Defense Federal Acquisition Regulation Supplement: Reporting Tax Information on Certain Foreign Procurements (DFARS Case 2021-D029), 65515-65518 [2022-23282]
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Federal Register / Vol. 87, No. 208 / Friday, October 28, 2022 / Rules and Regulations
17446 on March 28, 2014. Since the
pilot program expired on December 31,
2019, the program is being removed
from the DFARS. No contracts were
awarded as a result of this pilot
program.
II. Publication of This Final Rule for
Public Comment Is Not Required by
Statute
The statute that applies to the
publication of the Federal Acquisition
Regulation (FAR) is 41 U.S.C. 1707,
Publication of Proposed Regulations.
Subsection (a)(1) of the statute requires
that a procurement policy, regulation,
procedure, or form (including an
amendment or modification thereof)
must be published for public comment
if it relates to the expenditure of
appropriated funds and has either a
significant effect beyond the internal
operating procedures of the agency
issuing the policy, regulation,
procedure, or form, or has a significant
cost or administrative impact on
contractors or offerors. This final rule is
not required to be published for public
comment because it merely removes
obsolete text from the DFARS for a pilot
program that did not result in the award
of any contracts by DoD; therefore, this
final rule does not impact the
Government, contractors, or offerors.
lotter on DSK11XQN23PROD with RULES4
III. Applicability to Contracts at or
Below the Simplified Acquisition
Threshold, for Commercial Products
Including Commercially Available Offthe-Shelf Items, and for Commercial
Services
This rule does not create any new
solicitation provisions or contract
clauses. Although this rule removes the
provision at DFARS 252.212–7002, Pilot
Program for Acquisition of Military
Purpose Nondevelopmental Items, it
does not impact any other existing
solicitation provisions, contract clauses,
or prescriptions for the use of
solicitation provisions or contract
clauses.
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 not a significant
regulatory action and, therefore, was not
VerDate Sep<11>2014
21:00 Oct 27, 2022
Jkt 256001
subject to review under Section 6(b) of
E.O. 12866, Regulatory Planning and
Review, dated September 30, 1993.
PART 252—SOLICITATION
PROVISIONS AND CONTRACT
CLAUSES
V. Congressional Review Act
252.212–7002
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.
■
VI. Regulatory Flexibility Act
The Regulatory Flexibility Act does
not apply to this rule because this final
rule does not constitute a significant
DFARS revision within the meaning of
FAR 1.501–1, and 41 U.S.C. 1707 does
not require publication for public
comment.
VII. Paperwork Reduction Act
This proposed 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 and
252
Government procurement.
Jennifer D. Johnson,
Editor/Publisher, Defense Acquisition
Regulations System.
Therefore, 48 CFR parts 212 and 252
are amended as follows:
1. The authority citation for 48 CFR
parts 212 and 252 continues to read as
follows:
■
Authority: 41 U.S.C. 1303 and 48 CFR
chapter 1.
PART 212—ACQUISITION OF
COMMERCIAL ITEMS
Subpart 212.71 [Removed and
Reserved]
2. Remove and reserve subpart 212.71,
consisting of sections 212.7100,
212.7101, 212.7102, 212.7102–1 through
212.7102–3, and 212.7103.
■
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65515
[Removed and Reserved]
3. Remove and reserve section
252.212–7002.
[FR Doc. 2022–23286 Filed 10–27–22; 8:45 am]
BILLING CODE 5001–06–P
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations
System
48 CFR Parts 212, 213, 229, 232, and
252
[Docket DARS–2022–0014]
RIN 0750–AL51
Defense Federal Acquisition
Regulation Supplement: Reporting Tax
Information on Certain Foreign
Procurements (DFARS Case 2021–
D029)
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 allow for the efficient and
accurate identification of contracts
subject to excise tax withholding. DoD
is also amending the DFARS to prohibit
use of the Governmentwide commercial
purchase card as a method of payment
when the tax on certain foreign
procurements applies. These changes
will promote the efficient
administration of the excise tax.
DATES: Effective October 28, 2022.
FOR FURTHER INFORMATION CONTACT:
David E. Johnson, telephone 202–913–
5764.
SUMMARY:
SUPPLEMENTARY INFORMATION:
I. Background
DoD published a proposed rule in the
Federal Register at 87 FR 37473 on June
23, 2022, to amend the DFARS to
promote the efficient administration of
the two-percent excise tax on specified
Federal procurement payments to
certain foreign persons. Section 301 of
the James Zadroga 9/11 Health and
Compensation Act of 2010 (Pub. L. 111–
347), codified at 26 U.S.C. 5000C,
imposes a two-percent excise tax on
specified Federal procurement
payments to certain foreign persons; it
does not apply to payments to United
States persons. With certain exceptions,
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Federal Register / Vol. 87, No. 208 / Friday, October 28, 2022 / Rules and Regulations
A. Applicability to Contracts for the
Acquisition of Commercial Services and
Commercial Products Including COTS
Items
to administer this tax DoD must
withhold an amount equal to two
percent of the amount of specified
Federal procurement payments.
One respondent submitted a public
comment in response to the proposed
rule.
II. Discussion and Analysis
DoD reviewed the public comment in
the development of the final rule. A
discussion of the comment is provided,
as follows:
A. Summary of Significant Changes
From the Proposed Rule
There are no significant changes made
from the proposed rule.
B. Analysis of Public Comments
Comment: A respondent expressed
support for the rule.
Response: DoD acknowledges the
support.
C. Other Changes
The contract clause at DFARS
252.229–7014, Full Exemption from
Two-Percent Excise Tax on Certain
Foreign Procurements, is added to the
list at DFARS 212.301(f) of clauses that
are applicable to commercial items.
lotter on DSK11XQN23PROD with RULES4
III. Applicability to Contracts at or
Below the Simplified Acquisition
Threshold (SAT) and for Commercial
Services and Commercial Products,
Including Commercially Available Offthe-Shelf (COTS) Items
This rule creates a new DFARS clause
252.229–7014, Full Exemption from
Two-Percent Excise Tax on Certain
Foreign Procurements, to implement
section 301 of the James Zadroga 9/11
Health and Compensation Act of 2010
(Pub. L. 111–347), codified at 26 U.S.C.
5000C. The clause at DFARS 252.229–
7014 is prescribed at DFARS 229.402–
70(k) for use in contracts that include
the clause at Federal Acquisition
Regulation (FAR) 52.229–12, Tax on
Certain Foreign Procurements, for
which the contractor represented in its
offer that it is a foreign person and is
fully exempt from the tax for reasons
cited on their Internal Revenue Service
(IRS) Form W–14. FAR 52.229–12 is
used when FAR 52.229–11, Tax on
Certain Foreign Procurements—Notice
and Representation, is used; and FAR
52.229–11 does not apply to
acquisitions that do not exceed the SAT.
Accordingly, DoD is not applying the
rule to acquisitions at or below the SAT
but is applying the rule to the
acquisition of commercial services and
commercial products, including COTS
items.
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21:00 Oct 27, 2022
Jkt 256001
10 U.S.C. 2375 (redesignated as 10
U.S.C. 3452) exempts contracts and
subcontracts for the acquisition of
commercial products, including COTS
items, and commercial services from
provisions of law enacted after October
13, 1994, unless the Under Secretary of
Defense for Acquisition and
Sustainment (USD(A&S)) makes a
written determination that it would not
be in the best interest of DoD to exempt
contracts for the procurement of
commercial products and commercial
services from the applicability of the
provision or contract requirement,
except for a provision of law that—
• Provides for criminal or civil
penalties;
• Requires that certain articles be
bought from American sources pursuant
to 10 U.S.C. 2533c (redesignated as 10
U.S.C. 4862), or that strategic materials
critical to national security be bought
from American sources pursuant to 10
U.S.C. 2533b (redesignated as 10 U.S.C.
4863); or
• Specifically refers to 10 U.S.C. 2375
and states that it shall apply to contracts
and subcontracts for the acquisition of
commercial items (including COTS
items) and commercial services; or
• USD (A&S) determines in writing
that it would not be in the best interest
of the Government to exempt contracts
or subcontracts for the acquisition of
commercial items from the applicability
of the provision or contract clause
requirement.
Section 301 of the James Zadroga 9/
11 Health and Compensation Act of
2010 (Pub. L. 111–347), codified at 26
U.S.C. 5000C and implemented by this
rule, does not impose criminal or civil
penalties; does not require purchase
pursuant to 10 U.S.C. 2533b or 2533c;
and does not refer to 10 U.S.C. 2375.
Section 301 will not apply to the
acquisition of commercial products
including COTS items or to the
acquisition of commercial services
unless a written determination is made.
Due to delegations of authority from
USD(A&S), the Principal Director, DPC,
is the appropriate authority to make the
written determination. DoD has made
that determination to apply this rule to
the acquisition of commercial products
including COTS items and to the
acquisition of commercial services, if
otherwise applicable.
B. Determination
The clause at 252.229–7014 is
intended to provide a simple and
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Fmt 4701
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efficient way for contracting officers to
alert the DoD payment systems and
networks that a contractor claimed a full
exemption from the two-percent excise
tax in its offer, thereby preventing
erroneous withholding of the tax. Not
applying the clause to contracts for the
acquisition of commercial services and
commercial products, including COTS
items, would exclude contracts
intended to be covered by this rule and
undermine the overarching purpose of
the rule. Consequently, DoD is applying
the rule to contracts for the acquisition
of commercial services and commercial
products, including COTS items.
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 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.
V. 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.
VI. Regulatory Flexibility Act
A final regulatory flexibility analysis
has been prepared consistent with the
Regulatory Flexibility Act, 5 U.S.C. 601,
et seq. and is summarized as follows:
This rule is intended to promote
efficient administration of the twopercent excise tax on specified Federal
procurement payments to certain
foreign persons. The rule prescribes
inclusion of a new DFARS clause in
contracts when the tax on certain
foreign procurements applies and the
contractor claimed a full exemption
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Federal Register / Vol. 87, No. 208 / Friday, October 28, 2022 / Rules and Regulations
from the tax. In addition, the rule
prohibits use of the Governmentwide
commercial purchase card as a method
of payment when the tax on certain
foreign procurements applies and the
contractor did not claim a full
exemption.
DoD received no comments in
response to the initial regulatory
flexibility analysis.
The rule applies to Federal
Government contracts that include FAR
52.229–12, that are valued over
$250,000, and that are awarded to
foreign persons for goods or services, if
the goods are manufactured or produced
or the services are provided in any
country that is not a party to an
international procurement agreement
with the United States (see FAR 25.003
for the definitions of ‘‘World Trade
Organization Government Procurement
Agreement (WTO GPA) country’’ and
‘‘Free Trade Agreement country’’). Data
for fiscal year 2021 was obtained from
the Federal Procurement Data System
for contract awards reflecting these
criteria. There were 123 total awards;
117 were awarded to 56 unique large
foreign entities and 6 were awarded to
4 unique small foreign entities for a total
of 50 unique foreign entities.
Accordingly, the final rule is not
expected to have a significant impact on
small entities based in the United
States.
This rule imposes no reporting,
recordkeeping, and other compliance
requirements.
There are no known available
alternatives to accomplish the desired
objective of the statute.
VII. Paperwork Reduction Act
The Paperwork Reduction Act (44
U.S.C. chapter 35) applies to this rule.
However, these changes to the DFARS
do not impose additional information
collection requirements to the
paperwork burden previously approved
under OMB Control Number 1545–2263,
titled Tax on Certain Foreign
Procurement.
Government procurement.
lotter on DSK11XQN23PROD with RULES4
Jennifer D. Johnson,
Editor/Publisher, Defense Acquisition
Regulations System.
Therefore, 48 CFR parts 212, 213, 229,
232, and 252 are amended as follows:
■ 1. The authority citation for 48 CFR
parts 212, 213, 229, 232, and 252
continues to read as follows:
Authority: 41 U.S.C. 1303 and 48 CFR
chapter 1.
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21:00 Oct 27, 2022
Jkt 256001
5. Amend section 229.402–70 by
adding paragraph (k) to read as follows:
PART 212—ACQUISITION OF
COMMERCIAL ITEMS
■
2. Amend section 212.301 by—
a. Redesignating paragraphs (f)(xiii)
through (f)(xix) as paragraphs (f)(xiv)
through (f)(xx); and
■ b. Adding new paragraph (f)(xiii).
The addition reads as follows:
229.402–70
clauses.
■
■
212.301 Solicitation provisions and
contract clauses for the acquisition of
commercial items.
*
*
*
*
*
(f) * * *
(xiii) Part 229—Taxes. Use the clause
at 252.229–7014, Full Exemption from
Two-Percent Excise Tax on Certain
Foreign Procurements, as prescribed at
229.402–70, to comply with 26 U.S.C.
5000C.
*
*
*
*
*
PART 213—SIMPLIFIED ACQUISITION
PROCEDURES
3. Amend section 213.301 by
redesignating paragraph (4) as paragraph
(5) and adding a new paragraph (4).
The addition reads as follows:
■
213.301 Governmentwide commercial
purchase card.
*
*
*
*
*
(4) The contracting officer shall not
authorize the Governmentwide
commercial purchase card as a method
of payment during any contract period
of performance if the contract includes
the clause at FAR 52.229–12, Tax on
Certain Foreign Procurements, unless
the contract also includes the clause at
252.229–7014, Full Exemption from
Two-Percent Excise Tax on Certain
Foreign Procurements, indicating that
the contractor is fully exempt from the
tax.
*
*
*
*
*
PART 229—TAXES
4. Add subpart 229.2, consisting of
section 229.204, to read as follows:
■
Subpart 229.2—Federal Excise Taxes
229.204 Federal excise tax on specific
foreign contract payments.
List of Subjects in 48 CFR Parts 212,
213, 229, 232, and 252
The contracting officer shall not
authorize the Governmentwide
commercial purchase card as a method
of payment during any contract period
of performance if the contract includes
the clause at FAR 52.229–12, Tax on
Certain Foreign Procurements, unless
the contract also includes the clause at
252.229–7014, Full Exemption from
Two-Percent Excise Tax on Certain
Foreign Procurements, indicating that
the contractor is fully exempt from the
tax.
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65517
Additional provisions and
*
*
*
*
*
(k) Use the clause at 252.229–7014,
Full Exemption from Two-Percent
Excise Tax on Certain Foreign
Procurements, in contracts that include
the clause at FAR 52.229–12, Tax on
Certain Foreign Procurements, when the
contractor has—
(1) Represented that it is a foreign
person in response to the provision at
FAR 52.229–11, Tax on Certain Foreign
Procurements—Notice and
Representation; and
(2) Indicated that it is fully exempt
from the tax for reasons cited on their
IRS Form W–14, Certificate of Foreign
Contracting Party Receiving Federal
Procurement Payments.
PART 232—CONTRACT FINANCING
6. Add sections 232.1108 and
232.1108–70 to subpart 232.11 to read
as follows:
■
232.1108 Payment by Governmentwide
commercial purchase card.
232.1108–70 Prohibition of
Governmentwide commercial purchase
card as a method of payment when the tax
on certain foreign procurements applies.
The contracting officer shall not
authorize the Governmentwide
commercial purchase card as a method
of payment during any contract period
of performance if the contract includes
the clause at FAR 52.229–12, Tax on
Certain Foreign Procurements, unless
the contract also includes the clause at
252.229–7014, Full Exemption from
Two-Percent Excise Tax on Certain
Foreign Procurements, indicating that
the contractor is fully exempt from the
tax.
PART 252—SOLICITATION
PROVISIONS AND CONTRACT
CLAUSES
7. Add section 252.229–7014 to read
as follows:
■
252.229–7014 Full Exemption from TwoPercent Excise Tax on Certain Foreign
Procurements.
As prescribed in 229.402–70(k), use
the following clause:
Full Exemption From Two-Percent
Excise Tax on Certain Foreign
Procurements (OCT 2022)
(a) As the Contractor represented in its
offer, any item, including any item delivered
under subcontract; any service; or any
combination thereof delivered under this
contract is fully exempt from the 2-percent
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Federal Register / Vol. 87, No. 208 / Friday, October 28, 2022 / Rules and Regulations
lotter on DSK11XQN23PROD with RULES4
excise tax withholding imposed by 26 U.S.C.
5000C and implemented by Federal
Acquisition Regulation (FAR) 52.229–12, Tax
on Certain Foreign Procurements.
(b) If the full exemption no longer applies
due to a change in circumstances during the
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21:00 Oct 27, 2022
Jkt 256001
performance of the contract, causing the
Contractor to become subject to the
withholding for the 2-percent excise tax as
imposed by 26 U.S.C. 5000C, then the
Contractor shall immediately comply with
PO 00000
the notification and billing requirements of
FAR clause 52.229–12.
(End of clause)
[FR Doc. 2022–23282 Filed 10–27–22; 8:45 am]
BILLING CODE 5001–06–P
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]]>Agencies
[Federal Register Volume 87, Number 208 (Friday, October 28, 2022)]
[Rules and Regulations]
[Pages 65515-65518]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-23282]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 212, 213, 229, 232, and 252
[Docket DARS-2022-0014]
RIN 0750-AL51
Defense Federal Acquisition Regulation Supplement: Reporting Tax
Information on Certain Foreign Procurements (DFARS Case 2021-D029)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: DoD is issuing a final rule amending the Defense Federal
Acquisition Regulation Supplement (DFARS) to allow for the efficient
and accurate identification of contracts subject to excise tax
withholding. DoD is also amending the DFARS to prohibit use of the
Governmentwide commercial purchase card as a method of payment when the
tax on certain foreign procurements applies. These changes will promote
the efficient administration of the excise tax.
DATES: Effective October 28, 2022.
FOR FURTHER INFORMATION CONTACT: David E. Johnson, telephone 202-913-
5764.
SUPPLEMENTARY INFORMATION:
I. Background
DoD published a proposed rule in the Federal Register at 87 FR
37473 on June 23, 2022, to amend the DFARS to promote the efficient
administration of the two-percent excise tax on specified Federal
procurement payments to certain foreign persons. Section 301 of the
James Zadroga 9/11 Health and Compensation Act of 2010 (Pub. L. 111-
347), codified at 26 U.S.C. 5000C, imposes a two-percent excise tax on
specified Federal procurement payments to certain foreign persons; it
does not apply to payments to United States persons. With certain
exceptions,
[[Page 65516]]
to administer this tax DoD must withhold an amount equal to two percent
of the amount of specified Federal procurement payments.
One respondent submitted a public comment in response to the
proposed rule.
II. Discussion and Analysis
DoD reviewed the public comment in the development of the final
rule. A discussion of the comment is provided, as follows:
A. Summary of Significant Changes From the Proposed Rule
There are no significant changes made from the proposed rule.
B. Analysis of Public Comments
Comment: A respondent expressed support for the rule.
Response: DoD acknowledges the support.
C. Other Changes
The contract clause at DFARS 252.229-7014, Full Exemption from Two-
Percent Excise Tax on Certain Foreign Procurements, is added to the
list at DFARS 212.301(f) of clauses that are applicable to commercial
items.
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 DFARS clause 252.229-7014, Full Exemption
from Two-Percent Excise Tax on Certain Foreign Procurements, to
implement section 301 of the James Zadroga 9/11 Health and Compensation
Act of 2010 (Pub. L. 111-347), codified at 26 U.S.C. 5000C. The clause
at DFARS 252.229-7014 is prescribed at DFARS 229.402-70(k) for use in
contracts that include the clause at Federal Acquisition Regulation
(FAR) 52.229-12, Tax on Certain Foreign Procurements, for which the
contractor represented in its offer that it is a foreign person and is
fully exempt from the tax for reasons cited on their Internal Revenue
Service (IRS) Form W-14. FAR 52.229-12 is used when FAR 52.229-11, Tax
on Certain Foreign Procurements--Notice and Representation, is used;
and FAR 52.229-11 does not apply to acquisitions that do not exceed the
SAT. Accordingly, DoD is not applying the rule to acquisitions at or
below the SAT but is applying the rule to the acquisition of commercial
services and commercial products, including COTS items.
A. Applicability to Contracts for the Acquisition of Commercial
Services and Commercial Products Including COTS Items
10 U.S.C. 2375 (redesignated as 10 U.S.C. 3452) exempts contracts
and subcontracts for the acquisition of commercial products, including
COTS items, and commercial services from provisions of law enacted
after October 13, 1994, unless the Under Secretary of Defense for
Acquisition and Sustainment (USD(A&S)) makes a written determination
that it would not be in the best interest of DoD to exempt contracts
for the procurement of commercial products and commercial services from
the applicability of the provision or contract requirement, except for
a provision of law that--
Provides for criminal or civil penalties;
Requires that certain articles be bought from American
sources pursuant to 10 U.S.C. 2533c (redesignated as 10 U.S.C. 4862),
or that strategic materials critical to national security be bought
from American sources pursuant to 10 U.S.C. 2533b (redesignated as 10
U.S.C. 4863); or
Specifically refers to 10 U.S.C. 2375 and states that it
shall apply to contracts and subcontracts for the acquisition of
commercial items (including COTS items) and commercial services; or
USD (A&S) determines in writing that it would not be in
the best interest of the Government to exempt contracts or subcontracts
for the acquisition of commercial items from the applicability of the
provision or contract clause requirement.
Section 301 of the James Zadroga 9/11 Health and Compensation Act
of 2010 (Pub. L. 111-347), codified at 26 U.S.C. 5000C and implemented
by this rule, does not impose criminal or civil penalties; does not
require purchase pursuant to 10 U.S.C. 2533b or 2533c; and does not
refer to 10 U.S.C. 2375. Section 301 will not apply to the acquisition
of commercial products including COTS items or to the acquisition of
commercial services unless a written determination is made. Due to
delegations of authority from USD(A&S), the Principal Director, DPC, is
the appropriate authority to make the written determination. DoD has
made that determination to apply this rule to the acquisition of
commercial products including COTS items and to the acquisition of
commercial services, if otherwise applicable.
B. Determination
The clause at 252.229-7014 is intended to provide a simple and
efficient way for contracting officers to alert the DoD payment systems
and networks that a contractor claimed a full exemption from the two-
percent excise tax in its offer, thereby preventing erroneous
withholding of the tax. Not applying the clause to contracts for the
acquisition of commercial services and commercial products, including
COTS items, would exclude contracts intended to be covered by this rule
and undermine the overarching purpose of the rule. Consequently, DoD is
applying the rule to contracts for the acquisition of commercial
services and commercial products, including COTS items.
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 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.
V. 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.
VI. Regulatory Flexibility Act
A final regulatory flexibility analysis has been prepared
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq.
and is summarized as follows:
This rule is intended to promote efficient administration of the
two-percent excise tax on specified Federal procurement payments to
certain foreign persons. The rule prescribes inclusion of a new DFARS
clause in contracts when the tax on certain foreign procurements
applies and the contractor claimed a full exemption
[[Page 65517]]
from the tax. In addition, the rule prohibits use of the Governmentwide
commercial purchase card as a method of payment when the tax on certain
foreign procurements applies and the contractor did not claim a full
exemption.
DoD received no comments in response to the initial regulatory
flexibility analysis.
The rule applies to Federal Government contracts that include FAR
52.229-12, that are valued over $250,000, and that are awarded to
foreign persons for goods or services, if the goods are manufactured or
produced or the services are provided in any country that is not a
party to an international procurement agreement with the United States
(see FAR 25.003 for the definitions of ``World Trade Organization
Government Procurement Agreement (WTO GPA) country'' and ``Free Trade
Agreement country''). Data for fiscal year 2021 was obtained from the
Federal Procurement Data System for contract awards reflecting these
criteria. There were 123 total awards; 117 were awarded to 56 unique
large foreign entities and 6 were awarded to 4 unique small foreign
entities for a total of 50 unique foreign entities. Accordingly, the
final rule is not expected to have a significant impact on small
entities based in the United States.
This rule imposes no reporting, recordkeeping, and other compliance
requirements.
There are no known available alternatives to accomplish the desired
objective of the statute.
VII. Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. chapter 35) applies to this
rule. However, these changes to the DFARS do not impose additional
information collection requirements to the paperwork burden previously
approved under OMB Control Number 1545-2263, titled Tax on Certain
Foreign Procurement.
List of Subjects in 48 CFR Parts 212, 213, 229, 232, and 252
Government procurement.
Jennifer D. Johnson,
Editor/Publisher, Defense Acquisition Regulations System.
Therefore, 48 CFR parts 212, 213, 229, 232, and 252 are amended as
follows:
0
1. The authority citation for 48 CFR parts 212, 213, 229, 232, 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--
0
a. Redesignating paragraphs (f)(xiii) through (f)(xix) as paragraphs
(f)(xiv) through (f)(xx); and
0
b. Adding new paragraph (f)(xiii).
The addition reads as follows:
212.301 Solicitation provisions and contract clauses for the
acquisition of commercial items.
* * * * *
(f) * * *
(xiii) Part 229--Taxes. Use the clause at 252.229-7014, Full
Exemption from Two-Percent Excise Tax on Certain Foreign Procurements,
as prescribed at 229.402-70, to comply with 26 U.S.C. 5000C.
* * * * *
PART 213--SIMPLIFIED ACQUISITION PROCEDURES
0
3. Amend section 213.301 by redesignating paragraph (4) as paragraph
(5) and adding a new paragraph (4).
The addition reads as follows:
213.301 Governmentwide commercial purchase card.
* * * * *
(4) The contracting officer shall not authorize the Governmentwide
commercial purchase card as a method of payment during any contract
period of performance if the contract includes the clause at FAR
52.229-12, Tax on Certain Foreign Procurements, unless the contract
also includes the clause at 252.229-7014, Full Exemption from Two-
Percent Excise Tax on Certain Foreign Procurements, indicating that the
contractor is fully exempt from the tax.
* * * * *
PART 229--TAXES
0
4. Add subpart 229.2, consisting of section 229.204, to read as
follows:
Subpart 229.2--Federal Excise Taxes
229.204 Federal excise tax on specific foreign contract payments.
The contracting officer shall not authorize the Governmentwide
commercial purchase card as a method of payment during any contract
period of performance if the contract includes the clause at FAR
52.229-12, Tax on Certain Foreign Procurements, unless the contract
also includes the clause at 252.229-7014, Full Exemption from Two-
Percent Excise Tax on Certain Foreign Procurements, indicating that the
contractor is fully exempt from the tax.
0
5. Amend section 229.402-70 by adding paragraph (k) to read as follows:
229.402-70 Additional provisions and clauses.
* * * * *
(k) Use the clause at 252.229-7014, Full Exemption from Two-Percent
Excise Tax on Certain Foreign Procurements, in contracts that include
the clause at FAR 52.229-12, Tax on Certain Foreign Procurements, when
the contractor has--
(1) Represented that it is a foreign person in response to the
provision at FAR 52.229-11, Tax on Certain Foreign Procurements--Notice
and Representation; and
(2) Indicated that it is fully exempt from the tax for reasons
cited on their IRS Form W-14, Certificate of Foreign Contracting Party
Receiving Federal Procurement Payments.
PART 232--CONTRACT FINANCING
0
6. Add sections 232.1108 and 232.1108-70 to subpart 232.11 to read as
follows:
232.1108 Payment by Governmentwide commercial purchase card.
232.1108-70 Prohibition of Governmentwide commercial purchase card as
a method of payment when the tax on certain foreign procurements
applies.
The contracting officer shall not authorize the Governmentwide
commercial purchase card as a method of payment during any contract
period of performance if the contract includes the clause at FAR
52.229-12, Tax on Certain Foreign Procurements, unless the contract
also includes the clause at 252.229-7014, Full Exemption from Two-
Percent Excise Tax on Certain Foreign Procurements, indicating that the
contractor is fully exempt from the tax.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
7. Add section 252.229-7014 to read as follows:
252.229-7014 Full Exemption from Two-Percent Excise Tax on Certain
Foreign Procurements.
As prescribed in 229.402-70(k), use the following clause:
Full Exemption From Two-Percent Excise Tax on Certain Foreign
Procurements (OCT 2022)
(a) As the Contractor represented in its offer, any item,
including any item delivered under subcontract; any service; or any
combination thereof delivered under this contract is fully exempt
from the 2-percent
[[Page 65518]]
excise tax withholding imposed by 26 U.S.C. 5000C and implemented by
Federal Acquisition Regulation (FAR) 52.229-12, Tax on Certain
Foreign Procurements.
(b) If the full exemption no longer applies due to a change in
circumstances during the performance of the contract, causing the
Contractor to become subject to the withholding for the 2-percent
excise tax as imposed by 26 U.S.C. 5000C, then the Contractor shall
immediately comply with the notification and billing requirements of
FAR clause 52.229-12.
(End of clause)
[FR Doc. 2022-23282 Filed 10-27-22; 8:45 am]
BILLING CODE 5001-06-P
