[Federal Register Volume 72, Number 28 (Monday, February 12, 2007)]
[Rules and Regulations]
[Pages 6480-6484]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-2209]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 211 and 252

RIN 0750-AF31


Defense Federal Acquisition Regulation Supplement; Radio 
Frequency Identification (DFARS Case 2006-D002)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Final rule.

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SUMMARY: DoD has adopted as final, with changes, an interim rule 
amending the Defense Federal Acquisition Regulation Supplement (DFARS) 
to include additional commodities and locations that require package 
marking with passive radio frequency identification (RFID) tags. The 
rule requires contractors to affix passive RFID tags at the case and 
palletized unit load levels when shipping packaged petroleum, 
lubricants, oils, preservatives, chemicals, additives, construction and 
barrier materials, and medical materials to specified DoD locations.

EFFECTIVE DATE: February 12, 2007.

FOR FURTHER INFORMATION CONTACT: Ms. Robin Schulze, Defense Acquisition 
Regulations System, OUSD(AT&L)DPAP(DARS), IMD 3C132, 3062 Defense 
Pentagon, Washington, DC 20301-3062; telephone (703) 602-0326; 
facsimile (703) 602-0350. Please cite DFARS Case 2006-D002.

SUPPLEMENTARY INFORMATION:

A. Background

    DoD published an interim rule at 71 FR 29084 on May 19, 2006, to 
implement the second year of DoD's three-year roll-out plan for 
supplier implementation of RFID. The rule added requirements for 
contractors supplying materiel to DoD to affix passive RFID tags at the 
case and palletized unit load levels when shipping packaged petroleum, 
lubricants, oils, preservatives, chemicals, additives, construction and 
barrier materials, and medical materials to specified locations. Ten 
respondents submitted comments on the interim rule. A discussion of the 
comments is provided below.
    1. Comment: The DoD Suppliers' Passive RFID Information Guide 
states that the Air Mobility Command Terminals at Charleston, Dover, 
and Travis Air Force Bases will be added to the locations that require 
passive RFID tags in 2006. Instead of Dover Air Force Base, the rule 
adds the Naval Air Station in Norfolk.
    DoD Response: The locations identified in the DFARS rule are 
correct. DoD is updating the Suppliers' Passive RFID Information Guide 
to incorporate these changes.
    2. Comment: The Air Mobility Commands should be excluded until 
2007, when all ship-to locations will require RFID tags. For contracts 
with transshipment points, such as the Air Mobility Commands, vendors 
do not know whether or not the ship-to location requires RFID tags when 
they respond to the solicitation. Vendors are required to contact the 
Transportation Office for shipping instructions at time of shipment.
    DoD Response: DoD has amended the rule to require RFID tags for all 
high-

[[Page 6481]]

priority shipments (Transportation Priority 1). Therefore, vendors do 
not need to know the aerial shipping port. DoD also has amended the 
rule to exempt shipments to locations other than Defense Distribution 
Depots when the contract includes the clause at FAR 52.213-1, Fast 
Payment Procedure, because of limitations in the Wide Area WorkFlow-
Receipt and Acceptance electronic system.
    3. Comment: DoD should extend the ending date for use of Generation 
1 tags, from October 1, 2006, to January or May 2007, or should 
consider an attrition-based alternative to phase out the Generation 1 
tags. In the first year of DoD's supplier implementations of RFID, DoD 
encouraged vendors to buy large quantities of Generation 1 tags to help 
keep costs down. If the Generation 1 tags are not accepted after 
October 1, 2006, vendors who followed DoD's advice will have large 
inventories of the Generation 1 tags that are no longer acceptable.
    DoD Response: DoD has amended the rule to make the Generation 1 
tags acceptable under all new contracts until March 1, 2007. DoD's July 
30, 2004, policy statement on RFID (available at http://www.acq.osd.mil/log/rfid/rfid_policy.htm) provided that the Generation 
1 technology would no longer be accepted 2 years after the ratification 
of the UHF Generation 2 Standard. The UHF Generation 2 Standard was 
ratified in December 2004. DoD has extended the date an additional 5 
months to ensure that vendors are not left with large, obsolete 
inventories of the Generation 1 tags. In addition, DoD will continue to 
accept Class 0 and Class 1 Generation 1 and Class 1 Generation 2 tags 
for all shipments under contracts awarded prior to the effective date 
of the interim rule, May 19, 2006.
    4. Comment: The contract clause should reference the specific 
version or effective date of the applicable EPC Tag Data Standard 
instead of ``the most recent EPC Tag Data Standards document,'' because 
an open-ended requirement is inappropriate. Also, the clause should 
reference the specific versions or effective dates for the tag identity 
type instructions and receiving reports procedures, instead of the 
instructions and procedures at the cited Web sites.
    DoD Response: DoD has amended the clause to specify that the 
contractor must use the tag data standards in effect at the time of 
contract award. Incorporating the version number or effective date of 
the standard, instructions, and procedures in the DFARS clause would 
not be practicable, since these requirements may change.
    5. Comment: The rule should clarify whether RFID tags are required 
if a shipment contains both medical materials that require RFID tags 
and other products that do not require RFID tags.
    DoD Response: If an individual case contains an exempted item, or 
if an individual pallet contains an exempted case, RFID tags are not 
required. The rule has been amended to clarify that suppliers should 
limit mixing of exempted and non-exempted materials.
    6. Comment: DoD should retain the provision of the original clause 
that required the passive tag to be ``readable at the time of shipment 
in accordance with MIL-STD-129 (Section 4.9.1.1) readability 
performance requirements,'' instead of the current clause provision 
that only requires the tag to be ``readable,'' to ensure the 
requirement is appropriately bounded.
    DoD Response: Suppliers must apply a readable tag before shipping 
products to DoD. The clause has been amended to allow suppliers more 
flexibility in meeting this requirement.
    7. Comment: Contractors are required to ensure that each passive 
tag is ``readable,'' but the rule does not define ``readable.'' We 
understand ``readable'' to mean that the contents of the RFID tag can 
be read by an EPCglobal-compliant passive RFID reader.
    DoD Response: The respondent's understanding is correct. Suppliers 
must apply a readable tag before shipping products to DoD.
    8. Comment: DoD should establish a mechanism to address tags that 
are readable prior to shipment but non-readable at the point of 
receipt. A number of factors may affect tag readability during the 
shipping and receiving process (e.g., damage in transit, reader 
failure).
    DoD Response: Suppliers are required to affix a readable tag before 
shipment. DoD maintains a collaborative approach to working with its 
suppliers. If a trend of non-readable tags is noted for a specific 
supplier, DoD will work with that supplier to develop a mutually 
agreeable resolution.
    9. Comment: DoD should allow use of all ISO-approved RFID tag 
formats, instead of limiting the tag formats to either EPCglobal or the 
DoD tagging format utilizing the CAGE codes. Current product cases for 
medical materials utilize industry standard product bar codes. Medical 
material suppliers utilize two different consensus standards for bar 
code identification of their product cases, based on either Health 
Industry Business Council or GS1 (formerly the Uniform Code Council) 
formats. One format is predominately used to identify drug products 
(using the National Drug Code) and the other is used for medical 
devices or supplies. Each format has unique labeler codes assigned to 
each company. The data contained in the bar codes is currently used to 
identify the packages and their contents throughout the supply chain. 
DoD should allow the use of ISO-approved Issuing Agency Codes (IAC) 
instead of limiting supplier identification to the EPCglobal or CAGE 
code. The use of ISO-approved IACs is currently supported by DoD in its 
unique identification (UID) requirements. Allowing for this in the RFID 
would be consistent with other standards supported by DoD.
    DoD Response: The acceptable tag encoding schemes are those 
identified in the version of the EPCglobal Tag Data Standard in effect 
at the time of contract award. These tag data standards include the DoD 
tag identity which utilizes the CAGE code.
    10. Comment: DoD should allow RFID tag capacity of 128 Bit and 
higher. High capacity tags are now common, and are more likely to be 
used by suppliers. Many RFID tags have capacity of several kilobits.
    DoD Response: Under the DFARS rule, DoD will only accept tags 
encoded according to the tag data standards defined in the EPCglobal 
Tag Data Standards documents available at http://www.epcglobalinc.org/standards/ standards/. DoD will review the potential for accepting higher capacity 
tag data types as the standards for those tags are ratified.
    11. Comment: The RFID frequency specified in the DoD documents is 
915 MHz. Electromagnetic interference can cause medical device failures 
and malfunctions. 915 MHz is within the frequency band that medical 
devices are tested and have been shown to function during and after 
exposure. Medical devices are immune to 915 MHz signals at FCC 
regulated levels.
    DoD Response: DoD requires passive tags on the packaging of items, 
not on the item itself. The tags themselves do not emit any 
electromagnetic signal unless interrogated by an RF reader.
    12. Comment: DoD should work with the U.S. Food and Drug 
Administration (FDA) and compare its Medical Federal Supply Classes to 
the FDA combination product codes. DoD's RFID program calls for tagging 
of medical devices but not pharmaceuticals, biological, or in vitro 
diagnostics. Drug, biologics, and devices can be used in combination to 
potentially enhance the safety and/or effectiveness of either product 
used

[[Page 6482]]

alone. The appropriate classification of these combination products is 
sometimes unclear. FDA's Office of Combination Products addresses 
concerns with drug-device, drug-biologic, and device-biologic 
combination products. FDA is investigating the use of unique device 
identification to improve patient safety, by reducing medical errors, 
facilitating device recalls, and improving medical device adverse event 
reporting. No standard has been developed as of yet.
    DoD Response: DoD is working with the FDA to ensure that the RFID 
requirements are clearly defined and appropriate. In addition, DoD is 
sharing lessons learned from its work with uniquely identifying items 
with the FDA.
    13. Comment: Adding repairable and consumable items to the supplies 
that require passive RFID tags will add time and costs to low-dollar 
items. Small businesses are already burdened with the unique item 
identification (UID) requirements for certain items under $5,000. The 
RFID threshold is even lower. Is there any value added and cost trade-
off to keep track of low-dollar DoD inventory on a resistor or relay, 
etc?
    DoD Response: The benefits of applying RFID outweigh the costs. The 
dollar value of an item is not an accurate measure of its mission 
criticality (e.g., an inexpensive part that could keep a plane from 
flying its mission would be considered mission critical). Repair parts 
and components, including repairables and consumables, must be tagged 
for shipments to one of the specified locations. RFID technology is 
simply a faster, better way to acquire data for logistics and financial 
systems and will be a benefit for all items DoD manages.
    14. Comment: The rule should exempt limited volume suppliers from 
RFID requirements, because implementation and operation of an RFID 
system can be costly. Also, many suppliers do not currently have RFID 
capability and do not have requirements for RFID tagging for other 
customers. The cost to implement an initial system in one shipping 
location is approximately $100,000. The cost for additional shipping 
locations is approximately $65,000. Additional implementation costs 
would be incurred for automatically generated advance shipment notices, 
or significant operational costs would be incurred for manually 
inputted advance shipment notices. Measurable benefits of RFID do not 
exceed the costs for small businesses. With only one contract that 
requires RFID tags, we are using a contract labeler to make the tags 
instead of investing significant amounts of money ($12,000 or more) in 
cutting edge technology. We are hesitant to invest in the technology, 
because we have no idea of the volume of future requirements. We have 
to price each tag to recoup our costs.
    DoD Response: Outfitting an entire shipping location with RFID 
capability could be expensive. However, compliance with DoD's 
requirement is significantly less complex. The basic requirement is 
that materiel shipped to DoD must be tagged. A variety of low-cost 
solutions that enable suppliers to comply with DoD's requirement are 
available in the marketplace. A supplier can buy an RFID reader that 
reads and writes the tags for approximately $2,000 and can purchase 
pre-printed tags for as little as $0.70 per tag.
    15. Comment: DoD should streamline the contract clause by 
referencing the locations that require RFID tags in an attachment to 
the contract instead of listing the locations in the clause, to be 
consistent with DoD's DFARS transformation initiative and to eliminate 
the need for additional changes to the clause to add additional ship-to 
locations.
    DoD Response: In 2007, DoD plans to add the remaining locations 
that will require RFID tags and will consider a more generic clause 
that allows the contracting officer to specify the locations that 
require RFID tags. This change will be vetted through the rulemaking 
process.
    16. Comment: DoD should add language to encourage the use of a 
Single Process Initiative (SPI) where practicable.
    DoD Response: Suppliers can use an SPI, provided the single process 
meets contract requirements.
    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 has prepared a final regulatory flexibility analysis consistent 
with 5 U.S.C. 604. A copy of the analysis may be obtained from the 
point of contact specified herein. The analysis is summarized as 
follows:
    DoD has developed a three-year roll-out plan for supplier 
implementation of RFID. This rule finalizes the interim rule published 
in the Federal Register at 71 FR 29084 on May 19, 2006, to address the 
second year of the plan. The rule amends the clause at DFARS 252.211-
7006, Radio Frequency Identification. The rule contains requirements 
for DoD contractors supplying materiel to DoD to affix passive RFID 
tags at the case and palletized unit load levels when shipping packaged 
petroleum, lubricants, oils, preservatives, chemicals, additives, 
construction and barrier materials, and medical materials to specified 
DoD locations. Prior to this rule, DoD contractors were already 
required to print and affix military shipping labels to every package 
delivered to DoD. For packaged operational rations, clothing, 
individual equipment, tools, personal demand items, and weapon system 
repair parts shipped to the Defense Distribution Depot in Susquehanna, 
PA, or the Defense Distribution Depot in San Joaquin, CA, DoD 
contractors also were already required to affix passive RFID tags at 
the case and palletized unit load levels.
    To create an automated and sophisticated end-to-end supply chain, 
DoD is dependent upon initiating the technology at the point of origin, 
the DoD commercial suppliers. Without the assistance of the DoD 
supplier base to begin populating the DoD supply chain with passive 
RFID tags, a fully integrated, highly visible, automated end-to-end 
supply chain is untenable.
    As a result of comments received on the interim rule, the final 
rule extends the date for the acceptability of the EPC Class 0 and 
Class 1 Generation 1 tags until March 1, 2007, clarifies the shipments 
that require RFID tags, and exempts shipments to locations other than 
Defense Distribution Depots when the contract includes the clause at 
FAR 52.213-1, Fast Payment Procedures.
    The rule may affect businesses interested in receiving contracts 
for packaged petroleum, lubricants, oils, preservatives, chemical, 
additives, construction and barrier materials, and medical materials 
that will be shipped to specified DoD locations. Options to comply with 
the requirements of the rule can be as simple as replacing existing 
military shipping label printers with RFID-enabled printers. This will 
allow DoD contractors to print military shipping labels with embedded 
RFID tags. The regulatory flexibility analysis DoD prepared for the 
three-year roll-out plan for supplier implementation of RFID at http://www.acq.osd.mil/log/rfid/regflex.htm details other options and 
approximate costs to comply.

C. Paperwork Reduction Act

    The rule increases the information collection requirements approved 
under Office of Management and Budget (OMB) Control Number 0704-0434. 
The rule requires contractors to provide an electronic advance shipment 
notice in

[[Page 6483]]

accordance with the procedures at http://www.acq.osd.mil/log/rfid/advance_shipment_ntc.htm, to associate RFID tag data with the 
corresponding shipment. OMB has approved the increased information 
collection requirements for use through December 31, 2009.

List of Subjects in 48 CFR Parts 211 and 252

    Government procurement.

Michele P. Peterson,
Editor, Defense Acquisition Regulations System.

0
Accordingly, the interim rule amending 48 CFR Parts 211 and 252, which 
was published at 71 FR 29084 on May 19, 2006, is adopted as a final 
rule with the following changes:
0
1. The authority citation for 48 CFR Parts 211 and 252 continues to 
read as follows:

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

PART 211--DESCRIBING AGENCY NEEDS

0
2. Section 211.275-2 is revised to read as follows:


 211.275-2  Policy.

    (a) Except as provided in paragraph (b) of this subsection, radio 
frequency identification (RFID), in the form of a passive RFID tag, is 
required for individual cases and palletized unit loads that--
    (1) Contain items in any of the following classes of supply, as 
defined in DoD 4140.1-R, DoD Supply Chain Materiel Management 
Regulation, AP1.1.11:
    (i) Subclass of Class I--Packaged operational rations.
    (ii) Class II--Clothing, individual equipment, tentage, 
organizational tool kits, hand tools, and administrative and 
housekeeping supplies and equipment.
    (iii) Class IIIP--Packaged petroleum, lubricants, oils, 
preservatives, chemicals, and additives.
    (iv) Class IV--Construction and barrier materials.
    (v) Class VI--Personal demand items (non-military sales items).
    (vi) Subclass of Class VIII--Medical materials (excluding 
pharmaceuticals, biologicals, and reagents--suppliers should limit the 
mixing of excluded and non-excluded materials).
    (vii) Class IX--Repair parts and components including kits, 
assemblies and subassemblies, reparable and consumable items required 
for maintenance support of all equipment, excluding medical-peculiar 
repair parts; and
    (2) Will be shipped to one of the following locations:
    (i) Defense Distribution Depot, Susquehanna, PA: DoDAAC W25G1U or 
SW3124.
    (ii) Defense Distribution Depot, San Joaquin, CA: DoDAAC W62G2T or 
SW3224.
    (iii) Defense Distribution Depot, Albany, GA: DoDAAC SW3121.
    (iv) Defense Distribution Depot, Anniston, AL: DoDAAC W31G1Z or 
SW3120.
    (v) Defense Distribution Depot, Barstow, CA: DoDAAC SW3215.
    (vi) Defense Distribution Depot, Cherry Point, NC: DoDAAC SW3113.
    (vii) Defense Distribution Depot, Columbus, OH: DoDAAC SW0700.
    (viii) Defense Distribution Depot, Corpus Christi, TX: DoDAAC 
W45H08 or SW3222.
    (ix) Defense Distribution Depot, Hill, UT: DoDAAC SW3210.
    (x) Defense Distribution Depot, Jacksonville, FL: DoDAAC SW3122.
    (xi) Defense Distribution Depot, Oklahoma City, OK: DoDAAC SW3211.
    (xii) Defense Distribution Depot, Norfolk, VA: DoDAAC SW3117.
    (xiii) Defense Distribution Depot, Puget Sound, WA: DoDAAC SW3216.
    (xiv) Defense Distribution Depot, Red River, TX: DoDAAC W45G19 or 
SW3227.
    (xv) Defense Distribution Depot, Richmond, VA: DoDAAC SW0400.
    (xvi) Defense Distribution Depot, San Diego, CA: DoDAAC SW3218.
    (xvii) Defense Distribution Depot, Tobyhanna, PA: DoDAAC W25G1W or 
SW3114.
    (xviii) Defense Distribution Depot, Warner Robins, GA: DoDAAC 
SW3119.
    (xix) Air Mobility Command Terminal, Charleston Air Force Base, 
Charleston, SC: Air Terminal Identifier Code CHS.
    (xx) Air Mobility Command Terminal, Naval Air Station, Norfolk, VA: 
Air Terminal Identifier Code NGU.
    (xxi) Air Mobility Command Terminal, Travis Air Force Base, 
Fairfield, CA: Air Terminal Identifier Code SUU.
    (xxii) A location outside the contiguous United States when the 
shipment has been assigned Transportation Priority 1.
    (b) The following are excluded from the requirements of paragraph 
(a) of this subsection:
    (1) Shipments of bulk commodities.
    (2) Shipments to locations other than Defense Distribution Depots 
when the contract includes the clause at FAR 52.213-1, Fast Payment 
Procedures.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
3. Section 252.211-7006 is amended as follows:
0
a. By revising the clause date;
0
b. In paragraph (a) by revising the definition of ``Passive RFID tag'';
0
c. By revising paragraph (b)(1)(i)(F);
0
d. By adding paragraph (b)(1)(ii)(V); and
0
e. By revising paragraphs (b)(2) and (c) and paragraph (d) introductory 
text to read as follows:


 252.211-7006  Radio Frequency Identification.

* * * * *
RADIO FREQUENCY IDENTIFICATION (FEB 2007)
    (a) * * *
    Passive RFID tag means a tag that reflects energy from the reader/
interrogator or that receives and temporarily stores a small amount of 
energy from the reader/interrogator signal in order to generate the tag 
response.
    (1) Until February 28, 2007, the acceptable tags are--
    (i) EPC Class 0 passive RFID tags that meet the EPCglobal Class 0 
specification; and
    (ii) EPC Class 1 passive RFID tags that meet the EPCglobal Class 1 
specification. This includes both the Generation 1 and Generation 2 
Class 1 specifications.
    (2) Beginning March 1, 2007, the only acceptable tags are EPC Class 
1 passive RFID tags that meet the EPCglobal Class 1 Generation 2 
specification. Class 0 and Class 1 Generation 1 tags will no longer be 
accepted after February 28, 2007.
* * * * *
    (b)(1) * * *
    (i) * * *
    (F) Subclass of Class VIII--Medical materials (excluding 
pharmaceuticals, biologicals, and reagents--suppliers should limit the 
mixing of excluded and non-excluded materials).
* * * * *
    (ii) * * *
    (V) A location outside the contiguous United States when the 
shipment has been assigned Transportation Priority 1.
    (2) The following are excluded from the requirements of paragraph 
(b)(1) of this clause:
    (i) Shipments of bulk commodities.
    (ii) Shipments to locations other than Defense Distribution Depots 
when the contract includes the clause at FAR 52.213-1, Fast Payment 
Procedures.
    (c) The Contractor shall--
    (1) Ensure that the data encoded on each passive RFID tag are 
unique (i.e.,

[[Page 6484]]

the binary number is never repeated on any and all contracts) and 
conforms to the requirements in paragraph (d) of this clause;
    (2) Use passive tags that are readable; and
    (3) Ensure that the passive tag is affixed at the appropriate 
location on the specific level of packaging, in accordance with MIL-
STD-129 (Section 4.9.2) tag placement specifications.
    (d) Data syntax and standards. The Contractor shall encode an 
approved RFID tag using the instructions provided in the 
EPCTM Tag Data Standards in effect at the time of contract 
award. The EPCTM Tag Data Standards are available at http://www.epcglobalinc.org/standards/ standards/.
* * * * *
 [FR Doc. E7-2209 Filed 2-9-07; 8:45 am]
BILLING CODE 5001-08-P