[Federal Register Volume 66, Number 176 (Tuesday, September 11, 2001)]
[Proposed Rules]
[Pages 47155-47158]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-22429]



[[Page 47155]]

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DEPARTMENT OF DEFENSE

48 CFR Parts 225 and 252

[DFARS Case 2000-D020]


Defense Federal Acquisition Regulation Supplement; Balance of 
Payments Program

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for comments.

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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to add policy pertaining to the Balance 
of Payments Program. The DFARS policy would replace Federal Acquisition 
Regulation (FAR) policy on this subject that has been proposed for 
elimination.

DATES: Comments on the proposed rule should be submitted to the address 
shown below on or before November 13, 2001, to be considered in the 
formation of the final rule.

ADDRESSES: Respondents may submit comments directly on the World Wide 
Web at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcom. As an 
alternative, respondents may e-mail comments to: [email protected]. 
Please cite DFARS Case 2000-D020 in the subject line of e-mail 
comments.
    Respondents that cannot submit comments using either of the above 
methods may submit comments to: Defense Acquisition Regulations 
Council, Attn: Ms. Amy Williams, OUSD (AT&L) DP(DAR), IMD 3C132, 3062 
Defense Pentagon, Washington, DC 20301-3062; facsimile (703) 602-0350. 
Please cite DFARS Case 2000-D020.
    At the end of the comment period, interested parties may view 
public comments on the World Wide Web at http://emissary.acq.osd.mil/dar/dfars.nsf.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, (703) 602-0288.

SUPPLEMENTARY INFORMATION:

A. Background

    The proposed rule published at 65 FR 54936 on September 11, 2000, 
requested comments on the removal of all FAR policy pertaining to the 
Balance of Payments Program. This program applies to contracts for 
supplies to be used, and construction to be performed, outside the 
United States. Although the DFARS already contains policy that 
implements the Balance of Payments Program for acquisition of supplies 
for use outside the United States, DoD presently uses the FAR policy 
for construction contracts performed outside the United States. This 
DFARs rule proposes to add policy for application of the Balance of 
Payments Program to construction contracts that would replace the 
existing FAR policy for DoD.
    DoD is also considering discontinuation of application of the 
Balance of Payments Program to construction contracts. Therefore, in 
addition to the request for comments on this proposed rule, DoD invites 
comments on the advisability of discontinuing application of the 
Balance of Payments Program to DoD construction contracts.
    This proposed rule would streamline application of the Balance of 
Payments Program to DoD construction contracts by--
    (1) Exempting any particular construction material that is at or 
below the simplified acquisition threshold;
    (2) Authorizing the contracting officer to make pre-solicitation 
determinations as to whether a requirement can best be filled by a 
foreign end product or construction material; and
    (3) Specifically authorizing an assessment, prior to issuance of a 
solicitation, as to whether an exemption to the Balance of Payments 
Program applies on the basis of the entire project.
    In addition, this proposed rule updates the clause at DFARS 
252.225-7005, Identification of Expenditures in the United States, to 
implement the applicable requirements of the DoD Financial Management 
Regulations, Vol. 6A, Chapter 13, International Balance of Payments 
Reporting and Estimating.
    This rule was not subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

    The proposed rule is 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 the 
Balance of Payments Program requirements in this rule are transferred 
from existing FAR requirements, with streamlining changes that are not 
expected to have a significant effect outside the Government. 
Therefore, DoD has not performed an initial regulatory flexibility 
analysis. DoD invites comments from small businesses and other 
interested parties. DoD also will consider comments from small entities 
concerning the affected DFARS subparts in accordance with 5 U.S.C. 610. 
Such comments should be submitted separately and should cite DFARS Case 
2000-D020.

C. Paperwork Reduction Act

    This rule does not impose any information collection requirements 
that require the approval of the Office of Management and Budget (OMB) 
under 44 U.S.C. 3501, et seq. The information collection requirements 
associated with the clause at 252.225-7005, Identification of 
Expenditures in the United States, are already approved under OMB 
Clearance Number 0704-0229 for use through March 31, 2004.

List of Subjects in 48 CFR Parts 225 and 252

    Government procurement.

Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.
    Therefore, DoD proposes to amend 48 CFR Parts 225 and 252 as 
follows:
    1. The authority citation for 48 CFR Parts 225 and 252 continues to 
read as follows:

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

PART 225--FOREIGN ACQUISITION

    2. Section 225.003 is amended by revising paragraph (3) to read as 
follows:


225.003  Definitions.

* * * * *
    (3) ``Domestic concern'' means--
    (i) A concern incorporated in the United States (including a 
subsidiary that is incorporated in the United States, even if the 
parent corporation is a foreign concern); or
    (ii) An unincorporated concern having its principal place of 
business in the United States.
* * * * *

Subpart 225.3--[Removed]

    3. Subpart 225.3 is removed.


225.1101  [Amended]

    4. Section 225.1101 is amended by removing the phrase ``--Balance 
of Payments Program'' in the following places:
    a. In paragraph (1), in the first sentence, the second time it 
appears;
    b. In paragraph (2) introductory text;
    c. In paragraph (12) introductory text the second time it appears; 
and
    d. In paragraph (13) introductory text, in the first sentence, the 
second time it appears.
    5. Section 225.1103 is amended by revising paragraph (1) to read as 
follows:


225.1103  Other provisions and clauses.

    (1) Unless the contracting officer knows that the prospective 
contractor is not a domestic concern, use the clause

[[Page 47156]]

at 252.225-7005, Identification of Expenditures in the United States, 
in solicitations and contracts that--
    (i) Exceed the simplified acquisition threshold; and
    (ii) Are for the acquisition of--
    (A) Supplies for use outside the United States;
    (B) Construction to be performed outside the United States; or
    (C) Services to be performed primarily outside the United States.
    6. Subpart 225.75 is added to read as follows:

Subpart 225.75--Balance of Payments Program

Sec.
225.7500  Scope of subpart.
225.7501  Policy.
225.7502  Procedures.
225.7503  Contract clauses.


225.7500  Scope of subpart.

    This subpart provides policies and procedures implementing the 
Balance of Payments Program. It applies to contracts for the 
acquisition of--
    (a) Supplies for use outside the United States; and
    (b) Construction to be performed outside the United States.


225.7501  Policy.

    Acquire only domestic end products for use outside the United 
States, and use only domestic construction material for construction to 
be performed outside the United States, including end products and 
construction material for foreign military sales, unless--
    (a) Before issuing the solicitation--
    (1) The estimated cost of the acquisition or the value of a 
particular construction material is at or below the simplified 
acquisition threshold;
    (2) The end product or particular construction material is--
    (i) Listed in FAR 25.104 or 225.104(a)(iii);
    (ii) An end product or construction material that, by its nature or 
as a practical matter, can best be acquired in the geographic area 
concerned, e.g., ice or books; or bulk material, such as sand, gravel, 
or other soil material, stone, concrete masonry units, or fired brick;
    (iii) A petroleum product;
    (iv) A spare part for foreign-manufactured vehicles, equipment, 
machinery, or systems, provided the acquisition is restricted to the 
original manufacturer or its supplier in accordance with DoD 
standardization policy (see DoD Directive 4120.3, Defense 
Standardization and Specification Program);
    (v) An industrial gas; or
    (vi) A brand drug specified by the Defense Medical Materiel Board;
    (3) The acquisition of foreign end products or construction 
material is required by a treaty or executive agreement between 
governments;
    (4) The end product is acquired for commissary resale; or
    (5) The contracting officer determines that a requirement can best 
be filled by a foreign end product or construction material, including 
determinations that--
    (i) A subsistence product is perishable and delivery from the 
United States would significantly impair the quality at the point of 
consumption;
    (ii) A particular domestic construction material is not available;
    (iii) The cost of domestic construction material would exceed the 
cost of foreign construction material by more than 50 percent, 
calculated on the basis of--
    (A) A particular construction material; or
    (B) The comparative cost of application of the Balance of Payments 
to the total acquisition; or
    (iv) Use of a particular domestic construction material is 
impracticable.
    (b) After receipt of offers--
    (1) The evaluated low offer (see subpart 225.5) is an offer of an 
end product that--
    (i) Is a qualifying country end product;
    (ii) Is an eligible product subject to the Trade Agreements Act, 
NAFTA, or the Israeli Trade Act;
    (iii) For acquisitions subject to the Trade Agreements Act, is an 
information technology product in Federal Supply Group 70 or 74 that is 
substantially transformed in the United States; or
    (iv) Is a nonqualifying country end product, but application of the 
Balance of Payments Program evaluation factor would not result in award 
on a domestic offer; or
    (2) The construction material is designated country construction 
material or NAFTA country construction material, and the acquisition is 
subject to the Trade Agreements Act or NAFTA respectively; or
    (c) At any time during the acquisition process, the head of the 
agency determines that it is not in the public interest to apply the 
restrictions of the Balance of Payments Program to the end product or 
construction material.


225.7502  Procedures.

    (a) Solicitation of offers. Identify, in the solicitation, supplies 
and construction material known in advance to be exempt from the 
Balance of Payments Program.
    (b) Evaluation of offers. (1) Supplies. Unless the entire 
acquisition is exempt from the Balance of Payments Program, evaluate 
offers for supplies that are subject to the Balance of Payments Program 
using the evaluation procedures in subpart 225.5. However, treatment of 
duty may differ when delivery is overseas.
    (i) Duty may not be applicable to nonqualifying country offers.
    (ii) The U.S. Government cannot guarantee the exemption of duty for 
components or end products imported into foreign countries.
    (iii) Foreign governments may impose duties. Evaluate offers 
including such duties as offered.
    (2) Construction. Because the contracting officer evaluates the 
estimated cost of foreign and domestic construction material in 
accordance with 225.7501(a)(5)(iii) before issuing the solicitation, no 
special procedures are required for evaluation of construction offers.
    (c) Postaward. For construction contracts, the procedures at FAR 
25.206, for noncompliance under the Buy American Act, also apply to 
noncompliance under the Balance of Payments Program.


225.7503  Contract clauses.

    Unless the entire acquisition is exempt from the Balance of 
Payments Program under 225.7501(a)(3), 225.7501(a)(5)(iii), or 
225.7501(c)--
    (a) Use the clause at 252.225-70XX, Balance of Payments Program--
Construction Material, in solicitations and contracts for construction 
to be performed outside the United States with a value greater than the 
simplified acquisition threshold but less than $6,806,000.
    (b) Use the clause at 252.225-70YY, Balance of Payments Program--
Construction Material Under Trade Agreements, in solicitations and 
contracts for construction to be performed outside the United States 
with a value of $6,806,000 or more. For acquisitions with a value of 
$6,806,000 or more, but less than $7,068,419, use the clause with its 
Alternate I.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    7. Section 252.225-7005 is revised to read as follows:


252.225-7005  Identification of Expenditures in the United States.

    As prescribed in 225.1103(1), use the following clause:

[[Page 47157]]

Identification of Expenditures in the United States (XXX 2001)

    (a) This clause applies only if the Contractor is--
    (1) A concern incorporated in the United States (including a 
subsidiary that is incorporated in the United States, even if the 
parent corporation is not incorporated in the United States); or
    (2) An unincorporated concern having its principal place of 
business in the United States.
    (b) On each invoice, voucher, or other request for payment under 
this contract, the Contractor shall identify that part of the 
requested payment that represents estimated expenditures in the 
United States.
    (1) May be expressed either as dollar amounts or as percentages 
of the total amount of the request for payment;
    (2) Should be based on reasonable estimates; and
    (3) Shall state the full amount of the payment requested, 
subdivided into the following categories:
    (i) U.S. products-expenditures for material and equipment 
manufactured or produced in the United States, including end 
products, components, or construction material, but excluding 
transportation;
    (ii) U.S. services-expenditures for services performed in the 
United States, including all charges for overhead, other indirect 
costs, and profit for construction or service contracts;
    (iii) Transportation on U.S. carriers-expenditures for 
transportation furnished by U.S. flag, ocean, surface, and air 
carriers; and
    (iv) Expenditures not identified under paragraphs (b)(3)(i) 
through (iii) of this clause.
    (c) Nothing in this clause requires the establishment or 
maintenance of detailed accounting records or gives the U.S. 
Government any right to audit the Contractor's books or records.

(End of clause)

    8. Sections 252.225-70XX and 252.225-70YY are added to read as 
follows:


252.225-70XX  Balance of Payments Program--Construction Material.

    As prescribed in 225.7503(a), use the following clause:

Balance of Payments Program--Construction Material (XXX 2001)

    (a) Definitions. As used in this clause--
    ``Component'' means any article, material, or supply 
incorporated directly into construction material.
    ``Construction material'' means an article, material, or supply 
brought to the construction site by the Contractor or a 
subcontractor for incorporation into the building or work. The term 
also includes an item brought to the site preassembled from 
articles, materials, or supplies. However, emergency life safety 
systems, such as emergency lighting, fire alarm, and audio 
evacuation systems, that are discrete systems incorporated into a 
public building or work and that are produced as complete systems, 
are evaluated as a single and distinct construction material 
regardless of when or how the individual parts or components of 
those systems are delivered to the construction site. Materials 
purchased directly by the Government are supplies, not construction 
material.
    ``Cost of components'' means--
    (1) For components purchased by the Contractor, the acquisition 
cost, including transportation costs to the place of incorporation 
into the end product (whether or not such costs are paid to a 
domestic firm), and any applicable duty (whether or not a duty-free 
entry certificate is issued); or
    (2) For components manufactured by the Contractor, all costs 
associated with the manufactured of the component, including 
transportation costs as described in paragraph (1) of this 
definition, plus allocable overhead costs, but excluding profit. 
Cost of components does not include any costs associated with the 
manufacture of the end product.
    ``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 
for which nonavailability determinations have been made are treated 
as domestic.
    ``United States'' means the 50 States and the District of 
Columbia, U.S. territories and possessions, Puerto Rico, the 
Northern Mariana Islands, and any other place subject to U.S. 
jurisdiction, but does not include leased bases.
    (b) Domestic preference. This clause implements the Balance of 
Payments Program by providing a preference for domestic construction 
material. The Contractor shall use only domestic construction 
material in performing this contract, except for--
    (1) Construction material valued at or below the simplified 
acquisition threshold in part 2 of the Federal Acquisition 
Regulation; or
    (2) The construction material or components listed by the 
Government as follows:

----------------------------------------------------------------------
[Contracting Officer to list applicable excepted materials or 
indicate ``none'']

(End of clause)

252.225-70YY  Balance of Payments Program--Construction Materials Under 
Trade Agreements.

    As prescribed in 225.7503(b), use the following clause:

Balance of Payments Program--Construction Material Under Trade 
Agreements (XXX 2001)

    (a) Definitions. As used in this clause--
    ``Component'' means any article, material, or supply 
incorporated directly into construction material.
    ``Construction material'' means an article, material, or supply 
brought to the construction site by the Contractor or a 
subcontractor for incorporation into the building or work. The term 
also includes an item brought to the site preassembled from 
articles, materials, or supplies. However, emergency life safety 
systems, such as emergency lighting, fire alarm, and audio 
evacuation systems, that are discrete systems incorporated into a 
public building or work and that are produced as complete systems, 
are evaluated as a single and distinct construction material 
regardless of when or how the individual parts or components of 
those systems are delivered to the construction site. Materials 
purchased directly by the Government are supplies, not construction 
material.
    ``Cost of components'' means--
    (1) For components purchased by the Contractor, the acquisition 
cost, including transportation costs to the place of incorporation 
into the end product (whether or not such costs are paid to a 
domestic firm), and any applicable duty (whether or not a duty-free 
entry certificate is issued); or
    (2) For components manufactured by the Contractor, all costs 
associated with the manufactured of the component, including 
transportation costs as described in paragraph (1) of this 
definition, plus allocable overhead costs, but excluding profit. 
Cost of components does not include any costs associated with the 
manufacture of the end product.
    ``Designated country'' means any of the following countries:

Aruba
Austria
Bangladesh
Belgium
Benin
Bhutan
Botswana
Burkina Faso
Burundi
Canada
Cape Verde
Central African Republic
Chad
Comoros
Denmark
Djibouti
Equatorial Guinea
Finland
France
Gambia
Germany
Greece
Guinea
Guinea-Bissau
Haiti
Hong Kong
Iceland
Ireland
Israel
Italy
Japan
Kiribati
Korea, Republic of
Lesotho
Liechtenstein
Luxembourg
Malawi
Maldives

[[Page 47158]]

Mali
Mozambique
Nepal
Netherlands
Niger
Norway
Portugal
Rwanda
Sao Tome and Principe
Sierra Leone
Singapore
Somalia
Spain
Sweden
Switzerland
Tanzania U.R.
Togo
Tuvalu
Uganda
United Kingdom
Vanuatu
Western Samoa
Yemen

    ``Designated country construction material'' means a 
construction material that--
    (1) Is wholly the growth, product, or manufacture of a 
designated country; or
    (2) In the case of a construction material that consists in 
whole or in part of materials from another country, has been 
substantially transformed in a designated country into a new and 
different construction material distinct from the material from 
which it was transformed.
    ``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 
for which nonavailability determinations have been made are treated 
as domestic.
    ``North American Free Trade Agreement (NAFTA) country'' means 
Canada or Mexico.
    ``North American Free Trade Agreement (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 that consists in 
whole or in part of materials from another country, has been 
substantially transformed in a NAFTA country into a new and 
different construction material distinct from the material distinct 
from which it was transformed.
    ``United States'' means the 50 States and the District of 
Columbia, U.S. territories and possessions, Puerto Rico, the 
Northern Mariana Islands, and any other place subject to U.S. 
jurisdiction, but does not include leased bases.
    (b) This clause implements the Balance of Payments Program by 
providing a preference for domestic construction material. In 
addition, the Contracting Officer has determined that the Trade 
Agreements Act and the North American Free Trade Agreement (NAFTA) 
apply to this acquisition. Therefore, the Buy American Act and 
Balance of Payments Program restrictions are waived for designated 
country and NAFTA country construction materials.
    (c) The Contractor shall use only domestic, designated country, 
or NAFTA country construction material in performing this contract, 
except for--
    (1) Construction material valued at or below the simplified 
acquisition threshold in part 2 of the Federal Acquisition 
Regulation; or
    (2) The construction materials or components listed by the 
Government as follows:

----------------------------------------------------------------------
[Contracting Officer to list applicable excepted materials or 
indicate ``none''.]

Alternate I (XXX 2001)

    As prescribed in 225.7503(b), delete the definitions of ``North 
American Free Trade Agreement country'' and ``North American Free 
Trade Agreement country construction material'' from the definitions 
in paragraph (a) of the basic clause and substitute the following 
paragraphs (b) and (c) for paragraphs (b) and (c) of the basic 
clause:
    (b) This clause implements the Balance of Payments Program by 
providing a preference for domestic construction material. In 
addition, the Contracting Officer has determined that the Trade 
Agreements Act applies to this acquisition. Therefore, the Balance 
of Payments Program restrictions are waived for designated country 
construction material.
    (c) The Contractor shall use only domestic or designated country 
construction material in performing this contract, except for)--
    (1) Construction material valued at or below the simplified 
acquisition threshold in part 2 of the Federal Acquisition 
Regulation; or
    (2) The construction materials or components listed by the 
Government as follows:

----------------------------------------------------------------------
[Contracting Officer to list applicable excepted materials or 
indicate ``none''.]

[FR Doc. 01-22429 Filed 9-10-01; 8:45 am]
BILLING CODE 5000-04-M