Defense Federal Acquisition Regulation Supplement: Restriction on the Acquisition of Certain Magnets and Tungsten (DFARS Case 2018-D054), 72239-72245 [2019-27825]

Agencies

• Defense Acquisition Regulations System
• DEPARTMENT OF DEFENSE

[Federal Register Volume 84, Number 250 (Tuesday, December 31, 2019)]
[Rules and Regulations]
[Pages 72239-72245]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27825]


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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: Final rule.

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SUMMARY: DoD has adopted as final, with changes, 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 December 31, 2019.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, telephone 571-372-
6106.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD published an interim rule in the Federal Register at 84 FR 
18156 on April 30, 2019, to implement section 871 of the National 
Defense Authorization Act for Fiscal Year 2019, codified at 10 U.S.C. 
2533c. 10 U.S.C. 2533c prohibits acquisition of certain magnets and 
tungsten from North Korea, China, Russia, and Iran. Four respondents 
submitted public comments in response to the interim rule.

II. Discussion and Analysis

    DoD reviewed the public comments in the development of the final 
rule. A discussion of the comments and the changes made to the rule as 
a result of those comments is provided, as follows:

A. Summary of Significant Changes From the Interim Rule

    1. Definitions.
     Added definitions of ``electronic device'' and ``tungsten 
heavy alloy'' at DFARS 225.7018-1 and the associated clause at DFARS 
252.225-7052, Restriction on the Acquisition of Certain Magnets and 
Tungsten.
     Moved definitions of ``assembly,'' ``end item,'' and 
``subsystem,'' which apply to both specialty metals (DFARS 225.7003) 
and certain magnets and tungsten (DFARS 225.7018) from DFARS 225.7003 
to DFARS 225.7001 and included them in the clause at DFARS 252.225-
7052.
    2. Production of tungsten. Added a description of the production of 
tungsten at DFARS 225.7018-2(c), to explain the applicability of the 
restrictions on the production of tungsten.
    3. Exceptions. Since samarium-cobalt magnets are restricted under 
10 U.S.C. 2533b (specialty metals) as well as 10 U.S.C. 2533c--
     Added cross references to DFARS Procedures, Guidance, and 
Information (PGI) at DFARS 225.7018-3 to provide guidance where the 
exceptions for samarium-cobalt magnets under 10 U.S.C. 2533b are more 
stringent than the comparable exceptions under 10 U.S.C. 2533c;
     Provided the statutory cite to 10 U.S.C. 2533b(m)(4) and 
added the explanation of ``required form'' at DFARS 225.7003-3 and 
2352.225-7009(c)(5), in lieu of the definitions of ``required form'' at 
DFARS 225.7003-1 and 252.225-7009(a), because it was not actually a 
definition of ``required form'' and a different explanation of 
``required form'' is now required for the restrictions on samarium-
cobalt and neodymium-iron-boron magnets; and
     Added a tailored explanation of ``required form'' to the 
nonavailability exception for tungsten heavy alloy and certain magnets 
at DFARS 225.7018-3(d) and 252.225-7052(c)(2). No explanation of 
required form is necessary with regard to tungsten powder.
    4. Approval level for nonavailability determination. Lowered the 
approval level to head of the contracting activity for individual 
nonavailability determinations at DFARS 225.7018-4.

B. Analysis of Public Comments

    1. General.
    a. Support for statute and rule.
    Comment: Multiple respondents expressed support for the statute and 
strong implementation of the statute in the interim rule. One 
respondent stated support for DoD's efforts to promulgate a strong rule 
that will support a robust and healthy domestic industrial base, 
because a strong national strategic materials industry is important to 
national security. This respondent also supported speedy implementation 
of a final rule. Another respondent noted that the interim rule will 
shield U.S. critical resource needs from the decisions of foreign 
adversaries.
    Response: Noted.
    b. Oppose the statute and the rule.

[[Page 72240]]

    Comment: One respondent opposed 10 U.S.C. 2533c because the 
respondent believed that meaningful reform is necessary to mitigate 
U.S. reliance on foreign-sources critical minerals. This respondent 
recommended that DoD withdraw the interim rule to allow reasonable 
opportunity for the Administration to implement its recently published 
plan to reduce reliance on critical minerals from adversaries.
    Response: DoD is required to comply with 10 U.S.C. 2533c. Specific 
comments with regard to implementation of the statute will be addressed 
in more detail in the following analysis.
    c. Relationship to specialty metal regulations.
    Comment: Most respondents welcomed the use of procedures from the 
specialty metals regulations, to the extent that the laws are 
comparable. One respondent stated that this will generally support 
quick and fair implementation of the law. According to this respondent, 
because the new statute at 10 U.S.C. 2533c closely mirrors the language 
on specialty metals at 10 U.S.C. 2533b, the interim rule appropriately 
uses the procedures from the specialty metals clause, and will be 
better in implementation for it, because use of existing procedures 
minimizes adjustments for suppliers and for DoD. This respondent also 
stated that DoD should recognize that Congress's intent was for the two 
laws to operate in a complementary fashion.
    Several respondents recommended defining the term ``produce'' more 
in line with the definition of ``produce'' from the specialty metals 
clause (see discussion at section 3.).
    One respondent was of the opinion that this interim rule conflicts 
with other Federal rules, because samarium-cobalt magnets are already 
controlled by the specialty metals statute, and this rule established 
new restrictions for samarium-cobalt magnets for contractors that 
already comply with specialty metals requirements. According to this 
respondent, the statute and implementing regulations set in place new 
and contradictory prohibitions for those critical magnets that may have 
undesirable and unintended consequences.
    Response: To the extent that the new statute parallels the 
specialty metals statute, it makes sense to implement the statute in a 
way that is comparable.
    To the extent that the new statute imposes new restrictions on 
samarium-cobalt magnets, those restrictions must be applied in a way 
that harmonizes with the specialty metals restrictions, while fully 
implementing the new statute. There are other instances of overlapping 
restrictions (e.g., ball and roller bearings may be made from specialty 
metals), in which case a cross-reference is included to remind affected 
parties of the need to comply with both sets of restrictions (see DFARS 
225.7009-2(b) and 252.226-7016(e)). A similar cross-reference to the 
specialty metal restrictions was included in the interim rule at DFARS 
225.7018-2(c) (now 225.7018-2(b)(2)) and DFARS 252.225-7052(b)(3) (now 
252.225-7052(b)(2)(ii)). This rule also reformats the explanation of 
the term ``required form'' for specialty metals and provides a new 
explanation as to the meaning of ``required form'' when applied to 
magnets. In addition, some pointers to the DFARS PGI have been added to 
provide additional guidance on the interrelationship of certain 
exceptions to the specialty metals restrictions on samarium-cobalt 
magnets in 10 U.S.C. 2033b and the new restrictions on samarium-cobalt 
magnets in 10 U.S.C. 2533c.
    2. Covered materials. 10 U.S.C. 2533c defines ``covered material'' 
to mean 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.
    a. Remove samarium-cobalt magnets from the rule.
    Comment: One respondent recommended removing samarium-cobalt 
magnets from the interim rule and considering ways to strengthen 
compliance for those magnets in accordance with the specialty metals 
statute, rather than regulating the same commodities through two 
separate regulatory instruments.
    Response: Samarium-cobalt magnets are covered by both 10 U.S.C. 
2533b (specialty metals) and 10 U.S.C. 2533c, implemented under this 
rule. 10 U.S.C. 2533c applies specific separate prohibitions to 
samarium cobalt magnets, which must be harmonized with the restrictions 
of 10 U.S.C. 2533b. The specialty metals statute is generally more 
stringent than 10 U.S.C. 2533c, requiring melt or production in the 
United States or a qualifying country, rather than just prohibiting 
melt or production in certain covered countries (North Korea, China, 
Russia, and Iran). However, if an exception to 10 U.S.C. 2533b, such as 
nonavailability from the United States or a qualifying country, 
applies, then the requirement to not buy a samarium-cobalt magnet 
melted or produced in a covered country remains in effect, unless a 
magnet melted or produced in any country except a covered country is 
also nonavailable.
    b. Define ``tungsten heavy alloy.''
    Comment: One respondent requested confirmation that ``tungsten 
heavy alloy'' means ASTM B-777 tungsten alloys.
    Response: DoD has added a definition of ``tungsten heavy alloy'' so 
that it is clear whether a particular tungsten product is subject to 
the restrictions of 10 U.S.C. 2033c. In this final rule, ``tungsten 
heavy alloy'' is defined at DFARS 225.7018-1 and the associated clause 
at DFARS 252.225-7052. The definition recognizes two standards for 
specific classes of tungsten heavy alloy: ASTM B777 and SAE-AMS-T-2104. 
However, the definition also recognizes that there may be variants of 
tungsten heavy alloy that do not meet one of the standards for a 
specified class of tungsten heavy alloy, but are nevertheless in the 
tungsten heavy alloy family if the material contains at least 90 
percent tungsten, combined with other metals such as nickel-iron or 
nickel-copper, and has a density of at least 16.5 g/cm3.
    c. Add ``tantalum.''
    Comment: One respondent recommended adding tantalum as a covered 
material, because this requirement is in the Senate and House versions 
of the NDAA for FY 2020 and is therefore ``virtually certain to become 
law soon.''
    Response: DoD is unable to include tantalum in the DFARS until a 
law is enacted amending 10 U.S.C. 2533c to add tantalum as a covered 
material.
    3. Melted or produced. With some exceptions, 10 U.S.C. 2533c 
prohibits procuring any covered material ``melted or produced'' in any 
covered country.
    a. Define ``melted.''
    Comment: One respondent requested confirmation that ``melted'' 
means ``Converting a metal stock to liquid form for the purpose of 
forming shapes that can subsequently undergo further processing into 
further forms.''
    Response: The dictionary definition of ``melted'' is sufficiently 
clear, without need for further definition.
    b. Coverage point for magnets.
    Comment: One respondent stated that the coverage point in the 
interim rule for magnets is correct and well-considered, i.e., the 
melting of samarium with cobalt to produce the samarium-cobalt alloy or 
melting of neodymium with iron and boron to produce the neodymium-iron-
boron alloy, and all subsequent phases of production of the magnets 
shall not occur in a covered nation. According to this respondent, 
although the first few steps of the supply chain for these rare

[[Page 72241]]

earth magnets are overwhelmingly reliant on Chinese sources, for alloy 
and magnet manufacturing there is a robust and competitive non-Chinese 
market capable of meeting supply needs of DoD and of the commercial 
marketplace.
    Response: DoD selected this coverage point for magnets as being in 
compliance with the statutory prohibition on the melting and production 
of magnets in a covered country.
    c. Meaning of ``produced'' for tungsten.
    Comment: Several respondents noted that the rule did not address 
the production process for tungsten. One respondent provided further 
details with regard to production of tungsten. According to the 
respondent, tungsten metal powder and tungsten heavy alloy are not 
manufactured through a melting process, but through production 
processes in which the dissolution/digestion process of converting 
tungsten ore and ammonium paratungstate into refined tungsten powder 
are the key, value added ``melt-equivalent'' steps. Therefore, the 
respondent suggested defining ``produce'' for tungsten (similar to the 
definition in the specialty metals clause) as (i) atomization; (ii) 
calcination and reduction into powder; or (iii) final consolidation of 
non-melt derived metal powders.
    Response: This recommended description of the production of 
tungsten and tungsten heavy alloy has been added in the final rule at 
DFARS 225.7018-2(c) and in the clause DFARS 252.225-7052.
    d. Meaning of ``produced'' for tantalum.
    Comment: One respondent also addressed the production processes of 
tantalum.
    Response: This comment is outside the scope of this case, because 
tantalum is not a covered material under 10 U.S.C. 2533c.
    4. Nonavailability determination. 10 U.S.C. 2533c provides an 
exception if the Secretary of Defense determines that covered materials 
of satisfactory quality and quantity, in the required form, cannot be 
procured as and when needed at a reasonable price.
    a. Appropriate approval level for nonavailability determinations.
    Comment: One respondent considered the nonavailability 
determination process in the interim rule to be workable and 
appropriate. According to this respondent, DoD has struck a smart 
balance in determining the officials that can issue a nonavailability 
determination. The respondent recommended that DoD should retain this 
level of accountability in the final rule.
    Another respondent with a less optimistic view on the availability 
of covered materials from non-Chinese sources considered the 
nonavailability determination process in the interim rule to be 
unnecessarily complex and burdensome. According to this respondent, 
limiting authority to grant individual determinations to five officials 
other than the Secretary of Defense and limiting the class 
nonavailability determination to one additional official is unwarranted 
and will grind the acquisition process to a halt. This respondent 
recommended that the Secretary of Defense make a nonavailability 
determination that applies to all DoD procurements, or grant 
contracting officers the authority to make nonavailability 
determinations, with both options relying on Federal Government studies 
and reports to date. This respondent was of the opinion that DoD does 
not have to immediately cut off the supply chain of critical minerals 
and cause major disruptions.
    Response: In this final rule, DoD has made the head of the 
contracting activity the approving official at DFARS 225.7018-4(a) for 
individual nonavailability determinations, and does not limit further 
redelegation of this authority. However, USD(A&S)DASD for Industrial 
Policy still requires a copy of each individual nonavailability 
determination with supporting documentation and notification when 
individual waivers are requested, but denied. Because of the 
significant impact that a class determination of nonavailability may 
have, DoD has retained accountability at the USA(A&S) level and has 
made no changes to the requirements of the interim rule at DFARS 
225.7018-4(b).
    b. Criteria.
    Comment: One respondent recommended that DoD should clarify the 
process and criteria for nonavailability determinations and explain to 
contractors what information DoD may require in support of such 
determinations.
    Response: There are currently many source restrictions that allow 
an exception for nonavailability (such as the Buy American statute, the 
Berry Amendment at 10 U.S.C. 2533a, the specialty metal restrictions at 
10 U.S.C. 2533b, and various appropriations act domestic source 
restrictions). This determination is not substantively different. As 
specified at DFARS 225.7018-3(d), the restriction does not apply if the 
authorized agency official concerned determines that ``compliant 
covered materials of satisfactory quality and quantity, in the required 
form, cannot be procured as and when needed at a reasonable price.'' 
Any entity seeking a nonavailability determination must provide the 
Government with sufficient data and a rationale to justify such a 
determination.
    c. Public notice.
    Comment: One respondent suggested that the nonavailability 
procedures can be improved by requiring expanded public notice to 
potential suppliers for nonavailability determinations both for class 
determinations and individual determinations. The respondent also 
recommended a mechanism for suppliers to appeal to DoD when they 
believe that a determination has been wrongly granted or has been 
rendered superfluous by the establishment of a new compliant source of 
supply.
    Response: In an effort to balance the complexity and burden of the 
process against the expected benefits of additional public scrutiny and 
input, DoD considers that the requirements of the interim rule for 
publication of a notice of class determinations on the Federal Business 
Opportunities website is sufficient.
    5. Flowdown.
    Comment: One respondent stated that DoD should clarify whether or 
not it is mandatory to flow down the clause at DFARS 252.225-7052.
    Response: The interim rule does not require flowdown of the clause 
at DFARS 252.225-7052, because the intent was that the prime contractor 
is responsible for delivery of a compliant product. However, since 10 
U.S.C. 2533c(b) specifically states applicability to prime contracts 
and subcontracts at any tier, the final rule has been amended to 
specify flowdown in the clause at DFARS 252.225-7052.
    6. Define ``end item.''
    Comment: One respondent recommended confirmation that the term 
``end item'' means ``The final production product when assembled or 
completed, and ready for issue, delivery, or deployment'' (i.e., 10 
U.S.C. 2533b(m)(9)).
    Response: 10 U.S.C. 2533c specifies that the term ``end item'' has 
the meaning given in 10 U.S.C. 2533b(m). This has been clarified in the 
final rule by moving the definition of ``end item'' from 225.7003-1 to 
225.7001, so that it is applicable to both 225.7003 (specialty metals) 
and 225.7018 (certain magnets and tungsten) and adding the definition 
to the clause at DFARS 252.225-7052. In addition, DoD similarly moved 
the definitions of ``assembly'' and ``subsystem'' to DFARS 225.7001 and 
added them to the clause at 252.225-7052.

[[Page 72242]]

    7. Initial regulatory flexibility analysis. One respondent had 
several comments on the initial regulatory flexibility analysis (IRFA). 
For analysis of these comments, see section VI. of this preamble.

C. Other Changes

    1. Definitions.
     Included the full definitions of ``bearing component,'' 
``component,'' ``end product,'' and ``structural component of a tent'' 
at DFARS 225.7001, instead of referencing the definitions in the 
associated clauses.
     Included the full definitions of ``alloy,'' ``commercial 
derivative military article,'' ``electronic component,'' ``high 
performance magnet,'' ``produce,'' ``specialty metal,'' and ``steel'' 
in DFARS 225.7003-1, rather than just referencing the definitions in 
the associated specialty metal clauses at DFARS 252.225-7008 and 
252.225-7009.
     Moved the definition of ``covered country'' into correct 
alphabetical order at DFARS 225.7018-1 and 252.225-7052(a).
    2. Updated acronym. Revised ``USD(AT&L)'' to read ``USD(A&S)'' in 
several places at DFARS 225.7003-3.
    3. Nonavailability determination. Corrected wording at DFARS 
225.7018-3(d) to more accurately state the conditions for a 
nonavailability determination.

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

    The interim rule added a new clause at DFARS 252.225-7052, 
Restriction on the Acquisition of Certain Magnets and Tungsten, which 
does not apply to acquisitions below the simplified acquisition 
threshold (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). There is no change to the 
clause or the applicability of the clause in the final rule.

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 did not 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 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 as discussed in section VIII of preamble of the interim 
rule published at 84 FR 18156. No comments were received on the 
designation.

VI. Regulatory Flexibility Act

    A final regulatory flexibility analysis (FRFA) has been prepared 
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. 
The FRFA 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 is codified at 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 melted or produced in North 
Korea, China, Russia, or Iran).
    One respondent had several comments in response to the initial 
regulatory flexibility analysis.
    Comment: The respondent noted that the statement that ``DoD expects 
there will be some adjustment period as U.S. and other non-prohibited 
sources comes on line'' ignores the obvious significant risk of 
disruption this new prohibition will cause DoD and its suppliers.
    Response: The IRFA acknowledged that there will be an adjustment 
period. There is, however, an exception for nonavailability, which may 
initially be utilized until more non-prohibited sources become 
available. The final rule has also facilitated nonavailability 
determinations by reducing the approval level for individual 
determinations to the head of the contracting activity, with power of 
redelegation.
    Comment: The respondent did not agree with the assertion that there 
are no

[[Page 72243]]

projected reporting or recordkeeping requirements as a result of this 
rule.
    Response: The rule does not impose any specific reporting or 
recordkeeping requirements. It does not specify what records must be 
kept, or for how long. It is up to the Contractor how to track 
compliance with the rule, without any additional recordkeeping 
requirements imposed by the Government.
    Comment: According to the respondent, the rule conflicts with other 
Federal rules.
    Response: As stated in the response in section 1.c., the fact that 
two statutes, and the regulations implementing them, apply different 
restrictions to the same item does not create a conflict. Rather, the 
overlapping restrictions must be applied together in harmony, so that, 
in any given circumstance, the effective requirements can be 
determined.
    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.
    As discussed above, there are no projected reporting or 
recordkeeping requirements in this rule. However, based on this rule, 
there may be compliance costs to track the origin of covered materials.
    DoD is exempting acquisitions equal to or less than the SAT 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.

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).

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

    Government procurement.

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

    Accordingly, the interim rule amending 48 CFR parts 212, 225, and 
252, which was published in the Federal Register at 84 FR 18156 on 
April 30, 2019, is adopted as a final rule with the following changes:

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

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

PART 225--FOREIGN ACQUISITION

0
2. Revise section 225.7001 to read as follows:


225.7001  Definitions.

    As used in this subpart--
    Assembly means an item forming a portion of a system or subsystem 
that--
    (1) Can be provisioned and replaced as an entity; and
    (2) Incorporates multiple, replaceable parts.
    Bearing components means the bearing element, retainer, inner race, 
or outer race.
    Component means any item supplied to the Government as part of an 
end item or of another component except that for use in 225.7007, the 
term means an article, material, or supply incorporated directly into 
an end product.
    End item, as used in sections 225.7003 and 225.7018, means the 
final production product when assembled or completed and ready for 
delivery under a line item of the contract (10 U.S.C. 2533b(m)).
    End product means supplies delivered under a line item of the 
contract.
    Hand or measuring tools means those tools listed in Federal supply 
classifications 51 and 52, respectively.
    Structural component of a tent--
    (1) Means a component that contributes to the form and stability of 
the tent (e.g., poles, frames, flooring, guy ropes, pegs); and
    (2) Does not include equipment such as heating, cooling, or 
lighting.
    Subsystem means a functional grouping of items that combine to 
perform a major function within an end item, such as electrical power, 
altitude control, and propulsion.

0
3. Amend section 225.7003-1 by--
0
a. Removing paragraphs (a) and (c);
0
b. Removing the paragraph (b) designation for the definition 
``Automotive item''; and
0
c. Adding, in alphabetical order, the definitions of ``Alloy'', 
``Commercial derivative military article'', ``Electronic component'', 
``High performance magnet'', ``Produce'', ``Specialty metal'', and 
``Steel''.
    The additions read as follows:


225.7003-1  Definitions.

    As used in this section--
    Alloy means a metal consisting of a mixture of a basic metallic 
element and one or more metallic, or non-metallic, alloying elements.
    (1) For alloys named by a single metallic element (e.g., titanium 
alloy), it means that the alloy contains 50 percent or more of the 
named metal (by mass).
    (2) If two metals are specified in the name (e.g., nickel-iron 
alloy), those metals are the two predominant elements in the alloy, and 
together they constitute 50 percent or more of the alloy (by mass).
* * * * *
    Commercial derivative military article means an item acquired by 
the Department of Defense that is or will be produced using the same 
production facilities, a common supply chain, and the same or similar 
production processes that are used for the production of articles 
predominantly used by the general public or by nongovernmental entities 
for purposes other than governmental purposes.
    Electronic component means an item that operates by controlling the 
flow of electrons or other electrically charged particles in circuits, 
using interconnections of electrical devices such as resistors, 
inductors, capacitors, diodes, switches, transistors, or integrated 
circuits. The term does not include structural or mechanical parts of 
an assembly containing an electronic component and does not include any 
high performance magnets that may be used in the electronic component.
    High performance magnet means a permanent magnet that obtains a 
majority of its magnetic properties from rare earth metals (such as 
samarium).
    Produce means--
    (1) Atomization;
    (2) Sputtering; or
    (3) Final consolidation of non-melt derived metal powders.
    Specialty metal means--
    (1) Steel--
    (i) With a maximum alloy content exceeding one or more of the 
following limits: manganese, 1.65 percent; silicon, 0.60 percent; or 
copper, 0.60 percent; or
    (ii) Containing more than 0.25 percent of any of the following 
elements:

[[Page 72244]]

aluminum, chromium, cobalt, molybdenum, nickel, niobium (columbium), 
titanium, tungsten, or vanadium;
    (2) Metal alloys consisting of--
    (i) Nickel or iron-nickel alloys that contain a total of alloying 
metals other than nickel and iron in excess of 10 percent; or
    (ii) Cobalt alloys that contain a total of alloying metals other 
than cobalt and iron in excess of 10 percent;
    (3) Titanium and titanium alloys; or
    (4) Zirconium and zirconium alloys.
    Steel means an iron alloy that includes between .02 and 2 percent 
carbon and may include other elements.

0
4. Amend section 225.7003-3 by--
0
a. Revising paragraph (b)(5) introductory text; and
0
b. In paragraphs (b)(5)(ii) introductory text, (b)(5)(ii)(A) and (B) 
introductory text, (c)(2), (d) introductory text, (d)(1) and (2) 
introductory text, and (d)(2)(ii), removing ``USD(AT&L)'' wherever they 
appear and adding ``USD(A&S)'' in its place.
    The revision reads as follows:


225.7003-3  Exceptions.

* * * * *
    (b) * * *
    (5) Specialty metal in any of the items listed in 225.7003-2 if the 
USD(A&S), or an official authorized in accordance with paragraph 
(b)(5)(i) of this section, determines that specialty metal melted or 
produced in the United States cannot be acquired as and when needed at 
a fair and reasonable price in a satisfactory quality, a sufficient 
quantity, and the required form (i.e., a domestic nonavailability 
determination). In accordance with 10 U.S.C. 2533b(m)(4), the term 
``required form'' in this section refers to the form of the mill 
product, such as bar, billet, wire, slab, plate, or sheet, in the grade 
appropriate for the production of a finished end item to be delivered 
to the Government under this contract; or a finished component 
assembled into an end item to be delivered to the Government under the 
contract. See guidance in PGI 225.7003-3(b)(5).
* * * * *

0
5. Amend section 225.7018-1 by-
0
a. Redesignating the definitions of ``Covered country'' and ``Covered 
material'' in alphabetical order; and
0
b. Adding, in alphabetical order, the definitions of ``Electronic 
device'' and ``Tungsten heavy alloy''.
    The additions read as follows:


225.7018-1  Definitions.

* * * * *
    Electronic device means an item that operates by controlling the 
flow of electrons or other electrically charged particles in circuits, 
using interconnections such as resistors, inductors, capacitors, 
diodes, switches, transistors, or integrated circuits.
    Tungsten heavy alloy means a tungsten base pseudo alloy that--
    (1) Meets the specifications of ASTM B777 or SAE-AMS-T-21014 for a 
particular class of tungsten heavy alloy; or
    (2) Contains at least 90 percent tungsten in a matrix of other 
metals (such as nickel-iron or nickel-copper) and has density of at 
least 16.5 g/cm3).

0
6. Amend section 225.7018-2 by--
0
a. Redesignating paragraphs (b)(1) and (2) as (b)(i) and (ii);
0
b. Redesignating paragraph (b) introductory text as paragraph (b)(1);
0
c. Redesignating paragraph (c) as paragraph (b)(2); and
0
d. Adding a new paragraph (c).
    The addition reads as follows:


225.7018-2  Restriction.

* * * * *
    (c) For production of tungsten metal powder and tungsten heavy 
alloy, this restriction includes--
    (1) Atomization;
    (2) Calcination and reduction into powder;
    (3) Final consolidation of non-melt derived metal powders; and
    (4) All subsequent phases of production of tungsten metal powder, 
tungsten heavy alloy, or any finished or semi-finished component 
containing tungsten heavy alloy.

0
7. Amend section 225.7018-3 by--
0
a. Revising paragraph (c)(1) introductory text;
0
b. In paragraph (c)(1)(ii), removing ``had'' and adding ``has'' in its 
place;
0
c. Revising paragraph (c)(2); and
0
d. Revising paragraph (d).
    The revisions read as follows:


225.7018-3  Exceptions.

* * * * *
    (c) * * *
    (1) A commercially available off-the-shelf item (but see PGI 
225.7018-3(c)(1)(i) with regard to commercially available samarium-
cobalt magnets), other than--
* * * * *
    (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 (but see PGI 
225.7018-3(c)(1)(ii) with regard to samarium-cobalt magnets used in 
electronic components); or
* * * * *
    (d) If the authorized agency official concerned determines that 
compliant covered materials of satisfactory quality and quantity, in 
the required form, cannot be procured as and when needed at a 
reasonable price.
    (1) For tungsten heavy alloy, the term ``required form'' refers to 
the form of the mill product, such as bar, billet, wire, slab, plate, 
or sheet, in the grade appropriate for the production of a finished end 
item to be delivered to the Government under this contract; or a 
finished component assembled into an end item to be delivered to the 
Government under the contract.
    (2) For samarium-cobalt magnets or neodymium-iron-boron magnets, 
the term ``required form'' refers to the form and properties of the 
magnets.

0
8. Amend section 225.7018-4 by--
0
a. Revising paragraph (a)(1);
0
b. Removing paragraph (a)(3);
0
c. Redesignating paragraph (a)(4) as paragraph (a)(3); and
0
d. In the newly redesignated paragraph (a)(3), removing ``PGI 225.7018-
4(a)(4)'' and adding ``PGI 225.7018-4(a)(3)'' in its place.
    The revision reads as follows:


225.7018-4  Nonavailability determination.

    (a) * * *
    (1) The head of the contracting activity is authorized to make a 
nonavailability determination described in 225.7018-3(d) on an 
individual basis (i.e., applies to only one contract).
* * * * *

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
9. Amend section 252.225-7009 by--
0
a. Removing the clause date ``(OCT 2014)'' and adding ``(DEC 2019)'' in 
its place;
0
b. In paragraph (a), removing the definition of ``Required form''; and
0
c. Revising paragraph (c)(5)(iii).
    The revision reads as follows:


252.225-7009  Restriction on Acquisition of Certain Articles Containing 
Specialty Metals.

* * * * *
    (c) * * *
    (5) * * *
    (iii) The required form. In accordance with 10 U.S.C. 2533b(m)(4), 
the term ``required form'' in this clause refers to the form of the 
mill product, such as bar, billet, wire, slab, plate, or sheet, in the 
grade appropriate for the production of a finished end item to be 
delivered to the Government under this contract; or a finished 
component assembled into

[[Page 72245]]

an end item to be delivered to the Government under this contract.
* * * * *

0
10. Amend section 252.225-7052 by--
0
a. Removing the clause date ``(APR 2019)'' and adding ``(DEC 2019)'' in 
its place;
0
b. In paragraph (a), redesignating the definitions of ``Covered 
country'' and ``Covered material'' in alphabetical order, and adding 
the definitions, in alphabetical order, of ``Assembly'', ``Commercially 
available off-the-shelf item'', ``Component'', Electronic device'', 
``End item'', ``Subsystem'', and ``Tungsten heavy alloy'';
0
c. Redesignating paragraphs (b)(2)(i) and (ii) as (b)(2)(A) and (B);
0
d. Redesignating paragraph (b)(2) introductory text as (b)(2)(i);
0
e. Redesignating paragraph (b)(3) as paragraph (b)(2)(ii);
0
f. Adding a new paragraph (b)(3);
0
g. In paragraph (c)(1)(i)(B), removing ``had'' and adding ``has'' in 
its place;
0
h. Revising paragraph (c)(2); and
0
i. Adding a new paragraph (d).
    The additions and revision read as follows:


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

* * * * *
    (a) * * *
    Assembly means an item forming a portion of a system or subsystem 
that--
    (1) Can be provisioned and replaced as an entity; and
    (2) Incorporates multiple, replaceable parts.
    Commercially available off-the-shelf item--
    (1) Means any item of supply that is--
    (i) A commercial item (as defined in paragraph (1) of the 
definition of ``commercial item'' in section 2.101 of the Federal 
Acquisition Regulation);
    (ii) Sold in substantial quantities in the commercial marketplace; 
and
    (iii) Offered to the Government, under this contract or a 
subcontract at any tier, without modification, in the same form in 
which it is sold in the commercial marketplace; and
    (2) Does not include bulk cargo, as defined in 46 U.S.C. 40102(4), 
such as agricultural products and petroleum products.
    Component means any item supplied to the Government as part of an 
end item or of another component.
* * * * *
    Electronic device means an item that operates by controlling the 
flow of electrons or other electrically charged particles in circuits, 
using interconnections such as resistors, inductors, capacitors, 
diodes, switches, transistors, or integrated circuits.
    End item means the final production product when assembled or 
completed and ready for delivery under a line item of this contract.
    Subsystem means a functional grouping of items that combine to 
perform a major function within an end item, such as electrical power, 
attitude control, and propulsion.
    Tungsten heavy alloy means a tungsten base pseudo alloy that--
    (1) Meets the specifications of ASTM B777 or SAE-AMS-T-21014 for a 
particular class of tungsten heavy alloy; or
    (2) Contains at least 90 percent tungsten in a matrix of other 
metals (such as nickel-iron or nickel-copper) and has density of at 
least 16.5 g/cm3).
    (b) * * *
    (3) For production of tungsten metal powder and tungsten heavy 
alloy, this restriction includes--
    (i) Atomization;
    (ii) Calcination and reduction into powder;
    (iii) Final consolidation of non-melt derived metal powders; and
    (iv) All subsequent phases of production of tungsten metal powder, 
tungsten heavy alloy, or any finished or semi-finished component 
containing tungsten heavy alloy.
    (c) * * *
    (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 compliant 
covered materials of satisfactory quality and quantity, in the required 
form, cannot be procured as and when needed at a reasonable price.
    (i) For tungsten heavy alloy, the term ``required form'' refers to 
the form of the mill product, such as bar, billet, wire, slab, plate, 
or sheet, in the grade appropriate for the production of a finished end 
item to be delivered to the Government under this contract; or a 
finished component assembled into an end item to be delivered to the 
Government under the contract.
    (ii) For samarium-cobalt magnets or neodymium-iron-boron magnets, 
the term ``required form'' refers to the form and properties of the 
magnets.
    (d) The Contractor shall insert the substance of this clause, 
including this paragraph (d), in subcontracts and other contractual 
instruments that are for items containing a covered material, including 
subcontracts and other contractual instruments for commercial items, 
unless an exception in paragraph (c) of this clause applies. The 
Contractor shall not alter this clause other than to identify the 
appropriate parties.
* * * * *
[FR Doc. 2019-27825 Filed 12-30-19; 8:45 am]
BILLING CODE 5001-06-P