[Federal Register Volume 69, Number 35 (Monday, February 23, 2004)]
[Proposed Rules]
[Pages 8151-8152]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-3706]


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DEPARTMENT OF DEFENSE

48 CFR Part 212

[DFARS Case 2003-D018]


Defense Federal Acquisition Regulation Supplement; Laws 
Inapplicable to Commercial Subcontracts

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 remove the Trade Agreements Act and 
the Buy American Act from the list of laws inapplicable to subcontracts 
for commercial items. This proposed rule is a result of a 
transformation initiative undertaken by DoD to dramatically change the 
purpose and content of the DFARS.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before April 23, 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/pubcomm. As an alternative, 
respondents may e-mail comments to: [email protected]. Please cite DFARS 
Case 2003-D018 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-D018.
    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

    DFARS Transformation is a major DoD initiative to dramatically 
change the purpose and content of the DFARS. The objective is to 
improve the efficiency and effectiveness of the acquisition process, 
while allowing the acquisition workforce the flexibility to innovate. 
The transformed DFARS will contain only requirements of law, DoD-wide 
policies, delegations of FAR authorities, deviations from FAR 
requirements, and policies/procedures that have a significant effect 
beyond the internal operating procedures of DoD or a significant cost 
or administrative impact on contractors or offerors. Additional 
information on the DFARS Transformation initiative is available at 
http://www.acq.osd.mil/dp/dars/transf.htm.
    This proposed rule is a result of the DFARS Transformation 
initiative. The proposed changes amend DFARS 212.504 to remove the 
Trade Agreements Act (19 U.S.C. 2512) and the Buy American Act (41 
U.S.C. 10) from the list of laws inapplicable to subcontracts for the 
acquisition of commercial items. Inclusion of these laws on the list is 
unnecessary, because the Government does not apply the restrictions of 
the Buy American Act or the Trade Agreements Act at the subcontract 
level. The prime contractor is responsible for providing an end product 
that meets the requirements of the Acts. The Trade Agreements Act 
imposes no requirements as to the origin of components. Although the 
Buy American Act requires that the cost of domestic components exceed 
50 percent of the cost of all components, the subcontracts for the 
components themselves need not comply with the Buy American Act. The 
domestic components need only to have been manufactured in the United 
States, without themselves satisfying a component test.
    In some cases, inclusion of the Buy American Act on the list of 
laws inapplicable to subcontracts for commercial items has been 
misinterpreted to mean that commercial components do not count in the 
calculation of whether domestic components exceed 50 percent of the 
value of the components of an end item. This is an erroneous 
interpretation, because the prime contractor must still comply with the 
Buy American Act when using commercial components. In addition, 
inclusion of the Buy American Act and the Trade Agreements Act on the 
list has been misinterpreted to mean that the prime contractor need not 
comply with the Acts for subcontracted end items. This is also 
erroneous because, in accordance with FAR 12.501, waiver of the Buy 
American Act or the Trade Agreements Act is not applicable if the prime 
contractor is reselling or distributing commercial items of another 
contractor without adding value.
    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., because the rule is 
a clarification of the Government's existing policy of not applying the 
Buy American Act or the Trade Agreements Act at the subcontract level. 
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 subpart in accordance with 5 U.S.C. 610. 
Such comments should be submitted separately and should cite DFARS Case 
2003-D018.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the rule does 
not impose any information collection requirements that require the 
approval of the Office of Management and Budget under 44 U.S.C. 3501, 
et seq.

List of Subjects in 48 CFR Part 212

    Government procurement.

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

    Therefore, DoD proposes to amend 48 CFR Part 212 as follows:
    1. The authority citation for 48 CFR Part 212 continues to read as 
follows:


[[Page 8152]]


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

PART 212--ACQUISITION OF COMMERCIAL ITEMS


212.504  [Amended]

    2. Section 212.504 is amended by removing paragraphs (a)(xxiii) and 
(a)(xxiv) and redesignating paragraph (a)(xxv) as paragraph (a)(xxiii).

[FR Doc. 04-3706 Filed 2-20-04; 8:45 am]
BILLING CODE 5001-08-P