Federal Acquisition Regulation; Prohibition on Contracting With Inverted Domestic Corporations, 27547-27548 [2012-11148]

Agencies

• DEPARTMENT OF DEFENSE
• General Services Administration
• National Aeronautics and Space Administration

[Federal Register Volume 77, Number 91 (Thursday, May 10, 2012)]
[Rules and Regulations]
[Pages 27547-27548]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-11148]



[[Page 27547]]

-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 9 and 52

[FAC 2005-59; FAR Case 2012-013; Item I; Docket 2012-0013, Sequence 1]
RIN 9000-AM22


Federal Acquisition Regulation; Prohibition on Contracting With 
Inverted Domestic Corporations

AGENCY: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Interim rule.

-----------------------------------------------------------------------

SUMMARY: DoD, GSA, and NASA are issuing an interim rule amending the 
Federal Acquisition Regulation (FAR) to implement a section of the 
Consolidated Appropriations Act, 2012, that prohibits the award of 
contracts using appropriated funds to any foreign incorporated entity 
that is treated as an inverted domestic corporation or to any 
subsidiary of such entity.

DATES: Effective Date: May 10, 2012.
    Comment Date: Interested parties should submit written comments to 
the Regulatory Secretariat on or before July 9, 2012 to be considered 
in the formulation of a final rule.

ADDRESSES: Submit comments identified by FAC 2005-59, FAR Case 2012-013 
by any of the following methods:
     Regulations.gov: https://www.regulations.gov. Submit 
comments via the Federal eRulemaking portal by searching ``FAR Case 
2012-013''. Select the link ``Submit a Comment'' that corresponds with 
``FAR Case 2012-013''. Follow the instructions provided at the ``Submit 
a Comment'' screen. Please include your name, company name (if any), 
and ``FAR Case 2012-013'' on your attached document.
     Fax: 202-501-4067.
     Mail: General Services Administration, Regulatory 
Secretariat (MVCB), ATTN: Hada Flowers, 1275 First Street NE., 7th 
floor, Washington, DC 20417.
    Instructions: Please submit comments only and cite FAC 2005-59, FAR 
Case 2012-013, in all correspondence related to this case. All comments 
received will be posted without change to https://www.regulations.gov, 
including any personal and/or business confidential information 
provided.

FOR FURTHER INFORMATION CONTACT: Mr. Michael O. Jackson, Procurement 
Analyst, at 202-208-4949, for clarification of content. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat at 202-501-4755. Please cite FAC 2005-59, FAR Case 2012-
013.

SUPPLEMENTARY INFORMATION: 

I. Background

    This rule implements section 738 of Division C of the Consolidated 
Appropriations Act, 2012 (Pub. L. 112-74), which was signed on December 
23, 2011. The same Governmentwide restrictions are already incorporated 
in the FAR for funds appropriated in Fiscal Years 2008 through 2010, 
under FAR Case 2008-009, which published as an interim rule in the 
Federal Register at 74 FR 31561 on July 1, 2009, and as a final rule 
which published in the Federal Register at 76 FR 31410 on May 31, 2011.
    Section 738 of Division C extends to the use of Federal 
appropriated funds for Fiscal Year 2012, the prohibition against 
contracting with any inverted domestic corporation, as defined at 
section 835(b) of the Homeland Security Act of 2002 (Pub. L. 107-296, 6 
U.S.C. 395(b)) or any subsidiary of such an entity.
    An inverted domestic corporation is one that used to be 
incorporated in the United States, or used to be a partnership in the 
United States, but now is incorporated in a foreign country, or is a 
subsidiary whose parent corporation is incorporated in a foreign 
country. See the definition of inverted domestic corporation at FAR 
9.108-1.
    As in past consolidated appropriations acts that prohibited 
contracting with inverted domestic corporations, the prohibition does 
not apply when using Fiscal Year 2012 funds for a contract entered into 
before the date the funds were appropriated (December 23, 2011), or for 
any order issued pursuant to such contract. A paragraph has been added 
to FAR 52.209-10, Prohibition on Contracting with Inverted Domestic 
Corporations, to refer to the FAR 9.108-2 exceptions to the 
prohibition.

II. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993. This rule is not a major rule 
under 5 U.S.C. 804.

III. Regulatory Flexibility Act

    The Department of Defense (DoD), the General Services 
Administration (GSA), and the National Aeronautics and Space 
Administration (NASA) do 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., 
because this rule will only impact an offeror that is an inverted 
domestic corporation and wants to do business with the Government. It 
is expected that the number of entities impacted by this rule will be 
minimal. Small business concerns are unlikely to have been incorporated 
in the United States and then reincorporated in a tax haven; the major 
players in these transactions are reportedly the very large 
multinational corporations. No domestic entities will be impacted by 
this rule. For the definition of ``small business,'' the Regulatory 
Flexibility Act refers to the Small Business Act, which in turn allows 
the U.S. Small Business Administration (SBA) Administrator to specify 
detailed definitions or standards (5 U.S.C. 601(3) and 15 U.S.C. 
632(a)). The SBA regulations at 13 CFR 121.105 discuss who is a small 
business: ``(a)(1) Except for small agricultural cooperatives, a 
business concern eligible for assistance from SBA as a small business 
is a business entity organized for profit, with a place of business 
located in the United States, and which operates primarily within the 
United States or which makes a significant contribution to the U.S. 
economy through payment of taxes or use of American products, materials 
or labor.'' Therefore, an Initial Regulatory Flexibility Analysis has 
not been performed. DoD, GSA, and NASA invite comments from small 
business concerns and other interested parties on the expected impact 
of this rule on small entities.
    DoD, GSA, and NASA will also consider comments from small entities 
concerning the existing regulations in subparts affected by the rule in 
accordance with 5 U.S.C. 610. Interested parties must submit such 
comments separately and should cite 5 U.S.C 610 (FAR Case 2012-013), in 
correspondence.

[[Page 27548]]

IV. Paperwork Reduction Act

    The rule does not contain any information collection requirements 
that require the approval of the Office of Management and Budget under 
the Paperwork Reduction Act (44 U.S.C. chapter 35).

V. Determination To Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense (DoD), the Administrator of General Services (GSA), and the 
Administrator of the National Aeronautics and Space Administration 
(NASA) that urgent and compelling reasons exist to promulgate this 
interim rule without prior opportunity for public comment. This action 
is necessary because it implements section 738 of Division C of Public 
Law 112-74, which went into effect on December 23, 2011. Contracting 
officers who violate this prohibition may be subject to prosecution for 
violation of the Anti-Deficiency Act. However, pursuant to 41 U.S.C. 
1707 and FAR 1.501-3(b), DoD, GSA, and NASA will consider public 
comments received in response to this interim rule in the formation of 
the final rule.

List of Subjects in 48 CFR Parts 9 and 52

    Government procurement.

    Dated: May 3, 2012.
Laura Auletta,
Director, Office of Governmentwide Acquisition Policy, Office of 
Acquisition Policy, Office of Governmentwide Policy.

    Therefore, DoD, GSA, and NASA amend 48 CFR parts 9 and 52 as set 
forth below:

0
1. The authority citation for 48 CFR parts 9 and 52 continues to read 
as follows:

    Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 9--CONTRACTOR QUALIFICATIONS

0
2. Amend section 9.108-2 by--
0
a. In paragraph (a), revising the first sentence; and removing from the 
second sentence ``2008 and 2009'' and adding ``2008 through 2010'' in 
its place; and
0
b. Adding paragraph (b)(4).
    The revised and added text reads as follows:


9.108-2  Prohibition.

    (a) Section 738 of Division C of the Consolidated Appropriations 
Act, 2012 (Pub. L. 112-74) prohibits the use of 2012 appropriated funds 
for contracting with any foreign incorporated entity that is treated as 
an inverted domestic corporation, or with a subsidiary of such a 
corporation. * * *
    (b) * * *
    (4) When using Fiscal Year 2012 funds for any contract entered into 
before December 23, 2011, or for any order issued pursuant to such 
contract.


9.108-3  [Amended]

0
3. Amend section 9.108-3 by removing from paragraph (a) ``funds, an'' 
and adding ``funds or Fiscal Year 2012 funds, an'' in its place.


9.108-5  [Amended]

0
4. Amend section 9.108-5 by removing from the introductory text ``2010, 
unless'' and adding ``2010 or in Fiscal Year 2012, unless'' in its 
place.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


52.204-8  [Amended]

0
5. Amend section 52.204-8 by revising the date of the provision to read 
``(MAY 2012)''; and removing from paragraph (c)(1)(v) ``2008, 2009 or 
2010'' and adding ``2008, 2009, 2010, or 2012'' in its place.


0
6. Amend section 52.209-10 by revising the date of the clause; and 
adding paragraph (c) to read as follows:


52.209-10  Prohibition on Contracting with Inverted Domestic 
Corporations.

* * * * *

Prohibition on Contracting with Inverted Domestic Corporations (MAY 
2012)

* * * * *
    (c) Exceptions to this prohibition are located at 9.108-2.
* * * * *

0
7. Amend section 52.212-5 by revising the date of the clause, and 
paragraph (b)(8) to read as follows:


52.212-5  Contract Terms and Conditions Required to Implement Statutes 
or Executive Orders--Commercial Items.

* * * * *

Contract Terms and Conditions Required to Implement Statutes or 
Executive Orders--Commercial Items (MAY 2012)

* * * * *
    (b) * * *
    (8) 52.209-10, Prohibition on Contracting with Inverted Domestic 
Corporations (MAY 2012) (section 738 of Division C of Pub. L. 112-74, 
section 740 of Division C of Pub. L. 111-117, section 743 of Division D 
of Pub. L. 111-8, and section 745 of Division D of Pub. L. 110-161).
* * * * *

[FR Doc. 2012-11148 Filed 5-9-12; 8:45 am]
BILLING CODE 6820-EP-P