Defense Federal Acquisition Regulation Supplement: Limitation on the Acquisition of Certain Goods Other Than United States Goods (DFARS Case 2021-D022) (2024)

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

Final rule.

DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement two sections of the National Defense Authorization Act for Fiscal Year 2021, one section of the National Defense Authorization Act for Fiscal Year 2022, one section of the National Defense Authorization Act for Fiscal Year 2023, and one section of the Consolidated Appropriations Act, 2023. These statutes remove limitations and restrictions on certain components that are no longer required and add new limitations on other components, subject to exceptions.

Effective May 30, 2024.

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Kimberly Bass, telephone 703-717-3446.

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I. Background

DoD published a proposed rule in the Federal Register at 88 FR 80472 on November 17, 2023, to implement sections 845 and 1603 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2021 (Pub. L. 116-283); section 816 of the NDAA for FY 2022 (Pub. L. 117-81); section 853 of the NDAA for FY 2023 (Pub. L. 117-263), and section 8016 of the Consolidated Appropriations Act of 2023 (Pub. L. 117-328). These sections amend 10 U.S.C. 2534, now 10 U.S.C. 4864, to require acquisition of certain items and components from the national technology and industrial base. The national technology and industrial base is defined at 10 U.S.C. 4801 as the United States, Australia, Canada, New Zealand, or the United Kingdom.

One respondent submitted public comments in response to the proposed rule. There are no changes made to the final rule.

II. Discussion and Analysis

DoD reviewed the public comments in the development of the final rule. A discussion of the comments is provided, as follows:

Comment: A respondent recommended the words “weighing more than 400 pounds” be removed. The respondent provided that exempting satellites weighing less than 400 pounds cedes a large part of the U.S. market for star trackers to foreign suppliers that have been funded largely by the European Space Agency, and that the foreign suppliers currently dominate the high quality small star tracker market. The respondent stated that the exemption of satellites weighing less than 400 pounds also discourages members of the national technology and industrial base from investing and participating in possibly the most attractive segment of the U.S. star tracker market and the market as a whole. Lastly, the respondent recommended that DoD develop and include a DFARS clause that requires procurement of star trackers from domestic sources for satellites, including those weighing less than 400 pounds, and that this requirement should be included in U.S. Government agency procurements for information and services provided by commercial satellite systems.

Response: Section 1603 amends 10 U.S.C. 2534(a), now 10 U.S.C. 4864, and adds star trackers to the list of items that must be procured from manufacturers in the national technology and industrial base. The statute applies to a “star tracker used in a satellite weighing more than 400 pounds whose principal purpose is to support the national security, defense, or intelligence needs of the United States Government”. The rule implements this statutory requirement accordingly.

Moreover, the DFARS clause at 252.225-7064, Restriction on Acquisition of Satellite Star Trackers, is prescribed at DFARS 225.7004-7(d) for use in solicitations and contracts requiring the acquisition of satellite star trackers, including solicitations and contracts that exceed the simplified acquisition threshold (SAT) and that use FAR part 12 procedures for the acquisition of commercial products, including COTS items, and for the acquisition of commercial services. Lastly, as provided in section III of this preamble, DoD intends to apply the clause to contracts for the acquisition of commercial products including COTS items and for the acquisition of commercial services.

III. Applicability to Contracts at or Below the Simplified Acquisition Threshold (SAT), for Commercial Products (Including Commercially Available Off-the-Shelf (COTS) Items), and for Commercial Services

The clause at DFARS 252.225-7063, Restriction on Acquisition of Components of T-AO 205 Class Vessels, is prescribed at DFARS 225.7004-7(c) for use in solicitations and contracts requiring the acquisition of components of T-AO 205 and T-ARC class vessels, including solicitations and contracts that exceed the SAT and that use FAR part 12 procedures for the acquisition of commercial products, including COTS items, and for the acquisition of commercial services. The clause at DFARS 252.225-7064, Restriction on Acquisition of Satellite Star Trackers, is prescribed at DFARS 225.7004-7(d) for use in solicitations and contracts requiring the acquisition of satellite star trackers, including solicitations and contracts that exceed the SAT and that use FAR part 12 procedures for the acquisition of commercial products, including COTS items, and for the acquisition of commercial services.

Consistent with the analysis that DoD provided in the proposed rule with regard to the application of the requirements of sections 845 and 1603 of the NDAA for FY 2021 (Pub. L. 116-283) and section 852 of the NDAA for FY 2023 (Pub. L. 117-263), which amend 10 U.S.C. 4864, DoD has made the determination to apply the statute, as implemented in the clauses at DFARS 252.225-7063 and 252.225-7064 to contracts and subcontracts for the acquisition of commercial products including COTS items, and to the acquisition of commercial services, as defined at Federal Acquisition Regulation 2.101.

The requirements of 10 U.S.C. 4864 do not apply to a contract or subcontract for an amount at or below the SAT. Therefore, the clauses will not apply to acquisitions at or below the SAT.

IV. Expected Impact of the Rule

The final rule adds procurement limitations on the acquisition of star trackers for certain national security satellites and certain components for T-AO 205 and T-ARC class vessels, requiring they are manufactured in the national technology and industrial base: the United States, Australia, Canada, New Zealand or the United Kingdom in accordance with 10 U.S.C. 4864.

The rule is not expected to have a significant impact on the Government, offerors, or contractors. The satellite star trackers and components for the T-AO 205 and T-ARC class of vessels are the types of items that are readily available in the marketplace, so limitation to national technology and industrial base sources is not viewed as having a significant impact on the availability of sources. Further, the rule provides waiver procedures to the limitation.

The domestic source restriction does not apply to—

(1) Contracts or subcontracts that do not exceed the simplified acquisition threshold;

(2) The acquisition of spare or repair parts needed to support components for naval vessels manufactured outside the United States; and

(3) Large medium-speed diesel engines for icebreakers or special mission ships.

V. 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, as amended.

VI. Congressional Review Act

As required by the Congressional Review Act (5 U.S.C. 801-808) before an Start Printed Page 46813 interim or final rule takes effect, DoD will submit a copy of the interim or final rule with the form, Submission of Federal Rules under the Congressional Review Act, to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States. A major rule under the Congressional Review Act cannot take effect until 60 days after it is published in the Federal Register . The Office of Information and Regulatory Affairs has determined that this rule is not a major rule as defined by 5 U.S.C. 804.

VII. Regulatory Flexibility Act

A final regulatory flexibility analysis has been prepared consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. and is summarized as follows:

DoD is amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement statutes that remove limitations and restrictions no longer required, and that require the procurement of star trackers for certain national security satellites, as well as certain components for T-AO 205 and T-ARC class vessels, from the national technology and industrial base: the United States, Australia, Canada, New Zealand, or the United Kingdom.

The objective of the rule is to implement sections 845 and 1603 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2021 (Pub. L. 116-283); section 816 of the NDAA for FY 2022 (Pub. L. 117-81); and section 853 of the NDAA for FY 2023 (Pub. L. 117-263). Section 845 of the NDAA for FY 2021 amends 10 U.S.C. 4864(a) to update the list of components for naval vessels at paragraphs (a)(2)(A) through (E). Subsequently, section 816 of the NDAA for FY 2022 added to the list of components for naval vessels welded shipboard anchor and mooring chain, without size restrictions, at 10 U.S.C. 4864(a)(2)(F). Section 845 also added components for T-AO 205 class vessels at 10 U.S.C. 4864(a)(4). Section 853 of the NDAA for FY 2023 added T-ARC class vessels at 10 U.S.C. 4864(a)(4) along with the component list for T-AO 205 class vessels. Section 1603 of the NDAA for FY 2021 added limitations on procurement of satellite star trackers at 10 U.S.C. 4864(a)(5).

No significant issues were raised by public comments regarding the initial regulatory flexibility analysis.

DoD reviewed data from the Federal Procurement Data System for FY 2021, 2022, and 2023, excluding contracts that do not exceed the simplified acquisition threshold, for the following product service codes: 7G22, 2835, 2010, 3815, 1040, 5925, 2040, beginning with 70 (for example, information technology hardware and software), and 7435. DoD made an average of 712 awards per year, of which 401 were made to small entities, an average of 56 percent awarded to small entities over the three fiscal years.

It is expected that this rule will benefit small businesses. The rule will continue to provide small businesses the opportunity to participate in the manufacture of star trackers for certain national security satellites and certain components for T‐AO 205 and T-ARC class vessels in support of the national technology and industrial base.

This rule does not include any new reporting, recordkeeping, or other compliance requirements for small businesses.

The rule exempts acquisitions equal to or less than the simplified acquisition threshold. There are no other known significant alternative approaches to the rule that would meet the requirements of the statute.

VIII. Paperwork Reduction Act

This final 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).

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Government procurement

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Jennifer D. Johnson,

Editor/Publisher, Defense Acquisition Regulations System.

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Therefore, 48 CFR parts 212, 225, and 252 are amended as follows:

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1. The authority citation for 48 CFR parts 212, 225, and 252 continues to read as follows:

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Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.

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2. Amend section 212.301 by—

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a. Removing paragraphs (f)(x)(X) and (Y);

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b. Redesignating paragraphs (f)(x)(M) through (W) as (f)(x)(N) through (X);

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c. Adding a new paragraph (f)(x)(M);

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d. Redesignating paragraphs (f)(x)(Z) through (NN) as paragraphs (f)(x)(Y) through (MM);

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e. In the newly redesignated paragraph (f)(x)(Y), removing “Pub. L.” and adding “Public Law” in its place;

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f. In the newly redesignated paragraph (f)(x)(MM), removing “225.7010-5” and adding “225.7004-7(b)” in its place; and

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g. Adding paragraphs (f)(x)(NN) and (OO).

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The additions read as follows:

212.301

Solicitation provisions and contract clauses for the acquisition of commercial products and commercial services.

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(f) * * *

(x) * * *

(M) Use the clause at 252.225-7019, Restriction on Acquisition of Anchor and Mooring Chain, as prescribed in 225.7004-7(a), to comply with 10 U.S.C. 4864 and section 8041 of the Fiscal Year 1991 DoD Appropriations Act (Pub. L. 101-511) and similar sections in subsequent DoD appropriations acts.

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(NN) Use the clause at 252.225-7063, Restriction on Acquisition of Components of T-AO 205 and T-ARC Class Vessels, as prescribed in 225.7004-7(c), to comply with 10 U.S.C. 4864.

(OO) Use the clause at 252.225-7064, Restriction on Acquisition of Certain Satellite Components, as prescribed in 225.7004-7(d), to comply with 10 U.S.C. 4864.

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225.7001

See Also

GREER v. UNITED STATES

(2) The cost of the components manufactured in the United States exceeds 50 percent of the total cost of components.

(b) The statute at 10 U.S.C. 4864 also restricts acquisition of welded shipboard anchor and mooring chain, when used as a component of a naval vessel; however, the Appropriations Act restriction described in paragraph (a) of this section takes precedence over the restriction of 10 U.S.C. 4864 cited in 225.7004-2(b)(6).

225.7004-6

Waiver of restrictions.

(a) Welded shipboard anchor and mooring chain. (1) In accordance with section 8016 of the Consolidated Appropriations Act, 2023 (Pub. L. 117-328), the secretary of the department responsible for acquisition may waive the restrictions in 225.7004-2(b)(6) and 225.7004-5, on a case-by-case basis, if—

(i) Sufficient domestic suppliers are not available to meet DoD requirements on a timely basis; and

(ii) The acquisition is necessary to acquire capability for national security purposes.

(2) Document the waiver in a written determination and findings containing—

(i) The factors supporting the waiver; and

(ii) A certification that the acquisition must be made in order to acquire capability for national security purposes.

(3) Provide a copy of the determination and findings to the House and Senate Committees on Appropriations.

(b) Star trackers. The waiver criteria at paragraph (c) of this section apply, except that the USD(A&S) may delegate the authority to waive a restriction for a star tracker for a particular foreign country to the service acquisition executive, without power of redelegation (section 1603, National Defense Authorization Act for Fiscal Year 2021 (Pub. L. 116-283)). Start Printed Page 46815

(c) Waiver of restrictions of 10 U.S.C. 4864(a). The restrictions on certain foreign purchases at 225.7004-2 may be waived, except as provided in paragraphs (a) and (b) of this section, as follows:

(1)(i) USD(A&S), without power of delegation, may waive a restriction for a particular item for a particular foreign country upon determination that—

(A) U.S. producers of the item would not be jeopardized by competition from a foreign country, and that country does not discriminate against defense items produced in the United States to a greater degree than the United States discriminates against defense items produced in that country; or

(B) Application of the restriction would impede cooperative programs entered into between DoD and a foreign country, or would impede the reciprocal procurement of defense items under a memorandum of understanding providing for reciprocal procurement of defense items under 225.872, and that country does not discriminate against defense items produced in the United States to a greater degree than the United States discriminates against defense items produced in that country.

(ii) A notice of the determination to exercise the waiver authority shall be published in the Federal Register and submitted to the congressional defense committees at least 15 days before the effective date of the waiver.

(iii) The effective period of the waiver shall not exceed 1 year.

(iv) For contracts entered into prior to the effective date of a waiver, provided adequate consideration is received to modify the contract, the waiver shall be applied as directed or authorized in the waiver to—

(A) Subcontracts entered into on or after the effective date of the waiver; and

(B) Options for the procurement of items that are exercised after the effective date of the waiver, if the option prices are adjusted for any reason other than the application of the waiver.

(2) The head of the contracting activity may waive a restriction on a case-by-case basis upon execution of a determination and findings that any of the following applies:

(i) The restriction would cause unreasonable delays.

(ii) Satisfactory quality items manufactured in the national technology and industrial base are not available.

(iii) Application of the restriction would result in the existence of only one source for the item in the national technology and industrial base.

(iv) Application of the restriction is not in the national security interests of the United States.

(v) Application of the restriction would adversely affect a U.S. company.

(3) A restriction is waived when it would cause unreasonable costs. The cost of an item of national technology and industrial base origin is unreasonable if it exceeds 150 percent of the offered price, inclusive of duty, of items that are not of national technology and industrial base origin.

225.7004-7

Contract clauses.

(a) Unless a waiver has been granted, use the clause at 252.225-7019, Restriction on Acquisition of Anchor and Mooring Chain, in solicitations and contracts, including solicitations and contracts using FAR part 12 procedures for the acquisition of commercial products and commercial services, that exceed the simplified acquisition threshold and that require welded shipboard anchor or mooring chain.

(b) Use the clause at 252.225-7062, Restriction on Acquisition of Large Medium-Speed Diesel Engines, in solicitations and contracts, including solicitations and contracts using FAR part 12 procedures for the acquisition of commercial products and commercial services, that exceed the simplified acquisition threshold and that require large medium-speed diesel engines for new construction of auxiliary ships using funds available for National Defense Sealift Fund programs or Shipbuilding and Conversion, Navy unless—

(1) An exception at 225.7004-3(d) applies; or

(2) A waiver has been granted.

(c) Unless a waiver has been granted, use the clause at 252.225-7063, Restriction on Acquisition of Components of T-AO 205 and T-ARC Class Vessels, in solicitations and contracts, including solicitations and contracts using FAR part 12 procedures for the acquisition of commercial products and commercial services, that exceed the simplified acquisition threshold and that require components of T-AO 205 and T-ARC class vessels.

(d) Use the clause at 252.225-7064, Restriction on Acquisition of Certain Satellite Components, in solicitations and contracts, including solicitations and contracts using FAR part 12 procedures for the acquisition of commercial products and commercial services, that exceed the simplified acquisition threshold unless—

(1) An exception at 225.7004-3(e) applies; or

(2) A waiver has been granted.

225.7006

[Removed and Reserved]

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8. Remove and reserve section 225.7006.

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225.7006-1, 225.7006-2, 225.7006-3, and 225.7006-4

[Removed]

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9. Remove sections 225.7006-1, 225.7006-2, 225.7006-3, and 225.7006-4.

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225.7007

[Removed and Reserved]

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10. Remove and reserve section 225.7007.

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225.7007-1, 225.7007-2, and 225.7007-3

[Removed]

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11. Remove sections 225.7007-1, 225.7007-2, and 225.7007-3.

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225.7008

[Removed and Reserved]

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12. Remove and reserve section 225.7008.

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225.7009-1

[Amended]

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13. Amend section 225.7009-1 by removing “Section” and adding “section” in its place.

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225.7010

[Removed and Reserved]

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14. Remove and reserve section 225.7010.

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225.7010-1, 225.7010-2, 225.7010-3, 225.7010-4, and 225.7010-5

[Removed]

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15. Remove sections 225.7010-1, 225.7010-2, 225.7010-3, 225.7010-4, and 225.7006-5.

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16. Amend section 252.225-7019—

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a. By revising the section heading, introductory text, clause date, and paragraph (a);

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b. In paragraph (b) by removing “, four inches or less in diameter,”; and

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c. In paragraph (d) by removing “, four inches or less in diameter”.

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The revisions read as follows:

252.225-7019

Restriction on Acquisition of Anchor and Mooring Chain.

As prescribed in 225.7004-7(a), use the following clause:

Restriction On Acquisition of Anchor and Mooring Chain (MAY 2024)

(a) Definition. As used in this clause—

Component means an article, material, or supply incorporated directly into an end product.

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252.225-7037 and 252.22-7038

[Removed and Reserved]

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17. Remove and reserve sections 252.225-7037 and 252.225-7038.

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252.225-7062

[Amended]

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18. Amend section 252.225-7062 introductory text by removing “225.7010-5” and adding “225.7004-7(b)” in its place.

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19. Add section 252.225-7063 to read as follows:

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252.225-7063

Restriction on Acquisition of Components of T-AO 205 and T-ARC Class Vessels.

As prescribed in 225.7004-7(c), use the following clause:

Restriction on Acquisition of Components of T-AO 205 AND T-ARC Class Vessels (MAY 2024)

(a) Restriction.

(1) In accordance with 10 U.S.C. 4864, the following components of T-AO 205 and T-ARC class vessels must be manufactured in the United States, Australia, Canada, New Zealand, or the United Kingdom of Great Britain and Northern Ireland (United Kingdom):

(i) Auxiliary equipment, including pumps, for all shipboard services.

(ii) Propulsion system components, including engines, reduction gears, and propellers.

(iii) Shipboard cranes.

(iv) Spreaders for shipboard cranes.

(2) The Contractor shall deliver under this contract only T-AO 205 and T-ARC class vessel components, as described in paragraph (a)(1) of this clause, manufactured in the United States, Australia, Canada, New Zealand, or the United Kingdom (10 U.S.C. 4864).

(b) Subcontracts. The Contractor shall insert the substance of this clause, including this paragraph (b), in subcontracts for the components described in paragraph (a)(1) of this clause that exceed the simplified acquisition threshold, including subcontracts for commercial products and commercial services.

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21. Add section 252.225-7064 to read as follows:

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252.225-7064

Restriction on Acquisition of Certain Satellite Components.

As prescribed in 225.7004-7(d), use the following clause:

Restriction On Acquisition of Certain Satellite Components (MAY 2024)

(a) Definition. As used in this clause—

(b) Restriction. In accordance with 10 U.S.C. 4864, a star tracker must be manufactured in the United States, Australia, Canada, New Zealand, or the United Kingdom of Great Britain and Northern Ireland (United Kingdom). The Contractor shall deliver under this contract only star trackers manufactured in the United States, Australia, Canada, New Zealand, or the United Kingdom.

(c) Subcontracts. The Contractor shall insert the substance of this clause, including this paragraph (c), in subcontracts for star trackers that exceed the simplified acquisition threshold, including subcontracts for commercial products and commercial services.

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[FR Doc. 2024-11514 Filed 5-29-24; 8:45 am]

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