Defense Federal Acquisition Regulation Supplement: Employment Transparency Regarding Individuals Who Perform Work in the People's Republic of China (DFARS Case 2022-D010), 52339-52342 [2022-18226]

Agencies

• Defense Acquisition Regulations System
• DEPARTMENT OF DEFENSE

[Federal Register Volume 87, Number 164 (Thursday, August 25, 2022)]
[Rules and Regulations]
[Pages 52339-52342]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-18226]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 212, 225, and 252

[Docket DARS-2022-0020]
RIN 0750-AL61


Defense Federal Acquisition Regulation Supplement: Employment 
Transparency Regarding Individuals Who Perform Work in the People's 
Republic of China (DFARS Case 2022-D010)

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 that requires a disclosure from 
entities that employ one or more individuals who will perform work in 
the People's Republic of China.

DATES: Effective August 25, 2022.
    Comments on the interim rule should be submitted in writing to the 
address shown below on or before October 24, 2022, to be considered in 
the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2022-D010, using 
any of the following methods:
    [cir] Federal eRulemaking Portal: https://www.regulations.gov. 
Search for ``DFARS Case 2022-D010.'' Select ``Comment'' and follow the 
instructions to submit a comment. Please include your name, company 
name (if any), and ``DFARS Case 2022-D010'' on any attached document.
    [cir] Email: [email protected]. Include DFARS Case 2022-D010 in 
the subject line of the message.
    Comments received generally will be posted without change to 
https://www.regulations.gov, including any personal information 
provided. To confirm receipt of your comment(s), please check https://www.regulations.gov, approximately two to three days after submission 
to verify posting.

FOR FURTHER INFORMATION CONTACT: Kimberly Bass, telephone 703-717-3446.

SUPPLEMENTARY INFORMATION:

I. Background

    This interim rule revises the DFARS to implement section 855 of the 
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2022 
(Pub. L. 117-81, 10 U.S.C. 4651 note prec.). Section 855 requires 
offerors who are covered entities, when submitting a bid or proposal 
for a covered contract, to disclose their use of workforce and 
facilities in the People's Republic of China, if they employ one or 
more individuals who will perform work in the People's Republic of 
China, unless a national security waiver has been granted. A recurring 
disclosure is also required for fiscal years 2023 and 2024, for 
contractors that are covered entities and are a party to one or more 
covered contracts in each fiscal year, if the contractor employs one or 
more individuals who perform work in the People's Republic of China on 
any such contract.

II. Discussion and Analysis

A. Award Restriction

    Unless a waiver has been granted, the statutory restriction on the 
award, renewal, or extension of a covered contract requires the offeror 
to provide, at the time of an offer, the disclosures required in the 
solicitation provision at DFARS 252.225-7057, Preaward Disclosure of 
Employment of Individuals Who Work in the People's Republic of China. 
The statutory restriction requires contractors to provide the 
disclosures required in the contract clause at 252.225-7058, Postaward 
Disclosure of Employment of Individuals Who Work in the People's 
Republic of China. Specifically, offerors and contractors that are 
covered entities are required to disclose their use of workforce and 
facilities in the People's Republic of China, if they employ one or 
more individuals who will perform work in the People's Republic of 
China on a covered contract.

B. Preaward Disclosure Requirements

    This rule adds in the provision at 252.225-7057, Preaward 
Disclosure of Employment of Individuals Who Work in the People's 
Republic of China, the requirement for offerors to disclose their use 
of workforce and facilities in the People's Republic of China, if the 
offeror employs one or more individuals who perform work in the 
People's Republic of China, unless a national security waiver of the 
disclosure is granted. The preaward disclosure is required at the time 
the offeror submits an offer.

C. Postaward Disclosure Requirements

    The requirement for the postaward disclosures for fiscal years 2023 
and 2024 is located in the clause at 252.225-7058, Postaward Disclosure 
of Employment of Individuals Who Work in the People's Republic of 
China. These disclosures are required following the contract award for 
contractors that are covered entities. The postaward disclosures must 
include the total number of individuals who will perform work in the 
People's Republic of China on the covered contracts; and a description 
of the physical presence of the facility, including the street address, 
where work on the covered contract will be performed.

D. National Security Waiver of Disclosure

    The requirement for the national security waiver of disclosure is 
added at DFARS 225.7021-3. The disclosure requirements may be waived if 
the senior procurement executive determines in writing that such 
disclosure would not be in the national security interests of the 
United States. The waiver authority may not be delegated. A cross-
reference is provided to DFARS PGI 225.7021-4(a) to provide guidance on 
requirements for the senior procurement executive's determination.

E. Definitions

    Definitions for ``covered contract'' and ``covered entity'' are 
included at 225.7021-1 as defined in the statute. ``Covered contract'' 
is defined as any DoD contract or subcontract with a value in excess of 
$5 million and excludes contracts for commercial

[[Page 52340]]

items. ``Covered entity'' is defined as any corporation, company, 
limited liability, limited partnership, business trust, business 
association or similar entity, including any subsidiary thereof 
performing work on a covered contract in the People's Republic of 
China.

F. Lists of Laws Not Applicable to Commercial Items

    The statute does not apply to commercial contracts and 
subcontracts. Accordingly, 10 U.S.C. 4651 note prec. is added to the 
lists of laws that are not applicable to commercial items at DFARS 
212.503, Applicability of certain laws to executive agency contracts 
for the acquisition of commercial items; and 212.504, Applicability of 
certain laws to subcontracts for the acquisition of commercial items. 
At 212.503, paragraph (ix), 107 Stat 1720 (Section 843(a), Pub. L. 103-
160), Reporting Requirement Regarding Dealings with Terrorist 
Countries, is removed, as the statute expired on September 30, 1996.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold (SAT) and for Commercial Services and Commercial Products, 
Including Commercially Available Off-the-Shelf (COTS) Items

    This rule creates a new solicitation provision and contract clause: 
(1) DFARS 252.225-7057, Preaward Disclosure of Employment of 
Individuals Who Work in the People's Republic of China; and (2) DFARS 
252.225-7058, Postaward Disclosure of Employment of Individuals Who 
Work in the People's Republic of China. The solicitation provision at 
DFARS 252.225-7057 is prescribed at DFARS 225.7021-5(a) for use in 
solicitations that include the clause at DFARS 252.225-7058. The 
contract clause at DFARS 252.225-7058 is prescribed at DFARS 225.7021-
5(b) for use in solicitations and contracts with an estimated value in 
excess of $5 million unless a waiver has been granted. Section 855 of 
the NDAA for FY 2022 applies to covered contracts valued in excess of 
$5 million, excluding contracts for commercial products or commercial 
services. Therefore, DoD is not applying the rule to contracts at or 
below the SAT or to contracts for the acquisition of commercial 
services or commercial products, including COTS items.

IV. Expected Impact of the Rule

    The contracting officer will be required to insert the new 
solicitation provision and contract clause in solicitations and 
resulting contracts with a value in excess of $5 million, excluding 
contracts for commercial items. Contractors will be required to include 
the clause in subcontracts with a value in excess of $5 million, 
excluding subcontracts for commercial items. The offeror's preaward 
disclosure is required when the offeror that is a covered entity 
submits a proposal in response to a solicitation for a covered 
contract. The solicitation provision requires the offeror to disclose 
their proposed use of workforce and facilities in the People's Republic 
of China, if the offeror employs one or more individuals who will 
perform work in the People's Republic of China on a covered contract.
    The contractor's postaward disclosure is also required for fiscal 
years 2023 and 2024, to disclose if the contractor that is a covered 
entity employs one or more individuals who perform work in the People's 
Republic of China on a covered contract. The disclosure must include 
the total number of individuals who will perform work in the People's 
Republic of China on the contract; and a description of the exact 
street location of the physical presence in China where the work on the 
contract will be performed. The postaward disclosure requirements will 
flow down to subcontracts that meet the definition of ``covered 
contract.''
    In order to provide the disclosures, offerors, contractors, and 
subcontractors will need to maintain records of the information 
required for the disclosures, ensuring that the information is 
available when needed.

V. 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.

VI. Congressional Review Act

    As required by the Congressional Review Act (5 U.S.C. 801-808) 
before an interim or final rule takes effect, DoD will submit a copy of 
the interim or final rule with the form, Submission of Federal Rules 
under the Congressional Review Act, to the U.S. Senate, the U.S. House 
of Representatives, and the Comptroller General of the United States. A 
major rule under the Congressional Review Act cannot take effect until 
60 days after it is published in the Federal Register. The Office of 
Information and Regulatory Affairs has determined that this rule is not 
a major rule as defined by 5 U.S.C. 804.

VII. 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., 
because data analysis revealed no impacted small entities. However, an 
initial regulatory flexibility analysis has been performed and is 
summarized as follows:
    This rule is required to implement section 855 of the National 
Defense Authorization Act (NDAA) for Fiscal Year 2022 (Pub. L. 117-81, 
10 U.S.C. 4651 note prec.).
    The objective of the rule is implement section 855 of the NDAA for 
FY 2022 to require offerors when submitting a proposal for a covered 
contract to disclose their use of workforce and facilities in the 
People's Republic of China, if they employ one or more individuals who 
will perform work in the People's Republic of China, unless a national 
security waiver has been granted. A national security waiver may be 
granted if a determination is made that such disclosure would not be in 
the interest of national security. Recurring disclosures are required 
following contract award for contractors that are covered entities for 
fiscal years 2023 and 2024. The initial and recurring disclosures must 
include the total number of individuals who will perform work in the 
People's Republic of China on the covered contracts and a description 
of the physical presence of the facility, including the street address, 
where work on the covered contract will be performed.
    Data from the Federal Procurement Data System (FPDS) was analyzed 
for fiscal years 2019, 2020, and 2021, purchases of supplies or end 
products and services for which the place of manufacture, place of 
performance, or country of the product's origin is China; with a value 
above $5 million; and excluding commercial items and commercially 
available off-the-shelf (COTS) items. The FPDS data revealed no awards 
that met these criteria.
    In addition, a data analysis was performed on the North Atlantic 
Treaty Organization (NATO) Commercial and Government Entity (NCAGE) 
codes from the NATO Support and Procurement Agency for entities located 
in the

[[Page 52341]]

People's Republic of China, including Hong Kong. This review revealed a 
total of 5,143 entities. There were 4,706 entities in the People's 
Republic of China with NCAGE codes, and 437 entities in Hong Kong with 
NCAGE codes. This list of NCAGE codes was compared to any People's 
Republic of China or Hong Kong NCAGE codes from the FPDS data results 
for a list of contract awards in fiscal years 2019, 2020, and 2021. 
Similarly, there were no contract awards to any unique entities or 
small entities meeting the criteria.
    There are projected reporting or recordkeeping requirements, and 
there may be costs to ensure compliance. The contractor's postaward 
disclosure is required for fiscal years 2023 and 2024, if the 
contractor that is a covered entity employs one or more individuals who 
perform work in the People's Republic of China on a covered contract. 
The disclosure must include the total number of individuals who will 
perform work in the People's Republic of China on the contract and a 
description of the exact street location of the physical presence in 
China where the work on the contract will be performed.
    The rule does not duplicate, overlap, or conflict with any other 
Federal rules.
    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 2022-D010), in 
correspondence.

VIII. Paperwork Reduction Act

    This rule contains 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). This information collection 
requirement has been assigned OMB Control Number 0750-0005, entitled 
Defense Federal Acquisition Regulation Supplement (DFARS), Disclosure 
of Employment of Individuals Who Work in the People's Republic of 
China. The DFARS rule adds preaward and postaward disclosure 
requirements.

A. Estimate of Public Reporting Burden

    Public reporting burden for this collection of information is 
estimated to average approximately 1 hour per response, including the 
time for reviewing instructions, searching existing data sources, 
gathering and maintaining the data needed, and completing and reviewing 
the collection of information.
    The annual reporting burden estimated as follows:
    Respondents: 30.
    Responses per respondent: approximately 1.6.
    Total annual responses: 50.
    Preparation hours per response: 1.
    Total response burden hours: 50.

B. Request for Comments Regarding Paperwork Burden

    Written comments and recommendations on the proposed information 
collection, including suggestions for reducing this burden, should be 
sent to Ms. Susan Minson at the Office of Management and Budget, Desk 
Officer for DoD, Room 10236, New Executive Office Building, Washington, 
DC 20503, or email [email protected], with a copy to the 
Defense Acquisition Regulations System, Attn: Ms. Kimberly Bass, at 
[email protected]. Comments can be received from 30 to 60 days after 
the date of this notice, but comments to OMB will be most useful if 
received by OMB within 30 days after the date of this notice.
    Public comments are particularly invited on: whether this 
collection of information is necessary for the proper performance of 
functions of the DFARS, and will have practical utility; whether our 
estimate of the public burden of this collection of information is 
accurate, and based on valid assumptions and methodology; ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and ways in which we can minimize the burden of the 
collection of information on those who are to respond, through the use 
of appropriate technological collection techniques or other forms of 
information technology.
    To request more information on this proposed information collection 
or to obtain a copy of the proposal and associated collection 
instruments, please contact Defense Acquisition Regulations System, 
Attn: Ms. Kimberly Bass, via email at [email protected]. Include DFARS 
Case 2022-D010 in the subject line of the message.

IX. 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. 
Implementation of the disclosure requirements is urgent, because 
section 855 of the NDAA for FY 2022 requires DoD to collect preaward 
disclosures beginning in FY 2022 and postaward disclosures beginning in 
FY 2023. The disclosures are necessary to mitigate the risk associated 
with performance of DoD contracts and subcontracts at facilities 
located in the People's Republic of China. Performance of a contract, 
whether classified or unclassified, in a nation that is not our ally 
may provide opportunities for that nation to gather sensitive 
information. It is a matter of national security to be aware of the 
entities, contracts, and subcontracts that are exposed to such risks, 
so that mitigation strategies can be implemented. However, pursuant to 
41 U.S.C. 1707 and Federal Acquisition Regulation 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 D. Johnson,
Editor/Publisher, 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 212.503 by revising paragraph (a)(ix) to read as 
follows:


212.503  Applicability of certain laws to executive agency contracts 
for the acquisition of commercial items.

    (a) * * *
    (ix) 10 U.S.C. 4651, note prec. (section 855, Pub. L. 117-81), 
Employment Transparency Regarding Individuals Who Perform Work in the 
People's Republic of China.
* * * * *

0
3. Amend section 212.504 by--
0
a. Redesignating paragraphs (a)(xvi) and (xvii) as paragraphs (a)(xvii) 
and (xviii); and
0
b. Adding a new paragraph (a)(xvi) to read as follows:


212.504  Applicability of certain laws to subcontracts for the 
acquisition of commercial items.

    (a) * * *
    (xvi) 10 U.S.C. 4651, note prec. (section 855, Pub. L. 117-81),

[[Page 52342]]

Employment Transparency Regarding Individuals Who Perform Work in the 
People's Republic of China.
* * * * *

PART 225--FOREIGN ACQUISITION

0
4. Add sections 225.7021, 225.7021-1, 225.7021-2, 225.7021-3, and 
225.7021-4 to subpart 225.70 to read as follows:
* * * * *
Sec.
225.7021 Disclosure requirements for employment transparency 
regarding individuals who perform work in the People's Republic of 
China.
225.7021-1 Definitions.
225.7021-2 Restrictions.
225.7021-3 National security waiver of disclosure.
225.7021-4 Solicitation provision and contract clause.
* * * * *


225.7021  Disclosure requirements for employment transparency regarding 
individuals who perform work in the People's Republic of China.

    See PGI 225.7021 for additional procedures regarding disclosures.


225.7021-1  Definitions.

    As used in this section--
    Covered contract means any DoD contract or subcontract with a value 
in excess of $5 million, not including contracts for commercial items.
    Covered entity means any corporation, company, limited liability 
company, limited partnership, business trust, business association, or 
other similar entity, including any subsidiary thereof, performing work 
on a covered contract in the People's Republic of China, including by 
leasing or owning real property used in the performance of the covered 
contract in the People's Republic of China.


225.7021-2   Restrictions.

    In accordance with section 855 of the National Defense 
Authorization Act for Fiscal Year 2022 (Pub. L. 117-81, 10 U.S.C. 4651 
note prec.), do not award, extend, or exercise an option on a covered 
contract unless a covered entity has submitted each required 
disclosure.


225.7021-3  National security waiver of disclosure.

    The senior procurement executive (SPE) may waive the disclosure 
requirements at 225.7021-2 if the SPE determines in writing that such 
disclosure would not be in the national security interests of the 
United States. This authority may not be delegated. See PGI 225.7021-3 
for procedures and content requirements regarding the SPE's written 
determination.


225.7021-4   Solicitation provision and contract clause.

    (a) Use the provision at 252.225-7057, Preaward Disclosure of 
Employment of Individuals Who Work in the People's Republic of China, 
in solicitations that include the clause at 252.225-7058.
    (b) Unless a waiver has been granted, use the clause at 252.225-
7058, Postaward Disclosure of Employment of Individuals Who Work in the 
People's Republic of China, in solicitations and contracts with an 
estimated value in excess of $5 million.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
5. Add sections 252.225-7057 and 252.225-7058 to read as follows:


252.225-7057   Preaward Disclosure of Employment of Individuals Who 
Work in the People's Republic of China.

    As prescribed in 225.7021-4(a), use the following provision:

Preaward Disclosure of Employment of Individuals Who Work in the 
People's Republic of China (Aug 2022)

    (a) Definitions. As used in this provision--
    Covered contract and covered entity have the meaning given in 
the clause 252.225-7058, Postaward Disclosure of Employment of 
Individuals Who Work in the People's Republic of China.
    (b) Prohibition on award. In accordance with section 855 of the 
National Defense Authorization Act for Fiscal Year 2022 (Pub. L. 
117-81, 10 U.S.C. 4651 note prec.), DoD may not award a contract to 
the Offeror if it is a covered entity and proposes to employ one or 
more individuals who will perform work in the People's Republic of 
China on a covered contract, unless the Offeror has disclosed its 
use of workforce and facilities in the People's Republic of China.
    (c) Preaward disclosure requirement. At the time of submission 
of an offer for a covered contract, an Offeror that is a covered 
entity shall provide disclosures to include--
    (1) The proposed use of workforce on a covered contract or 
subcontract, if the Offeror employs one or more individuals who 
perform work in the People's Republic of China;
    (2) The total number of such individuals who will perform work 
in the People's Republic of China; and
    (3) A description of the physical presence, including street 
address or addresses, in the People's Republic of China, where work 
on the covered contract will be performed.

(End of provision)

252.225-7058  Postaward Disclosure of Employment of Individuals Who 
Work in the People's Republic of China.

    As prescribed in 225.7021-4(b), use the following clause:

Postaward Disclosure of Employment of Individuals Who Work in The 
People's Republic of China (Aug 2022)

    (a) Definitions. As used in this clause--
    Covered contract means any DoD contract or subcontract with a 
value in excess of $5 million, not including contracts for 
commercial items.
    Covered entity means any corporation, company, limited liability 
company, limited partnership, business trust, business association, 
or other similar entity, including any subsidiary thereof, 
performing work on a covered contract in the People's Republic of 
China, including by leasing or owning real property used in the 
performance of the covered contract in the People's Republic of 
China.
    (b) Disclosure requirement. (1) In accordance with section 855 
of the National Defense Authorization Act for Fiscal Year 2022 (Pub. 
L. 117-81, 10 U.S.C. 4651 note prec.), DoD may not award, extend, or 
exercise an option on a covered contract with a covered entity 
unless such covered entity submits each required disclosure of its 
use of workforce and facilities in the People's Republic of China, 
if it employs one or more individuals who perform work in the 
People's Republic of China on a covered contract.
    (2) If the Contractor is a covered entity, the Contractor shall 
disclose for the Government's fiscal years 2023 and 2024, the 
Contractor's employment of one or more individuals who perform work 
in the People's Republic of China on any covered contract. The 
disclosures shall include--
    (i) The total number of such individuals who perform work in the 
People's Republic of China on the covered contracts funded by DoD; 
and
    (ii) A description of the physical presence, including street 
address or addresses in the People's Republic of China, where work 
on the covered contract is performed.
    (c) Subcontracts. The Contractor shall insert this clause, 
including this paragraph (c), without alteration other than to 
identify the appropriate parties, in all subcontracts that meet the 
definition of a covered contract.


(End of clause)

[FR Doc. 2022-18226 Filed 8-24-22; 8:45 am]
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