[Federal Register Volume 84, Number 183 (Friday, September 20, 2019)]
[Proposed Rules]
[Pages 49502-49505]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20046]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 12, 29, and 52
[FAR Case 2018-023; Docket No. FAR-2018-0023, Sequence No. 1]
RIN 9000-AN68
Federal Acquisition Regulation: Taxes--Foreign Contracts in
Afghanistan
AGENCY: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule.
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SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal
Acquisition Regulation (FAR) to add two new clauses that notify
contractors of requirements relating to Afghanistan taxes or similar
charges when contracts are being performed in Afghanistan.
DATES: Interested parties should submit written comments to the
Regulatory Secretariat Division at one of the addresses shown below on
or before November 19, 2019 to be considered in the formation of the
final rule.
ADDRESSES: Submit comments in response to FAR Case 2018-023 using any
of the following methods:
Regulations.gov: https://www.regulations.gov. Submit
comments via the Federal eRulemaking portal by entering ``FAR Case
2018-023'' under the heading ``Enter Keyword or ID'' and selecting
``Search''. Select the link ``Submit a Comment'' that corresponds with
``FAR Case 2018-023''. Follow the instructions provided at the ``Submit
a Comment'' screen. Please include your name, company name (if any),
and ``FAR Case 2018-023'' on your attached document.
Mail: General Services Administration, Regulatory
Secretariat (MVCB), ATTN: Lois Mandell, 1800 F Street NW, 2nd Floor,
Washington, DC 20405.
Instructions: Please submit comments only and cite ``FAR Case 2018-
023'' in all correspondence related to this case. All comments received
will be posted without change to https://www.regulations.gov, including
any
[[Page 49503]]
personal and/or business confidential information provided.
FOR FURTHER INFORMATION CONTACT: Mr. Kevin Funk, Procurement Analyst,
at 202-357-5805 or [email protected] for clarification of content. For
information pertaining to status or publication schedules, contact the
Regulatory Secretariat at 202-501-4755. Please cite ``FAR Case 2018-
023.''
SUPPLEMENTARY INFORMATION:
I. Background
Agreements established with the Islamic Republic of Afghanistan
exempt the United States Government and the North Atlantic Treaty
Organization (NATO) Forces, and their contractors from liability for
Afghanistan taxes and similar charges (e.g. customs, duties, fees).
The Security and Defense Cooperation Agreement (the Agreement)
between the Islamic Republic of Afghanistan and the United States of
America was signed on September 30, 2014, and entered into force on
January 1, 2015. The Agreement exempts the United States Government,
and its contractors and subcontractors (other than those that are
Afghan legal entities or residents), from paying any tax or similar
charge assessed on activities associated with contracts performed
within Afghanistan. The Agreement also exempts the acquisition,
importation, exportation, reexportation, transportation, and use of
supplies and services in Afghanistan, by or on behalf of the United
States Government, from any taxes, customs, duties, fees, or similar
charges in Afghanistan.
The Status of Forces Agreement (SOFA) between NATO and the Islamic
Republic of Afghanistan was issued on September 30, 2014, and entered
into force on January 1, 2015. The SOFA exempts NATO Forces and its
contractors and subcontractors (other than those that are Afghan legal
entities or residents) from paying any tax or similar charge assessed
within Afghanistan. The SOFA also exempts the acquisition, importation,
exportation, reexportation, transportation and use of supplies and
services in Afghanistan from all Afghan taxes, customs, duties, fees,
or similar charges.
DoD, GSA, and NASA are proposing to add two new FAR clauses to
notify contractors of the exemptions under the Agreement and the SOFA.
This FAR rule was opened at the request of DoD's Regulatory Reform
Task Force (RRTF). The RRTF was established under Executive Order
13777, titled ``Enforcing the Regulatory Reform Agenda,'' which
requires agencies to evaluate existing regulations on whether they
should be repealed, replaced, modified, or retained. The focus of the
DoD RRTF was to reduce regulatory burden on the public. The DoD RRTF
recommended this case be opened, since these policies apply to multiple
federal agencies identified in this rule as a ``covered agency.'' Some
covered agencies have developed agency-level clauses. Therefore, the
recommendation was made to elevate and include this policy in the FAR.
This measure eliminates the need for agency-unique supplemental
regulations and ensures unified guidance among the affected agencies,
consistent with the purpose of the FAR system.
II. Discussion and Analysis
This proposed rule would notify contractors about the tax
exemptions described in Section I of this preamble by adding the
following two clauses:
FAR 52.229-XX, Taxes-Foreign Contracts in Afghanistan, is
proposed for inclusion in all solicitations and contracts, including
solicitations and contracts using FAR part 12 procedures for the
acquisition of commercial items, with performance in Afghanistan,
unless the clause at 52.229-YY is used. The Agreement incorporated by
this clause exempts: (1) The United States Government, and its
contractors and subcontractors, (other than those that are Afghan legal
entities or residents), from paying any tax or similar charge assessed
on activities associated with contracts within Afghanistan; and (2) the
acquisition, importation, exportation, reexportation, transportation,
and use of supplies and services in Afghanistan, by or on behalf of the
United States Government, from any taxes, customs, duties, or similar
charges in Afghanistan. Contractors are required to exclude any Afghan
taxes, customs, duties, or similar charges from contract prices, other
than those charged to Afghan legal entities or residents.
FAR 52.229-YY, Taxes--Foreign Contracts in Afghanistan
(North Atlantic Treaty Organization Status of Forces Agreement) is
proposed for inclusion, instead of clause 52.229-XX, Taxes-Foreign
Contracts in Afghanistan, in all solicitations and contracts, including
solicitations and contracts using FAR part 12 procedures for the
acquisition of commercial items, with performance in Afghanistan
awarded on behalf of NATO. The SOFA incorporated by this clause
exempts: (1) NATO Forces and its contractors and subcontractors (other
than those that are Afghan legal entities or residents) from paying any
tax or similar charge assessed within Afghanistan; and (2) the
acquisition, importation, exportation, transportation, and use of
supplies and services in Afghanistan, by or on behalf of the U.S.
Government, from all Afghan taxes, customs, duties, or similar charges.
Since both agreements are currently effective for contractors
operating in Afghanistan, this rule is only notifying contractors about
the exemptions from liability for Afghanistan taxes, customs, duties,
fees or similar charges. The rule is not adding any new requirements
for contractors; however, it is providing unified guidance for
contractors performing in Afghanistan. DoD issued a final rule on
December 30, 2015, at 80 FR 81467 that added similar clauses for
applicable DoD contracts.
III. Applicability to Contracts at or Below the Simplified Acquisition
Threshold (SAT) and for Commercial Items, Including Commercially
Available Off-the-Shelf (COTS) Items
This rule creates two new clauses: (1) FAR 52.229-XX, Taxes--
Foreign Contracts in Afghanistan, and (2) FAR 52.229-YY, Taxes--Foreign
Contracts in Afghanistan (North Atlantic Treaty Organization Status of
Forces Agreement). The objective of the rule is to notify U.S.
Government contractors that contracts performed in Afghanistan are
exempt from payment liability for Afghan taxes, customs, duties, fees
or similar charges pursuant to the Agreement and SOFA.
DoD, GSA, and NASA are applying these two clauses to applicable
solicitations and contracts below the SAT and to the acquisition of
commercial items, including COTS items, as defined at FAR 2.101. This
rule clarifies the application of requirements relating to treatment of
Afghan taxes, customs, duties, fees or similar charges for contracts
performed in Afghanistan. Not applying these clauses to contracts below
the SAT and for the acquisition of commercial items, including COTS
items, would exclude contracts intended to be covered by this rule and
undermine the overarching purpose of the rule for providing guidance to
all applicable contractors. Consequently, DoD, GSA, and NASA are
applying the rule to applicable contracts below the SAT and for the
acquisition of applicable commercial items, including COTS items.
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
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(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 rule is a not
significant regulatory action and, therefore, is 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. Executive Order 13771
This rule is not subject to E.O. 13771, because this rule is not a
significant regulatory action under E.O. 12866.
VI. Regulatory Flexibility Act
DoD, GSA, and NASA do 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 this rule only clarifies contractor exemptions from Afghan
taxes, customs, duties, fees or similar charges on contracts performed
in Afghanistan. However, an Initial Regulatory Flexibility Analysis has
been performed, and is summarized as follows:
DoD, GSA, and NASA are proposing to amend the Federal
Acquisition Regulation (FAR) to add two new clauses that notify
contractors of requirements relating to Afghanistan taxes, customs,
duties, fees, or similar charges when contracts are being performed
in Afghanistan.
The Agreement between the Islamic Republic of Afghanistan and
the U.S. Government exempts the Government, and its contractors and
subcontractors (other than those that are Afghan legal entities or
residents), from paying any tax or similar charge assessed on
activities associated with contracts performed within Afghanistan.
The SOFA between NATO and the Islamic Republic of Afghanistan
exempts NATO Forces and its contractors and subcontractors (other
than those that are Afghan legal entities or residents) from paying
any tax or similar charge assessed within Afghanistan.
The objective is to notify contractors of both the Agreement and
SOFA to clarify how they apply to contracts performed in
Afghanistan.
According to data in the Federal Procurement Data System, the
Government awarded an annual average of 4,277 contracts for fiscal
years 2017 and 2018 with the principal place of performance in
Afghanistan to 444 unique contractors annually, of which 488
contracts were awarded annually to 110 unique small businesses (23
percent). There was an average of 488 contracts with the principal
place of performance in Afghanistan awarded annually to small
businesses in fiscal years 2017 and 2018. There was an average of
3,789 contracts with the principal place of performance in
Afghanistan awarded annually to large businesses. The number of
potential subcontractors to which the clause would flow down was
calculated by using a ratio of 1:3, subcontractors per prime
contract (4,277 annual prime contracts). This equates to 1,426
subcontractors, of which DoD, GSA, and NASA estimate that 75 percent
would be small entities (i.e., 1,069). The total number of prime
contractor and subcontractor small businesses impacted annually is
1,577.
The proposed rule does not include additional reporting, record
keeping requirements, or other compliance requirements. The proposed
rule does not duplicate, overlap, or conflict with any other Federal
rules.
There are no available alternatives to the proposed rule to
accomplish the desired objective of the statute. We do not expect
this proposed rule to have a significant economic impact on a
substantial number of small entities, because the rule is not
implementing any new requirements with which small entities must
comply. Also, small entities will benefit from having one
governmentwide clause that identifies the current requirements
relating to Afghanistan taxes or similar charges when contracts are
being performed in Afghanistan.
The Regulatory Secretariat has submitted a copy of the IRFA to the
Chief Counsel for Advocacy of the Small Business Administration. A copy
of the IRFA may be obtained from the Regulatory Secretariat. DoD, GSA,
and NASA invite comments from small business concerns and other
interested parties on the expected impact of this rule on small
entities.
DoD, GSA, and NASA will also consider comments from small entities
concerning the existing regulations in subparts affected by the rule in
accordance with 5 U.S.C. 610. Interested parties must submit such
comments separately and should cite 5 U.S.C 610 (FAR Case 2018-023), in
correspondence.
VII. Paperwork Reduction Act
This rule does not contain any information collection requirements
that require the approval of the Office of Management and Budget under
the Paperwork Reduction Act (44 U.S.C. chapter 35).
List of Subjects in 48 CFR parts 12, 29, and 52
Government procurement.
William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of
Acquisition Policy, Office of Government-wide Policy.
Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 12, 29,
and 52 to read as follows:
0
1. The authority citation for 48 CFR parts 12, 29, 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 12--ACQUISITION OF COMMERCIAL ITEMS
0
2. Amend section 12.301 by redesignating paragraph (d)(12) as paragraph
(d)(14), and adding new paragraphs (d)(12) and (d)(13) to read as
follows:
12.301 Solicitation provisions and contract clauses for the
acquisition of commercial items.
* * * * *
(d) * * *
(12) Insert the clause at 52.229-XX, Taxes--Foreign Contracts in
Afghanistan, as prescribed in 29.402-3(a).
(13) Insert the clause at 52.229-YY, Taxes--Foreign Contracts in
Afghanistan (North Atlantic Treaty Organization Status of Forces
Agreement), as prescribed in 29.402-3(b).
* * * * *
29.001 [Added]
0
3. Add section 29.001 to read as follows:
29.001 Definitions.
As used in this part--
``North Atlantic Treaty Organization (NATO) Forces'' means the
Members of the Force, Members of the Civilian Component, NATO Personnel
and all property, equipment, and materiel of NATO, NATO Member States,
and Operational Partners present in the territory of Afghanistan.
``U.S. Forces'' means the entity comprising the members of the
force and of the civilian component, and all property, equipment, and
materiel of the United States Armed Forces present in the territory of
Afghanistan.
29.402-3 [Added]
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4. Add section 29.402-3 to read as follows:
29.402-3 Taxes--Foreign Contracts in Afghanistan.
(a) Use the clause at 52.229-XX, Taxes--Foreign Contracts in
Afghanistan, in solicitations and contracts with performance in
Afghanistan awarded by or on behalf of U.S. Forces, unless the clause
at 52.229-YY is used.
(b) Use the clause at 52.229-YY, Taxes--Foreign Contracts in
Afghanistan (North Atlantic Treaty Organization Status of Forces
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Agreement), instead of the clause at 52.229-XX, Taxes--Foreign
Contracts in Afghanistan, in solicitations and contracts with
performance in Afghanistan awarded on behalf of or in support of the
North Atlantic Treaty Organization (NATO), which are governed by the
NATO Status of Forces Agreement (SOFA).
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
52.229-XX and 52.229-YY [Added]
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5. Add sections 52.229-XX and 52.229-YY to read as follows:
52.229-XX Taxes--Foreign Contracts in Afghanistan.
As prescribed in 29.402-3(a), use the following clause:
Taxes--Foreign Contracts in Afghanistan (Date)
(a) Definition. ``U.S. Forces,'' as used in this clause, means
the entity comprising the members of the force and of the civilian
component, and all property, equipment, and materiel of the United
States Armed Forces present in the territory of Afghanistan.
(b) Tax exemption. This acquisition is covered by the Security
and Defense Cooperation Agreement (the Agreement) between the
Islamic Republic of Afghanistan (Afghanistan) and the United States
of America signed on September 30, 2014, and entered into force on
January 1, 2015.
(1) The Agreement exempts the United States Government, and its
contractors and subcontractors (other than those that are Afghan
legal entities or residents), from paying any tax or similar charge
assessed on activities associated with this contract within
Afghanistan if the activities are on behalf of or in support of U.S.
Forces. The Agreement also exempts the acquisition, importation,
exportation, reexportation, transportation, and use of supplies and
services in Afghanistan, on behalf of or in support of U.S. Forces,
from any taxes, customs, duties, fees, or similar charges imposed by
the Government of Afghanistan.
(2) The Contractor shall exclude any Afghan taxes, customs,
duties, fees, or similar charges from the contract price, other than
those charged to Afghan legal entities or residents.
(3) The Agreement does not exempt Afghan employees of Government
contractors and subcontractors from Afghan tax laws. To the extent
required by Afghan law, the Contractor shall withhold tax from the
wages of these employees and remit those payments to the appropriate
Afghan taxing authority. These withholdings are an individual's
liability, not a tax against the Contractor.
(c) Subcontracts. The Contractor shall include the substance of
this clause, including this paragraph (c), in all subcontracts,
including subcontracts for commercial items.
(End of clause)
52.229-YY Taxes--Foreign Contracts in Afghanistan (North Atlantic
Treaty Organization Status of Forces Agreement).
As prescribed in 29.402-3(b), use the following clause:
TAXES--FOREIGN CONTRACTS IN AFGHANISTAN (NORTH ATLANTIC TREATY
ORGANIZATION STATUS OF FORCES AGREEMENT) (DATE)
(a) Definition. ``North Atlantic Treaty Organization (NATO)
Forces,'' as used in this clause, means the Members of the Force,
Members of the Civilian Component, NATO Personnel and all property,
equipment, and materiel of NATO, NATO Member States, and Operational
Partners present in the territory of Afghanistan.
(b) Tax exemption. This acquisition is covered by the Status of
Forces Agreement (SOFA) entered into between NATO and the Islamic
Republic of Afghanistan (Afghanistan) issued on September 30, 2014,
and entered into force on January 1, 2015.
(1) The SOFA exempts NATO Forces and its contractors and
subcontractors (other than those that are Afghan legal entities or
residents) from paying any tax or similar charge assessed within
Afghanistan if the activities are on behalf of or in support of NATO
Forces. The SOFA also exempts the acquisition, importation,
exportation, reexportation, transportation and use of supplies and
services in Afghanistan on behalf of or in support of NATO Forces
from all Afghan taxes, customs, duties, fees, or similar charges.
(2) The Contractor shall exclude any Afghan taxes, customs,
duties, fees or similar charges from the contract price, other than
those charged to Afghan legal entities or residents.
(3) Afghan citizens employed by NATO contractors and
subcontractors are subject to Afghan tax laws. To the extent
required by Afghan law, the Contractor shall withhold tax from the
wages of these employees and remit those withholdings to the
appropriate Afghan taxing authority. These withholdings are an
individual's liability, not a tax against the Contractor.
(c) Subcontracts. The Contractor shall include the substance of
this clause, including this paragraph (c), in all subcontracts
including subcontracts for commercial items.
(End of clause)
[FR Doc. 2019-20046 Filed 9-19-19; 8:45 am]
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