FedGovContracts.com

Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: December 20, 2002

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

SOURCE: Federal Register, December 20, 2002, Vol. 67, No. 245, page 77937

AGENCIES: Department of Defense (DOD)

ACTION: Final Rule

SYNOPSIS: DOD is finalizing, without change, the July 30, 2002, proposed rule to revise DFARS Part 225, Foreign Acquisition, and the corresponding provisions and clauses in DFARS Part 252, 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 proposed rule being finalized, see the July 30, 2002, FEDERAL CONTRACTS DISPATCH "Defense Federal Acquisition Regulation Supplement (DFARS); Trade Agreements Act -- Exception for U.S.-Made End Products."

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.

EFFECTIVE DATE: December 20, 2002.

FOR FURTHER INFORMATION CONTACT: Amy Williams, Defense Acquisition Regulations Council, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; 703-602-0328; fax: 703-602-0350.

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, Definiions, and DFARS 225.003).

The intent of the USD(AT&L) determination was to 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 -- 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.

On July 30, 2002, a proposed rule was published to implement the USD(AT&L) determination by simplifying the evaluation of offers in acquisitions subject to the TAA since it was no longer be necessary for DOD contracting officers to determine if a U.S.-made end product is also a domestic end product.

The following changes were contained in the July 30, 2002, proposed rule:

Two respondents submitted comments in support of the proposed rule, so DOD is adopting the proposed rule as a final rule without change.

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.

Return to the Dispatches Library.

Return to the Main Page.