Federal Acquisition Regulation; Prohibition on Contracting With Inverted Domestic Corporations-Representation and Notification, 74558-74559 [2014-29151]

Agencies

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

[Federal Register Volume 79, Number 240 (Monday, December 15, 2014)]
[Proposed Rules]
[Pages 74558-74559]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-29151]



Federal Register / Vol. 79, No. 240 / Monday December 15, 2014 / 
Proposed Rules

[[Page 74558]]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Part 52

[FAR Case 2015-006; Docket No. 2014-0051; Sequence No. 1]
RIN 9000-AM85


Federal Acquisition Regulation; Prohibition on Contracting With 
Inverted Domestic Corporations--Representation and Notification

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

ACTION: Proposed rule.

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SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal 
Acquisition Regulation (FAR) to require additional actions by 
contractors to assist contracting officers in ensuring compliance with 
the Governmentwide statutory prohibition on the use of appropriated (or 
otherwise made available) funds for contracts with any foreign 
incorporated entity that is an inverted domestic corporation or to any 
subsidiary of such entity.

DATES: Interested parties should submit written comments to the 
Regulatory Secretariat Division at one of the addresses shown below on 
or before February 13, 2015 to be considered in the formation of the 
final rule.

ADDRESSES: Submit comments in response to FAR Case 2015-006 by any of 
the following methods:
     Regulations.gov: https://www.regulations.gov. Submit 
comments via the Federal eRulemaking portal by searching for ``FAR Case 
2015-006''. Select the link ``Comment Now'' that corresponds with ``FAR 
Case 2015-006''. Follow the instructions provided at the ``Comment 
Now'' screen. Please include your name, company name (if any), and 
``FAR Case 2015-006'' on your attached document.
     Fax: 202-501-4067.
     Mail: General Services Administration, Regulatory 
Secretariat Division (MVCB), ATTN: Ms. Hada Flowers, 1800 F Street NW., 
2nd Floor, Washington, DC 20405.
    Instructions: Please submit comments only and cite FAR Case 2015-
006, 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 FAR Case 2015-006.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD, GSA, and NASA are proposing to revise the provisions of the 
FAR that address the continuing Governmentwide statutory prohibition 
(in effect since fiscal year 2008) on the use of appropriated (or 
otherwise made available) funds for contracts with any foreign 
incorporated entity that is an inverted domestic corporation (under 
section 835 of the Homeland Security Act of 2002, codified at 6 U.S.C. 
395) or any subsidiary of such entity. By separate notice, DOD, GSA, 
and NASA have issued an interim rule (FAR Case 2014-017) that more 
clearly reflects the ongoing and continuing nature of this statutory 
prohibition.
    An inverted domestic corporation is a corporation that meets the 
criteria specified in 6 U.S.C. 395(b) and (c). To date, an offeror has 
been required to include a statement in its offer (found at FAR 52.209-
2(c) and 52.212-3(n)(2)) representing that by signing the offer, the 
offeror is representing that it is not an inverted domestic corporation 
or a subsidiary of an inverted domestic corporation. To increase the 
Government's ability to identify an offeror's status as an inverted 
domestic corporation, this rule proposes to change the representation 
to require an affirmative act by the offeror to complete two yes/no 
check-off boxes on whether it is an inverted domestic corporation, or a 
subsidiary of one, so that the Government will know which corporations 
are subject to the contracting prohibition. (Contracting officers would 
be allowed to continue relying on the offeror's representation unless 
there is an independent reason to question it.)
    In accordance with FAR 4.1201(b)(1), 52.204-8, and 52.212-3, 
offerors would continue to be required to represent their current 
status at the earlier of an offer submission or the annual anniversary 
of their registration in the System for Award Management (SAM). This 
existing requirement, coupled with the proposed new more specific 
representation, will better ensure clear, current, accurate, and 
complete disclosure by offerors of whether or not they are an inverted 
domestic corporation, for consideration by a contracting officer before 
making a new contract award.
    In addition, the rule proposes to add a new paragraph to FAR clause 
52.209-10 that would require the contractor, when the contractor 
becomes an inverted domestic corporation during contract performance, 
to give written notification of its change in status as an inverted 
domestic corporation to the contracting officer within five business 
days from the date of the inversion event.

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 a significant regulatory action and, therefore, was 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

    DoD, GSA, and 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 small entities impacted by this rule 
will be minimal. Small business concerns are unlikely to have been 
incorporated in the United States (or, if a partnership, established in 
the United States) and then subsequently incorporated in a foreign 
country; the major participants in these transactions are reportedly 
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

[[Page 74559]]

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 2015-006), in 
correspondence.

IV. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. Chapter 35) applies because 
the proposed rule contains information collection requirements. 
Accordingly, the Regulatory Secretariat Division will submit a request 
for approval of a new information collection requirement concerning 
Prohibition on Contracting with Inverted Domestic Corporations to the 
Office of Management and Budget.

A. Public Reporting Burden

    The public reporting burden for this collection of information is 
estimated to average .2 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information.
    The annual reporting burden estimated as follows:
    Respondents: 352,000.
    Responses per respondent: Approximately 1.
    Total annual responses: 352,002.
    Preparation hours per response: Approximately .2.
    Total response Burden Hours: 70,410.

B. Request for Comments Regarding Paperwork Burden.

    Submit comments, including suggestions for reducing this burden, 
not later than February 13, 2015 to: FAR Desk Officer, OMB, Room 10102, 
NEOB, Washington, DC 20503, and a copy to the General Services 
Administration, Regulatory Secretariat Division (MVCB), ATTN: Ms. Hada 
Flowers, 1800 F Street NW., 2nd Floor, Washington, DC 20405.
    Public comments are particularly invited on: Whether this 
collection of information is necessary for the proper performance of 
functions of the FAR, and will have practical utility; whether our 
estimate of the public burden of this collection of information is 
accurate, and based on valid assumptions and methodology; ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and ways in which we can minimize the burden of the 
collection of information on those who are to respond, through the use 
of appropriate technological collection techniques or other forms of 
information technology.
    Requesters may obtain a copy of the supporting statement from the 
General Services Administration, Regulatory Secretariat Division 
(MVCB), ATTN: Ms. Hada Flowers, 1800 F Street NW., 2nd Floor, 
Washington, DC 20405.
    Please cite OMB Control Number 9000-00XX, Prohibition on 
Contracting with Inverted Domestic Corporations, in all correspondence.

List of Subject in 48 CFR Part 52

    Government procurement.

    Dated: December 5, 2014.
William Clark,
Acting Director, Office of Government-wide Acquisition Policy, Office 
of Acquisition Policy, Office of Government-wide Policy.
    Therefore, DoD, GSA, and NASA are proposing to amend 48 CFR part 52 
as set forth below:

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

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

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.

0
2. Amend section 52.209-2 by revising the date of the provision and 
paragraph (c) to read as follows:


52.209-2  Prohibition on Contracting with Inverted Domestic 
Corporations--Representation.

* * * * *

Prohibition on Contracting With Inverted Domestic Corporations--
Representation (Date)


* * * * *
    (c) Representation. The offeror represents that--
    (1) It [shabox1] is, [shabox1] is not an inverted domestic 
corporation; and
    (2) It [shabox1] is, [shabox1] is not a subsidiary of an 
inverted domestic corporation.

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


52.209-10  Prohibition on Contracting with Inverted Domestic 
Corporations.

* * * * *

Prohibition on Contracting With Inverted Domestic Corporations (DATE)


* * * * *
    (d) In the event the Contractor becomes either an inverted 
domestic corporation, or a subsidiary of an inverted domestic 
corporation during contract performance, the Contractor shall give 
written notice to the Contracting Officer within five business days 
from the date of the inversion event.
* * * * *

0
4. Amend section 52.212-3 by revising the date of the provision; and 
paragraph (n)(2) to read as follows:


52.212-3  Offeror Representations and Certifications--Commercial Items.

* * * * *

Offeror Representations and Certifications--Commercial Items (DATE)


* * * * *
    (n) * * *
    (2) Representation. The offeror represents that--
    (i) It [shabox1] is, [shabox1] is not an inverted domestic 
corporation; and
    (ii) It [shabox1] is, [shabox1] is not a subsidiary of an 
inverted domestic corporation.
* * * * *

0
5. Amend section 52.212-5 by revising the date of the clause and 
paragraph (a)(1) 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 (DATE)

    (a) * * *
    (1) 52.209-10, Prohibition on Contracting with Inverted Domestic 
Corporations (DATE)(section 745 of Division D of Pub. L. 110-161 and 
its successor provisions in subsequent appropriations acts and 
continuing resolutions).
* * * * *
[FR Doc. 2014-29151 Filed 12-12-14; 8:45 am]
BILLING CODE 6820-EP-P