Defense Federal Acquisition Regulation Supplement; Restriction on Acquisition of Specialty Metals (DFARS Case 2008-D003), 42300-42309 [E8-16675]

Agencies

• Defense Acquisition Regulations System
• DEPARTMENT OF DEFENSE

[Federal Register Volume 73, Number 140 (Monday, July 21, 2008)]
[Proposed Rules]
[Pages 42300-42309]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-16675]



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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 202, 212, 225, and 252

RIN 0750-AF95


Defense Federal Acquisition Regulation Supplement; Restriction on 
Acquisition of Specialty Metals (DFARS Case 2008-D003)

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

ACTION: Proposed rule with request for comments.

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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to address statutory restrictions on the 
acquisition of specialty metals not melted or produced in the United 
States. The proposed rule implements Section 842 of the National 
Defense Authorization Act for Fiscal Year 2007 and Sections 804 and 884 
of the National Defense Authorization Act for Fiscal Year 2008.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before September 19, 2008, to be 
considered in the formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2008-D003, 
using any of the following methods:
    Federal eRulemaking Portal: https://www.regulations.gov. Follow the 
instructions for submitting comments.
    E-mail: dfars@osd.mil. Include DFARS Case 2008-D003 in the subject 
line of the message.
    Fax: 703-602-7887.
    Mail: Defense Acquisition Regulations System, Attn: Ms. Amy 
Williams, OUSD (AT&L) DPAP (DARS), IMD 3D139, 3062 Defense Pentagon, 
Washington, DC 20301-3062.
    Hand Delivery/Courier: Defense Acquisition Regulations System, 
Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 22202-
3402.
    Comments received generally will be posted without change to http:/
/www.regulations.gov, including any personal information provided.

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

SUPPLEMENTARY INFORMATION:

A. Background

    Section 842 of the National Defense Authorization Act for Fiscal 
Year 2007 (Pub. L. 109-364) added new provisions at 10 U.S.C. 2533b, to 
address requirements for the purchase of specialty metals from domestic 
sources. Section 804 of the National Defense Authorization Act for 
Fiscal Year 2008 (Pub. L. 110-181) made amendments to 10 U.S.C. 2533b 
with regard to its applicability to commercial items, electronic 
components, items containing minimal amounts of specialty metals, items 
necessary in the interest of national security, and items not available 
domestically in the required form. In addition, Section 884 of the 
National Defense Authorization Act for Fiscal Year 2008 added a 
requirement for DoD to publish a notice on the Federal Business 
Opportunities Web site before making a domestic nonavailability 
determination that would apply to more than one contract.
    This proposed rule implements 10 U.S.C. 2533b and Section 884 of 
the National Defense Authorization Act for Fiscal Year 2008. The 
previous specialty metals policy is removed from DFARS 225.7002-1 
through 225.7002-3; the new policy is added at 225.7003-1 through 
225.7003-5; and the policy previously at 225.7003, addressing waiver of 
10 U.S.C. 2534, is relocated to 225.7008 with no substantive change to 
content. The following is a discussion of the new specialty metals 
policy:

1. Restriction on Acquisition of Specialty Metals Not Melted or 
Produced in the United States

    a. Applicability to the six product categories. Much of 10 U.S.C. 
2533b reflects requirements already established in the DFARS. 10 U.S.C. 
2533b(a)(1) is consistent with the existing DFARS requirement for 
flowdown of the specialty metals restriction to all subcontract tiers 
when acquiring aircraft, missile and space systems, ships, tank and 
automotive items, weapon systems, or ammunition, for applicability to 
end items and components thereof. This restriction applies to 
acquisition of the item containing the specialty metal, not just the 
specialty metal. This restriction is implemented in the proposed rule 
at 225.7003-2(a).
    b. Applicability to specialty metals acquired as end items.
    The restriction at 10 U.S.C. 2533b(a)(2) applies to the purchase of 
specialty metal as an end item, whether purchased directly by DoD or by 
a DoD prime contractor. This restriction is implemented in the proposed 
rule at 225.7003-2(b).

2. Exceptions

    a. Continuation of existing exceptions.
    The types of acquisitions that were previously exempted from 
specialty metals restrictions, other than those by vessels in foreign 
waters, are also included in 10 U.S.C. 2533b and are implemented in the 
proposed rule at 225.7003-3(a). These exceptions are as follows:
     Acquisitions at or below the simplified acquisition 
threshold.
     Acquisitions outside the United States in support of 
combat operations.
     Acquisitions in support of contingency operations.
     Acquisitions for which the use of other than competitive 
procedures has been approved on the basis of unusual and compelling 
urgency in accordance with FAR 6.302-2.
     Acquisitions of items specifically for commissary resale.
    In addition, the proposed rule clarifies, at 225.7003-3(a)(6), that 
the specialty metals restriction does not apply to acquisitions of 
items for test and evaluation under the foreign comparative testing 
program (10 U.S.C. 2350a(g)). However, this exception does not apply to 
any acquisitions under follow-on production contracts.
    b. New or revised exceptions that may be used in tandem. Exceptions 
that were added or revised by 10 U.S.C. 2533b and that can be used 
singly or together are implemented in the proposed rule at 225.7003-
3(b).
    (1) Electronic components. 10 U.S.C. 2533b, as added by Section 842 
of Public Law 109-364, provided a new exception for commercially 
available electronic components whose specialty metal content is 
minimal in value compared to the overall value of the lowest level 
component produced that contains such specialty metal. As amended by 
Section 804 of Public Law 110-181, the electronic component exception 
in 10 U.S.C. 2533b has been broadened to cover all electronic 
components, unless the Secretary of Defense, upon the recommendation of 
the Strategic Materials Protection Board, determines that the domestic 
availability of a particular electronic component is critical to 
national security.
    (2) Commercially Available Off-the-Shelf (COTS) items. 10 U.S.C. 
2533b contains new provisions applicable to COTS items. With certain 
exceptions, the statute does not apply to COTS items. However, the 
statute requires the reporting of information regarding the acquisition 
of noncommercial end items incorporating COTS items containing non-
domestic specialty metals (fiscal years 2008 and 2009 only). The 
proposed rule requires contractors to provide this information for 
fiscal year 2009 in accordance with the clause at 252.225-70X4, 
Reporting of

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Commercially Available Off-the-Shelf Items that Contain Specialty 
Metals and are Incorporated into Noncommercial End Items. In addition, 
the proposed rule contains an internal DoD reporting requirement with 
regard to the acquisition of COTS end items valued at $5 million or 
more per item, containing non-domestic specialty metals.
    (3) Fasteners. 10 U.S.C. 2533b provides a new exception applicable 
to the acquisition of fasteners. The exception applies to fasteners 
that are commercial items purchased under a contract or subcontract, if 
the manufacturer of the fasteners certifies that it will purchase, 
during the relevant calendar year, an amount of domestically melted 
specialty metal for use in the production of such fasteners for sale to 
DoD and other customers, that is not less than 50 percent of the amount 
of specialty metal it will purchase to carry out the production of such 
fasteners.
    (4) Agreements with foreign governments. 10 U.S.C. 2533b provides 
an exception applicable to acquisitions that further an agreement with 
a foreign government (i.e., a qualifying country). However, the 
exception does not apply to specialty metals acquired as an end item, 
which is a change from the current practice.
    (5) Domestic specialty metals nonavailable. 10 U.S.C. 2533b revises 
the criteria for granting exceptions based on the nonavailability of 
domestic specialty metals. Such exceptions are permitted if domestic 
specialty metal cannot be acquired in a satisfactory quality, a 
sufficient quantity, and in the required form. 10 U.S.C. 2533b(m)(4) 
clarifies that ``in the required form'' does not apply to end items or 
their components at any tier; and that the term means ``in the form of 
mill product'' and in the grade appropriate for the production of a 
finished end item or a finished component assembled into an end item.
    (i) 10 U.S.C. 2533b also establishes new requirements with regard 
to the approval of a domestic nonavailability determination (DNAD). At 
least 30 days prior to approval of a DNAD that would apply to more than 
one DoD contract, a notice of the intent to approve the DNAD must be 
published on the Federal Business Opportunities website. DoD must take 
into consideration all information submitted in response to the notice, 
and this information must be made publicly available, except for 
classified information and confidential business information.
    (ii) The proposed rule eliminates the nonstatutory requirement for 
notification to the congressional defense committees at least 10 days 
before the award of a contract that relies on a determination of 
nonavailability for the acquisition of titanium or a product containing 
titanium. This requirement was at DFARS 225.7002-2(b)(4).
    (6) Minimal amounts of otherwise noncompliant specialty metal. 10 
U.S.C. 2533b provides a new exception applicable to otherwise 
noncompliant specialty metals that do not exceed 2 percent of the total 
weight of specialty metals in a delivered item. The proposed rule 
permits use of this exception in tandem with other exceptions listed in 
225.7003-3(b); any foreign specialty metal not covered by any of the 
other exceptions may still be acceptable if it does not exceed 2 
percent of the total weight of all specialty metals in the end item. 
This de minimis exception does not apply to the specialty metal in high 
performance magnets. The proposed rule places responsibility with the 
prime contractor for management of the content of specialty metals in 
the end item. In order to manage the de minimis exception, the 
contractor is authorized, but is not required, to flow down the 
substance of the specialty metals clause to subcontractors.
    c. Commercial derivative military articles. 10 U.S.C. 2533b 
provides an alternative compliance method for commercial derivative 
military articles. This compliance method can be used if the Government 
determines that an item to be acquired is a commercial derivative 
military article, and the contractor certifies that the contractor and 
its subcontractors will enter into a contractual agreement or 
agreements to purchase a specified amount of domestically melted 
specialty metal for use, during the period of contract performance, in 
the production of the commercial derivative military article and the 
related commercial article.
    d. National security. 10 U.S.C. 2533b permits DoD to accept the 
delivery of an end item containing noncompliant specialty metal if the 
Under Secretary of Defense (Acquisition, Technology, and Logistics) 
(USD (AT&L)) determines that acceptance of the item is necessary to the 
national security interests of the United States. In any case in which 
the USD (AT&L) makes such a determination, the USD (AT&L) is required 
to ensure that the contractor or subcontractor responsible for the 
noncompliance develops and implements an effective plan to ensure 
future compliance.

3. One-Time Waiver

    Section 842(b) of the National Defense Authorization Act for Fiscal 
Year 2007 (not codified) established one-time waiver authority for 
contracts under which specialty metals were incorporated into items 
produced, manufactured, or assembled in the United States prior to 
October 17, 2006, and where final acceptance by the Government takes 
place after that date, but before September 30, 2010. DoD may grant 
such a waiver, provided the noncompliance was not knowing or willful. 
This policy is addressed in the proposed rule at 225.7003-4.

4. Definitions

    a. Specialty metal, alloy, and steel. 10 U.S.C. 2533b contains a 
definition of ``specialty metal'' that is consistent with the one used 
in the clause at DFARS 252.225-7014, Preference for Domestic Specialty 
Metals. The proposed rule makes minor changes to this definition to 
clarify its meaning, as there has been frequent misinterpretation of 
the definition with regard to nickel, iron-nickel, and cobalt alloys. 
Nickel alone is not a metal alloy. The meaning of the term ``other 
alloying metals'' within the definition depends on whether the alloy is 
nickel or iron-nickel, or cobalt. If the metal is a nickel alloy, the 
other alloying metal can be cobalt. If it is a cobalt alloy, the other 
alloying metal can be nickel.
    In addition, this proposed rule clarifies the definitions of the 
terms ``alloy'' and ``steel,'' as used in the definition of specialty 
metal in the clauses at DFARS 252.225-70X1, Restriction on Acquisition 
of Specialty Metals, and 252.225-70X2, Restriction on Acquisition of 
Certain Articles Containing Specialty Metals. DoD believes there is a 
need for clarification of the terms used within the definition of 
specialty metal, as numerous questions have arisen with regard to the 
meaning of these terms.
    i. Alloy.
    Basic to understanding the definition of specialty metals is an 
understanding of the term ``alloy.'' An alloy is a metal that consists 
of a mixture of a metal and one or more other elements. Often, these 
other elements will be metals. In other cases, a metal will be alloyed 
with a non-metal (such as carbon). However, the resultant material must 
retain its metallic properties (e.g., high electrical conductivity, 
luster, and malleability). If a metal and a nonmetal form a salt, or if 
a metal and oxygen form an oxide, those are not alloys.
    The proposed rule defines ``alloy'' as a metal consisting of a 
mixture of a basic metallic element and one or more metallic, or non-
metallic, alloying elements. For alloys named by a single metallic 
element (e.g., ``titanium alloy''),

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the term means that the alloy contains 50 percent or more of the named 
metal (by mass). If two metals are specified in the name (e.g., nickel-
iron alloy), those are the two predominant elements in the alloy, and 
together they constitute 50 percent or more of the alloy (by mass).
    DoD considered whether to define a particular alloy based on ``more 
than 50 percent,'' or based on ``predominance.'' If there were multiple 
elements in an alloy, the ``predominant'' metal could be as low as 20 
percent or less. However, it did not appear appropriate to determine 
whether an alloy is considered to be an alloy of a particular metal 
based not on the percentage of that metal, but on how the remaining 
percentage is divided up among other elements. For example--
    [cir] Under the ``predominance'' approach, an alloy of 35 percent 
titanium and 65 percent iron would not be considered a titanium alloy; 
it would be an iron alloy; but
    [cir] An alloy of 35 percent titanium, 33 percent iron, and 32 
percent nickel would be considered a titanium alloy (although it 
contains no more titanium than the prior example, and the non-titanium 
elements exceed the titanium element).
    This anomaly is avoided by requiring an alloy to contain at least 
50 percent titanium to be considered a titanium alloy. Using this 
approach, an alloy is named by whatever combination of metals equals at 
least 50 percent of the alloy (e.g., the last named example would be a 
titanium-iron alloy).
    DoD concluded that there is no generally accepted industry 
definition to the contrary. The proposed rule does not establish a 
universal definition, but a definition that is appropriate within this 
specific regulation.
    ii. Steel.
    The definition of ``specialty metal'' is dependent on the meaning 
of the term ``steel.'' In order to know whether a particular alloy that 
has more than 1.65 percent manganese meets the definition in 252.225-
70X2(a)(12)(i)(A), it is necessary to be able to first determine 
whether or not it meets the definition of ``steel''. The proposed rule 
defines ``steel'' as an iron alloy that includes between .02 and 2 
percent carbon and may include other elements. The range of percentage 
of carbon for steel is based on the Metals Handbook of the American 
Society of Metals.
    Therefore, as used in the proposed rule, steel must have at least 
50 percent iron to be an iron alloy, and it must also have between .02 
and 2 percent carbon. There are low-carbon steels and high-carbon 
steels. If the percentages of other metals increase, the material is 
termed an alloy steel.
    b. Commercially available off-the-shelf (COTS) items. 10 U.S.C. 
2533b(m)(5) specifies that ``commercially available off-the-shelf'' has 
the meaning provided at 41 U.S.C. 431(c), i.e., a commercial item sold 
in substantial quantities in the commercial marketplace and offered to 
the Government, without modification, in the same form in which it is 
sold in the commercial marketplace. The proposed rule contains a 
definition of ``COTS item'' that reflects the definition at 41 U.S.C. 
431(c) and also the provisions of 10 U.S.C. 2533b, which make the 
specialty metals restriction applicable to items delivered under 
subcontracts at any tier. As implemented in the proposed rule at 
252.225-70X2(c)(2)(ii), COTS items are determined at the point of sale 
by the next higher tier in the supply chain.
    c. Produce. 10 U.S.C. 2533b requires that specialty metals be 
melted or produced in the United States. The proposed rule adds a 
definition of ``produce'' at 252.225-70X1(a)(2) and 252.225-70X2(a)(9). 
Specialty metals may be melted in another country, but certain 
significant production processes occur in this country. Furthermore, 
using new production methods, specialty metals may not even be 
``melted'' to achieve the desired physical properties.
    d. High performance magnet.
    The proposed rule defines ``high performance magnet'' to mean a 
permanent magnet that obtains a majority of its magnetic properties 
from rare earth metals (such as samarium). DoD considers that magnets 
containing rare earth elements (such as samarium) should be the only 
magnets included in the definition of ``high performance magnet,'' 
because they are so technologically superior in magnetic performance to 
other types of magnets and make miniaturization possible in many 
electronic applications. This definition of high performance magnets 
includes magnets made from samarium cobalt, neodymium iron-boron, and 
ferrites, but of these high performance magnets, only samarium cobalt 
magnets contain specialty metals. Therefore, this proposed rule, which 
addresses restrictions on the acquisition of specialty metals, only 
impacts the acquisition of samarium cobalt high performance magnets. 
Although alnico magnets contain specialty metals, they are not high 
performance magnets. Therefore, if an alnico magnet is a COTS item, the 
specialty metals in it are not covered by the restriction. This 
definition of high performance magnet is in the proposed rule at 
252.225-70X2(a)(8).
    e. Automotive item. The definition of ``automotive item'' in the 
proposed rule clarifies that the term means military transport 
vehicles. The use of ``tank'' in conjunction with the term ``automotive 
items'' at 10 U.S.C. 2533(a)(1) implies that this product category is 
intended to cover tactical, combat-type vehicles, not commercially 
available off-the-shelf cars, trucks, or vans. This definition is in 
the proposed rule at 225.7003-1(b).
    f. Component. 10 U.S.C. 2533b(m)(2) specifies that ``component'' 
has the meaning provided at 41 U.S.C. 403, i.e., any item supplied to 
the Federal Government as part of an end item or of another component. 
This definition is in the proposed rule at 252.225-70X2(a)(5).
    g. Assembly, end item, and subsystem. 10 U.S.C. 2533b provides new 
definitions of these terms, which have been incorporated in the 
proposed rule at 252.225-70X2(a)(2), (a)(7), and (a)(14) respectively. 
The definition of ``end item'' has been tailored for contract use.

5. Clauses and Clause Prescriptions

    a. The proposed rule removes the contract clause at DFARS 252.225-
7014, Preference for Domestic Specialty Metals, and adds three new 
contract clauses and a new solicitation provision as follows:
    [cir] 252.225-70X1, Restriction on Acquisition of Specialty Metals, 
applies to the acquisition of specialty metal as an end item.
    [cir] 252.225-70X2, Restriction on Acquisition of Certain Articles 
Containing Specialty Metals, applies to the acquisition of specialty 
metal as a component of an item in one of six major product categories.
    [cir] 252.225-70X3, Commercial Derivative Military Article--
Specialty Metals Compliance Certificate, applies to solicitations for 
which it is anticipated that offers of commercial derivative military 
articles may be received.
    [cir] 252.225-70X4, Reporting of Commercially Available Off-the-
Shelf Items that Contain Specialty Metals and are Incorporated into 
Noncommercial End Items, applies to solicitations and contracts that 
contain the clause 252.225-70X2, are for the acquisition of 
noncommercial end products, and are awarded in fiscal year 2009.
    b. 10 U.S.C. 2533b requires application of the specialty metals 
restrictions to commercial items. Therefore, requirements for use of 
252.225-70X1 and 252.225-70X2 have been added to the clause at 252.212-
7001, Contract Terms and Conditions

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Required to Implement Statutes or Executive Orders Applicable to 
Defense Acquisitions of Commercial Items. In addition, 252.225-70X3 has 
been added to the list of provisions applicable to the acquisition of 
commercial items at 212.301.
    This rule was not subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

    DoD has prepared an initial regulatory flexibility analysis 
consistent with 5 U.S.C. 603. A copy of the analysis may be obtained 
from the point of contact specified herein. The analysis is summarized 
as follows:
    The proposed rule affects producers of specialty metals, and 
manufacturers of components containing specialty metals that will be 
incorporated into end items to be acquired by DoD. Producers of 
specialty metals are generally large businesses. There is a high 
capitalization requirement to establish a business that can melt or 
produce specialty metals. The small business size standard for primary 
metal manufacturing ranges from 500 to 1,000 employees. All the 
specialty metals producers reviewed had more than 500 employees. There 
are numerous manufacturers of products containing specialty metals, 
either as prime contractors or subcontractors. DoD does not have the 
data to determine the total number of these manufacturers, or the 
number that are small businesses, because the Federal Procurement Data 
System only collects data on prime contractors and end items, not 
subcontractors and components of end items.
    DoD invites comments from small businesses and other interested 
parties. DoD also will consider comments from small entities concerning 
the affected DFARS subparts in accordance with 5 U.S.C. 610. Such 
comments should be submitted separately and should cite DFARS Case 
2008-D003.

C. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. Chapter 35) applies, because 
the proposed rule contains information collection requirements. DoD 
invites comments on the following aspects of the proposed rule: (a) 
Whether the collection of information is necessary for the proper 
performance of the functions of DoD, including whether the information 
will have practical utility; (b) the accuracy of the estimate of the 
burden of the information collection; (c) ways to enhance the quality, 
utility, and clarity of the information to be collected; and (d) ways 
to minimize the burden of the information collection on respondents, 
including the use of automated collection techniques or other forms of 
information technology. The following is a summary of the information 
collection requirement.
    Title: Defense Federal Acquisition Regulation Supplement (DFARS); 
Restriction on Acquisition of Specialty Metals.
    Type of Request: New collection.
    Number of Respondents: 3,885.
    Responses per Respondent: Approximately 4.
    Annual Responses: 15,390.
    Average Burden per Response: Approximately 100 hours.
    Annual Burden Hours: 1,544,000.
    Needs and Uses: DoD needs the information required by 252.225-70X4 
(fiscal year 2009 contract awards only) to prepare the report to 
Congress required by 10 U.S.C. 2533b(i). The report must include, at a 
minimum, a description of the types of items containing specialty 
metals that are being acquired as commercially available off-the-shelf 
components of noncommercial items and, therefore, are exempted from 
domestic source requirements.
    DoD needs the information required by 252.225-70X3 to satisfy the 
requirement of 10 U.S.C. 2533b(j), for an offeror to certify that it 
will take certain actions with regard to specialty metals if the 
offeror chooses to use the alternative compliance approach when 
providing commercial derivative military articles to the Government.
    Affected Public: Businesses or other for-profit institutions.
    Respondent's Obligation: Required to obtain or retain benefits.
    Frequency: On occasion.
    Written comments and recommendations on the proposed information 
collection should be sent to Ms. Jasmeet Seehra at the Office of 
Management and Budget, Desk Officer for DoD, Room 10236, New Executive 
Office Building, Washington, DC 20503, with a copy to the Defense 
Acquisition Regulations System, Attn: Ms. Amy Williams, OUSD (AT&L) 
DPAP (DARS), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-
3062. Comments can be received from 30 to 60 days after the date of 
this notice, but comments to OMB will be most useful if received by OMB 
within 30 days after the date of this notice.
    To request more information on this proposed information collection 
or to obtain a copy of the proposal and associated collection 
instruments, please write to the Defense Acquisition Regulations 
System, Attn: Ms. Amy Williams, OUSD (AT&L) DPAP (DARS), IMD 3D139, 
3062 Defense Pentagon, Washington, DC 20301-3062.

List of Subjects in 48 CFR Parts 202, 212, 225, and 252

    Government procurement.

Michele P. Peterson,
Editor, Defense Acquisition Regulations System.

    Therefore, DoD proposes to amend 48 CFR parts 202, 212, 225, and 
252 as follows:

    1. The authority citation for 48 CFR parts 202, 212, 225, and 252 
continues to read as follows:

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

PART 202--DEFINITIONS OF WORDS AND TERMS

    2. Section 202.101 is amended by revising the definition of 
``Commercially available off-the-shelf item'' to read as follows:


202.101  Definitions.

    Commercially available off-the-shelf item--
    (1) Means any item of supply that is--
    (i) A commercial item (as defined in FAR 2.101);
    (ii) Sold in substantial quantities in the commercial marketplace; 
and
    (iii) Offered to the Government, under a contract or subcontract at 
any tier, without modification, in the same form in which it is sold in 
the commercial marketplace; and
    (2) Does not include bulk cargo, as defined in Section 3 of the 
Shipping Act of 1984 (46 U.S.C. App. 1702), such as agricultural 
products and petroleum products.
* * * * *

PART 212--ACQUISITION OF COMMERCIAL ITEMS

    3. Section 212.301 is amended by adding paragraph (f)(xiii) to read 
as follows:


212.301  Solicitation provisions and contract clauses for the 
acquisition of commercial items.

    (f) * * *
    (xiii) Use the provision at 252.225-70X3, Commercial Derivative 
Military Article--Specialty Metals Compliance Certificate, as 
prescribed in 225.7003-5(b).
    4. Section 212.570 is revised to read as follows:

[[Page 42304]]

212.570  Applicability of certain laws to contracts and subcontracts 
for the acquisition of commercially available off-the-shelf items.

    Paragraph (a)(1) of 10 U.S.C. 2533b, Requirement to buy strategic 
materials critical to national security from American sources, is not 
applicable to contracts and subcontracts for the acquisition of 
commercially available off-the-shelf items, except as provided at 
225.7003-3(b)(2)(i).

PART 225--FOREIGN ACQUISITION

    5. Section 225.7001 is amended by revising paragraph (b) and 
removing paragraph (d). The revised text reads as follows:


225.7001  Definitions.

* * * * *
    (b) Component is defined in the clauses at 252.225-70X2, 
Restriction on Acquisition of Certain Articles Containing Specialty 
Metals, 252.225-7012, Preference for Certain Domestic Commodities, and 
252.225-7016, Restriction on Acquisition of Ball and Roller Bearings.
* * * * *
    6. Section 225.7002 is added to read as follows:


225.7002  Restrictions on food, clothing, fabrics, and hand or 
measuring tools.


225.7002-1  [Amended]

    7. Section 225.7002-1 is amended by removing paragraph (b) and 
redesignating paragraph (c) as paragraph (b).


225.7002-2  [Amended]

    8. Section 225.7002-2 is amended as follows:
    a. In paragraph (b), in the first sentence, by removing ``or (b)'';
    b. By removing paragraph (b)(4);
    c. By redesignating paragraph (b)(5) as paragraph (b)(4);
    d. In newly designated paragraph (b)(4), by removing ``PGI 
225.7002-2(b)(5)'' and adding in its place ``PGI 225.7002-2(b)(4)'';
    e. In paragraph (f) introductory text, by removing ``, specialty 
metals,'';
    f. By removing paragraphs (m) and (n);
    g. By redesignating paragraphs (o) and (p) as paragraphs (m) and 
(n), respectively; and
    h. By removing paragraph (q).


225.7002-3  [Amended]

    9. Section 225.7002-3 is amended by removing paragraph (b) and 
redesignating paragraph (c) as paragraph (b).
    10. Section 225.7003 is revised to read as follows:


225.7003  Restrictions on acquisition of specialty metals.

    11. Sections 225.7003-1 through 225.7003-5 are added to read as 
follows:


225.7003-1  Definitions.

    As used in this section--
    (a) Assembly, commercial derivative military article, component, 
electronic component, end item, high performance magnet, required form, 
and subsystem are defined in the clause at 252.225-70X2, Restriction on 
Acquisition of Certain Articles Containing Specialty Metals.
    (b) Automotive item--
    (1) Means a self-propelled military transport tactical vehicle, 
primarily intended for use by military personnel or for carrying cargo, 
such as--
    (i) A high-mobility multipurpose wheeled vehicle;
    (ii) An armored personnel carrier; or
    (iii) A troop/cargo-carrying truckcar, truck, or van; and
    (2) Does not include--
    (i) A commercially available off-the-shelf vehicle; or
    (ii) Construction equipment (such as bulldozers, excavators, lifts, 
or loaders) or other self-propelled equipment (such as cranes or 
aircraft ground support equipment).
    (c) Produce and specialty metal are defined in the clauses at 
252.225-70X1, Restriction on Acquisition of Specialty Metals, and 
252.225-70X2, Restriction on Acquisition of Certain Articles Containing 
Specialty Metals. See PGI 225.7003-1(c) for examples of specialty 
metals.


225.7003-2  Restrictions.

    The following restrictions implement 10 U.S.C. 2533b. Except as 
provided in 225.7003-3--
    (a) Do not acquire the following items, or any components of the 
following items, unless any specialty metals contained in the items or 
components are melted or produced in the United States (also see 
guidance at PGI 225.7003-2(a)):
    (1) Aircraft.
    (2) Missile or space systems.
    (3) Ships.
    (4) Tank or automotive items.
    (5) Weapon systems.
    (6) Ammunition.
    (b) Do not acquire a specialty metal (e.g., raw stock, including 
bar, billet, slab, wire, plate, and sheet; castings; and forgings) as 
an end item, unless the specialty metal is melted or produced in the 
United States. This restriction applies to specialty metal acquired by 
a contractor for delivery to DoD as an end item, in addition to 
specialty metal acquired by DoD directly from the entity that melted or 
produced the specialty metal.


225.7003-3  Exceptions.

    Procedures for submitting requests to the Under Secretary of 
Defense (Acquisition, Technology, and Logistics) (USD(AT&L)) for a 
determination or approval as required in paragraphs (b)(5), (c), or (d) 
of this subsection are at PGI 225.7003-3.
    (a) Acquisitions in the following categories are not subject to the 
restrictions in 225.7003-2:
    (1) Acquisitions at or below the simplified acquisition threshold.
    (2) Acquisitions outside the United States in support of combat 
operations.
    (3) Acquisitions in support of contingency operations.
    (4) Acquisitions for which the use of other than competitive 
procedures has been approved on the basis of unusual and compelling 
urgency in accordance with FAR 6.302-2.
    (5) Acquisitions of items specifically for commissary resale.
    (6) Acquisitions of items for test and evaluation under the foreign 
comparative testing program (10 U.S.C. 2350a(g)). However, this 
exception does not apply to any acquisitions under follow-on production 
contracts.
    (b) One or more of the following exceptions may apply to an end 
item or component that includes any of the following, under a prime 
contract or subcontract at any tier. The restrictions in 225.7003-2 do 
not apply to the following:
    (1) Electronic components, unless the Secretary of Defense, upon 
the recommendation of the Strategic Materials Protection Board pursuant 
to 10 U.S.C. 187, determines that the domestic availability of a 
particular electronic component is critical to national security.
    (2)(i) Commercially available off-the-shelf (COTS) items containing 
specialty metals, except the restrictions do apply to contracts or 
subcontracts for the acquisition of--
    (A) Specialty metal mill products, such as bar, billet, slab, wire, 
plate, and sheet, that have not been incorporated into end items, 
subsystems, assemblies, or components. Specialty metal supply contracts 
issued by COTS producers are not subcontracts for the purposes of this 
exception;
    (B) Forgings or castings of specialty metals, unless the forgings 
or castings are incorporated into COTS end items, subsystems, or 
assemblies;
    (C) Commercially available high performance magnets that contain 
specialty metal, unless such high performance magnets are incorporated 
into COTS end items or subsystems; and

[[Page 42305]]

    (D) COTS fasteners, unless--
    (1) The fasteners are incorporated into COTS end items, subsystems, 
or assemblies; or
    (2) The manufacturer of such fasteners certifies that it will 
purchase, during the relevant calendar year, an amount of domestically 
melted or produced specialty metal, in the required form, for use in 
the production of fasteners for sale to DoD and other customers, that 
is not less than 50 percent of the total amount of the specialty metal 
that the manufacturer will purchase to carry out the production of such 
fasteners for all customers.
    (ii) If this exception is used for an acquisition of COTS end items 
valued at $5 million or more per item, the acquiring department or 
agency shall submit an annual report to the Director, Defense 
Procurement, Acquisition Policy, and Strategic Sourcing, in accordance 
with the procedures at PGI 225.7003-3(b)(2).
    (iii) At the end of fiscal years 2008 and 2009, contractors are 
required to report use of this exception to acquire COTS items, 
containing specialty metal, that are incorporated into a noncommercial 
end item (see 252.225-70X4).
    (3) Fasteners that are commercial items and are acquired under a 
contract or subcontract with a manufacturer of such fasteners, if the 
manufacturer has certified that it will purchase, during the relevant 
calendar year, an amount of domestically melted or produced specialty 
metal, in the required form, for use in the production of fasteners for 
sale to DoD and other customers, that is not less than 50 percent of 
the total amount of the specialty metal that the manufacturer will 
purchase to carry out the production of such fasteners for all 
customers.
    (4) Items listed in 225.7003-2(a), manufactured in a qualifying 
country or containing specialty metals melted in a qualifying country 
(see 225.872-1(a) and (b)).
    (5) Specialty metal in any of the items listed in 225.7003-2 if the 
USD(AT&L), or an official authorized in accordance with paragraph 
(b)(5)(i) of this subsection, determines that specialty metal melted or 
produced in the United States cannot be acquired as and when needed at 
a fair and reasonable price in a satisfactory quality, a sufficient 
quantity, and the required form (i.e., a domestic nonavailability 
determination). See guidance in PGI 225.7003-3.
    (i) The Secretary of the military department concerned is 
authorized, without power of redelegation, to make a domestic 
nonavailability determination that applies to only one contract. The 
supporting documentation for the determination shall include--
    (A) An analysis of alternatives that would not require a domestic 
nonavailability determination; and
    (B) Written documentation by the requiring activity, with 
specificity, why such alternatives are unacceptable.
    (ii) A domestic nonavailability determination that applies to more 
than one contract (i.e., a class domestic nonavailability 
determination), requires the approval of the USD(AT&L).
    (A) At least 30 days before making a domestic nonavailability 
determination that would apply to more than one contract, the USD(AT&L) 
will, to the maximum extent practicable, and in a manner consistent 
with the protection of national security and confidential business 
information--
    (1) Publish a notice on the Federal Business Opportunities Web site 
(https://www.FedBizOpps.gov or any successor site) of the intent to make 
the domestic nonavailability determination; and
    (2) Solicit information relevant to such notice from interested 
parties, including producers of specialty metal mill products.
    (B) The USD(AT&L)--
    (1) Will take into consideration all information submitted in 
response to the notice in making a class domestic nonavailability 
determination;
    (2) May consider other relevant information that cannot be made 
part of the public record consistent with the protection of national 
security information and confidential business information; and
    (3) Will ensure that any such domestic nonavailability 
determination and the rationale for the determination are made publicly 
available to the maximum extent consistent with the protection of 
national security and confidential business information.
    (6) A minimal amount of otherwise noncompliant specialty metals 
(i.e. , specialty metals not melted or produced in the United States 
that are not covered by another exception listed in this paragraph 
(b)), if the total weight of noncompliant specialty metal does not 
exceed 2 percent of the total weight of all specialty metal in the end 
item. This exception does not apply to the specialty metals in high 
performance magnets.
    (c) Compliance for commercial derivative military articles.
    (1) The restrictions at 225.7003-2(a) do not apply to an item 
acquired under a prime contract if--
    (i) The offeror has certified that the offeror and its 
subcontractor(s) will enter into a contractual agreement or agreements 
to purchase a specified amount of domestically melted or produced 
specialty metal in accordance with the provision at 252.225-70X3; and
    (ii) The USD(AT&L), or the Secretary of the military department 
concerned, determines that the item is a commercial derivative military 
article (defense agencies see procedures at PGI 225.7003-3). The 
contracting officer shall submit the offeror's certification and a 
request for a determination to the appropriate official, through agency 
channels, and shall notify the offeror when a decision has been made.
    (d) National security waiver. The USD(AT&L) may waive the 
restrictions at 225.7003-2 if the USD(AT&L) determines in writing that 
acceptance of the item is necessary to the national security interests 
of the United States (see procedures at PGI 225.7003-3). This authority 
may not be delegated.
    (1) The written determination of the USD(AT&L)--
    (i) Shall specify the quantity of end items to which the national 
security waiver applies;
    (ii) Shall specify the time period over which the national security 
waiver applies; and
    (iii) Shall be provided to the congressional defense committees 
before the determination is executed, except that in the case of an 
urgent national security requirement, the determination may be provided 
to the congressional defense committees up to 7 days after it is 
executed.
    (2) After making such a determination, the USD(AT&L) will--
    (i) Ensure that the contractor or subcontractor responsible for the 
noncompliant specialty metal develops and implements an effective plan 
to ensure future compliance; and
    (ii) Determine whether or not the noncompliance was knowing and 
willful. If the USD(AT&L) determines that the noncompliance was knowing 
and willful, the appropriate debarring and suspending official shall 
consider suspending or debarring the contractor or subcontractor until 
such time as the contractor or subcontractor has effectively addressed 
the issues that led to the noncompliance.
    (3) Because national security waivers will only be granted when the 
acquisition in question is necessary to the national security interests 
of the United States, the requirement for a plan will be applied as a 
condition subsequent, and not a condition precedent, to the granting of 
a waiver.

[[Page 42306]]

225.7003-4  One-time waiver.

    DoD may accept articles containing specialty metals that are not in 
compliance with the specialty metals clause of the contract if--
    (a) Final acceptance takes place before September 30, 2010;
    (b) The specialty metals were incorporated into items (whether end 
items or components) produced, manufactured, or assembled in the United 
States before October 17, 2006;
    (c) The contracting officer determines in writing that--
    (1) It would not be practical or economical to remove or replace 
the specialty metals incorporated in such items or to substitute items 
containing compliant materials;
    (2) The contractor and any subcontractor responsible for providing 
items containing non-compliant specialty metals have in place an 
effective plan to ensure compliance with the specialty metals clause of 
the contract for future items produced, manufactured, or assembled in 
the United States; and
    (3) The non-compliance was not knowing or willful;
    (d) The determination is approved by--
    (1) The USD(AT&L); or
    (2) The service acquisition executive of the military department 
concerned; and
    (e) Not later than 15 days after approval of the determination, the 
contracting officer posts a notice on the Federal Business 
Opportunities Web site at https://www.FedBizOpps.gov, stating that a 
waiver for the contract has been granted under Section 842(b) of the 
National Defense Authorization Act for Fiscal Year 2007 (Pub. L. 109-
364).


225.7003-5  Solicitation provision and contract clauses.

    (a) Unless an exception in 225.7003-3(a) or (d) applies (but see 
paragraph (c) of this subsection)--
    (1) Use the clause at 252.225-70X1, Restriction on Acquisition of 
Specialty Metals, in solicitations and contracts that--
    (i) Exceed the simplified acquisition threshold; and
    (ii) Require the delivery of specialty metals as end items.
    (2) Use the clause at 252.225-70X2, Restriction on Acquisition of 
Certain Articles Containing Specialty Metals, in solicitations and 
contracts that--
    (i) Exceed the simplified acquisition threshold; and
    (ii) Require delivery of any of the following items, or components 
of the following items, if such items or components contain specialty 
metal:
    (A) Aircraft.
    (B) Missile or space systems.
    (C) Ships.
    (D) Tank or automotive items.
    (E) Weapon systems.
    (F) Ammunition.
    (b) Use the provision at 252.225-70X3, Commercial Derivative 
Military Article--Specialty Metals Compliance Certificate, in 
solicitations--
    (1) That contain the clause at 252.225-70X2; and
    (2) For which the contracting officer anticipates that one or more 
offers of commercial derivative military articles may be received.
    (c) Use the clause at 252.225-70X4, Reporting of Commercially 
Available Off-the-Shelf Items that Contain Specialty Metals and are 
Incorporated into Noncommercial End Items, in solicitations and 
contracts that--
    (1) Contain the clause at 252.225-70X2;
    (2) Are for the acquisition of noncommercial end items; and
    (3) Are awarded in fiscal year 2009.
    (d) If an agency cannot reasonably determine at time of acquisition 
whether some or all of the items will be used in support of combat 
operations or in support of contingency operations, the contracting 
officer should not rely on the exception at 225.7003-3(a)(2) or (3), 
but should include the appropriate specialty metals clause or provision 
in the solicitation and contract.
    (e) If the solicitation and contract require delivery of a variety 
of contract line items containing specialty metals, but only some of 
the items are subject to domestic specialty metals restrictions, 
identify in the Schedule those items that are subject to the 
restrictions.


225.7004-4  [Amended]

    12. Section 225.7004-4 is amended by removing ``225.7003'' and 
adding in its place ``225.7008''.


225.7005-3  [Amended]

    13. Section 225.7005-3 is amended by removing ``225.7003'' and 
adding in its place ``225.7008''.


225.7006-3  [Amended]

    14. Section 225.7006-3 is amended in paragraph (a), and in the 
second sentence of paragraph (b), by removing ``225.7003'' and adding 
in its place ``225.7008''.
    15. Section 225.7008 is added to read as follows:


225.7008  Waiver of restrictions of 10 U.S.C. 2534.

    (a) When specifically authorized by reference elsewhere in this 
subpart, the restrictions on certain foreign purchases under 10 U.S.C. 
2534(a) may be waived as follows:
    (1)(i) The USD(AT&L), without power of delegation, may waive a 
restriction for a particular item for a particular foreign country upon 
determination that--
    (A) United States 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 United States 
or Canada are not available.
    (iii) Application of the restriction would result in the existence 
of only one source for the item in the United States or Canada.
    (iv) Application of the restriction is not in the national security 
interests of the United States.

[[Page 42307]]

    (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 U.S. or Canadian origin is unreasonable if it 
exceeds 150 percent of the offered price, inclusive of duty, of items 
that are not of U.S. or Canadian origin.
    (b) In accordance with the provisions of paragraphs (a)(1)(i) 
through (iii) of this section, the USD (AT&L) has waived the 
restrictions of 10 U.S.C. 2534(a) for certain items manufactured in the 
United Kingdom, including air circuit breakers for naval vessels (see 
225.7006). This waiver applies to--
    (1) Procurements under solicitations issued on or after August 4, 
1998; and
    (2) Subcontracts and options under contracts entered into prior to 
August 4, 1998, under the conditions described in paragraph (a)(1)(iv) 
of this section.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    16. Section 252.212-7001 is amended as follows:
    a. By revising the clause date to read ``(XXX 2008)'';
    b. By removing paragraph (b)(6);
    c. By redesignating paragraphs (b)(7) through (21) as paragraphs 
(b)(8) through (22) respectively;
    d. By redesignating paragraph (b)(5) as paragraph (b)(7);
    e. By adding new paragraphs (b)(5) and (b)(6);
    f. By removing paragraph (c)(1); and
    g. By redesignating paragraphs (c)(2) through (4) as paragraphs 
(c)(1) through (3), respectively. The added text reads as follows:


252.212-7001  Contract terms and conditions required to implement 
statutes or Executive orders applicable to Defense acquisitions of 
commercial items.

* * * * *
    (b) * * *
    (5) ---- 252.225-70X1, Restriction on Acquisition of Specialty 
Metals (XXX 2008) (10 U.S.C. 2533b).
    (6) ---- 252.225-70X2, Restriction on Acquisition of Certain 
Articles Containing Specialty Metals (XXX 2008) (10 U.S.C. 2533b).
* * * * *


252.225-7014  [Removed and Reserved]

    17. Section 252.225-7014 is removed and reserved.


252.225-7015  [Amended]

    18. Section 252.225-7015 is amended in the introductory text by 
removing ``225.7002-3(c)'' and adding in its place ``225.7002-3(b)''.
    19. Sections 252.225-70X1 through 252.225-70X4 are added to read as 
follows:


252.225-70X1  Restriction on acquisition of specialty metals.

    As prescribed in 225.7003-5(a)(1), use the following clause:

RESTRICTION ON ACQUISITION OF SPECIALTY METALS (XXX 2008)

    (a) Definitions. As used in this clause--
    (1) Alloy means a metal consisting of a mixture of a basic 
metallic element and one or more metallic, or non-metallic, alloying 
elements.
    (i) For alloys named by a single metallic element (e.g., 
titanium alloy), it means that the alloy contains 50 percent or more 
of the named metal (by mass).
    (ii) If two metals are specified in the name (e.g., nickel-iron 
alloy), those metals are the two predominant elements in the alloy, 
and together they constitute 50 percent or more of the alloy (by 
mass).
    (2) Produce means the application of forces or processes to a 
specialty metal to create the desired physical properties through 
quenching or tempering of steel plate, gas atomization or sputtering 
of titanium, or final consolidation of non-melt derived titanium 
powder or titanium alloy powder.
    (3) Specialty metal means--
    (i) Steel--
    (A) With a maximum alloy content exceeding one or more of the 
following limits: manganese, 1.65 percent; silicon, 0.60 percent; or 
copper, 0.60 percent; or
    (B) Containing more than 0.25 percent of any of the following 
elements: aluminum, chromium, cobalt, molybdenum, nickel, niobium 
(columbium), titanium, tungsten, or vanadium;
    (ii) Metal alloys consisting of--
    (A) Nickel or iron-nickel alloys that contain a total of 
alloying metals other than nickel and iron in excess of 10 percent; 
or
    (B) Cobalt alloys that contain a total of alloying metals other 
than cobalt and iron in excess of 10 percent;
    (iii) Titanium and titanium alloys; or
    (iv) Zirconium and zirconium alloys.
    (4) Steel means an iron alloy that includes between 0.02 and 2 
percent carbon and may include other elements.
    (b) Any specialty metal delivered under this contract shall be 
melted or produced in the United States or its outlying areas.

(End of clause)


252.225-70X2  Restriction on acquisition of certain articles containing 
specialty metals.

    As prescribed in 225.7003-5(a)(2), use the following clause:

RESTRICTION ON ACQUISITION OF CERTAIN ARTICLES CONTAINING SPECIALTY 
METALS (XXX 2008)

    (a) Definitions. As used in this clause--
    (1) Alloy means a metal consisting of a mixture of a basic 
metallic element and one or more metallic, or non-metallic, alloying 
elements.
    (i) For alloys named by a single metallic element (e.g., 
titanium alloy), it means that the alloy contains 50 percent or more 
of the named metal (by mass).
    (ii) If two metals are specified in the name (e.g., nickel-iron 
alloy), those metals are the two predominant elements in the alloy, 
and together they constitute 50 percent or more of the alloy (by 
mass).
    (2) Assembly means an item forming a portion of a system or 
subsystem that--
    (i) Can be provisioned and replaced as an entity; and
    (ii) Incorporates multiple, replaceable parts.
    (3) Commercial derivative military article means an item 
acquired by the Department of Defense that is or will be produced 
using the same production facilities, a common supply chain, and the 
same or similar production processes that are used for the 
production of articles predominantly used by the general public or 
by nongovernmental entities for purposes other than governmental 
purposes.
    (4) Commercially available off-the-shelf item--
    (i) Means any item of supply that is--
    (A) A commercial item;
    (B) Sold in substantial quantities in the commercial 
marketplace; and
    (C) Offered to the Government, under this contract or a 
subcontract at any tier, without modification, in the same form in 
which it is sold in the commercial marketplace; and
    (ii) Does not include bulk cargo, as defined in section 3 of the 
Shipping Act of 1984 (46 U.S.C. App 1702), such as agricultural 
products and petroleum products.
    (5) Component means any item supplied to the Government as part 
of an end item or of another component.
    (6) Electronic component means an item that operates by 
controlling the flow of electrons or other electrically charged 
particles in circuits, using interconnections of electrical devices 
such as resistors, inductors, capacitors, diodes, switches, 
transistors, or integrated circuits. The term does not include 
structural or mechanical parts of an assembly containing an 
electronic component.
    (7) End item means the final production product when assembled 
or completed and ready for delivery under a line item of this 
contract.
    (8) High performance magnet means a permanent magnet that 
obtains a majority of its magnetic properties from rare earth metals 
(such as samarium).
    (9) Produce means the application of forces or processes to a 
specialty metal to create the desired physical properties through 
quenching or tempering of steel plate, gas atomization or sputtering 
of titanium, or final consolidation of non-melt derived titanium 
powder or titanium alloy powder.
    (10) Qualifying country means any country listed in subsection 
225.872-1(a) or (b) of the Defense Federal Acquisition Regulation 
Supplement (DFARS).
    (11) Required form means in the form of mill product, such as 
bar, billet, wire, slab, plate, or sheet, and in the grade 
appropriate for the production of--
    (i) A finished end item to be delivered to the Government under 
this contract; or

[[Page 42308]]

    (ii) A finished component assembled into an end item to be 
delivered to the Government under this contract.
    (12) Specialty metal means--
    (i) Steel--
    (A) With a maximum alloy content exceeding one or more of the 
following limits: manganese, 1.65 percent; silicon, 0.60 percent; or 
copper, 0.60 percent; or
    (B) Containing more than 0.25 percent of any of the following 
elements: aluminum, chromium, cobalt, molybdenum, nickel, niobium 
(columbium), titanium, tungsten, or vanadium;
    (ii) Metal alloys consisting of--
    (A) Nickel or iron-nickel alloys that contain a total of 
alloying metals other than nickel and iron in excess of 10 percent; 
or
    (B) Cobalt alloys that contain a total of alloying metals other 
than cobalt and iron in excess of 10 percent;
    (iii) Titanium and titanium alloys; or
    (iv) Zirconium and zirconium alloys.
    (13) Steel means an iron alloy that includes between 0.02 and 2 
percent carbon and may include other elements.
    (14) Subsystem means a functional grouping of items that combine 
to perform a major function within an end item, such as electrical 
power, attitude control, and propulsion.
    (b) Restriction. Except as provided in paragraph (c) of this 
clause, any specialty metals incorporated in items delivered under 
this contract shall be melted or produced in the United States, its 
outlying areas, or a qualifying country.
    (c) Exceptions. The restriction in paragraph (b) of this clause 
does not apply to--
    (1) Electronic components;
    (2)(i) Commercially available off-the-shelf (COTS) items, other 
than--
    (A) Specialty metal mill products, such as bar, billet, slab, 
wire, plate, or sheet, that have not been incorporated into COTS end 
items, subsystems, assemblies, or components;
    (B) Forgings or castings of specialty metals, unless the 
forgings or castings are incorporated into COTS end items, 
subsystems, or assemblies;
    (C) Commercially available high performance magnets that contain 
specialty metal, unless such high performance magnets are 
incorporated into COTS end items or subsystems; and
    (D) COTS fasteners, unless--
    (1) The fasteners are incorporated into COTS end items, 
subsystems, assemblies, or components; or
    (2) The manufacturer of the fasteners certifies that it will 
purchase, during the relevant calendar year, an amount of 
domestically melted specialty metal, in the required form, for use 
in the production of fasteners for sale to the Department of Defense 
and other customers, that is not less than 50 percent of the total 
amount of the specialty metal that it will purchase to carry out the 
production of such fasteners for all customers.
    (ii) A COTS item is considered to be ``without modification'' if 
it is not modified prior to contractual acceptance by the next 
higher tier in the supply chain.
    (A) Specialty metals in a COTS item that was accepted without 
modification by the next higher tier are excepted from the 
restriction in paragraph (b) of this clause, and remain excepted, 
even if a piece of the COTS item subsequently is removed (e.g., the 
end is removed from a COTS screw or an extra hole is drilled in a 
COTS bracket).
    (B) Specialty metals that were not contained in a COTS item upon 
acceptance, but are added to the COTS item after acceptance, are 
subject to the restriction in paragraph (b) of this clause (e.g., a 
special reinforced handle made of specialty metal is added to a COTS 
item).
    (C) If two or more COTS items are combined in such a way that 
the resultant item is not a COTS item, only the specialty metals 
involved in joining the COTS items together are subject to the 
restriction in paragraph (b) of this clause (e.g., a COTS aircraft 
is outfitted with a COTS engine that is not the COTS engine normally 
provided with the aircraft).
    (D) For COTS items that are normally sold in the commercial 
marketplace with various options, items that include such options 
are also COTS items. However, if a COTS item is offered to the 
Government with an option that is not normally offered in the 
commercial marketplace, that option is subject to the restriction in 
paragraph (b) of this clause (e.g.--An aircraft is normally sold to 
the public with an option for installation kits. The Department of 
Defense requests a military-unique kit. The aircraft is still a COTS 
item, but the military-unique kit is not a COTS item and must comply 
with the restriction in paragraph (b) of this clause unless another 
exception applies).
    (3) Fasteners that are commercial items, if the manufacturer of 
the fasteners certifies it will purchase, during the relevant 
calendar year, an amount of domestically melted specialty metal, in 
the required form, for use in the production of fasteners for sale 
to the Department of Defense and other customers, that is not less 
than 50 percent of the total amount of the specialty metal that it 
will purchase to carry out the production of such fasteners for all 
customers.
    (4) Items manufactured in a qualifying country.
    (5) Specialty metals for which the Government has determined in 
accordance with DFARS 225.7003-3 that specialty metal melted or 
produced in the United States, its outlying areas, or a qualifying 
country cannot be acquired as and when needed in--
    (i) A satisfactory quality;
    (ii) A sufficient quantity; and
    (iii) The required form.
    (6) A minimal amount of otherwise noncompliant specialty metals 
(i.e., specialty metals not melted or produced in the United States, 
an outlying area, or a qualifying country, that are not covered by 
one of the other exceptions in this paragraph (c), if the total 
amount of such noncompliant metals does not exceed 2 percent of the 
total weight of the noncompliant specialty metals in the end item, 
as estimated in good faith by the Contractor, does not exceed 2 
percent of the total weight of all specialty metal in the end item. 
This exception does not apply to the specialty metals in high 
performance magnets.
    (d) Compliance for commercial derivative military articles. As 
an alternative to the compliance required in paragraph (b) of this 
clause, the Contractor may purchase an amount of domestically melted 
or produced specialty metals in the required form, for use during 
the period of contract performance in the production of the 
commercial derivative military article and the related commercial 
article, if--
    (1) The Contracting Officer has notified the Contractor of the 
items to be delivered under this contract that have been determined 
by the Government to meet the definition of ``commercial derivative 
military article''; and
    (2) For each item that has been determined by the Government to 
meet the definition of ``commercial derivative military article,'' 
the Contractor has certified, as specified in the provision of the 
solicitation entitled ``Commercial Derivative Military Article-
Specialty Metals Compliance Certificate'' (DFARS 252.225-70X3), that 
the Contractor and its subcontractor(s) will enter into a 
contractual agreement or agreements to purchase an amount of 
domestically melted or produced specialty metal in the required 
form, for use during the period of contract performance in the 
production of each commercial derivative military article and the 
related co