Defense Federal Acquisition Regulation Supplement: Restriction on the Acquisition of Certain Magnets and Tungsten (DFARS Case 2018-D054), 18156-18160 [2019-08485]

Download as PDF 18156 Federal Register / Vol. 84, No. 83 / Tuesday, April 30, 2019 / Rules and Regulations Navy/Marine Corps—The Assistant General Counsel (Acquisition Integrity) Air Force—Deputy General Counsel (Contractor Responsibility) Defense Advanced Research Projects Agency—The Director Defense Information Systems Agency— The General Counsel Defense Intelligence Agency—The Senior Procurement Executive Defense Logistics Agency—The Special Assistant for Contracting Integrity National Geospatial—Intelligence Agency—The General Counsel Defense Threat Reduction Agency—The Director National Security Agency—The Senior Acquisition Executive Missile Defense Agency—The General Counsel United States Cyber Command—The Staff Judge Advocate Defense Health Agency—The General Counsel Overseas installations—as designated by the agency head * * * * * [FR Doc. 2019–08488 Filed 4–29–19; 8:45 am] BILLING CODE 5001–06–P DEPARTMENT OF DEFENSE Defense Acquisition Regulations System 48 CFR Parts 212, 225, and 252 [Docket DARS–2019–0016] RIN 0750–AK15 Defense Federal Acquisition Regulation Supplement: Restriction on the Acquisition of Certain Magnets and Tungsten (DFARS Case 2018–D054) Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Interim rule. AGENCY: DoD is issuing an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement a section of the National Defense Authorization Act for Fiscal Year 2019 that prohibits acquisition of certain magnets and tungsten from North Korea, China, Russia, and Iran. DATES: Effective April 30, 2019. Comments on the interim rule should be submitted in writing to the address shown below on or before July 1, 2019, to be considered in the formation of a final rule. ADDRESSES: Submit comments identified by DFARS Case 2018–D054, using any of the following methods: amozie on DSK9F9SC42PROD with RULES SUMMARY: VerDate Sep<11>2014 17:09 Apr 29, 2019 Jkt 247001 Æ Regulations.gov: http:// www.regulations.gov. Search for ‘‘DFARS Case 2018–D054’’. Select ‘‘Comment Now’’ and follow the instructions provided to submit a comment. Please include ‘‘DFARS Case 2018–D054’’ on any attached document. Æ Email: osd.dfars@mail.mil. Include DFARS Case 2018–D054 in the subject line of the message. Æ Fax: 571–372–6094. Æ Mail: Defense Acquisition Regulations System, Attn: Ms. Amy 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:// 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 Williams, telephone 571–372– 6106. SUPPLEMENTARY INFORMATION: I. Background DoD is revising the DFARS to implement section 871 of the National Defense Authorization Act for Fiscal Year 2019 (Pub. L. 115–232). Section 871 adds section 10 U.S.C. 2533c, which prohibits acquisition of samarium-cobalt magnets, neodymium-iron-boron magnets, tungsten metal powder, and tungsten heavy alloy or any finished or semi-finished component containing tungsten heavy alloy melted or produced in North Korea, China, Russia, and Iran, because these materials play an essential role in national defense. Samarium-cobalt magnets and neodymium-iron-boron magnets are rare earth magnets with many military applications, particularly in aviation and navigation, such as sonar, radar, and guidance systems. Rare earth magnets have unique properties, such as very high magnetic force and the ability to withstand demagnetization at very high temperatures. The electrical systems in aircrafts use samarium-cobalt permanent magnets to generate power. These magnets are also essential to many military weapons systems. Aircrafts use small high-powered rare earth magnet actuators that control their various surfaces during operation. Rare earth magnets may also be used as fasteners. While substitutes can be used in some applications; they are usually not as effective. While rare earth ore deposits are geographically diverse, current PO 00000 Frm 00024 Fmt 4700 Sfmt 4700 capabilities to process rare earth metals into finished materials are limited mostly to Chinese sources. DoD has been studying this issue and the General Accountability Office provided a briefing in response to the National Defense Authorization Act for Fiscal Year 2010 (Pub. L. 111–84) (https:// www.gao.gov/products/GAO-10-617R). Section 871, which was effective in August 2018, puts significant new restrictions at 10 U.S.C. 2533c on the use of foreign magnets in the military supply chain. The element of tungsten and various tungsten heavy alloys are widely used in military applications, because tungsten heavy alloys can endure high temperature without deformation and are free from air erosion at room temperature. In addition, tungsten products are non-toxic and environmentally friendly. Some military uses include: Tungsten alloy bullets, shrapnel head; balance pinball in missiles and aircrafts; measuring core of armor-piercer; kinetic armor-piercer; armor and artillery shell; grenades; bullet-proof vehicles, armored tanks, artillery parts, gun; rocket accessories, and so on. The most significant use of tungsten is for a variety of high-speed ammunition, especially armor-piercer. Tungsten is almost an indispensable part of armor-piercer. The kinetic armorpiercer made from tungsten alloy can compete directly with the depleted uranium bomb (depleted uranium has become an environmental problem). Tungsten can also be used for nuclear weapon material shell protection. As well as offensive use, tungsten is used for some missile defense systems. A hypervelocity projectile, can be launched at 5,600 miles per hour, to defend against incoming projectiles, such as miniaturized nuclear warheads fired by tanks. The new restriction in 10 U.S.C. 2533c is similar to the domestic source restrictions in the Specialty Metals Amendment (10 U.S.C. 2533b), though it differs in a few important respects. The Specialty Metals Amendment maintains a healthy and competitive U.S. specialty metals industry, especially for aerospace materials such as titanium and super alloys. 10 U.S.C. 2533c is meant to do the same for both rare earth magnets and tungsten. However, rather than limiting to domestic sources, 10 U.S.C. 2533c prohibits ‘‘covered material’’ that was ‘‘melted or produced’’ in China, Russia, North Korea, or Iran. While samariumcobalt magnets have long been covered under the Specialty Metals Amendment (because cobalt is a specialty metal), 10 E:\FR\FM\30APR1.SGM 30APR1 Federal Register / Vol. 84, No. 83 / Tuesday, April 30, 2019 / Rules and Regulations U.S.C. 2533c affects neodymium-ironboron magnets for the first time. With the Specialty Metals Amendment, the prohibition is tied to the place of first melt or equivalent process. In the case of magnets, the prohibition is tied to where the alloy is melted and the subsequent sintering operation takes place. Based on the statute, neodymiuim-iron-boron and samarium-cobalt magnets produced in China cannot be used by the U.S. military. This does not apply when covered materials from non-covered countries cannot be acquired at a reasonable price within the required timeframe. DoD expects there will be some adjustment period as U.S. and other non-prohibited sources come online. There are also important exceptions for some commercially available off-the-shelf magnets incorporated into end items and for electronic devices. All of these exceptions exist in similar forms within the Specialty Metals Amendment. Finally, there is an exception for recycled neodymium magnets, where the ‘‘first melt’’ may have taken place in a covered country but where subsequent milling and recycling to create a ‘‘new’’ magnet takes place within the United States. 10 U.S.C. 2533c does not incorporate the ‘‘qualifying country’’ exception found within the Specialty Metals Amendment, when specialty metals are incorporated into an end product produced in a qualifying country. As a result, the distributor/fabricator model that involves taking magnets produced in China and conducting subsequent processes on them in a ‘‘qualifying country’’ will not suffice under 10 U.S.C. 2533c to render a magnet compliant for U.S. military needs. This will primarily be important for samarium-cobalt magnet sellers who will now have to comply with both laws. amozie on DSK9F9SC42PROD with RULES II. Discussion and Analysis This rule adds a new section at DFARS 225.7018 and a clause at 252.225–7052, Restriction on the Acquisition of Certain Magnets and Tungsten, to implement the new restriction at 10 U.S.C. 2533c on acquisition of certain magnets and tungsten. A. Restriction With some exceptions, 10 U.S.C. 2533c prohibits acquisition of samarium-cobalt magnets, neodymiumiron-boron magnets, tungsten metal powder, and tungsten heavy alloy or any finished or semi-finished component containing tungsten heavy VerDate Sep<11>2014 17:09 Apr 29, 2019 Jkt 247001 alloy from North Korea, China, Russia, or Iran. This rule clarifies that, with regard to samarium-cobalt magnets and neodymium iron-boron magnets, this restriction includes melting samarium with cobalt to produce the samariumcobalt alloy or melting neodymium with iron and boron to produce the neodymium-iron-boron alloy, and all subsequent phases of production of the magnets, such as powder formation, pressing, sintering or bonding, and magnetization. However, the restriction on melting of the samarium-cobalt alloy is in addition to any applicable restriction on melting of certain cobalt alloys at DFARS 225.7003 and the clause at 252.225– 7009, Restriction on Acquisition of Certain Articles Containing Specialty Metals, in accordance with 10 U.S.C. 2533b. B. Exceptions In accordance with 10 U.S.C. 2533c, the rule does not apply to an acquisition— • Equal to or less than the simplified acquisition threshold (SAT) (see section III.A. of this preamble); • Outside the United States, of an item for use outside the United States; • Of an end item that is— Æ A commercially available off-theshelf (COTS) item, other than a COTS item that is 50 percent or more tungsten by weight, or a tungsten or tungsten heavy alloy mill product, such as bar, billet, slab, wire, cube, sphere, block, blank, plate, or sheet, that had not been incorporated into an end item, subsystem, assembly, or component; Æ An electronic device, unless the Secretary of Defense, upon the recommendation of the Strategic Materials Protection Board pursuant to 10 U.S.C. 187, determines that the domestic availability of a particular electronic device is critical to national security; or Æ A neodymium-iron-boron magnet manufactured from recycled material if the milling of the recycled material and sintering of the final magnet takes place in the United States; or • If the authorized agency official concerned, without power of redelegation, determines that covered materials of satisfactory quality and quantity, in the required form, cannot be purchased as and when needed. Note that, unlike the domestic source restrictions of the Berry Amendment (10 U.S.C. 2533a) and specialty metals (10 U.S.C. 2533b), this is not a domestic nonavailability determination, but a determination that covered materials of satisfactory quality and quantity, in the PO 00000 Frm 00025 Fmt 4700 Sfmt 4700 18157 required form, cannot be procured as and when needed at a reasonable price from any country other than a covered country. III. Applicability to Contracts at or Below the Simplified Acquisition Threshold and for Commercial Items, Including Commercially Available Offthe-Shelf Items This rule adds a new clause at DFARS 252.225–7052, Restriction on the Acquisition of Certain Magnets and Tungsten, which will not apply to acquisitions below the SAT, in accordance with 41 U.S.C. 1905, but applies to contracts for the acquisition of commercial items, except as provided in the statute at 10 U.S.C. 2533c(c)(3). A. Applicability to Contracts at or Below the Simplified Acquisition Threshold 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 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. DoD does not intend to make that determination. Therefore, this rule will not apply below the SAT. B. Applicability to Contracts for the Acquisition of Commercial Items, Including COTS Items 10 U.S.C. 2375 governs the applicability of laws to DoD contracts and subcontracts for the acquisition of commercial items, including COTS items, and is intended to limit the applicability of laws to contracts and subcontracts for the acquisition of commercial items, including COTS items. 10 U.S.C. 2375 provides that if a provision of law contains criminal or civil penalties, or if the Under Secretary of Defense for Acquisition and Sustainment ((USD)(A&S)) 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. Due to delegations of authority from USD(A&S), the Principal Director, DPC, is the appropriate E:\FR\FM\30APR1.SGM 30APR1 18158 Federal Register / Vol. 84, No. 83 / Tuesday, April 30, 2019 / Rules and Regulations authority to make this determination. DoD has made that determination to apply this rule to the acquisition of commercial items, including COTS items, if otherwise applicable. 10 U.S.C. 2533c specifically exempts the acquisition of an end item that is a COTS item, other than a COTS item that is 50 percent or more tungsten by weight, or a mill product that has not been incorporated into an end item, subsystem, assembly, or component. Although 10 U.S.C. 2533c does not refer to 10 U.S.C. 2375 and provide that, notwithstanding those statutes it shall be applicable to contracts for the procurement of commercial items, it is the clear intent of the statute to cover commercial items, other than those specifically exempted. Therefore, DoD has signed a determination of applicability to acquisitions of commercial items, except as exempted in the statute. 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 DSK9F9SC42PROD with RULES V. Executive Order 13771 This rule is not subject to the requirements of E.O. 13771, because this 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: This rule is required to implement section 871 of the National Defense Authorization act (NDAA) for Fiscal Year (FY) 2019, which adds 10 U.S.C. 2533c. The objective of the rule is to prohibit acquisition of sensitive materials (i.e. VerDate Sep<11>2014 17:09 Apr 29, 2019 Jkt 247001 samarium-cobalt magnets, neodymiumiron-boron magnets, tungsten metal powder, and tungsten heavy alloy or any finished or semi-finished components containing tungsten heavy alloy) from North Korea, China, Russia, or Iran. Based on Federal Procurement Data System data for FY 2017, DoD awarded in the United States 13,400 contracts that exceeded $250,000 and were for the acquisition of manufactured end products, excluding those categories that could not include samarium-cobalt magnets, neodymium-iron-boron magnets, or a covered form of tungsten (such as clothing and fabrics, books, or lumber products). These contracts were awarded to 5,073 unique entities, of which 3,074 were small entities. It is not known what percentage of these awards involved samarium-cobalt magnets, neodymium-iron-boron magnets, or a covered form of tungsten, or what lesser percentage might involve such materials from China, North Korea, Russia, or Iran. There are no projected reporting or recordkeeping requirements, as a result of this rule. However, there may be compliance costs to track the origin of covered materials. The rule does not duplicate, overlap, or conflict with any other Federal rules. DoD is exempting acquisitions equal to or less than the simplified acquisition threshold in accordance with 41 U.S.C. 1905. DoD was unable to identify any other alternatives that would reduce burden on small businesses and still meet the objectives of the statute. 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–D054), in correspondence. VII. Paperwork Reduction Act The rule does not contain any information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35). Although this rule does not impose any reporting requirements, DoD notes that tungsten (as a derivative of wolframite) is considered a conflict mineral under section 1502 of the DoddFrank Wall Street Reform and Consumer Protection Act (Pub. L. 111–203) and is thus subject to associated reporting requirements reflected therein. PO 00000 Frm 00026 Fmt 4700 Sfmt 4700 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. The law was effective upon enactment in August 2018 as a way to decrease DoD dependence—and thus improve national security—on these materials that originate in certain countries. As discussed in Section I, Background, due to the use of these materials in the supply chain for DoD military systems, nonmilitary systems of importance to DoD, and national defense applications, immediate application of this provision is necessary. The intent of 10 U.S.C. 2533c is to promote growth in domestic capability for these materials and reduce dependence on foreign sources as a shortage would impact many DOD applications as well as a negatively impact on the broader industrial base. Pursuant to 41 U.S.C. 1707 and FAR 1.501–3(b), DoD will consider public comments received in response to this interim rule in the formation of the final rule. List of Subjects in 48 CFR Parts 212, 225, and 252 Government procurement. Jennifer L. Hawes, Regulatory Control Officer, Defense Acquisition Regulations System. Therefore, 48 CFR parts 212, 225, and 252 are amended as follows: ■ 1. The authority citation for 48 CFR parts 212, 225, and 252 continues to read as follows: Authority: 41 U.S.C. 1303 and 48 CFR chapter 1. PART 212—ACQUISITION OF COMMERCIAL ITEMS 2. Amend section 212.301 by adding paragraph (f)(ix)(FF) to read as follows: ■ 212.301 Solicitation provisions and contract clauses for the acquisition of commercial items. * * * * * (f) * * * (ix) * * * (FF) Use the clause at 252.225–7052, Restriction on the Acquisition of Certain Magnets and Tungsten, as prescribed in 225.7018–5. * * * * * PART 225—FOREIGN ACQUISITION 3. Add sections 225.7018, 225.7018–1, 225.7018–2, 225.7018–3, 225.7018–4, ■ E:\FR\FM\30APR1.SGM 30APR1 Federal Register / Vol. 84, No. 83 / Tuesday, April 30, 2019 / Rules and Regulations and 225.7018–5 to subpart 225.70 to read as follows: * * * * * Sec. 225.7018 Restriction on acquisition of certain magnets and tungsten. 225.7018–1 Definitions. 225.7018–2 Restriction. 225.7018–3 Exceptions. 225.7018–4 Nonavailability determination. 225.7018–5 Contract clause. 225.7018 Restriction on acquisition of certain magnets and tungsten. 225.7018–1 Definitions. As used in this section— Covered material means— (1) Samarium-cobalt magnets; (2) Neodymium-iron-boron magnets; (3) Tungsten metal powder; and (4) Tungsten heavy alloy or any finished or semi-finished component containing tungsten heavy alloy. Covered country means— (1) The Democratic People’s Republic of North Korea; (2) The People’s Republic of China; (3) The Russian Federation; and (4) The Islamic Republic of Iran. 225.7018–2 Restriction. (a) Except as provided in 225.7018–3 and 225.7018–4, do not acquire any covered material melted or produced in any covered country, or any end item, manufactured in any covered country, that contains a covered material (10 U.S.C. 2533c). (b) For samarium-cobalt magnets and neodymium iron-boron magnets, this restriction includes— (1) Melting samarium with cobalt to produce the samarium-cobalt alloy or melting neodymium with iron and boron to produce the neodymium-ironboron alloy; and (2) All subsequent phases of production of the magnets, such as powder formation, pressing, sintering or bonding, and magnetization. (c) The restriction on melting and producing of samarium-cobalt magnets is in addition to any applicable restrictions on melting of specialty metals at 225.7003 and the clause at 252.225–7009, Restriction on Acquisition of Certain Articles Containing Specialty Metals. amozie on DSK9F9SC42PROD with RULES 225.7018–3 Exceptions. The restriction in section 225.7018–2 does not apply to an acquisition— (a) At or below the simplified acquisition threshold; (b) Outside the United States of an item for use outside the United States; or (c) Of an end item that is— (1) A commercially available off-theshelf item, other than— VerDate Sep<11>2014 17:09 Apr 29, 2019 Jkt 247001 (i) A commercially available off-theshelf item that is 50 percent or more tungsten by weight; or (ii) A tungsten heavy alloy mill product, such as bar, billet, slab, wire, cube, sphere, block, blank, plate, or sheet, that had not been incorporated into an end item, subsystem, assembly, or component; (2) An electronic device, unless the Secretary of Defense, upon the recommendation of the Strategic Materials Protection Board pursuant to 10 U.S.C. 187 determines that the domestic availability of a particular electronic device is critical to national security; or (3) A neodymium-iron-boron magnet manufactured from recycled material if the milling of the recycled material and sintering of the final magnet takes place in the United States. (d) If the authorized agency official concerned, without power of redelegation, determines that covered materials of satisfactory quality and quantity, in the required form, cannot be procured as and when needed at a reasonable price from a source other than a covered country (see 225.7018– 4). 225.7018–4 Nonavailability determination. (a) Individual nonavailability determinations. (1) The following officials are authorized, without power of redelegation, to make a nonavailability determination described in 225.7018–3(d) on an individual basis (i.e., applies to only one contract): (i) The Under Secretary of Defense (Acquisition and Sustainment). (ii) The Secretary of the Army. (iii) The Secretary of the Navy. (iv) The Secretary of the Air Force. (v) The Director of the Defense Logistics Agency. (2) The supporting documentation for the determination shall include— (i) An analysis of alternatives that would not require a nonavailability determination; and (ii) A written certification by the requiring activity that describes, with specificity, why such alternatives are unacceptable. (3) Defense agencies other than the Defense Logistics Agency shall follow the procedures at PGI 225.7018–4(a)(3) when submitting a request for a nonavailability determination. (4) Provide to USD(A&S) DASD (Industrial Policy), in accordance with the procedures at PGI 225.7018– 4(a)(4)— (i) A copy of individual nonavailability determinations with supporting documentation; and (ii) Notification when individual waivers are requested, but denied. PO 00000 Frm 00027 Fmt 4700 Sfmt 4700 18159 (b) Class nonavailability determinations. A class nonavailability determination (i.e., a nonavailability determinations that applies to more than one contract) requires the approval of the USD(A&S). Follow the procedures at PGI 225.7018–4(b) when submitting a request for a class nonavailability determination. (1) At least 30 days before making a nonavailability determination that would apply to more than one contract, the USD(A&S) will, to the maximum extent practicable, and in a manner consistent with the protection of national security and confidential business information— (i) Publish a notice on the Federal Business Opportunities website (www.FedBizOpps.gov) of the intent to make the nonavailability determination; and (ii) Solicit information relevant to such notice from interested parties, including producers of mill products from covered materials. (2) The USD(A&S)— (i) Will take into consideration all information submitted in response to the notice in making a class nonavailability determination; (ii) May consider other relevant information that cannot be made part of the public record consistent with the protection of national security information and confidential business information; and (iii) Will ensure that any such nonavailability determination and the rationale for the determination are made publicly available to the maximum extent consistent with the protection of national security and confidential business information. 225.7018–5 Contract clause. Unless acquiring items outside the United States for use outside the United States or a nonavailability determination has been made in accordance with 225.7018–4, use the clause at 252.225–7052, Restriction on Acquisition of Certain Magnets and Tungsten, in solicitations and contracts, including solicitations and contracts using FAR part 12 procedures for the acquisition of commercial items, that exceed the simplified acquisition threshold. PART 252—SOLICITATION PROVISIONS AND CONTRACT CLAUSES 4. Add section 252.225–7052 to read as follows: ■ E:\FR\FM\30APR1.SGM 30APR1 18160 Federal Register / Vol. 84, No. 83 / Tuesday, April 30, 2019 / Rules and Regulations 252.225–7052 Restriction on the Acquisition of Certain Magnets and Tungsten. amozie on DSK9F9SC42PROD with RULES As prescribed in 225.7018–5, use the following clause: Restriction on the Acquisition of Certain Magnets and Tungsten (APR 2019) (a) Definitions. As used in this clause— Covered material means— (1) Samarium-cobalt magnets; (2) Neodymium-iron-boron magnets; (3) Tungsten metal powder; and (4) Tungsten heavy alloy or any finished or semi-finished component containing tungsten heavy alloy. Covered country means— (1) The Democratic People’s Republic of North Korea; (2) The People’s Republic of China; (3) The Russian Federation; and (4) The Islamic Republic of Iran. (b) Restriction. (1) Except as provided in paragraph (c) of this clause, the Contractor shall not deliver under this contract any covered material melted or produced in any covered country, or any end item, manufactured in any covered country, that contains a covered material (10 U.S.C. 2533c). (2) For samarium-cobalt magnets and neodymium iron-boron magnets, this restriction includes— (i) Melting samarium with cobalt to produce the samarium-cobalt alloy or melting neodymium with iron and boron to produce the neodymium-iron-boron alloy; and (ii) All subsequent phases of production of the magnets, such as powder formation, pressing, sintering or bonding, and magnetization. (3) The restriction on melting and producing of samarium-cobalt magnets is in addition to any applicable restrictions on melting of specialty metals if the clause at 252.225–7009, Restriction on Acquisition of Certain Articles Containing Specialty Metals, is included in the contract. (c) Exceptions. This clause does not apply— (1) To an end item that is— (i) A commercially available off-the-shelf item, other than— (A) A commercially available off-the-shelf item that is 50 percent or more tungsten by weight; or (B) A tungsten heavy alloy mill product, such as bar, billet, slab, wire, cube, sphere, block, blank, plate, or sheet, that had not been incorporated into an end item, subsystem, assembly, or component; (ii) An electronic device, unless otherwise specified in the contract; or (iii) A neodymium-iron-boron magnet manufactured from recycled material if the milling of the recycled material and sintering of the final magnet takes place in the United States. (2) If the authorized agency official concerned has made a nonavailability determination, in accordance with section 225.7018–4 of the Defense Federal Acquisition Regulation Supplement, that covered materials of satisfactory quality and quantity, in the required form, cannot be procured as and when needed at a reasonable VerDate Sep<11>2014 17:09 Apr 29, 2019 Jkt 247001 price from a source other than a covered country. final rule, except to add a reference to 10 U.S.C. 2855. (End of clause) II. Applicability to Contracts at or Below the Simplified Acquisition Threshold and for Commercial Items, Including Commercially Available Offthe-Shelf Items This rule does not create any new provisions or clauses or impact any existing provisions or clauses. [FR Doc. 2019–08485 Filed 4–29–19; 8:45 am] BILLING CODE 5001–06–P DEPARTMENT OF DEFENSE Defense Acquisition Regulations System 48 CFR Part 219 [Docket DARS–2018–0056] RIN 0750–AK18 Defense Federal Acquisition Regulation Supplement: Small Business Set-Asides for ArchitectEngineer and Construction Design Contracts (DFARS Case 2018–D057) Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Final rule. AGENCY: DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement a section of the National Defense Authorization Act for Fiscal Year 2019 regarding set-asides for architect-engineer and construction design contracts. DATES: Effective April 30, 2019. FOR FURTHER INFORMATION CONTACT: Ms. Jennifer D. Johnson, telephone 571– 372–6100. SUPPLEMENTARY INFORMATION: SUMMARY: I. Background DoD published a proposed rule in the Federal Register at 83 FR 62554 on December 4, 2018, to implement section 2804 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019 (Pub. L. 115–232). Section 2804 increases to $1 million the threshold at 10 U.S.C. 2855 for small business set-asides of acquisitions for architect-engineer services, including construction design, in connection with military construction projects or military family housing projects. In addition, section 2804 removes the prohibition on setting aside these acquisitions valued above the threshold. As a result of these statutory changes, these acquisitions must be set aside for small business, if valued below $1 million, and may be set aside for small business, if valued at $1 million or more. There were no public comments submitted in response to the proposed rule. There are no changes made to the PO 00000 Frm 00028 Fmt 4700 Sfmt 4700 III. Executive Orders 12866 and 13563 Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804. IV. Executive Order 13771 This rule is not subject to E.O. 13771, because this rule is not a significant regulatory action under E.O. 12866. V. Regulatory Flexibility Act A final regulatory flexibility analysis has been prepared consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. The FRFA is summarized as follows: DoD is issuing a final rule to amend the DFARS to implement section 2804 of the NDAA for FY 2019. Section 2804 increases to $1 million the threshold at 10 U.S.C. 2855 for small business setasides of acquisitions for architectengineer services, including construction design, in connection with military construction projects or military family housing projects. In addition, section 2804 removes the prohibition on setting aside these acquisitions valued above the threshold. As a result of these statutory changes, these acquisitions must be set aside for small business, if valued below $1 million, and may be set aside for small business, if valued at $1 million or more. No public comments were received in response to the initial regulatory flexibility analysis. The rule applies to contract awards for architect-engineer services, E:\FR\FM\30APR1.SGM 30APR1

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[Federal Register Volume 84, Number 83 (Tuesday, April 30, 2019)]
[Rules and Regulations]
[Pages 18156-18160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08485]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 212, 225, and 252

[Docket DARS-2019-0016]
RIN 0750-AK15


Defense Federal Acquisition Regulation Supplement: Restriction on 
the Acquisition of Certain Magnets and Tungsten (DFARS Case 2018-D054)

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

ACTION: Interim rule.

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SUMMARY: DoD is issuing an interim rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement a section of the 
National Defense Authorization Act for Fiscal Year 2019 that prohibits 
acquisition of certain magnets and tungsten from North Korea, China, 
Russia, and Iran.

DATES: Effective April 30, 2019. Comments on the interim rule should be 
submitted in writing to the address shown below on or before July 1, 
2019, to be considered in the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2018-D054, using 
any of the following methods:
    [cir] Regulations.gov: http://www.regulations.gov. Search for 
``DFARS Case 2018-D054''. Select ``Comment Now'' and follow the 
instructions provided to submit a comment. Please include ``DFARS Case 
2018-D054'' on any attached document.
    [cir] Email: [email protected]. Include DFARS Case 2018-D054 in 
the subject line of the message.
    [cir] Fax: 571-372-6094.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Ms. Amy 
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://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 Williams, telephone 571-372-
6106.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD is revising the DFARS to implement section 871 of the National 
Defense Authorization Act for Fiscal Year 2019 (Pub. L. 115-232). 
Section 871 adds section 10 U.S.C. 2533c, which prohibits acquisition 
of samarium-cobalt magnets, neodymium-iron-boron magnets, tungsten 
metal powder, and tungsten heavy alloy or any finished or semi-finished 
component containing tungsten heavy alloy melted or produced in North 
Korea, China, Russia, and Iran, because these materials play an 
essential role in national defense.
    Samarium-cobalt magnets and neodymium-iron-boron magnets are rare 
earth magnets with many military applications, particularly in aviation 
and navigation, such as sonar, radar, and guidance systems. Rare earth 
magnets have unique properties, such as very high magnetic force and 
the ability to withstand demagnetization at very high temperatures. The 
electrical systems in aircrafts use samarium-cobalt permanent magnets 
to generate power. These magnets are also essential to many military 
weapons systems. Aircrafts use small high-powered rare earth magnet 
actuators that control their various surfaces during operation. Rare 
earth magnets may also be used as fasteners. While substitutes can be 
used in some applications; they are usually not as effective.
    While rare earth ore deposits are geographically diverse, current 
capabilities to process rare earth metals into finished materials are 
limited mostly to Chinese sources. DoD has been studying this issue and 
the General Accountability Office provided a briefing in response to 
the National Defense Authorization Act for Fiscal Year 2010 (Pub. L. 
111-84) (https://www.gao.gov/products/GAO-10-617R). Section 871, which 
was effective in August 2018, puts significant new restrictions at 10 
U.S.C. 2533c on the use of foreign magnets in the military supply 
chain.
    The element of tungsten and various tungsten heavy alloys are 
widely used in military applications, because tungsten heavy alloys can 
endure high temperature without deformation and are free from air 
erosion at room temperature. In addition, tungsten products are non-
toxic and environmentally friendly. Some military uses include: 
Tungsten alloy bullets, shrapnel head; balance pinball in missiles and 
aircrafts; measuring core of armor-piercer; kinetic armor-piercer; 
armor and artillery shell; grenades; bullet-proof vehicles, armored 
tanks, artillery parts, gun; rocket accessories, and so on. The most 
significant use of tungsten is for a variety of high-speed ammunition, 
especially armor-piercer. Tungsten is almost an indispensable part of 
armor-piercer. The kinetic armor-piercer made from tungsten alloy can 
compete directly with the depleted uranium bomb (depleted uranium has 
become an environmental problem). Tungsten can also be used for nuclear 
weapon material shell protection. As well as offensive use, tungsten is 
used for some missile defense systems. A hypervelocity projectile, can 
be launched at 5,600 miles per hour, to defend against incoming 
projectiles, such as miniaturized nuclear warheads fired by tanks.
    The new restriction in 10 U.S.C. 2533c is similar to the domestic 
source restrictions in the Specialty Metals Amendment (10 U.S.C. 
2533b), though it differs in a few important respects. The Specialty 
Metals Amendment maintains a healthy and competitive U.S. specialty 
metals industry, especially for aerospace materials such as titanium 
and super alloys. 10 U.S.C. 2533c is meant to do the same for both rare 
earth magnets and tungsten. However, rather than limiting to domestic 
sources, 10 U.S.C. 2533c prohibits ``covered material'' that was 
``melted or produced'' in China, Russia, North Korea, or Iran. While 
samarium-cobalt magnets have long been covered under the Specialty 
Metals Amendment (because cobalt is a specialty metal), 10

[[Page 18157]]

U.S.C. 2533c affects neodymium-iron-boron magnets for the first time.
    With the Specialty Metals Amendment, the prohibition is tied to the 
place of first melt or equivalent process. In the case of magnets, the 
prohibition is tied to where the alloy is melted and the subsequent 
sintering operation takes place. Based on the statute, neodymiuim-iron-
boron and samarium-cobalt magnets produced in China cannot be used by 
the U.S. military.
    This does not apply when covered materials from non-covered 
countries cannot be acquired at a reasonable price within the required 
timeframe. DoD expects there will be some adjustment period as U.S. and 
other non-prohibited sources come online. There are also important 
exceptions for some commercially available off-the-shelf magnets 
incorporated into end items and for electronic devices. All of these 
exceptions exist in similar forms within the Specialty Metals 
Amendment. Finally, there is an exception for recycled neodymium 
magnets, where the ``first melt'' may have taken place in a covered 
country but where subsequent milling and recycling to create a ``new'' 
magnet takes place within the United States.
    10 U.S.C. 2533c does not incorporate the ``qualifying country'' 
exception found within the Specialty Metals Amendment, when specialty 
metals are incorporated into an end product produced in a qualifying 
country. As a result, the distributor/fabricator model that involves 
taking magnets produced in China and conducting subsequent processes on 
them in a ``qualifying country'' will not suffice under 10 U.S.C. 2533c 
to render a magnet compliant for U.S. military needs. This will 
primarily be important for samarium-cobalt magnet sellers who will now 
have to comply with both laws.

II. Discussion and Analysis

    This rule adds a new section at DFARS 225.7018 and a clause at 
252.225-7052, Restriction on the Acquisition of Certain Magnets and 
Tungsten, to implement the new restriction at 10 U.S.C. 2533c on 
acquisition of certain magnets and tungsten.

A. Restriction

    With some exceptions, 10 U.S.C. 2533c prohibits acquisition of 
samarium-cobalt magnets, neodymium-iron-boron magnets, tungsten metal 
powder, and tungsten heavy alloy or any finished or semi-finished 
component containing tungsten heavy alloy from North Korea, China, 
Russia, or Iran.
    This rule clarifies that, with regard to samarium-cobalt magnets 
and neodymium iron-boron magnets, this restriction includes melting 
samarium with cobalt to produce the samarium-cobalt alloy or melting 
neodymium with iron and boron to produce the neodymium-iron-boron 
alloy, and all subsequent phases of production of the magnets, such as 
powder formation, pressing, sintering or bonding, and magnetization.
    However, the restriction on melting of the samarium-cobalt alloy is 
in addition to any applicable restriction on melting of certain cobalt 
alloys at DFARS 225.7003 and the clause at 252.225-7009, Restriction on 
Acquisition of Certain Articles Containing Specialty Metals, in 
accordance with 10 U.S.C. 2533b.

B. Exceptions

    In accordance with 10 U.S.C. 2533c, the rule does not apply to an 
acquisition--
     Equal to or less than the simplified acquisition threshold 
(SAT) (see section III.A. of this preamble);
     Outside the United States, of an item for use outside the 
United States;
     Of an end item that is--
    [cir] A commercially available off-the-shelf (COTS) item, other 
than a COTS item that is 50 percent or more tungsten by weight, or a 
tungsten or tungsten heavy alloy mill product, such as bar, billet, 
slab, wire, cube, sphere, block, blank, plate, or sheet, that had not 
been incorporated into an end item, subsystem, assembly, or component;
    [cir] An electronic device, unless the Secretary of Defense, upon 
the recommendation of the Strategic Materials Protection Board pursuant 
to 10 U.S.C. 187, determines that the domestic availability of a 
particular electronic device is critical to national security; or
    [cir] A neodymium-iron-boron magnet manufactured from recycled 
material if the milling of the recycled material and sintering of the 
final magnet takes place in the United States; or
     If the authorized agency official concerned, without power 
of redelegation, determines that covered materials of satisfactory 
quality and quantity, in the required form, cannot be purchased as and 
when needed. Note that, unlike the domestic source restrictions of the 
Berry Amendment (10 U.S.C. 2533a) and specialty metals (10 U.S.C. 
2533b), this is not a domestic nonavailability determination, but a 
determination that covered materials of satisfactory quality and 
quantity, in the required form, cannot be procured as and when needed 
at a reasonable price from any country other than a covered country.

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

    This rule adds a new clause at DFARS 252.225-7052, Restriction on 
the Acquisition of Certain Magnets and Tungsten, which will not apply 
to acquisitions below the SAT, in accordance with 41 U.S.C. 1905, but 
applies to contracts for the acquisition of commercial items, except as 
provided in the statute at 10 U.S.C. 2533c(c)(3).

A. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold

    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 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. DoD does not intend to make that determination. 
Therefore, this rule will not apply below the SAT.

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

    10 U.S.C. 2375 governs the applicability of laws to DoD contracts 
and subcontracts for the acquisition of commercial items, including 
COTS items, and is intended to limit the applicability of laws to 
contracts and subcontracts for the acquisition of commercial items, 
including COTS items. 10 U.S.C. 2375 provides that if a provision of 
law contains criminal or civil penalties, or if the Under Secretary of 
Defense for Acquisition and Sustainment ((USD)(A&S)) 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. Due to 
delegations of authority from USD(A&S), the Principal Director, DPC, is 
the appropriate

[[Page 18158]]

authority to make this determination. DoD has made that determination 
to apply this rule to the acquisition of commercial items, including 
COTS items, if otherwise applicable.
    10 U.S.C. 2533c specifically exempts the acquisition of an end item 
that is a COTS item, other than a COTS item that is 50 percent or more 
tungsten by weight, or a mill product that has not been incorporated 
into an end item, subsystem, assembly, or component. Although 10 U.S.C. 
2533c does not refer to 10 U.S.C. 2375 and provide that, 
notwithstanding those statutes it shall be applicable to contracts for 
the procurement of commercial items, it is the clear intent of the 
statute to cover commercial items, other than those specifically 
exempted. Therefore, DoD has signed a determination of applicability to 
acquisitions of commercial items, except as exempted in the statute.

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 
this 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:
    This rule is required to implement section 871 of the National 
Defense Authorization act (NDAA) for Fiscal Year (FY) 2019, which adds 
10 U.S.C. 2533c.
    The objective of the rule is to prohibit acquisition of sensitive 
materials (i.e. samarium-cobalt magnets, neodymium-iron-boron magnets, 
tungsten metal powder, and tungsten heavy alloy or any finished or 
semi-finished components containing tungsten heavy alloy) from North 
Korea, China, Russia, or Iran.
    Based on Federal Procurement Data System data for FY 2017, DoD 
awarded in the United States 13,400 contracts that exceeded $250,000 
and were for the acquisition of manufactured end products, excluding 
those categories that could not include samarium-cobalt magnets, 
neodymium-iron-boron magnets, or a covered form of tungsten (such as 
clothing and fabrics, books, or lumber products). These contracts were 
awarded to 5,073 unique entities, of which 3,074 were small entities. 
It is not known what percentage of these awards involved samarium-
cobalt magnets, neodymium-iron-boron magnets, or a covered form of 
tungsten, or what lesser percentage might involve such materials from 
China, North Korea, Russia, or Iran.
    There are no projected reporting or recordkeeping requirements, as 
a result of this rule. However, there may be compliance costs to track 
the origin of covered materials.
    The rule does not duplicate, overlap, or conflict with any other 
Federal rules.
    DoD is exempting acquisitions equal to or less than the simplified 
acquisition threshold in accordance with 41 U.S.C. 1905. DoD was unable 
to identify any other alternatives that would reduce burden on small 
businesses and still meet the objectives of the statute.
    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-D054), in 
correspondence.

VII. Paperwork Reduction Act

    The rule does not contain any information collection requirements 
that require the approval of the Office of Management and Budget under 
the Paperwork Reduction Act (44 U.S.C. chapter 35). Although this rule 
does not impose any reporting requirements, DoD notes that tungsten (as 
a derivative of wolframite) is considered a conflict mineral under 
section 1502 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Pub. L. 111-203) and is thus subject to associated 
reporting requirements reflected therein.

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.
    The law was effective upon enactment in August 2018 as a way to 
decrease DoD dependence--and thus improve national security--on these 
materials that originate in certain countries. As discussed in Section 
I, Background, due to the use of these materials in the supply chain 
for DoD military systems, nonmilitary systems of importance to DoD, and 
national defense applications, immediate application of this provision 
is necessary. The intent of 10 U.S.C. 2533c is to promote growth in 
domestic capability for these materials and reduce dependence on 
foreign sources as a shortage would impact many DOD applications as 
well as a negatively impact on the broader industrial base.
    Pursuant to 41 U.S.C. 1707 and FAR 1.501-3(b), DoD will consider 
public comments received in response to this interim rule in the 
formation of the final rule.

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

    Government procurement.

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

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

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

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

PART 212--ACQUISITION OF COMMERCIAL ITEMS

0
2. Amend section 212.301 by adding paragraph (f)(ix)(FF) to read as 
follows:


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

* * * * *
    (f) * * *
    (ix) * * *
    (FF) Use the clause at 252.225-7052, Restriction on the Acquisition 
of Certain Magnets and Tungsten, as prescribed in 225.7018-5.
* * * * *

PART 225--FOREIGN ACQUISITION

0
3. Add sections 225.7018, 225.7018-1, 225.7018-2, 225.7018-3, 225.7018-
4,

[[Page 18159]]

and 225.7018-5 to subpart 225.70 to read as follows:
* * * * *
Sec.
225.7018 Restriction on acquisition of certain magnets and tungsten.
225.7018-1 Definitions.
225.7018-2 Restriction.
225.7018-3 Exceptions.
225.7018-4 Nonavailability determination.
225.7018-5 Contract clause.


225.7018  Restriction on acquisition of certain magnets and tungsten.


225.7018-1  Definitions.

    As used in this section--
    Covered material means--
    (1) Samarium-cobalt magnets;
    (2) Neodymium-iron-boron magnets;
    (3) Tungsten metal powder; and
    (4) Tungsten heavy alloy or any finished or semi-finished component 
containing tungsten heavy alloy.
    Covered country means--
    (1) The Democratic People's Republic of North Korea;
    (2) The People's Republic of China;
    (3) The Russian Federation; and
    (4) The Islamic Republic of Iran.


225.7018-2  Restriction.

    (a) Except as provided in 225.7018-3 and 225.7018-4, do not acquire 
any covered material melted or produced in any covered country, or any 
end item, manufactured in any covered country, that contains a covered 
material (10 U.S.C. 2533c).
    (b) For samarium-cobalt magnets and neodymium iron-boron magnets, 
this restriction includes--
    (1) Melting samarium with cobalt to produce the samarium-cobalt 
alloy or melting neodymium with iron and boron to produce the 
neodymium-iron-boron alloy; and
    (2) All subsequent phases of production of the magnets, such as 
powder formation, pressing, sintering or bonding, and magnetization.
    (c) The restriction on melting and producing of samarium-cobalt 
magnets is in addition to any applicable restrictions on melting of 
specialty metals at 225.7003 and the clause at 252.225-7009, 
Restriction on Acquisition of Certain Articles Containing Specialty 
Metals.


225.7018-3  Exceptions.

    The restriction in section 225.7018-2 does not apply to an 
acquisition--
    (a) At or below the simplified acquisition threshold;
    (b) Outside the United States of an item for use outside the United 
States; or
    (c) Of an end item that is--
    (1) A commercially available off-the-shelf item, other than--
    (i) A commercially available off-the-shelf item that is 50 percent 
or more tungsten by weight; or
    (ii) A tungsten heavy alloy mill product, such as bar, billet, 
slab, wire, cube, sphere, block, blank, plate, or sheet, that had not 
been incorporated into an end item, subsystem, assembly, or component;
    (2) An electronic device, unless the Secretary of Defense, upon the 
recommendation of the Strategic Materials Protection Board pursuant to 
10 U.S.C. 187 determines that the domestic availability of a particular 
electronic device is critical to national security; or
    (3) A neodymium-iron-boron magnet manufactured from recycled 
material if the milling of the recycled material and sintering of the 
final magnet takes place in the United States.
    (d) If the authorized agency official concerned, without power of 
redelegation, determines that covered materials of satisfactory quality 
and quantity, in the required form, cannot be procured as and when 
needed at a reasonable price from a source other than a covered country 
(see 225.7018-4).


225.7018-4  Nonavailability determination.

    (a) Individual nonavailability determinations. (1) The following 
officials are authorized, without power of redelegation, to make a 
nonavailability determination described in 225.7018-3(d) on an 
individual basis (i.e., applies to only one contract):
    (i) The Under Secretary of Defense (Acquisition and Sustainment).
    (ii) The Secretary of the Army.
    (iii) The Secretary of the Navy.
    (iv) The Secretary of the Air Force.
    (v) The Director of the Defense Logistics Agency.
    (2) The supporting documentation for the determination shall 
include--
    (i) An analysis of alternatives that would not require a 
nonavailability determination; and
    (ii) A written certification by the requiring activity that 
describes, with specificity, why such alternatives are unacceptable.
    (3) Defense agencies other than the Defense Logistics Agency shall 
follow the procedures at PGI 225.7018-4(a)(3) when submitting a request 
for a nonavailability determination.
    (4) Provide to USD(A&S) DASD (Industrial Policy), in accordance 
with the procedures at PGI 225.7018-4(a)(4)--
    (i) A copy of individual nonavailability determinations with 
supporting documentation; and
    (ii) Notification when individual waivers are requested, but 
denied.
    (b) Class nonavailability determinations. A class nonavailability 
determination (i.e., a nonavailability determinations that applies to 
more than one contract) requires the approval of the USD(A&S). Follow 
the procedures at PGI 225.7018-4(b) when submitting a request for a 
class nonavailability determination.
    (1) At least 30 days before making a nonavailability determination 
that would apply to more than one contract, the USD(A&S) will, to the 
maximum extent practicable, and in a manner consistent with the 
protection of national security and confidential business information--
    (i) Publish a notice on the Federal Business Opportunities website 
(www.FedBizOpps.gov) of the intent to make the nonavailability 
determination; and
    (ii) Solicit information relevant to such notice from interested 
parties, including producers of mill products from covered materials.
    (2) The USD(A&S)--
    (i) Will take into consideration all information submitted in 
response to the notice in making a class nonavailability determination;
    (ii) May consider other relevant information that cannot be made 
part of the public record consistent with the protection of national 
security information and confidential business information; and
    (iii) Will ensure that any such nonavailability determination and 
the rationale for the determination are made publicly available to the 
maximum extent consistent with the protection of national security and 
confidential business information.


225.7018-5  Contract clause.

    Unless acquiring items outside the United States for use outside 
the United States or a nonavailability determination has been made in 
accordance with 225.7018-4, use the clause at 252.225-7052, Restriction 
on Acquisition of Certain Magnets and Tungsten, in solicitations and 
contracts, including solicitations and contracts using FAR part 12 
procedures for the acquisition of commercial items, that exceed the 
simplified acquisition threshold.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
4. Add section 252.225-7052 to read as follows:

[[Page 18160]]

252.225-7052  Restriction on the Acquisition of Certain Magnets and 
Tungsten.

    As prescribed in 225.7018-5, use the following clause:

Restriction on the Acquisition of Certain Magnets and Tungsten (APR 
2019)

    (a) Definitions. As used in this clause--
    Covered material means--
    (1) Samarium-cobalt magnets;
    (2) Neodymium-iron-boron magnets;
    (3) Tungsten metal powder; and
    (4) Tungsten heavy alloy or any finished or semi-finished 
component containing tungsten heavy alloy.
    Covered country means--
    (1) The Democratic People's Republic of North Korea;
    (2) The People's Republic of China;
    (3) The Russian Federation; and
    (4) The Islamic Republic of Iran.
    (b) Restriction. (1) Except as provided in paragraph (c) of this 
clause, the Contractor shall not deliver under this contract any 
covered material melted or produced in any covered country, or any 
end item, manufactured in any covered country, that contains a 
covered material (10 U.S.C. 2533c).
    (2) For samarium-cobalt magnets and neodymium iron-boron 
magnets, this restriction includes--
    (i) Melting samarium with cobalt to produce the samarium-cobalt 
alloy or melting neodymium with iron and boron to produce the 
neodymium-iron-boron alloy; and
    (ii) All subsequent phases of production of the magnets, such as 
powder formation, pressing, sintering or bonding, and magnetization.
    (3) The restriction on melting and producing of samarium-cobalt 
magnets is in addition to any applicable restrictions on melting of 
specialty metals if the clause at 252.225-7009, Restriction on 
Acquisition of Certain Articles Containing Specialty Metals, is 
included in the contract.
    (c) Exceptions. This clause does not apply--
    (1) To an end item that is--
    (i) A commercially available off-the-shelf item, other than--
    (A) A commercially available off-the-shelf item that is 50 
percent or more tungsten by weight; or
    (B) A tungsten heavy alloy mill product, such as bar, billet, 
slab, wire, cube, sphere, block, blank, plate, or sheet, that had 
not been incorporated into an end item, subsystem, assembly, or 
component;
    (ii) An electronic device, unless otherwise specified in the 
contract; or
    (iii) A neodymium-iron-boron magnet manufactured from recycled 
material if the milling of the recycled material and sintering of 
the final magnet takes place in the United States.
    (2) If the authorized agency official concerned has made a 
nonavailability determination, in accordance with section 225.7018-4 
of the Defense Federal Acquisition Regulation Supplement, that 
covered materials of satisfactory quality and quantity, in the 
required form, cannot be procured as and when needed at a reasonable 
price from a source other than a covered country.
(End of clause)

[FR Doc. 2019-08485 Filed 4-29-19; 8:45 am]
BILLING CODE 5001-06-P