[Federal Register: December 8, 2010 (Volume 75, Number 235)]
[Rules and Regulations]
[Page 76297-76300]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08de10-20]
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 225 and 252
RIN 0750-AG57
Defense Federal Acquisition Regulation Supplement; Restriction on
Ball and Roller Bearings (DFARS Case 2006-D029)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD)
ACTION: Final rule.
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SUMMARY: DoD is issuing a final rule amending the Defense Federal
Acquisition Regulation Supplement (DFARS) to revise the domestic source
restriction on acquisition of ball and roller bearings. This final
rule, which implements the DoD annual appropriations act domestic
source restrictions, requires that each ball or roller bearing be
manufactured in the United States, its outlying areas, or Canada, and
that the cost of the bearing components manufactured in the United
States, its outlying areas, or Canada, shall exceed 50 percent of the
total cost of the bearing components of that ball or roller bearing.
DATES: Effective Date: December 8, 2010.
FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, 703-602-0328.
SUPPLEMENTARY INFORMATION:
I. Background
The current DFARS restriction on ball and roller bearings
(225.7009) implemented two statutory restrictions: 10 U.S.C. 2534(a)(5)
and annual appropriations act restrictions. 10 U.S.C. 2534(a)(5)
required that all ball and roller bearings and bearing components,
either as end items or components of end items, be wholly manufactured
in the United States or Canada. The annual defense appropriations act
restrictions require that all ball and roller bearings be produced by a
domestic source and be of domestic origin. This restriction does not
apply to the acquisition of commercial items, either as components or
end products, unless the commercial bearings themselves are purchased
as the end products.
II. Discussion and Analysis
A. Analysis of Public Comments
DoD published a proposed rule in the Federal Register on May 7,
2010 (75 FR 25167). The comment period closed on July 6, 2010. Three
respondents submitted comments.
[[Page 76298]]
1. Nonavailablity
Comment: One respondent commented that, in some cases, it is
necessary to import foreign bearings.
Response: Noted. This rule does not make any change in the existing
ability to waive the restriction on a case-by-case basis by certifying
that adequate domestic supplies are not available and that the
acquisition must be made in order to acquire capability for national
security purposes.
Comment: Another respondent was of the opinion that there is not
really a shortage of bearings compliant with 10 U.S.C. 2534(a)(5), just
an unwillingness on the part of distributors and wholesalers to devote
the time to market research and tracking the supply chain to
demonstrate the availability of compliant bearings.
Response: Commercial bearings manufacturers make business decisions
based on the market. Many suppliers of commercial bearings and bearing
components are unwilling to track the origin of bearings components and
subcomponents because the Government does not have enough market
leverage for it to be in the business interest of the manufacturers and
suppliers to do so. Therefore, many bearings must be treated as
nondomestic because the manufacturer is unable to certify to domestic
sourcing of the components.
Comment: This respondent recommended retaining the requirement for
100 per cent domestic content for the following reasons:
a. According to the respondent, changing the rules now to allow
cheaper sources after using public law to create domestic sourcing
would be detrimental to the companies that have recently invested in
capacity.
Response: The reason for changing the rule is statutory change. 10
U.S.C. 2534(a)(5) is no longer in effect because Congress allowed the
restriction to expire.
Furthermore, the experience of Government buyers indicates that, in
general, the current regulation has not prevented the loss of domestic
sources, due to lack of Government leverage with regard to acquisition
of commercial bearings. The Government continues to issue more and more
waivers in the instances when bearings are no longer available that the
manufacturer or distributor can certify as having 100 percent domestic
components. Bearings manufacturers have stated that manufacture of the
retainer, inner race, and outer race are not core competencies.
Therefore, more and more bearings manufacturers obtain these components
from foreign sources, which are significantly cheaper, and then do the
complex manufacture of the bearing in this country. The advantage of
changing the regulation to allow some foreign components without the
need for a waiver is that fewer waivers will be required and then the
requirement for manufacture in the United States and 50 percent
domestic components remains in effect.
b. According to the respondent, quality of components is very
critical to eliminating latent defects. The respondent stated that
retaining a fully domestic source will make it easier to track the
components and determine the cause of any failure.
Response: Nothing in this rule alters DoD procedures for ensuring
the quality of the products it purchases.
c. The respondent considered that retaining all of this skill set
is critical to maintaining a viable industrial base. According to the
respondent, there is potential in the near future to have difficulty
getting bearings even from qualifying countries, leaving China as the
sole source of this critical component. The respondent was concerned
that China may manipulate the market if there is no ready domestic
supplier of bearings.
Response: DoD has existing authority under 10 U.S.C. 2304(c)(3) and
implementing DFARS provisions to restrict procurements to domestic
sources when it determines that a particular industrial capability must
be protected for national security reasons, and can use this authority
for bearings if it proves necessary.
d. The respondent stated that the fact that the rule affects any
small business supplier is worthy of consideration, not just when it
affects a significant number.
Response: The language in the preamble to the proposed rule
relating to impact on small business entities is based on the statutory
requirement to assess whether the rule will have a significant impact
on a substantial number of small entities within the meaning of the
Regulatory Flexibility Act (5 U.S.C. 601, et seq.). The analysis,
however, did assess both positive and negative impact on small business
entities.
2. Exemptions
Comment: One respondent was concerned that the language in 252.225-
7016 is unchanged from the currently existing exemption.
a. According to the respondent, by allowing the same exemption and
lowering the content requirement to 50 per cent, a bearing used in
assembly for a military application may be sourced from anywhere in the
world, including countries that have less sophisticated production
capabilities. The respondent recommended revision of the exemptions to
require manufacture of domestically nonavailable ball or roller
bearings in a designated country.
b. The respondent also mentioned that when the Government needs to
buy a spare or replacement foreign commercial bearing, it cannot do so
without a waiver.
Response: a. This case is only concerned with the definition of
what constitutes a domestic bearing, based on statutory change. The
definition of a domestic bearing still requires manufacture in the
United States, its outlying areas, or Canada. There was no change in
the statute regarding the exemptions from these requirements.
b. The issue relating to problems of buying spare or replacement
foreign commercial bearings is also a problem of the current
regulation, and is a direct result of the statutory lack of exceptions
when buying commercial ball or roller bearings as the end item rather
than as a component.
3. Waivers
Comment: One respondent stated that waivers go too far. If there is
no domestic bearing to meet the requirement, then the restriction
should only be waived to allow purchase of bearings from designated
countries. The respondent was concerned that the proposal may ease the
restrictions beyond those found in the Buy American Act, thus opening
the possibility of allowing bearings for defense purposes to include
components manufactured by unreliable sources. The respondent noted
that there are 2,059 FSC ball and roller bearings on the DLA FY 2010
waiver list. According to the respondent, sourcing is open to any
country of origin, with price being the sole determining factor for
award.
Response: This rule implements section 8065 of the DoD
Appropriations Act for Fiscal Year 2002 (Pub. L. 107-117) and the same
restriction in subsequent DoD appropriations acts. While DoD interprets
the phrase ``produced by a domestic source and of domestic origin'' in
a way that is comparable to the Buy American Act definition of
``domestic end product'', this does not imply that DoD is empowered to
determine exceptions and waiver authority under this statute on any
basis other than the specific provisions of the appropriations act.
There is no basis provided in the appropriations act for restricting
acquisitions of domestically
[[Page 76299]]
nonavailable items to the products of designated countries. Price is
the sole determining factor for award after determination that the
offered products meet the criteria of the solicitation. Nor does the
respondent provide any evidence that the products of nondesignated
countries are necessarily unreliable. Requiring a reliable product
would be a more direct way to achieve the objective than prohibiting
acquisition from nondesignated countries.
4. Confusing or Inconsistent
Comment: One respondent commented that the rules on bearings are
only applied by DoD, not other Federal agencies, and that the rules are
different depending on whether bearings are purchased as an end product
or a component.
Response: These inconsistencies are inherent within the law. The
restrictions on bearings are contained in the annual defense
appropriations acts, and apply only to DoD. Further, the law provides
an exception for commercial bearings purchased as components, but does
not allow the same exception for bearings when purchased as end
products.
5. Need for Qualified Suppliers (QSL) List and Qualified Manufacturers
List (QML)
Comment: One respondent recommended that other protections should
be put in place in conjunction with this change to the domestic source
restriction on ball and roller bearings. The respondent also
recommended that the annual defense appropriations acts should include
a requirement for the use of QSLs and QMLs when acquiring ball and
roller bearings.
Response: FAR subpart 9.2 addresses qualifications requirements.
FAR 9.202 provides the policy criteria that must be met in order for
the head of the agency to establish a qualification requirement. The
head of the agency must address in writing why a qualification
requirement is necessary, and address the likely costs for testing and
evaluation that will be incurred for a potential offeror to become
qualified. A DoD agency that purchases bearings and products that
contain bearings was concerned about the impact a QSL would have on
competition. In addition, although a QSL would address quality issues,
the agency does not consider that the level of effort associated with a
QSL would be an economical solution to pursue. With regard to a QML,
the agency indicated that a QML would add very little value to the
purchase of bearings. The manufacturers are usually approved by the
drawings, a Qualified Producers List (QPL), or the Engineering Service
Activities (ESA). The recommended statutory change is outside the scope
of this case. The intent of this case is to comply with the existing
statute.
B. Other Changes
DoD incorporated three editorial changes in the final rule.
1. The reference at 225.7009-2(b) to the specialty metals
restriction has changed from ``225.7002-1(b)'' to ``225.7003-2.''
2. Conforming changes are required to the clause dates in 252.212-
7001.
3. In paragraph (b)(2) of DFARS 252.225-7016, ``, its outlying
areas'' was added to ``in the United States or Canada'' to clarify that
this requirement also applies to the outlying areas of the United
States. It was not necessary to add this in the text in part 225,
because in FAR 25.003, ``United States'' is defined to include the
outlying areas. It could be inferred that this also applies in the
clauses prescribed in part 225 (see 52.202-1(a)). However, it is
clearer to explicitly add it.
III. Executive Order 12866
This is a significant regulatory action and, therefore, was subject
to review under section 6(b) of Executive Order 12866, Regulatory
Planning and Review, dated September 30, 1993. This rule is not a major
rule under 5 U.S.C. 804.
IV. Regulatory Flexibility Act
DoD does not expect this rule to have a significant economic impact
on a substantial number of small entities within the meaning of the
Regulatory Flexibility Act, 5 U.S.C. 601, et seq. However, because this
rule has impact on the application of domestic source restrictions, DoD
has performed a final regulatory flexibility analysis, which is
summarized as follows:
This rule revises the restriction on ball and roller bearings to
implement the annual defense appropriations act restriction. The DFARS
currently reflects the more stringent requirement of 10 U.S.C.
2534(a)(5), that the bearing and all main bearing components must be
manufactured in the United States or Canada. This restriction expired
on October 1, 2005. This rule interprets the annual defense
appropriations act to allow a 50 percent component test similar to the
Buy American Act component test.
The objective of the rule is to allow more flexibility to domestic
bearings manufacturers in the acquisition of nondomestic components.
The legal basis for the rule is section 8065 of the DoD Appropriations
Act for Fiscal Year 2002 (Pub. L. 107-117) and the same restriction in
subsequent DoD appropriations acts.
One respondent stated that the fact that the rule affects any small
business supplier is worthy of consideration, not just a significant
number. The analysis, however, did assess both positive and negative
impact on small business entities. Generally, the impact is considered
to be positive (see next paragraph). No changes were made to the rule
as a result of the comment. The only alternative would be to do
nothing, which would have worse results as more waivers are granted for
nonavailability of domestic bearings.
The final rule affects manufacturers of bearings, bearing
components, and noncommercial products that incorporate bearings.
Bearings. This rule applies only to bearings purchased as
end products or noncommercial bearings incorporated in noncommercial
end products or noncommercial components of noncommercial end products.
Because this rule allows some element of nondomestic content in ball
and roller bearing components, as long as the United States- or
Canadian- manufactured bearing contains less than 50 percent
nondomestic bearing components, both large and small businesses may
find greater numbers of sources from which to obtain ball and roller
bearing components. Greater sourcing choices may enable small
businesses to compete more successfully for DoD ball and roller bearing
acquisitions.
Bearing components. Manufacturers of domestic bearing
components may face increased competition from manufacturers of
nondomestic bearing components. However, many of the bearing components
that are being outsourced are no longer readily available from domestic
sources.
Manufacturers of noncommercial products incorporating
bearings. Manufacturers of noncommercial products incorporating
bearings (both large and small businesses) will find it easier to
acquire domestic bearings and will less frequently need to request
nonavailability determinations.
There is no significant economic impact on small entities as a
result of this rule. The impact of this rule on small business is
expected to be predominantly positive. If this rule is not implemented,
the regulations will continue to meet the statutory requirements, but
more domestic nonavailability waivers would continue to be required,
which would mean that there would be no requirement to manufacture such
bearings in the
[[Page 76300]]
United States or Canada, or provide predominantly domestic components.
V. Paperwork Reduction Act
This final rule does not impose any new or modified reporting,
recordkeeping, or information collection requirements that require the
approval of the Office of Management and Budget under 44 U.S.C. 3501,
et seq.
List of Subjects in 48 CFR Parts 225 and 252
Government procurement.
Clare M. Zebrowski,
Editor, Defense Acquisition Regulations System.
0
Therefore, 48 CFR parts 225 and 252 are amended as follows:
0
1. The authority citation for 48 CFR parts 225 and 252 continues to
read as follows:
Authority: 41 U.S.C. 421 and 48 CFR chapter 1.
PART 225--FOREIGN ACQUISITION
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2. Revise section 225.7009-2 to read as follows:
225.7009-2 Restriction.
(a) Do not acquire ball and roller bearings unless--
(1) The bearings are manufactured in the United States or Canada;
and
(2) For each ball or roller bearing, the cost of the bearing
components mined, produced, or manufactured in the United States or
Canada exceeds 50 percent of the total cost of the bearing components
of that ball or roller bearing.
(b) The restriction at 225.7003-2 may also apply to bearings that
are made from specialty metals, such as high carbon chrome steel
(bearing steel).
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
252.212-7001 [Amended]
0
3. Section 252.212-7001 is amended as follows:
0
a. By revising the clause date to read ``(DEC 2010)''; and
0
b. In paragraph (b)(10) by removing ``(MAR 2006)'' and adding in its
place ``(DEC 2010)''.
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4. Revise section 252.225-7016 to read as follows:
252.225-7016 Restriction on Acquisition of Ball and Roller Bearings.
As prescribed in 225.7009-5, use the following clause:
RESTRICTION ON ACQUISITION OF BALL AND ROLLER BEARINGS (DEC 2010)
(a) Definitions. As used in this clause--
(1) Bearing component means the bearing element, retainer, inner
race, or outer race.
(2) Component, other than a bearing component, means any item
supplied to the Government as part of an end product or of another
component.
(3) End product means supplies delivered under a line item of
this contract.
(b) Except as provided in paragraph (c) of this clause--
(1) Each ball and roller bearing delivered under this contract
shall be manufactured in the United States, its outlying areas, or
Canada; and
(2) For each ball or roller bearing, the cost of the bearing
components mined, produced, or manufactured in the United States,
its outlying areas, or Canada shall exceed 50 percent of the total
cost of the bearing components of that ball or roller bearing.
(c) The restriction in paragraph (b) of this clause does not
apply to ball or roller bearings that are acquired as--
(1) Commercial components of a noncommercial end product; or
(2) Commercial or noncommercial components of a commercial
component of a noncommercial end product.
(d) The restriction in paragraph (b) of this clause may be
waived upon request from the Contractor in accordance with
subsection 225.7009-4 of the Defense Federal Acquisition Regulation
Supplement.
(e) If this contract includes DFARS clause 252.225-7009,
Restriction on Acquisition of Certain Articles Containing Specialty
Metals, all bearings that contain specialty metals, as defined in
that clause, must meet the requirements of that clause.
(f) The Contractor shall insert the substance of this clause,
including this paragraph (f), in all subcontracts, except those
for--
(1) Commercial items; or
(2) Items that do not contain ball or roller bearings.
(End of clause)
[FR Doc. 2010-30670 Filed 12-7-10; 8:45 am]
BILLING CODE 5001-08-P