[Federal Register Volume 61, Number 120 (Thursday, June 20, 1996)]
[Rules and Regulations]
[Pages 31646-31649]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14529]



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DEPARTMENT OF DEFENSE
48 CFR Parts 25, 27, and 52

[FAC 90-39, FAR Case 93-310, Item XIV]
RIN 9000-AF60


Federal Acquisition Regulation; Implementation of the North 
American Free Trade Agreement Implementation Act

AGENCIES: Department of Defense (DOD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Revised interim rule with request for comment.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council have agreed to a revised interim rule 
implementing the North American Free Trade Agreement (NAFTA) 
Implementation Act. This regulatory action was not subject to Office of 
Management and Budget review under Executive Order 12866, dated 
September 30, 1993, and is not a major rule under 5 U.S.C. 804.

DATES: Effective Date: June 20, 1996.

    -Comment Date: Comments should be submitted to the FAR Secretariat 
at the address shown below on or before August 19, 1996, to be 
considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to: -
General Services Administration, FAR Secretariat (MVRS), 18th & F 
Streets, NW., Room 4035, Attn: Ms. Beverly Fayson, Washington, DC 
20405. Please cite FAC 90-39, FAR case 93-310 in all correspondence 
related to this case.

FOR FURTHER INFORMATION CONTACT: Mr. Peter O'Such at (202) 501-1759 in 
reference to this FAR case. For general information, contact the FAR 
Secretariat, Room 4037, GS Building, Washington, DC 20405 (202) 501-
4755. Please cite FAC 90-39, FAR case 93-310.

SUPPLEMENTARY INFORMATION:

A. Background

    While the North American Free Trade Agreement (NAFTA) remains in 
effect, the Canadian Free Trade Agreement (CFTA) is suspended. The CFTA 
interim rule published December 30, 1988 (53 FR 53340, FAC 84-41, FAR 
case 88-070), which revised the FAR coverage

[[Page 31647]]

concerning Canadian products, has been revised and updated by FAR case 
93-310, which implements NAFTA. As a result, FAR case 88-070 was closed 
into FAR case 93-310.
    An interim rule was published January 5, 1994 (59 FR 544, FAC 90-
19, FAR case 93-310), to implement NAFTA. Based on the analysis of 
public comments, the interim rule has been revised to--
    (1) Add language to FAR 25.402 to address the applicability of 
NAFTA to services.
    (2) Implement Article 1709(10) of NAFTA and Section 6 of Executive 
Order 12889 of December 27, 1993. FAR 27.208 is added to make 
contracting personnel aware of the requirements to obtain authorization 
from the owner of technology covered by a valid patent prior to use by 
or for the Federal Government and of waivers permitted under Section 6 
of Executive Order 12889.
    (3) Revise 52.212-3 and 52.212-5 to reflect changes to 52.225-20 
and 52.225-21, accomplished in this revised interim rule.
    (4) Add alternates for the provision at 52.225-20 and the clause at 
52.225-21 for use in procurements between $25,000 and $50,000.
    (5) Add a new clause 52.225-22, ``Balance of Payments Program--
Construction Materials--NAFTA,'' for construction contracts awarded 
outside the United States with an estimated value over $6,500,000.

B. Regulatory Flexibility Act

    The amendments in this revised interim rule are not expected to 
have a significant economic impact on a substantial number of small 
entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 
601 et seq., because (1) the new clause, ``Balance of Payments 
Program--Construction Materials--NAFTA, is only for construction 
contracts awarded outside the United States; (2) the new coverage at 
27.208 pertains only to patents held by parties from NAFTA countries; 
and (3) other changes are primarily for clarification or editorial. An 
Initial Regulatory Flexibility Analysis (IRFA) was prepared and 
provided to the Chief Counsel for Advocacy for the Small Business 
Administration when the interim rule was issued in January 1994. A copy 
of the IRFA may be obtained from the FAR Secretariat. Comments are 
invited. Comments from small entities concerning the affected FAR 
subparts will be considered in accordance with 5 U.S.C. 610. Such 
comments must be submitted separately and cite 5 U.S.C. 601 et seq. 
(FAC 90-39, FAR case 93-310), in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the FAR do not impose recordkeeping or information collection 
requirements, or collections of information from offerors, contractors, 
or members of the public which require the approval of OMB under 44 
U.S.C. 3501 et seq.

D. Determination to Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense (DOD), the Administrator of General Services (GSA), and the 
Administrator of the National Aeronautics and Space Administration 
(NASA) that compelling reasons exist to promulgate this revised interim 
rule without prior opportunity for public comment. This action is 
necessary because the North American Free Trade Agreement 
Implementation Act, signed into law on December 8, 1993, became 
effective on January 1, 1994, and several substantive changes to the 
existing interim rule are needed to fully implement the Act. However, 
pursuant to Public Law 98-577 and FAR 1.501, public comments received 
in response to this interim rule will be considered in the formation of 
the final rule.

List of Subjects in 48 CFR Parts 25, 27, and 52

    Government procurement.

    Dated: June 4, 1996.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.
    Therefore, 48 CFR parts 25, 27, and 52 are amended as set forth 
below:
    1. The authority citation for 48 CFR parts 25, 27, and 52 continues 
to read as follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 25--FOREIGN ACQUISITION

    2. Section 25.305 is amended in the section heading and in the 
heading of paragraph (c) by revising the word ``clause'' to read 
``clauses''; designating the existing paragraph (c) as (c)(1); and 
adding paragraph (c)(2) to read as follows:


25.305   Solicitation provision and contract clauses.

* * * * *
    (c) * * *
    (2) For construction contracts outside the United States, with an 
estimated value of $6,500,000 or more, insert the clause at 52.225-22, 
Balance of Payments Program--Construction Materials-- NAFTA.
    3. Section 25.402 is amended by adding paragraph (g) to read as 
follows:


25.402   Policy.

* * * * *
    (g) The procedures in 25.405 apply to the acquisition of NAFTA 
country services. These are services provided by a firm established in 
a NAFTA country under service contracts with an estimated acquisition 
value of $50,000 or more ($6,500,000 or more for construction), except 
for the following excluded services (Federal Service Code or Category 
from the Federal Procurement Data System Product/Service Code Manual is 
indicated in parentheses):
    (1) Information processing and related telecommunications services 
(D):
    (i) Automated data processing (ADP) telecommunications and 
transmission services (D304).
    (ii) ADP teleprocessing and timesharing services (D305).
    (iii) Telecommunications network management services (D316).
    (iv) Automated news services, data services, or other information 
services (D317).
    (v) Other ADP and telecommunications services (D399).
    (2) Maintenance, repair, modification, rebuilding, and installation 
of equipment (J):
    (i) Maintenance, repair, modification, rebuilding, and installation 
of equipment related to ships (J019).
    (ii) Non-nuclear ship repair (J998).
    (3) Operation of Government-owned facilities (M):
    (i) All facilities operated by the Department of Defense, 
Department of Energy, and the National Aeronautics and Space 
Administration.
    (ii) Research and development facilities (M180).
    (4) Utilities--all classes (S).
    (5) Transportation, travel, and relocation services--all classes 
except V503 travel agent services (V).
    (6) All services purchased in support of military forces overseas.
    (7) Construction dredging services.
    4. Section 25.408 is amended by revising paragraphs (a)(3) and 
(a)(4) to read as follows:


25.408   Solicitation provisions and contract clauses.

    (a) * * *
    (3) The provision at 52.225-20, Buy American Act--North American 
Free Trade Agreement Implementation Act--Balance of Payments Program 
Provision, in solicitations containing the clause at 52.225-21. Use the 
provision with its

[[Page 31648]]

Alternate I if the acquisition value is between $25,000 and $50,000; 
and
    (4) The clause at 52.225-21, Buy American Act--North American Free 
Trade Agreement Implementation Act--Balance of Payments Program, in 
solicitations and contracts for supplies where the contracting officer 
has determined that the acquisition is not subject to the Trade 
Agreements Act but is subject to NAFTA. Use the clause with its 
Alternate I if the acquisition value is between $25,000 and $50,000.
* * * * *

PART 27--PATENTS, DATA, AND COPYRIGHTS

    5. Section 27.208 is added to read as follows:


27.208   Use of patented technology under the North American Free Trade 
Agreement.

    (a) The requirements of this section apply to the use of technology 
covered by a valid patent when the patent holder is from a country that 
is a party to the North American Free Trade Agreement (NAFTA).
    (b) Article 1709(10) of NAFTA generally requires a user of 
technology covered by a valid patent to make a reasonable effort to 
obtain authorization prior to use of the patented technology. However, 
NAFTA provides that this requirement for authorization may be waived in 
situations of national emergency or other circumstances of extreme 
urgency, or public noncommercial use.
    (c) Section 6 of Executive Order 12889 of December 27, 1993, waives 
the requirement to obtain advance authorization for--
    (1) An invention used or manufactured by or for the Federal 
Government, except that the patent owner must be notified whenever the 
agency or its contractor, without making a patent search, knows or has 
demonstrable reasonable grounds to know that an invention described in 
and covered by a valid U.S. patent is or will be used or manufactured 
without a license; and
    (2) The existence of a national emergency or other circumstances of 
extreme urgency, except that the patent owner must be notified as soon 
as it is reasonably practicable to do so.
    (d) Section 6(c) of Executive Order 12889 provides that the notice 
to the patent owner does not constitute an admission of infringement of 
a valid privately owned patent.
    (e) When addressing issues regarding compensation for the use of 
patented technology, Government personnel should be advised that NAFTA 
uses the term ``adequate remuneration.'' Executive Order 12889 equates 
``remuneration'' to ``reasonable and entire compensation'' as used in 
28 U.S.C. 1498, the statute which gives jurisdiction to the U.S. Court 
of Federal Claims to hear patent and copyright cases involving 
infringement by the U.S. Government.
    (f) Depending on agency procedures, either the technical/requiring 
activity or the contracting officer shall ensure compliance with the 
notice requirements of NAFTA Article 1709(10). A contract award should 
not be suspended pending notification to the right holder.
    (g) When questions arise regarding the notice requirements or other 
matters relating to this section, the contracting officer should 
consult with legal counsel.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    6. Section 52.212-3 is amended--
    (a) By revising the date of the provision to read ``(JUN 1996)'';
    (b) Redesignating paragraphs (g)(1) through (g)(4) as (g)(1)(i) 
through (g)(1)(iv) and redesignating paragraph (g) as ``(g)(1)''; 
removing ``(NAFTA)'' each time it appears (twice); and removing the 
word ``Certificate'';
    (c) Revising newly designated paragraphs (g)(1)(i), (g)(1)(iii), 
and (g)(1)(iv); and
    (d) Adding paragraph (g)(2) to read as follows:


52.212-3   Offeror Representations and Certifications--Commercial 
Items.

* * * * *

Offeror Representations and Certifications--Commercial Items (JUN 1996)

* * * * *
    (g)(1) * * *
    (i) Each end product being offered, except those listed in 
paragraph (g)(1)(ii) of this provision, is a domestic end product 
(as defined in the clause entitled ``Buy American Act--North 
American Free Trade Agreement Implementation Act--Balance of 
Payments Program.'' Components of unknown origin have been 
considered to have been mined, produced, or manufactured outside the 
United States.
* * * * *
    (iii) Offers will be evaluated by giving certain preferences to 
domestic end products or NAFTA country end products over other end 
products. In order to obtain these preferences in the evaluation of 
each excluded end product listed in paragraph (g)(1)(ii) of this 
provision, offerors must identify below those excluded end products 
that are NAFTA country end products. Products that are not 
identified below will not be deemed NAFTA country end products.
    The following supplies qualify as ``NAFTA country end products'' 
as that term is defined in the clause entitled ``Buy American Act--
North American Free Trade Agreement Implementation Act--Balance of 
Payments Program:''
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
(Insert line item numbers)
    (iv) Offers will be evaluated in accordance with Part 25 of the 
Federal Acquisition Regulation. In addition, if this solicitation is 
for supplies for use outside the United States, an evaluation factor 
of 50 percent will be applied to offers of end products that are not 
domestic or NAFTA country end products.
    (2) Alternate I. If Alternate I to the clause at 52.225-21 is 
included in this solicitation, substitute the following paragraph 
(g)(1)(iii) for paragraph (g)(1)(iii) of this provision:
    (g)(1)(iii) Offers will be evaluated by giving certain 
preferences to domestic end products or Canadian end products over 
other end products. In order to obtain these preferences in the 
evaluation of each excluded end product listed in paragraph (b) of 
this provision, offerors must identify below those excluded end 
products that are Canadian end products. Products that are not 
identified below will not be deemed Canadian end products.
    The following supplies qualify as ``Canadian end products'' as 
that term is defined in the clause entitled ``Buy American Act--
North American Free Trade Agreement Implementation Act--Balance of 
Payments Program'':
----------------------------------------------------------------------
(Insert line item numbers)

    7. Section 52.212-5 is amended by revising the date of the clause 
to read ``(JUN 1996)''; paragraph (b)(15) is redesignated as 
(b)(15)(i); and (b)(15)(ii) is added to read as follows:


52.212-5  Contract Terms and Conditions Required To Implement Statutes 
or Executive Orders--Commercial Items.

* * * * *

Contract Terms and Conditions Required to Implement Statutes or 
Executive Orders--Commercial Items (Jun 1996)

* * * * *
    (b) * * *
    ____(15)(ii) Alternate I of 52.225-21.
* * * * *
    8. Section 52.225-20 is amended in the section heading and 
provision heading by revising the word ``Certificate'' to read 
``Provision''; revising the date of the provision to read ``(JUN 
1996)''; revising paragraphs (a), (c), and (d) of the provision; and 
adding Alternate I to read as follows:


52.225-20  Buy American Act--North American Free Trade Agreement 
Implementation Act--Balance of Payments Program Provision.

* * * * *

[[Page 31649]]

Buy American Act--North American Free Trade Agreement Implementation 
Act--Balance of Payments Program Provision (Jun 1996)

    (a) Each end product being offered, except those listed in 
paragraph (b) of this provision, is a domestic end product (as 
defined in the clause entitled ``Buy American Act--North American 
Free Trade Agreement Implementation Act--Balance of Payments 
Program''). Components of unknown origin have been considered to 
have been mined, produced, or manufactured outside the United 
States.
* * * * *
    (c) Offers will be evaluated by giving certain preferences to 
domestic end products or NAFTA country end products over other end 
products. In order to obtain these preferences in the evaluation of 
each excluded end product listed in paragraph (b) of this provision, 
offerors must identify below those excluded end products that are 
NAFTA country end products. Products that are not identified below 
will not be deemed NAFTA country end products.
    The following supplies qualify as ``NAFTA country end products'' 
as that term is defined in the clause entitled ``Buy American Act-- 
North American Free Trade Agreement Implementation Act--Balance of 
Payments Program'':

------------------------------------------------------------------------
             Line item no.----                    Country of origin     
------------------------------------------------------------------------
                                                                        
                                                                        
------------------------------------------------------------------------

(List as necessary)
    (d) Offers will be evaluated in accordance with Part 25 of the 
Federal Acquisition Regulation. In addition, if this solicitation is 
for supplies for use outside the United States, an evaluation factor 
of 50 percent will be applied to offers of end products that are not 
domestic or NAFTA country end products.

(End of provision)
    Alternate I (JUN 1996). As prescribed in 25.408(a)(3), 
substitute the following paragraph (c) for paragraph (c) of the 
basic provision:
    (c) Offers will be evaluated by giving certain preferences to 
domestic end products or Canadian end products over other end 
products. In order to obtain these preferences in the evaluation of 
each excluded end product listed in paragraph (b) of this provision, 
offerors must identify below those excluded end products that are 
Canadian end products. Products that are not identified below will 
not be deemed Canadian end products.
    The following supplies qualify as ``Canadian end products'' as 
that term is defined in the clause entitled ``Buy American Act--
North American Free Trade Agreement Implementation Act--Balance of 
Payments Program'':
----------------------------------------------------------------------
(Insert line item numbers)

    9. Section 52.225-21 is amended by revising the date of the clause 
to read ``(JUN 1996)''; in the fourth sentence of paragraph (c) by 
revising the word ``certifying'' to read ``specifying''; removing 
paragraph (d) of the clause; and by adding Alternate I to read as 
follows:


52.225-21  Buy American Act--North American Free Trade Agreement 
Implementation Act--Balance of Payments Program.

* * * * *

Buy American Act--North American Free Trade Agreement Implementation 
Act--Balance of Payments Program (Jun 1996)

* * * * *
    Alternate I (JUN 1996). As prescribed in 25.408(a)(4), add the 
following definition to paragraph (a) and substitute the following 
paragraph (c) for paragraph (c) of the basic clause:
    Canadian end product means an article that (1) is wholly the 
growth, product, or manufacture of Canada, or (2) in the case of an 
article which consists in whole or in part of materials from another 
country or instrumentality, has been substantially transformed in 
Canada into a new and different article of commerce with a name, 
character, or use distinct from that of the article or articles from 
which it was transformed. The term refers to a product offered for 
purchase under a supply contract, but for purposes of calculating 
the value of the end product includes services (except 
transportation services) incidental to its supply; provided, that 
the value of those incidental services does not exceed that of the 
product itself.
    (c) The Contracting Officer has determined that NAFTA applies to 
this acquisition. Unless otherwise specified, NAFTA applies to all 
items in the schedule. The Contractor agrees to deliver under this 
contract only domestic end products unless, in its offer, it 
specifies delivery of foreign end products in the provision entitled 
``Buy American Act--North American Free Trade Agreement 
Implementation Act--Balance of Payments Program Certificate.'' An 
offer specifying that a Canadian end product will be supplied 
requires the Contractor to supply a Canadian end product or, at the 
Contractor's option, a domestic end product.

    10. Section 52.225-22 is added to read as follows:


52.225-22 Balance of Payments Program--Construction Materials--NAFTA.

    As prescribed in 25.305(c)(2), insert the following clause:
Balance of Payments Program--Construction Materials--NAFTA (Jun 1996)
    (a) Definitions. As used in this clause--
    Components means those articles, materials, and supplies 
incorporated directly into construction materials.
    Construction material means an article, material, or supply 
brought to the construction site for incorporation into the building 
or work. Construction material also includes an item brought to the 
site pre-assembled from articles, materials, or supplies. However, 
emergency life safety systems, such as emergency lighting, fire 
alarm, and audio evacuation systems, which are discrete systems 
incorporated into a public building or work and which are produced 
as a complete system, shall be evaluated as a single and distinct 
construction material regardless of when or how the individual parts 
or components of such systems are delivered to the construction 
site.
    Domestic construction material means (1) an unmanufactured 
construction material mined or produced in the United States, or (2) 
a construction material manufactured in the United States, if the 
cost of its components mined, produced, or manufactured in the 
United States exceeds 50 percent of the cost of all its components. 
Components of foreign origin of the same class or kind as the 
construction materials determined to be unavailable pursuant to 
subparagraph 25.202(a)(3) of the Federal Acquisition Regulation 
shall be treated as domestic.
    NAFTA country construction material means a construction 
material that (1) is wholly the growth, product, or manufacture of a 
NAFTA country, or (2) in the case of a construction material which 
consists in whole or in part of materials from another country or 
instrumentality, has been substantially transformed in a NAFTA 
country into a new and different construction material distinct from 
the materials from which it was transformed.
    North American Free Trade Agreement (NAFTA) country means Canada 
and Mexico.
    (b) The Balance of Payments Program provides that the Government 
give preference to domestic construction material.
    (c) The Contractor agrees that only domestic construction 
material or NAFTA country construction material will be used by the 
Contractor, subcontractors, material men, and suppliers in the 
performance of this contract, except for other foreign construction 
materials, if any, listed in this contract.
(End of clause)

[FR Doc. 96-14529 Filed 6-19-96; 8:45 am]
BILLING CODE 6820-EP-P