Defense Federal Acquisition Regulation Supplement; Restriction on Ball and Roller Bearings (DFARS Case 2006-D029), 76297-76300 [2010-30670]
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Federal Register / Vol. 75, No. 235 / Wednesday, December 8, 2010 / Rules and Regulations
List of Subjects in 48 CFR Parts 222 and
252
Government procurement.
Clare M. Zebrowski,
Editor, Defense Acquisition Regulations
System.
Accordingly, the interim rule
amending 48 CFR parts 222 and 252,
which was published in the Federal
Register at 75 FR 27946 on May 19,
2010, is adopted as final with the
following changes:
■ 1. The authority citation for 48 CFR
parts 222, and 252 continues to read as
follows:
■
Authority: 41 U.S.C. 421 and 48 CFR
chapter 1.
PART 222—APPLICATION OF LABOR
LAWS TO GOVERNMENT
ACQUISITIONS
[Sections 222.7401 through 222.7404
redesignated as sections 222.7402
through 222.7405]
■ 2. Redesignate sections 222.7401
through 222.7404 as section 222.7402
through 222.7405 respectively.
■ 3. Add a new section 222.7401 to read
as follows:
222.7401
Definition.
Covered subcontractor, as used in this
subpart, is defined in the clause at
252.222–7006, Restrictions on the Use
of Mandatory Arbitration Agreements.
■ 4. Revise newly designated sections
222.7403 through 222.7405 to read as
follows:
222.7403
Applicability.
This requirement does not apply to
the acquisition of commercial items
(including commercially available offthe-shelf items).
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222.7404
Waiver.
(a) The Secretary of Defense may
waive, in accordance with paragraphs
(b) through (d) of this section, the
applicability of paragraphs (a) or (b) of
222.7402 to a particular contract or
subcontract, if the Secretary or the
Deputy Secretary personally determines
that the waiver is necessary to avoid
harm to national security interests of the
United States, and that the term of the
contract or subcontract is not longer
than necessary to avoid such harm.
(b) The waiver determination shall set
forth the grounds for the waiver with
specificity, stating any alternatives
considered, and explain why each of the
alternatives would not avoid harm to
national security interests.
(c) The contracting officer shall
submit requests for waivers in
accordance with agency procedures.
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(d) The Secretary of Defense will
transmit the determination to Congress
and simultaneously publish it in the
Federal Register, not less than 15
business days before the contract or
subcontract addressed in the
determination may be awarded.
DEPARTMENT OF DEFENSE
222.7405
Defense Federal Acquisition
Regulation Supplement; Restriction on
Ball and Roller Bearings (DFARS Case
2006–D029)
Contract clause.
Use the clause at 252.222–7006,
Restrictions on the Use of Mandatory
Arbitration Agreements, in all
solicitations and contracts (including
task or delivery orders and bilateral
modifications adding new work) valued
in excess of $1 million utilizing funds
appropriated or otherwise made
available by the Defense Appropriations
Act for Fiscal Year 2010 (Pub. L. 111–
118), except in contracts for the
acquisition of commercial items,
including commercially available offthe-shelf items.
PART 252—SOLICITATION
PROVISIONS AND CONTRACT
CLAUSES
5. Amend section 252.222–7006 by:
■ a. Revising the introductory text;
■ b. Revising the clause date; and
■ c. Revising paragraphs (b)(2) and (d) to
read as follows:
■
252.222–7006 Restrictions on the Use of
Mandatory Arbitration Agreements.
As prescribed in 222.7405, use the
following clause:
RESTRICTIONS ON THE USE OF
MANDATORY ARBITRATION
AGREEMENTS (DEC 2010)
*
*
*
*
*
(b) * * *
(2) Certifies, by signature of the contract,
that it requires each covered subcontractor to
agree not to enter into, and not to take any
action to enforce, any provision of any
existing agreements, as described in
paragraph (b)(1) of this clause, with respect
to any employee or independent contractor
performing work related to such subcontract.
*
*
*
*
*
(d) The Secretary of Defense may waive the
applicability of the restrictions of paragraph
(b) of this clause in accordance with Defense
Federal Acquisition Regulation Supplement
222.7404.
Defense Acquisition Regulations
System
48 CFR Parts 225 and 252
RIN 0750–AG57
Defense Acquisition
Regulations System, Department of
Defense (DoD)
ACTION: Final rule.
AGENCY:
DoD is issuing a final rule
amending the Defense Federal
Acquisition Regulation Supplement
(DFARS) to revise the domestic source
restriction on acquisition of ball and
roller bearings. This final rule, which
implements the DoD annual
appropriations act domestic source
restrictions, requires that each ball or
roller bearing be manufactured in the
United States, its outlying areas, or
Canada, and that the cost of the bearing
components manufactured in the United
States, its outlying areas, or Canada,
shall exceed 50 percent of the total cost
of the bearing components of that ball
or roller bearing.
DATES: Effective Date: December 8, 2010.
FOR FURTHER INFORMATION CONTACT: Ms.
Amy Williams, 703–602–0328.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Background
The current DFARS restriction on ball
and roller bearings (225.7009)
implemented two statutory restrictions:
10 U.S.C. 2534(a)(5) and annual
appropriations act restrictions. 10 U.S.C.
2534(a)(5) required that all ball and
roller bearings and bearing components,
either as end items or components of
end items, be wholly manufactured in
the United States or Canada. The annual
defense appropriations act restrictions
require that all ball and roller bearings
be produced by a domestic source and
be of domestic origin. This restriction
does not apply to the acquisition of
commercial items, either as components
or end products, unless the commercial
bearings themselves are purchased as
the end products.
II. Discussion and Analysis
(End of clause)
[FR Doc. 2010–30669 Filed 12–7–10; 8:45 am]
A. Analysis of Public Comments
BILLING CODE 5001–08–P
DoD published a proposed rule in the
Federal Register on May 7, 2010 (75 FR
25167). The comment period closed on
July 6, 2010. Three respondents
submitted comments.
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1. Nonavailablity
Comment: One respondent
commented that, in some cases, it is
necessary to import foreign bearings.
Response: Noted. This rule does not
make any change in the existing ability
to waive the restriction on a case-bycase basis by certifying that adequate
domestic supplies are not available and
that the acquisition must be made in
order to acquire capability for national
security purposes.
Comment: Another respondent was of
the opinion that there is not really a
shortage of bearings compliant with 10
U.S.C. 2534(a)(5), just an unwillingness
on the part of distributors and
wholesalers to devote the time to market
research and tracking the supply chain
to demonstrate the availability of
compliant bearings.
Response: Commercial bearings
manufacturers make business decisions
based on the market. Many suppliers of
commercial bearings and bearing
components are unwilling to track the
origin of bearings components and
subcomponents because the
Government does not have enough
market leverage for it to be in the
business interest of the manufacturers
and suppliers to do so. Therefore, many
bearings must be treated as nondomestic
because the manufacturer is unable to
certify to domestic sourcing of the
components.
Comment: This respondent
recommended retaining the requirement
for 100 per cent domestic content for the
following reasons:
a. According to the respondent,
changing the rules now to allow cheaper
sources after using public law to create
domestic sourcing would be detrimental
to the companies that have recently
invested in capacity.
Response: The reason for changing the
rule is statutory change. 10 U.S.C.
2534(a)(5) is no longer in effect because
Congress allowed the restriction to
expire.
Furthermore, the experience of
Government buyers indicates that, in
general, the current regulation has not
prevented the loss of domestic sources,
due to lack of Government leverage with
regard to acquisition of commercial
bearings. The Government continues to
issue more and more waivers in the
instances when bearings are no longer
available that the manufacturer or
distributor can certify as having 100
percent domestic components. Bearings
manufacturers have stated that
manufacture of the retainer, inner race,
and outer race are not core
competencies. Therefore, more and
more bearings manufacturers obtain
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these components from foreign sources,
which are significantly cheaper, and
then do the complex manufacture of the
bearing in this country. The advantage
of changing the regulation to allow some
foreign components without the need
for a waiver is that fewer waivers will
be required and then the requirement
for manufacture in the United States
and 50 percent domestic components
remains in effect.
b. According to the respondent,
quality of components is very critical to
eliminating latent defects. The
respondent stated that retaining a fully
domestic source will make it easier to
track the components and determine the
cause of any failure.
Response: Nothing in this rule alters
DoD procedures for ensuring the quality
of the products it purchases.
c. The respondent considered that
retaining all of this skill set is critical to
maintaining a viable industrial base.
According to the respondent, there is
potential in the near future to have
difficulty getting bearings even from
qualifying countries, leaving China as
the sole source of this critical
component. The respondent was
concerned that China may manipulate
the market if there is no ready domestic
supplier of bearings.
Response: DoD has existing authority
under 10 U.S.C. 2304(c)(3) and
implementing DFARS provisions to
restrict procurements to domestic
sources when it determines that a
particular industrial capability must be
protected for national security reasons,
and can use this authority for bearings
if it proves necessary.
d. The respondent stated that the fact
that the rule affects any small business
supplier is worthy of consideration, not
just when it affects a significant number.
Response: The language in the
preamble to the proposed rule relating
to impact on small business entities is
based on the statutory requirement to
assess whether the rule will have a
significant impact on a substantial
number of small entities within the
meaning of the Regulatory Flexibility
Act (5 U.S.C. 601, et seq.). The analysis,
however, did assess both positive and
negative impact on small business
entities.
2. Exemptions
Comment: One respondent was
concerned that the language in 252.225–
7016 is unchanged from the currently
existing exemption.
a. According to the respondent, by
allowing the same exemption and
lowering the content requirement to 50
per cent, a bearing used in assembly for
a military application may be sourced
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from anywhere in the world, including
countries that have less sophisticated
production capabilities. The respondent
recommended revision of the
exemptions to require manufacture of
domestically nonavailable ball or roller
bearings in a designated country.
b. The respondent also mentioned
that when the Government needs to buy
a spare or replacement foreign
commercial bearing, it cannot do so
without a waiver.
Response: a. This case is only
concerned with the definition of what
constitutes a domestic bearing, based on
statutory change. The definition of a
domestic bearing still requires
manufacture in the United States, its
outlying areas, or Canada. There was no
change in the statute regarding the
exemptions from these requirements.
b. The issue relating to problems of
buying spare or replacement foreign
commercial bearings is also a problem
of the current regulation, and is a direct
result of the statutory lack of exceptions
when buying commercial ball or roller
bearings as the end item rather than as
a component.
3. Waivers
Comment: One respondent stated that
waivers go too far. If there is no
domestic bearing to meet the
requirement, then the restriction should
only be waived to allow purchase of
bearings from designated countries. The
respondent was concerned that the
proposal may ease the restrictions
beyond those found in the Buy
American Act, thus opening the
possibility of allowing bearings for
defense purposes to include
components manufactured by unreliable
sources. The respondent noted that
there are 2,059 FSC ball and roller
bearings on the DLA FY 2010 waiver
list. According to the respondent,
sourcing is open to any country of
origin, with price being the sole
determining factor for award.
Response: This rule implements
section 8065 of the DoD Appropriations
Act for Fiscal Year 2002 (Pub. L. 107–
117) and the same restriction in
subsequent DoD appropriations acts.
While DoD interprets the phrase
‘‘produced by a domestic source and of
domestic origin’’ in a way that is
comparable to the Buy American Act
definition of ‘‘domestic end product’’,
this does not imply that DoD is
empowered to determine exceptions
and waiver authority under this statute
on any basis other than the specific
provisions of the appropriations act.
There is no basis provided in the
appropriations act for restricting
acquisitions of domestically
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nonavailable items to the products of
designated countries. Price is the sole
determining factor for award after
determination that the offered products
meet the criteria of the solicitation. Nor
does the respondent provide any
evidence that the products of
nondesignated countries are necessarily
unreliable. Requiring a reliable product
would be a more direct way to achieve
the objective than prohibiting
acquisition from nondesignated
countries.
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4. Confusing or Inconsistent
Comment: One respondent
commented that the rules on bearings
are only applied by DoD, not other
Federal agencies, and that the rules are
different depending on whether
bearings are purchased as an end
product or a component.
Response: These inconsistencies are
inherent within the law. The restrictions
on bearings are contained in the annual
defense appropriations acts, and apply
only to DoD. Further, the law provides
an exception for commercial bearings
purchased as components, but does not
allow the same exception for bearings
when purchased as end products.
5. Need for Qualified Suppliers (QSL)
List and Qualified Manufacturers List
(QML)
Comment: One respondent
recommended that other protections
should be put in place in conjunction
with this change to the domestic source
restriction on ball and roller bearings.
The respondent also recommended that
the annual defense appropriations acts
should include a requirement for the
use of QSLs and QMLs when acquiring
ball and roller bearings.
Response: FAR subpart 9.2 addresses
qualifications requirements. FAR 9.202
provides the policy criteria that must be
met in order for the head of the agency
to establish a qualification requirement.
The head of the agency must address in
writing why a qualification requirement
is necessary, and address the likely
costs for testing and evaluation that will
be incurred for a potential offeror to
become qualified. A DoD agency that
purchases bearings and products that
contain bearings was concerned about
the impact a QSL would have on
competition. In addition, although a
QSL would address quality issues, the
agency does not consider that the level
of effort associated with a QSL would be
an economical solution to pursue. With
regard to a QML, the agency indicated
that a QML would add very little value
to the purchase of bearings. The
manufacturers are usually approved by
the drawings, a Qualified Producers List
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(QPL), or the Engineering Service
Activities (ESA). The recommended
statutory change is outside the scope of
this case. The intent of this case is to
comply with the existing statute.
B. Other Changes
DoD incorporated three editorial
changes in the final rule.
1. The reference at 225.7009–2(b) to
the specialty metals restriction has
changed from ‘‘225.7002–1(b)’’ to
‘‘225.7003–2.’’
2. Conforming changes are required to
the clause dates in 252.212–7001.
3. In paragraph (b)(2) of DFARS
252.225–7016, ‘‘, its outlying areas’’ was
added to ‘‘in the United States or
Canada’’ to clarify that this requirement
also applies to the outlying areas of the
United States. It was not necessary to
add this in the text in part 225, because
in FAR 25.003, ‘‘United States’’ is
defined to include the outlying areas. It
could be inferred that this also applies
in the clauses prescribed in part 225
(see 52.202–1(a)). However, it is clearer
to explicitly add it.
III. Executive Order 12866
This is a significant regulatory action
and, therefore, was subject to review
under section 6(b) of Executive Order
12866, Regulatory Planning and Review,
dated September 30, 1993. This rule is
not a major rule under 5 U.S.C. 804.
IV. Regulatory Flexibility Act
DoD does not expect this rule to have
a significant economic impact on a
substantial number of small entities
within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq.
However, because this rule has impact
on the application of domestic source
restrictions, DoD has performed a final
regulatory flexibility analysis, which is
summarized as follows:
This rule revises the restriction on
ball and roller bearings to implement
the annual defense appropriations act
restriction. The DFARS currently
reflects the more stringent requirement
of 10 U.S.C. 2534(a)(5), that the bearing
and all main bearing components must
be manufactured in the United States or
Canada. This restriction expired on
October 1, 2005. This rule interprets the
annual defense appropriations act to
allow a 50 percent component test
similar to the Buy American Act
component test.
The objective of the rule is to allow
more flexibility to domestic bearings
manufacturers in the acquisition of
nondomestic components. The legal
basis for the rule is section 8065 of the
DoD Appropriations Act for Fiscal Year
2002 (Pub. L. 107–117) and the same
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76299
restriction in subsequent DoD
appropriations acts.
One respondent stated that the fact
that the rule affects any small business
supplier is worthy of consideration, not
just a significant number. The analysis,
however, did assess both positive and
negative impact on small business
entities. Generally, the impact is
considered to be positive (see next
paragraph). No changes were made to
the rule as a result of the comment. The
only alternative would be to do nothing,
which would have worse results as
more waivers are granted for
nonavailability of domestic bearings.
The final rule affects manufacturers of
bearings, bearing components, and
noncommercial products that
incorporate bearings.
• Bearings. This rule applies only to
bearings purchased as end products or
noncommercial bearings incorporated in
noncommercial end products or
noncommercial components of
noncommercial end products. Because
this rule allows some element of
nondomestic content in ball and roller
bearing components, as long as the
United States- or Canadianmanufactured bearing contains less than
50 percent nondomestic bearing
components, both large and small
businesses may find greater numbers of
sources from which to obtain ball and
roller bearing components. Greater
sourcing choices may enable small
businesses to compete more
successfully for DoD ball and roller
bearing acquisitions.
• Bearing components. Manufacturers
of domestic bearing components may
face increased competition from
manufacturers of nondomestic bearing
components. However, many of the
bearing components that are being
outsourced are no longer readily
available from domestic sources.
• Manufacturers of noncommercial
products incorporating bearings.
Manufacturers of noncommercial
products incorporating bearings (both
large and small businesses) will find it
easier to acquire domestic bearings and
will less frequently need to request
nonavailability determinations.
There is no significant economic
impact on small entities as a result of
this rule. The impact of this rule on
small business is expected to be
predominantly positive. If this rule is
not implemented, the regulations will
continue to meet the statutory
requirements, but more domestic
nonavailability waivers would continue
to be required, which would mean that
there would be no requirement to
manufacture such bearings in the
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Federal Register / Vol. 75, No. 235 / Wednesday, December 8, 2010 / Rules and Regulations
United States or Canada, or provide
predominantly domestic components.
V. Paperwork Reduction Act
This final rule does not impose any
new or modified reporting,
recordkeeping, or information collection
requirements that require the approval
of the Office of Management and Budget
under 44 U.S.C. 3501, et seq.
List of Subjects in 48 CFR Parts 225 and
252
Government procurement.
Clare M. Zebrowski,
Editor, Defense Acquisition Regulations
System.
Therefore, 48 CFR parts 225 and 252
are amended as follows:
■ 1. The authority citation for 48 CFR
parts 225 and 252 continues to read as
follows:
■
Authority: 41 U.S.C. 421 and 48 CFR
chapter 1.
PART 225—FOREIGN ACQUISITION
2. Revise section 225.7009–2 to read
as follows:
■
225.7009–2
Restriction.
(a) Do not acquire ball and roller
bearings unless—
(1) The bearings are manufactured in
the United States or Canada; and
(2) For each ball or roller bearing, the
cost of the bearing components mined,
produced, or manufactured in the
United States or Canada exceeds 50
percent of the total cost of the bearing
components of that ball or roller
bearing.
(b) The restriction at 225.7003–2 may
also apply to bearings that are made
from specialty metals, such as high
carbon chrome steel (bearing steel).
PART 252—SOLICITATION
PROVISIONS AND CONTRACT
CLAUSES
252.212–7001
[Amended]
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BILLING CODE 5001–08–P
50 CFR Part 622
[Docket No. 100510220–0598–05]
RIN 0648–AY90
252.225–7016 Restriction on Acquisition
of Ball and Roller Bearings.
As prescribed in 225.7009–5, use the
following clause:
RESTRICTION ON ACQUISITION OF BALL
AND ROLLER BEARINGS (DEC 2010)
(a) Definitions. As used in this clause—
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[FR Doc. 2010–30670 Filed 12–7–10; 8:45 am]
National Oceanic and Atmospheric
Administration
3. Section 252.212–7001 is amended
as follows:
■ a. By revising the clause date to read
‘‘(DEC 2010)’’; and
■ b. In paragraph (b)(10) by removing
‘‘(MAR 2006)’’ and adding in its place
‘‘(DEC 2010)’’.
■ 4. Revise section 252.225–7016 to
read as follows:
17:00 Dec 07, 2010
(End of clause)
DEPARTMENT OF COMMERCE
■
VerDate Mar<15>2010
(1) Bearing component means the bearing
element, retainer, inner race, or outer race.
(2) Component, other than a bearing
component, means any item supplied to the
Government as part of an end product or of
another component.
(3) End product means supplies delivered
under a line item of this contract.
(b) Except as provided in paragraph (c) of
this clause—
(1) Each ball and roller bearing delivered
under this contract shall be manufactured in
the United States, its outlying areas, or
Canada; and
(2) For each ball or roller bearing, the cost
of the bearing components mined, produced,
or manufactured in the United States, its
outlying areas, or Canada shall exceed 50
percent of the total cost of the bearing
components of that ball or roller bearing.
(c) The restriction in paragraph (b) of this
clause does not apply to ball or roller
bearings that are acquired as—
(1) Commercial components of a
noncommercial end product; or
(2) Commercial or noncommercial
components of a commercial component of a
noncommercial end product.
(d) The restriction in paragraph (b) of this
clause may be waived upon request from the
Contractor in accordance with subsection
225.7009–4 of the Defense Federal
Acquisition Regulation Supplement.
(e) If this contract includes DFARS clause
252.225–7009, Restriction on Acquisition of
Certain Articles Containing Specialty Metals,
all bearings that contain specialty metals, as
defined in that clause, must meet the
requirements of that clause.
(f) The Contractor shall insert the
substance of this clause, including this
paragraph (f), in all subcontracts, except
those for—
(1) Commercial items; or
(2) Items that do not contain ball or roller
bearings.
Fisheries of the Caribbean, Gulf of
Mexico, and South Atlantic;
Emergency Fisheries Closure in the
Gulf of Mexico Due to the Deepwater
Horizon MC252 Oil Spill; Amendment 4
National Marine Fisheries
Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA),
Commerce.
ACTION: Temporary emergency rule;
request for comments.
AGENCY:
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NMFS issues this temporary
emergency rule to prohibit royal red
shrimp fishing in a specific area of the
Gulf of Mexico (Gulf) exclusive
economic zone (EEZ), in response to a
fishery interaction of the Gulf shrimp
fishery with sub-surface oil byproducts
from the Deepwater Horizon MC252 oil
spill. This temporary emergency rule
supersedes the temporary emergency
rule published December 1, 2010 (75 FR
74648) and will remain in effect for 60
days. The intended effect of this
temporary emergency rule is to assure
seafood safety and consumer confidence
in Gulf seafood.
DATES: This rule is effective December 3,
2010, through 12:01 a.m., local time,
February 2, 2011. Comments may be
submitted through January 2, 2011.
ADDRESSES: You may submit comments
on this rule, identified by ‘‘0648–AY90’’
by any of the following methods:
• Electronic Submissions: Submit all
electronic public comments via the
Federal e-Rulemaking Portal: https://
www.regulations.gov.
• Fax: 727–824–5308; Attention:
Anik Clemens.
• Mail: Anik Clemens, Southeast
Regional Office, NMFS, 263 13th
Avenue South, St. Petersburg, FL 33701.
Instructions: No comments will be
posted for public viewing until after the
comment period. All comments
received are a part of the public record
and will generally be posted to https://
www.regulations.gov without change.
All Personal Identifying Information (for
example, name, address, etc.)
voluntarily submitted by the commenter
may be publicly accessible. Do not
submit Confidential Business
Information or otherwise sensitive or
protected information.
To submit comments through the
Federal e-Rulemaking Portal: https://
www.regulations.gov, enter ‘‘NOAA–
NMFS–2010–0244’’ in the keyword
search, then select ‘‘Send a Comment or
Submission.’’ NMFS will accept
anonymous comments (enter N/A in the
required fields, if you wish to remain
anonymous). You may submit
attachments to electronic comments in
Microsoft Word, Excel, WordPerfect, or
Adobe PDF file formats only.
Copies of the environmental
assessment, signed on June 17, 2010,
may be obtained from Susan Gerhart,
Southeast Regional Office, NMFS, 263
13th Avenue South, St. Petersburg, FL
33701–5505; telephone: 727–824–5305;
e-mail: Susan.Gerhart@noaa.gov.
FOR FURTHER INFORMATION CONTACT:
Anik Clemens, telephone: 727–824–
5305, fax: 727–824–5308; e-mail:
anik.clemens@noaa.gov.
SUMMARY:
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]]>Agencies
[Federal Register Volume 75, Number 235 (Wednesday, December 8, 2010)]
[Rules and Regulations]
[Pages 76297-76300]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-30670]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 225 and 252
RIN 0750-AG57
Defense Federal Acquisition Regulation Supplement; Restriction on
Ball and Roller Bearings (DFARS Case 2006-D029)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD)
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: DoD is issuing a final rule amending the Defense Federal
Acquisition Regulation Supplement (DFARS) to revise the domestic source
restriction on acquisition of ball and roller bearings. This final
rule, which implements the DoD annual appropriations act domestic
source restrictions, requires that each ball or roller bearing be
manufactured in the United States, its outlying areas, or Canada, and
that the cost of the bearing components manufactured in the United
States, its outlying areas, or Canada, shall exceed 50 percent of the
total cost of the bearing components of that ball or roller bearing.
DATES: Effective Date: December 8, 2010.
FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, 703-602-0328.
SUPPLEMENTARY INFORMATION:
I. Background
The current DFARS restriction on ball and roller bearings
(225.7009) implemented two statutory restrictions: 10 U.S.C. 2534(a)(5)
and annual appropriations act restrictions. 10 U.S.C. 2534(a)(5)
required that all ball and roller bearings and bearing components,
either as end items or components of end items, be wholly manufactured
in the United States or Canada. The annual defense appropriations act
restrictions require that all ball and roller bearings be produced by a
domestic source and be of domestic origin. This restriction does not
apply to the acquisition of commercial items, either as components or
end products, unless the commercial bearings themselves are purchased
as the end products.
II. Discussion and Analysis
A. Analysis of Public Comments
DoD published a proposed rule in the Federal Register on May 7,
2010 (75 FR 25167). The comment period closed on July 6, 2010. Three
respondents submitted comments.
[[Page 76298]]
1. Nonavailablity
Comment: One respondent commented that, in some cases, it is
necessary to import foreign bearings.
Response: Noted. This rule does not make any change in the existing
ability to waive the restriction on a case-by-case basis by certifying
that adequate domestic supplies are not available and that the
acquisition must be made in order to acquire capability for national
security purposes.
Comment: Another respondent was of the opinion that there is not
really a shortage of bearings compliant with 10 U.S.C. 2534(a)(5), just
an unwillingness on the part of distributors and wholesalers to devote
the time to market research and tracking the supply chain to
demonstrate the availability of compliant bearings.
Response: Commercial bearings manufacturers make business decisions
based on the market. Many suppliers of commercial bearings and bearing
components are unwilling to track the origin of bearings components and
subcomponents because the Government does not have enough market
leverage for it to be in the business interest of the manufacturers and
suppliers to do so. Therefore, many bearings must be treated as
nondomestic because the manufacturer is unable to certify to domestic
sourcing of the components.
Comment: This respondent recommended retaining the requirement for
100 per cent domestic content for the following reasons:
a. According to the respondent, changing the rules now to allow
cheaper sources after using public law to create domestic sourcing
would be detrimental to the companies that have recently invested in
capacity.
Response: The reason for changing the rule is statutory change. 10
U.S.C. 2534(a)(5) is no longer in effect because Congress allowed the
restriction to expire.
Furthermore, the experience of Government buyers indicates that, in
general, the current regulation has not prevented the loss of domestic
sources, due to lack of Government leverage with regard to acquisition
of commercial bearings. The Government continues to issue more and more
waivers in the instances when bearings are no longer available that the
manufacturer or distributor can certify as having 100 percent domestic
components. Bearings manufacturers have stated that manufacture of the
retainer, inner race, and outer race are not core competencies.
Therefore, more and more bearings manufacturers obtain these components
from foreign sources, which are significantly cheaper, and then do the
complex manufacture of the bearing in this country. The advantage of
changing the regulation to allow some foreign components without the
need for a waiver is that fewer waivers will be required and then the
requirement for manufacture in the United States and 50 percent
domestic components remains in effect.
b. According to the respondent, quality of components is very
critical to eliminating latent defects. The respondent stated that
retaining a fully domestic source will make it easier to track the
components and determine the cause of any failure.
Response: Nothing in this rule alters DoD procedures for ensuring
the quality of the products it purchases.
c. The respondent considered that retaining all of this skill set
is critical to maintaining a viable industrial base. According to the
respondent, there is potential in the near future to have difficulty
getting bearings even from qualifying countries, leaving China as the
sole source of this critical component. The respondent was concerned
that China may manipulate the market if there is no ready domestic
supplier of bearings.
Response: DoD has existing authority under 10 U.S.C. 2304(c)(3) and
implementing DFARS provisions to restrict procurements to domestic
sources when it determines that a particular industrial capability must
be protected for national security reasons, and can use this authority
for bearings if it proves necessary.
d. The respondent stated that the fact that the rule affects any
small business supplier is worthy of consideration, not just when it
affects a significant number.
Response: The language in the preamble to the proposed rule
relating to impact on small business entities is based on the statutory
requirement to assess whether the rule will have a significant impact
on a substantial number of small entities within the meaning of the
Regulatory Flexibility Act (5 U.S.C. 601, et seq.). The analysis,
however, did assess both positive and negative impact on small business
entities.
2. Exemptions
Comment: One respondent was concerned that the language in 252.225-
7016 is unchanged from the currently existing exemption.
a. According to the respondent, by allowing the same exemption and
lowering the content requirement to 50 per cent, a bearing used in
assembly for a military application may be sourced from anywhere in the
world, including countries that have less sophisticated production
capabilities. The respondent recommended revision of the exemptions to
require manufacture of domestically nonavailable ball or roller
bearings in a designated country.
b. The respondent also mentioned that when the Government needs to
buy a spare or replacement foreign commercial bearing, it cannot do so
without a waiver.
Response: a. This case is only concerned with the definition of
what constitutes a domestic bearing, based on statutory change. The
definition of a domestic bearing still requires manufacture in the
United States, its outlying areas, or Canada. There was no change in
the statute regarding the exemptions from these requirements.
b. The issue relating to problems of buying spare or replacement
foreign commercial bearings is also a problem of the current
regulation, and is a direct result of the statutory lack of exceptions
when buying commercial ball or roller bearings as the end item rather
than as a component.
3. Waivers
Comment: One respondent stated that waivers go too far. If there is
no domestic bearing to meet the requirement, then the restriction
should only be waived to allow purchase of bearings from designated
countries. The respondent was concerned that the proposal may ease the
restrictions beyond those found in the Buy American Act, thus opening
the possibility of allowing bearings for defense purposes to include
components manufactured by unreliable sources. The respondent noted
that there are 2,059 FSC ball and roller bearings on the DLA FY 2010
waiver list. According to the respondent, sourcing is open to any
country of origin, with price being the sole determining factor for
award.
Response: This rule implements section 8065 of the DoD
Appropriations Act for Fiscal Year 2002 (Pub. L. 107-117) and the same
restriction in subsequent DoD appropriations acts. While DoD interprets
the phrase ``produced by a domestic source and of domestic origin'' in
a way that is comparable to the Buy American Act definition of
``domestic end product'', this does not imply that DoD is empowered to
determine exceptions and waiver authority under this statute on any
basis other than the specific provisions of the appropriations act.
There is no basis provided in the appropriations act for restricting
acquisitions of domestically
[[Page 76299]]
nonavailable items to the products of designated countries. Price is
the sole determining factor for award after determination that the
offered products meet the criteria of the solicitation. Nor does the
respondent provide any evidence that the products of nondesignated
countries are necessarily unreliable. Requiring a reliable product
would be a more direct way to achieve the objective than prohibiting
acquisition from nondesignated countries.
4. Confusing or Inconsistent
Comment: One respondent commented that the rules on bearings are
only applied by DoD, not other Federal agencies, and that the rules are
different depending on whether bearings are purchased as an end product
or a component.
Response: These inconsistencies are inherent within the law. The
restrictions on bearings are contained in the annual defense
appropriations acts, and apply only to DoD. Further, the law provides
an exception for commercial bearings purchased as components, but does
not allow the same exception for bearings when purchased as end
products.
5. Need for Qualified Suppliers (QSL) List and Qualified Manufacturers
List (QML)
Comment: One respondent recommended that other protections should
be put in place in conjunction with this change to the domestic source
restriction on ball and roller bearings. The respondent also
recommended that the annual defense appropriations acts should include
a requirement for the use of QSLs and QMLs when acquiring ball and
roller bearings.
Response: FAR subpart 9.2 addresses qualifications requirements.
FAR 9.202 provides the policy criteria that must be met in order for
the head of the agency to establish a qualification requirement. The
head of the agency must address in writing why a qualification
requirement is necessary, and address the likely costs for testing and
evaluation that will be incurred for a potential offeror to become
qualified. A DoD agency that purchases bearings and products that
contain bearings was concerned about the impact a QSL would have on
competition. In addition, although a QSL would address quality issues,
the agency does not consider that the level of effort associated with a
QSL would be an economical solution to pursue. With regard to a QML,
the agency indicated that a QML would add very little value to the
purchase of bearings. The manufacturers are usually approved by the
drawings, a Qualified Producers List (QPL), or the Engineering Service
Activities (ESA). The recommended statutory change is outside the scope
of this case. The intent of this case is to comply with the existing
statute.
B. Other Changes
DoD incorporated three editorial changes in the final rule.
1. The reference at 225.7009-2(b) to the specialty metals
restriction has changed from ``225.7002-1(b)'' to ``225.7003-2.''
2. Conforming changes are required to the clause dates in 252.212-
7001.
3. In paragraph (b)(2) of DFARS 252.225-7016, ``, its outlying
areas'' was added to ``in the United States or Canada'' to clarify that
this requirement also applies to the outlying areas of the United
States. It was not necessary to add this in the text in part 225,
because in FAR 25.003, ``United States'' is defined to include the
outlying areas. It could be inferred that this also applies in the
clauses prescribed in part 225 (see 52.202-1(a)). However, it is
clearer to explicitly add it.
III. Executive Order 12866
This is a significant regulatory action and, therefore, was subject
to review under section 6(b) of Executive Order 12866, Regulatory
Planning and Review, dated September 30, 1993. This rule is not a major
rule under 5 U.S.C. 804.
IV. Regulatory Flexibility Act
DoD does not expect this rule to have a significant economic impact
on a substantial number of small entities within the meaning of the
Regulatory Flexibility Act, 5 U.S.C. 601, et seq. However, because this
rule has impact on the application of domestic source restrictions, DoD
has performed a final regulatory flexibility analysis, which is
summarized as follows:
This rule revises the restriction on ball and roller bearings to
implement the annual defense appropriations act restriction. The DFARS
currently reflects the more stringent requirement of 10 U.S.C.
2534(a)(5), that the bearing and all main bearing components must be
manufactured in the United States or Canada. This restriction expired
on October 1, 2005. This rule interprets the annual defense
appropriations act to allow a 50 percent component test similar to the
Buy American Act component test.
The objective of the rule is to allow more flexibility to domestic
bearings manufacturers in the acquisition of nondomestic components.
The legal basis for the rule is section 8065 of the DoD Appropriations
Act for Fiscal Year 2002 (Pub. L. 107-117) and the same restriction in
subsequent DoD appropriations acts.
One respondent stated that the fact that the rule affects any small
business supplier is worthy of consideration, not just a significant
number. The analysis, however, did assess both positive and negative
impact on small business entities. Generally, the impact is considered
to be positive (see next paragraph). No changes were made to the rule
as a result of the comment. The only alternative would be to do
nothing, which would have worse results as more waivers are granted for
nonavailability of domestic bearings.
The final rule affects manufacturers of bearings, bearing
components, and noncommercial products that incorporate bearings.
Bearings. This rule applies only to bearings purchased as
end products or noncommercial bearings incorporated in noncommercial
end products or noncommercial components of noncommercial end products.
Because this rule allows some element of nondomestic content in ball
and roller bearing components, as long as the United States- or
Canadian- manufactured bearing contains less than 50 percent
nondomestic bearing components, both large and small businesses may
find greater numbers of sources from which to obtain ball and roller
bearing components. Greater sourcing choices may enable small
businesses to compete more successfully for DoD ball and roller bearing
acquisitions.
Bearing components. Manufacturers of domestic bearing
components may face increased competition from manufacturers of
nondomestic bearing components. However, many of the bearing components
that are being outsourced are no longer readily available from domestic
sources.
Manufacturers of noncommercial products incorporating
bearings. Manufacturers of noncommercial products incorporating
bearings (both large and small businesses) will find it easier to
acquire domestic bearings and will less frequently need to request
nonavailability determinations.
There is no significant economic impact on small entities as a
result of this rule. The impact of this rule on small business is
expected to be predominantly positive. If this rule is not implemented,
the regulations will continue to meet the statutory requirements, but
more domestic nonavailability waivers would continue to be required,
which would mean that there would be no requirement to manufacture such
bearings in the
[[Page 76300]]
United States or Canada, or provide predominantly domestic components.
V. Paperwork Reduction Act
This final rule does not impose any new or modified reporting,
recordkeeping, or information collection requirements that require the
approval of the Office of Management and Budget under 44 U.S.C. 3501,
et seq.
List of Subjects in 48 CFR Parts 225 and 252
Government procurement.
Clare M. Zebrowski,
Editor, Defense Acquisition Regulations System.
0
Therefore, 48 CFR parts 225 and 252 are amended as follows:
0
1. The authority citation for 48 CFR parts 225 and 252 continues to
read as follows:
Authority: 41 U.S.C. 421 and 48 CFR chapter 1.
PART 225--FOREIGN ACQUISITION
0
2. Revise section 225.7009-2 to read as follows:
225.7009-2 Restriction.
(a) Do not acquire ball and roller bearings unless--
(1) The bearings are manufactured in the United States or Canada;
and
(2) For each ball or roller bearing, the cost of the bearing
components mined, produced, or manufactured in the United States or
Canada exceeds 50 percent of the total cost of the bearing components
of that ball or roller bearing.
(b) The restriction at 225.7003-2 may also apply to bearings that
are made from specialty metals, such as high carbon chrome steel
(bearing steel).
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
252.212-7001 [Amended]
0
3. Section 252.212-7001 is amended as follows:
0
a. By revising the clause date to read ``(DEC 2010)''; and
0
b. In paragraph (b)(10) by removing ``(MAR 2006)'' and adding in its
place ``(DEC 2010)''.
0
4. Revise section 252.225-7016 to read as follows:
252.225-7016 Restriction on Acquisition of Ball and Roller Bearings.
As prescribed in 225.7009-5, use the following clause:
RESTRICTION ON ACQUISITION OF BALL AND ROLLER BEARINGS (DEC 2010)
(a) Definitions. As used in this clause--
(1) Bearing component means the bearing element, retainer, inner
race, or outer race.
(2) Component, other than a bearing component, means any item
supplied to the Government as part of an end product or of another
component.
(3) End product means supplies delivered under a line item of
this contract.
(b) Except as provided in paragraph (c) of this clause--
(1) Each ball and roller bearing delivered under this contract
shall be manufactured in the United States, its outlying areas, or
Canada; and
(2) For each ball or roller bearing, the cost of the bearing
components mined, produced, or manufactured in the United States,
its outlying areas, or Canada shall exceed 50 percent of the total
cost of the bearing components of that ball or roller bearing.
(c) The restriction in paragraph (b) of this clause does not
apply to ball or roller bearings that are acquired as--
(1) Commercial components of a noncommercial end product; or
(2) Commercial or noncommercial components of a commercial
component of a noncommercial end product.
(d) The restriction in paragraph (b) of this clause may be
waived upon request from the Contractor in accordance with
subsection 225.7009-4 of the Defense Federal Acquisition Regulation
Supplement.
(e) If this contract includes DFARS clause 252.225-7009,
Restriction on Acquisition of Certain Articles Containing Specialty
Metals, all bearings that contain specialty metals, as defined in
that clause, must meet the requirements of that clause.
(f) The Contractor shall insert the substance of this clause,
including this paragraph (f), in all subcontracts, except those
for--
(1) Commercial items; or
(2) Items that do not contain ball or roller bearings.
(End of clause)
[FR Doc. 2010-30670 Filed 12-7-10; 8:45 am]
BILLING CODE 5001-08-P
