BNUMBER: B-278111; B-278111.2
DATE: December 30, 1997
TITLE: CSK International, Inc., B-278111; B-278111.2, December 30,
1997
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Matter of:CSK International, Inc.
File: B-278111; B-278111.2
Date:December 30, 1997
James P. Rome, Esq., for the protester.
John E. Rodgers for Barco Industries, Inc., an intervenor.
Marie Adamson Collins, Esq., General Services Administration, for the
agency.
Christina Sklarew, Esq., and Paul Lieberman, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Under procurement subject to the Trade Agreements Act (TAA), agency
properly rejected a bid offering a tool that consists of a tool head
produced in a nondesignated country and a tool handle produced in the
United States; assembly of the tool head and handle does not represent
the type of "substantial transformation" of these elements required to
qualify as a "U.S. made end product" for TAA purposes.
DECISION
CSK International, Inc. protests the rejection of its bid by the
General Services Administration (GSA) under invitation for bids (IFB)
No. 7FXI-J6-97-5102-S for a quantity of pulaski tools and handles.
We deny the protest.
The IFB, issued on May 30, 1997, contemplated the award of a
requirements contract for a pulaski tool, which is a combination axe
and mattock of forged steel, fastened to a hickory wood handle, that
is used primarily for clearing brush, small logs, and other surface
debris, and for digging in the soil to construct fire lines in
wildfires and controlled burn operations. In addition to the axe head
and handle, the IFB required an equal number of replacement handles in
anticipation of their eventual need, since the handle typically cracks
or breaks before the axe head is worn out. The IFB identified the axe
head and handle by national stock numbers and included specifications
and drawings, supplied by the Forest Service, describing the exact
item required.
The IFB indicated that it was subject to the Trade Agreements Act of
1979 (TAA), 19 U.S.C. sec. 2501-2582 (1994), pursuant to which the
President waived the provisions of the Buy American Act. The TAA is
implemented by Federal Acquisition Regulation (FAR) Subpart 25.4 which
requires offerors/contractors to deliver under the contract only
eligible products,[1] unless a waiver (based on national interest) has
been granted to permit delivery of ineligible country products. FAR
25.402(c). The IFB incorporated by reference a General Services
Administration Acquisition Regulation clause, 48 C.F.R. sec. 552.225-9,
implementing provisions of the TAA, which provides that, under certain
circumstances, an end product made of components from nondesignated
countries,[2] but assembled in the United States, may be considered a
"U.S. made end product," as follows:
"U.S. made end product," as used in this clause, means an article
which (1) is wholly the growth, product, or manufacture of the
United States, or (2) in the case of an article which consists in
whole or in part of materials from another country or
instrumentality, has been substantially transformed in the United
States into a new and different article of commerce with a name,
character, or use distinct from that of the article or articles
from which it was so transformed.
The agency received five timely bids, including CSK's. When the bids
were opened, it was apparent that CSK had submitted the low price.
The contracting officer ordered pre-award surveys on CSK in
anticipation of awarding the contract to the firm. During an
inspection of CSK's facility, it was discovered that the axe head that
the firm had offered and intended to furnish was manufactured in
China, a nondesignated country. The contracting officer determined on
this basis that CSK's offer failed to comply with the requirements of
the TAA and therefore rejected the bid.
CSK protests that its bid was improperly rejected because its pulaski
tool qualifies as a U.S.-made end product.[3]
Under the applicable GSA clause, the pulaski tool will only be
considered a U.S.-made end product if the component parts have been
"substantially transformed in the United States into a new and
different article of commerce with a name, character, or use distinct
from that of the article or articles from which it was so
transformed." 48 C.F.R. sec. 552.225-9.
CSK argues that in order to determine whether "substantial
transformation" has occurred, one must compare the character of a
component prior to its incorporation into an end product and its
character after such incorporation. Applying that methodology here,
CSK reasons that, because "the head component of the end product, the
Pulaski Tool, has no value or use standing alone," but becomes useful
when it is combined with other components, i.e., the handle, the
assembly of the axe head and handle represents a "substantial
transformation." On the other hand, CSK also argues that "the
evaluation should be of the entire end product, not whether one
component is intrinsically or physically changed."
In our view, these arguments fail to establish that fastening the
pulaski tool head together with its wooden handle substantially
transformed these materials into a new and different article of
commerce with a name, character, or use distinct from that of the
article or articles (i.e., the tool head and handle) from which it was
so transformed. None of these three indicia of transformation is
present here. The pulaski tool head and handle retain their original
names after they are fastened together. They retain their character:
the main feature of the axe head is its ability to cut materials such
as brush and small logs and to dig in soil, while the handle serves to
aid in manipulating the object to which it is attached. The
components' use is predetermined at the time they are manufactured,
and does not change as a result of the assembly process. We think it
is clear that the "substantial transformation" standard has not been
met by the assembly process that occurred in this case.
This conclusion is consonant with that of the United States Court of
Federal Claims, which, when faced with strikingly similar facts,
decided that cookware could not be characterized as a "U.S. made end
product" (under the same GSA clause as is at issue in this case) based
on the contractor attaching handles to the pans and covers after they
were received in the U.S. from China. Ran-Paige Co., Inc. v. United
States, 35 Fed. Cl. 117, 120-22 (1996).[4] Our conclusion is further
supported by the fact that the procurement included replacement
handles, which would be inserted by the end-user at a later time; this
demonstrates that the components retained their single, predetermined
purpose, and that the assembly process was minimal. Accordingly,
CSK's bid was properly rejected because CSK was offering to provide an
article which did not qualify as a U.S.-made end product.
The protest is denied.
Comptroller General
of the United States
1. Eligible products include U.S.-made end products, designated
country end products, Caribbean Basin country end products, Canadian
end products or Mexican end products. See FAR 25.401.
2. Pursuant to the definition of "nondesignated country end products"
in 48 C.F.R. sec. 552.225-9(a), "nondesignated countries" are those other
than the United States, designated countries, Caribbean Basin
Countries, Canada and Mexico.
3. CSK argues that its pulaski tool qualifies either as a U.S.-made
end product under the GSA clause or as a domestic end product under
FAR 25.101. However, the cited FAR provision implements the Buy
American Act (BAA) and is not applicable to this procurement. While
CSK "agrees that the core issue is whether its actions with respect to
the head imported from China constitute substantial transformation,"
quoting the standard for U.S.-made end products established in the GSA
clause, it repeatedly refers to the issue as "whether the end product
qualifies as a domestic item." The standard for "domestic items,"
which involves the percentage of components of domestic origin,
pertains to a BAA evaluation, which is inapplicable here.
4. See also Becton Dickinson AcuteCare, B-238942, July 20, 1990, 90-2
CPD para. 55 at
4-6, in which our Office determined that the requirement for
substantial transformation was not met by the folding of articles,
manufactured elsewhere, into an innerwrap and insertion into envelopes
which were then sealed within a TAA-qualified country.