Defense Federal Acquisition Regulation Supplement: Foreign Commercial Satellite Services and Certain Items on the Commerce Control List (DFARS Case 2018-D020), 66066-66075 [2018-27558]

Download as PDF 66066 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Rules and Regulations MATERIAL INSPECTION AND RECEIVING REPORT TABLE 1—STANDARD DISTRIBUTION Number of copies Standard distribution With Shipment * ................................................................................................................................................................................... Consignee (via mail) ............................................................................................................................................................................ (For Navy procurement, include unit price.) (For foreign military sales, consignee copies are not required.) Contract Administration Office (CAO) ................................................................................................................................................. (Forward direct to address in Block 10 except when addressee is a Defense Contract Management Agency (DCMA) office and a certificate of conformance or the alternative release procedures (see F–301, Block 21) is involved, and acceptance is at origin; then, forward through the authorized Government representative.) Purchasing Office ................................................................................................................................................................................ Payment Office ** ................................................................................................................................................................................. (Forward direct to address in Block 12 except— (i) When address in Block 10 is a DCMA office and payment office in Block 12 is the Defense Finance and Accounting Service, Columbus Center, do not make distribution to the Block 12 addressee; (ii) When address in Block 12 is the Defense Finance and Accounting Service, Columbus Center/Albuquerque Office (DFAS–CO/ALQ), Kirtland AFB, NM, attach only one copy to the required number of copies of the contractor’s invoice; (iii) When acceptance is at destination and a Navy finance office will make payment, forward to destination; and (iv) When a certificate of conformance or the alternative release procedures (see F–301, Block 21) are involved and acceptance is at origin, forward the copies through the authorized Government representative.) ADP Point for CAO (applicable to Air Force only) .............................................................................................................................. (When DFAS–CO/ALQ is the payment office in Block 12, send one copy to DFAS–CO/ALQ immediately after signature. If submission of delivery data is made electronically, distribution of this hard copy need not be made to DFAS–CO/ALQ.) CAO of Contractor Receiving GFP ..................................................................................................................................................... (For items fabricated or acquired for the Government and shipped to a contractor as Government furnished property, send one copy directly to the CAO cognizant of the receiving contractor, ATTN: Property Administrator (see DoD 4105.59–H).) 2 1 1 1 2 1 1 * Attach as follows: Type of shipment Location Carload or truckload ................................................................................. Affix to the shipment where it will be readily visible and available upon receipt. Affix to container number one or container truckload bearing lowest number. Attach to outside or include in the package. Include a copy in each additional package of multi-package shipments. Forward with consignee copies. Less than carload or truckload ................................................................. Mail, including parcel post ........................................................................ Pipeline, tank car, or railroad cars for coal movements .......................... ** Payment by Defense Finance and Accounting Service, Columbus Center will be based on the source acceptance copies of DD Forms 250 forwarded to the contract administration office. * * * * * BILLING CODE 5001–06–P DEPARTMENT OF DEFENSE Defense Acquisition Regulations System 48 CFR Parts 204, 212, 225, and 252 [Docket DARS–2018–0060] amozie on DSK3GDR082PROD with RULES5 RIN 0750–AJ82 Defense Federal Acquisition Regulation Supplement: Foreign Commercial Satellite Services and Certain Items on the Commerce Control List (DFARS Case 2018–D020) Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Interim rule. AGENCY: VerDate Sep<11>2014 00:42 Dec 21, 2018 DoD is amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement sections of the National Defense Authorization Act for Fiscal Years 2017 and 2018. One section imposes additional prohibitions with regard to acquisition of certain foreign commercial satellite services, such as cybersecurity risk and source of satellites and launch vehicles used to provide the foreign commercial satellite services, and expands the definition of ‘‘covered foreign country’’ to include Russia. Another section prohibits purchase of items from a Communist Chinese military company that meet the definition of goods and services controlled as munitions items when moved to the Commerce Control List of the Export Administration Regulations of the Department of Commerce. SUMMARY: [FR Doc. 2018–27555 Filed 12–20–18; 8:45 am] Jkt 247001 Effective Date: December 21, 2018. Comment Date: Comments on the interim rule should be submitted in DATES: PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 writing to the address shown below on or before February 19, 2019, to be considered in the formation of a final rule. Submit comments identified by DFARS Case 2018–D020, using any of the following methods: Æ Federal eRulemaking Portal: http:// www.regulations.gov. Search for ‘‘DFARS Case 2018–D020.’’ Select ‘‘Comment Now’’ and follow the instructions provided to submit a comment. Please include ‘‘DFARS Case 2018–D020’’ on any attached documents. Æ Email: osd.dfars@mail.mil. Include DFARS Case 2018–D020 in the subject line of the message. Æ Fax: 571–372–6094. Æ Mail: Defense Acquisition Regulations System, Attn: Ms. Amy G. Williams, OUSD (A&S) DPC/DARS, Room 3B941, 3060 Defense Pentagon, Washington, DC 20301–3060. Comments received generally will be posted without change to http:// ADDRESSES: E:\FR\FM\21DER5.SGM 21DER5 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Rules and Regulations www.regulations.gov, including any personal information provided. To confirm receipt of your comment(s), please check www.regulations.gov, approximately two to three days after submission to verify posting (except allow 30 days for posting of comments submitted by mail). Ms. Amy G. Williams, Defense Acquisition Regulations System, OUSD (A&S) DPC/ DARS, Room 3B855, 3060 Defense Pentagon, Washington, DC 20301–3060. Telephone 571–372–6106; facsimile 571–372–6094. FOR FURTHER INFORMATION CONTACT: SUPPLEMENTARY INFORMATION: I. Background DoD is amending the DFARS to implement sections of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2018 (Pub. L. 115–91) and the NDAA for FY 2017 (Pub. L. 114–328) as follows: amozie on DSK3GDR082PROD with RULES5 A. Section 1603 of the NDAA for FY 2018 Section 1603 amends 10 U.S.C. 2279 to impose additional prohibitions with regard to acquisition of certain foreign commercial satellite services. It addresses cybersecurity risks and the source of satellites and launch vehicles used to provide the foreign satellite services. The definition of ‘‘covered foreign country’’ is expanded to include Russia, in addition to any country described in section 1261(c)(2) of the NDAA for FY 2013 (Pub. L. 112–239), which specifies the People’s Republic of China, North Korea, and any country that is a state sponsor of terrorism (currently Iran, North Korea, Sudan, and Syria). 10 U.S.C. 2327, entitled ‘‘Contracts: consideration of national security objectives,’’ is the underlying statute that prohibits DoD from entering into contracts with a firm or subsidiary of a firm, that is owned or controlled by the government of a foreign country that has been identified by the Secretary of State as a state sponsor of terrorism under section 6(j)(1)(A) of the Export Administration Act of 1979 (50 U.S.C. App. 2405(j)(1)(A)). 50 U.S.C. App. 2405 was subsequently reclassified and renumbered as 50 U.S.C. 4605, which has now been repealed by section 1766(a) of the Export Control Reform Act of 2018 (Title XVII, Subtitle B, of the NDAA for FY 2019, Pub. L. 115– 232). 50 U.S.C. 4605(j) has been replaced by section 1754(c) of the Export Control Reform Act of 2018 (to be eventually codified at 50 U.S.C. 4813(c)). VerDate Sep<11>2014 00:42 Dec 21, 2018 Jkt 247001 B. Section 1296 of the NDAA for FY 2017 Section 1211 of the NDAA for FY 2006 (Pub. L. 109–163) established the prohibition against purchase of items on the United States Munitions List (USML) from a Communist Chinese military company. Section 1296 of the NDAA for FY 2017 amends section 1211 to prohibit purchase from any Communist Chinese military company, through a contract or subcontract (at any tier), of goods and services controlled as munitions items on the 600 series of the Commerce Control List (CCL) of the Export Administration Regulations of the Department of Commerce. Under the Export Control Reform Initiative, the International Traffic in Arms Regulations (ITAR) and the USML have been amended so that they control only those items that provide the United States with a critical military or intelligence advantage or otherwise warrant such controls. In parallel, the Export Administration Regulations (EAR) were amended to transition some items from the USML to a series of new export control classification numbers (the 600 series) on the CCL, providing control for military items that do not warrant USML controls, because they provide less than a critical military or intelligence capability, but are not in normal commercial use. The 600 series is so identified when the third character in the 5-character export control classification number is the number ‘‘6’’. However, an unintended consequence of this transition of some munitions from the USML to the 600 series of the CCL was that the items were no longer covered by the prohibition of section 1211 of the NDAA for FY 2006, prohibiting purchase from Communist Chinese military companies. Therefore, section 1296 of the NDAA for FY 2017 has extended the prohibition to cover items listed in the 600 series of the CCL. II. Discussion and Analysis This rule amends the DFARS as follows: A. Section 1603 of the NDAA for FY 2018 1. Definitions. This rule expands the definition of ‘‘covered foreign country’’ to include Russia, as specified in the statute, and adds the statutory definitions of ‘‘cybersecurity risk’’ and ‘‘launch vehicle’’ at DFARS 225.772–1 and in the associated provision at DFARS 252.224–7049, Prohibition on Acquisition of Certain Foreign Commercial Satellite Services— Representations, and the clause at PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 66067 DFARS 252.225–7051, Prohibition on Acquisition of Certain Foreign Commercial Satellite Services, as appropriate. In addition, the statutory references to the Export Administration Act of 1979 in the definitions of ‘‘state sponsor of terrorism’’ at DFARS 225.772–1 and in the clauses at 252.225–7051 and 252.225–7050, Disclosure of Ownership or Control by the Government of a Country that is a State Sponsor of Terrorism, have been revised to refer to ‘‘section 1754(c)(1)(A)(i) of the Export Control Reform Act of 2018 (Title XVII, Subtitle B, of the National Defense Authorization Act for Fiscal Year 2019, Pub. L. 115–232)’’. 2. Cybersecurity Risk. The prohibitions at DFARS 225.772–2 and the provision at DFARS 252.225–7049, Prohibition on Acquisition of Certain Foreign Commercial Satellite Services— Representation, are expanded to include prohibition on award of a contract for commercial satellite services to a foreign entity if entering into such contract would create an unacceptable cybersecurity risk for DoD. The procedures at DFARS 225.772–3 further specify that unacceptable cybersecurity risk is to be determined by the Under Secretary of Defense for Acquisition and Sustainment or the Under Secretary of Defense for Policy, the two officials to whom the statute permits delegation of the authority to enter into a contract, subject to the prohibitions in paragraphs (a) and (b) of the statute. 3. Satellites and Launch Vehicles. Restrictions are added at DFARS 225.772–2 and the provision at DFARS 252.225–7049 for contracts for commercial services awarded to any entity (whether or not foreign) with regard to the design or manufacture of the satellite to be used to provide the services, or the launch vehicle that will be used to launch the satellite outside the United States. These restrictions do not apply to a launch that occurs prior to December 31, 2022, or to a satellite service provider that has a contract or other agreement relating to launch service that, prior to June 10, 2018, was either fully paid for by the satellite service provider, or covered by a legally binding commitment of the satellite service provider to pay for such services. 4. Representations and Disclosures. The representations are expanded to cover the new restrictions on satellites and launch vehicles, but these new restrictions will only be applicable with regard to commercial satellite services that will use satellites launched or after December 31, 2022. The restriction on launch vehicles does not apply to E:\FR\FM\21DER5.SGM 21DER5 66068 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Rules and Regulations launches within the United States. For added clarity, the disclosures that relate to the representations are integrated into the representations. 5. Clause. This rule creates a new clause to require compliance during contract performance with the representations in their offer with regard to the origin of the satellite services, satellites, and launch vehicles. amozie on DSK3GDR082PROD with RULES5 B. Section 1296 of the NDAA for FY 2017 1. Definitions. This rule provides a definition of ‘‘600 series of the Commerce Control List’’ and adds the definition of ‘‘item’’ with crossreferences to the EAR at 15 CFR 772.1 and ITAR at 22 CFR 120.6 and 22 CFR 120.9. The definitions already contain cross-references to the USML at 22 CFR part 121. For increased ease of reading, the definitions of Communist Chinese military company and ‘‘United States Munitions List’’ are now repeated at DFARS 225.003, rather than just providing a cross-reference at 225.770– 1 to the definitions in the clause at DFARS 252.225–7007. 2. 600 series. This rule amends DFARS 225.770 and the clause at DFARS 252.225–7007 to extend the prohibition on acquisition of USML items from Communist Chinese military companies to apply to items in the 600 series of the CCL. III. Applicability to Contracts at or Below the Simplified Acquisition Threshold and for Commercial Items, Including Commercially Available Offthe-Shelf Items This rule amends the applicability of existing DFARS solicitation provisions and contract clauses and adds a new clause as follows: • To implement section 1603 of the NDAA for FY 2018, this rule amends the provision at DFARS 252.225–7049, Prohibition on Acquisition of Commercial Satellite Services from Certain Foreign Entities— Representation, and adds a clause to enforce compliance with the representations in the associated provisions. This provision and clause will apply to acquisitions not greater than the Simplified Acquisition Threshold (SAT) and acquisitions of commercial items. • To implement section 1296 of the NDAA for FY 2017, this rule modifies the clause at DFARS 252.225–7007, Prohibition on Acquisition of United States Munitions List Items from Communist Chinese Military Companies, to prohibit contractors or subcontractors from acquiring items listed on the 600 series of the CCL that VerDate Sep<11>2014 00:42 Dec 21, 2018 Jkt 247001 are to be delivered under the contract from any Communist Chinese military company. As a result of the Export Control Reform Initiative, certain items were transferred from the USML to a series of new export control classification numbers (the 600 series) in the CCL. In order to ensure continued prohibition against purchase of items listed in the 600 series of the CCL from a Communist Chinese military company, this rule requires use of the clause in solicitations and contracts involving the delivery of items listed in the 600 series of the CCL, but does not otherwise change the clause prescription. The rule continues to prescribe the use of this clause for use in solicitations and contracts for items valued at or below the SAT. The clause will also apply to the acquisition of commercial items, including Commercially Available Off-the-Shelf (COTS) items, if the items are 600 series items on the CCL, or USML items. Although most 600 series items are not commercial items, and USML items are even less likely to be commercial items, it is possible that some of these covered items will be commercial items and must not be purchased from a Communist Chinese military company. A. Applicability to Contracts at or Below the SAT 41 U.S.C. 1905 governs the applicability of laws to contracts or subcontracts in amounts not greater than the SAT. It is intended to limit the applicability of laws to such contracts or subcontracts. 41 U.S.C. 1905 provides that if a provision of law contains criminal or civil penalties, or if the Federal Acquisition Regulation (FAR) Council makes a written determination that it is not in the best interest of the Federal Government to exempt contracts or subcontracts at or below the SAT, the law will apply to them. The Principal Director, Defense Pricing and Contracting (DPC), is the appropriate authority to make comparable determinations for regulations to be published in the DFARS, which is part of the FAR system of regulations. B. Applicability to Contracts for the Acquisition of Commercial Items, Including COTS Items 41 U.S.C. 1906 governs the applicability of laws to contracts for the acquisition of commercial items and is intended to limit the applicability of laws to contracts for the acquisition of commercial items. 41 U.S.C. 1906 provides that if a provision of law contains criminal or civil penalties, or if the FAR Council makes a written determination that it is not in the best PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 interest of the Federal Government to exempt commercial item contracts, the provision of law will apply to contracts for the acquisition of commercial items. Likewise, 41 U.S.C. 1907 governs the applicability of laws to COTS items, with the Administrator for Federal Procurement Policy the decision authority to determine that it is in the best interest of the Government to apply a provision of law to acquisitions of COTS items in the FAR. The Principal Director, DPC, is the appropriate authority to make comparable determinations for regulations to be published in the DFARS, which is part of the FAR system of regulations. C. Determinations • Section 1603 of the NDAA for FY 2018. A determination and finding was signed by the Director, Defense Procurement and Acquisition Policy, on June 23, 2014, that due to potential risk to national security it would not be in the best interest of the United States to exempt acquisitions not greater than the SAT and acquisitions of commercial items from the applicability of 10 U.S.C. 2279. Therefore, a separate determination under 41 U.S.C. 1905– 1907 is not required. • Section 1296 of the NDAA for FY 2017. A determination under 41 U.S.C. 1905 is not required to prescribe DFARS 252.225–7012 for use in solicitations and contracts valued at or below the SAT, because this is consistent with the current applicability of the clause DFARS 252.225–7007, which prohibits acquisitions of items on the USML from Communist Chinese Military companies. Modifying the clause to also cover items listed in the 600 series of the CCL is reinstating the prohibition that applied to those items before the items were moved off the USML and into the 600 series of the CCL. However, in accordance with 41 U.S.C. 1906 and 1907, the Principal Director, DPC, has determined that it is in the best interest of the Government to apply the requirements of section 1296 of the NDAA for FY 2017 to contracts for the acquisition of commercial items, including COTS. This rule prescribes the use of the clause at DFARS 252.225– 7007 in contracts for the acquisition of commercial items, if they involve the acquisition of 600 series or USML items. These items are export-controlled, irrespective of the contracting vehicle, including commercial contracts. The broad prohibition would be consistent with the intent of the law, DoD policy, and our National Defense Strategy with respect to China. The concern is with the integrity of the DoD supply chain and to prevent insertion of malicious E:\FR\FM\21DER5.SGM 21DER5 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Rules and Regulations items from China into U.S. weapons platforms, information technology systems and other areas, presenting a threat to our warfighters and their ability to defend U.S. national security. Further, because the meaning of the term ‘‘commercial’’ is not aligned between contracting and export control regulations, the disconnect could be used as a loophole for suppliers to violate the prohibition. Therefore, exempting contracts for the acquisition of commercial items (including COTS items) from the statutory prohibition on the acquisition of 600 series and USML items would severely decrease the intended effect of the statutes and could jeopardize the integrity of the DoD supply chain. IV. 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. amozie on DSK3GDR082PROD with RULES5 V. Executive Order 13771 This rule is not subject to the requirements of E.O. 13771, because the rule is issued with respect to a national security function of the United States. VI. Regulatory Flexibility Act DoD does not expect this interim 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, an initial regulatory flexibility analysis has been performed and is summarized as follows: The reason for this rule is to implement section 1603 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2018 and section 1296 of the NDAA for FY 2017. Section 1603 of the NDAA for FY 2018 amends 10 U.S.C. 2279, which prohibits acquisition of certain foreign commercial satellite services. Section 1296 of the NDAA for FY 2017 amends section 1211 of the NDAA for FY 2006 to prohibit purchase from any Communist Chinese military VerDate Sep<11>2014 00:42 Dec 21, 2018 Jkt 247001 company, through a contract or subcontract (at any tier), of goods and services controlled as munitions items on the 600 series of the Commerce Control List (CCL) of the Export Administration Regulations of the Department of Commerce. The objectives of the rule are as follows: • Section 1603. To prohibit award of contracts for commercial satellite services to a foreign entity if entering into such contract would create an unacceptable cybersecurity risk. In addition, the definition of covered foreign country is expanded to include Russia (other covered foreign countries are China, North Korea, Iran, Sudan, and Syria). New restrictions are also added with regard to the satellites and launch vehicles to be used to provide the satellite services, but these restrictions do not apply to launches that occur prior to December 31, 2022. • Section 1296. To prohibit purchase from a Communist Chinese military company of items that meet the definition of goods and services controlled as munitions items when moved to the 600 series of the CCL of the Export Administration Regulations of the Department of Commerce. DoD estimates that this rule will apply small entities as follows: • Section 1603. This part of the rule will apply to less than 86 small entities. According to Federal Procurement Data System (FPDS) data for FY 2016, 86 small entities were awarded contracts or orders for services under Product Service Code D304 (ADP Telecommunications and Transmission Services), of which commercial satellite services are a subset. Although the focus of the Regulatory Flexibility Act is protection of domestic small business entities that are eligible for assistance from the Small Business Administration, there may be domestic small business entities in the United States that offer the satellite services of a foreign entity that would be restricted by this rule. • Section 1296. This part of the rule will apply to any small entities that intend to provide items on the 600 series of the Commerce Control List under a DoD contract or subcontract. The 600 series consists of items on the Commerce Control List that have an export control classification number of which the third character is a ‘‘6’’. These items were transitioned from the United States Munitions List (USML) to the 600 series, because they have less than a critical military or intelligence capability than the items that remain on the USML, but they are not currently in normal commercial use. Data on the PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 66069 number of entities that can provide such items, and whether they are small or other than small entities, is not available in FPDS, because these items are not readily identifiable in FPDS and are often acquired through subcontracts. Projected reporting or recordkeeping requirements of this rule are as follows: • Section 1603. In addition to the current annual representations as to whether the offeror is, or is not, a foreign entity subject to the prohibitions of the statute; or is, or is not, offering commercial satellite services provided by such a foreign entity, this rule adds five more annual representations as to whether the offeror— Æ Is, or is not offering commercial satellite services using satellites, launched on or after December 31, 2022, that will be designed or manufactured in a covered foreign country; Æ Is, or is not offering commercial satellite services using satellites, launched on or after December 31, 2022, that will be designed or manufactured by an entity controlled in whole or in part by, or acting on behalf of, the government of a covered foreign country; Æ Is, or is not offering commercial satellite services using satellites, launched outside the United States on or after December 31, 2022, using a launch vehicle that is designed or manufactured in a covered foreign country; Æ Is, or is not offering commercial satellite services using satellites, launched outside the United States on or after December 31, 2022, using a launch vehicle that is provided by the government of a covered foreign country; and Æ Is, or is not offering commercial satellite services using satellites, launched outside the United States on or after December 31, 2022, using a launch vehicle that is provided by an entity controlled in whole or in part by, or acting on behalf of, the government of a covered foreign country. Further information is required if the offeror provides an affirmative response to any of the representations, but such affirmative response and further submission is expected to be extremely rare because of the statutory prohibition and the expected rarity of a waiver by the Under Secretary of Defense for Acquisition and Sustainment or for Policy. Furthermore, this prohibition is only applicable to launches on or after December 31, 2022. If the satellite service provider responded affirmatively to any of the new representations regarding launch vehicles, if such launches are covered in E:\FR\FM\21DER5.SGM 21DER5 66070 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Rules and Regulations amozie on DSK3GDR082PROD with RULES5 whole or in part by a contract or other agreement relating to launch services that, prior to June 10, 2018, was either fully paid by the satellite service provider or covered by a legally binding commitment of the satellite service provider to pay for such services, a de minimis amount of information is required with regard to such contract or agreement in order to establish an exception to the associated prohibitions. • Section 1296. There are no projected reporting or recordkeeping requirements relating to implementation of section 1296. The only compliance requirements are to not purchase 600 series items from a Communist Chinese military company. The rule does not duplicate, overlap, or conflict with any other Federal rules. This rule will not have a significant economic impact on any small entities, unless they are offering commercial satellite services subject to the restrictions of this rule or providing 600 series items from a Communist Chinese military company. DoD was not able to identify any alternatives that would reduce the burden on small entities and meet the objectives of the rule. DoD invites comments from small business concerns and other interested parties on the expected impact of this rule on small entities. DoD will also consider comments from small entities concerning the existing regulations in subparts affected by this rule in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 610 (DFARS Case 2018–D020), in correspondence. VII. Paperwork Reduction Act This rule will affect the information collection requirements in the provision at DFARS 252.225–7049, currently approved through March 31, 2021, under OMB Control Number 0704–0525, entitled Prohibition on Acquisition of Commercial Satellite Services from Certain Foreign Entities, in accordance with the Paperwork Reduction Act (44 U.S.C. chapter 35). The impact, however, is negligible at this time, because the prohibition on use of certain foreign satellites and launch vehicles only applies to launches outside the United States on or after December 31, 2022. The information collection will be updated to reflect these changes when renewed in two years. VIII. Determination To Issue an Interim Rule A determination has been made under the authority of the Secretary of Defense that urgent and compelling reasons exist VerDate Sep<11>2014 00:42 Dec 21, 2018 Jkt 247001 to promulgate this interim rule without prior opportunity for public comment. It is critical that the DFARS is immediately revised to include the requirements of the law. A. Foreign Commercial Satellite Services DoD uses commercial satellite services to increase the availability and flexibility of military communications. Commercial satellite services may provide access to bandwidth and services that are unavailable through other means to support a variety of missions. Although these are commercial services, they are still being used to carry out military missions. Use of certain foreign commercial satellite services and foreign launches can pose an unacceptable risk to national security. Section 1603 of the NDAA for FY 2018 amends 10 U.S.C. 2279 to impose additional prohibitions with regard to acquisition of certain foreign commercial satellite services, especially from certain ‘‘covered foreign countries.’’ Section 1603 expands the definition of ‘‘covered foreign country’’ from China, North Korea, and any country that is a state sponsor of terrorism (10 U.S.C. 2279) to include the Russian Federation. Section 1603 also defines ‘‘cybersecurity risk’’ and provides that DoD shall not enter into a contract for satellite services with a foreign entity if the Secretary of Defense reasonably believes that entering into such a contract would create an unacceptable cybersecurity risk for DoD. Congress enacted section 1603 in order to provide DoD, when contracting for commercial satellite services, with tools to reduce the perceived risk related to dealing with the Russian Federation. Indicating increasing distrust of Russia, there have been several other sections of the NDAAs in FY 2018 and FY 2019 placing prohibitions on buying critical items from Russia, such as rare earth magnets, tungsten, or telecommunications equipment or services to be used in the DoD nuclear deterrence mission or homeland defense mission. This rule also requires DoD not to enter into a contract for commercial satellite services with any foreign entity if the Secretary of Defense reasonably believes that such contract will present an unacceptable cybersecurity risk. Currently, there is no regulatory prohibition against contracting with a foreign entity in which the Government of Russia has an ownership interest that enables the government of Russia to affect satellite operations, or a foreign entity that plans to provide satellite PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 services from Russia. There is also no mechanism in place that allows the Secretary of Defense to decide not to enter into a contract with a foreign entity based on the level or cybersecurity risk it would create; in such instances, DoD must either accept the risk and award the contract or cancel the solicitation. According to data available in the Federal Procurement Data System for fiscal year 2017, DoD awarded 3,715 contracts and orders for commercial supplies or services under the product service code D304, IT and Telecom— Telecommunications and Transmission, to 256 unique entities. It is expected that a subset of these awards were for commercial satellite services. While the universe of contracts and entities affected by this rule is relatively small, a single contract award to one of the foreign entities excluded by this rule could damage our national security. Without this rule to implement the prohibitions and limitations provided by section 1603, there is no way for DoD contracting officers to exclude the Russian-controlled entities, or the other foreign entities that present and unacceptable cybersecurity risk, from competing for or being awarded contracts for covered commercial satellite services. This creates an opportunity for Russian interference with DoD satellite communications and increases the risk of cyberattacks by other foreign entities, which could jeopardize our military communications, the lives of our warfighters, and our national security. B. Certain Items on the Commerce Control List Section 1211 of the NDAA for FY 2006, prohibited purchase of items on the United States Munitions List (USML) from a Communist Chinese military company, in order to protect the integrity of the supply chain for military items. Section 1296 of the NDAA for FY 2017 extends that prohibition to cover items moved from the USML to the Commerce Control List (CCL) of the Export Administration Regulations of the Department of Commerce. As a result of the Export Control Reform Initiative, beginning in 2013, certain items specially designed for military applications have been transferred from the USML to a new category on the CCL (the 600 series). The 600 series includes such items as F–16 wings, fins, panels, fuselages, cockpit structures, and landing gear, and analogous items from other categories on the USML. While helpful in facilitating cooperation with our allies and E:\FR\FM\21DER5.SGM 21DER5 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Rules and Regulations partners, an unintended consequence of this export reform was that the prohibition imposed by section 1211 of the NDAA for FY 2006 no longer covered these items, since they were no longer on the USML. The Under Secretary of Defense for Policy, including the Defense Technology Security Administration, as well as the offices in the purview of the previous Under Secretary of Defense for Acquisition, Technology, and Logistics, the National Security staff, and others were very concerned about potential acquisition of military components from a Communist Chinese military company, due to potential adverse impact on the integrity of the supply chain for major U.S. weapons systems. These organizations, along with export control stakeholders in the Departments of Commerce and State, were also in favor of continuing the prohibition against purchase of military items, now controlled as 600 series items, from Communist Chinese military companies. After consultation with the DoD Office of General Counsel, DoD determined that the only solution was to seek legislative correction to this problem, resulting in enactment of section 1296 of the NDAA for FY 2017. 600 series items are frequently used in DoD’s weapon systems and it is imperative that DoD ensure that the integrity of those weapon systems is maintained by immediately restricting the purchase of these items from Communist Chinese military companies. Until this rule is in effect, there is no basis on which to refuse to buy items with military applications listed in the 600 series of the CCL from a Communist Chinese military company. Purchase of such items from a Communist Chinese military company poses a serious risk to U.S. national security, the safety of military personnel, and the integrity of the U.S. defense supply chain, because according to DoD information, China is the top source of counterfeit U.S. military electronics. List of Subjects in 48 CFR Parts 204, 212, 225, and 252 Government procurement. amozie on DSK3GDR082PROD with RULES5 Jennifer Lee Hawes, Regulatory Control Officer, Defense Acquisition Regulations System. Therefore, 48 CFR parts 204, 212, 225, and 252 are amended as follows: ■ 1. The authority citation for 48 CFR parts 204, 212, 225, and 252 continues to read as follows: Authority: 41 U.S.C. 1303 and 48 CFR chapter 1. VerDate Sep<11>2014 00:42 Dec 21, 2018 Jkt 247001 PART 204—ADMINISTRATIVE MATTERS 2. Amend section 204.1202 by revising paragraph (2)(ix) to read as follows: ■ 204.1202 Solicitation provision. * * * * * (2) * * * (ix) 252.225–7049, Prohibition on Acquisition of Certain Foreign Commercial Satellite Services— Representations. * * * * * PART 212—ACQUISITION OF COMMERCIAL ITEMS 3. Amend section 212.301 by— a. Redesignating paragraphs (f)(ix)(BB) and (CC) as paragraphs (f)(ix)(CC) and (DD), respectively; ■ b. In the newly redesignated paragraph (f)(ix)(CC), removing ‘‘Commercial Satellite Services from Certain Foreign Entities’’ and ‘‘at 225.772–5’’ and adding ‘‘Certain Foreign Commercial Satellite Services’’ and ‘‘in 225.772–5(a)’’, in their place, respectively; ■ c. Redesignating paragraphs (f)(ix)(D) through (AA) as (f)(ix)(E) through (BB); and ■ d. Adding new paragraph (f)(ix)(D) and paragraph (f)(ix)(EE). The additions read as follows: ■ ■ 212.301 Solicitation provisions and contract clauses for the acquisition of commercial items. * * * * * (f) * * * (ix) * * * (D) Use the clause at 252.225–7007, Prohibition on Acquisition of Certain Items from Communist Chinese Military Companies, as prescribed in 225.1103(4), to comply with section 1211 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2006 (Pub. L. 109–163) as amended by the NDAAs for FY 2012 and FY 2017. * * * * * (EE) Use the clause at 252.225–7051, Prohibition on Acquisition for Certain Foreign Commercial Satellite Services, as prescribed in 225.772–5(b), to comply with 10 U.S.C. 2279. * * * * * PART 225—FOREIGN ACQUISITION 4. Amend section 225.003 by— a. Removing paragraph designations (1) through (16); ■ b. Adding, in alphabetical order, definitions for ‘‘600 series of the Commerce Control List’’ and ■ ■ PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 66071 ‘‘Communist Chinese military company’’; ■ c. In the definition for ‘‘Domestic concerns,’’ redesignating paragraphs (i) and (ii) as paragraphs (1) and (2); ■ d. In the definition for ‘‘Eligible product,’’ redesignating paragraphs (i) introductory text and (i)(A) and (B) as paragraphs (1) and (1)(i) and (ii), respectively, and paragraphs (ii) and (iii) as paragraphs (2) through (3), respectively; ■ e. In the definitions of ‘‘South Caucasus/Central and South Asian (SC/ CASA) state construction material’’ and ‘‘South Caucasus/Central and South Asian (SC/CASA) state end product,’’ redesignating paragraphs (i) and (ii) as paragraphs (1) and (2); ■ f. Adding, in alphabetical order, a definition for ‘‘United States Munitions List’’. The additions read as follows: 225.003 Definitions. * * * * * 600 series of the Commerce Control List means the series of 5-character export control classification numbers (ECCNs) of the Commerce Control List of the Export Administration Regulations in 15 CFR part 774, supplement no. 1, that have a ‘‘6’’ as the third character. The 600 series constitutes the munitions and munitions-related ECCNs within the larger Commerce Control List. (See definition of ‘‘600 series’’ in 15 CFR 772.) * * * * * Communist Chinese military company means any entity, regardless of geographic location, that is— (1) A part of the commercial or defense industrial base of the People’s Republic of China (including a subsidiary or affiliate of such entity); or (2) Owned or controlled by, or affiliated with, an element of the Government or armed forces of the People’s Republic of China. * * * * * United States Munitions List means the munitions list of the International Traffic in Arms Regulation in 22 CFR part 121. ■ 5. Revise section 225.770 to read as follows: 225.770 Prohibition on acquisition of certain items from Communist Chinese military companies. This section implements section 1211 of the National Defense Authorization Act for Fiscal Year 2006 (Pub. L. 109– 163), section 1243 of the National Defense Authorization Act for Fiscal Year 2012 (Pub. L. 112–81), and section 1296 of the National Defense E:\FR\FM\21DER5.SGM 21DER5 66072 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Rules and Regulations Authorization Act for Fiscal Year 2017 (Pub. L. 114–328). See PGI 225.770 for additional information relating to this statute, the terms used in this section, the United States Munitions List (USML), and the 600 series of the Commerce Control List (CCL). ■ 6. Revise section 225.770–1 to read as follows: 225.770–1 Definitions. As used in this section— Component means an item that is useful only when used in conjunction with an end item (15 CFR 772.1 and 22 CFR 120.45(b)). Item means— (1) A USML defense article, as defined at 22 CFR 120.6; (2) A USML defense service, as defined at 22 CFR 120.9; or (3) A 600 series item, as defined at 15 CFR 772.1. Part means any single unassembled element of a major or minor component, accessory, or attachment, that is not normally subject to disassembly without the destruction or impairment of designed use (15 CFR 772.1 and 22 CFR 120.45(d)). ■ 7. Revise section 225.770–2 to read as follows: 225.770–2 Prohibition. Do not acquire items covered by the USML or the 600 series of the CCL, through a contract or subcontract at any tier, from any Communist Chinese military company. This prohibition does not apply to components and parts of covered items unless the components and parts are themselves covered by the USML or the 600 series of the CCL. 225.770–3 [Amended] 8. Amend section 225.770–3, in the introductory text, by removing ‘‘supplies or services’’ and adding ‘‘items’’ in its place. ■ 9. Revise section 225.770–4 to read as follows: ■ 225.770–4 Identifying items covered by the USML or the 600 series of the CCL. amozie on DSK3GDR082PROD with RULES5 each category, many of which contain 600 series items. Since not all items covered by the USML or 600 series of the CCL are themselves munitions (e.g., protective personnel equipment, military training equipment), the requiring activity should consult the USML and the 600 series of the CCL before concluding that an item is or is not covered. See PGI 225.770–4. (a) Before issuance of a solicitation, the requiring activity will notify the contracting officer in writing whether the items to be acquired are covered by the USML or the 600 series of the CCL. The notification will identify any covered item(s) and will provide the pertinent USML reference(s) from 22 CFR part 121 or the 600 series of the CCL references from 15 CFR part 774, supplement no. 1. (b) The USML includes defense articles and defense services that fall into 21 categories. The CCL includes ten categories and five product groups in VerDate Sep<11>2014 00:42 Dec 21, 2018 Jkt 247001 225.770–5 [Amended] 10. Amend section 225.770–5, in paragraph (b)(1), by removing ‘‘Acquisition, Technology, and Logistics’’ and adding ‘‘Acquisition and Sustainment’’ in its place. ■ 11. Revise section 225.772 heading to read as follows: ■ 225.772 Prohibition on acquisition of certain foreign commercial satellite services. 12. Revise section 225.772–1 to read as follows: ■ 225.772–1 Definitions. As used in this section— Covered foreign country means— (1) The People’s Republic of China; (2) North Korea; (3) The Russian Federation; or (4) Any country that is a state sponsor of terrorism. (10 U.S.C. 2279) Cybersecurity risk means threats to and vulnerabilities of information or information systems and any related consequences caused by or resulting from unauthorized access, use, disclosure, degradation, disruption, modification, or destruction of such information or information systems, including such related consequences caused by an act of terrorism. (10 U.S.C. 2279) Foreign entity means— (1) Any branch, partnership, group or sub-group, association, estate, trust, corporation or division of a corporation, or organization organized under the laws of a foreign state if either its principal place of business is outside the United States or its equity securities are primarily traded on one or more foreign exchanges. (2) Notwithstanding paragraph (1) of this definition, any branch, partnership, group or sub-group, association, estate, trust, corporation or division of a corporation, or organization that demonstrates that a majority of the equity interest in such entity is ultimately owned by U.S. nationals is not a foreign entity. (31 CFR 800.212) Government of a covered foreign country includes the state and the government of a covered foreign country, as well as any political subdivision, agency, or instrumentality thereof. PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 Launch vehicle means a fully integrated space launch vehicle. (10 U.S.C. 2279) Satellite services means communications capabilities that utilize an on-orbit satellite for transmitting the signal from one location to another. State sponsor of terrorism means a country determined by the Secretary of State, under section 1754(c)(1)(A)(i) of the Export Control Reform Act of 2018 (Title XVII, Subtitle B, of the National Defense Authorization Act for Fiscal Year 2019, Pub. L. 115–232), to be a country the government of which has repeatedly provided support for acts of international terrorism. As of December 21, 2018, state sponsors of terrorism include: Iran, North Korea, Sudan, and Syria. (10 U.S.C. 2327) ■ 13. Revise section 225.772–2 to read as follows: 225.772–2 Prohibitions. Except as provided in 225.772–4, the contracting officer shall not award a contract for commercial satellite services to— (a)(1) A foreign entity if the Under Secretary of Defense for Acquisition and Sustainment or the Under Secretary of Defense for Policy reasonably believes that— (i) The foreign entity is an entity in which the government of a covered foreign country has an ownership interest that enables the government to affect satellite operations; (ii) The foreign entity plans to or is expected to provide satellite services under the contract from a covered foreign country; or (iii) Entering into such contract would create an unacceptable cybersecurity risk for DoD, as determined by the Under Secretary of Defense for Acquisition and Sustainment or the Under Secretary of Defense for Policy; or (2) An offeror that is offering commercial satellite services provided by a foreign entity as described in paragraph (a) of this section; or (b)(1) Any entity, except as provided in paragraph (b)(2) of this section, for a launch that occurs on or after December 31, 2022, if the Under Secretary of Defense for Acquisition and Sustainment or the Under Secretary of Defense for Policy reasonably believes that such satellite services will be provided using satellites that will be— (i) Designed or manufactured— (A) In a covered foreign country; or (B) By an entity controlled in whole or in part by, or acting on behalf of, the government of a covered foreign country; or E:\FR\FM\21DER5.SGM 21DER5 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Rules and Regulations (ii) Launched outside the United States using a launch vehicle that is— (A) Designed or manufactured in a covered foreign country; or (B) Provided by— (1) The government of a covered foreign country; or (2) An entity controlled in whole or in part by, or acting on behalf of, the government of a covered foreign country. (2) The prohibition in paragraph (b)(1) of this section does not apply with respect to launch services for which a satellite service provider has a contract or other agreement that, prior to June 10, 2018, was either fully paid for by the satellite service provider or covered by a legally binding commitment of the satellite service provider to pay for such services. 14. Amend section 225.772–3 by— a. Redesignating paragraphs (a) and (b) as paragraphs (b) and (c), respectively; ■ b. In the newly redesignated paragraph (b) introductory text, removing ‘‘paragraph (d)’’ and ‘‘Commercial Satellite Services from Certain Foreign Entities’’ and adding ‘‘paragraph (c)’’ and ‘‘Certain Foreign Commercial Satellite Services’’ in their place, respectively; and ■ c. Adding a new paragraph (a). The addition reads as follows: ■ ■ 225.772–3 Procedures. amozie on DSK3GDR082PROD with RULES5 (a)(1) The contracting officer shall not award to any source that is a foreign satellite service provider or is offering satellite services provided by a foreign entity if such award presents an unacceptable cybersecurity risk, as determined by the Under Secretary of Defense for Acquisition and Sustainment or the Under Secretary of Defense for Policy. (2) When procuring commercial satellite services from a foreign entity, the contracting officer shall review the exclusion records in the System for Award Management (SAM) database as required at FAR 9.405, to ensure that an entity identified in, or otherwise known to be involved in, the otherwise successful offer is not listed as ineligible in the SAM database (see FAR 9.405). * * * * * 15. Amend section 225.772–4 by— a. Revising paragraph (a) introductory text; and ■ b. In paragraph (a)(1), by removing ‘‘Acquisition, Technology, and Logistics’’ and adding ‘‘Acquisition and Sustainment’’ in its place. ■ ■ VerDate Sep<11>2014 00:42 Dec 21, 2018 Jkt 247001 225.772–4 Exception. (a) The prohibitions in 225.772–2(a) and (b) do not apply if— * * * * * ■ 16. Revise section 225.772–5 to read as follows: 225.772–5 Solicitation provision and contract clauses. (a) Use the provision at 252.225–7049, Prohibition on Acquisition of Certain Foreign Commercial Satellite Services— Representations, in solicitations that include the clause at 252.225–7051, Prohibition on Acquisition of Certain Foreign Commercial Satellite Services. If the solicitation includes the provision at FAR 52.204–7, do not separately list the provision 252.225–7049 in the solicitation. (b) Use the clause at 252.225–7051, Prohibition on Acquisition of Certain Foreign Commercial Satellite Services, in solicitations and contracts for the acquisition of commercial satellite services, including solicitation and contracts using FAR part 12 procedures for the acquisition of commercial items. (c) Use the clause at 252.239–7018, Supply Chain Risk, as prescribed at 239.7306(b), when applicable. ■ 17. Amend section 225.1103 by revising paragraph (4) to read as follows: 225.1103 Other provisions and clauses. * * * * * (4) Unless an exception in 225.770–3 applies, use the clause at 252.225–7007, Prohibition on Acquisition of Certain Items from Communist Chinese Military Companies, in solicitations and contracts involving the delivery of items covered by the United States Munitions List or the 600 series of the Commerce Control List. 66073 Prohibition on Acquisition of Certain Items From Communist Chinese Military Companies (Dec 2018) (a) Definitions. As used in this clause— 600 series of the Commerce Control List means the series of 5-character export control classification numbers (ECCNs) of the Commerce Control List of the Export Administration Regulations in 15 CFR part 774, supplement no. 1, that have a ‘‘6’’ as the third character. The 600 series constitutes the munitions and munitions-related ECCNs within the larger Commerce Control List. (See definition of ‘‘600 series’’ in 15 CFR 772.) Communist Chinese military company means any entity, regardless of geographic location, that is— (1) A part of the commercial or defense industrial base of the People’s Republic of China (including a subsidiary or affiliate of such entity); or (2) Owned or controlled by, or affiliated with, an element of the Government or armed forces of the People’s Republic of China. Item means— (1) A USML defense article, as defined at 22 CFR 120.6; (2) A USML defense service, as defined at 22 CFR 120.9; or (3) A 600 series item, as defined at 15 CFR 772.1. United States Munitions List means the munitions list of the International Traffic in Arms Regulation in 22 CFR part 121. (b) Any items covered by the United States Munitions List or the 600 series of the Commerce Control List that are delivered under this contract may not be acquired, directly or indirectly, from a Communist Chinese military company. (c) The Contractor shall insert the substance of this clause, including this paragraph (c), in all subcontracts for items covered by the United States Munitions List or the 600 series of the Commerce Control List. (End of clause) 20. Revise section 252.225–7049 to read as follows: ■ PART 252—SOLICITATION PROVISIONS AND CONTRACT CLAUSES 252.225–7049 Prohibition on Acquisition of Certain Foreign Commercial Satellite Services—Representations. 252.204–7007 As prescribed in 225.772–5(a), use the following provision: [Amended] 18. Amend section 252.204–7007 by— a. Removing clause date ‘‘(JAN 2015)’’ and add ‘‘(DEC 2018)’’; and ■ b. In paragraph (d)(1)(v), by removing ‘‘Commercial Satellite Services from Certain Foreign Entities’’ and adding ‘‘Certain Foreign Commercial Satellite Services’’ in its place. ■ 19. Revise section 252.225–7007 to read as follows: ■ ■ 252.225–7007 Prohibition on Acquisition of Certain Items from Communist Chinese Military Companies. As prescribed in 225.1103(4), use the following clause: PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 Prohibition on Acquisition of Certain Foreign Commercial Satellite Services— Representations (Dec 2018) (a) Definitions. As used in this provision— Covered foreign country, foreign entity, government of a covered foreign country, launch vehicle, satellite services, and state sponsor of terrorism are defined in the clause at Defense Federal Acquisition Regulation Supplement (DFARS) 252.225–7051, Prohibition on Acquisition of Certain Commercial Satellite Services. Cybersecurity risk means threats to and vulnerabilities of information or information systems and any related consequences caused by or resulting from unauthorized access, use, disclosure, degradation, E:\FR\FM\21DER5.SGM 21DER5 amozie on DSK3GDR082PROD with RULES5 66074 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Rules and Regulations disruption, modification, or destruction of such information or information systems, including such related consequences caused by an act of terrorism. (10 U.S.C. 2279)] (b) Prohibition on award. In accordance with 10 U.S.C. 2279, unless an exception is determined to apply in accordance with DFARS 225.772–4, no contract for commercial satellite services may be awarded to— (1)(i) A foreign entity if the Under Secretary of Defense for Acquisition and Sustainment or the Under Secretary of Defense for Policy reasonably believes that— (A) The foreign entity is an entity in which the government of a covered foreign country has an ownership interest that enables the government to affect satellite operations; (B) The foreign entity plans to, or is expected to, provide satellite services under the contract from a covered foreign country; or (C) Entering into such contract would create an unacceptable cybersecurity risk for DoD; or (ii) An offeror that is offering to provide the commercial satellite services of a foreign entity as described in paragraph (b)(1) of this provision; or (2)(i) Any entity, except as provided in paragraph (b)(2)(ii) of this provision, for a launch that occurs on or after December 31, 2022, if the Under Secretary of Defense for Acquisition and Sustainment or the Under Secretary of Defense for Policy reasonably believes that such satellite service will be provided using satellites that will be— (A) Designed or manufactured— (1) In a covered foreign country; or (2) By an entity controlled in whole or in part by, or acting on behalf of, the government of a covered foreign country; or (B) Launched outside the United States using a launch vehicle that is— (1) Designed or manufactured in a covered foreign country; or (2) Provided by— (i) The government of a covered foreign country; or (ii) An entity controlled in whole or in part by, or acting on behalf of, the government of a covered foreign country. (ii) The prohibition in paragraph (b)(2)(i)(B) of this provision does not apply with respect to launch vehicles for which the satellite service provider has a contract or other agreement relating to launch services that, prior to June 10, 2018, was either fully paid for by the satellite service provider or covered by a legally binding commitment of the satellite service provider to pay for such services. (c) Representations. The Offeror represents that— (1) It [ ] is, [ ] is not a foreign entity in which the government of a covered foreign country has an ownership interest that enables the government to affect satellite operations. If affirmative, identify the covered foreign country: llll; (2) It [ ] is, [ ] is not a foreign entity that plans to provide satellite services under the contract from a covered foreign country. If affirmative, identify the covered foreign country: llll; (3) It [ ] is, [ ] is not offering commercial satellite services provided by a foreign entity VerDate Sep<11>2014 00:42 Dec 21, 2018 Jkt 247001 in which the government of a covered foreign country has an ownership interest that enables the government to affect satellite operations. If affirmative, identify the foreign entity and the covered foreign country: llll; (4) It [ ] is, [ ] is not offering commercial satellite services provided by a foreign entity that plans to or is expected to provide satellite services under the contract from a covered foreign country. If affirmative, identify the foreign entity and the covered foreign country: llll; (5) It [ ] is, [ ] is not offering commercial satellite services that will use satellites, launched on or after December 31, 2022, that will be designed or manufactured in a covered foreign country. If affirmative, identify the covered foreign country: llll; (6) It [ ] is, [ ] is not offering commercial satellite services that will use satellites, launched on or after December 31, 2022, that will be designed or manufactured by an entity controlled in whole or in part by, or acting on behalf of, the government of a covered foreign country. If affirmative, identify the entity, the covered foreign country, and the relationship of the entity to the government of the covered foreign country: llll; (7) It [ ] is, [ ] is not offering commercial satellite services that will use satellites, launched outside the United States on or after December 31, 2022, using a launch vehicle that is designed or manufactured in a covered foreign country. If affirmative, identify the covered foreign country: llll; (8) It [ ] is, [ ] is not offering commercial satellite services that will use satellites, launched outside the United States on or after December 31, 2022, using a launch vehicle that is provided by the government of a covered foreign country. If affirmative, identify the covered foreign country: llll; and (9) It [ ] is, [ ] is not offering commercial satellite services that will use satellites, launched outside the United States on or after December 31, 2022, using a launch vehicle that is provided by an entity controlled in whole or in part by, or acting on behalf of, the government of a covered foreign country. If affirmative, identify the entity, the covered foreign country, and the relationship of the entity to the government of the covered foreign country: llll; (d) If the Offeror has responded affirmatively to any representation in paragraphs (c)(7) through (9) of this provision, and if such launches are covered in whole or in part by a contract or other agreement relating to launch services that, prior to June 10, 2018, was either fully paid for by the satellite service provider or covered by a legally binding commitment of the satellite service provider to pay for such services, provide the following information: (1) The entity awarded the contract or other agreement: llll. (2) The date the contract or other agreement was awarded: llll. (3) The period of performance for the contract or other agreement: llll. (e) The representations in paragraph (c) of this provision are a material representation of PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 fact upon which reliance will be placed when making award. If it is later determined that the Offeror knowingly rendered an erroneous representation, in addition to other remedies available to the Government, the Contracting Officer may terminate the contract resulting from this solicitation for default. (End of provision) 21. Amend section 252.225–7050 by— a. Removing clause date ‘‘(JAN 2018)’’ and adding ‘‘(DEC 2018)’’ in its place; and ■ b. In paragraph (a), revising the definition of ‘‘State sponsor of terrorism’’. The revision reads as follows: ■ ■ 252.225–7050 Disclosure of Ownership or Control by the Government of a Country that is a State Sponsor of Terrorism. * * * * * (a) * * * State sponsor of terrorism means a country determined by the Secretary of State, under section 1754(c)(1)(A)(i) of the Export Control Reform Act of 2018 (Title XVII, Subtitle B, of the National Defense Authorization Act for Fiscal Year 2019, Pub. L. 115–232), to be a country the government of which has repeatedly provided support for acts of international terrorism. As of the date of this provision, state sponsors of terrorism include: Iran, North Korea, Sudan, and Syria. * * * * * ■ 22. Add section 252.225–7051 to read as follows: 252.225–7051 Prohibition on Acquisition of Certain Foreign Commercial Satellite Services. As prescribed in 225.772–5, use the following clause: Prohibition on Acquisition of Certain Foreign Commercial Satellite Services (DEC 2018) (a) Definitions. As used in this clause— Covered foreign country means— (i) The People’s Republic of China; (ii) North Korea; (iii) The Russian Federation; or (iv) Any country that is a state sponsor of terrorism. (10 U.S.C. 2279) Foreign entity means— (i) Any branch, partnership, group or subgroup, association, estate, trust, corporation or division of a corporation, or organization organized under the laws of a foreign state if either its principal place of business is outside the United States or its equity securities are primarily traded on one or more foreign exchanges. (ii) Notwithstanding paragraph (i) of this definition, any branch, partnership, group or sub-group, association, estate, trust, corporation or division of a corporation, or organization that demonstrates that a majority of the equity interest in such entity E:\FR\FM\21DER5.SGM 21DER5 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Rules and Regulations amozie on DSK3GDR082PROD with RULES5 is ultimately owned by U.S. nationals is not a foreign entity. (31 CFR 800.212) Government of a covered foreign country includes the state and the government of a covered foreign country, as well as any political subdivision, agency, or instrumentality thereof. Launch vehicle means a fully integrated space launch vehicle. (10 U.S.C. 2279) Satellite services means communications capabilities that utilize an on-orbit satellite for transmitting the signal from one location to another. State sponsor of terrorism means a country determined by the Secretary of State, under section 1754(c)(1)(A)(i) of the Export Control Reform Act of 2018 (Title XVII, Subtitle B, of the National Defense Authorization Act for Fiscal Year 2019, Pub. L. 115–232), to be a country the government of which has repeatedly provided support for acts of VerDate Sep<11>2014 00:42 Dec 21, 2018 Jkt 247001 international terrorism. As of the date of this provision, state sponsors of terrorism include: Iran, North Korea, Sudan, and Syria. (10 U.S.C. 2327) (b) Limitation. Unless specified in its offer, the Contractor shall not provide satellite services under this contract that— (1) Are from a covered foreign country; or (2) Except as provided in paragraph (c) of this provision, use satellites that will be— (i) Designed or manufactured— (A) In a covered foreign country; or (B) By an entity controlled in whole or in part by, or acting on behalf of, the government of a covered foreign country; or (ii) Launched outside the United States using a launch vehicle that is designed or manufactured— (A) In a covered foreign country; or (B) Provided by— PO 00000 Frm 00015 Fmt 4701 Sfmt 9990 66075 (1) The government of a covered foreign country; (2) An entity controlled in whole or in part by, or acting on behalf of, the government of a covered foreign country. (c) Exception. The limitation in paragraph (b)(2) of this provision shall not apply with respect to— (1) A launch that occurs prior to December 31, 2022; or (2) A satellite service provider that has a contract or other agreement relating to launch services that, prior to June 10, 2018, was either fully paid for by the satellite service provider or covered by a legally binding commitment of the satellite service provider to pay for such services. (End of clause) [FR Doc. 2018–27558 Filed 12–20–18; 8:45 am] BILLING CODE 5001–06–P E:\FR\FM\21DER5.SGM 21DER5

Agencies

[Federal Register Volume 83, Number 245 (Friday, December 21, 2018)]
[Rules and Regulations]
[Pages 66066-66075]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27558]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 204, 212, 225, and 252

[Docket DARS-2018-0060]
RIN 0750-AJ82


Defense Federal Acquisition Regulation Supplement: Foreign 
Commercial Satellite Services and Certain Items on the Commerce Control 
List (DFARS Case 2018-D020)

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

ACTION: Interim rule.

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

SUMMARY: DoD is amending the Defense Federal Acquisition Regulation 
Supplement (DFARS) to implement sections of the National Defense 
Authorization Act for Fiscal Years 2017 and 2018. One section imposes 
additional prohibitions with regard to acquisition of certain foreign 
commercial satellite services, such as cybersecurity risk and source of 
satellites and launch vehicles used to provide the foreign commercial 
satellite services, and expands the definition of ``covered foreign 
country'' to include Russia. Another section prohibits purchase of 
items from a Communist Chinese military company that meet the 
definition of goods and services controlled as munitions items when 
moved to the Commerce Control List of the Export Administration 
Regulations of the Department of Commerce.

DATES: Effective Date: December 21, 2018.
    Comment Date: Comments on the interim rule should be submitted in 
writing to the address shown below on or before February 19, 2019, to 
be considered in the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2018-D020, using 
any of the following methods:
    [cir] Federal eRulemaking Portal: http://www.regulations.gov. 
Search for ``DFARS Case 2018-D020.'' Select ``Comment Now'' and follow 
the instructions provided to submit a comment. Please include ``DFARS 
Case 2018-D020'' on any attached documents.
    [cir] Email: osd.dfars@mail.mil. Include DFARS Case 2018-D020 in 
the subject line of the message.
    [cir] Fax: 571-372-6094.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Ms. Amy 
G. Williams, OUSD (A&S) DPC/DARS, Room 3B941, 3060 Defense Pentagon, 
Washington, DC 20301-3060.
    Comments received generally will be posted without change to http:/
/

[[Page 66067]]

www.regulations.gov, including any personal information provided. To 
confirm receipt of your comment(s), please check www.regulations.gov, 
approximately two to three days after submission to verify posting 
(except allow 30 days for posting of comments submitted by mail).

FOR FURTHER INFORMATION CONTACT: Ms. Amy G. Williams, Defense 
Acquisition Regulations System, OUSD (A&S) DPC/DARS, Room 3B855, 3060 
Defense Pentagon, Washington, DC 20301-3060. Telephone 571-372-6106; 
facsimile 571-372-6094.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD is amending the DFARS to implement sections of the National 
Defense Authorization Act (NDAA) for Fiscal Year (FY) 2018 (Pub. L. 
115-91) and the NDAA for FY 2017 (Pub. L. 114-328) as follows:

A. Section 1603 of the NDAA for FY 2018

    Section 1603 amends 10 U.S.C. 2279 to impose additional 
prohibitions with regard to acquisition of certain foreign commercial 
satellite services. It addresses cybersecurity risks and the source of 
satellites and launch vehicles used to provide the foreign satellite 
services. The definition of ``covered foreign country'' is expanded to 
include Russia, in addition to any country described in section 
1261(c)(2) of the NDAA for FY 2013 (Pub. L. 112-239), which specifies 
the People's Republic of China, North Korea, and any country that is a 
state sponsor of terrorism (currently Iran, North Korea, Sudan, and 
Syria). 10 U.S.C. 2327, entitled ``Contracts: consideration of national 
security objectives,'' is the underlying statute that prohibits DoD 
from entering into contracts with a firm or subsidiary of a firm, that 
is owned or controlled by the government of a foreign country that has 
been identified by the Secretary of State as a state sponsor of 
terrorism under section 6(j)(1)(A) of the Export Administration Act of 
1979 (50 U.S.C. App. 2405(j)(1)(A)). 50 U.S.C. App. 2405 was 
subsequently reclassified and renumbered as 50 U.S.C. 4605, which has 
now been repealed by section 1766(a) of the Export Control Reform Act 
of 2018 (Title XVII, Subtitle B, of the NDAA for FY 2019, Pub. L. 115-
232). 50 U.S.C. 4605(j) has been replaced by section 1754(c) of the 
Export Control Reform Act of 2018 (to be eventually codified at 50 
U.S.C. 4813(c)).

B. Section 1296 of the NDAA for FY 2017

    Section 1211 of the NDAA for FY 2006 (Pub. L. 109-163) established 
the prohibition against purchase of items on the United States 
Munitions List (USML) from a Communist Chinese military company. 
Section 1296 of the NDAA for FY 2017 amends section 1211 to prohibit 
purchase from any Communist Chinese military company, through a 
contract or subcontract (at any tier), of goods and services controlled 
as munitions items on the 600 series of the Commerce Control List (CCL) 
of the Export Administration Regulations of the Department of Commerce. 
Under the Export Control Reform Initiative, the International Traffic 
in Arms Regulations (ITAR) and the USML have been amended so that they 
control only those items that provide the United States with a critical 
military or intelligence advantage or otherwise warrant such controls. 
In parallel, the Export Administration Regulations (EAR) were amended 
to transition some items from the USML to a series of new export 
control classification numbers (the 600 series) on the CCL, providing 
control for military items that do not warrant USML controls, because 
they provide less than a critical military or intelligence capability, 
but are not in normal commercial use. The 600 series is so identified 
when the third character in the 5-character export control 
classification number is the number ``6''.
    However, an unintended consequence of this transition of some 
munitions from the USML to the 600 series of the CCL was that the items 
were no longer covered by the prohibition of section 1211 of the NDAA 
for FY 2006, prohibiting purchase from Communist Chinese military 
companies. Therefore, section 1296 of the NDAA for FY 2017 has extended 
the prohibition to cover items listed in the 600 series of the CCL.

II. Discussion and Analysis

    This rule amends the DFARS as follows:

A. Section 1603 of the NDAA for FY 2018

    1. Definitions. This rule expands the definition of ``covered 
foreign country'' to include Russia, as specified in the statute, and 
adds the statutory definitions of ``cybersecurity risk'' and ``launch 
vehicle'' at DFARS 225.772-1 and in the associated provision at DFARS 
252.224-7049, Prohibition on Acquisition of Certain Foreign Commercial 
Satellite Services--Representations, and the clause at DFARS 252.225-
7051, Prohibition on Acquisition of Certain Foreign Commercial 
Satellite Services, as appropriate.
    In addition, the statutory references to the Export Administration 
Act of 1979 in the definitions of ``state sponsor of terrorism'' at 
DFARS 225.772-1 and in the clauses at 252.225-7051 and 252.225-7050, 
Disclosure of Ownership or Control by the Government of a Country that 
is a State Sponsor of Terrorism, have been revised to refer to 
``section 1754(c)(1)(A)(i) of the Export Control Reform Act of 2018 
(Title XVII, Subtitle B, of the National Defense Authorization Act for 
Fiscal Year 2019, Pub. L. 115-232)''.
    2. Cybersecurity Risk. The prohibitions at DFARS 225.772-2 and the 
provision at DFARS 252.225-7049, Prohibition on Acquisition of Certain 
Foreign Commercial Satellite Services--Representation, are expanded to 
include prohibition on award of a contract for commercial satellite 
services to a foreign entity if entering into such contract would 
create an unacceptable cybersecurity risk for DoD. The procedures at 
DFARS 225.772-3 further specify that unacceptable cybersecurity risk is 
to be determined by the Under Secretary of Defense for Acquisition and 
Sustainment or the Under Secretary of Defense for Policy, the two 
officials to whom the statute permits delegation of the authority to 
enter into a contract, subject to the prohibitions in paragraphs (a) 
and (b) of the statute.
    3. Satellites and Launch Vehicles. Restrictions are added at DFARS 
225.772-2 and the provision at DFARS 252.225-7049 for contracts for 
commercial services awarded to any entity (whether or not foreign) with 
regard to the design or manufacture of the satellite to be used to 
provide the services, or the launch vehicle that will be used to launch 
the satellite outside the United States. These restrictions do not 
apply to a launch that occurs prior to December 31, 2022, or to a 
satellite service provider that has a contract or other agreement 
relating to launch service that, prior to June 10, 2018, was either 
fully paid for by the satellite service provider, or covered by a 
legally binding commitment of the satellite service provider to pay for 
such services.
    4. Representations and Disclosures. The representations are 
expanded to cover the new restrictions on satellites and launch 
vehicles, but these new restrictions will only be applicable with 
regard to commercial satellite services that will use satellites 
launched or after December 31, 2022. The restriction on launch vehicles 
does not apply to

[[Page 66068]]

launches within the United States. For added clarity, the disclosures 
that relate to the representations are integrated into the 
representations.
    5. Clause. This rule creates a new clause to require compliance 
during contract performance with the representations in their offer 
with regard to the origin of the satellite services, satellites, and 
launch vehicles.

B. Section 1296 of the NDAA for FY 2017

    1. Definitions. This rule provides a definition of ``600 series of 
the Commerce Control List'' and adds the definition of ``item'' with 
cross-references to the EAR at 15 CFR 772.1 and ITAR at 22 CFR 120.6 
and 22 CFR 120.9. The definitions already contain cross-references to 
the USML at 22 CFR part 121. For increased ease of reading, the 
definitions of Communist Chinese military company and ``United States 
Munitions List'' are now repeated at DFARS 225.003, rather than just 
providing a cross-reference at 225.770-1 to the definitions in the 
clause at DFARS 252.225-7007.
    2. 600 series. This rule amends DFARS 225.770 and the clause at 
DFARS 252.225-7007 to extend the prohibition on acquisition of USML 
items from Communist Chinese military companies to apply to items in 
the 600 series of the CCL.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold and for Commercial Items, Including Commercially Available 
Off-the-Shelf Items

    This rule amends the applicability of existing DFARS solicitation 
provisions and contract clauses and adds a new clause as follows:
     To implement section 1603 of the NDAA for FY 2018, this 
rule amends the provision at DFARS 252.225-7049, Prohibition on 
Acquisition of Commercial Satellite Services from Certain Foreign 
Entities--Representation, and adds a clause to enforce compliance with 
the representations in the associated provisions. This provision and 
clause will apply to acquisitions not greater than the Simplified 
Acquisition Threshold (SAT) and acquisitions of commercial items.
     To implement section 1296 of the NDAA for FY 2017, this 
rule modifies the clause at DFARS 252.225-7007, Prohibition on 
Acquisition of United States Munitions List Items from Communist 
Chinese Military Companies, to prohibit contractors or subcontractors 
from acquiring items listed on the 600 series of the CCL that are to be 
delivered under the contract from any Communist Chinese military 
company. As a result of the Export Control Reform Initiative, certain 
items were transferred from the USML to a series of new export control 
classification numbers (the 600 series) in the CCL. In order to ensure 
continued prohibition against purchase of items listed in the 600 
series of the CCL from a Communist Chinese military company, this rule 
requires use of the clause in solicitations and contracts involving the 
delivery of items listed in the 600 series of the CCL, but does not 
otherwise change the clause prescription. The rule continues to 
prescribe the use of this clause for use in solicitations and contracts 
for items valued at or below the SAT. The clause will also apply to the 
acquisition of commercial items, including Commercially Available Off-
the-Shelf (COTS) items, if the items are 600 series items on the CCL, 
or USML items. Although most 600 series items are not commercial items, 
and USML items are even less likely to be commercial items, it is 
possible that some of these covered items will be commercial items and 
must not be purchased from a Communist Chinese military company.

A. Applicability to Contracts at or Below the SAT

    41 U.S.C. 1905 governs the applicability of laws to contracts or 
subcontracts in amounts not greater than the SAT. It is intended to 
limit the applicability of laws to such contracts or subcontracts. 41 
U.S.C. 1905 provides that if a provision of law contains criminal or 
civil penalties, or if the Federal Acquisition Regulation (FAR) Council 
makes a written determination that it is not in the best interest of 
the Federal Government to exempt contracts or subcontracts at or below 
the SAT, the law will apply to them. The Principal Director, Defense 
Pricing and Contracting (DPC), is the appropriate authority to make 
comparable determinations for regulations to be published in the DFARS, 
which is part of the FAR system of regulations.

B. Applicability to Contracts for the Acquisition of Commercial Items, 
Including COTS Items

    41 U.S.C. 1906 governs the applicability of laws to contracts for 
the acquisition of commercial items and is intended to limit the 
applicability of laws to contracts for the acquisition of commercial 
items. 41 U.S.C. 1906 provides that if a provision of law contains 
criminal or civil penalties, or if the FAR Council makes a written 
determination that it is not in the best interest of the Federal 
Government to exempt commercial item contracts, the provision of law 
will apply to contracts for the acquisition of commercial items. 
Likewise, 41 U.S.C. 1907 governs the applicability of laws to COTS 
items, with the Administrator for Federal Procurement Policy the 
decision authority to determine that it is in the best interest of the 
Government to apply a provision of law to acquisitions of COTS items in 
the FAR. The Principal Director, DPC, is the appropriate authority to 
make comparable determinations for regulations to be published in the 
DFARS, which is part of the FAR system of regulations.

C. Determinations

     Section 1603 of the NDAA for FY 2018. A determination and 
finding was signed by the Director, Defense Procurement and Acquisition 
Policy, on June 23, 2014, that due to potential risk to national 
security it would not be in the best interest of the United States to 
exempt acquisitions not greater than the SAT and acquisitions of 
commercial items from the applicability of 10 U.S.C. 2279. Therefore, a 
separate determination under 41 U.S.C. 1905-1907 is not required.
     Section 1296 of the NDAA for FY 2017. A determination 
under 41 U.S.C. 1905 is not required to prescribe DFARS 252.225-7012 
for use in solicitations and contracts valued at or below the SAT, 
because this is consistent with the current applicability of the clause 
DFARS 252.225-7007, which prohibits acquisitions of items on the USML 
from Communist Chinese Military companies. Modifying the clause to also 
cover items listed in the 600 series of the CCL is reinstating the 
prohibition that applied to those items before the items were moved off 
the USML and into the 600 series of the CCL. However, in accordance 
with 41 U.S.C. 1906 and 1907, the Principal Director, DPC, has 
determined that it is in the best interest of the Government to apply 
the requirements of section 1296 of the NDAA for FY 2017 to contracts 
for the acquisition of commercial items, including COTS. This rule 
prescribes the use of the clause at DFARS 252.225-7007 in contracts for 
the acquisition of commercial items, if they involve the acquisition of 
600 series or USML items. These items are export-controlled, 
irrespective of the contracting vehicle, including commercial 
contracts. The broad prohibition would be consistent with the intent of 
the law, DoD policy, and our National Defense Strategy with respect to 
China. The concern is with the integrity of the DoD supply chain and to 
prevent insertion of malicious

[[Page 66069]]

items from China into U.S. weapons platforms, information technology 
systems and other areas, presenting a threat to our warfighters and 
their ability to defend U.S. national security. Further, because the 
meaning of the term ``commercial'' is not aligned between contracting 
and export control regulations, the disconnect could be used as a 
loophole for suppliers to violate the prohibition. Therefore, exempting 
contracts for the acquisition of commercial items (including COTS 
items) from the statutory prohibition on the acquisition of 600 series 
and USML items would severely decrease the intended effect of the 
statutes and could jeopardize the integrity of the DoD supply chain.

IV. 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.

V. Executive Order 13771

    This rule is not subject to the requirements of E.O. 13771, because 
the rule is issued with respect to a national security function of the 
United States.

VI. Regulatory Flexibility Act

    DoD does not expect this interim 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, an initial regulatory flexibility analysis has been performed 
and is summarized as follows:
    The reason for this rule is to implement section 1603 of the 
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2018 and 
section 1296 of the NDAA for FY 2017. Section 1603 of the NDAA for FY 
2018 amends 10 U.S.C. 2279, which prohibits acquisition of certain 
foreign commercial satellite services. Section 1296 of the NDAA for FY 
2017 amends section 1211 of the NDAA for FY 2006 to prohibit purchase 
from any Communist Chinese military company, through a contract or 
subcontract (at any tier), of goods and services controlled as 
munitions items on the 600 series of the Commerce Control List (CCL) of 
the Export Administration Regulations of the Department of Commerce.
    The objectives of the rule are as follows:
     Section 1603. To prohibit award of contracts for 
commercial satellite services to a foreign entity if entering into such 
contract would create an unacceptable cybersecurity risk. In addition, 
the definition of covered foreign country is expanded to include Russia 
(other covered foreign countries are China, North Korea, Iran, Sudan, 
and Syria). New restrictions are also added with regard to the 
satellites and launch vehicles to be used to provide the satellite 
services, but these restrictions do not apply to launches that occur 
prior to December 31, 2022.
     Section 1296. To prohibit purchase from a Communist 
Chinese military company of items that meet the definition of goods and 
services controlled as munitions items when moved to the 600 series of 
the CCL of the Export Administration Regulations of the Department of 
Commerce.
    DoD estimates that this rule will apply small entities as follows:
     Section 1603. This part of the rule will apply to less 
than 86 small entities. According to Federal Procurement Data System 
(FPDS) data for FY 2016, 86 small entities were awarded contracts or 
orders for services under Product Service Code D304 (ADP 
Telecommunications and Transmission Services), of which commercial 
satellite services are a subset. Although the focus of the Regulatory 
Flexibility Act is protection of domestic small business entities that 
are eligible for assistance from the Small Business Administration, 
there may be domestic small business entities in the United States that 
offer the satellite services of a foreign entity that would be 
restricted by this rule.
     Section 1296. This part of the rule will apply to any 
small entities that intend to provide items on the 600 series of the 
Commerce Control List under a DoD contract or subcontract. The 600 
series consists of items on the Commerce Control List that have an 
export control classification number of which the third character is a 
``6''. These items were transitioned from the United States Munitions 
List (USML) to the 600 series, because they have less than a critical 
military or intelligence capability than the items that remain on the 
USML, but they are not currently in normal commercial use. Data on the 
number of entities that can provide such items, and whether they are 
small or other than small entities, is not available in FPDS, because 
these items are not readily identifiable in FPDS and are often acquired 
through subcontracts.
    Projected reporting or recordkeeping requirements of this rule are 
as follows:
     Section 1603.
    In addition to the current annual representations as to whether the 
offeror is, or is not, a foreign entity subject to the prohibitions of 
the statute; or is, or is not, offering commercial satellite services 
provided by such a foreign entity, this rule adds five more annual 
representations as to whether the offeror--
    [cir] Is, or is not offering commercial satellite services using 
satellites, launched on or after December 31, 2022, that will be 
designed or manufactured in a covered foreign country;
    [cir] Is, or is not offering commercial satellite services using 
satellites, launched on or after December 31, 2022, that will be 
designed or manufactured by an entity controlled in whole or in part 
by, or acting on behalf of, the government of a covered foreign 
country;
    [cir] Is, or is not offering commercial satellite services using 
satellites, launched outside the United States on or after December 31, 
2022, using a launch vehicle that is designed or manufactured in a 
covered foreign country;
    [cir] Is, or is not offering commercial satellite services using 
satellites, launched outside the United States on or after December 31, 
2022, using a launch vehicle that is provided by the government of a 
covered foreign country; and
    [cir] Is, or is not offering commercial satellite services using 
satellites, launched outside the United States on or after December 31, 
2022, using a launch vehicle that is provided by an entity controlled 
in whole or in part by, or acting on behalf of, the government of a 
covered foreign country.
    Further information is required if the offeror provides an 
affirmative response to any of the representations, but such 
affirmative response and further submission is expected to be extremely 
rare because of the statutory prohibition and the expected rarity of a 
waiver by the Under Secretary of Defense for Acquisition and 
Sustainment or for Policy. Furthermore, this prohibition is only 
applicable to launches on or after December 31, 2022.
    If the satellite service provider responded affirmatively to any of 
the new representations regarding launch vehicles, if such launches are 
covered in

[[Page 66070]]

whole or in part by a contract or other agreement relating to launch 
services that, prior to June 10, 2018, was either fully paid by the 
satellite service provider or covered by a legally binding commitment 
of the satellite service provider to pay for such services, a de 
minimis amount of information is required with regard to such contract 
or agreement in order to establish an exception to the associated 
prohibitions.
     Section 1296. There are no projected reporting or 
recordkeeping requirements relating to implementation of section 1296. 
The only compliance requirements are to not purchase 600 series items 
from a Communist Chinese military company.
    The rule does not duplicate, overlap, or conflict with any other 
Federal rules.
    This rule will not have a significant economic impact on any small 
entities, unless they are offering commercial satellite services 
subject to the restrictions of this rule or providing 600 series items 
from a Communist Chinese military company. DoD was not able to identify 
any alternatives that would reduce the burden on small entities and 
meet the objectives of the rule.
    DoD invites comments from small business concerns and other 
interested parties on the expected impact of this rule on small 
entities.
    DoD will also consider comments from small entities concerning the 
existing regulations in subparts affected by this rule in accordance 
with 5 U.S.C. 610. Interested parties must submit such comments 
separately and should cite 5 U.S.C. 610 (DFARS Case 2018-D020), in 
correspondence.

VII. Paperwork Reduction Act

    This rule will affect the information collection requirements in 
the provision at DFARS 252.225-7049, currently approved through March 
31, 2021, under OMB Control Number 0704-0525, entitled Prohibition on 
Acquisition of Commercial Satellite Services from Certain Foreign 
Entities, in accordance with the Paperwork Reduction Act (44 U.S.C. 
chapter 35). The impact, however, is negligible at this time, because 
the prohibition on use of certain foreign satellites and launch 
vehicles only applies to launches outside the United States on or after 
December 31, 2022. The information collection will be updated to 
reflect these changes when renewed in two years.

VIII. Determination To Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense that urgent and compelling reasons exist to promulgate this 
interim rule without prior opportunity for public comment. It is 
critical that the DFARS is immediately revised to include the 
requirements of the law.

A. Foreign Commercial Satellite Services

    DoD uses commercial satellite services to increase the availability 
and flexibility of military communications. Commercial satellite 
services may provide access to bandwidth and services that are 
unavailable through other means to support a variety of missions. 
Although these are commercial services, they are still being used to 
carry out military missions. Use of certain foreign commercial 
satellite services and foreign launches can pose an unacceptable risk 
to national security.
    Section 1603 of the NDAA for FY 2018 amends 10 U.S.C. 2279 to 
impose additional prohibitions with regard to acquisition of certain 
foreign commercial satellite services, especially from certain 
``covered foreign countries.'' Section 1603 expands the definition of 
``covered foreign country'' from China, North Korea, and any country 
that is a state sponsor of terrorism (10 U.S.C. 2279) to include the 
Russian Federation. Section 1603 also defines ``cybersecurity risk'' 
and provides that DoD shall not enter into a contract for satellite 
services with a foreign entity if the Secretary of Defense reasonably 
believes that entering into such a contract would create an 
unacceptable cybersecurity risk for DoD.
    Congress enacted section 1603 in order to provide DoD, when 
contracting for commercial satellite services, with tools to reduce the 
perceived risk related to dealing with the Russian Federation. 
Indicating increasing distrust of Russia, there have been several other 
sections of the NDAAs in FY 2018 and FY 2019 placing prohibitions on 
buying critical items from Russia, such as rare earth magnets, 
tungsten, or telecommunications equipment or services to be used in the 
DoD nuclear deterrence mission or homeland defense mission. This rule 
also requires DoD not to enter into a contract for commercial satellite 
services with any foreign entity if the Secretary of Defense reasonably 
believes that such contract will present an unacceptable cybersecurity 
risk.
    Currently, there is no regulatory prohibition against contracting 
with a foreign entity in which the Government of Russia has an 
ownership interest that enables the government of Russia to affect 
satellite operations, or a foreign entity that plans to provide 
satellite services from Russia. There is also no mechanism in place 
that allows the Secretary of Defense to decide not to enter into a 
contract with a foreign entity based on the level or cybersecurity risk 
it would create; in such instances, DoD must either accept the risk and 
award the contract or cancel the solicitation.
    According to data available in the Federal Procurement Data System 
for fiscal year 2017, DoD awarded 3,715 contracts and orders for 
commercial supplies or services under the product service code D304, IT 
and Telecom--Telecommunications and Transmission, to 256 unique 
entities. It is expected that a subset of these awards were for 
commercial satellite services. While the universe of contracts and 
entities affected by this rule is relatively small, a single contract 
award to one of the foreign entities excluded by this rule could damage 
our national security.
    Without this rule to implement the prohibitions and limitations 
provided by section 1603, there is no way for DoD contracting officers 
to exclude the Russian-controlled entities, or the other foreign 
entities that present and unacceptable cybersecurity risk, from 
competing for or being awarded contracts for covered commercial 
satellite services. This creates an opportunity for Russian 
interference with DoD satellite communications and increases the risk 
of cyberattacks by other foreign entities, which could jeopardize our 
military communications, the lives of our warfighters, and our national 
security.

B. Certain Items on the Commerce Control List

    Section 1211 of the NDAA for FY 2006, prohibited purchase of items 
on the United States Munitions List (USML) from a Communist Chinese 
military company, in order to protect the integrity of the supply chain 
for military items. Section 1296 of the NDAA for FY 2017 extends that 
prohibition to cover items moved from the USML to the Commerce Control 
List (CCL) of the Export Administration Regulations of the Department 
of Commerce. As a result of the Export Control Reform Initiative, 
beginning in 2013, certain items specially designed for military 
applications have been transferred from the USML to a new category on 
the CCL (the 600 series). The 600 series includes such items as F-16 
wings, fins, panels, fuselages, cockpit structures, and landing gear, 
and analogous items from other categories on the USML.
    While helpful in facilitating cooperation with our allies and

[[Page 66071]]

partners, an unintended consequence of this export reform was that the 
prohibition imposed by section 1211 of the NDAA for FY 2006 no longer 
covered these items, since they were no longer on the USML. The Under 
Secretary of Defense for Policy, including the Defense Technology 
Security Administration, as well as the offices in the purview of the 
previous Under Secretary of Defense for Acquisition, Technology, and 
Logistics, the National Security staff, and others were very concerned 
about potential acquisition of military components from a Communist 
Chinese military company, due to potential adverse impact on the 
integrity of the supply chain for major U.S. weapons systems. These 
organizations, along with export control stakeholders in the 
Departments of Commerce and State, were also in favor of continuing the 
prohibition against purchase of military items, now controlled as 600 
series items, from Communist Chinese military companies. After 
consultation with the DoD Office of General Counsel, DoD determined 
that the only solution was to seek legislative correction to this 
problem, resulting in enactment of section 1296 of the NDAA for FY 
2017.
    600 series items are frequently used in DoD's weapon systems and it 
is imperative that DoD ensure that the integrity of those weapon 
systems is maintained by immediately restricting the purchase of these 
items from Communist Chinese military companies. Until this rule is in 
effect, there is no basis on which to refuse to buy items with military 
applications listed in the 600 series of the CCL from a Communist 
Chinese military company. Purchase of such items from a Communist 
Chinese military company poses a serious risk to U.S. national 
security, the safety of military personnel, and the integrity of the 
U.S. defense supply chain, because according to DoD information, China 
is the top source of counterfeit U.S. military electronics.

List of Subjects in 48 CFR Parts 204, 212, 225, and 252

    Government procurement.

Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 204, 212, 225, and 252 are amended as 
follows:

0
1. The authority citation for 48 CFR parts 204, 212, 225, and 252 
continues to read as follows:

    Authority:  41 U.S.C. 1303 and 48 CFR chapter 1.

PART 204--ADMINISTRATIVE MATTERS

0
2. Amend section 204.1202 by revising paragraph (2)(ix) to read as 
follows:


204.1202   Solicitation provision.

* * * * *
    (2) * * *
    (ix) 252.225-7049, Prohibition on Acquisition of Certain Foreign 
Commercial Satellite Services--Representations.
* * * * *

PART 212--ACQUISITION OF COMMERCIAL ITEMS

0
3. Amend section 212.301 by--
0
a. Redesignating paragraphs (f)(ix)(BB) and (CC) as paragraphs 
(f)(ix)(CC) and (DD), respectively;
0
b. In the newly redesignated paragraph (f)(ix)(CC), removing 
``Commercial Satellite Services from Certain Foreign Entities'' and 
``at 225.772-5'' and adding ``Certain Foreign Commercial Satellite 
Services'' and ``in 225.772-5(a)'', in their place, respectively;
0
c. Redesignating paragraphs (f)(ix)(D) through (AA) as (f)(ix)(E) 
through (BB); and
0
d. Adding new paragraph (f)(ix)(D) and paragraph (f)(ix)(EE).
    The additions read as follows:


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

* * * * *
    (f) * * *
    (ix) * * *
    (D) Use the clause at 252.225-7007, Prohibition on Acquisition of 
Certain Items from Communist Chinese Military Companies, as prescribed 
in 225.1103(4), to comply with section 1211 of the National Defense 
Authorization Act (NDAA) for Fiscal Year (FY) 2006 (Pub. L. 109-163) as 
amended by the NDAAs for FY 2012 and FY 2017.
* * * * *
    (EE) Use the clause at 252.225-7051, Prohibition on Acquisition for 
Certain Foreign Commercial Satellite Services, as prescribed in 
225.772-5(b), to comply with 10 U.S.C. 2279.
* * * * *

PART 225--FOREIGN ACQUISITION

0
4. Amend section 225.003 by--
0
a. Removing paragraph designations (1) through (16);
0
b. Adding, in alphabetical order, definitions for ``600 series of the 
Commerce Control List'' and ``Communist Chinese military company'';
0
c. In the definition for ``Domestic concerns,'' redesignating 
paragraphs (i) and (ii) as paragraphs (1) and (2);
0
d. In the definition for ``Eligible product,'' redesignating paragraphs 
(i) introductory text and (i)(A) and (B) as paragraphs (1) and (1)(i) 
and (ii), respectively, and paragraphs (ii) and (iii) as paragraphs (2) 
through (3), respectively;
0
e. In the definitions of ``South Caucasus/Central and South Asian (SC/
CASA) state construction material'' and ``South Caucasus/Central and 
South Asian (SC/CASA) state end product,'' redesignating paragraphs (i) 
and (ii) as paragraphs (1) and (2);
0
f. Adding, in alphabetical order, a definition for ``United States 
Munitions List''.
    The additions read as follows:


225.003   Definitions.

* * * * *
    600 series of the Commerce Control List means the series of 5-
character export control classification numbers (ECCNs) of the Commerce 
Control List of the Export Administration Regulations in 15 CFR part 
774, supplement no. 1, that have a ``6'' as the third character. The 
600 series constitutes the munitions and munitions-related ECCNs within 
the larger Commerce Control List. (See definition of ``600 series'' in 
15 CFR 772.)
* * * * *
    Communist Chinese military company means any entity, regardless of 
geographic location, that is--
    (1) A part of the commercial or defense industrial base of the 
People's Republic of China (including a subsidiary or affiliate of such 
entity); or
    (2) Owned or controlled by, or affiliated with, an element of the 
Government or armed forces of the People's Republic of China.
* * * * *
    United States Munitions List means the munitions list of the 
International Traffic in Arms Regulation in 22 CFR part 121.

0
5. Revise section 225.770 to read as follows:


225.770   Prohibition on acquisition of certain items from Communist 
Chinese military companies.

    This section implements section 1211 of the National Defense 
Authorization Act for Fiscal Year 2006 (Pub. L. 109-163), section 1243 
of the National Defense Authorization Act for Fiscal Year 2012 (Pub. L. 
112-81), and section 1296 of the National Defense

[[Page 66072]]

Authorization Act for Fiscal Year 2017 (Pub. L. 114-328). See PGI 
225.770 for additional information relating to this statute, the terms 
used in this section, the United States Munitions List (USML), and the 
600 series of the Commerce Control List (CCL).

0
6. Revise section 225.770-1 to read as follows:


225.770-1   Definitions.

    As used in this section--
    Component means an item that is useful only when used in 
conjunction with an end item (15 CFR 772.1 and 22 CFR 120.45(b)).
    Item means--
    (1) A USML defense article, as defined at 22 CFR 120.6;
    (2) A USML defense service, as defined at 22 CFR 120.9; or
    (3) A 600 series item, as defined at 15 CFR 772.1.
    Part means any single unassembled element of a major or minor 
component, accessory, or attachment, that is not normally subject to 
disassembly without the destruction or impairment of designed use (15 
CFR 772.1 and 22 CFR 120.45(d)).

0
7. Revise section 225.770-2 to read as follows:


225.770-2   Prohibition.

    Do not acquire items covered by the USML or the 600 series of the 
CCL, through a contract or subcontract at any tier, from any Communist 
Chinese military company. This prohibition does not apply to components 
and parts of covered items unless the components and parts are 
themselves covered by the USML or the 600 series of the CCL.


225.770-3   [Amended]

0
8. Amend section 225.770-3, in the introductory text, by removing 
``supplies or services'' and adding ``items'' in its place.

0
9. Revise section 225.770-4 to read as follows:


225.770-4   Identifying items covered by the USML or the 600 series of 
the CCL.

    (a) Before issuance of a solicitation, the requiring activity will 
notify the contracting officer in writing whether the items to be 
acquired are covered by the USML or the 600 series of the CCL. The 
notification will identify any covered item(s) and will provide the 
pertinent USML reference(s) from 22 CFR part 121 or the 600 series of 
the CCL references from 15 CFR part 774, supplement no. 1.
    (b) The USML includes defense articles and defense services that 
fall into 21 categories. The CCL includes ten categories and five 
product groups in each category, many of which contain 600 series 
items. Since not all items covered by the USML or 600 series of the CCL 
are themselves munitions (e.g., protective personnel equipment, 
military training equipment), the requiring activity should consult the 
USML and the 600 series of the CCL before concluding that an item is or 
is not covered. See PGI 225.770-4.


225.770-5   [Amended]

0
10. Amend section 225.770-5, in paragraph (b)(1), by removing 
``Acquisition, Technology, and Logistics'' and adding ``Acquisition and 
Sustainment'' in its place.

0
11. Revise section 225.772 heading to read as follows:


225.772   Prohibition on acquisition of certain foreign commercial 
satellite services.

0
12. Revise section 225.772-1 to read as follows:


225.772-1   Definitions.

    As used in this section--
    Covered foreign country means--
    (1) The People's Republic of China;
    (2) North Korea;
    (3) The Russian Federation; or
    (4) Any country that is a state sponsor of terrorism. (10 U.S.C. 
2279)
    Cybersecurity risk means threats to and vulnerabilities of 
information or information systems and any related consequences caused 
by or resulting from unauthorized access, use, disclosure, degradation, 
disruption, modification, or destruction of such information or 
information systems, including such related consequences caused by an 
act of terrorism. (10 U.S.C. 2279)
    Foreign entity means--
    (1) Any branch, partnership, group or sub-group, association, 
estate, trust, corporation or division of a corporation, or 
organization organized under the laws of a foreign state if either its 
principal place of business is outside the United States or its equity 
securities are primarily traded on one or more foreign exchanges.
    (2) Notwithstanding paragraph (1) of this definition, any branch, 
partnership, group or sub-group, association, estate, trust, 
corporation or division of a corporation, or organization that 
demonstrates that a majority of the equity interest in such entity is 
ultimately owned by U.S. nationals is not a foreign entity. (31 CFR 
800.212)
    Government of a covered foreign country includes the state and the 
government of a covered foreign country, as well as any political 
subdivision, agency, or instrumentality thereof.
    Launch vehicle means a fully integrated space launch vehicle. (10 
U.S.C. 2279)
    Satellite services means communications capabilities that utilize 
an on-orbit satellite for transmitting the signal from one location to 
another.
    State sponsor of terrorism means a country determined by the 
Secretary of State, under section 1754(c)(1)(A)(i) of the Export 
Control Reform Act of 2018 (Title XVII, Subtitle B, of the National 
Defense Authorization Act for Fiscal Year 2019, Pub. L. 115-232), to be 
a country the government of which has repeatedly provided support for 
acts of international terrorism. As of December 21, 2018, state 
sponsors of terrorism include: Iran, North Korea, Sudan, and Syria. (10 
U.S.C. 2327)

0
13. Revise section 225.772-2 to read as follows:


225.772-2   Prohibitions.

    Except as provided in 225.772-4, the contracting officer shall not 
award a contract for commercial satellite services to--
    (a)(1) A foreign entity if the Under Secretary of Defense for 
Acquisition and Sustainment or the Under Secretary of Defense for 
Policy reasonably believes that--
    (i) The foreign entity is an entity in which the government of a 
covered foreign country has an ownership interest that enables the 
government to affect satellite operations;
    (ii) The foreign entity plans to or is expected to provide 
satellite services under the contract from a covered foreign country; 
or
    (iii) Entering into such contract would create an unacceptable 
cybersecurity risk for DoD, as determined by the Under Secretary of 
Defense for Acquisition and Sustainment or the Under Secretary of 
Defense for Policy; or
    (2) An offeror that is offering commercial satellite services 
provided by a foreign entity as described in paragraph (a) of this 
section; or
    (b)(1) Any entity, except as provided in paragraph (b)(2) of this 
section, for a launch that occurs on or after December 31, 2022, if the 
Under Secretary of Defense for Acquisition and Sustainment or the Under 
Secretary of Defense for Policy reasonably believes that such satellite 
services will be provided using satellites that will be--
    (i) Designed or manufactured--
    (A) In a covered foreign country; or
    (B) By an entity controlled in whole or in part by, or acting on 
behalf of, the government of a covered foreign country; or

[[Page 66073]]

    (ii) Launched outside the United States using a launch vehicle that 
is--
    (A) Designed or manufactured in a covered foreign country; or
    (B) Provided by--
    (1) The government of a covered foreign country; or
    (2) An entity controlled in whole or in part by, or acting on 
behalf of, the government of a covered foreign country.
    (2) The prohibition in paragraph (b)(1) of this section does not 
apply with respect to launch services for which a satellite service 
provider has a contract or other agreement that, prior to June 10, 
2018, was either fully paid for by the satellite service provider or 
covered by a legally binding commitment of the satellite service 
provider to pay for such services.

0
14. Amend section 225.772-3 by--
0
a. Redesignating paragraphs (a) and (b) as paragraphs (b) and (c), 
respectively;
0
b. In the newly redesignated paragraph (b) introductory text, removing 
``paragraph (d)'' and ``Commercial Satellite Services from Certain 
Foreign Entities'' and adding ``paragraph (c)'' and ``Certain Foreign 
Commercial Satellite Services'' in their place, respectively; and
0
c. Adding a new paragraph (a).
    The addition reads as follows:


225.772-3   Procedures.

    (a)(1) The contracting officer shall not award to any source that 
is a foreign satellite service provider or is offering satellite 
services provided by a foreign entity if such award presents an 
unacceptable cybersecurity risk, as determined by the Under Secretary 
of Defense for Acquisition and Sustainment or the Under Secretary of 
Defense for Policy.
    (2) When procuring commercial satellite services from a foreign 
entity, the contracting officer shall review the exclusion records in 
the System for Award Management (SAM) database as required at FAR 
9.405, to ensure that an entity identified in, or otherwise known to be 
involved in, the otherwise successful offer is not listed as ineligible 
in the SAM database (see FAR 9.405).
* * * * *

0
15. Amend section 225.772-4 by--
0
a. Revising paragraph (a) introductory text; and
0
b. In paragraph (a)(1), by removing ``Acquisition, Technology, and 
Logistics'' and adding ``Acquisition and Sustainment'' in its place.


225.772-4   Exception.

    (a) The prohibitions in 225.772-2(a) and (b) do not apply if--
* * * * *

0
16. Revise section 225.772-5 to read as follows:


225.772-5   Solicitation provision and contract clauses.

    (a) Use the provision at 252.225-7049, Prohibition on Acquisition 
of Certain Foreign Commercial Satellite Services--Representations, in 
solicitations that include the clause at 252.225-7051, Prohibition on 
Acquisition of Certain Foreign Commercial Satellite Services. If the 
solicitation includes the provision at FAR 52.204-7, do not separately 
list the provision 252.225-7049 in the solicitation.
    (b) Use the clause at 252.225-7051, Prohibition on Acquisition of 
Certain Foreign Commercial Satellite Services, in solicitations and 
contracts for the acquisition of commercial satellite services, 
including solicitation and contracts using FAR part 12 procedures for 
the acquisition of commercial items.
    (c) Use the clause at 252.239-7018, Supply Chain Risk, as 
prescribed at 239.7306(b), when applicable.

0
17. Amend section 225.1103 by revising paragraph (4) to read as 
follows:


225.1103   Other provisions and clauses.

* * * * *
    (4) Unless an exception in 225.770-3 applies, use the clause at 
252.225-7007, Prohibition on Acquisition of Certain Items from 
Communist Chinese Military Companies, in solicitations and contracts 
involving the delivery of items covered by the United States Munitions 
List or the 600 series of the Commerce Control List.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


252.204-7007   [Amended]

0
18. Amend section 252.204-7007 by--
0
a. Removing clause date ``(JAN 2015)'' and add ``(DEC 2018)''; and
0
b. In paragraph (d)(1)(v), by removing ``Commercial Satellite Services 
from Certain Foreign Entities'' and adding ``Certain Foreign Commercial 
Satellite Services'' in its place.

0
19. Revise section 252.225-7007 to read as follows:


252.225-7007  Prohibition on Acquisition of Certain Items from 
Communist Chinese Military Companies.

    As prescribed in 225.1103(4), use the following clause:

Prohibition on Acquisition of Certain Items From Communist Chinese 
Military Companies (Dec 2018)

    (a) Definitions. As used in this clause--
    600 series of the Commerce Control List means the series of 5-
character export control classification numbers (ECCNs) of the 
Commerce Control List of the Export Administration Regulations in 15 
CFR part 774, supplement no. 1, that have a ``6'' as the third 
character. The 600 series constitutes the munitions and munitions-
related ECCNs within the larger Commerce Control List. (See 
definition of ``600 series'' in 15 CFR 772.)
    Communist Chinese military company means any entity, regardless 
of geographic location, that is--
    (1) A part of the commercial or defense industrial base of the 
People's Republic of China (including a subsidiary or affiliate of 
such entity); or
    (2) Owned or controlled by, or affiliated with, an element of 
the Government or armed forces of the People's Republic of China.
    Item means--
    (1) A USML defense article, as defined at 22 CFR 120.6;
    (2) A USML defense service, as defined at 22 CFR 120.9; or
    (3) A 600 series item, as defined at 15 CFR 772.1.
    United States Munitions List means the munitions list of the 
International Traffic in Arms Regulation in 22 CFR part 121.
    (b) Any items covered by the United States Munitions List or the 
600 series of the Commerce Control List that are delivered under 
this contract may not be acquired, directly or indirectly, from a 
Communist Chinese military company.
    (c) The Contractor shall insert the substance of this clause, 
including this paragraph (c), in all subcontracts for items covered 
by the United States Munitions List or the 600 series of the 
Commerce Control List.


(End of clause)


0
20. Revise section 252.225-7049 to read as follows:


252.225-7049   Prohibition on Acquisition of Certain Foreign Commercial 
Satellite Services--Representations.

    As prescribed in 225.772-5(a), use the following provision:

Prohibition on Acquisition of Certain Foreign Commercial Satellite 
Services--Representations (Dec 2018)

    (a) Definitions. As used in this provision--
    Covered foreign country, foreign entity, government of a covered 
foreign country, launch vehicle, satellite services, and state 
sponsor of terrorism are defined in the clause at Defense Federal 
Acquisition Regulation Supplement (DFARS) 252.225-7051, Prohibition 
on Acquisition of Certain Commercial Satellite Services.
    Cybersecurity risk means threats to and vulnerabilities of 
information or information systems and any related consequences 
caused by or resulting from unauthorized access, use, disclosure, 
degradation,

[[Page 66074]]

disruption, modification, or destruction of such information or 
information systems, including such related consequences caused by 
an act of terrorism. (10 U.S.C. 2279)]
    (b) Prohibition on award. In accordance with 10 U.S.C. 2279, 
unless an exception is determined to apply in accordance with DFARS 
225.772-4, no contract for commercial satellite services may be 
awarded to--
    (1)(i) A foreign entity if the Under Secretary of Defense for 
Acquisition and Sustainment or the Under Secretary of Defense for 
Policy reasonably believes that--
    (A) The foreign entity is an entity in which the government of a 
covered foreign country has an ownership interest that enables the 
government to affect satellite operations;
    (B) The foreign entity plans to, or is expected to, provide 
satellite services under the contract from a covered foreign 
country; or
    (C) Entering into such contract would create an unacceptable 
cybersecurity risk for DoD; or
    (ii) An offeror that is offering to provide the commercial 
satellite services of a foreign entity as described in paragraph 
(b)(1) of this provision; or
    (2)(i) Any entity, except as provided in paragraph (b)(2)(ii) of 
this provision, for a launch that occurs on or after December 31, 
2022, if the Under Secretary of Defense for Acquisition and 
Sustainment or the Under Secretary of Defense for Policy reasonably 
believes that such satellite service will be provided using 
satellites that will be--
    (A) Designed or manufactured--
    (1) In a covered foreign country; or
    (2) By an entity controlled in whole or in part by, or acting on 
behalf of, the government of a covered foreign country; or
    (B) Launched outside the United States using a launch vehicle 
that is--
    (1) Designed or manufactured in a covered foreign country; or
    (2) Provided by--
    (i) The government of a covered foreign country; or
    (ii) An entity controlled in whole or in part by, or acting on 
behalf of, the government of a covered foreign country.
    (ii) The prohibition in paragraph (b)(2)(i)(B) of this provision 
does not apply with respect to launch vehicles for which the 
satellite service provider has a contract or other agreement 
relating to launch services that, prior to June 10, 2018, was either 
fully paid for by the satellite service provider or covered by a 
legally binding commitment of the satellite service provider to pay 
for such services.
    (c) Representations. The Offeror represents that--
    (1) It [ ] is, [ ] is not a foreign entity in which the 
government of a covered foreign country has an ownership interest 
that enables the government to affect satellite operations. If 
affirmative, identify the covered foreign country: ____;
    (2) It [ ] is, [ ] is not a foreign entity that plans to provide 
satellite services under the contract from a covered foreign 
country. If affirmative, identify the covered foreign country: ____;
    (3) It [ ] is, [ ] is not offering commercial satellite services 
provided by a foreign entity in which the government of a covered 
foreign country has an ownership interest that enables the 
government to affect satellite operations. If affirmative, identify 
the foreign entity and the covered foreign country: ____;
    (4) It [ ] is, [ ] is not offering commercial satellite services 
provided by a foreign entity that plans to or is expected to provide 
satellite services under the contract from a covered foreign 
country. If affirmative, identify the foreign entity and the covered 
foreign country: ____;
    (5) It [ ] is, [ ] is not offering commercial satellite services 
that will use satellites, launched on or after December 31, 2022, 
that will be designed or manufactured in a covered foreign country. 
If affirmative, identify the covered foreign country: ____;
    (6) It [ ] is, [ ] is not offering commercial satellite services 
that will use satellites, launched on or after December 31, 2022, 
that will be designed or manufactured by an entity controlled in 
whole or in part by, or acting on behalf of, the government of a 
covered foreign country. If affirmative, identify the entity, the 
covered foreign country, and the relationship of the entity to the 
government of the covered foreign country: ____;
    (7) It [ ] is, [ ] is not offering commercial satellite services 
that will use satellites, launched outside the United States on or 
after December 31, 2022, using a launch vehicle that is designed or 
manufactured in a covered foreign country. If affirmative, identify 
the covered foreign country: ____;
    (8) It [ ] is, [ ] is not offering commercial satellite services 
that will use satellites, launched outside the United States on or 
after December 31, 2022, using a launch vehicle that is provided by 
the government of a covered foreign country. If affirmative, 
identify the covered foreign country: ____; and
    (9) It [ ] is, [ ] is not offering commercial satellite services 
that will use satellites, launched outside the United States on or 
after December 31, 2022, using a launch vehicle that is provided by 
an entity controlled in whole or in part by, or acting on behalf of, 
the government of a covered foreign country. If affirmative, 
identify the entity, the covered foreign country, and the 
relationship of the entity to the government of the covered foreign 
country: ____;
    (d) If the Offeror has responded affirmatively to any 
representation in paragraphs (c)(7) through (9) of this provision, 
and if such launches are covered in whole or in part by a contract 
or other agreement relating to launch services that, prior to June 
10, 2018, was either fully paid for by the satellite service 
provider or covered by a legally binding commitment of the satellite 
service provider to pay for such services, provide the following 
information:
    (1) The entity awarded the contract or other agreement: ____.
    (2) The date the contract or other agreement was awarded: ____.
    (3) The period of performance for the contract or other 
agreement: ____.
    (e) The representations in paragraph (c) of this provision are a 
material representation of fact upon which reliance will be placed 
when making award. If it is later determined that the Offeror 
knowingly rendered an erroneous representation, in addition to other 
remedies available to the Government, the Contracting Officer may 
terminate the contract resulting from this solicitation for default.


(End of provision)


0
21. Amend section 252.225-7050 by--
0
a. Removing clause date ``(JAN 2018)'' and adding ``(DEC 2018)'' in its 
place; and
0
b. In paragraph (a), revising the definition of ``State sponsor of 
terrorism''.
    The revision reads as follows:


252.225-7050   Disclosure of Ownership or Control by the Government of 
a Country that is a State Sponsor of Terrorism.

* * * * *
    (a) * * *
    State sponsor of terrorism means a country determined by the 
Secretary of State, under section 1754(c)(1)(A)(i) of the Export 
Control Reform Act of 2018 (Title XVII, Subtitle B, of the National 
Defense Authorization Act for Fiscal Year 2019, Pub. L. 115-232), to be 
a country the government of which has repeatedly provided support for 
acts of international terrorism. As of the date of this provision, 
state sponsors of terrorism include: Iran, North Korea, Sudan, and 
Syria.
* * * * *

0
22. Add section 252.225-7051 to read as follows:


252.225-7051  Prohibition on Acquisition of Certain Foreign Commercial 
Satellite Services.

    As prescribed in 225.772-5, use the following clause:

Prohibition on Acquisition of Certain Foreign Commercial Satellite 
Services (DEC 2018)

    (a) Definitions. As used in this clause--
    Covered foreign country means--
    (i) The People's Republic of China;
    (ii) North Korea;
    (iii) The Russian Federation; or
    (iv) Any country that is a state sponsor of terrorism. (10 
U.S.C. 2279)
    Foreign entity means--
    (i) Any branch, partnership, group or sub-group, association, 
estate, trust, corporation or division of a corporation, or 
organization organized under the laws of a foreign state if either 
its principal place of business is outside the United States or its 
equity securities are primarily traded on one or more foreign 
exchanges.
    (ii) Notwithstanding paragraph (i) of this definition, any 
branch, partnership, group or sub-group, association, estate, trust, 
corporation or division of a corporation, or organization that 
demonstrates that a majority of the equity interest in such entity

[[Page 66075]]

is ultimately owned by U.S. nationals is not a foreign entity. (31 
CFR 800.212)
    Government of a covered foreign country includes the state and 
the government of a covered foreign country, as well as any 
political subdivision, agency, or instrumentality thereof.
    Launch vehicle means a fully integrated space launch vehicle. 
(10 U.S.C. 2279)
    Satellite services means communications capabilities that 
utilize an on-orbit satellite for transmitting the signal from one 
location to another.
    State sponsor of terrorism means a country determined by the 
Secretary of State, under section 1754(c)(1)(A)(i) of the Export 
Control Reform Act of 2018 (Title XVII, Subtitle B, of the National 
Defense Authorization Act for Fiscal Year 2019, Pub. L. 115-232), to 
be a country the government of which has repeatedly provided support 
for acts of international terrorism. As of the date of this 
provision, state sponsors of terrorism include: Iran, North Korea, 
Sudan, and Syria. (10 U.S.C. 2327)
    (b) Limitation. Unless specified in its offer, the Contractor 
shall not provide satellite services under this contract that--
    (1) Are from a covered foreign country; or
    (2) Except as provided in paragraph (c) of this provision, use 
satellites that will be--
    (i) Designed or manufactured--
    (A) In a covered foreign country; or
    (B) By an entity controlled in whole or in part by, or acting on 
behalf of, the government of a covered foreign country; or
    (ii) Launched outside the United States using a launch vehicle 
that is designed or manufactured--
    (A) In a covered foreign country; or
    (B) Provided by--
    (1) The government of a covered foreign country;
    (2) An entity controlled in whole or in part by, or acting on 
behalf of, the government of a covered foreign country.
    (c) Exception. The limitation in paragraph (b)(2) of this 
provision shall not apply with respect to--
    (1) A launch that occurs prior to December 31, 2022; or
    (2) A satellite service provider that has a contract or other 
agreement relating to launch services that, prior to June 10, 2018, 
was either fully paid for by the satellite service provider or 
covered by a legally binding commitment of the satellite service 
provider to pay for such services.


(End of clause)

[FR Doc. 2018-27558 Filed 12-20-18; 8:45 am]
 BILLING CODE 5001-06-P