Restrictions on Specialty Metals (10 U.S.C. 2533b)

1.   Berry Amendment 10 U.S.C. 2533a, Contracts Awarded Prior to December 6, 2006

              Prior to the John Warner National Defense Authorization Act for Fiscal Year 2007 (Publication 109-364), the specialty metals restriction existed in 10 U.S.C. 2533a. On February 17, 2006, DCMA issued an interim instruction addressing the process for conditional acceptance of items containing noncompliant parts. A revision was issued on March 10, 2006. This was followed by additional guidance on June 1, 2006 from the Director, Defense Pricing and Contracting (DPC). This guidance aligned with the DCMA instruction, and explained that contracting officers could use conditional acceptance and withholding of payment as a method for accepting needed equipment, however, compliance plans would be required in such circumstances. On August 18, 2006, the Director, DPC issued a memorandum which stressed the importance of addressing contractor compliance with the specialty metals restriction in the Berry Amendment (10 U.S.C. 2533a) prior to award of contracts in order to ensure compliance. This memo stated that the contracting officer should inquire and verify that the contractor will deliver compliant items. Last, on September 21, 2006, the Director, DPC provided additional pre-award guidance.

2.   Contracts Awarded Between December 6, 2006 and October 25, 2007

              On December 6, 2006, Director, DPC issued Class Deviation 2006-O0004, Restriction on Procurement of Specialty Metals. This Class Deviation addressed changes made by section 842 of the John Warner National Defense Authorization Act for Fiscal Year 2007 (Public Law 109-364), entitled “Protection of Strategic Materials Critical to National Security”. This new law was effective on October 17, 2006 and included a de minimis exception for commercially available electronic components and a one-time waiver authority under certain circumstances. For any contract awarded after October 17, 2006, the Department can no longer continue the practice of withholding payment while conditionally accepting noncompliant end items or components or covered items.

3.   Contracts Awarded Between October 26, 2007 and January 28, 2008

              Contracts issued during this period fall under Class Deviation 2007-O0011, Waiver of Specialty Metals Restriction for Acquisition of COTS Items. This Class Deviation superseded the attachment to Class Deviation 2007-O0004, and listed 10 U.S.C. 2533b(a)(1) as a statute that is inapplicable to the acquisition of COTS items, in accordance with 41 U.S.C. 431. The Class Deviation was followed by Federal Register publication of a final rule on November 8, 2007, under DFARS Case 2007-D013, Waiver of Specialty Metals Restriction for Acquisition of Commercially Available Off-the-Shelf Items. Contracts awarded between October 26, 2007 and January 28, 2008, can continue to rely on Class Deviation 2007-O0011, however, new procurement actions under those contracts must follow the policy on specialty metals in place at the time of award.

4.   Contracts Awarded As of January 29, 2008

              Contracts awarded as of January 29, 2008 fall under Class Deviation 2008-O0002, Implementation of New Specialty Metals Restrictions. Class Deviation 2008-O0002 supersedes Class Deviations 2006-O0004 and 2007-O0011 and implemented sections 804 and 884 of the FY 2008 NDAA, as well as section 842 of the FY 2007 NDAA. Class Deviation 2008-O0002 incorporated several new statutory flexibilities, including an expanded electronic component exception, a commercial derivative military articles exception, a COTS exception with restrictions, and a de minimis exception.

5.   Broad Class DNADs Expired for Contracts Awarded after January 26, 2008

              The Fastener DNAD, along with three other broad DNADs approved by the Under Secretary of Defense (Acquisition, Technology, and Logistics) expired for use on new contracts after July 26, 2008.

6.   DFARS Final Rule 2008-D003, published July 29, 2009

              Section 842 of the National Defense Authorization Act for Fiscal Year 2007 (Pub. L. 109–364) added new provisions at 10 U.S.C. 2533b, to address requirements for the purchase of specialty metals from domestic sources. Section 804 of the National Defense Authorization Act for Fiscal Year 2008 (Pub. L. 110–181) made amendments to 10 U.S.C. 2533b with regard to its applicability to commercial items. Effective July 29, 2009, DoD issued a final rule implementing Section 842 of the National Defense Authorization Act for Fiscal Year 2007 and Sections 804 and 884 of the National Defense Authorization Act for Fiscal Year 2008.

              The DFARS final rule implemented the following prohibition and required that prime contractors must flow down the clause to subcontractors to comply with the requirements imposed by the Government in the contract.

(a) Do not acquire the following items, or any components of the following items, unless any specialty metals contained in the items or components are melted or produced in the United States (also see guidance at PGI 225.7003–2(a)):

  1. Aircraft.
  2. Missile or space systems.
  3. Ships.
  4. Tank or automotive items.
  5. Weapon systems.
  6. Ammunition.

(b) Do not acquire a specialty metal (e.g., raw stock, including bar, billet, slab, wire, plate, and sheet; castings; and forgings) as an end item, unless the specialty metal is melted or produced in the United States. This restriction applies to specialty metal acquired by a contractor for delivery to DoD as an end item, in addition to specialty metal acquired by DoD directly from the entity that melted or produced the specialty metal.

Acquisitions in the following categories are not subject to the restrictions in 225.7003–2:

  1. Acquisitions at or below the simplified acquisition threshold.
  2. Acquisitions outside the United States in support of combat operations.
  3. Acquisitions in support of contingency operations.
  4. Acquisitions for which the use of other than competitive procedures has been approved on the basis of unusual and compelling urgency in accordance with FAR 6.302–2.
  5. Acquisitions of items specifically for commissary resale.
  6. Acquisitions of items for test and evaluation under the foreign comparative testing program (10 U.S.C. 2350a(g)). However, this exception does not apply to any acquisitions under follow-on production contracts.

(b) One or more of the following exceptions may apply to an end item or component that includes any of the following, under a prime contract or subcontract at any tier. The restrictions in 225.7003-2 do not apply to the following:

Electronic components;

Commercial Off The Shelf (COTS) items

Fasteners

Items manufactured in a Qualifying County;

End items containing a minimal amount of otherwise noncompliant specialty metal.

Commercial Item fasteners provided that the contractor procures an equal amount from a U.S. manufacturer.

Specialty metal in any of the items listed in 225.7003-2 if the USD(AT&L), or an official authorized in accordance with paragraph (b)(5)(i) of this subsection, 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).

The DFARS rule contains additional exceptions.

Exceptions in DFARS 225.7003-2 do not apply to the following:

(A) Specialty metal mill products, such as bar, billet, slab, wire, plate, and sheet, which have not been incorporated into end items, subsystems, assemblies, or components.

(B) Forgings or castings of specialty metals, unless the forgings or castings are incorporated into COTS end items, subsystems, or assemblies;

(C) Commercially available high performance magnets that contain specialty metal, unless such high performance magnets are incorporated into COTS end items or subsystems (see PGI 225.7003-3(b)(6) for a table of applicability of specialty metals restrictions to magnets); and

(D) COTS fasteners, unless—

              (1)  The fasteners are incorporated into COTS end items, subsystems, or assemblies; or

              (2)  The fasteners qualify for the commercial item exception in paragraph (b)(3) of this subsection

Frequently Asked Questions Regarding the Specialty Metals Restriction

Reporting of Specialty Metals Non-compliances

Once DCMA becomes aware of a specialty metals non-compliance, its occurrence will be verified through DCMA internal processes by acquisition, legal and technical resources. Verified occurrences of specialty metals non-compliances will be communicated and reported to government departments and agencies and to government contractors through the utilization of Government Industry Data Exchange Program (GIDEP) Agency Action Notices (AANs). The Agency Action Notice-Unlimited distribution (AAN-Us) will contain sufficient information such that all recipients will be fully aware of the details of specialty metals non-compliances. AANs distribute problem information issued by a Government department or agency to GIDEP participants who include Government and Government contractor members. Such notices may be restricted to Government only members of GIDEP (Agency Action Notice Limited distribution (AAN-L)) or may be released to all GIDEP participants (AAN-U)).

DCMA will communicate information to Government contractors, describing occurrences of verified specialty metals non-compliances by generating GIDEP AAN-Us. Specialty metals non-compliance AAN-Us will contain non-sensitive information only. Issuing these notices will allow DCMA to inform all Government contractors who participate in the GIDEP.

DCMA workforce personnel will be informed of verified specialty metals non-compliances through the DCMA Forum, which is used to notify individuals of issues of significance that may require risk assessment and surveillance.

Contact the DCMA Headquarters GIDEP Program Manager, Quality Assurance Directorate, for specialty metals non-compliances at (804) 734-0411 or qa.gidep@dcma.mil for more information.

Domestic Non-Availability Determinations (DNADs)

In accordance with DFARS 225.7002-2(b), the secretaries of the military departments, without power of redelegation have authority to approve DNAD Determination and Findings for specialty metals applicable to one contract for their respective requirements.

“Required form” means in the form of mill product, such as bar, billet, wire, slab, plate, or sheet, and in the grade appropriate for the production of specialty metals. DoD notes that, based on the new definition of ‘‘required form’’ provided in Section 804(e), it is more difficult to justify nonavailability of an item such as a fastener, since the nonavailability of the specialty metal itself must be justified. Read more.

National Security Waivers

The Under Secretary of Defense (AT&L) has approved six waivers since the DFARS final rule was published in 2009. With one exception, the waivers were for noncompliant high performance Samarium-Cobalt magnets.

DoD weapons programs affected: F-35, F-16, B-1B Reliability and Maintainability Improvement Program (RMIP), C-130J, AIM-9X, and the SM3-Block IIA missile.

Application of specialty metals restrictions to magnets. See DFARS PGI.

HPM = High performance magnet
COTS = Commercially available off-the-shelf. See DFARS PGI 225.7003-3.

Magnet made of specialty metal is: Commercially available, HPM
NOT Commercially available, HPM COTS, NOT HPM NOT COTS, NOT HPM
ncorporated into COTS assembly or COTS end item NOT restricted * NOT restricted *
NOT incorporated into COTS assembly or COTS end item Restricted Restricted NOT
restricted
Restricted
Included in 2 percent minimum content? Cannot be included in 2 percent minimum content Cannot be included in 2 percent minimum content NOT
restricted
Can be included in 2 percent minimum content

* By definition, COTS assemblies and COTS end items will not include a HPM that is not commercially available or any other magnet that is not COTS.

      (c)  Compliance for commercial derivative military articles. See DFARS PGI 225.7003-3.

              (i)  A department or agency requesting a determination or approval from USD(AT&L) in accordance with DFARS 225.7003-3(c) shall submit the request, including the proposed determination, to—

                          Director, Defense Pricing and Contracting (DPC)
                          ATTN: OUSD(AT&L) DPC/POLICY
                          3060 Defense Pentagon
                          Washington, DC 20301-3060.

              (ii)  The Director, DPC will forward the request to USD(AT&L) as appropriate.

      (d)  National security waiver. See DFARS PGI 225.7003-3.

              (i)  A department or agency shall request a national security waiver from USD(AT&L) in accordance with DFARS 225.7003-3(d) in a timely manner after discovering or being informed of a specialty metals noncompliance in an item, or component thereof, listed at 225.7003-2(a). The department or agency shall submit the request, via the chain of command, including the draft determination and draft letters of notification to the congressional defense committees, as follows:

                          Director, Defense Pricing and Contracting (DPC)
                          ATTN: OUSD(AT&L) DPC/POLICY
                          3060 Defense Pentagon
                          Washington, DC 20301-3060

              (ii)  The request shall include—

                          (A)  The quantity of end items to which the waiver would apply;

                          (B)  The time period that the waiver will cover;

                          (C)  How and when the noncompliance was discovered—

                                (1)  By the subcontractor(s);

                                (2)  By the contractor; and

                                (3)  By the department or agency;

                          (D)  A complete description of all of the items or systems containing noncompliant specialty metals;

                          (E)  The contract number(s), date(s), duration, and subcontractor(s) associated with the noncompliance;

                          (F)  The manufacturer and country of origin of the noncompliant material, if known;

                          (G)  Whether the contractor flowed down the DFARS clause to the subcontractors and in what format (e.g., exact quote or substantially the same?);

                          (H)  A technical description of the affected parts, their role in the larger assembly, and their function in the end item;

                          (I)  Estimated cost and schedule to replace noncompliant parts if a national security waiver is not granted;

                          (J)  Operational and safety implications;

                          (K)  Other national security considerations (such as how the requested waiver will contribute to national security policy or operational security);

                          (L)  A description of the contractor’s efforts to develop and implement a corrective plan to ensure future compliance; and

                          (M)  Information helpful to a determination as to whether any noncompliance was knowing and willful.

              (iii)  The Director, Defense Pricing and Contracting will forward the request to USD(AT&L) as appropriate.

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