[Federal Register Volume 66, Number 153 (Wednesday, August 8, 2001)]
[Notices]
[Pages 41561-41562]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-19915]


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DEPARTMENT OF DEFENSE


Proposed Buy American Act Exemption for Commercial U.S.-Made End 
Products

AGENCY: Department of Defense (DoD).

ACTION: Request for public comments.

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SUMMARY: The Office of the Under Secretary of Defense (Acquisition, 
Technology, and Logistics) is seeking information that will assist it 
in evaluating a proposed public interest exception to the Buy American 
Act (BAA) in procurements subject to the Trade Agreements Act (TAA) for 
commercial U.S.-made end products, substantially transformed in the 
United States, that do not qualify as domestic end products under the 
BAA. A similar exception was issued for U.S.-made information 
technology products on May 16, 1997. Interested parties are invited to 
submit written comments or recommendations relative to this proposed 
public interest exception.

DATES: Comments must be received no later than September 24, 2001.

ADDRESSES: Send all comments to Domenico C. Cipicchio, Deputy Director, 
Defense Procurement, Contract

[[Page 41562]]

Policy & Administration, OUSD (AT&L), 3060 Defense Pentagon, 
Washington, DC 20301-3060.

FOR FURTHER INFORMATION CONTACT: Susan M. Hildner, Procurement Analyst, 
Defense Procurement, Defense Systems Procurement Strategies, OUSD 
(AT&L), 3060 Defense Pentagon, Washington, DC 20301-3060, (703) 695-
4258, or e-mail to Susan.Hildner@osd.mil.

SUPPLEMENTARY INFORMATION: The BAA requires the Government to purchase 
for public use only domestic end products. For a manufactured end 
product, this means a product that has been manufactured in the United 
States substantially all from articles, materials, or supplies in mind, 
produced, or manufactured in the United States. DoD considers a product 
to be ``substantially all from articles, materials, or supplies mined, 
produced, manufactured in the United States'' if the cost of its 
qualifying country components and its components that are mined, 
produced, or manufactured in the United States exceeds 50 percent of 
the cost of all its components. Under the TAA, the BAA is waived for 
eligible products from certain designated countries. The country of 
origin for eligible products is the country in which the articles/
components (wherever the origin) have been substantially transformed 
into an article of commerce with a name, character, or use distinct 
from that of the articles from which it was transformed. Since the TAA 
applies only to products of foreign countries, the BAA is not waived 
for products substantially transformed in the United States from mostly 
foreign components, i.e., U.S.-made end products that do not qualify as 
domestic end products. This results in treating such U.S.-made end 
products less favorably than designated country end products, which 
might encourage companies to manufacture products or locate 
manufacturing facilities in a designated foreign country rather than in 
the United States. Because of the different rules of origin, U.S.-made 
end products that do not qualify as domestic end products are at a 
competitive disadvantage against designated foreign countries when 
competing for DoD procurements (because of the application of the 50 
percent evaluation factor to U.S.-made end products that do not qualify 
as domestic end products). Additionally, the different rules of origin 
result in a disproportionately burdensome record-keeping requirement on 
firms offering both domestic and U.S.-made end products. Because of the 
component content requirement of the BAA, vendors must determine, 
control, and track the source of components. In today's global economy, 
this has become an extremely difficult, if not impossible, task and 
create a disincentive for commercial companies to sell to DoD. On the 
other hand, this burden does not apply to vendors from designated 
countries, because the TAA substantial transformation rule of origin 
does not require tracking the origin of components. This is especially 
true for commercial items. Given the impact of the different rules of 
origin, it seems appropriate to determine that application of the BAA 
to commercial U.S.-made end products is inconsistent with the public 
interest in procurements subject to the TAA. The proposed exception 
will eliminate the burdensome record-keeping requirements for U.S. 
companies, allow DoD to procure U.S.-made commercial items if they are 
lower in cost, allow DoD access to state-of-the-art commercial 
technology, and reduce the incentive to move end product manufacturing 
facilities to a designated foreign country.

Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.
[FR Doc. 01-19915 Filed 8-7-01; 8:45 am]
BILLING CODE 5000-04-M