordingly, the interim rule amending 48 CFR Parts 209, 225, and 
252, which was published at 58 FR 28458 on May 13, 1993, is hereby 
adopted as a final rule with the following changes.
    1. The authority citation for 48 CFR Parts 209, 225, and 252 
continues to read as follows:

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

PART 209--CONTRACTOR QUALIFICATIONS

    2. Section 209.101 is revised to read as follows:


209.101  Definitions.

    ``Entity controlled by a foreign government,'' ``foreign 
government,'' and ``proscribed information,'' are defined in the 
provision at 252.209-7002, Disclosure of Ownership or Control by a 
Foreign Government.
    3. Section 209.104-1 is amended by revising paragraph (g)(ii)(A) 
and the last two sentences of paragraph (g)(ii)(C) to read as follows:


209.104-1  General standards.

* * * * *
    (g) * * *
    (ii) * * *
    (A) Under 10 U.S.C. 2536(a), no DoD contract under a national 
security program may be awarded to an entity controlled by a foreign 
government if that entity requires access to proscribed information to 
perform the contract.
* * * * *
    (C) * * * Waiver requests, prepared by the requiring activity in 
coordination with the contracting officer, shall be processed through 
the Director of Defense Procurement, Office of the Under Secretary of 
Defense (Acquisition & Technology), and shall include a proposed 
national interest determination. The proposed national interest 
determination, prepared by the requiring activity in coordination with 
the contracting officer, shall include:
* * * * *
    4. Section 225.702 is revised to read as follows:


225.702  Restrictions.

    See 209.104-1(g)(i) for restrictions on contracting with firms 
owned or controlled by foreign governments that support terrorism. See 
209.104-1(g)(ii) for prohibition on award of a DoD contract under a 
national security program to an entity controlled by a foreign 
government when access to proscribed information is required to perform 
the contract.
    5. Section 252.209-7002 in lieu of ``APR is amended by revising the 
clause date to read ``SEP 1994'' and by revising paragraphs (a)(1), 
(2), (3) and (b) to read as follows:


252.209-7002  Disclosure of Ownership or Control by a Foreign 
Government.

* * * * *
    (a) Definitions.
    As used in this provision--
    (1) Effectively owned or controlled means that a foreign government 
or any entity controlled by a foreign government has the power, either 
directly or indirectly, whether exercised or exercisable, to control 
the election, appointment, or tenure of the Offeror's officers or a 
majority of the Offeror's board of directors by any means, e.g., 
ownership, contract, or operation of law (or equivalent power for 
unincorporated organizations).
    (2) Entity controlled by a foreign government--
    (i) Means--
    (A) Any domestic or foreign organization or corporation that is 
effectively owned or controlled by a foreign government; or
    (B) Any individual acting on behalf of a foreign government.
    (ii) Does not include an organization or corporation that is owned, 
but is not controlled, either directly or indirectly, by a foreign 
government if the ownership of that organization or corporation by that 
foreign government was effective before October 23, 1992.
    (3) Foreign government includes the state and the government of any 
country (other than the United States and its possessions and trust 
territories) as well as any political subdivision, agency, or 
instrumentality thereof.
* * * * *
    (b) Prohibition on award.
    No contract under a national security program may be awarded to an 
entity controlled by a foreign government if that entity requires 
access to proscribed information to perform the contract, unless the 
Secretary of Defense or a designee has waived application of 10 U.S.C. 
2536(a).
* * * * *
[FR Doc. 94-24773 Filed 10-6-94; 8:45 am]
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