[Federal Register Volume 80, Number 127 (Thursday, July 2, 2015)]
[Rules and Regulations]
[Pages 38306-38307]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-16208]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1 and 52

[FAC 2005-83; FAR Case 2015-006; Item II; Docket No. 2015-0006, 
Sequence No. 1]
RIN 9000-AM85


Federal Acquisition Regulation; Prohibition on Contracting With 
Inverted Domestic Corporations--Representation and Notification

AGENCIES:  Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: DoD, GSA, and NASA are issuing a final rule amending the 
Federal Acquisition Regulation (FAR) to require additional actions by 
contractors to assist contracting officers in ensuring compliance with 
the Governmentwide statutory prohibition on the use of appropriated (or 
otherwise made available) funds for contracts with any foreign 
incorporated entity that is an inverted domestic corporation or to any 
subsidiary of such entity.

DATES: Effective: November 1, 2015.

FOR FURTHER INFORMATION CONTACT: Mr. Michael O. Jackson, Procurement 
Analyst, at 202-208-4949, for clarification of content. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat at 202-501-4755. Please cite FAC 2005-83, FAR Case 2015-
006.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD, GSA, and NASA published a proposed rule in the Federal 
Register at 79 FR 74558 on December 15, 2014, to revise the provisions 
of the FAR that address the continuing Governmentwide statutory 
prohibition (in effect since fiscal year 2008) on the use of 
appropriated (or otherwise made available) funds for contracts with any 
foreign incorporated entity that is an inverted domestic corporation 
(under section 835 of the Homeland Security Act of 2002, codified at 6 
U.S.C. 395) or any subsidiary of such entity. The rule modifies the 
existing representation and adds a requirement to notify the 
contracting officer if the contractor becomes an inverted domestic 
corporation, or a subsidiary of an inverted domestic corporation, 
during performance of the contract.
    One respondent submitted a comment in response to the proposed 
rule.

II. Discussion and Analysis

    The Civilian Agency Acquisition Council and the Defense Acquisition 
Regulations Council (the Councils) reviewed the comments in the 
development of the final rule. A discussion of the comments is provided 
as follows:

A. Summary of Significant Changes

    There is no change from the proposed rule in response to the public 
comment received.

B. Analysis of Public Comments

    Comment: The respondent stated that a particular contract is in 
violation of Federal law, because the contractor merged with a 
corporation outside the United States.
    Response: The Councils are not enforcement agencies, and are not in 
a position to assess whether the merger of two companies resulted in an 
entity that meets all the criteria in the applicable definition of 
``inverted domestic corporation.'' This comment does not address the 
substance of the proposed rule, which proposed to require additional 
actions by contractors to assist contracting officers in ensuring 
compliance with the Governmentwide statutory prohibition on the use of 
appropriated (or otherwise made available) funds for contracts with any 
foreign incorporated entity that is an inverted domestic corporation 
(under 6 U.S.C. 395) or to any subsidiary of such entity. Contractors 
with the modified clause in their contracts will be required to make a 
positive representation with the offer as to their status as an 
inverted domestic corporation, and notify the contracting officer if 
they become an inverted domestic corporation during contract 
performance, as defined in the statute. The contracting activity will 
take appropriate action if the contractor notifies the Government in 
accordance with the clause that it has become an inverted domestic 
corporation, or if investigation by the appropriate Government agency 
determines that the contractor became an inverted domestic corporation 
during contract performance and failed to notify the Government of its 
change in status.

III. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993. This rule is not a major rule 
under 5 U.S.C. 804.

IV. Regulatory Flexibility Act

    DoD, GSA, and NASA certify that this rule will not 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 this rule will only impact an offeror that is an inverted 
domestic corporation or a subsidiary of an inverted domestic 
corporation and wants to do business with the Government. It is 
expected that the number of small entities impacted by this rule will 
be minimal. Small business concerns are unlikely to have been 
incorporated in the United States (or, if a partnership, established in 
the United States) and then subsequently incorporated in a foreign 
country; the major participants in these transactions are reportedly 
large multinational corporations. For the definition of ``small 
business'', the Regulatory Flexibility Act refers to the Small Business 
Act, which in turn allows the U.S. Small Business Administration (SBA) 
Administrator to specify detailed definitions or standards (5 U.S.C. 
601(3) and 15 U.S.C. 632(a)). The SBA regulations at 13 CFR 121.105 
discuss who is a small business: ``(a)(1) Except for small agricultural 
cooperatives, a business concern eligible for assistance from SBA as a 
small business is a business entity organized for profit, with a place 
of business located in the United States, and which operates primarily 
within the United States or which makes a significant contribution to 
the U.S. economy through payment of taxes or use of American products, 
materials or labor''.

V. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. Chapter 35) applies. The 
rule contains information collection requirements. OMB has cleared this 
information collection requirement under OMB Control Number 9000-0190,

[[Page 38307]]

titled: Prohibition on Contracting with Inverted Domestic 
Corporations--Representation and Notification.

List of Subjects in 48 CFR Parts 1 and 52

    Government procurement.

    Dated: June 18, 2015.
William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of 
Acquisition Policy, Office of Government-wide Policy.

    Therefore, DoD, GSA, and NASA amend 48 CFR parts 1 and 52 as set 
forth below:

0
1. The authority citation for 48 CFR parts 1 and 52 continues to read 
as follows:

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.

PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM


1.106   [Amended]

0
2. Amend section 1.106 in the table following the introductory text, by 
adding in numerical sequence, ``52.209-10'' and its corresponding OMB 
Control Number ``9000-0190''.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
3. Amend section 52.209-2 by revising the date of provision and 
paragraph (c) to read as follows:


52.209-2   Prohibition on Contracting With Inverted Domestic 
Corporations--Representation.

* * * * *

Prohibition on Contracting with Inverted Domestic Corporations--
Representation (Nov 2015)

* * * * *
    (c) Representation. The Offeror represents that--
    (1) It [squ] is, [squ] is not an inverted domestic corporation; 
and
    (2) It [squ] is, [squ] is not a subsidiary of an inverted 
domestic corporation.


(End of provision)


0
4. Amend section 52.209-10 by revising the date of the clause; and 
adding paragraph (d) to read as follows:


52.209-10   Prohibition on Contracting with Inverted Domestic 
Corporations.

* * * * *

Prohibition on Contracting With Inverted Domestic Corporations (Nov 
2015)

* * * * *
    (d) In the event the Contractor becomes either an inverted 
domestic corporation, or a subsidiary of an inverted domestic 
corporation during contract performance, the Contractor shall give 
written notice to the Contracting Officer within five business days 
from the date of the inversion event.


(End of clause)


0
5. Amend section 52.212-3 by revising the date of the provision and 
paragraph (n)(2) to read as follows:


52.212-3   Offeror Representations and Certifications--Commercial 
Items.

* * * * *

Offeror Representations and Certifications--Commercial Items (Nov 2015)

* * * * *
    (n) * * *
    (2) Representation. The Offeror represents that--
    (i) It [squ] is, [squ] is not an inverted domestic corporation; 
and
    (ii) It [squ] is, [squ] is not a subsidiary of an inverted 
domestic corporation.
* * * * *

0
6. Amend section 52.212-5 by revising the date of the clause and 
paragraph (a)(1) to read as follows:


52.212-5   Contract Terms and Conditions Required to Implement Statutes 
or Executive Orders--Commercial Items.

* * * * *

Contract Terms and Conditions Required to Implement Statutes or 
Executive Orders--Commercial Items (Nov 2015)

* * * * *
    (a) * * *
    (1) 52.209-10, Prohibition on Contracting with Inverted Domestic 
Corporations (Nov 2015).
* * * * *
[FR Doc. 2015-16208 Filed 7-1-15; 8:45 am]
 BILLING CODE 6820-EP-P