[Federal Register Volume 69, Number 8 (Tuesday, January 13, 2004)]
[Rules and Regulations]
[Pages 1926-1930]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-568]


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

DEPARTMENT OF DEFENSE

48 CFR Parts 212, 213, 225, and 252

[DFARS Case 2003-D088]


Defense Federal Acquisition Regulation Supplement; Free Trade 
Agreements--Chile and Singapore

AGENCY: Department of Defense (DoD).

ACTION: Interim rule with request for comments.

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

SUMMARY: DoD has issued an interim rule amending the Defense Federal 
Acquisition Regulation Supplement to implement new Free Trade 
Agreements with Chile and Singapore, as approved by Congress in the 
United States-Chile Free Trade Agreement Implementation Act and the 
United States-Singapore Free Trade Agreement Implementation Act. The 
new Free Trade Agreements waive the applicability of the Buy American 
Act for some foreign supplies and construction materials from Chile and 
Singapore, and specify procurement procedures designed to ensure 
fairness.

DATES: Effective date: January 13, 2004.
    Comment date: Comments on the interim rule should be submitted to 
the address shown below on or before March 15, 2004, to be considered 
in the formation of the final rule.

ADDRESSES: Respondents may submit comments via the Internet at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcom. As an alternative, 
respondents may e-mail comments to: [email protected]. Please cite DFARS 
Case 2003-D088 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)DPAP(DAR), IMD 3C132, 3062 
Defense Pentagon, Washington, DC 20301-3062; facsimile (703) 602-0350. 
Please cite DFARS Case 2003-D088.
    At the end of the comment period, interested parties may view 
public comments on the Internet 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 amends DFARS 212.301, 213.302-5, part 225, and associated 
clauses to implement new Free Trade Agreements with Chile and 
Singapore, as approved by Congress in the United States-Chile Free 
Trade Agreement Implementation Act (Pub. L. 108-77) and the United 
States-Singapore Free Trade Agreement Implementation Act (Pub. L. 108-
78). Applicable changes to the Federal Acquisition Regulation (FAR) 
were published in Federal Acquisition Circular 2001-19 on January 7, 
2004 (69 FR 1051).
    The threshold for applicability of the new Free Trade Agreements 
with Chile and Singapore is $58,550 for supplies and services, and 
$6,725,000 for construction. Singapore was already a signatory to the 
Agreement on Government Procurement, and therefore was already included 
as a designated country under the Trade Agreements Act (FAR 25.003), 
with thresholds of $175,000 for supplies or services and $6,725,000 for 
construction.
    The trade agreements clauses at DFARS 252.225-7021, 252.225-7036, 
and 252.225-7045 are amended to include definitions of ``Free Trade 
Agreement country'' and ``Free Trade Agreement country end product'' or 
``Free Trade Agreement country construction material'' instead of 
``NAFTA country'' and ``NAFTA country end product'' or ``NAFTA country 
construction material.'' The Free Trade Agreement countries are Canada, 
Chile, Mexico, and Singapore.
    Section 106 of Pub. L. 108-77 and section 106 of Pub. L. 108-78 
provide for arbitration of certain claims. The United States is 
authorized to resolve any claim against the United States covered by 
the section of the applicable Free Trade Agreement relating to 
Investor-State Disputes Settlement, pursuant to the investor-state 
dispute settlement procedures set forth in the applicable section 
(section B of chapter 10 for Chile; section C of chapter 15 for 
Singapore). DoD invites comment on

[[Page 1927]]

appropriate implementation of this authorization. Sections 106 of the 
same public laws also require that, after the new trade agreements 
become effective, contracts must specify the law that will apply to 
resolve any breach of contract claim. The statement that ``United 
States law will apply to resolve any claim of breach of this contract'' 
has been included in each of the trade agreements clauses, rather than 
creating a separate clause.
    This rule was not subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

    DoD does not expect this rule 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. Although the rule 
opens up Government procurement to the products of Chile, and lowers 
the trade agreements threshold for the products of Singapore, DoD does 
not believe there will be a significant economic impact on U.S. small 
businesses. DoD applies the trade agreements to only those non-defense 
items listed at DFARS 225.401-70, and acquisitions below $100,000 that 
are set aside for small businesses are exempt. Therefore, DoD has not 
performed an initial regulatory flexibility analysis. DoD invites 
comments from small businesses and other interested parties. DoD also 
will consider comments from small entities concerning the affected 
DFARS subparts in accordance with 5 U.S.C. 610. Such comments should be 
submitted separately and should cite DFARS Case 2003-D088.

C. Paperwork Reduction Act

    This interim rule affects the certification and information 
collection requirements in the provisions at DFARS 252.225-7020 and 
252.225-7035, currently approved under OMB Clearance 0704-0229. The 
impact, however, is negligible. In the provision at DFARS 252.225-7020, 
Trade Agreements Certificate, the offeror no longer has to list offers 
of end products from Chile as nondesignated country end products. 
However, offers of Chilean end products would have been unlikely, 
because purchase of foreign products other than eligible products is 
prohibited by the Trade Agreements Act. In the provision at DFARS 
252.225-7035, Buy American Act--Free Trade Agreements--Balance of 
Payments Program Certificate, the offeror must list all end products 
that are not domestic end products. The offeror will list products of 
Chile and Singapore on the list of Free Trade Agreement country end 
products, rather than the list of ``other foreign end products.''

D. Determination to Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense that urgent and compelling reasons exist to publish an 
interim rule prior to affording the public an opportunity to comment. 
This interim rule implements new Free Trade Agreements with Chile and 
Singapore, as approved by Congress in the United States-Chile Free 
Trade Agreement Implementation Act (Pub. L. 108-77) and the United 
States-Singapore Free Trade Agreement Implementation Act (Pub. L. 108-
78). These agreements waive the applicability of the Buy American Act 
for some foreign supplies and construction materials from Chile and 
Singapore, and specify procurement procedures designed to ensure 
fairness. The new Free Trade Agreements became effective on January 1, 
2004. Comments received in response to this interim rule will be 
considered in the formation of the final rule.

List of Subjects in 48 CFR Parts 212, 213, 225, and 252

    Government procurement.

Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.


0
Therefore, 48 CFR parts 212, 213, 225, and 252 are amended as follows:
0
1. The authority citation for 48 CFR parts 212, 213, 225, and 252 
continues to read as follows:

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

PART 212--ACQUISITION OF COMMERCIAL ITEMS

0
2. Section 212.301 is amended by revising paragraph (f)(i)(C) to read 
as follows:


212.301  Solicitation provisions and contract clauses for the 
acquisition of commercial items.

    (f)(i) * * *
    (C) 252.225-7035, Buy American Act--Free Trade Agreements--Balance 
of Payments Program Certificate.
* * * * *

PART 213--SIMPLIFIED ACQUISITION PROCEDURES

0
3. Section 213.302-5 is amended by revising paragraph (d)(ii) to read 
as follows:


213.302-5  Clauses.

* * * * *
    (d) * * *
    (ii) 252.225-7036, Buy American Act--Free Trade Agreements--Balance 
of Payments Program, as prescribed at 225.1101(10).

PART 225--FOREIGN ACQUISITION

0
4. Section 225.003 is amended by revising paragraphs (4), (5), and (10) 
to read as follows:


225.003  Definitions.

* * * * *
    (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--Free Trade Agreements--Balance of 
Payments Program, instead of the meaning in FAR 25.003.
    (5) Eligible product means, instead of the definition in FAR 
25.003--
    (i) A foreign end product that--
    (A) Is in a category listed in 225.401-70; and
    (B) Is not subject to discriminatory treatment, due to the 
applicability of a trade agreement to a particular acquisition; or
    (ii) A foreign service that is not subject to discriminatory 
treatment, due to the applicability of a trade agreement to a 
particular acquisition.
* * * * *
    (10) 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--
Free Trade Agreements--Balance of Payments Program. Qualifying country 
end product is also defined in the clause at 252.225-7021, Trade 
Agreements.
* * * * *

0
5. Section 225.401-70 is amended by revising the section heading and 
introductory text to read as follows:


225.401-70  Products subject to trade agreements.

    Acquisitions of end products in the following Federal supply groups 
(FSG) are subject to trade agreements, if the value of the acquisition 
is at or above the applicable trade agreement threshold and no 
exception applies. If an end product is not in one of the listed 
groups, the trade agreements do not apply. The definition of Caribbean 
Basin country end products in FAR 25.003 excludes those end products 
that are not eligible for duty-free treatment under 19 U.S.C. 2703(b). 
Therefore certain watches, watch parts, and luggage from

[[Page 1928]]

certain Caribbean Basin countries are not eligible products. However, 
225.003 expands the definition of Caribbean Basin country end products 
to include petroleum and any product derived from petroleum.
* * * * *

0
6. Section 225.502 is amended by revising paragraph (c)(i)(B) to read 
as follows:


225.502  Application.

* * * * *
    (c) * * *
    (i) * * *
    (B) If the acquisition is also subject to a Free Trade Agreement, 
then end products of the applicable Free Trade Agreement country are 
also exempt from application of the Buy American Act or Balance of 
Payments Program evaluation factor.
* * * * *


225.901  [Amended]

0
7. Section 225.901 is amended in the introductory text and paragraph 
(2) by removing ``NAFTA'' and adding in its place ``a Free Trade 
Agreement''.
0
8. Section 225.1101 is amended by revising paragraphs (2)(iv)(B), 
(3)(iii), (9), and (10) to read as follows:


225.1101  Acquisition of supplies.

* * * * *
    (2) * * *
    (iv) * * *
    (B) 252.225-7036, Buy American Act--Free Trade Agreements--Balance 
of Payments Program.
    (3) * * *
    (iii) 252.225-7036, Buy American Act--Free Trade Agreements--
Balance of Payments Program.
* * * * *
    (9) Use the provision at 252.225-7035, Buy American Act--Free Trade 
Agreements--Balance of Payments Program Certificate, instead of the 
provision at FAR 52.225-4, Buy American Act--Free Trade Agreements--
Israeli Trade Act Certificate, in solicitations that include the clause 
at 252.225-7036, Buy American Act--Free Trade Agreements--Balance of 
Payments Program. Use the provision with its Alternate I when the 
clause at 252.225-7036 is used with its Alternate I.
    (10)(i) Use the clause at 252.225-7036, Buy American Act--Free 
Trade Agreements--Balance of Payments Program, instead of the clause at 
FAR 52.225-3, Buy American Act--Free Trade Agreements--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 
$175,000, and a Free Trade Agreement applies to the acquisition.
    (A) Use the basic clause when the estimated value equals or exceeds 
$58,550.
    (B) Use the clause with its Alternate I when the estimated value 
equals or exceeds $25,000 but is less than $58,550.
    (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 a Free Trade 
Agreement to only some of the items acquired. In such case, indicate in 
the Schedule those items covered by the Buy American Act--Free Trade 
Agreements--Balance of Payments Program clause.

0
9. Section 225.7501 is amended by revising paragraphs (b)(1)(ii) and 
(b)(2) to read as follows:


225.7501  Policy.

* * * * *
    (b) * * *
    (1) * * *
    (ii) Is an eligible product;
* * * * *
    (2) The construction material is designated country construction 
material or Free Trade Agreement country construction material, and the 
acquisition is subject to the Trade Agreements Act or a Free Trade 
Agreement respectively; or
* * * * *


225.7503  [Amended]

0
10. Section 225.7503 is amended as follows:
    a. In paragraph (a), and in paragraph (b) in the first and second 
sentences, by removing ``$6,481,000'' and adding in its place 
``$6,725,000''; and
    b. In paragraph (b), in the second sentence, by removing 
``$7,304,733'' and adding in its place ``$7,611,532''.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
11. Section 252.212-7001 is amended as follows:
0
a. By revising the clause date to read ``(JAN 2004)'';
0
b. In paragraph (b), in entry ``252.225-7021'', by removing ``(AUG 
2003)'' and adding in its place ``(JAN 2004)''; and
0
c. In paragraph (b), by revising entry ``252.225-7036'' to read as 
follows:


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

* * * * *

    (b) * * *
    ------252.225-7036 Buy American Act--Free Trade Agreements--
Balance of Payments Program (JAN 2004) (----Alternate I) (JAN 2004) 
(41 U.S.C. 10a-10d and 19 U.S.C. 3301 note).

* * * * *

0
12. Section 252.225-7013 is amended as follows:
0
a. By revising the clause date to read ``(JAN 2004)''
0
b. By revising paragraphs (a)(2) and (3); and
0
c. In paragraph (e)(2)(iv)(B) by revising the parenthetical to read as 
follows:


252.225-7013  Duty-Free Entry.

* * * * *

    (a) * * *
    (2) 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) Free Trade Agreement country end product as defined in the 
Trade Agreements clause or the Buy American Act--Free Trade 
Agreements--Balance of Payments Program clause of this contract; or
    (iii) Canadian end product as defined in Alternate I of the Buy 
American Act--Free Trade Agreements--Balance of Payments Program 
clause of this contract.
    (3) 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--Free Trade Agreements--Balance of Payments Program clause of 
this contract.
* * * * *
    (e) * * *
    (2) * * *
    (iv) * * *
    (B) * * * (If the shipment will be consigned to a contractor's 
plant and no duty-free entry certificate is required due to a trade 
agreement, the Contractor shall claim duty-free entry under the 
applicable trade agreement and shall comply with the U.S. Customs 
Service requirements. No notification to Commander, DCMA New York, 
is required.)

* * * * *


252.225-7020  [Amended]

0
13. Section 252.225-7020 is amended as follows:
0
a. By revising the clause date to read ``(JAN 2004)''; and
0
b. In paragraph (a), paragraph (b)(2) introductory text, and paragraph 
(c)(1) by removing ``NAFTA'' and adding in its place ``Free Trade 
Agreement''.

0
14. Section 252.225-7021 is amended as follows:

[[Page 1929]]

0
a. By revising the clause date to read ``(JAN 2004)'';

0
b. By revising paragraphs (a)(7), (a)(8), (a)(9) and (b);
0
c. In paragraph (c) introductory text and paragraph (c)(2)(i) by 
removing ``NAFTA'' and adding in its place ``Free Trade Agreement'';
0
d. By redesignating paragraph (e) as paragraph (f); and
0
e. By adding a new paragraph (e) to read as follows:


252.225-7021  Trade Agreements.

* * * * *
    (a) * * *
    (7) Free Trade Agreement country means Canada, Chile, Mexico, or 
Singapore.
    (8) Free Trade Agreement country end product means an article 
that--
    (i) Is wholly the growth, product, or manufacture of a Free Trade 
Agreement 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 Free Trade Agreement 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.
    (9) Nondesignated country end product means any end product that is 
not a U.S.-made end product or a designated country end product.
* * * * *
    (b) Unless otherwise specified, this clause applies to all items in 
the Schedule.
* * * * *
    (e) United States law will apply to resolve any claim of breach of 
this contract.
* * * * *

0
15. Section 252.225-7035 is amended by revising the section heading, 
clause title, clause date, paragraphs (a) and (b)(2), paragraph (c)(1) 
introductory text, paragraph (c)(2)(ii), and Alternate I to read as 
follows:


252.225-7035  Buy American Act--Free Trade Agreements--Balance of 
Payments Program Certificate.

* * * * *

Buy American Act--Free Trade Agreements--Balance of Payments Program 
Certificate (Jan 2004)

    (a) Definitions. Domestic end product, foreign end product, Free 
Trade Agreement country end product, qualifying country end product, 
and United States have the meanings given in the Buy American Act--
Free Trade Agreements--Balance of Payments Program clause of this 
solicitation.
    (b) * * *
    (2) For line items subject to Free Trade Agreements, will 
evaluate offers of qualifying country end products or Free Trade 
Agreement country end products without regard to the restrictions of 
the Buy American Act or the Balance of Payments Program.
    (c) * * *
    (1) For all line items subject to the Buy American Act--Free 
Trade Agreements--Balance of Payments Program clause of this 
solicitation, the offeror certifies that--
* * * * *
    (2) * * *
    (ii) The offeror certifies that the following supplies are Free 
Trade Agreement country end products:
-----------------------------------------------------------------------
(Line Item Number)
-----------------------------------------------------------------------
(Country of Origin)
* * * * *

Alternate I (Jan 2004)

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


0
16. Section 252.225-7036 is amended as follows:
0
a. By revising the section heading, clause title, clause date, and 
paragraph (a)(5);
0
b. In paragraph (a)(6) introductory text, paragraph (a)(6)(i), and the 
first sentence of paragraph (a)(6)(ii) by removing ``NAFTA'' and adding 
in its place ``Free Trade Agreement'';
0
c. By revising paragraphs (b) and (c);
0
d. By adding paragraph (e); and
0
e. In Alternate I by revising the date and the first sentence of 
paragraph (c) to read as follows:


252.225-7036  Buy American Act--Free Trade Agreements--Balance of 
Payments Program.

* * * * *

Buy American Act--Free Trade Agreements--Balance of Payments Program 
(Jan 2004)

    (a) * * *
    (5) Free Trade Agreement country means Canada, Chile, Mexico, or 
Singapore.
* * * * *
    (b) 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, Free Trade Agreement country, or other foreign 
end products in the Buy American Act--Free Trade Agreements--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 Free Trade Agreement country end 
product, the Contractor shall deliver a qualifying country end 
product, a Free Trade Agreement country end product, or, at the 
Contractor's option, a domestic end product.
* * * * *
    (e) United States law will apply to resolve any claim of breach 
of this contract.
    (End of clause)

Alternate I (Jan 2004)

* * * * *
    (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--Free Trade Agreements--Balance of Payments Program 
Certificate provision of the solicitation. * * *


0
17. Section 252.225-7045 is amended as follows:

0
a. By revising the clause date to read ``(Jan 2004)'';
0
b. In paragraph (a) by removing the definitions of ``North American 
Free Trade Agreement (NAFTA) country'' and ``North American Free Trade 
Agreement (NAFTA) country construction material'';
0
c. In paragraph (a) by adding, in alphabetical order, definitions of 
``Free Trade Agreement country'' and ``Free Trade Agreement country 
construction material'';
0
d. By revising paragraph (b);
0
e. In paragraph (c) introductory text by removing ``NAFTA'' and adding 
in its place ``Free Trade Agreement'';
0
f. By adding paragraph (d); and
0
g. By revising Alternate I to read as follows:


252.225-7045  Balance of Payments Program--Construction Material Under 
Trade Agreements.

* * * * *

    (a) * * *
    ``Free Trade Agreement country'' means Canada, Chile, Mexico, or 
Singapore.
    ``Free Trade Agreement country construction material'' means a 
construction material that--
    (1) Is wholly the growth, product, or manufacture of a Free 
Trade Agreement country; or
    (2) In the case of a construction material that consists in 
whole or in part of materials from another country, has been 
substantially transformed in a Free Trade Agreement country into a 
new and different construction

[[Page 1930]]

material distinct from the material from which it was transformed.
* * * * *
    (b) This clause implements the Balance of Payments Program by 
providing a preference for domestic construction material. In 
addition, the Contracting Officer has determined that the Trade 
Agreements Act and Free Trade Agreements apply to this acquisition. 
Therefore, the Balance of Payments Program restrictions are waived 
for designated country and Free Trade Agreement country construction 
materials.
* * * * *
    (d) United States law will apply to resolve any claim of breach 
of this contract.
    (End of clause)

Alternate I (Jan 2004)

    As prescribed in 225.7503(b), delete the definitions of ``Free 
Trade Agreement country'' and ``Free Trade Agreement country 
construction material'' from the definitions in paragraph (a) of the 
basic clause, add the following definition of ``Chilean construction 
material'' to paragraph (a) of the basic clause, and substitute the 
following paragraphs (b) and (c) for paragraphs (b) and (c) of the 
basic clause:
    ``Chilean construction material'' means a construction material 
that--
    (1) Is wholly the growth, product, or manufacture of Chile; or
    (2) In the case of a construction material that consists in 
whole or in part of materials from another country, has been 
substantially transformed in Chile into a new and different 
construction material distinct from the materials from which it was 
transformed.
    (b) This clause implements the Balance of Payments Program by 
providing a preference for domestic construction material. In 
addition, the Contracting Officer has determined that the Trade 
Agreements Act, the Chile Free Trade Agreement, and the Singapore 
Free Trade Agreement apply to this acquisition. Therefore, the 
Balance of Payments Program restrictions are waived for designated 
country and Chilean construction material.
    (c) The Contractor shall use only domestic, designated country, 
or Chilean construction material in performing this contract, except 
for--
    (1) Construction material valued at or below the simplified 
acquisition threshold in Part 2 of the Federal Acquisition 
Regulation; or
    (2) The construction material or components listed by the 
Government as follows:
    [Contracting Officer to list applicable excepted materials or 
indicate ``none''.]

[FR Doc. 04-568 Filed 1-12-04; 8:45 am]
BILLING CODE 5001-08-P