[Federal Register Volume 67, Number 194 (Monday, October 7, 2002)]
[Proposed Rules]
[Pages 62590-62616]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-24739]



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Part III





Department of Defense





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48 CFR Parts 206, et al.



Defense Federal Acquisition Regulation Supplement; Foreign Acquisition; 
Proposed Rule

  Federal Register / Vol. 67, No. 194 / Monday, October 7, 2002 / 
Proposed Rules  

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DEPARTMENT OF DEFENSE

48 CFR Parts 206, 208, 209, 225, 242, and 252

[DFARS Case 2002-D009]


Defense Federal Acquisition Regulation Supplement; Foreign 
Acquisition

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 simplify and clarify policy pertaining 
to the acquisition of supplies and services from foreign sources.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before December 6, 2002, 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/pubcomm. As an 
alternative, respondents may e-mail comments to: [email protected]. 
Please cite DFARS Case 2002-D009 in the subject line of e-mailed 
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 2002-D009.
    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) 602-0328.

SUPPLEMENTARY INFORMATION:

A. Background

    This rule proposes revisions to DFARS Part 225, Foreign 
Acquisition, and associated provisions and clauses. The rule--
    [sbull] Provides streamlined procedures for evaluating foreign 
offers when acquiring supplies, and adds procedures for evaluating 
foreign offers in acquisitions in which price is not the determining 
factor.
    [sbull] Changes the definition of ``qualifying country end 
product'' to permit the qualifying country manufacturing the product to 
use components from any other qualifying country.
    [sbull] Lowers the required approval levels for determinations of 
nonavailability under the Buy American Act.
    [sbull] Lowers the required approval levels for individual public 
interest determinations for acquisition of end products from qualifying 
countries.
    [sbull] Provides that the Government will evaluate duty only if it 
is to be paid. Except for qualifying country supplies or eligible end 
products, the contractor will request duty-free entry only on foreign 
supplies for which the contractor estimates that duty will exceed $200 
per unit (end product or component). One duty-free entry clause 
replaces five existing clauses.
    [sbull] Makes use of the clause pertaining to Waiver of United 
Kingdom Levies optional for acquisitions not expected to exceed the 
simplified acquisition threshold.
    [sbull] Eliminates the requirement for a contractor to represent 
that it will comply with all laws, decrees, labor standards, and 
regulations of the foreign country in which the contract will be 
performed.
    [sbull] Moves restrictions on contracting with firms owned or 
controlled by the government of a terrorist country or other foreign 
governments from Part 209, Contractor Responsibility, to Part 225, 
Foreign Acquisition.
    [sbull] Deletes obsolete text and clauses relating to outdated 
appropriations act restrictions, resulting in the elimination of four 
clauses.
    [sbull] Incorporates the DFARS changes proposed under Case 2002-
D008, Trade Agreements Act-Exception for U.S.-Made End Products, 
published at 67 FR 49278 on July 30, 2002.
    Because of the complexity of the Buy American Act and the trade 
agreements, DoD is preparing an on-line training module to assist in 
understanding DFARS Part 225. The goal is to provide sufficient 
explanatory material and practical examples to clarify the main issues.
    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 most of 
the changes in the rule merely simplify and clarify existing policy and 
procedures. Other changes, such as the revised definition of 
``qualifying country end product'' primarily affect foreign firms, 
which, by definition, do not qualify as small entities within the 
meaning of the Regulatory Flexibility Act. The changes in procedures 
for evaluation of duty will result in a paperwork burden reduction for 
both large and small businesses, but the economic impact will not be 
significant. Therefore, DoD has not prepared 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 2002-D009.

C. Paperwork Reduction Act

    This rule does not impose any new information collection 
requirements that require the approval of the Office of Management and 
Budget under 44 U.S.C. 3501, et seq. The information collection 
requirements in the rule are currently approved by the Office of 
Management and Budget under Control Numbers 0704-0229 and 0704-0187. 
Elimination of the provision at 252.225-7003, Information for Duty-Free 
Entry Evaluation, will result in a reduction of 21,451 hours in 
estimated annual burden.

List of Subjects in 48 CFR Parts 206, 208, 209, 225, 242, and 252

    Government procurement.

Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.
    Therefore, DoD proposes to amend 48 CFR Parts 206, 208, 209, 225, 
242, and 252 as follows:
    1. The authority citation for 48 CFR Parts 206, 208, 209, 225, 242, 
and 252 continues to read as follows:

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

PART 206--COMPETITION REQUIREMENTS

    2. Section 206.303-1 is amended by adding paragraph (d) to read as 
follows:


206.303-1  Requirements.

* * * * *
    (d) The Director of Defense Procurement, Office of the Under 
Secretary of Defense (Acquisition, Technology, and Logistics), is the 
agency point of contact for submission of justifications to the Office 
of the United States Trade Representative.

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PART 208--REQUIRED SOURCES OF SUPPLIES AND SERVICES


208.7203  [Amended]

    3. Section 208.7203 is amended in paragraph (c) by removing 
``225.7010'' and adding in its place ``225.7005''.

PART 209--CONTRACTOR QUALIFICATIONS


209.101  [Removed]

    4. Section 209.101 is removed.
    5. Section 209.104-1 is amended by revising paragraph (g) to read 
as follows:


209.104-1  General standards.

* * * * *
    (g) For restrictions on contract award to certain foreign firms, 
see subparts 225.7 and 225.70.


209.104-70  [Removed]

    6. Section 209.104-70 is removed.


209.405-2  [Removed]

    7. Section 209.405-2 is removed.


209.409  [Removed]

    8. Section 209.409 is removed.

PART 225--FOREIGN ACQUISITION

    9. Sections 225.000, 225.001, and 225.003 are revised to read as 
follows:


225.000  Scope of part.

    This part also provides policy and procedures for--
    (1) Purchasing foreign defense supplies, services, and construction 
materials, including special procedures for--
    (i) Contracting with Canadian and other qualifying country sources; 
and
    (ii) Cooperative projects;
    (2) Implementing statutory and policy restrictions on foreign 
acquisition;
    (3) Reporting contract performance outside the United States;
    (4) Foreign military sales acquisitions; and
    (5) Antiterrorism/force protection for defense contractors outside 
the United States.


225.001  General.

    When evaluating offers of foreign end products, consider the 
following:
    (1) Statutory or policy restrictions.
    (i) Determine whether the product is restricted by--
    (A) Statute (see subpart 225.70); or
    (B) DoD policy (see subpart 225.71 and FAR 6.302-3).
    (ii) If an exception to or waiver of a restriction in subpart 
225.70 or 225.71 would result in award of a foreign end product, apply 
the policies and procedures of the Buy American Act or the Balance of 
Payments Program, and, if applicable, the trade agreements.
    (2) Memoranda of understanding or other international agreements. 
Determine whether the offered product is the product of one of the 
qualifying countries listed in 225.872-1.
    (3) Trade agreements. If the product is not an eligible product, a 
qualifying country end product, or a U.S.-made end product, purchase of 
the foreign end product may be prohibited (see FAR 25.403(c) and 
225.403(c)).
    (4) Other trade sanctions and prohibited sources.
    (i) Determine whether the offeror complies with the secondary Arab 
boycott of Israel. Award to such offerors may be prohibited (see 
225.670).
    (ii) Determine whether the offeror is a prohibited source (see 
225.770).
    (5) Buy American Act and Balance of Payments Program. See the 
evaluation procedures in Subpart 225.5.


225.003  Definitions.

    As used in this part--
    (1) Caribbean Basin country end product includes petroleum or any 
product derived from petroleum.
    (2) Defense equipment means any equipment, item of supply, 
component, or end product purchased by DoD.
    (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.
    (4) Domestic end product has the meaning given in the clauses at 
252.225-7001, Buy American Act and Balance of Payments Program; and 
252.225-7036, Buy American Act--North American Free Trade Agreement 
Implementation Act--Balance of Payments Program, instead of the meaning 
in FAR 25.003.
    (5) Eligible product means, instead of the definition in FAR 
25.003, a designated, NAFTA, or Caribbean Basin country end product in 
the categories listed in 225.401-70.
    (6) Foreign concern means any concern other than a domestic 
concern.
    (7) Government of a terrorist country is defined in the provision 
at 252.225-7017, Disclosure of Ownership or Control by the Government 
of a Terrorist Country.
    (8) Nonqualifying country means a country other than the United 
States or a qualifying country.
    (9) Nonqualifying country component means a component mined, 
produced, or manufactured in a nonqualifying country.
    (10) Qualifying country means a country with a memorandum of 
understanding or international agreement with the United States. 
Qualifying countries are listed in 225.872-1.
    (11) Qualifying country component and qualifying country end 
product are defined in the clauses at 252.225-7001, Buy American Act 
and Balance of Payments Program; and 252.225-7036, Buy American Act--
North American Free Trade Agreement Implementation Act--Balance of 
Payments Program. Qualifying country end product is also defined in the 
clause at 252.225-7021, Trade Agreements.
    (12) Qualifying country offer means an offer of a qualifying 
country end product, including the price of transportation to 
destination.
    (13) Source, when restricted by such words as foreign, domestic, or 
qualifying country, means the actual manufacturer or producer of the 
end product or component.
    (14) Terrorist country is defined in the provision at 252.225-7017, 
Disclosure of Ownership or Control by the Government of a Terrorist 
Country.
    10. Subpart 225.1 is revised to read as follows:
Subpart 225.1--Buy American Act--Supplies
Sec.
225.101 General.
225.103 Exceptions.
225.104 Nonavailable articles.
225.105 Determining reasonableness of cost.
225.170 Solicitations.


225.101  General.

    (a) For DoD, the following two-part test determines whether a 
manufactured end product is a domestic end product:
    (i) The end product is manufactured in the United States; and
    (ii) The cost of its U.S. and qualifying country components exceeds 
50 percent of the cost of all its components. This test is applied to 
end products only and not to individual components.
    (c) Additional exceptions that allow the purchase of foreign end 
products are listed at 225.103.


225.103  Exceptions.

    (a)(i)(A) Public interest exceptions for certain countries are in 
225.872.
    (B) For procurements subject to the Trade Agreements Act, the Under 
Secretary of Defense (Acquisition, Technology, and Logistics) has 
determined that it is inconsistent with the public interest to apply 
the Buy American Act to end products that are substantially transformed 
in the United States.
    (ii)(A) Normally, use the evaluation procedures in Subpart 225.5, 
but

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consider recommending a public interest exception if the purposes of 
the Buy American Act are not served, or in order to meet a need set 
forth in 10 U.S.C. 2533. For example, a public interest exception may 
be appropriate--
    (1) If accepting the low domestic offer will involve substantial 
foreign expenditures, or accepting the low foreign offer will involve 
substantial domestic expenditures;
    (2) To ensure access to advanced state-of-the-art commercial 
technology; or
    (3) To maintain the same source of supply for spare and replacement 
parts (also see paragraph (b)(iii)(B) of this section)--
    (i) For an end item that qualifies as a domestic end product; or
    (ii) In order not to impair integration of the military and 
commercial industrial base.
    (B) Except as provided in 225.872-4(b), process a determination for 
a public interest exception after consideration of the factors in 10 
U.S.C. 2533--
    (1) At a level above the contracting officer for acquisitions 
valued at $100,000 or less;
    (2) By the head of the contracting activity for acquisitions valued 
at more than $100,000 but less than $1,000,000; or
    (3) By the agency head for acquisitions valued at $1,000,000 or 
more.
    (b)(i) A determination that an article, material, or supply is not 
reasonably available is required when domestic offers are insufficient 
to meet the requirement and award is to be made on other than a 
qualifying country or eligible end product.
    (ii) Except as provided in FAR 25.103(b)(3), the determination 
shall be approved--
    (A) At a level above the contracting officer, if the acquisition is 
valued at $100,000 or less;
    (B) By the chief of the contracting office if the acquisition is 
valued at more than $100,000 but less than $1,000,000; or
    (C) By the head of the contracting activity or immediate deputy if 
the acquisition is valued at $1,000,000 or more.
    (iii) DoD has determined that the following articles are not 
reasonably available from domestic sources:
    (A) End products or components listed in 225.104(a).
    (B) Spare or replacement parts that must be acquired from the 
original foreign manufacturer or supplier.
    (C) Foreign drugs acquired by the Defense Supply Center, 
Philadelphia, when the Director, Pharmaceuticals Group, Directorate of 
Medical Materiel, determines that only the requested foreign drug will 
fulfill the requirements.
    (iv) Under coordinated acquisition (see subpart 208.70), the 
determination is the responsibility of the requiring department when 
the requiring department specifies acquisition of a foreign end 
product.
    (c) The cost of a domestic end product is unreasonable if it is not 
the low evaluated offer when evaluated under subpart 225.5.


225.104  Nonavailable articles.

    (a) DoD has determined that the following articles also are 
nonavailable in accordance with FAR 25.103(b):
    (i) Aluminum clad steel wire.
    (ii) Sperm oil.


225.105  Determining reasonableness of cost.

    (b) Use an evaluation factor of 50 percent instead of the factors 
specified in FAR 25.105(b).


225.170  Solicitations.

    For oral solicitations, inform prospective quoters that only 
domestic and qualifying country end products are acceptable unless--
    (1) Other foreign end products are excepted either on a blanket or 
an individual basis; or
    (2) The price of another foreign end product is the low offer under 
the evaluation procedures in Subpart 225.5.


225.202  [Amended]

    11. Section 225.202 is amended in paragraph (a)(2) as follows:
    a. In the first sentence, by removing the parenthetical ``(iii)''; 
and
    b. In the second sentence, by removing ``must'' and adding in its 
place ``shall''.
    12. Section 225.401 is revised to read as follows:


225.401  Exceptions.

    (a)(2) If a department or agency considers an individual 
acquisition of a product to be indispensable for national security or 
national defense purposes and appropriate for exclusion from the 
provisions of FAR Subpart 25.4, it may submit a request with supporting 
rationale to the Director of Defense Procurement (OUSD (AT&L) DP). 
Approval by OUSD (AT&L) DP is not required if--
    (A) Purchase from foreign sources is restricted by statute (see 
Subpart 225.70);
    (B) Another exception in FAR 25.401 applies to the acquisition; or
    (C) Competition from foreign sources is restricted under Subpart 
225.71.
    13. Section 225.401-70 is amended in the introductory text by 
revising the last sentence to read as follows:


225.401-70  Products subject to trade agreement acts.

    * * * The following list indicates those products that are eligible 
for designated and NAFTA countries, but are not eligible for Caribbean 
Basin countries.
* * * * *
    14. Sections 225.402 and 225.403 are revised to read as follows:


225.402  General.

    To estimate the value of the acquisition, use the total estimated 
value of end products subject to trade agreement acts (see 225.401-70).


225.403  Trade Agreements Act.

    (c) For acquisitions subject to the Trade Agreements Act, acquire 
only U.S.-made, qualifying country, or eligible end products unless--
    (i) The contracting officer determines that offers of U.S.-made, 
qualifying country, or eligible products from responsive, responsible 
offerors are either--
    (A) Not received; or
    (B) Insufficient to fill the Government's requirements. In this 
case, accept all responsive, responsible offers of U.S.-made, 
qualifying country, and eligible products before accepting any other 
offers; or
    (ii) A national interest waiver under 19 U.S.C. 2512(b)(2) is 
granted on a case-by-case basis. Except as delegated in paragraphs 
(c)(i)(A) and (B) of this section, submit any request for a national 
interest waiver to the Director of Defense Procurement in accordance 
with department or agency procedures. Include supporting rationale with 
the request.
    (A) The head of the contracting activity may approve a national 
interest waiver for a purchase by an overseas purchasing activity, if 
the waiver is supported by a written statement from the requiring 
activity that the products being acquired are critical for the support 
of U.S. forces stationed abroad.
    (B) The Commander or Director, Defense Energy Support Center, may 
approve national interest waivers for purchases of fuel for use by U.S. 
forces overseas.
    15. Subpart 225.5 is revised to read as follows:
Subpart 225.5--Evaluating Foreign Offers--Supply Contracts
Sec.
225.502 Application.
225.503 Group offers.
225.504 Evaluation examples.

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225.502  Application.

    (b) Use the following procedures instead of the procedures in FAR 
25.502(b) for acquisitions subject to the Trade Agreements Act:
    (i) Consider only offers of U.S.-made, qualifying country, or 
eligible end products, except as permitted by 225.403.
    (ii) If price is the determining factor, award on the low offer.
    (c) Use the following procedures instead of the procedures in FAR 
25.502(c) for acquisitions subject to the Buy American Act or the 
Balance of Payments Program:
    (i)(A) If the acquisition is subject only to the Buy American Act 
or the Balance of Payments Program, then only qualifying country end 
products are exempt from application of the Buy American Act or Balance 
of Payments Program evaluation factor.
    (B) If the acquisition is also subject to NAFTA, then NAFTA country 
end products are also exempt from application of the Buy American Act 
or Balance of Payments Program evaluation factor.
    (C) If the acquisition is also subject to the Trade Agreements Act, 
then designated country end products and Caribbean Basin Country end 
products are also exempt from application of the Buy American Act or 
Balance of Payments Program evaluation factor.
    (ii) If price is the determining factor, use the following 
procedures:
    (A) If the low offer is a domestic offer, award on that offer.
    (B) If there are no domestic offers, award on the low offer (see 
example in 225.504(1)).
    (C) If the low offer is a foreign offer that is exempt from 
application of the Buy American Act or Balance of Payments Program 
evaluation factor, award on that offer. (If the low offer is a 
qualifying country offer from a country listed at 225.872-1(b) and the 
Trade Agreements Act does not apply, execute a determination in 
accordance with 225.872-4.)
    (D) If the low offer is a foreign offer that is not exempt from 
application of the Buy American Act or Balance of Payments Program 
evaluation factor, and there is another foreign offer that is exempt, 
and is lower than the lowest domestic offer, award on the low foreign 
offer (see example in 225.504(2)).
    (E) Otherwise, apply the 50 percent evaluation factor to the low 
foreign offer.
    (1) If the price of the low domestic offer is less than the 
evaluated price of the low foreign offer, award on the low domestic 
offer (see example in 225.504(3)).
    (2) If the evaluated price of the low foreign offer remains less 
than the low domestic offer, award on the low foreign offer (see 
example in 225.504(4)).
    (iii) If price is not the determining factor, use the following 
procedures:
    (A) If there are domestic offers, apply the 50 percent Buy American 
Act or Balance of Payments Program evaluation factor to all foreign 
offers unless an exemption applies.
    (B) Evaluate in accordance with the criteria of the solicitation.
    (C) If these procedures will not result in award on a domestic 
offer, reevaluate offers without the 50 percent factor. If this will 
result in award on an offer to which the Buy American Act or Balance of 
Payments Program applies, but evaluation in accordance with paragraph 
(c)(ii) of this section would result in award on a domestic offer, 
proceed with award only after execution of a determination in 
accordance with 225.103(a)(ii)(B), that domestic preference would be 
inconsistent with the public interest.


225.503  Group offers.

    Evaluate group offers in accordance with FAR 25.503, but apply the 
evaluation procedures of 225.502.


225.504  Evaluation examples.

    The following examples illustrate the evaluation procedures in 
225.502(c)(ii). The examples assume that the contracting officer has 
eliminated all offers that are unacceptable for reasons other than 
price or a trade agreement and that price is the determining factor in 
contract award. The same evaluation procedures and the 50 percent 
evaluation factor apply regardless of whether the acquisition is 
subject to the Buy American Act (BAA) or the Balance of Payments 
Program (BOPP).
    (1) Example 1.

Offer A $945,000 Foreign offer subject to BAA/BOPP
Offer B $950,000 Foreign offer exempt from BAA/BOPP

    Since no domestic offers are received, do not apply the 
evaluation factor. Award on Offer A.

    (2) Example 2.

Offer A $950,000 Domestic offer
Offer B $890,000 Foreign offer exempt from BAA/BOPP
Offer C $880,000 Foreign offer subject to BAA/BOPP

    Since the exempt foreign offer is lower than the domestic offer, 
do not apply the evaluation factor. Award on Offer C.

    (3) Example 3.

Offer A $9,100 Foreign offer exempt from BAA/BOPP
Offer B $8,900 Domestic offer
Offer C $6,000 Foreign offer subject to BAA/BOPP

    Since the domestic offer is lower than the exempt foreign offer, 
apply the 50 percent evaluation factor to Offer C. This results in 
an evaluated price of $9,000 for Offer C. Award on Offer B.

    (4) Example 4.

Offer A $910,000 Foreign offer exempt from BAA/BOPP
Offer B $890,000 Domestic offer
Offer C $590,000 Foreign offer subject to BAA/BOPP

    Since the domestic offer is lower than the exempt foreign offer, 
apply the 50 percent evaluation factor to Offer C. This results in 
an evaluated price of $885,000 for Offer C. Award on Offer C.

    16. Subpart 225.6 is added to read as follows:

Subpart 225.6--Trade Sanctions

Sec.
225.670 Secondary Arab boycott of Israel.
225.670-1 Restriction.
225.670-2 Procedures.
225.670-3 Exceptions.
225.670-4 Waivers.


225.670  Secondary Arab boycott of Israel.


225.670-1  Restriction.

    In accordance with 10 U.S.C. 2410i, do not enter into a contract 
with a foreign entity unless it has certified that it does not comply 
with the secondary Arab boycott of Israel.


225.670-2  Procedures.

    For contracts awarded to the Canadian Commercial Corporation (CCC), 
the CCC will submit a certification from its proposed subcontractor 
with the other required precontractual information (see 225.870).


225.670-3  Exceptions.

    This restriction does not apply to--
    (a) Purchases at or below the simplified acquisition threshold;
    (b) Contracts for consumable supplies, provisions, or services for 
the support of United States forces or of allied forces in a foreign 
country; or
    (c) Contracts pertaining to the use of any equipment, technology, 
data, or services for intelligence or classified purposes, or to the 
acquisition or lease thereof, in the interest of national security.


225.670-4  Waivers.

    The Secretary of Defense may waive this restriction on the basis of 
national security interests. Forward waiver requests to the Director, 
Defense Procurement, ATTN: OUSD(AT&L)DP/FC, 3060 Defense Pentagon, 
Washington, DC 20301-3060.

[[Page 62594]]

    17. Subpart 225.7 is revised to read as follows:

Subpart 225.7--Prohibited Sources

Sec.
225.770 Ownership or control by the government of a terrorist 
country.
225.770-1 Prohibition.
225.770-2 Procedures.
225.770-3 Waiver.


225.770  Ownership or control by the government of a terrorist country.


225.770-1  Prohibition.

    (a) In accordance with 10 U.S.C. 2327(b), do not award a contract 
of $100,000 or more to a firm or to a subsidiary of a firm if the 
government of a terrorist country, either directly or indirectly, has a 
significant interest--
    (1) In the firm; or
    (2) In the subsidiary or the firm that owns the subsidiary.
    (b) Do not consent to any subcontract with a firm, or a subsidiary 
of a firm, that the Secretary of Defense has identified as being owned 
or controlled by the government of a terrorist country unless the 
agency head states in writing the compelling reasons for the 
subcontract.


225.770-2  Procedures.

    Forward any disclosure that the government of a terrorist country 
has a significant interest in an offeror or a subsidiary of an offeror, 
through the head of the agency, to the Director, Defense Procurement, 
ATTN: OUSD(AT&L)DP/FC, 3060 Defense Pentagon, Washington, DC 20301-
3060.


225.770-3  Waiver.

    The Secretary of Defense may waive the prohibition in 225.770-1(a) 
in accordance with 10 U.S.C. 2327(c). The Secretary of Defense may not 
delegate this waiver authority.
    18. Subpart 225.8 is revised to read as follows:

Subpart 225.8--Other International Agreements and Coordination

Sec.
225.802 Procedures.
225.802-70 Contracts for performance outside the United States and 
Canada.
225.802-71 End use certificates.
225.870 Contracting with Canadian contractors.
225.870-1 General.
225.870-2 Solicitation of Canadian contractors.
225.870-3 Submission of offers.
225.870-4 Contracting procedures.
225.870-5 Contract administration.
225.870-6 Termination procedures.
225.870-7 Acceptance of Canadian supplies.
225.870-8 Industrial security.
225.871 North Atlantic Treaty Organization cooperative projects.
225.871-1 Scope.
225.871-2 Definitions.
225.871-3 General.
225.871-4 Statutory waivers.
225.871-5 Directed subcontracting.
225.871-6 Disposal of property.
225.871-7 Congressional notification.
225.872 Contracting with qualifying country sources.
225.872-1 General.
225.872-2 Applicability.
225.872-3 Solicitation procedures.
225.872-4 Individual determinations.
225.872-5 Contract administration.
225.872-6 Audit.
225.872-7 Industrial security for qualifying countries.
225.872-8 Subcontracting with qualifying country sources.
225.873 Waiver of United Kingdom commercial exploitation levies.
225.873-1 Policy.
225.873-2 Procedures.


225.802  Procedures.

    (b) Information on specific agreements is available as follows:
    (i) Memoranda of understanding and other international agreements 
between the United States and the countries listed in 225.872-1 are 
maintained in the Foreign Contracting Directorate, Office of the 
Director of Defense Procurement ((703) 697-9351/2/3; DSN 227-9351/2/3).
    (ii) Military Assistance Advisory Groups, Naval Missions, and Joint 
U.S. Military Aid Groups normally have copies of the agreements 
applicable to the countries concerned.
    (iii) Copies of international agreements covering the United 
Kingdom of Great Britain and Northern Ireland, Western European 
countries, North Africa, and the Middle East are filed with the U.S. 
European Command.
    (iv) Agreements with countries in the Pacific and Far East are 
filed with the U.S. Pacific Command.


225.802-70  Contracts for performance outside the United States and 
Canada.

    (a) When a contracting office anticipates placement of a contract 
for performance outside the United States and Canada, and the 
contracting office is not under the jurisdiction of a command for the 
country involved, the contracting office shall maintain liaison with 
the cognizant contract administration office (CAO) during preaward 
negotiations and postaward administration. The CAO will provide 
pertinent information for contract negotiations, effect appropriate 
coordination, and obtain required approvals for the performance of the 
contract.
    (b) If the acquisition requires the performance of work in the 
foreign country by U.S. personnel or a third country contractor, or if 
the acquisition requires logistics support for contract employees, 
source inspection, or additional Government employees--
    (1) The contracting officer shall coordinate with the CAO before 
contract award;
    (2) The contracting officer shall request the following information 
from the CAO:
    (i) The applicability of any international agreements to the 
acquisition.
    (ii) Security requirements applicable to the area.
    (iii) The standards of conduct for the prospective contractor and 
its employees and any consequences for violation of the standards of 
conduct.
    (iv) Requirements for use of foreign currencies, including 
applicability of U.S. holdings of excess foreign currencies.
    (v) Availability of logistical support for contractor employees.
    (vi) Information on taxes and duties from which the Government may 
be exempt;
    (3) The contracting officer shall furnish the following information 
to the CAO:
    (i) A synopsis of the work to be performed and, if practical, a 
copy of the solicitation.
    (ii) Any contractor logistical support desired in support of U.S. 
or foreign military sale requirements.
    (iii) Contract performance period and estimated contract value.
    (iv) Number and nationality of contractor employees and date of 
planned arrival of contractor personnel.
    (v) Contract security requirements.
    (vi) Other pertinent information to effect complete coordination 
and cooperation.


225.802-71  End use certificates.

    Contracting officers considering the purchase of an item from a 
foreign source may encounter a request for the signing of a certificate 
to indicate that the Armed Forces of the United States is the end user 
of the item, and that the U.S. Government will not transfer the item to 
third parties without authorization from the Government of the country 
selling the item. When encountering this situation, refer to DoD 
Directive 2040.3, End Use Certificates, for guidance.


225.870  Contracting with Canadian contractors.


225.870-1  General.

    (a) The Canadian Government guarantees to the U.S. Government all 
commitments, obligations, and

[[Page 62595]]

covenants of the Canadian Commercial Corporation under any contract or 
order issued to the Corporation by any contracting office of the U.S. 
Government. The Canadian Government has waived notice of any change or 
modification that may be made, from time to time, in these commitments, 
obligations, or covenants.
    (b) For production planning purposes, Canada is part of the defense 
industrial base (see 225.870-2(b)).
    (c) The Canadian Commercial Corporation will award and administer 
contracts with contractors located in Canada, except for--
    (1) Negotiated acquisitions for experimental, developmental, or 
research work under projects other than the Defense Development Sharing 
Program;
    (2) Acquisitions of unusual or compelling urgency;
    (3) Acquisitions at or below the simplified acquisition threshold; 
or
    (4) Acquisitions made by DoD activities located in Canada.
    (d) The Canadian Commercial Corporation uses provisions in 
contracts with Canadian or U.S. concerns that give DoD the same 
production rights, data, and information that DoD would obtain in 
contracts with U.S. concerns.
    (e) The Government of Canada will provide the following services 
under contracts with the Canadian Commercial Corporation without charge 
to DoD:
    (1) Contract administration services, including--
    (i) Cost and price analysis;
    (ii) Industrial security;
    (iii) Accountability and disposal of Government property;
    (iv) Production expediting;
    (v) Compliance with Canadian labor laws;
    (vi) Processing of termination claims and disposal of termination 
inventory;
    (vii) Customs documentation;
    (viii) Processing of disputes and appeals; and
    (ix) Such other related contract administration functions as may be 
required with respect to the Canadian Commercial Corporation contract 
with the Canadian supplier.
    (2) Audits. The Public Works and Government Services Canada 
performs audits when needed. Route requests for audit on non-Canadian 
Commercial Corporation contracts through the cognizant contract 
management office of the Defense Contract Management Agency.
    (3) Inspection. The Department of National Defence (Canada) 
provides inspection personnel, services, and facilities at no charge to 
DoD departments and agencies (see 225.870-7).


225.870-2  Solicitation of Canadian contractors.

    (a) Except for acquisitions described in 225.870-1(c)(1) through 
(4), include Canadian firms on solicitation mailing lists and 
comparable source lists only at the request of the Canadian Commercial 
Corporation.
    (b) Include Canadian planned producers under the Industrial 
Preparedness Production Planning Program on solicitation mailing lists 
for their planned items (see FAR 14.205-1).
    (c) Send solicitations directly to Canadian firms appearing on the 
appropriate solicitation mailing lists. Send a complete copy of the 
solicitation and a listing of Canadian firms solicited to the Canadian 
Commercial Corporation, 11th Floor, 50 O'Connor Street, Ottawa, 
Ontario, K1A-0S6, Canada.
    (d) If requested, furnish a solicitation to the Canadian Commercial 
Corporation even if no Canadian firm is solicited.
    (e) Handle acquisitions at or below the simplified acquisition 
threshold directly with Canadian firms and not through the Canadian 
Commercial Corporation.


225.870-3  Submission of offers.

    (a) As indicated in 225.870-4, the Canadian Commercial Corporation 
is the prime contractor. To indicate acceptance of offers by individual 
Canadian companies, the Canadian Commercial Corporation issues a letter 
supporting the Canadian offer and containing the following information:
    (1) Name of the Canadian offeror.
    (2) Confirmation and endorsement of the offer in the name of the 
Canadian Commercial Corporation.
    (3) A statement that the Corporation shall subcontract 100 percent 
with the offeror.
    (b) When a Canadian offer cannot be processed through the Canadian 
Commercial Corporation in time to meet the date for receipt of offers, 
the Corporation may permit Canadian firms to submit offers directly. 
However, the contracting officer shall receive the Canadian Commercial 
Corporation's endorsement before contract award.
    (c) The Canadian Commercial Corporation will submit all sealed bids 
in terms of U.S. currency. Do not adjust contracts awarded under sealed 
bidding for losses or gains from fluctuation in exchange rates.
    (d) Except for sealed bids, the Canadian Commercial Corporation 
normally will submit offers and quotations in terms of Canadian 
currency. The Corporation may, at the time of submitting an offer, 
elect to quote and receive payment in terms of U.S. currency, in which 
case the contract--
    (1) Shall provide for payment in U.S. currency; and
    (2) Shall not be adjusted for losses or gains from fluctuation in 
exchange rates.


225.870-4  Contracting procedures.

    (a) Except for contracts described in 225.870-1(c)(1) through (4), 
award individual contracts covering purchases from suppliers located in 
Canada to the Canadian Commercial Corporation, 11th Floor, 50 O'Connor 
Street, Ottawa, Ontario, Canada, K1A-0S6.
    (b) Direct communication with the Canadian supplier is authorized 
and encouraged in connection with all technical aspects of the 
contract, provided the Corporation's approval is obtained on any 
matters involving changes to the contract.
    (c) Identify in the contract, the type of currency, i.e., U.S. or 
Canadian. Contracts that provide for payment in Canadian currency 
shall--
    (1) Quote the contract price in terms of Canadian dollars and 
identify the amount by the initials ``CN''; e.g., $1,647.23CN; and
    (2) Clearly indicate on the face of the contract the U.S./Canadian 
conversion rate at the time of award and the U.S. dollar equivalent of 
the Canadian dollar contract amount.


225.870-5  Contract administration.

    (a) Assign contract administration in accordance with Part 242. 
When the Defense Contract Management Agency will perform contract 
administration in Canada, name in the contract the following payment 
office for disbursement of DoD funds (DoD Department Code: 17--Navy; 
21--Army; 57--Air Force; 97--all other DoD components), whether payment 
is in Canadian or U.S. dollars: DFAS--Columbus Center; DFAS-CO/New 
Dominion Division; PO Box 182041; Columbus, OH 43218-2041.
    (b) The following procedures apply to cost-reimbursement type 
contracts:
    (1) The Public Works and Government Services Canada (PWGSC) 
automatically arranges audits on contracts with the Canadian Commercial 
Corporation.
    (i) Consulting and Audit Canada (CAC) furnishes audit reports to 
PWGSC.
    (ii) Upon advice from PWGSC, the Canadian Commercial Corporation 
certifies the invoice and forwards it with Standard Form (SF) 1034, 
Public Voucher, to the administrative

[[Page 62596]]

contracting officer for further processing and transmittal to the 
disbursing office.
    (2) For contracts placed directly with Canadian firms, the 
administrative contracting officer requests audits from the CAC, 
Ottawa, Ontario, Canada.
    (i) The CAC/PWGSC approves invoices on a provisional basis pending 
completion of the contract and final audit.
    (ii) The CAC/PWGSC forwards these invoices, accompanied by SF 1034, 
Public Voucher, to the administrative contracting officer for further 
processing and transmittal to the disbursing officer.
    (iii) The CAC/PWGSC furnishes periodic advisory audit reports 
directly to the administrative contracting officer.


225.870-6  Termination procedures.

    (a) The Canadian Commercial Corporation will continue administering 
contracts that the U.S. contracting officer terminates.
    (b) The Corporation will settle all Canadian subcontracts in 
accordance with the policies, practices, and procedures of the Canadian 
Government.
    (c) The U.S. agency administering the contract with the Canadian 
Commercial Corporation shall provide any services required by the 
Canadian Commercial Corporation, including disposal of inventory, for 
settlement of any subcontracts placed in the United States. Settlement 
of such U.S. subcontracts will be in accordance with this regulation.


225.870-7  Acceptance of Canadian supplies.

    (a) For contracts placed in Canada, either with the Canadian 
Commercial Corporation or directly with Canadian suppliers, the 
Department of National Defence (Canada) will perform any necessary 
contract quality assurance and/or acceptance, as applicable.
    (b) Signature by the Department of National Defence (Canada) 
quality assurance representative on the DoD inspection and acceptance 
form is satisfactory evidence of acceptance for payment purposes.


225.870-8  Industrial security.

    Industrial security for Canada shall be in accordance with the 
U.S.-Canada Industrial Security Agreement of March 31, 1952, as 
amended.


225.871  North Atlantic Treaty Organization cooperative projects.


225.871-1  Scope.

    This section--
    (a) Implements 22 U.S.C. 2767 and 10 U.S.C. 2350b; and
    (b) Provides guidance on awarding contracts for North Atlantic 
Treaty Organization (NATO) cooperative projects.


225.871-2  Definitions.

    (a) Cooperative project means a jointly managed arrangement--
    (1) Described in a written agreement between the parties;
    (2) Undertaken to further the objectives of standardization, 
rationalization, and interoperability of the armed forces of NATO 
member countries; and
    (3) Providing for--
    (i) One or more of the other participants to share with the United 
States the cost of research and development, testing, evaluation, or 
joint production (including follow-on support) of certain defense 
articles;
    (ii) Concurrent production in the United States and in another 
member country of a defense article jointly developed; or
    (iii) Acquisition by the United States of a defense article or 
defense service from another member country.
    (b) Other participant means a cooperative project participant other 
than the United States.


225.871-3  General.

    (a) Cooperative project authority.
    (1) Departments and agencies, that have authority to do so, may 
enter into cooperative project agreements with NATO or with one or more 
member countries of NATO under DoDD 5530.3, International Agreements.
    (2) Under laws and regulations governing the negotiation and 
implementation of cooperative project agreements, departments and 
agencies may enter into contracts, or incur other obligations, on 
behalf of other participants without charge to any appropriation or 
contract authorization.
    (3) Agency heads are authorized to solicit and award contracts to 
implement cooperative projects.
    (b) Contracts implementing cooperative projects shall comply with 
all applicable laws relating to Government acquisition, unless a waiver 
is granted under 225.871-4. A waiver of certain laws and regulations 
may be obtained if the waiver--
    (1) Is required by the terms of a written cooperative project 
agreement;
    (2) Will significantly further NATO standardization, 
rationalization, and interoperability; and
    (3) Is approved by the appropriate DoD official.


225.871-4  Statutory waivers.

    (a) For contracts or subcontracts placed outside the United States, 
the Deputy Secretary of Defense may waive any provision of law that 
specifically prescribes--
    (1) Procedures for the formation of contracts;
    (2) Terms and conditions for inclusion in contracts;
    (3) Requirements or preferences for--
    (i) Goods grown, produced, or manufactured in the United States or 
in U.S. Government-owned facilities; or
    (ii) Services to be performed in the United States; or
    (4) Requirements regulating the performance of contracts.
    (b) There is no authority for waiver of--
    (1) Any provision of the Arms Export Control Act (22 U.S.C. 2751);
    (2) Any provision of 10 U.S.C. 2304;
    (3) The cargo preference laws of the United States, including the 
Military Cargo Preference Act of 1904 (10 U.S.C. 2631) and the Cargo 
Preference Act of 1954 (46 U.S.C. 1241(b)); or
    (4) Any of the financial management responsibilities administered 
by the Secretary of the Treasury.
    (c) Forward any request for waiver under a cooperative project to 
the Deputy Secretary of Defense, through the Director of Defense 
Procurement, Office of the Under Secretary of Defense (Acquisition, 
Technology, and Logistics). The waiver request shall include a draft 
Determination and Findings for signature by the Deputy Secretary of 
Defense establishing that the waiver is necessary to significantly 
further NATO standardization, rationalization, and interoperability.
    (d) Obtain the approval of the Deputy Secretary of Defense before 
committing to make a waiver in an agreement or a contract.


225.871-5  Directed subcontracting.

    (a) The Director of Defense Procurement may authorize the direct 
placement of subcontracts with particular subcontractors. Directed 
subcontracting is not authorized unless specifically addressed in the 
cooperative project agreement.
    (b) In some instances, it may not be feasible to name specific 
subcontractors at the time the agreement is concluded. However, the 
agreement shall clearly state the general provisions for work sharing 
at the prime and subcontract level.
    (c) The agreement is the authority for a contractual provision 
requiring the contractor to place certain subcontracts with particular 
subcontractors. No separate justification and approval during the 
acquisition process is required.

[[Page 62597]]

225.871-6  Disposal of property.

    Dispose of property that is jointly acquired by the members of a 
cooperative project under the procedures established in the agreement 
or in a manner consistent with the terms of the agreement.


225.871-7  Congressional notification.

    (a) Congressional notification is required when DoD makes a 
determination to award a contract or subcontract to a particular 
entity, if the determination was not part of the certification made 
under 22 U.S.C. 2767(f) before finalizing the cooperative agreement.
    (1) Departments and agencies shall provide a proposed Congressional 
notice to the Director of Defense Procurement in sufficient time to 
forward to Congress before the time of contract award.
    (2) The proposed notice shall include the reason it is necessary to 
use the authority to designate a particular contractor or 
subcontractor.
    (b) Congressional notification is also required each time a 
statutory waiver under 225.871-4 is incorporated in a contract or a 
contract modification, if such information was not provided in the 
certification to Congress before finalizing the cooperative agreement.


225.872  Contracting with qualifying country sources.


225.872-1  General.

    (a) As a result of memoranda of understanding and other 
international agreements, DoD has determined it inconsistent with the 
public interest to apply restrictions of the Buy American Act or the 
Balance of Payments Program to the acquisition of defense equipment 
that is mined, produced, or manufactured in any of the following 
countries (referred to in this part as ``qualifying countries''):

Australia
Belgium
Canada
Denmark
Egypt
Federal Republic of Germany
France
Greece
Israel
Italy
Luxembourg
Netherlands
Norway
Portugal
Spain
Switzerland
Turkey
United Kingdom of Great Britain and Northern Ireland

    (b) Individual acquisitions for products of the following 
qualifying countries may, on a purchase-by-purchase basis (see 225.872-
4), be exempted from application of the Buy American Act and the 
Balance of Payments Program as inconsistent with the public interest'

Austria
Finland
Sweden

    (c) The determination in paragraph (a) of this subsection does not 
limit the authority of the Secretary concerned to restrict acquisitions 
to domestic sources or reject an otherwise acceptable offer from a 
qualifying country source when considered necessary for national 
defense reasons.


225.872-2  Applicability.

    (a) This section applies to all acquisitions of supplies except 
those restricted by--
    (1) U.S. National Disclosure Policy, DoDD 5230.11, Disclosure of 
Classified Military Information to Foreign Governments and 
International Organizations;
    (2) U.S. defense mobilization base requirements purchased under the 
authority of FAR 6.302-3(a)(2)(i) except for quantities in excess of 
that required to maintain the defense mobilization base. This 
restriction does not apply to Canadian planned producers.
    (i) Review individual solicitations to determine whether this 
restriction applies.
    (ii) Information concerning restricted items may be obtained from 
the Deputy Under Secretary of Defense (Industrial Affairs);
    (3) Other U.S. laws or regulations (e.g., the annual DoD 
appropriations act); and
    (4) U.S. industrial security requirements.
    (b) This section does not apply to construction contracts.


225.872-3  Solicitation procedures.

    (a) Include qualifying country sources on solicitation mailing 
lists upon their request (see FAR 14.205).
    (b) Except for items developed under the U.S./Canadian Development 
Sharing Program, use the criteria for soliciting and awarding contracts 
to small business concerns under FAR part 19 without regard to whether 
there are potential qualifying country sources for the end product. Do 
not consider an offer of a qualifying country end product if the 
solicitation is identified for the exclusive participation of small 
business concerns.
    (c) Send solicitations directly to qualifying country sources. 
Solicit Canadian sources through the Canadian Commercial Corporation in 
accordance with 225.870.
    (d) Use international air mail if solicitation destinations are 
outside the United States and security classification permits such use.
    (e) If unusual technical or security requirements preclude the 
acquisition of otherwise acceptable defense equipment from qualifying 
country sources, review the need for such requirements. Do not impose 
unusual technical or security requirements solely for the purpose of 
precluding the acquisition of defense equipment from qualifying 
countries.
    (f) Do not automatically exclude qualifying country sources from 
submitting offers because their supplies have not been tested and 
evaluated by the department or agency.
    (1) Consider the adequacy of qualifying country service testing on 
a case-by-case basis. Departments or agencies that must limit 
solicitations to sources whose items have been tested and evaluated by 
the department or agency shall consider supplies from qualifying 
country sources that have been tested and accepted by the qualifying 
country for service use.
    (2) The department or agency may perform a confirmatory test, if 
necessary.
    (3) Apply U.S. test and evaluation standards, policies, and 
procedures when the department or agency decides that confirmatory 
tests of qualifying country end products are necessary.
    (4) If it appears that these provisions might adversely delay 
service programs, obtain the concurrence of the Under Secretary of 
Defense (Acquisition, Technology, and Logistics), before excluding the 
qualifying country source from consideration.
    (g) Permit industry representatives from a qualifying country to 
attend symposia, program briefings, prebid conferences (see FAR 14.207 
and 15.201(c)), and similar meetings that address U.S. defense 
equipment needs and requirements. When practical, structure these 
meetings to allow attendance by representatives of qualifying country 
concerns.


225.872-4  Individual determinations.

    (a) If the offer of an end product from a qualifying country source 
listed in 225.872-1(b), as evaluated, is low or otherwise eligible for 
award, prepare a determination and findings exempting the acquisition 
from the Buy American Act and Balance of Payments Program as 
inconsistent with the public interest, unless another exception such as 
the Trade Agreements Act applies.

[[Page 62598]]

    (b) Obtain signature of the determination and findings--
    (1) At a level above the contracting officer, if the acquisition is 
valued at $100,000 or less; or
    (2) By the chief of the contracting office, if the acquisition is 
valued at more than $100,000.
    (c) Prepare the determination and findings substantially as 
follows:

Service or Agency

Exemption of the Buy American Act and Balance of Payments Program

Determination and Findings

    Upon the basis of the following findings and determination which 
I hereby make in accordance with the provisions of FAR 25.103(a), 
the acquisition of a qualifying country end product may be made as 
follows:

Findings

    1. The (contracting office) proposes to purchase under contract 
number --------, (describe item) mined, produced, or manufactured in 
(qualifying country of origin). The total estimated cost of this 
acquisition is --------.
    2. The United States Government and the Government of -------- 
have agreed to remove barriers to procurement at the prime and 
subcontract level for defense equipment produced in each other's 
countries insofar as laws and regulations permit.
    3. The agreement provides that the Department of Defense will 
evaluate competitive offers of qualifying country end products 
mined, produced, or manufactured in (qualifying country) without 
imposing any price differential under the Buy American Act or 
Balance of Payments Program and without taking applicable U.S. 
customs and duties into consideration so that such items may better 
compete for sales of defense equipment to the Department of Defense. 
In addition, the Agreement stipulates that acquisitions of such 
items shall fully satisfy Department of Defense requirements for 
performance, quality, and delivery and shall cost the Department of 
Defense no more than would comparable U.S. source or other foreign 
source defense equipment eligible for award.
    4. To achieve the foregoing objectives, the solicitation 
contained the clause (title and number of the Buy American Act 
clause contained in the contract). Offers were solicited from other 
sources and the offer received from (offeror) is found to be 
otherwise eligible for award.

Determination

    I hereby determine that it is inconsistent with the public 
interest to apply the restrictions of the Buy American Act or the 
Balance of Payments Program to the offer described in this 
determination and findings.

-----------------------------------------------------------------------
(Date)

-----------------------------------------------------------------------


225.872-5  Contract administration.

    (a) Arrangements exist with some qualifying countries to provide 
reciprocal contract administration services. Some arrangements are at 
no cost to either government. To determine whether such an arrangement 
has been negotiated and what contract administration functions are 
covered, contact the Deputy Director of Defense Procurement (Foreign 
Contracting), ((703) 697-9351/2/3, DSN 227-9351/2/3).
    (b) When contract administration services are required on contracts 
to be performed in qualifying countries, direct the request to the 
cognizant activity listed in the Federal Directory of Contract 
Administration Services. The cognizant activity also will arrange 
contract administration services for DoD subcontracts that qualifying 
country sources place in the United States.
    (c) The contract administration activity receiving a delegation 
shall determine whether any portions of the delegation are covered by 
memoranda of understanding annexes and, if so, shall delegate those 
functions to the appropriate organization in the qualifying country's 
government.
    (d) Information on quality assurance delegations to foreign 
governments is in subpart 246.4, Government Contract Quality Assurance.


225.872-6  Audit.

    (a) Memoranda of understanding with some qualifying countries 
contain annexes that provide for reciprocal ``no-cost'' audits of 
contracts and subcontracts (pre- and post-award).
    (b) To determine if such an annex is applicable to a particular 
qualifying country, contact the Deputy Director of Defense Procurement 
(Foreign Contracting), ((703) 697-9351/2/3, DSN 227-9351/2/3).
    (c) Handle requests for audits in qualifying countries in 
accordance with 215.404-2(c).
    (1) Except for the United Kingdom, send the request to the 
administrative contracting officer at the cognizant activity listed in 
Section 2B of the Federal Directory of Contract Administration 
Services. Send the request for audit from the United Kingdom directly 
to their Ministry of Defence.
    (2) Send an advance copy of the request to the focal point 
identified by the Deputy Director of Defense Procurement (Foreign 
Contracting).


225.872-7  Industrial security for qualifying countries.

    The required procedures for safeguarding classified defense 
information necessary for the performance of contracts awarded to 
qualifying country sources are in the DoD Industrial Security 
Regulation DoD 5220.22-R (implemented for the Army by AR 380-49; for 
the Navy by SECNAV Instruction 5510.1H; for the Air Force by AFI 31-
601; for the Defense Information Systems Agency by DCA Instruction 240-
110-8; and for the National Imagery and Mapping Agency by NIMA 
Instruction 5220.22).


225.872-8  Subcontracting with qualifying country sources.

    In reviewing contractor subcontracting procedures, the contracting 
officer shall ensure that the contract does not preclude qualifying 
country sources from competing for subcontracts, except when restricted 
by national security interest reasons, mobilization base 
considerations, or applicable U.S. laws or regulations (see the clause 
at 252.225-7002, Qualifying Country Sources as Subcontractors).


225.873  Waiver of United Kingdom commercial exploitation levies.


225.873-1  Policy.

    DoD and the Government of the United Kingdom (U.K.) have agreed to 
waive U.K. commercial exploitation levies and U.S. nonrecurring cost 
recoupment charges on a reciprocal basis. For U.K. levies to be waived, 
the offeror or contractor shall identify the levies and the contracting 
officer shall request a waiver before award of the contract or 
subcontract under which the levies are charged.


225.873-2  Procedures.

    (a) The Government of the U.K. shall approve waiver of U.K. levies. 
When an offeror or contractor identifies a levy included in an offered 
or contract price, the contracting officer shall provide written 
notification to the Defense Security Cooperation Agency, ATTN: PSD-PMD, 
1111 Jefferson Davis Highway, Arlington, VA 22202-4306, telephone (703) 
601-3864. The Defense Security Cooperation Agency will request a waiver 
of the levy from the Government of the U.K. The notification shall 
include--
    (1) Name of the U.K. firm;
    (2) Prime contract number;
    (3) Description of item for which waiver is being sought;
    (4) Quantity being acquired; and
    (5) Amount of levy.
    (b) Waiver may occur after contract award. If levies are waived 
before contract award, evaluate the offer without the levy. If levies 
are identified but not waived before contract award, evaluate the offer 
inclusive of the levies.

    19. Subpart 225.9 is revised to read as follows:

[[Page 62599]]

Subpart 225.9--Customs and Duties
Sec.
225.901 Policy.
225.902 Procedures.
225.903 Exempted supplies.


225.901  Policy.

    Unless the supplies are entitled to duty-free treatment under a 
special category in the Harmonized Tariff Schedule of the United States 
(e.g., the Caribbean Basin Economic Recovery Act or NAFTA), or unless 
the supplies already have entered into the customs territory of the 
United States and the contractor already has paid the duty, DoD will 
issue duty-free entry certificates for--
    (1) Qualifying country supplies (end products and components);
    (2) Eligible products (end products but not components) under 
contracts subject to the Trade Agreements Act or NAFTA; and
    (3) Other foreign supplies for which the contractor estimates that 
duty will exceed $200 per unit (end product or component).


225.902  Procedures.

    (1) Formal entry and release.
    (i) The administrative contracting officer shall--
    (A) Ensure that contractors are aware of and understand any Duty-
Free Entry clause requirements. Contractors should understand that 
failure by them or their subcontractors to provide the data required by 
the clause will result in treatment of the shipment as without benefit 
of free entry under Section XXII, Chapter 98, Subchapter VIII, Item 
9808.00.30 of the Harmonized Tariff Schedule of the United States.
    (B) Upon receipt of the required notice of purchase of foreign 
supplies from the contractor or any tier subcontractor--
    (1) Verify the duty-free entitlement of supplies entering under the 
contract; and
    (2) Review the prime contract to ensure that performance of the 
contract requires the foreign supplies (quantity and price) identified 
in the notice.
    (C) Within 20 days after receiving the notification of purchase of 
foreign supplies, forward the following information in the format 
indicated to the Commander, DCMA New York, ATTN: Customs Team, DCMAE-
GNTF, 207 New York Avenue, Building 120, Staten Island, NY 10305-5013:

    We have received a contractor notification of the purchase of 
foreign supplies. I have verified that foreign supplies are required 
for the performance of the contract.

Prime Contractor Name and Address:
Prime Contractor CAGE Code:
Prime Contract Number plus Delivery Order Number, if applicable:
Total Dollar Value of the Prime Contract or Delivery Order:
Expiration Date of the Prime Contract or Delivery Order:
Foreign Supplier Name and Address:
Number of Subcontract/Purchase Order for Foreign Supplies:
Total Dollar Value of the Subcontract for Foreign Supplies:
Expiration Date of the Subcontract for Foreign Supplies:
CAO Activity Address Number:
ACO Name and Telephone Number:
ACO Code:
Signature:
Title:

    (D) If a contract modification results in a change to any data 
verifying duty-free entitlement previously furnished, forward a revised 
notification including the changed data to DCMA New York.
    (ii) The Customs Team, DCMAE-GNTF, DCMA New York--
    (A) Is responsible for issuing duty-free entry certificates for 
foreign supplies purchased under a DoD contract or subcontract; and
    (B) Upon receipt of import documentation for incoming shipments 
from the contractor, its agent, or the U.S. Customs Service, will 
verify the duty-free entitlement and execute the duty-free entry 
certificate.
    (iii) Upon arrival of foreign supplies at ports of entry, the 
consignee, generally the contractor or its agent (import broker) for 
shipments to other than a military installation, will file U.S. Customs 
Form 7501, 7501A, or 7506, with the District Director of Customs.
    (2) Immediate entry and release. Importations made in the name of a 
DoD military facility or shipped directly to a military facility are 
entitled to release under the immediate delivery procedure.
    (i) A DoD immediate delivery application has been approved and is 
on file at Customs Headquarters.
    (ii) The application is for an indefinite period and is good for 
all Customs districts, areas, and ports.


225.903  Exempted supplies.

    (b)(i) The term ``supplies''--
    (A) Includes--
    (1) Articles known as ``stores,'' such as food, medicines, and 
toiletries; and
    (2) All consumable articles necessary and appropriate for the 
propulsion, operation, and maintenance of the vessel or aircraft, such 
as fuel, oil, gasoline, grease, paint, cleansing compounds, solvents, 
wiping rags, and polishes; and
    (B) Does not include portable articles necessary and appropriate 
for the navigation, operation, or maintenance of the vessel or aircraft 
and for the comfort and safety of the persons on board, such as rope, 
bolts and nuts, bedding, china and cutlery, which are included in the 
term ``equipment.''
    (ii) The duty-free certificate shall be printed, stamped, or typed 
on the face of, or attached to, Customs Form 7501. A duly designated 
officer or civilian official of the appropriate department or agency 
shall execute the certificate in the following form:

 (Date)----------------------------------------------------------------

    I certify that the acquisition of this material constituted a 
purchase of supplies by the United States for vessels or aircraft 
operated by the United States, and is admissible free of duty 
pursuant to 19 U.S.C. 1309.
 (Name)----------------------------------------------------------------

 (Title)---------------------------------------------------------------

 (Organization)--------------------------------------------------------

    20. Subpart 225.11 is revised to read as follows:
Subpart 225.11--Solicitation Provisions and Contract Clauses
Sec.
225.1100 Scope of subpart.
225.1101 Acquisition of supplies.
225.1103 Other provisions and clauses.


225.1100  Scope of subpart.

    This subpart prescribes the clauses that implement subparts 225.1 
through 225.10. The clauses that implement subparts 225.70 through 
225.75 are prescribed within those subparts.


225.1101  Acquisition of supplies.

    (1) Use the provision at 252.225-7000, Buy American Act--Balance of 
Payments Program Certificate, instead of the provision at FAR 52.225-2, 
Buy American Act Certificate. Use the provision in any solicitation 
that includes the clause at 252.225-7001, Buy American Act and Balance 
of Payments Program.
    (2) Use the clause at 252.225-7001, Buy American Act and Balance of 
Payments Program, instead of the clause at FAR 52.225-1, Buy American 
Act--Supplies, in solicitations and contracts unless--
    (i) All line items will be acquired from a particular source or 
sources under the authority of FAR 6.302-3;
    (ii) All line items must be domestic or qualifying country end 
products in accordance with subpart 225.70. (However, the clause may 
still be required if subpart 225.70 requires manufacture of the end 
product in the United States or in the United States or Canada, without 
a corresponding requirement for use of domestic components);
    (iii) An exception to the Buy American Act or Balance of Payments 
Program applies; or

[[Page 62600]]

    (iv) One or both of the following clauses will apply to all line 
items in the contract:
    (A) 252.225-7021, Trade Agreements.
    (B) 252.225-7036, Buy American Act--North American Free Trade 
Agreement Implementation Act--Balance of Payments Program.
    (3) Use the clause at 252.225-7002, Qualifying Country Sources as 
Subcontractors, in solicitations and contracts that include one of the 
following clauses:
    (i) 252.225-7001, Buy American Act and Balance of Payments Program.
    (ii) 252.225-7021, Trade Agreements.
    (iii) 252.225-7036, Buy American Act--North American Free Trade 
Agreement Implementation Act--Balance of Payments Program.
    (4) Use the clause at 252.225-7013, Duty-Free Entry, instead of the 
clause at FAR 52.225-10. Do not use the clause for acquisitions of 
supplies for exclusive use outside the United States.
    (5) Use the provision at 252.225-7020, Trade Agreements 
Certificate, instead of the provision at FAR 52.225-6, Trade Agreements 
Certificate, in solicitations that include the clause at 252.225-7021, 
Trade Agreements.
    (6)(i) Use the clause at 252.225-7021, Trade Agreements, instead of 
the clause at FAR 52.225-5, Trade Agreements, when the Trade Agreements 
Act applies.
    (ii) Do not use the clause if purchase from foreign sources is 
restricted, unless the contracting officer anticipates a waiver of the 
restriction.
    (iii) The acquisition of eligible and noneligible products under 
the same contract may result in the application of trade agreements to 
only some of the items acquired. In such case, indicate in the Schedule 
those items covered by the Trade Agreements clause.
    (7) Use the provision at 252.225-7032, Waiver of United Kingdom 
Levies--Evaluation of Offers, in solicitations and contracts if a U.K. 
firm is expected to--
    (i) Submit an offer; or
    (ii) Receive a subcontract exceeding $1 million.
    (8) Use the clause at 252.225-7033, Waiver of United Kingdom 
Levies, in solicitations and contracts if a U.K. firm is expected to--
    (i) Submit an offer; or
    (ii) Receive a subcontract exceeding $1 million.
    (9) Use the provision at 252.225-7035, Buy American Act--North 
American Free Trade Agreement Implementation Act--Balance of Payments 
Program Certificate, instead of the provision at FAR 52.225-4, Buy 
American Act--North American Free Trade Agreement--Israeli Trade Act, 
in solicitations that include the clause at 252.225-7036, Buy American 
Act--North American Free Trade Agreement Implementation Act--Balance of 
Payments Program. Use the provision with its Alternate I when the 
clause at 252.225-7005 is used with its Alternate I.
    (10)(i) Use the clause at 252.225-7036, Buy American Act--North 
American Free Trade Agreement Implementation Act--Balance of Payments 
Program, instead of the clause at FAR 52.225-3, Buy American Act--North 
American Free Trade Agreement--Israeli Trade Act, in solicitations and 
contracts for the items listed at 225.401-70, when the estimated value 
equals or exceeds $25,000, but is less than $169,000, and NAFTA applies 
to the acquisition.
    (A) Use the basic clause when the estimated value equals or exceeds 
$56,190.
    (B) Use the clause with its Alternate I when the estimated value 
equals or exceeds $25,000 but is less than $56,190.
    (ii) Do not use the clause if purchase from foreign sources is 
restricted (see 225.401(a)(2)), unless the contracting officer 
anticipates a waiver of the restriction.
    (iii) The acquisition of eligible and noneligible products under 
the same contract may result in the application of the North American 
Free Trade Agreement Implementation Act to only some of the items 
acquired. In such case, indicate in the Schedule those items covered by 
the Buy American Act--North American Free Trade Agreement 
Implementation Act--Balance of Payments Program clause.


225.1103  Other provisions and clauses.

    (1) Unless the contracting officer knows that the prospective 
contractor is not a domestic concern, use the clause 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.
    (2) Use the provision at 252.225-7008, Disclosure of Ownership or 
Control by the Government of a Terrorist Country, in solicitations 
expected to result in contracts of $100,000 or more.
    (3) Use the clause at 252.225-7009, Subcontracting with Firms Owned 
or Controlled by the Government of a Terrorist Country, in 
solicitations and contracts with a value of $100,000 or more.
    (4) Unless an exception applies or a waiver has been granted in 
accordance with subpart 225.6, use the provision at 252.225-7031, 
Secondary Arab Boycott of Israel, in all solicitations.
    (5) Use the clause at 252.225-7041, Correspondence in English, in 
solicitations and contracts when contract performance will be wholly or 
in part in a foreign country.
    (6) Use the provision at 252.225-7042, Authorization to Perform, in 
solicitations when contract performance will be wholly or in part in a 
foreign country.


225.7000  [Amended]

    21. Section 225.7000 is amended as follows:
    a. In paragraph (a), in the first sentence, by removing ``Defense'' 
and adding in its place ``DoD''; and
    b. In paragraph (b), by adding ``the'' before ``Balance of Payments 
Program''.
    22. Section 225.7002-3 is amended by revising paragraph (c) to read 
as follows:


225.7002-3  Contract clauses.

* * * * *
    (c) Use the clause at 252.225-7015, Restriction on Acquisition of 
Hand or Measuring Tools, in solicitations and contracts exceeding the 
simplified acquisition threshold that require delivery of hand or 
measuring tools.


225.7003 through 225.7023-3  [Removed]

    23. Sections 225.7003 through 225.7023-3 are removed.
    24. New sections 225.7003 through 225.7018-4 are added to read as 
follows:


225.7003  Waiver of restrictions of 10 U.S.C. 2534.

    (a) Where provided for elsewhere in this subpart, the restrictions 
on certain foreign purchases under 10 U.S.C. 2534(a) may be waived as 
follows:
    (1)(i) The Under Secretary of Defense (Acquisition, Technology, and 
Logistics), without power of delegation, may waive a restriction for a 
particular item for a particular foreign country upon determination 
that--
    (A) United States producers of the item would not be jeopardized by 
competition from a foreign country, and that country does not 
discriminate against defense items produced in the United States to a 
greater degree than the United States discriminates against defense 
items produced in that country; or
    (B) Application of the restriction would impede cooperative 
programs entered into between DoD and a foreign country, or would 
impede the reciprocal

[[Page 62601]]

procurement of defense items under a memorandum of understanding 
providing for reciprocal procurement of defense items under 225.872, 
and that country does not discriminate against defense items produced 
in the United States to a greater degree than the United States 
discriminates against defense items produced in that country.
    (ii) A notice of the determination to exercise the waiver authority 
shall be published in the Federal Register and submitted to the 
congressional defense committees at least 15 days before the effective 
date of the waiver.
    (iii) The effective period of the waiver shall not exceed 1 year.
    (iv) For contracts entered into prior to the effective date of a 
waiver, provided adequate consideration is received to modify the 
contract, the waiver will be applied as directed or authorized in the 
waiver to--
    (A) Subcontracts entered into on or after the effective date of the 
waiver; and
    (B) Options for the procurement of items that are exercised after 
the effective date of the waiver, if the option prices are adjusted for 
any reason other than the application of the waiver.
    (2) The head of the contracting activity may waive a restriction on 
a case-by-case basis upon execution of a determination and findings 
that any of the following applies:
    (i) The restriction would cause unreasonable delays.
    (ii) Satisfactory quality items manufactured in the United States 
or Canada are not available.
    (iii) Application of the restriction would result in the existence 
of only one source for the item in the United States or Canada.
    (iv) Application of the restriction is not in the national security 
interests of the United States.
    (v) Application of the restriction would adversely affect a U.S. 
company.
    (3) A restriction is waived when it would cause unreasonable costs. 
The cost of an item of U.S. or Canadian origin is unreasonable if it 
exceeds 150 percent of the offered price, inclusive of duty, of items 
that are not of U.S. or Canadian origin.
    (b) In accordance with the provisions of paragraphs (a)(1)(i) 
through (a)(1)(iii) of this section, the Under Secretary of Defense 
(Acquisition, Technology, and Logistics) has waived the restrictions of 
10 U.S.C. 2534(a) for certain items manufactured in the United Kingdom, 
including air circuit breakers for naval vessels, totally enclosed 
lifeboats, and ball and roller bearings (see 225.7006, 225.7008, and 
225.7009). This waiver applies to--
    (1) Procurements under solicitations issued on or after August 4, 
1998; and
    (2) Subcontracts and options under contracts entered into prior to 
August 4, 1998, under the conditions described in paragraph (a)(1)(iv) 
of this section.


225.7004  Restriction on acquisition of foreign buses.


225.7004-1  Restriction.

    In accordance with 10 U.S.C. 2534, do not acquire a multipassenger 
motor vehicle (bus) unless it is manufactured in the United States or 
Canada.


225.7004-2  Applicability.

    Apply this restriction if the buses are purchased, leased, rented, 
or made available under contracts for transportation services.


225.7004-3  Exceptions.

    This restriction does not apply in any of the following 
circumstances:
    (a) Buses manufactured outside the United States and Canada are 
needed for temporary use because buses manufactured in the United 
States or Canada are not available to satisfy requirements that cannot 
be postponed. Such use may not, however, exceed the lead time required 
for acquisition and delivery of buses manufactured in the United States 
or Canada.
    (b) The requirement for buses is temporary in nature. For example, 
to meet a special, nonrecurring requirement or a sporadic and 
infrequent recurring requirement, buses manufactured outside the United 
States and Canada may be used for temporary periods of time. Such use 
may not, however, exceed the period of time needed to meet the special 
requirement.
    (c) Buses manufactured outside the United States and Canada are 
available at no cost to the U.S. Government.
    (d) The acquisition is for an amount at or below the simplified 
acquisition threshold.


225.7004-4  Waiver.

    The waiver criteria at 225.7003(a) apply to this restriction.


225.7005  Restriction on certain chemical weapons antidote.


225.7005-1  Restriction.

    In accordance with 10 U.S.C. 2534 and defense industrial 
mobilization requirements (see subpart 208.72), do not acquire chemical 
weapons antidote contained in automatic injectors, or the components 
for such injectors, unless the chemical weapons antidote or component 
is manufactured in the United States or Canada by a company that--
    (a) Is a producer under the industrial preparedness program at the 
time of contract award;
    (b) Has received all required regulatory approvals; and
    (c) Has the plant, equipment, and personnel to perform the contract 
in the United States or Canada at the time of contract award.


225.7005-2  Exception.

    This restriction does not apply if the acquisition is for an amount 
at or below the simplified acquisition threshold.


225.7005-3  Waiver.

    The waiver criteria at 225.7003(a) apply to this restriction.


225.7006  Restriction on air circuit breakers for naval vessels.


225.7006-1  Restriction.

    In accordance with 10 U.S.C. 2534, do not acquire air circuit 
breakers for naval vessels unless they are manufactured in the United 
States or Canada.


225.7006-2  Exceptions.

    This restriction does not apply if the acquisition is--
    (a) For an amount at or below the simplified acquisition threshold; 
or
    (b) For spare or repair parts needed to support air circuit 
breakers manufactured outside the United States. Support includes the 
purchase of spare air circuit breakers when those from alternate 
sources are not interchangeable.


225.7006-3  Waiver.

    (a) The waiver criteria at 225.7003(a) apply to this restriction.
    (b) The Under Secretary of Defense (Acquisition, Technology, and 
Logistics) has waived the restriction for air circuit breakers 
manufactured in the United Kingdom. See 225.7003(b) for applicability.


225.7006-4  Solicitation provision and contract clause.

    (a) Use the provision at 252.225-7037, Evaluation of Offers for Air 
Circuit Breakers, in solicitations requiring air circuit breakers for 
naval vessels unless--
    (1) An exception applies; or
    (2) A waiver has been granted, other than the waiver for the United 
Kingdom, which has been incorporated into the provision.
    (b) Use the clause at 252.225-7038, Restriction on Acquisition of 
Air Circuit Breakers, in solicitations and contracts requiring air 
circuit breakers for naval vessels unless--
    (1) An exception applies; or
    (2) A waiver has been granted, other than the waiver for the United 
Kingdom,

[[Page 62602]]

which has been incorporated into the clause.


225.7007  Restrictions on anchor and mooring chain.


225.7007-1  Restrictions.

    (a) In accordance with section 8041 of the Fiscal Year 1991 DoD 
Appropriations Act (Public Law 101-511) and similar sections in 
subsequent DoD appropriations acts, do not acquire welded shipboard 
anchor and mooring chain, four inches or less in diameter, unless'
    (1) It is manufactured in the United States, including cutting, 
heat treating, quality control, testing, and welding (both forging and 
shot blasting process); and
    (2) The cost of the components manufactured in the United States 
exceeds 50 percent of the total cost of components.
    (b) 10 U.S.C. 2534 also restricts acquisition of welded shipboard 
anchor and mooring chain, four inches or less in diameter, when used as 
a component of a naval vessel. However, the Appropriations Act 
restriction described in paragraph (a) of this subsection takes 
precedence over the restriction of 10 U.S.C. 2534.


225.7007-2  Waiver.

    (a) The Secretary of the department responsible for acquisition may 
waive the restriction in 225.7007-1(a), on a case-by-case basis, if--
    (1) Sufficient domestic suppliers are not available to meet DoD 
requirements on a timely basis; and
    (2) The acquisition is necessary to acquire capability for national 
security purposes.
    (b) Document the waiver in a written determination and findings 
containing--
    (1) The factors supporting the waiver; and
    (2) A certification that the acquisition must be made in order to 
acquire capability for national security purposes.
    (c) Provide a copy of the determination and findings to the House 
and Senate Committees on Appropriations.


225.7007-3  Contract clause.

    Unless a waiver has been granted, use the clause at 252.225-7019, 
Restriction on Acquisition of Anchor and Mooring Chain, in 
solicitations and contracts requiring welded shipboard anchor or 
mooring chain four inches or less in diameter.


225.7008  Restrictions on totally enclosed lifeboat survival systems.


225.7008-1  Restrictions.

    (a) In accordance with section 8124 of the Fiscal Year 1994 DoD 
Appropriations Act (Public Law 103-139) and section 8093 of the Fiscal 
Year 1995 DoD Appropriations Act (Public Law 103-335), do not purchase 
a totally enclosed lifeboat survival system, which consists of the 
lifeboat and associated davits and winches, unless--
    (1) 50 percent or more of the components are manufactured in the 
United States; and
    (2) 50 percent or more of the labor in the final manufacture and 
assembly of the entire system is performed in the United States.
    (b) In accordance with 10 U.S.C. 2534(a), do not purchase a totally 
enclosed lifeboat that is a component of a naval vessel unless it is 
manufactured in the United States or Canada.
    (1) 10 U.S.C. 2534(h) prohibits the use of a contract clause or 
certification to implement this restriction.
    (2) Implement this restriction through management and oversight 
techniques that achieve the objective of the restriction without 
imposing a significant management burden on the Government or the 
contractor.


225.7008-2  Exceptions.

    The restriction in 225.7008-1(b) does not apply if the acquisition 
is--
    (a) For an amount at or below the simplified acquisition threshold; 
or
    (b) For spare or repair parts needed to support totally enclosed 
lifeboats manufactured outside the United States.


225.7008-3  Waiver.

    (a) The waiver criteria at 225.7003(a) apply to the restriction of 
225.7008-1(b).
    (b) The Under Secretary of Defense (Acquisition, Technology, and 
Logistics) has waived the restriction of 225.7008-1(b) for totally 
enclosed lifeboats manufactured in the United Kingdom. See 225.7003(b) 
for applicability.


225.7008-4  Contract clause.

    Use the clause at 252.225-7039, Restriction on Acquisition of 
Totally Enclosed Lifeboat Survival Systems, in solicitations and 
contracts that require delivery of totally enclosed lifeboat survival 
systems.


225.7009  Restrictions on ball and roller bearings.


225.7009-1  Restrictions.

    (a) In accordance with 10 U.S.C. 2534, through fiscal year 2005, do 
not acquire ball and roller bearings or bearing components unless they 
are manufactured in the United States or Canada.
    (b) In accordance with section 8099 of the DoD Appropriations Act 
for Fiscal Year 1996 (Public Law 104-61) and similar sections in 
subsequent DoD appropriations acts, do not acquire ball and roller 
bearings unless the bearings and bearing components are manufactured in 
the United States or Canada.


225.7009-2  Exceptions.

    (a) The restriction in 225.7009-1(a) does not apply to--
    (1) Acquisitions using simplified acquisition procedures, unless 
ball or roller bearings or bearing components are the end items being 
purchased;
    (2) Commercial items incorporating ball or roller bearings;
    (3) Miniature and instrument ball bearings needed to meet urgent 
military requirements;
    (4) Items acquired overseas for use overseas; or
    (5) Ball and roller bearings or bearing components, or items 
containing bearings, for use in a cooperative or co-production project 
under an international agreement. This exception does not apply to 
miniature and instrument ball bearings.
    (b) The restriction in 225.7009-1(b) does not apply to contracts or 
subcontracts for the acquisition of commercial items, except for 
commercial ball and roller bearings acquired as end items.


225.7009-3  Waiver.

    (a)(1) The waiver criteria at 225.7003(a)(1) apply to the 
restriction of 225.7009-1(a).
    (2) The Under Secretary of Defense (Acquisition, Technology, and 
Logistics) has waived the restriction of 225.7009-1(a) for ball and 
roller bearings manufactured in the United Kingdom. See 225.7003(b) for 
applicability.
    (b) The head of the contracting activity may waive the restriction 
in 225.7009-1(a)--
    (1) Upon execution of a determination and findings that--
    (i) No domestic (U.S. or Canadian) bearing manufacturer meets the 
requirement;
    (ii) It is not in the best interests of the United States to 
qualify a domestic bearing to replace a qualified nondomestic bearing.
    (A) This determination shall be based on a finding that the 
qualification of a domestically manufactured bearing would cause 
unreasonable costs or delay.
    (B) A finding that a cost is unreasonable should take into

[[Page 62603]]

consideration DoD policy to assist the domestic industrial mobilization 
base.
    (C) Contracts should be awarded to domestic bearing manufacturers 
to increase their capability to reinvest and become more competitive;
    (iii) Application of the restriction would result in the existence 
of only one source for the item in the United States or Canada;
    (iv) Application of the restriction is not in the national security 
interests of the United States; or
    (v) Application of the restriction would adversely affect a U.S. 
company.
    (2) If the acquisition is for an amount less than the simplified 
acquisition threshold and simplified acquisition procedures are being 
used.
    (3) For multiyear contracts or contracts exceeding 12 months, 
except those for miniature and instrument ball bearings, if--
    (i) The head of the contracting activity executes a determination 
and findings in accordance with paragraph (b)(1) of this subsection;
    (ii) The contractor submits a written plan for transitioning from 
the use of nondomestic to domestically manufactured bearings;
    (iii) The contractor's written plan--
    (A) States whether a domestically manufactured bearing can be 
qualified, at a reasonable cost, for use during the course of the 
contract period;
    (B) Identifies any bearings that are not domestically manufactured, 
their application, and source of supply; and
    (C) Describes, including cost and timetable, the transition to a 
domestically manufactured bearing (The timetable for the transition 
should normally take no longer than 24 months from the date the waiver 
is granted); and
    (iv) The contracting officer accepts the contractor's plan and 
incorporates it into the contract.
    (4) For miniature and instrument ball bearings, only if the 
contractor agrees to acquire a like quantity and type of domestic 
manufacture for nongovernmental use.
    (c) The Secretary of the department responsible for acquisition may 
waive the restriction in 225.7009-1(b), on a case-by-case basis, by 
certifying to the House and Senate Committees on Appropriations that--
    (1) Adequate domestic supplies are not available to meet DoD 
requirements on a timely basis; and
    (2) The acquisition must be made in order to acquire capability for 
national security purposes.


225.7009-4  Contract clause.

    (a) Use the clause at 252.225-7016, Restriction on Acquisition of 
Ball and Roller Bearings, in solicitations and contracts, unless--
    (1) The items being acquired do not contain ball and roller 
bearings; or
    (2) An exception applies or a waiver has been granted, other than 
the waiver for the United Kingdom, which has been incorporated into the 
clause.
    (b) Use the clause with its Alternate I in solicitations and 
contracts that use simplified acquisition procedures.


225.7010  Restriction on vessel propellers.


225.7010-1  Restriction.

    In accordance with section 8064 of the National Defense 
Appropriations Act for Fiscal Year 2001 (Public Law 106-259), do not 
use fiscal year 2000 or 2001 funds to acquire vessel propellers other 
than those produced by a domestic source and of domestic origin, i.e., 
vessel propellers--
    (a) Manufactured in the United States or Canada; and
    (b) For which all component castings were poured and finished in 
the United States or Canada.


225.7010-2  Exceptions.

    This restriction does not apply to contracts or subcontracts for 
acquisition of commercial items.


225.7010-3  Waiver.

    The Secretary of the department responsible for acquisition may 
waive this restriction on a case-by-case basis, by certifying to the 
House and Senate Committees on Appropriations that--
    (a) Adequate domestic supplies are not available to meet DoD 
requirements on a timely basis; and
    (b) The acquisition must be made in order to acquire capability for 
national security purposes.


225.7010-4  Contract clause.

    Use the clause at 252.225-7023, Restriction on Acquisition of 
Vessel Propellers, in solicitations and contracts that use fiscal year 
2000 or 2001 funds for the acquisition of vessels or vessel propellers, 
unless--
    (a) An exception applies or a waiver has been granted; or
    (b) The vessels being acquired do not contain vessel propellers.


225.7011  Restriction on carbon, alloy, and armor steel plate.


225.7011-1  Restriction.

    In accordance with section 8111 of the Fiscal Year 1992 DoD 
Appropriations Act (Public Law 102-172) and similar sections in 
subsequent DoD appropriations acts, do not acquire any of the following 
types of carbon, alloy, or armor steel plate unless it is melted and 
rolled in the United States or Canada:
    (a) Carbon, alloy, or armor steel plate in Federal Supply Class 
9515.
    (b) Carbon, alloy, or armor steel plate described by specifications 
of the American Society for Testing Materials or the American Iron and 
Steel Institute.


225.7011-2  Waiver.

    The Secretary of the department responsible for acquisition may 
waive this restriction, on a case-by-case basis, by certifying to the 
House and Senate Committees on Appropriations that--
    (a) Adequate U.S. or Canadian supplies are not available to meet 
DoD requirements on a timely basis; and
    (b) The acquisition must be made in order to acquire capability for 
national security purposes.


225.7011-3  Contract clause.

    Unless a waiver has been granted, use the clause at 252.225-7030, 
Restriction on Acquisition of Carbon, Alloy, and Armor Steel Plate, in 
solicitations and contracts that--
    (a) Require the delivery to the Government of carbon, alloy, or 
armor steel plate that will be used in a facility owned by the 
Government or under the control of DoD; or
    (b) Require contractors operating in a Government-owned facility or 
a facility under the control of DoD to purchase carbon, alloy, or armor 
steel plate.


225.7012  Restriction on supercomputers.


225.7012-1  Restriction.

    In accordance with section 8112 of Public Law 100-202, and similar 
sections in subsequent DoD appropriations acts, do not purchase a 
supercomputer unless it is manufactured in the United States.


225.7012-2  Waiver.

    The Secretary of Defense may waive this restriction, on a case-by-
case basis, after certifying to the Armed Services and Appropriations 
Committees of Congress that--
    (a) Adequate U.S. supplies are not available to meet requirements 
on a timely basis; and
    (b) The acquisition must be made in order to acquire capability for 
national security purposes.


225.7012-3  Contract clause.

    Unless a waiver has been granted, use the clause at 252.225-7011, 
Restriction on Acquisition of Supercomputers, in solicitations and 
contracts for the acquisition of supercomputers.


225.7013  Restrictions on construction or repair of vessels in foreign 
shipyards.

    In accordance with 10 U.S.C. 7309--

[[Page 62604]]

    (a) Do not award a contract to construct in a foreign shipyard--
    (1) A vessel for any of the armed forces; or
    (2) A major component of the hull or superstructure of a vessel for 
any of the armed forces; and
    (b) Do not overhaul, repair, or maintain in a foreign shipyard, a 
naval vessel (or any other vessel under the jurisdiction of the 
Secretary of the Navy) homeported in the United States. This 
restriction does not apply to voyage repairs.


225.7014  Restriction on overseas military construction.

    For restriction on award of military construction contracts to be 
performed in the United States territories and possessions in the 
Pacific and on Kwajalein Atoll, or in countries bordering the Arabian 
Gulf, see 236.274(a).


225.7015  Restriction on overseas architect-engineer services.

    For restriction on award of architect-engineer contracts to be 
performed in Japan, in any North Atlantic Treaty Organization member 
country, or in countries bordering the Arabian Gulf, see 236.602-70.


225.7016  Restriction on research and development.

    (a) In accordance with Public Law 92-570, do not use DoD 
appropriations to make an award to any foreign corporation, 
organization, person, or entity, for research and development in 
connection with any weapon system or other military equipment, if there 
is a U.S. corporation, organization, person, or entity--
    (1) Equally competent; and
    (2) Willing to perform at a lower cost.
    (b) This restriction does not affect the requirements of FAR part 
35 for selection of research and development contractors. However, when 
a U.S. source and a foreign source are equally competent, award to the 
source that will provide the services at the lower cost.


225.7017  Restriction on Ballistic Missile Defense research, 
development, test, and evaluation.


225.7017-1  Definitions.

    Competent,'' ``foreign firm,'' and ``U.S. firm'' are defined in the 
provision at 252.225-7018, Notice of Prohibition of Certain Contracts 
with Foreign Entities for the Conduct of Ballistic Missile Defense 
Research, Development, Test, and Evaluation.


225.7017-2  Restriction.

    In accordance with section 222 of the DoD Authorization Act for 
Fiscal Years 1988 and 1989 (Public Law 100-180), do not use any funds 
appropriated to or for the use of DoD to enter into or carry out a 
contract with a foreign government or firm, including any contract 
awarded as a result of a broad agency announcement, if the contract 
provides for the conduct of research, development, test, and evaluation 
(RDT&E) in connection with the Ballistic Missile Defense Program.


225.7017-3  Exceptions.

    This restriction does not apply--
    (a) To contracts awarded to a foreign government or firm if the 
contracting officer determines that--
    (1) The contract will be performed within the United States;
    (2) The contract is exclusively for RDT&E in connection with 
antitactical ballistic missile systems; or
    (3) The foreign government or firm agrees to share a substantial 
portion of the total contract cost. Consider the foreign share as 
substantial if it is equitable with respect to the relative benefits 
that the United States and the foreign parties will derive from the 
contract. For example, if the contract is more beneficial to the 
foreign party, its share of the cost should be correspondingly higher; 
or
    (b) If the head of the contracting activity certifies in writing, 
before contract award, that a U.S. firm cannot competently perform a 
contract for RDT&E at a price equal to or less than the price at which 
a foreign government or firm would perform the RDT&E. The contracting 
officer or source selection authority, as applicable, shall make a 
determination that will be the basis for the certification.
    (1) The determination shall--
    (i) Describe the contract effort;
    (ii) State the number of proposals solicited and received from both 
U.S. and foreign firms;
    (iii) Identify the proposed awardee and the amount of the contract;
    (iv) State that selection of the contractor was based on the 
evaluation factors contained in the solicitation, or the criteria 
contained in the broad agency announcement; and
    (v) State that a U.S. firm cannot competently perform the effort at 
a price equal to, or less than, the price at which the foreign awardee 
would perform it.
    (2) When either a broad agency announcement or program research and 
development announcement is used, or when the determination is 
otherwise not based on direct competition between foreign and domestic 
proposals, the determination shall not be merely conclusory.
    (i) The determination shall specifically explain its basis, include 
a description of the method used to determine the competency of U.S. 
firms, and describe the cost or price analysis performed.
    (ii) Alternately, the determination may contain--
    (A) A finding, including the basis for such finding, that the 
proposal was submitted solely in response to the terms of a broad 
agency announcement, program research and development announcement, or 
other solicitation document without any technical guidance from the 
program office; and
    (B) A finding, including the basis for such finding, that 
disclosure of the information in the proposal for the purpose of 
conducting a competitive acquisition is prohibited.
    (3) Within 30 days after contract award, forward a copy of the 
certification and supporting documentation to the Ballistic Missile 
Defense Organization, ATTN: BMDO/DRI, 7100 Defense Pentagon, 
Washington, DC 20301-7100.


225.7017-4  Solicitation provision.

    Unless foreign participation is otherwise excluded, use the 
provision at 252.225-7018, Notice of Prohibition of Certain Contracts 
With Foreign Entities for the Conduct of Ballistic Missile Defense 
Research, Development, Test, and Evaluation, in competitively 
negotiated solicitations for RDT&E in connection with the Ballistic 
Missile Defense Program.


225.7018  Restriction on access to proscribed information.


225.7018-1  Definitions.

    ``Entity controlled by a foreign government,'' ``foreign 
government,'' and ``proscribed information,'' are defined in the 
provision at 252.225-7010, Disclosure of Ownership or Control by a 
Foreign Government.


225.7018-2  Restriction.

    (a) In accordance with 10 U.S.C. 2536(a), do not award a contract 
under a national security program to an entity controlled by a foreign 
government if that entity requires access to proscribed information to 
perform the contract.
    (b) The contracting officer may seek advice regarding this 
restriction from the Director, Defense Security Programs, Office of the 
Assistant Secretary of Defense for Command, Control, Communications, 
and Intelligence.


225.7018-3  Waiver.

    (a) Except as provided in paragraph (b) of this subsection, the 
Assistant Secretary of Defense for Command, Control, Communications, 
and Intelligence may waive the restriction in

[[Page 62605]]

225.7018-2 upon determining that the waiver is essential to the 
national security interests of the United States. Requests for waiver 
shall include a proposed national security interest determination 
that--
    (1) Contains the solicitation and other reference numbers to 
identify the action;
    (2) Identifies the proposed awardee and provides a synopsis of its 
foreign ownership;
    (3) Provides a general description of the acquisition and 
performance requirements;
    (4) Identifies the national security interests involved and the 
ways that award of the contract will help advance those interests;
    (5) Provides a statement as to availability of another entity with 
the capacity, capability, and technical expertise to satisfy defense 
acquisition, technology base, or industrial base requirements; and
    (6) Describes any alternate means available to satisfy the 
requirement, e.g., use of substitute products or technology or 
alternate approaches to accomplish the program objectives.
    (b) In the case of a contract awarded for environmental 
restoration, remediation, or waste management at a DoD facility, the 
Secretary of Defense may waive this restriction upon--
    (1) Determining that--
    (i) The waiver will advance the environmental restoration, 
remediation, or waste management objectives of DoD and will not harm 
the national security interests of the United States; and
    (ii) The entity to which the contract will be awarded is controlled 
by a foreign government with which the Secretary is authorized to 
exchange Restricted Data under section 144c of the Atomic Energy Act of 
1954 (42 U.S.C. 2164(c)); and
    (2) Notifying Congress of the decision to grant the waiver. Do not 
award the contract until the end of the 45-day period that begins on 
the date the appropriate Congressional committees received the 
notification.
    (c) The requiring activity--
    (1) Will prepare waiver requests in coordination with the 
contracting officer; and
    (2) Will submit waiver requests through the Director of Defense 
Procurement, Office of the Under Secretary of Defense (Acquisition, 
Technology, and Logistics).


225.7018-4  Solicitation provision.

    Use the provision at 252.225-7010, Disclosure of Ownership or 
Control by a Foreign Government, in solicitations for contracts that 
will require contractor access to proscribed information.
    25. Sections 225.7100 through 225.7103-3 are revised to read as 
follows:


225.7100  Scope of subpart.

    This subpart contains foreign product restrictions that are based 
on policies designed to protect the defense industrial base.


225.7101  Definitions.

    ``Domestic manufacture'' is defined in the clause at 252.225-7025, 
Restriction on Acquisition of Forgings.


225.7102  Forgings.


225.7102-1  Policy.

    When acquiring the following forging items, whether as end items or 
components, acquire items that are of domestic manufacture to the 
maximum extent practicable:

------------------------------------------------------------------------
                   Items                             Categories
------------------------------------------------------------------------
Ship propulsion shafts....................  Excludes service and landing
                                             craft shafts.
Periscope tubes...........................  All.
Ring forgings for bull gears..............  All greater than 120 inches
                                             in diameter.
------------------------------------------------------------------------

225.7102-2  Exceptions.

    The policy in 225.7102-1 does not apply to acquisitions--
    (a) Using simplified acquisition procedures, unless the restricted 
item is the end item being purchased;
    (b) Overseas for overseas use; or
    (c) When the quantity acquired exceeds the amount needed to 
maintain the U.S. defense mobilization base (provided the excess 
quantity is an economical purchase quantity). The requirement for 
domestic manufacture does not apply to the quantity above that required 
to maintain the base, in which case, qualifying country sources may 
compete.


225.7102-3  Waiver.

    Upon request from a contractor, the contracting officer may waive 
the requirement for domestic manufacture of the items listed in 
225.7102-1.


225.7102-4  Contract clause.

    Use the clause at 252.225-7025, Restriction on Acquisition of 
Forgings, in solicitations and contracts, unless--
    (a) The supplies being acquired do not contain any of the items 
listed in 225.7102-1; or
    (b) An exception in 225.7102-2 applies. If an exception applies to 
only a portion of the acquisition, specify the excepted portion in the 
solicitation and contract.


225.7103  Polyacrylonitrile (PAN) carbon fiber.


225.7103-1  Policy.

    DoD has imposed restrictions on the acquisition of PAN carbon fiber 
from foreign sources. DoD is phasing out the restrictions over the 5-
year period ending May 31, 2005. Contractors with contracts that 
contain the clause at 252.225-7022 shall use U.S. or Canadian 
manufacturers or producers for all PAN carbon fiber requirements.


225.7103-2  Waivers.

    With the approval of the chief of the contracting office, the 
contracting officer may waive, in whole or in part, the requirement of 
the clause at 252.225-7022. For example, a waiver may be justified if a 
qualified U.S. or Canadian source cannot meet scheduling requirements.


225.7103-3  Contract clause.

    Use the clause at 252.225-7022, Restriction on Acquisition of 
Polyacrylonitrile (PAN) Carbon Fiber, in solicitations and contracts 
for major systems as follows:
    (a) In solicitations and contracts issued on or before May 31, 
2003, if--
    (1) The system is not yet in production (milestone C as defined in 
DoDI 5000.2, Operation of the Defense Acquisition System): or
    (2) The clause was used in prior program contracts.
    (b) In solicitations and contracts issued during the period 
beginning June 1, 2003, and ending May 31, 2005, if the system is not 
yet in system development and demonstration (milestone B as defined in 
DoDI 5000.2).
    26. Section 225.7200 is revised to read as follows:


225.7200  Scope of subpart.

    This subpart--
    (a) Prescribes procedures for contractor reporting and DoD 
monitoring of the volume, type, and nature of contract performance 
outside the United States; and
    (b) Implements 10 U.S.C. 2410g, which requires offerors and 
contractors to notify DoD of any intention to perform a DoD contract 
outside the United States and Canada when the contract could be 
performed inside the United States or Canada.
    27. Sections 225.7202 and 225.7203 are revised to read as follows:


225.7202  Distribution of reports.

    Forward a copy of reports submitted in accordance with the clause 
at 252.225-7004, Reporting of Contract Performance Outside the United 
States, to the Deputy Director of Defense

[[Page 62606]]

Procurement (Foreign Contracting), OUSD(AT&L)DP(FC), Washington, DC 
20301-3060. This is necessary to satisfy the requirement of 10 U.S.C. 
2410g that the notifications (or copies) be maintained in compiled form 
for 5 years after the date of submission.


225.7203  Solicitation provision and contract clause.

    Except for acquisitions described in 225.7201--
    (a) Use the provision at 252.225-7003, Report of Intended 
Performance Outside the United States, in solicitations with a value 
exceeding $500,000; and
    (b) Use the clause at 252.225-7004, Reporting of Contract 
Performance Outside the United States, in solicitations and contracts 
with a value exceeding $500,000.
    28. Section 225.7301 is amended by revising paragraphs (b) through 
(d) to read as follows:


225.7301  General.

* * * * *
    (b) Conduct FMS acquisitions under the same acquisition and 
contract management procedures used for other defense acquisitions.
    (c) Separately identify known FMS requirements and the FMS customer 
in solicitations.
    (d) Clearly identify contracts for known FMS requirements by 
marking ``FMS requirement'' on the face of the contract along with the 
FMS customer and the case identifier code.
    29. Section 225.7302 is amended by revising the introductory text 
and paragraph (a)(4) to read as follows:


225.7302  Procedures.

    For FMS programs that will require an acquisition, the contracting 
officer will assist the departmental/agency activity responsible for 
preparing the LOA by--
    (a) * * *
    (4) For noncompetitive acquisitions over $10,000, ask the 
prospective contractor for information on price, delivery, and other 
relevant factors. The request for information shall identify the fact 
that the information is for a potential foreign military sale and shall 
identify the foreign customer; and
* * * * *


225.7303  [Amended]

    30. Section 225.7303 is amended as follows:
    a. In paragraph (a), in the first sentence, by removing the phrase 
``as are'';
    b. In paragraph (a), in the second sentence, by removing 
``Application'' and adding in its place ``However, application''; and
    c. In paragraph (b), in the first sentence, by removing ``must'' 
and adding in its place ``shall''.
    31. Section 225.7303-2 is amended as follows:
    a. In paragraph (a) introductory text, by revising the last 
sentence;
    b. By revising paragraph (a)(1);
    c. In paragraph (a)(2)(ii), by adding ``or'' before ``operations/
tactics'';
    d. By revising paragraph (c) introductory text; and
    e. In paragraph (c)(1) by removing the period and adding in its 
place ``; and''. The revised text reads as follows:


225.7303-2  Cost of doing business with a foreign government or an 
international organization.

    (a) * * * Examples of such costs include, but are not limited to, 
the following:
    (1) Selling expenses (not otherwise limited by FAR Part 31), such 
as--
    (i) Maintaining international sales and service organizations;
    (ii) Sales commissions and fees in accordance with FAR Subpart 3.4;
    (iii) Sales promotions, demonstrations, and related travel for 
sales to foreign governments. Section 126.8 of the International 
Traffic in Arms Regulations (ITAR) (22 CFR 126.8) may require 
Government approval for these costs to be allowable, in which case the 
appropriate Government approval shall be obtained; and
    (iv) Configuration studies and related technical services 
undertaken as a direct selling effort to a foreign country.
* * * * *
    (c) The limitations for major contractors on independent research 
and development and bid and proposal (IR&D/B&P) costs for projects that 
are of potential interest to DoD, in 231.205-18(c)(iii), do not apply 
to FMS contracts, except as provided in 225.7303-5. The allowability of 
IR&D/B&P costs on contracts for FMS not wholly paid for from funds made 
available on a nonrepayable basis is limited to the contract's 
allocable share of the contractor's total IR&D/B&P expenditures. In 
pricing contracts for such FMS--
* * * * *
    32. Section 225.7303-4 is revised to read as follows:


225.7303-4  Contingent fees.

    (a) Except as provided in paragraph (b) of this subsection, 
contingent fees are generally allowable under DoD contracts, provided--
    (1) The fees are paid to a bona fide employee or a bona fide 
established commercial or selling agency maintained by the prospective 
contractor for the purpose of securing business (see FAR part 31 and 
FAR subpart 3.4); and
    (2) The contracting officer determines that the fees are fair and 
reasonable.
    (b)(1) Under DoD 5105.38-M, LOAs for requirements for the 
governments of Australia, Taiwan, Egypt, Greece, Israel, Japan, Jordan, 
Republic of Korea, Kuwait, Pakistan, Philippines, Saudi Arabia, Turkey, 
Thailand, or Venezuela (Air Force) shall provide that all U.S. 
Government contracts resulting from the LOAs prohibit the reimbursement 
of contingent fees as an allowable cost under the contract, unless the 
contractor identifies the payments and the foreign customer approves 
the payments in writing before contract award (see 225.7308(a)).
    (2) For FMS to countries not listed in paragraph (b)(1) of this 
subsection, contingent fees exceeding $50,000 per FMS case are 
unallowable under DoD contracts, unless the contractor identifies the 
payment and the foreign customer approves the payment in writing before 
contract award.
    33. Section 225.7303-5 is amended by revising paragraphs (a) and 
(b) to read as follows:


225.7303-5  Acquisitions wholly paid for from nonrepayable funds.

    (a) In accordance with 22 U.S.C. 2762(d), price FMS wholly paid for 
from funds made available on a nonrepayable basis on the same costing 
basis with regard to profit, overhead, IR&D/B&P, and other costing 
elements as is applicable to acquisitions of like items purchased by 
DoD for its own use.
    (b) Direct costs associated with meeting a foreign customer's 
additional or unique requirements are allowable under such contracts. 
Indirect burden rates applicable to such direct costs are permitted at 
the same rates applicable to acquisitions of like items purchased by 
DoD for its own use.
* * * * *
    34. Section 225.7305 is amended by revising the first sentence to 
read as follows:


225.7305  Limitation of liability.

    Advise the contractor when the foreign customer will assume the 
risk for loss or damage under the appropriate limitation of liability 
clause(s) (see FAR subpart 46.8). * * *
    35. Section 225.7308 is revised to read as follows:


225.7308  Contract clauses.

    (a) Use the clause at 252.225-7027, Restriction on Contingent Fees 
for Foreign Military Sales, in solicitations and contracts for FMS.

[[Page 62607]]

    (b) Use the clause at 252.225-7028, Exclusionary Policies and 
Practices of Foreign Governments, in solicitations and contracts for 
the purchase of supplies and services for international military 
education training and FMS.

PART 242--CONTRACT ADMINISTRATION


242.302  [Amended]

    36. Section 242.302 is amended by removing paragraph (a)(19).

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


252.209-7001, 252.209-7002, and 252.209-7004  [Removed and Reserved]

    37. Sections 252.209-7001, 252.209-7002, and 252.209-7004 are 
removed and reserved.
    38. Section 252.212-7001 is amended as follows:
    a. By revising the clause date and paragraph (b); and
    b. In paragraph (c), in entry ``252.225-7014'', by removing ``(MAR 
1998)'' and adding in its place ``(XXX 2002)''. The revised text reads 
as follows:


252.212-7001  Contract Terms and Conditions Required to Implement 
Statutes or Executive Orders Applicable to Defense Acquisitions of 
Commercial Items.

* * * * *

Contract Terms and Conditions Required to Implement Statutes or 
Executive Orders Applicable to Defense Acquisitions of Commercial Items 
(XXX 2002)

* * * * *
    (b) The Contractor agrees to comply with any clause that is 
checked on the following list of Defense FAR Supplement clauses 
which, if checked, is included in this contract by reference to 
implement provisions of law or Executive orders applicable to 
acquisitions of commercial items or components.

-- 252.205 7000 Provision of Information to Cooperative Agreement 
Holders (DEC 1991) (10 U.S.C. 2416).
-- 252.219-7003 Small, Small Disadvantaged and Women-Owned Small 
Business Subcontracting Plan (DoD Contracts) (APR 1996) (15 U.S.C. 
637).
-- 252.219-7004 Small, Small Disadvantaged and Women-Owned Small 
Business Subcontracting Plan (Test Program) (JUN 1997) (15 U.S.C. 
637 note).
-- 252.225-7001 Buy American Act and Balance of Payments Program 
(XXX 2002) (41 U.S.C. 10a-10d, E.O. 10582).
-- 252.225-7012 Preference for Certain Domestic Commodities (APR 
2002) (10 U.S.C. 2533a).
-- 252.225-7014 Preference for Domestic Specialty Metals (XXX 2002) 
(10 U.S.C. 2533a).
-- 252.225-7015 Restriction on Acquisition of Hand or Measuring 
Tools (XXX 2002) (10 U.S.C. 2533a).
-- 252.225 7016 Restriction on Acquisition of Ball and Roller 
Bearings (XXX 2002) (-- Alternate I) (DEC 2000) (10 U.S.C. 2534 and 
section 8099 of Public Law 104-61 and similar sections in subsequent 
DoD appropriations acts).
-- 252.225-7021 Trade Agreements (XXX 2002) (19 U.S.C. 2501-2518 and 
19 U.S.C. 3301 note).
-- 252.225-7027 Restriction on Contingent Fees for Foreign Military 
Sales (XXX 2002) (22 U.S.C. 2779).
-- 252.225-7028 Exclusionary Policies and Practices of Foreign 
Governments (XXX 2002) (22 U.S.C. 2755).
-- 252.225-7036 Buy American Act--North American Free Trade 
Agreement Implementation Act--Balance of Payments Program (XXX 2002) 
(---- Alternate I) (XXX 2002) (41 U.S.C. 10a-10d and 19 U.S.C. 3301 
note).
-- 252.225-7038 Preference for United States or Canadian Air Circuit 
Breakers (XXX 2002) (10 U.S.C. 2534(a)(3)).
-- 252.227-7015 Technical Data--Commercial Items (NOV 1995) (10 
U.S.C. 2320).
-- 252.227-7037 Validation of Restrictive Markings on Technical Data 
(SEP 1999) (10 U.S.C. 2321).
-- 252.243-7002 Requests for Equitable Adjustment (MAR 1998) (10 
U.S.C. 2410).
-- 252.247-7023 Transportation of Supplies by Sea (MAY 2002) (---- 
Alternate I) (MAR 2000) (---- Alternate II) (MAR 2000) (10 U.S.C. 
2631).
-- 252.247-7024 Notification of Transportation of Supplies by Sea 
(MAR 2000) (10 U.S.C. 2631).
* * * * *
    39. Sections 252.225-7000 through 252.225-7003 are revised to read 
as follows:


252.225-7000  Buy American Act--Balance of Payments Program 
Certificate.

    As prescribed in 225.1101(1), use the following provision:

Buy American Act--Balance of Payments Program Certificate (XXX 2002)

    (a) Definitions. Domestic end product, foreign end product, 
qualifying country, and qualifying country end product have the 
meanings given in the Buy American Act and Balance of Payments 
Program clause of this solicitation.
    (b) Evaluation. The Government--
    (1) Will evaluate offers in accordance with the policies and 
procedures of part 225 of the Defense Federal Acquisition Regulation 
Supplement; and
    (2) Will evaluate offers of qualifying country end products 
without regard to the restrictions of the Buy American Act or the 
Balance of Payments Program.
    (c) Certifications and identification of country of origin.
    (1) For all line items subject to the Buy American Act and 
Balance of Payments Program clause of this solicitation, the offeror 
certifies that--
    (i) Each end product, except those listed in paragraphs (c)(2) 
or (3) of this provision, is a domestic end product; and
    (ii) Components of unknown origin are considered to have been 
mined, produced, or manufactured outside the United States or a 
qualifying country.
    (2) The offeror certifies that the following end products are 
qualifying country end products:

------------------------------------------------------------------------
   Line Item No.          Country of origin
-----------------------------------------------
----------------     ----------------


    (3) The following end products are other foreign end products:

------------------------------------------------------------------------
           Line Item No.                Country of origin  (If known)
------------------------------------------------------------------------
----------------                     ----------------


(End of provision)


252.225-7001  Buy American Act and Balance of Payments Program.

    As prescribed in 225.1101(2), use the following clause:

Buy American Act and Balance of Payments Program (XXX 2002)

    (a) Definitions. As used in this clause--
    (1) Component means an article, material, or supply incorporated 
directly into an end product.
    (2) Domestic end product means--
    (i) An unmanufactured end product that has been mined or 
produced in the United States; or
    (ii) An end product 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. The cost of components 
includes transportation costs to the place of incorporation into the 
end product and U.S. duty (whether or not a duty-free entry 
certificate is issued). Scrap generated, collected, and prepared for 
processing in the United States is considered domestic. A component 
is considered to have been mined, produced, or manufactured in the 
United States (regardless of its source in fact) if the end product 
in which it is incorporated is manufactured in the United States and 
the component is of a class or kind for which the Government has 
determined that--
    (A) Sufficient and reasonably available commercial quantities of 
a satisfactory quality are not mined, produced, or manufactured in 
the United States; or
    (B) It is inconsistent with the public interest to apply the 
restrictions of the Buy American Act.
    (3) End product means those articles, materials, and supplies to 
be acquired under this contract for public use.
    (4) Foreign end product means an end product other than a 
domestic end product.
    (5) Qualifying country means any country set forth in subsection 
225.872-1 of the Defense Federal Acquisition Regulation Supplement.
    (6) Qualifying country component means a component mined, 
produced, or manufactured in a qualifying country.

[[Page 62608]]

    (7) Qualifying country end product means--
    (i) An unmanufactured end product mined or produced in a 
qualifying country; or
    (ii) An end product manufactured in a qualifying country if the 
cost of the following types of components exceeds 50 percent of the 
cost of all its components:
    (A) Components mined, produced, or manufactured in a qualifying 
country.
    (B) Components mined, produced, or manufactured in the United 
States.
    (C) Components of foreign origin of a class or kind for which 
the Government has determined that sufficient and reasonably 
available commercial quantities of a satisfactory quality are not 
mined, produced, or manufactured in the United States.
    (b) This clause implements the Buy American Act (41 U.S.C. 10a-
10d). Unless otherwise specified, this clause applies to all line 
items in the contract.
    (c) The Contractor shall deliver only domestic end products 
unless, in its offer, it specified delivery of other end products in 
the Buy American Act--Balance of Payments Program Certificate 
provision of the solicitation. If the Contractor certified in its 
offer that it will deliver a qualifying country end product, the 
Contractor shall deliver a qualifying country end product or, at the 
Contractor's option, a domestic end product.
    (d) The contract price does not include duty for end products or 
components for which the Contractor will claim duty-free entry.

(End of clause)


252.225-7002  Qualifying Country Sources as Subcontractors.

    As prescribed in 225.1101(3), use the following clause:

Qualifying Country Sources as Subcontractors (XXX 2002)

    (a) Definition. Qualifying country, as used in this clause, 
means any country set forth in subsection 225.872-1 of the Defense 
Federal Acquisition Regulation (FAR) Supplement.
    (b) Subject to the restrictions in section 225.872 of the 
Defense FAR Supplement, the Contractor shall not preclude qualifying 
country sources or U.S. sources from competing for subcontracts 
under this contract.

(End of clause)


252.225-7003  Report of Intended Performance Outside the United States.

    As prescribed in 225.7203(a), use the following provision:

Report of Intended Performance Outside the United States (XXX 2002)

    (a) The offeror shall submit a Report of Contract Performance 
Outside the United States, with its offer, if--
    (1) The offer exceeds $10 million in value; and
    (2) The offeror is aware that the offeror or a first-tier 
subcontractor intends to perform any part of the contract outside 
the United States and Canada that--
    (i) Exceeds $500,000 in value; and
    (ii) Could be performed inside the United States or Canada.
    (b) Information to be reported includes that for--
    (1) Subcontracts;
    (2) Purchases; and
    (3) Intracompany transfers when transfers originate in a foreign 
location.
    (c) The offeror shall submit the report using--
    (1) DD Form 2139, Report of Contract Performance Outside the 
United States; or
    (2) A computer-generated report that contains all information 
required by DD Form 2139.
    (d) The offeror may obtain a copy of DD Form 2139 from the 
Contracting Officer.

(End of provision)

    40. Section 252.225-7004 is added to read as follows:


252.225-7004  Reporting of Contract Performance Outside the United 
States.

    As prescribed in 225.7203(b), use the following clause:

Reporting of Contract Performance Outside the United States (XXX 2002)

    (a) Reporting criteria. Reporting under this clause is required 
for--
    (1) Contracts exceeding $10 million in value, when any part that 
exceeds $500,000 in value could be performed inside the United 
States or Canada, but will be performed outside the United States 
and Canada. If the Contractor submitted the information with its 
offer, the Contractor need not resubmit the information unless it 
changes; and
    (2) Contracts exceeding $500,000 in value, when any part that 
exceeds the simplified acquisition threshold in part 2 of the 
Federal Acquisition Regulation will be performed outside the United 
States, unless--
    (i) A foreign place of performance is the principal place of 
performance; and
    (ii) The Contractor indicated the foreign place of performance 
in the Place of Performance provision of its offer.
    (b) Information required. Information to be reported includes 
that for--
    (1) Subcontracts;
    (2) Purchases; and
    (3) Intracompany transfers when transfers originate in a foreign 
location.
    (c) Submission of reports. The Contractor--
    (1) Shall submit reports required by paragraph (a)(1) of this 
clause to the Contracting Officer as soon as the information is 
known, with a copy to the addressee in paragraph (c)(2) of this 
clause. To the maximum extent practicable, the Contractor shall 
report information regarding a first-tier subcontractor at least 30 
days before award of the subcontract;
    (2) Shall submit reports required by paragraph (a)(2) of this 
clause within 10 days after the end of each Government quarter to 
Deputy Director of Defense Procurement (Foreign Contracting), 
OUSD(AT&L)DP(FC), Washington, DC 20301-3060;
    (3) Shall submit reports using--
    (i) DD Form 2139, Report of Contract Performance Outside the 
United States; or
    (ii) A computer-generated report that contains all information 
required by DD Form 2139; and
    (4) May obtain copies of DD Form 2139 from the Contracting 
Officer.
    (d) Flowdown requirements.
    (1) The Contractor shall include the substance of this clause in 
all first-tier subcontracts exceeding $500,000, except those for 
commercial items, construction, ores, natural gases, utilities, 
petroleum products and crudes, timber (logs), or subsistence.
    (2) The Contractor shall provide the number of this contract to 
its subcontractors for reporting purposes.

(End of clause)

    41. Sections 252.225-7008 through 252.225-7011 are revised to read 
as follows:


252.225-7008  Disclosure of Ownership or Control by the Government of a 
Terrorist Country.

    As prescribed in 225.1103(2), use the following provision:

Disclosure of Ownership or Control by the Government of a Terrorist 
Country (XXX 2002)

    (a) Definitions. As used in this provision--
    (1) Government of a terrorist country includes the State and the 
government of a terrorist country, as well as any political 
subdivision, agency, or instrumentality thereof.
    (2) Terrorist country means a country determined by the 
Secretary of State, under section 6(j)(1)(A) of the Export 
Administration Act of 1979 (50 U.S.C. App. 2405(j)(i)(A)), to be a 
country the government of which has repeatedly provided support for 
acts of international terrorism. As of the date of this provision, 
terrorist countries include: Cuba, Iran, Iraq, Libya, North Korea, 
Sudan, and Syria.
    (3) ``Significant interest'' means--
    (i) Ownership of or beneficial interest in 5 percent or more of 
the firm's or subsidiary's securities. Beneficial interest includes 
holding 5 percent or more of any class of the firm's securities in 
``nominee shares,'' ``street names,'' or some other method of 
holding securities that does not disclose the beneficial owner;
    (ii) Holding a management position in the firm, such as a 
director or an officer;
    (iii) Ability to control or influence the election, appointment, 
or tenure of directors or officers in the firm;
    (iv) Ownership of 10 percent or more of the assets of a firm, 
such as equipment, buildings, real estate, or other tangible assets 
of the firm; or
    (v) Holding 50 percent or more of the indebtedness of a firm.
    (b) Prohibition on award. In accordance with 10 U.S.C. 2327, DoD 
will not award a contract to a firm or a subsidiary of a firm if the 
government of a terrorist country has a significant interest in the 
firm or subsidiary or, in the case of a subsidiary, the firm that 
owns the subsidiary, unless the Secretary of Defense grants a 
waiver.
    (c) Disclosure. If the government of a terrorist country has a 
significant interest in the offeror or a subsidiary of the offeror, 
the offeror shall disclose the interest in an

[[Page 62609]]

attachment to its offer. If the offeror is a subsidiary, it shall 
also disclose any significant interest the government of a terrorist 
country has in any firm that owns or controls the subsidiary. The 
disclosure shall include--
    (1) Identification of each government holding a significant 
interest; and
    (2) A description of the significant interest held by each 
government.
(End of provision)

252.225-7009  Subcontracting with Firms Owned or Controlled by the 
Government of a Terrorist Country.

    As prescribed in 225.1103(3), use the following clause:

Subcontracting With Firms Owned or Controlled by the Government of a 
Terrorist Country (XXX 2002)

    (a) Except as provided in paragraph (b) of this clause, the 
Contractor shall not enter into any subcontract exceeding $25,000 
with a firm, or a subsidiary of a firm, that is--
    (1) On the List of Parties Excluded from Federal Procurement and 
Nonprocurement Programs; and
    (2) Identified on the List as being ineligible for the award of 
DoD contracts or subcontracts because the firm or subsidiary is 
owned or controlled by the government of a terrorist country.
    (b) If the Contractor believes there is a compelling need to 
enter into a subcontract with a subcontractor described in paragraph 
(a) of this clause, the Contractor shall submit a written notice to 
the Contracting Officer that includes--
    (1) The name of the proposed subcontractor; and
    (2) The compelling reason(s) for doing business with the 
proposed subcontractor.

(End of clause)


252.225-7010  Disclosure of Ownership or Control by a Foreign 
Government.

    As prescribed in 225.7018-4, use the following provision:

Disclosure of Ownership or Control by a Foreign Government (XXX 2002)

    (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; and
    (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.
    (4) Proscribed information means--
    (i) Top Secret information;
    (ii) Communications Security (COMSEC) information, except 
classified keys used to operate secure telephone units (STU IIIs);
    (iii) Restricted Data as defined in the U.S. Atomic Energy Act 
of 1954, as amended;
    (iv) Special Access Program (SAP) information; or
    (v) Sensitive Compartmented Information (SCI).
    (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).
    (c) Disclosure. The offeror shall disclose any interest a 
foreign government has in the offeror when that interest constitutes 
control by a foreign government as defined in this provision. If the 
offeror is a subsidiary, it shall also disclose any reportable 
interest a foreign government has in any entity that owns or 
controls the subsidiary, including reportable interest concerning 
the offeror's immediate parent, intermediate parents, and the 
ultimate parent. Use a separate sheet if necessary, and provide the 
information in the following format:

   Offeror's Point of Contact for Questions about Disclosure (Name and
Phone Number with Country Code, City Code and Area Code, as applicable):
 
Name and Address of Offeror:
Name and Address of Entity           Description of Interest, Ownership
 Controlled by a Foreign              Percentage, and Identification of
 Government:                          Foreign Government:
 
                            (End of provision)
 

252.225-7011  Restriction on Acquisition of Supercomputers.

    As prescribed in 225.7012-3, use the following clause:

Restriction on Acquisition of Supercomputers (XXX 2002)

    Supercomputers delivered under this contract shall be 
manufactured in the United States.

(End of clause)

    42. Section 252.225-7013 is added to read as follows:


252.225-7013  Duty-Free Entry.

    As prescribed in 225.1101(4), use the following clause:

Duty-Free Entry (XXX 2002)

    (a) Definitions. As used in this clause--
    (1) Eligible product means--
    (i) ``Designated country end product'' or ``Caribbean Basin 
country end product'' as defined in the Trade Agreements clause of 
this contract;
    (ii) ``NAFTA country end product'' as defined in the Trade 
Agreements clause or the Buy American Act--North American Free Trade 
Agreement Implementation Act--Balance of Payments Program clause of 
this contract; or
    (iii) ``Canadian end product'' as defined in Alternate I of the 
Buy American Act--North American Free Trade Agreement Implementation 
Act--Balance of Payments Program clause of this contract.
    (2) Qualifying country and qualifying country end product have 
the meanings given in the Trade Agreements clause, the Buy American 
Act and Balance of Payments Program clause, or the Buy American 
Act--North American Free Trade Agreement Implementation Act--Balance 
of Payments Program clause of this contract.
    (b) Except as provided in paragraph (i) of this clause, or 
unless supplies were imported into the United States before the date 
of this contract or the applicable subcontract, the price of this 
contract shall not include any amount for duty on--
    (1) End items that are eligible products or qualifying country 
end products;
    (2) Components (including, without limitation, raw materials and 
intermediate assemblies) produced or made in qualifying countries, 
that are to be incorporated in U.S.-made end products to be 
delivered under this contract; or
    (3) Other supplies for which the Contractor estimates that duty 
will exceed $200 per unit (end product or component).
    (c) The Contractor shall--
    (1) Claim duty-free entry only for supplies that the Contractor 
intends to deliver to the Government under this contract, either as 
end items or components of end items; and
    (2) Pay duty on supplies, or any portion thereof, that are 
diverted to nongovernmental use, other than--
    (i) Scrap or salvage; or
    (ii) Competitive sale made, directed, or authorized by the 
Contracting Officer.
    (d) Except as the Contractor may otherwise agree, the Government 
will execute duty-free entry certificates and will afford such 
assistance as appropriate to obtain the duty-free entry of 
supplies--

[[Page 62610]]

    (1) For which no duty is included in the contract price in 
accordance with paragraph (b) of this clause; and
    (2) For which shipping documents bear the notation specified in 
paragraph (e) of this clause.
    (e) For foreign supplies for which the Government will issue 
duty-free entry certificates in accordance with this clause, 
shipping documents submitted to Customs shall--
    (1) Consign the shipments to the appropriate--
    (i) Military department in care of the Contractor, including the 
Contractor's delivery address; or
    (ii) Military installation; and
    (2) Include the following information:
    (i) Prime contract number and, if applicable, delivery order 
number.
    (ii) Number of the subcontract for foreign supplies, if 
applicable.
    (iii) Identification of the carrier.
    (iv)(A) For direct shipments to a U.S. military installation, 
the notation: ``UNITED STATES GOVERNMENT, DEPARTMENT OF DEFENSE, 
Duty-Free Entry to be claimed pursuant to Section XXII, Chapter 98, 
Subchapter VIII, Item 9808.00.30 of the Harmonized Tariff Schedule 
of the United States. Upon arrival of shipment at the appropriate 
port of entry, District Director of Customs, please release shipment 
under 19 CFR part 142 and notify Commander, Defense Contract 
Management Agency (DCMA) New York, ATTN: Customs Team, DCMAE-GNTF, 
207 New York Avenue, Staten Island, New York 10305-5013, for 
execution of Customs Form 7501, 7501A, or 7506 and any required 
duty-free entry certificates.''
    (B) If the shipment will be consigned to other than a military 
installation, e.g., a domestic contractor's plant, the shipping 
document notation shall be altered to include the name and address 
of the contractor, agent, or broker who will notify Commander, DCMA 
New York, for execution of the duty-free entry certificate. (If the 
shipment will be consigned to a contractor's plant and no duty-free 
entry certificate is required due to NAFTA or another trade 
agreement, the Contractor shall claim duty-free entry under NAFTA or 
the applicable trade agreement and shall comply with the U.S. 
Customs Service requirements. No notification to Commander, DCMA New 
York, is required.)
    (v) Gross weight in pounds (if freight is based on space 
tonnage, state cubic feet in addition to gross shipping weight).
    (vi) Estimated value in U.S. dollars.
    (vii) Activity address number of the contract administration 
office administering the prime contract, e.g., for DCMA Dayton, 
S3605A.
    (f) Preparation of customs forms.
    (1)(i) Except for shipments consigned to a military 
installation, the Contractor shall--
    (A) Prepare any customs forms required for the entry of foreign 
supplies into the United States in connection with this contract; 
and
    (B) Submit the completed customs forms to the District Director 
of Customs, with a copy to DCMA NY for execution of any required 
duty-free entry certificates.
    (ii) Shipments consigned directly to a military installation 
will be released in accordance with sections 10.101 and 10.102 of 
the U.S. Customs regulations.
    (2) For shipments containing both supplies that are to be 
accorded duty-free entry and supplies that are not, the Contractor 
shall identify on the customs forms those items that are eligible 
for duty-free entry.
    (g) The Contractor shall--
    (1) Prepare (if the Contractor is a foreign supplier), or shall 
instruct the foreign supplier to prepare, a sufficient number of 
copies of the bill of lading (or other shipping document) so that at 
least two of the copies accompanying the shipment will be available 
for use by the District Director of Customs at the port of entry;
    (2) Consign the shipment as specified in paragraph (e) of this 
clause; and
    (3) Mark on the exterior of all packages--
    (i) ``UNITED STATES GOVERNMENT, DEPARTMENT OF DEFENSE'; and
    (ii) The activity address number of the contract administration 
office administering the prime contract.
    (h) The Contractor shall notify the Administrative Contracting 
Officer (ACO) in writing of any purchase of qualifying country 
supplies to be accorded duty-free entry, that are to be imported 
into the United States for delivery to the Government or for 
incorporation in end items to be delivered to the Government. The 
Contractor shall furnish the notice to the ACO immediately upon 
award to the qualifying country supplier and shall include in the 
notice--
    (1) The Contractor's name, address, and Commercial and 
Government Entity (CAGE) code;
    (2) Prime contract number and, if applicable, delivery order 
number;
    (3) Total dollar value of the prime contract or delivery order;
    (4) Date of the last scheduled delivery under the prime contract 
or delivery order;
    (5) Foreign supplier's name and address;
    (6) Number of the subcontract for foreign supplies;
    (7) Total dollar value of the subcontract for foreign supplies;
    (8) Date of the last scheduled delivery under the subcontract 
for foreign supplies;
    (9) List of items purchased;
    (10) An agreement that the Contractor will pay duty on supplies, 
or any portion thereof, that are diverted to nongovernmental use 
other than--
    (i) Scrap or salvage; or
    (ii) Competitive sale made, directed, or authorized by the 
Contracting Officer;
    (11) Qualifying country of origin; and
    (12) Scheduled delivery date(s).
    (i) This clause does not apply to purchases of qualifying 
country supplies in connection with this contract if--
    (1) The supplies are identical in nature to supplies purchased 
by the Contractor or any subcontractor in connection with its 
commercial business; and
    (2) It is not economical or feasible to account for such 
supplies so as to ensure that the amount of the supplies for which 
duty-free entry is claimed does not exceed the amount purchased in 
connection with this contract.
    (j) The Contractor shall--
    (1) Insert the substance of this clause, including this 
paragraph (j), in all subcontracts for--
    (i) Qualifying country components; or
    (ii) Nonqualifying country components for which the Contractor 
estimates that duty will exceed $200 per unit;
    (2) Require subcontractors to include the number of this 
contract on all shipping documents submitted to Customs for supplies 
for which duty-free entry is claimed pursuant to this clause; and
    (3) Include in applicable subcontracts--
    (i) The name and address of the ACO for this contract;
    (ii) The name, address, and activity address number of the 
contract administration office specified in this contract; and
    (iii) The information required by paragraphs (h)(1), (2), and 
(3) of this clause.
(End of clause)

    43. Sections 252.225-7014 through 252.225-7016 are revised to read 
as follows:


252.225-7014  Preference for Domestic Specialty Metals.

    As prescribed in 225.7002-3(b)(1), use the following clause:

Preference for Domestic Specialty Metals (XXX 2002)

    (a) Definitions. As used in this clause--
    (1) Qualifying country means any country listed in subsection 
225.872-1 of the Defense Federal Acquisition Regulation Supplement.
    (2) Specialty metals means--
    (i) Steel--
    (A) With a maximum alloy content exceeding one or more of the 
following limits: manganese, 1.65 percent; silicon, 0.60 percent; or 
copper, 0.60 percent; or
    (B) Containing more than 0.25 percent of any of the following 
elements: aluminum, chromium, cobalt, columbium, molybdenum, nickel, 
titanium, tungsten, or vanadium;
    (ii) Metal alloys consisting of nickel, iron-nickel, and cobalt 
base alloys containing a total of other alloying metals (except 
iron) in excess of 10 percent;
    (iii) Titanium and titanium alloys; or
    (iv) Zirconium and zirconium base alloys.
    (b) Any specialty metals incorporated in articles delivered 
under this contract shall be melted in the United States, its 
possessions, or Puerto Rico.
    (c) This clause does not apply to specialty metals--
    (1) Melted in a qualifying country or incorporated in an article 
manufactured in a qualifying country; or
    (2) Purchased by a subcontractor at any tier.

(End of clause)

Alternate I (XXX 2002)

    As prescribed in 225.7002-3(b)(2), substitute the following 
paragraph (c) for paragraph (c) of the basic clause, and add the 
following paragraph (d) to the basic clause:
    (c) This clause does not apply to specialty metals melted in a 
qualifying country or incorporated in an article manufactured in a 
qualifying country.
    (d) The Contractor shall insert the substance of this clause, 
including this

[[Page 62611]]

paragraph (d), in all subcontracts for items containing specialty 
metals.


252.225-7015  Restriction on Acquisition of Hand or Measuring Tools.

    As prescribed in 225.7002-3(c), use the following clause:

Restriction on Acquisition of Hand or Measuring Tools (XXX 2002)

    Hand or measuring tools delivered under this contract shall be 
produced in the United States or its possessions.

(End of clause)


252.225-7016  Restriction on Acquisition of Ball and Roller Bearings.

    As prescribed in 225.7009-4(a), use the following clause:

Restriction on Acquisition of Ball and Roller Bearings (XXX 2002)

    (a) Definitions. As used in this clause--
    (1) Bearing components means the bearing element, retainer, 
inner race, or outer race.
    (2) Miniature and instrument ball bearings means all rolling 
contact ball bearings with a basic outside diameter (exclusive of 
flange diameters) of 30 millimeters or less, regardless of material, 
tolerance, performance, or quality characteristics.
    (b) Except as provided in paragraph (c) of this clause, all ball 
and roller bearings and ball and roller bearing components 
(including miniature and instrument ball bearings) delivered under 
this contract, either as end items or components of end items, shall 
be wholly manufactured in the United States or Canada. Unless 
otherwise specified, raw materials, such as preformed bar, tube, or 
rod stock and lubricants, need not be mined or produced in the 
United States or Canada.
    (c)(1) The restriction in paragraph (b) of this clause does not 
apply to ball or roller bearings that are acquired as components 
if--
    (i) The end items or components containing ball or roller 
bearings are commercial items; or
    (ii) The ball or roller bearings are commercial components 
manufactured in the United Kingdom.
    (2) The commercial item exception in paragraph (c)(1) of this 
clause does not include items designed or developed under a 
Government contract if the end item is bearings or bearing 
components.
    (d) The restriction in paragraph (b) of this clause may be 
waived upon request from the Contractor in accordance with 
subsection 225.7019-3 of the Defense Federal Acquisition Regulation 
Supplement. If the restriction is waived for miniature and 
instrument ball bearings, the Contractor shall acquire a like 
quantity and type of domestic manufacture for nongovernmental use.
    (e) The Contractor shall retain records showing compliance with 
the restriction in paragraph (b) of this clause until 3 years after 
final payment and shall make the records available upon request of 
the Contracting Officer.
    (f) The Contractor shall insert the substance of this clause, 
including this paragraph (f), in all subcontracts, except those 
for--
    (1) Commercial items other than ball or roller bearings; or
    (2) Items that do not contain ball or roller bearings.

(End of clause)

Alternate I (DEC 2000)

    As prescribed in 225.7009-4(b), substitute the following 
paragraph (c)(1)(ii) for paragraph (c)(1)(ii) of the basic clause:
    (c)(1)(ii) The ball or roller bearings are commercial 
components.


252.225-7017  [Removed and Reserved]

    44. Section 252.225-7017 is removed and reserved.
    45. Sections 252.225-7018 through 252.225-7021 are revised to read 
as follows:


252.225-7018  Notice of Prohibition of Certain Contracts with Foreign 
Entities for the Conduct of Ballistic Missile Defense Research, 
Development, Test, and Evaluation.

    As prescribed in 225.7017-4, use the following provision:
Notice of Prohibition of Certain Contracts With Foreign Entities for 
the Conduct of Ballistic Missile Defense Research, Development, Test, 
and Evaluation (XXX 2002)
    (a) Definitions.
    (1) Competent means the ability of an offeror to satisfy the 
requirements of the solicitation. This determination is based on a 
comprehensive assessment of each offeror's proposal, including 
consideration of the specific areas of evaluation criteria in the 
relative order of importance described in the solicitation.
    (2) Foreign firm means a business entity owned or controlled by one 
or more foreign nationals or a business entity in which more than 50 
percent of the stock is owned or controlled by one or more foreign 
nationals.
    (3) U.S. firm means a business entity other than a foreign firm.
    (b) Except as provided in paragraph (c) of this provision, the 
Department of Defense will not enter into or carry out any contract, 
including any contract awarded as a result of a broad agency 
announcement, with a foreign government or firm if the contract 
provides for the conduct of research, development, test, or evaluation 
in connection with the Ballistic Missile Defense Program. However, 
foreign governments and firms are encouraged to submit offers, since 
this provision is not intended to restrict access to unique foreign 
expertise if the contract will require a level of competency 
unavailable in the United States.
    (c) This prohibition does not apply to a foreign government or firm 
if--
    (1) The contract will be performed within the United States;
    (2) The contract is exclusively for research, development, test, or 
evaluation in connection with antitactical ballistic missile systems;
    (3) The foreign government or firm agrees to share a substantial 
portion of the total contract cost. The foreign share is considered 
substantial if it is equitable with respect to the relative benefits 
that the United States and the foreign parties will derive from the 
contract. For example, if the contract is more beneficial to the 
foreign party, its share of the costs should be correspondingly higher; 
or
    (4) The U.S. Government determines that a U.S. firm cannot 
competently perform the contract at a price equal to or less than the 
price at which a foreign government or firm can perform the contract.
    (d) The offeror (------) is (------) is not a U.S. firm.


(End of provision)


252.225-7019  Restriction on Acquisition of Foreign Anchor and Mooring 
Chain.

    As prescribed in 225.7007-3, use the following clause:

Restriction on Acquisition of Foreign Anchor and Mooring Chain (XXX 
2002)

    (a) Welded shipboard anchor and mooring chain, four inches or 
less in diameter, delivered under this contract--
    (1) Shall be manufactured in the United States, including 
cutting, heat treating, quality control, testing, and welding (both 
forging and shot blasting process); and
    (2) The cost of the components manufactured in the United States 
shall exceed 50 percent of the total cost of components.
    (b) The Contractor may request a waiver of this restriction if 
adequate domestic supplies meeting the requirements in paragraph (a) 
of this clause are not available to meet the contract delivery 
schedule.
    (c) The Contractor shall insert the substance of this clause, 
including this paragraph (c), in all subcontracts for items 
containing welded shipboard anchor and mooring chain, four inches or 
less in diameter.

(End of clause)


252.225-7020  Trade Agreements Certificate.

    As prescribed in 225.1101(5), use the following provision:

Trade Agreements Certificate (XXX 2002)

    (a) Definitions. Caribbean Basin country end product, designated 
country end product, NAFTA country end product, nondesignated 
country end product, qualifying country end product, and U.S.-made 
end product have the meanings given in the Trade Agreements clause 
of this solicitation.
    (b) Evaluation. The Government--

[[Page 62612]]

    (1) Will evaluate offers in accordance with the policies and 
procedures of part 225 of the Defense Federal Acquisition Regulation 
Supplement; and
    (2) Will consider only offers of end products that are U.S.-
made, qualifying country, designated country, Caribbean Basin 
country, or NAFTA country end products, unless the Government 
determines that--
    (i) There are no offers of such end products;
    (ii) The offers of such end products are insufficient to fulfill 
the Government's requirements; or
    (iii) A national interest exception to the Trade Agreements Act 
applies.
    (c) Certification and identification of country of origin.
    (1) For all line items subject to the Trade Agreements clause of 
this solicitation, the offeror certifies that each end product to be 
delivered under this contract, except those listed in paragraph 
(c)(2) of this provision, is a U.S.-made, qualifying country, 
designated country, Caribbean Basin country, or NAFTA country end 
product.
    (2) The following supplies are other nondesignated country end 
products:

(insert line item number)
(insert country of origin)

(End of provision)


252.225-7021  Trade Agreements.

    As prescribed in 225.1101(6), use the following clause:

Trade Agreements (XXX 2002)

    (a) Definitions. As used in this clause--
    (1) Caribbean Basin country means--

Antigua and Barbuda
Aruba
Bahamas
Barbados
Belize
British Virgin Islands
Costa Rica
Dominica
El Salvador
Grenada
Guatemala
Guyana
Haiti
Jamaica
Montserrat
Netherlands Antilles
Nicaragua
St. Kitts-Nevis
St. Lucia
St. Vincent and the Grenadines
Trinidad and Tobago

    (2) Caribbean Basin country end product
    (i) Means an article that--
    (A) Is wholly the growth, product, or manufacture of a Caribbean 
Basin country; or
    (B) In the case of an article that consists in whole or in part 
of materials from another country or instrumentality, has been 
substantially transformed in a Caribbean Basin country 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 the value of the product itself; 
and
    (ii) Excludes products, other than petroleum and any product 
derived from petroleum, that are not granted duty-free treatment 
under the Caribbean Basin Economic Recovery Act (19 U.S.C. 2703(b)). 
These exclusions presently consist of--
    (A) Textiles, apparel articles, footwear, handbags, luggage, 
flat goods, work gloves, leather wearing apparel, and handloomed, 
handmade, or folklore articles that are not granted duty-free status 
in the Harmonized Tariff Schedule of the United States (HTSUS);
    (B) Tuna, prepared or preserved in any manner in airtight 
containers; and
    (C) Watches and watch parts (including cases, bracelets, and 
straps) of whatever type, including, but not limited to, mechanical, 
quartz digital, or quartz analog, if such watches or watch parts 
contain any material that is the product of any country to which the 
HTSUS column 2 rates of duty (HTSUS General Note 3(b)) apply.
    (3) Component means an article, material, or supply incorporated 
directly into an end product.
    (4) Designated country means--

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

    (5) Designated country end product means an article that--
    (i) Is wholly the growth, product, or manufacture of the 
designated country; or
    (ii) In the case of an article that consists in whole or in part 
of materials from another country or instrumentality, has been 
substantially transformed in a designated country 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 the value of the product itself.
    (6) End product means those articles, materials, and supplies to 
be acquired under this contract for public use.
    (7) NAFTA country end product means an article that--
    (i) Is wholly the growth, product, or manufacture of a NAFTA 
country; or
    (ii) In the case of an article that 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 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 the value of the product itself.
    (8) Nondesignated country end product means any end product that 
is not a U.S.-made end product or a designated country end product.
    (9) North American Free Trade Agreement (NAFTA) country means 
Canada or Mexico.
    (10) Qualifying country means any country set forth in 
subsection 225.872-1 of the Defense Federal Acquisition Regulation 
Supplement.
    (11) Qualifying country end product means--
    (i) An unmanufactured end product mined or produced in a 
qualifying country; or
    (ii) An end product manufactured in a qualifying country if the 
cost of the following

[[Page 62613]]

types of components exceeds 50 percent of the cost of all its 
components:
    (A) Components mined, produced, or manufactured in a qualifying 
country.
    (B) Components mined, produced, or manufactured in the United 
States.
    (C) Components of foreign origin of a class or kind for which 
the Government has determined that sufficient and reasonably 
available commercial quantities of a satisfactory quality are not 
mined, produced, or manufactured in the United States.
    (12) United States means the United States, its possessions, 
Puerto Rico, and any other place subject to its jurisdiction, but 
does not include leased bases or trust territories.
    (13) U.S.-made end product means an article that--
    (i) Is mined, produced, or manufactured in the United States; or
    (ii) Is substantially transformed in the United States 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.
    (b) This clause implements the Trade Agreements Act of 1979 (19 
U.S.C. 2501, et seq.), the North American Free Trade Agreement 
Implementation Act of 1993 (19 U.S.C. 3301 note), and the Caribbean 
Basin Initiative. Unless otherwise specified, this clause applies to 
all items in the Schedule.
    (c) The Contractor shall deliver under this contract only U.S.-
made, qualifying country, designated country, Caribbean Basin 
country, or NAFTA country end products unless--
    (1) In its offer, the Contractor specified delivery of other 
nondesignated country end products in the Trade Agreements 
Certificate provision of the solicitation; and
    (2) The Government determines that--
    (i) Offers of U.S.-made end products or qualifying, designated, 
Caribbean Basin, or NAFTA country end products from responsive, 
responsible offerors are either not received or are insufficient to 
fill the Government's requirements; or
    (ii) A national interest exception to the Trade Agreements Act 
applies.
    (d) The contract price does not include duty for end products or 
components for which the Contractor will claim duty-free entry.
    (e) The HTSUS is available on the Internet at http://www.customs.ustreas.gov/impoexpo/impoexpo.htm. The following 
sections of the HTSUS provide information regarding duty-free status 
of articles specified in paragraph (a)(2)(ii)(A) of this clause:
    (1) General Note 3(c), Products Eligible for Special Tariff 
Treatment.
    (2) General Note 17, Products of Countries Designated as 
Beneficiary Countries Under the United States--Caribbean Basin Trade 
Partnership Act of 2000.
    (3) Section XXII, Chapter 98, Subchapter II, Articles Exported 
and Returned, Advanced or Improved Abroad, U.S. Note 7(b).
    (4) Section XXII, Chapter 98, Subchapter XX, Goods Eligible for 
Special Tariff Benefits Under the United States--Caribbean Basin 
Trade Partnership Act.

(End of clause)


252.225-7022  [Amended]

    46. Section 252.225-7022 is amended by revising the clause date to 
read ``(XXX 2002)''; and in paragraph (a) by removing ``only''.


252.225-7023  [Amended]

    47. Section 252.225-7023 is amended in the introductory text by 
removing ``225.7020-4'' and adding in its place ``225.7010-4''.


252.225-7024  [Removed and Reserved]

    48. Section 252.225-7024 is removed and reserved.
    49. Section 252.225-7025 is revised to read as follows:


252.225-7025  Restriction on Acquisition of Forgings.

    As prescribed in 225.7102-4, use the following clause:

Restriction on Acquisition of Forgings (XXX 2002)

    (a) Definitions. As used in this clause--
    (1) Domestic manufacture means manufactured in the United States 
or Canada if the Canadian firm--
    (i) Normally produces similar items or is currently producing 
the item in support of DoD contracts (as a contractor or a 
subcontractor); and
    (ii) Agrees to become (upon receiving a contract/order) a 
planned producer under DoD's Industrial Preparedness Production 
Planning Program, if it is not already a planned producer for the 
item.
    (2) Forging items means--

------------------------------------------------------------------------
                   Items                             Categories
------------------------------------------------------------------------
Ship propulsion shafts....................  Excludes service and landing
                                             craft shafts.
Periscope tubes...........................  All.
Ring forgings for bull gears..............  All greater than 120 inches
                                             in diameter.
------------------------------------------------------------------------

    (b) End items and their components delivered under this contract 
shall contain forging items that are of domestic manufacture only.
    (c) The restriction in paragraph (b) of this clause may be 
waived upon request from the Contractor in accordance with 
subsection 225.7102-3 of the Defense Federal Acquisition Regulation 
Supplement.
    (d) The Contractor shall retain records showing compliance with 
the restriction in paragraph (b) of this clause until 3 years after 
final payment and shall make the records available upon request of 
the Contracting Officer.
    (e) The Contractor shall insert the substance of this clause, 
including this paragraph (e), in subcontracts for forging items or 
for other items that contain forging items.

(End of clause)


252.225-7026  [Removed and Reserved]

    50. Section 252.225-7026 is removed and reserved.
    51. Sections 252.225-7027 and 252.225-7028 are revised to read as 
follows:


252.225-7027  Restriction on Contingent Fees for Foreign Military 
Sales.

    As prescribed in 225.7308(a), use the following clause:

Restriction on Contingent Fees for Foreign Military Sales (XXX 2002)

    (a) Except as provided in paragraph (b) of this clause, 
contingent fees, as defined in the Covenant Against Contingent Fees 
clause of this contract, are generally an allowable cost, provided 
the fees are paid to--
    (1) A bona fide employee of the Contractor; or
    (2) A bona fide established commercial or selling agency 
maintained by the Contractor for the purpose of securing business.
    (b) For foreign military sales, unless the contingent fees have 
been identified and payment approved in writing by the foreign 
customer before contract award, the following contingent fees are 
unallowable under this contract:
    (1) For sales to the Government(s) of ----------, contingent 
fees in any amount.
    (2) For sales to Governments not listed in paragraph (b)(1) of 
this clause, contingent fees exceeding $50,000 per foreign military 
sale case.

(End of clause)


252.225-7028  Exclusionary Policies and Practices of Foreign 
Governments.

    As prescribed in 225.7308(b), use the following clause:

Exclusionary Policies and Practices of Foreign Governments (XXX 2002)

    The Contractor and its subcontractors shall not take into 
account the exclusionary policies or practices of any foreign 
government in employing or assigning personnel, if--
    (a) The personnel will perform functions required by this 
contract, either in the United States or abroad; and
    (b) The exclusionary policies or practices of the foreign 
government are based on race, religion, national origin, or sex.

(End of clause)


252.225-7029  [Removed and Reserved]

    52. Section 252.225-7029 is removed and reserved.
    53. Sections 252.225-7030 through 252.225-7033 are revised to read 
as follows:


252.225-7030  Restriction on Acquisition of Carbon, Alloy, and Armor 
Steel Plate.

    As prescribed in 225.7011-3, use the following clause:

Restriction on Acquisition of Carbon, Alloy, and Armor Steel Plate (XXX 
2002)

    Carbon, alloy, and armor steel plate shall be melted and rolled 
in the United States or Canada if the carbon, alloy, or armor steel 
plate--
    (a) Is in Federal Supply Class 9515 or is described by 
specifications of the American Society for Testing Materials or the 
American Iron and Steel Institute; and
    (b) Will be delivered to the Government or will be purchased by 
the Contractor as a raw

[[Page 62614]]

material for use in a Government-owned facility or a facility under 
the control of the Department of Defense.

(End of clause)


252.225-7031  Secondary Arab Boycott of Israel.

    As prescribed in 225.1103(4), use the following provision:

Secondary Arab Boycott of Israel (XXX 2002)

    (a) Definitions. As used in this provision--
    (1) Foreign person means any person (including any individual, 
partnership, corporation, or other form of association) other than a 
United States person.
    (2) United States person is defined in 50 U.S.C. App. 2415(2) 
and means--
    (i) Any United States resident or national (other than an 
individual resident outside the United States who is employed by 
other than a United States person);
    (ii) Any domestic concern (including any permanent domestic 
establishment of any foreign concern); and
    (iii) Any foreign subsidiary or affiliate (including any 
permanent foreign establishment) of any domestic concern that is 
controlled in fact by such domestic concern.
    (b) Certification. If the offeror is a foreign person, the 
offeror certifies, by submission of an offer, that it--
    (1) Does not comply with the Secondary Arab Boycott of Israel; 
and
    (2) Is not taking or knowingly agreeing to take any action, with 
respect to the Secondary Boycott of Israel by Arab countries, which 
50 U.S.C. App. 2407(a) prohibits a United States person from taking.

(End of provision)


252.225-7032  Waiver of United Kingdom Levies--Evaluation of Offers.

    As prescribed in 225.1101(7), use the following provision:

Waiver of United Kingdom Levies--Evaluation of Offers (XXX 2002)

    (a) Offered prices for contracts or subcontracts with United 
Kingdom (U.K.) firms may contain commercial exploitation levies 
assessed by the Government of the U.K. The offeror shall identify to 
the Contracting Officer all levies included in the offered price by 
describing--
    (1) The name of the U.K. firm;
    (2) The item to which the levy applies and the item quantity; 
and
    (3) The amount of levy plus any associated indirect costs and 
profit or fee.
    (b) In the event of difficulty in identifying levies included in 
a price from a prospective subcontractor, the offeror may seek 
advice through the Director of Procurement, United Kingdom Defence 
Procurement Office, British Embassy, 3100 Massachusetts Avenue NW., 
Washington, DC 20006.
    (c) The U.S. Government may attempt to obtain a waiver of levies 
pursuant to the U.S./U.K. reciprocal waiver agreement of July 1987.
    (1) If the U.K. waives levies before award of a contract, the 
Contracting Officer will evaluate the offer without the levy.
    (2) If levies are identified but not waived before award of a 
contract, the Contracting Officer will evaluate the offer inclusive 
of the levies.
    (3) If the U.K. grants a waiver of levies after award of a 
contract, the U.S. Government reserves the right to reduce the 
contract price by the amount of the levy waived plus associated 
indirect costs and profit or fee.

(End of provision)


252.225-7033  Waiver of United Kingdom Levies.

    As prescribed in 225.1101(8), use the following clause:

Waiver of United Kingdom Levies (XXX 2002)

    (a) The U.S. Government may attempt to obtain a waiver of any 
commercial exploitation levies included in the price of this 
contract, pursuant to the U.S./United Kingdom (U.K.) reciprocal 
waiver agreement of July 1987. If the U.K. grants a waiver of levies 
included in the price of this contract, the U.S. Government reserves 
the right to reduce the contract price by the amount of the levy 
waived plus associated indirect costs and profit or fee.
    (b) If the Contractor contemplates award of a subcontract 
exceeding $1 million to a U.K. firm, the Contractor shall provide 
the following information to the Contracting Officer before award of 
the subcontract:
    (1) Name of the U.K. firm.
    (2) Prime contract number.
    (3) Description of item to which the levy applies.
    (4) Quantity being acquired.
    (5) Amount of levy plus any associated indirect costs and profit 
or fee.
    (c) In the event of difficulty in identifying levies included in 
a price from a prospective subcontractor, the Contractor may seek 
advice through the Director of Procurement, United Kingdom Defence 
Procurement Office, British Embassy, 3100 Massachusetts Avenue, NW., 
Washington, DC 20006.
    (d) The Contractor shall insert the substance of this clause, 
including this paragraph (d), in any subcontract for supplies where 
a lower-tier subcontract exceeding $1 million with a U.K. firm is 
anticipated.

(End of clause)

    54. Sections 252.225-7035 through 252.225-7039 are revised to read 
as follows:


252.225-7035  Buy American Act--North American Free Trade Agreement 
Implementation Act--Balance of Payments Program Certificate.

    As prescribed in 225.1101(9), use the following provision:

Buy American Act--North American Free Trade Agreement Implementation 
Act--Balance of Payments Program Certificate (XXX 2002)

    (a) Definitions. Domestic end product, foreign end product, 
NAFTA country end product, qualifying country end product, and 
United States have the meanings given in the Buy American Act--North 
American Free Trade Agreement Implementation Act--Balance of 
Payments Program clause of this solicitation.
    (b) Evaluation. The Government will--
    (1) Evaluate offers in accordance with the policies and 
procedures of part 225 of the Defense Federal Acquisition Regulation 
Supplement; and
    (2) For line items subject to the North American Free Trade 
Agreement Implementation Act, will evaluate offers of qualifying 
country end products or NAFTA country end products without regard to 
the restrictions of the Buy American Act or the Balance of Payments 
Program.
    (c) Certifications and identification of country of origin.
    (1) For all line items subject to the Buy American Act--North 
American Free Trade Agreement Implementation Act--Balance of 
Payments Program clause of this solicitation, the offeror certifies 
that--
    (i) Each end product, except the end products listed in 
paragraph (c)(2) of this provision, is a domestic end product; and
    (ii) Components of unknown origin are considered to have been 
mined, produced, or manufactured outside the United States or a 
qualifying country.
    (2) The offeror shall identify all end products that are not 
domestic end products.
    (i) The offeror certifies that the following supplies are 
qualifying country (except Canadian) end products:

 (insert line item number)---------------------------------------------
 (insert country of origin)--------------------------------------------
    (ii) The offeror certifies that the following supplies are NAFTA 
country end products:
 (insert line item number)---------------------------------------------
 (insert country of origin)--------------------------------------------
    (iii) The following supplies are other foreign end products, 
including end products manufactured in the United States that do not 
qualify as domestic end products.
 (insert line item number)---------------------------------------------
 (insert country of origin)--------------------------------------------
(End of provision)

Alternate I (XXX 2002)

    As prescribed in 225.1101(9), substitute the phrase ``Canadian 
end product'' for the phrase ``NAFTA country end product'' in 
paragraph (a) of the basic provision; and substitute the phrase 
``Canadian end products'' for the phrase ``NAFTA country end 
products'' in paragraphs (b) and (c)(2)(ii) of the basic provision.


252.225-7036  Buy American Act--North American Free Trade Agreement 
Implementation Act--Balance of Payments Program.

    As prescribed in 225.1101(10)(i), use the following clause:

Buy American Act--North American Free Trade Agreement Implementation 
Act--Balance of Payments Program (XXX 2002)

    (a) Definitions. As used in this clause--
    (1) Component means an article, material, or supply incorporated 
directly into an end product.
    (2) Domestic end product means--
    (i) An unmanufactured end product that has been mined or 
produced in the United States; or
    (ii) An end product manufactured in the United States if the 
cost of its qualifying country components and its components that

[[Page 62615]]

are mined, produced, or manufactured in the United States exceeds 50 
percent of the cost of all its components. The cost of components 
includes transportation costs to the place of incorporation into the 
end product and U.S. duty (whether or not a duty-free entry 
certificate is issued). Scrap generated, collected, and prepared for 
processing in the United States is considered domestic. A component 
is considered to have been mined, produced, or manufactured in the 
United States (regardless of its source in fact) if the end product 
in which it is incorporated is manufactured in the United States and 
the component is of a class or kind for which the Government has 
determined that--
    (A) Sufficient and reasonably available commercial quantities of 
a satisfactory quality are not mined, produced, or manufactured in 
the United States; or
    (B) It is inconsistent with the public interest to apply the 
restrictions of the Buy American Act.
    (3) End product means those articles, materials, and supplies to 
be acquired under this contract for public use.
    (4) Foreign end product means an end product other than a 
domestic end product.
    (5) North American Free Trade Agreement (NAFTA) country means 
Canada or Mexico.
    (6) NAFTA country end product means an article that--
    (i) Is wholly the growth, product, or manufacture of a NAFTA 
country; or
    (ii) In the case of an article that 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 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 the value of the product itself.
    (7) Qualifying country means any country set forth in subsection 
225.872-1 of the Defense Federal Acquisition Regulation Supplement.
    (8) Qualifying country component means a component mined, 
produced, or manufactured in a qualifying country.
    (9) Qualifying country end product means--
    (i) An unmanufactured end product mined or produced in a 
qualifying country; or
    (ii) An end product manufactured in a qualifying country if the 
cost of the following types of components exceeds 50 percent of the 
cost of all its components:
    (A) Components mined, produced, or manufactured in a qualifying 
country.
    (B) Components mined, produced, or manufactured in the United 
States.
    (C) Components of foreign origin of a class or kind for which 
the Government has determined that sufficient and reasonably 
available commercial quantities of a satisfactory quality are not 
mined, produced, or manufactured in the United States.
    (10) United States means the United States, its possessions, 
Puerto Rico, and any other place subject to its jurisdiction, but 
does not include leased bases or trust territories.
    (b) This clause implements the Buy American Act (41 U.S.C. 10a-
10d), the Balance of Payments Program, and the North American Free 
Trade Agreement Implementation Act of 1993 (19 U.S.C. 3301 note). 
Unless otherwise specified, this clause applies to all items in the 
Schedule.
    (c) The Contractor shall deliver under this contract only 
domestic end products unless, in its offer, it specified delivery of 
qualifying country, NAFTA country, or other foreign end products in 
the Buy American Act--North American Free Trade Agreement 
Implementation Act--Balance of Payments Program Certificate 
provision of the solicitation. If the Contractor certified in its 
offer that it will deliver a qualifying country end product or a 
NAFTA country end product, the Contractor shall deliver a qualifying 
country end product, a NAFTA country end product, or, at the 
Contractor's option, a domestic end product.
    (d) The contract price does not include duty for end products or 
components for which the Contractor will claim duty-free entry.
(End of clause)

Alternate I (XXX 2002)

    As prescribed in 225.1101(10)(i)(B), substitute the following 
paragraphs (a)(6), (b), and (c) for paragraphs (a)(6), (b), and (c) 
of the basic clause:
    (a)(6) ``Canadian end product,'' means an article that--
    (i) Is wholly the growth, product, or manufacture of Canada; or
    (ii) In the case of an article that 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.
    (b) This clause implements the Buy American Act (41 U.S.C. 10a-
10d), the Balance of Payments Program, and the North American Free 
Trade Agreement Implementation Act of 1993 (19 U.S.C. 3301 note). 
Unless otherwise specified, this clause applies to all items in the 
Schedule.
    (c) The Contractor shall deliver under this contract only 
domestic end products unless, in its offer, it specified delivery of 
qualifying country, Canadian, or other foreign end products in the 
Buy American Act--North American Free Trade Agreement Implementation 
Act--Balance of Payments Program Certificate provision of the 
solicitation. If the Contractor certified in its offer that it will 
deliver a qualifying country end product or a Canadian end product, 
the Contractor shall deliver a qualifying country end product, a 
Canadian end product, or, at the Contractor's option, a domestic end 
product.


252.225-7037  Evaluation of Offers for Air Circuit Breakers.

    As prescribed in 225.7006-4(a), use the following provision:

Evaluation of Offers for Air Circuit Breakers (XXX 2002)

    (a) The offeror shall specify, in its offer, any intent to 
furnish air circuit breakers that are not manufactured in the United 
States, Canada, or the United Kingdom.
    (b) The Contracting Officer will evaluate offers by adding a 
factor of 50 percent to the offered price of air circuit breakers 
that are not manufactured in the United States, Canada, or the 
United Kingdom.

(End of provision)


252.225-7038  Restriction on Acquisition of Air Circuit Breakers.

    As prescribed in 225.7006-4(b), use the following clause:

Restriction on Acquisition of Air Circuit Breakers (XXX 2002)

    Unless otherwise specified in its offer, the Contractor shall 
deliver under this contract air circuit breakers manufactured in the 
United States, Canada, or the United Kingdom.

(End of clause)


252.225-7039  Restriction on Acquisition of Totally Enclosed Lifeboat 
Survival Systems.

    As prescribed in 225.7008-4, use the following clause:
Restriction on Acquisition of Totally Enclosed Lifeboat Survival 
Systems (XXX 2002)
    The Contractor shall deliver under this contract totally enclosed 
lifeboat survival systems (consisting of the lifeboat and associated 
davits and winches), for which--
    (a) 50 percent or more of the components have been manufactured in 
the United States; and
    (b) 50 percent or more of the labor in the manufacture and assembly 
of the entire system has been performed in the United States.


(End of clause)


252.225-7041  [Amended]

    55. Section 252.225-7041 is amended in the introductory text by 
removing ``225.1103(2)'' and adding in its place ``225.1103(5)''.
    56. Section 252.225-7042 is revised to read as follows:


252.225-7042  Authorization to Perform.

    As prescribed in 225.1103(6), use the following provision:

Authorization To Perform (XXX 2002)

    The offeror represents that it has been duly authorized to 
operate and to do business in

[[Page 62616]]

the country or countries in which the contract is to be performed.

(End of provision)

[FR Doc. 02-24739 Filed 10-4-02; 8:45 am]
BILLING CODE 5001-08-P