[Federal Register Volume 68, Number 52 (Tuesday, March 18, 2003)]
[Rules and Regulations]
[Pages 13202-13204]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-6373]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 12, 32, 47, and 52
[FAC 2001-13; FAR Case 1999-024; Item II]
RIN 9000-AI97
Federal Acquisition Regulation; Preference for U.S.-Flag
Vessels--Subcontracts for Commercial Items
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) have agreed on a final rule
amending the Federal Acquisition Regulation (FAR) regarding the
applicability of statutory requirements for use of U.S.-flag vessels in
the transportation of supplies by sea. The FAR presently waives these
requirements for subcontracts for the acquisition of commercial items.
This rule would require the use of U.S.-flag vessels under certain
subcontracts for commercial items.
DATES: Effective Date: April 17, 2003.
FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS
Building, Washington, DC, 20405, (202) 501-4755, for information
pertaining to status or publication schedules. For clarification of
content, contact Ms. Linda Klein, Procurement Analyst, at (202) 501-
3775. Please cite FAC 2001-13, FAR case 1999-024.
SUPPLEMENTARY INFORMATION:
A. Background
This final rule amends FAR Parts 12, 32, 47, and associated clauses
to limit the types of subcontracts for which the waiver of cargo
preference statutes is applicable. The rule is intended to ensure
compliance with cargo preference statutes if ocean cargoes are clearly
destined for Government use, while avoiding disruption of commercial
delivery systems. This final rule also amends FAR Part 12 by adding 10
U.S.C. 2631 to the list of laws inapplicable to subcontracts for the
acquisition of commercial items, except for certain subcontracts, since
civilian agencies may buy supplies for use of military departments.
DoD, GSA, and NASA published a proposed rule in the Federal
Register at 65 FR 66920, November 7, 2000. Four respondents submitted
public comments during the comment period. These comments were
considered in the formulation of the final rule. A summary of the
comments and their respective disposition is as follows:
1. One respondent voiced opposition to the rule indicating that (1)
neither the statute nor the legislative history grants authority to
create an administrative deviation from the explicit requirement to use
U.S.-flag vessels in the transportation of supplies bought for the
Department of Defense (DoD) either by DoD or a civilian agency; (2) the
rule should be considered a major rule under 5 U.S.C. 804; and (3) this
rule will have a significant impact on a substantial number of small
entities. The Councils did not concur. 41 U.S.C. 430(b), as added by
the Federal Acquisition Streamlining Act (FASA) of 1994 (Pub. L. 103-
355, Section 8003), requires that the FAR list those laws inapplicable
to subcontracts for commercial items, and requires that covered laws as
defined in 41 U.S.C. 430(c) be included on that list unless the FAR
Council makes a written determination that it would not be in the best
interest of the Federal Government to exempt commercial subcontracts
from the applicability of the provision (see comment 2). In accordance
with this statute, FAR 12.504(a)(10) currently lists 46 U.S.C. 1241(b),
with the inapplicability effective May 1, 1996. This rule adds 10
U.S.C. 2631 to the FAR list, because civilian agencies may buy supplies
for use of military departments. 10 U.S.C. 2631 is currently listed as
inapplicable to commercial items at DFARS 212.504(a)(xxii), with the
same exceptions now being incorporated in the FAR. This rule clarifies
existing policy and limits the number of allowable waivers. The rule
strengthens the Government support for the Cargo Preference statutes.
The Office of Information and Regulatory Affairs reviewed the proposed
rule before publication and did not declare it to be a major rule under
5 U.S.C. 804.
2. One respondent expressed opposition to the rule considering it
to be inconsistent with FASA with respect to commercial item
procurements. The respondent states that 10 U.S.C. Sec. 2631 is not
specifically enumerated to remain unaffected by Title VIII of FASA, it
does not provide for criminal or civil penalties, or contain any
provisions that would override the provisions in Title VIII of FASA
and, therefore, a written determination of the FAR Council is required
to not exempt all commercial item subcontracts from the provisions of
10 U.S.C. Sec 2631. The FAR Council has made a determination in writing
as required by the OFPP Act, 41 U.S.C. 430(b).
3. One respondent expressed concern regarding deletion of contracts
awarded using the simplified acquisition procedures in Part 13 from the
current list of exceptions to the preference for U.S.-flag vessels.
This change was accomplished under FAR case 98-604, and is outside the
scope of this case.
4. One respondent expressed concern that the rule does not waive
Cargo Preference for commercial subcontracts if the prime contractor is
redistributing or reselling without adding value. The Council did not
concur. FASA specifically prohibits waiver of laws for subcontracts
where the prime does not add value; the subcontractor then is held to
all laws applicable to a prime contractor. The rule merely clarifies
this portion of the law.
5. One respondent expressed concern regarding the difference
between the requirements outlined in the statutes covering DoD and non-
DoD cargo. The concern is that extension of the rule to civilian agency
acquisitions places an insurmountable burden on Government contractors
and subcontractors. The Councils did not concur as FAR 47.503(b)(2)
already states that 10 U.S.C. 2631 is applicable if supplies being
shipped are for use of military departments. This rule does not expand
that applicability of 10 U.S.C. 2631 to other non-DoD cargo, but
actually limits application of Cargo Preference, by providing waiver of
10 U.S.C. 2631, if it would otherwise be applicable.
6. One respondent contends that if the proposed rule is not
withdrawn, it should be modified to require prime contractors to advise
their subcontractors when the statutes apply. The Councils did not
concur because the FAR currently requires the prime contractor to
notify the subcontractors of any flow-down statutes.
7. Two respondents were concerned that the rule could be read to
omit one major exception to cargo preference waivers for subcontracts
for commercial
[[Page 13203]]
items--``non-commercial component parts'' and requests clarification.
The Councils did not concur because the rule only relates to commercial
component parts.
This is not a significant regulatory action and, therefore, was not
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.
B. Regulatory Flexibility Act
The Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration certify that this
final rule will not 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 most ocean
transportation companies are large business concerns. FAR Subpart 47.5
and the clause at FAR 52.247-64 do not generally apply to acquisitions
by the Department of Defense.
C. Paperwork Reduction Act
The Paperwork Reduction Act (Pub. L. 104-13) applies because the
final rule will increase the flow down of FAR clause 52.247-64,
Preference for Privately Owned U.S.-Flag Commercial Vessels, to certain
commercial subcontracts. This information collection requirement is
currently approved by the Office of Management and Budget under OMB
Control Number 9000-0061, Transportation Requirements, which also
covers other transportation related information collection
requirements. We estimate an increase of 9000 responses per year as a
result of this final rule, and a corresponding increase of 900 burden
hours per year. We received no comments on the information collection
requirements published in the proposed rule.
List of Subjects in 48 CFR Parts 12, 32, 47, and 52
Government procurement.
Dated: March 12, 2003.
Laura G. Smith,
Director, Acquisition Policy Division.
Therefore, DoD, GSA, and NASA amend 48 CFR parts 12, 32, 47, and 52
as set forth below:
1. The authority citation for 48 CFR parts 12, 32, 47, and 52
continues to read as follows:
Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 12--ACQUISITION OF COMMERCIAL ITEMS
2. In section 12.504, amend paragraph (a) by redesignating
paragraphs (a)(1) through (a)(11) as (a)(2) through (a)(12),
respectively; by adding a new paragraph (a)(1); and by revising the
newly designated paragraph (a)(11) to read as follows:
12.504 Applicability of certain laws to subcontracts for the
acquisition of commercial items.
(a) * * *
(1) 10 U.S.C. 2631, Transportation of Supplies by Sea (except for
the types of subcontracts listed at 47.504(d)).
* * * * *
(11) 46 U.S.C. Appx 1241(b), Transportation in American Vessels of
Government Personnel and Certain Cargo (see Subpart 47.5) (except for
the types of subcontracts listed at 47.504(d)).
* * * * *
PART 32--CONTRACT FINANCING
32.1103 [Amended]
3. Amend section 32.1103 in the introductory text of paragraph (e)
by removing ``10 U.S.C. 101(a)(13)'' and adding ``2.101'' in its place.
PART 47--TRANSPORTATION
4. Amend section 47.504 by revising paragraph (d) to read as
follows:
47.504 Exceptions.
* * * * *
(d) Subcontracts for the acquisition of commercial items or
commercial components (see 12.504(a)(1) and (a)(11)). This exception
does not apply to--
(1) Grants-in-aid shipments, such as agricultural and food-aid
shipments;
(2) Shipments covered under 46 U.S.C. Appx 1241-1, such as those
generated by Export-Import Bank loans or guarantees;
(3) Subcontracts under--
(i) Government contracts or agreements for ocean transportation
services; or
(ii) Construction contracts; or
(4) Shipments of commercial items that are--
(i) Items the contractor is reselling or distributing to the
Government without adding value (see FAR 12.501(b)). Generally, the
contractor does not add value to the items when it subcontracts items
for f.o.b. destination shipment; or
(ii) Shipped in direct support of U.S. military--
(A) Contingency operations;
(B) Exercises; or
(C) Forces deployed in connection with United Nations or North
Atlantic Treaty Organization humanitarian or peacekeeping operations.
5. Revise section 47.507 to read as follows:
47.507 Contract clauses.
(a)(1) Insert the clause at 52.247-64, Preference for Privately
Owned U.S.-Flag Commercial Vessels, in solicitations and contracts that
may involve ocean transportation of supplies subject to the Cargo
Preference Act of 1954. (For application of the Cargo Preference Act of
1954, see 47.502(a)(3), 47.503(a), and 47.504.)
(2) If an applicable statute requires, or if it has been determined
under agency procedures, that the supplies to be furnished under the
contracts must be transported exclusively in privately owned U.S.-flag
commercial vessels (see 47.502(a)(1) and 47.503(b)), use the clause
with its Alternate I.
(3) Except for contracts or agreements for ocean transportation
services or construction contracts, use the clause with its Alternate
II if any of the supplies to be transported are commercial items that
are shipped in direct support of U.S. military--
(i) Contingency operations;
(ii) Exercises; or
(iii) Forces deployed in connection with United Nations or North
Atlantic Treaty Organization humanitarian or peacekeeping operations.
(b) The contracting officer may insert in solicitations and
contracts, under agency procedures, additional appropriate clauses
concerning the vessels to be used.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
6. Amend section 52.212-5 by revising the date of the clause and
paragraph (e)(4) to read as follows:
52.212-5 Contract Terms and Conditions Required to Implement Statutes
or Executive Orders--Commercial Items.
* * * * *
Contract Terms and Conditions Required To Implement Statutes or
Executive Orders--Commercial Items (Apr. 2003)
* * * * *
(e) * * *
(4) 52.247-64, Preference for Privately Owned U.S.-Flag
Commercial Vessels (46 U.S.C. Appx 1241 and 10 U.S.C. 2631) (flow
down required in accordance with paragraph (d) of FAR clause 52.247-
64); and
* * * * *
7. Amend section 52.213-4 by revising the date of the clause and
paragraph (b)(1)(xi) to read as follows:
[[Page 13204]]
52.213-4 Terms and Conditions--Simplified Acquisitions (Other than
Commercial Items).
* * * * *
Terms and Conditions--Simplified Acquisitions (Other Than Commercial
Items) (Apr. 2003)
* * * * *
(b)(1) * * *
(xi) 52.247-64, Preference for Privately Owned U.S.-Flag
Commercial Vessels (APR 2003) (46 U.S.C. Appx 1241). (Applies to
supplies transported by ocean vessels (except for the types of
subcontracts listed at 47.504(d).)
* * * * *
8. Amend section 52.244-6 by revising the section and clause
heading, the date of the clause, and paragraph (c)(1)(v) to read as
follows:
Sec. 52.244-6 Subcontracts for Commercial Items and Commercial
Components.
* * * * *
Subcontracts for Commercial Items and Commercial Components (Apr. 2003)
* * * * *
(c)(1) * * *
(v) 52.247-64, Preference for Privately Owned U.S.-Flag
Commercial Vessels (APR 2003) (46 U.S.C. Appx 1241 and 10 U.S.C.
2631) (flow down required in accordance with paragraph (d) of FAR
clause 52.247-64).
* * * * *
9. Amend section 52.247-64 by--
a. Revising the date of the clause;
b. Removing ``The'' from the beginning of the introductory text of
paragraph (a) and adding ``Except as provided in paragraph (e) of this
clause, the'' in its place;
c. Removing the period at the end of paragraph (d) and adding ``,
except those described in paragraph (e)(4).'' in its place;
d. Removing ``and'' at the end of paragraph (e)(2);
e. Removing the period at the end of paragraph (e)(3) and adding
``; and'' in its place;
f. Adding paragraph (e)(4);
g. Revising the date, introductory text, and paragraph (a) of
Alternate I; and
h. Revising Alternate II to read as follows:
52.247-64 Preference for Privately Owned U.S.-Flag Commercial Vessels.
* * * * *
Preference for Privately Owned U.S.-Flag Commercial Vessels (Apr 2003)
* * * * *
(e) * * *
(4) Subcontracts or purchase orders for the acquisition of
commercial items unless--
(i) This contract is--
(A) A contract or agreement for ocean transportation services;
or
(B) A construction contract; or
(ii) The supplies being transported are--
(A) Items the Contractor is reselling or distributing to the
Government without adding value. (Generally, the Contractor does not
add value to the items when it subcontracts items for f.o.b.
destination shipment); or
(B) Shipped in direct support of U.S. military--
(1) Contingency operations;
(2) Exercises; or
(3) Forces deployed in connection with United Nations or
North Atlantic Treaty Organization humanitarian or peacekeeping
operations.
* * * * *
Alternate I (Apr 2003). As prescribed in 47.507(a)(2),
substitute the following paragraphs (a) and (b) for paragraphs (a)
and (b) of the basic clause:
(a) Except as provided in paragraphs (b) and (e) of this clause,
the Contractor shall use privately owned U.S.-flag commercial
vessels, and no others, in the ocean transportation of any supplies
to be furnished under this contract.
* * * * *
Alternate II (Apr 2003). As prescribed in 47.507(a)(3),
substitute the following paragraph (e) for paragraph (e) of the
basic clause:
(e) The requirement in paragraph (a) does not apply to--
(1) Cargoes carried in vessels of the Panama Canal
Commission or as required or authorized by law or treaty;
(2) Ocean transportation between foreign countries of supplies
purchased with foreign currencies made available, or derived from
funds that are made available, under the Foreign Assistance Act of
1961 (22 U.S.C. 2353); and
(3) Shipments of classified supplies when the classification
prohibits the use of non-Government vessels.
(4) Subcontracts or purchase orders under this contract for the
acquisition of commercial items unless the supplies being
transported are--
(i) Items the Contractor is reselling or distributing to the
Government without adding value. (Generally, the Contractor does not
add value to the items when it subcontracts items for f.o.b.
destination shipment); or
(ii) Shipments in direct support of U.S. military--
(A) Contingency operations;
(B) Exercises; or
(C) Forces deployed in connection with United Nations or North
Atlantic Treaty Organization humanitarian or peacekeeping
operations. (Note: This contract requires shipment of commercial
items in direct support of U.S. military contingency operations,
exercises, or forces deployed in connection with United Nations or
North Atlantic Treaty Organization humanitarian or peacekeeping
operations.)
[FR Doc. 03-6373 Filed 3-17-03; 8:45 am]
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