[Federal Register Volume 84, Number 105 (Friday, May 31, 2019)]
[Rules and Regulations]
[Pages 25188-25190]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11306]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 204, 212, 225, and 252

[Docket DARS-2018-0060]
RIN 0750-AJ82


Defense Federal Acquisition Regulation Supplement: Foreign 
Commercial Satellite Services and Certain Items on the Commerce Control 
List (DFARS Case 2018-D020)

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

ACTION: Final rule.

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SUMMARY: DoD has adopted as final, without change, an interim rule 
amending the Defense Federal Acquisition Regulation Supplement (DFARS) 
to implement sections of the National Defense Authorization Act for 
Fiscal Years 2017 and 2018. One section imposes additional prohibitions 
with regard to acquisition of certain foreign commercial satellite 
services, such as cybersecurity risk and source of satellites and 
launch vehicles used to provide the foreign commercial satellite 
services, and expands the definition of ``covered foreign country'' to 
include Russia. Another section prohibits purchase of items originating 
in the People's Republic of China that meet the definition of goods and 
services controlled as munitions items when moved to the Commerce 
Control List of the Export Administration Regulations of the Department 
of Commerce.

DATES: Effective May 31, 2019.

FOR FURTHER INFORMATION CONTACT: Ms. Amy G. Williams, telephone 571-
372-6106.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD published an interim rule in the Federal Register at 83 FR 
66066 on December 21, 2018, to implement section 1603 of the National 
Defense Authorization Act (NDAA) for Fiscal Year (FY) 2018 (Pub. L. 
115-91) and section 1296 of the NDAA for FY 2017 (Pub. L. 114-328). 
Section 1603 amends 10 U.S.C. 2279 to impose additional prohibitions 
with regard to acquisition of certain foreign commercial satellite 
services, such as cybersecurity risk and source of satellites and 
launch vehicles used to provide the foreign commercial satellite 
services. Section 1603 also expands the definition of ``Covered foreign 
country'' to include Russia. Section 1296 prohibits purchase of items 
from a Communist Chinese military company. One respondent submitted a 
public comment in response to the interim rule.

II. Discussion and Analysis

    DoD reviewed the public comment received. It was favorable to 
implementation of the rule. No changes from the interim rule are made 
in the final rule.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold and for Commercial Items, Including Commercially Available 
Off-the-Shelf Items

A. The Interim Rule Amended the Applicability of Existing DFARS 
Solicitation Provisions and Contract Clauses and Added a New Clause as 
Follows

     To implement section 1603 of the NDAA for FY 2018, this 
rule amended the provision at DFARS 252.225-7049, Prohibition on 
Acquisition of Commercial Satellite Services from Certain Foreign 
Entities--Representation, and added a clause to

[[Page 25189]]

enforce compliance with the representations in the associated 
provisions. This provision and clause apply to acquisitions not greater 
than the simplified acquisition threshold (SAT) and acquisitions of 
commercial items.
     To implement section 1296 of the NDAA for FY 2017, this 
rule modified the clause at DFARS 252.225-7007, Prohibition on 
Acquisition of United States Munitions List Items from Communist 
Chinese Military Companies, to prohibit contractors or subcontractors 
from acquiring items listed on the 600 series of the CCL that are to be 
delivered under the contract from any Communist Chinese military 
company. The rule continues to prescribe the use of this clause for use 
in solicitations and contracts for items valued at or below the SAT. 
However, the clause now applies to the acquisition of commercial items, 
including Commercially Available Off-the-Shelf (COTS) items, if the 
items are 600 series items on the CCL, or USML items. Although most 600 
series items are not commercial items, and USML items are even less 
likely to be commercial items, it is possible that some of these 
covered items will be commercial items and must not be purchased from a 
Communist Chinese military company.

B. Determinations

     Section 1603 of the NDAA for FY 2018. A determination and 
finding was signed by the Director, Defense Procurement and Acquisition 
Policy, on June 23, 2014, that due to potential risk to national 
security it would not be in the best interest of the United States to 
exempt acquisitions not greater than the SAT and acquisitions of 
commercial items from the applicability of 10 U.S.C. 2279.
     Section 1296 of the NDAA for FY 2017. A determination 
under 41 U.S.C. 1905 was not required to prescribe DFARS 252.225-7012 
for use in solicitations and contracts valued at or below the SAT, 
because this is consistent with the current applicability of the clause 
DFARS 252.225-7007, which prohibits acquisitions of items on the USML 
from Communist Chinese Military companies. The Principal Director, DPC, 
determined that it is in the best interest of the Government to apply 
the requirements of section 1296 to contracts for the acquisition of 
commercial items, including COTS items, to prevent insertion of 
malicious items into U.S. weapons platforms, information technology 
systems, and other areas, presenting a threat to our warfighters and 
their ability to defend national security.

IV. 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.

V. Regulatory Flexibility Act

    A final regulatory flexibility analysis (FRFA) has been prepared 
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. 
The FRFA is summarized as follows:
    The reason for this rule is to implement section 1603 of the 
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2018 and 
section 1296 of the NDAA for FY 2017. Section 1603 of the NDAA for FY 
2018 amends 10 U.S.C. 2279, which prohibits acquisition of certain 
foreign commercial satellite services. Section 1296 of the NDAA for FY 
2017 amends section 1211 of the NDAA for FY 2006 to prohibit purchase 
from any Communist Chinese military company, through a contract or 
subcontract (at any tier), of goods and services controlled as 
munitions items on the 600 series of the Commerce Control List (CCL) of 
the Export Administration Regulations of the Department of Commerce.
    The objectives of the rule are as follows:
     Section 1603. To prohibit award of contracts for 
commercial satellite services to a foreign entity if entering into such 
contract would create an unacceptable cybersecurity risk. In addition, 
the definition of covered foreign country is expanded to include Russia 
(other covered foreign countries are China, North Korea, Iran, Sudan, 
and Syria). New restrictions are also added with regard to the 
satellites and launch vehicles to be used to provide the satellite 
services, but these restrictions do not apply to launches that occur 
prior to December 31, 2022.
     Section 1296. To prohibit purchase of items originating in 
the People's Republic of China that meet the definition of goods and 
services controlled as munitions items when moved to the 600 series of 
the CCL of the Export Administration Regulations of the Department of 
Commerce.
    There were no significant issues raised by the public comments in 
response to the initial regulatory flexibility analysis.
    DoD estimates that this rule applies to small entities as follows:
     Section 1603. This part of the rule applies to less than 
86 small entities. According to Federal Procurement Data System (FPDS) 
data for FY 2016, 86 small entities were awarded contracts or orders 
for services under Product Service Code D304 (ADP Telecommunications 
and Transmission Services), of which commercial satellite services are 
a subset. Although the focus of the Regulatory Flexibility Act is 
protection of domestic small business entities that are eligible for 
assistance from the Small Business Administration, there may be 
domestic small business entities in the United States that offer the 
satellite services of a foreign entity that would be restricted by this 
rule.
     Section 1296. This part of the rule applies to any small 
entities that intend to provide items on the 600 series of the Commerce 
Control List under a DoD contract or subcontract. The 600 series 
consists of items on the Commerce Control List that have an export 
control classification number of which the third character is a ``6''. 
These items were transitioned from the United States Munitions List 
(USML) to the 600 series, because they have less than a critical 
military or intelligence capability than the items that remain on the 
USML, but they are not currently in normal commercial use. Data on the 
number of entities that can provide such items, and whether they are 
small or other than small entities, is not available in FPDS, because 
these items are not readily identifiable in FPDS and are often acquired 
through subcontracts.
    Projected reporting or recordkeeping requirements of this rule are 
as follows:
     Section 1603. In addition to the current annual 
representations as to whether the offeror is, or is not, a foreign 
entity subject to the prohibitions of the statute; or is, or is not, 
offering commercial satellite services provided by such a foreign 
entity, this rule adds five more annual representations as to whether 
the offeror--
    [cir] Is, or is not offering commercial satellite services using 
satellites, launched on or after December 31, 2022, that will be 
designed or manufactured in a covered foreign country;

[[Page 25190]]

    [cir] Is, or is not offering commercial satellite services using 
satellites, launched on or after December 31, 2022, that will be 
designed or manufactured by an entity controlled in whole or in part 
by, or acting on behalf of, the government of a covered foreign 
country;
    [cir] Is, or is not offering commercial satellite services using 
satellites, launched outside the United States on or after December 31, 
2022, using a launch vehicle that is designed or manufactured in a 
covered foreign country;
    [cir] Is, or is not offering commercial satellite services using 
satellites, launched outside the United States on or after December 31, 
2022, using a launch vehicle that is provided by the government of a 
covered foreign country; and
    [cir] Is, or is not offering commercial satellite services using 
satellites, launched outside the United States on or after December 31, 
2022, using a launch vehicle that is provided by an entity controlled 
in whole or in part by, or acting on behalf of, the government of a 
covered foreign country.
    Further information is required if the offeror provides an 
affirmative response to any of the representations, but such 
affirmative response and further submission is expected to be extremely 
rare because of the statutory prohibition and the expected rarity of a 
waiver by the Under Secretary of Defense for Acquisition and 
Sustainment or for Policy. Furthermore, this prohibition is only 
applicable to launches on or after December 31, 2022.
    If the satellite service provider responded affirmatively to any of 
the new representations regarding launch vehicles, if such launches are 
covered in whole or in part by a contract or other agreement relating 
to launch services that, prior to June 10, 2018, was either fully paid 
by the satellite service provider or covered by a legally binding 
commitment of the satellite service provider to pay for such services, 
a de minimis amount of information is required with regard to such 
contract or agreement in order to establish an exception to the 
associated prohibitions.
     Section 1296. There are no projected reporting or 
recordkeeping requirements relating to implementation of section 1296. 
The only compliance requirements are to not purchase 600 series items 
that originate in the People's Republic of China.
    This rule will not have a significant economic impact on any small 
entities, unless they are offering commercial satellite services 
subject to the restrictions of this rule or providing 600 series items 
that originate in the Peoples Republic of China. DoD was not able to 
identify any alternatives that would reduce the burden on small 
entities and meet the objectives of the rule.

VI. Paperwork Reduction Act

    The interim rule affected the information collection requirements 
in the provision at DFARS 252.225-7049, currently approved through 
March 31, 2021, under OMB Control Number 0704-0525, entitled 
Prohibition on Acquisition of Commercial Satellite Services from 
Certain Foreign Entities, in accordance with the Paperwork Reduction 
Act (44 U.S.C. chapter 35). The impact, however, is negligible at this 
time, because the prohibition on use of certain foreign satellites and 
launch vehicles only applies to launches outside the United States on 
or after December 31, 2022. The information collection will be updated 
to reflect these changes when renewed.

List of Subjects in 48 CFR Parts 201, 212, 225, and 252

    Government procurement.

0
Accordingly, the interim rule amending 48 CFR parts 201, 212, 225, and 
252, which was published at 83 FR 66066 on December 21, 2018, is 
adopted as final without change.

Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.
[FR Doc. 2019-11306 Filed 5-30-19; 8:45 am]
BILLING CODE 5001-06-P