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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: July 30, 2002

SUBJECT: Defense Federal Acquisition Regulation Supplement (DFARS); Trade Agreements Act -- Exception for U.S.-Made End Products

SOURCE: Federal Register, July 30, 2002, Vol. 67, No. 146, page 49278

AGENCIES: Department of Defense (DOD)

ACTION: Proposed Rule

SYNOPSIS: It is proposed that DFARS Part 225, Foreign Acquisition, and the corresponding provisions and clauses in DFARS Part 252, be revised to implement the determination of Under Secretary of Defense for Acquisition, Technology, and Logistics E.C. "Pete" Aldridge (USD(AT&L)) that, for procurements subject to the Trade Agreements Act (TAA), it would be inconsistent with the public interest to apply the Buy American Act (BAA) to U.S.-made end products that are substantially transformed in the United States.

EDITOR'S NOTE: For more on the BAA, see Federal Acquisition Regulation (FAR) Subpart 25.1, Buy American Act - Supplies, FAR Subpart 25.2, Buy American Act - Construction Materials, and the corresponding DFARS Subparts 225.1 and 225.2.

The TAA applies to acquisitions for supplies or services if the estimated value of the acquisition is $169,000, and to construction if the estimated value of the acquisition is $6,481,000. For more on the TAA, see FAR Subpart 25.4, Trade Agreements, and the corresponding DFARS Subpart 225.4.

DATES: Comments on the proposed rule should be submitted on or before September 30, 2002.

ADDRESSES: Respondents may submit comments directly on the web site at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. As an alternative, respondents may e-mail comments to dfars@acq.osd.mil. Also, respondents who cannot submit comments through the web site or by e-mail may submit comments to Defense Acquisition Regulations Council, Attn: Amy Williams, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; or by fax to 703-602-0350. Cite DFARS Case 2002-D008 when making comments on this proposed rule.

FOR FURTHER INFORMATION CONTACT: Amy Williams, 703-602-0328.

SUPPLEMENTAL INFORMATION: On March 14, 2002, the USD(AT&L) determined that it would not be in the public interest to apply the BAA to U.S.-made end products that are substantially transformed in the U.S. in procurements subject to the TAA. This determination expands the May 16, 1997, USD(AT&L) determination that it would not be in the public interest to apply the BAA to U.S.-made information technology products in Federal Supply Group (FSG) 70 and FSG 74. The March 14, 2002, determination is consistent with paragraph (b)(2) of FAR 25.502, Application, which permits agencies to give the same consideration to offers of U.S.-made end products that are not domestic end products as given to eligible offers (for definitions of "domestic end products," "eligible offers," "U.S.-made end products," and other key terms applicable to the BAA and TAA, see FAR 25.003, Definitions, and DFARS 225.003).

The USD(AT&L) determination and the proposed DFARS rule that would implement the determination would eliminate a conflict between the definition of "domestic end product" under the BAA and the definition of "U.S.-made end product" under the TAA. A Japanese firm can manufacture a computer with 60% of its components coming from Taiwan (a "non-designated country" under the TAA -- that is, a non-signatory of the Agreement on Government Procurement, which produced the TAA) and still offer it under the TAA because those Taiwanese components have been "substantially transformed" in Japan into a "designated country end product." However, an American firm manufacturing the same computer with 60% of its components coming from Taiwan would be disqualified under the TAA: though the computer would be considered a "U.S.-made end product" because the Taiwanese components have been "substantially transformed" in the U.S., it would not be considered a "domestic end product" because it would flunk the 50% domestic component test under the BAA, so the computer would be considered a Taiwanese product, and Taiwanese products are not permitted under the TAA.

The proposed rule would simplify evaluation of offers in acquisitions subject to the TAA because it will no longer be necessary for DOD contracting officers to determine if a U.S.-made end product is also a domestic end product. In addition, DFARS 252.225-7006, Buy American Act -- Trade Agreements -- Balance of Payments Program Certificate, and DFARS 252.225-7007, Buy American Act -- Trade Agreements -- Balance of Payments Program, would no longer be necessary because DFARS 252.225-7020, Trade Agreements Certificate, and DFARS 252.225-7021, Trade Agreements, would be applicable for all acquisitions subject to the TAA.

The proposed rule would make the following changes to DFARS Part 225 and DFARS Part 252:

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2002 by Panoptic Enterprises. All Rights Reserved.

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