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Notice

Proposed Buy American Act Exemption for Commercial U.S.-Made End Products

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Information about this document as published in the Federal Register.

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AGENCY:

Department of Defense (DoD).

ACTION:

Request for public comments.

SUMMARY:

The Office of the Under Secretary of Defense (Acquisition, Technology, and Logistics) is seeking information that will assist it in evaluating a proposed public interest exception to the Buy American Act (BAA) in procurements subject to the Trade Agreements Act (TAA) for commercial U.S.-made end products, substantially transformed in the United States, that do not qualify as domestic end products under the BAA. A similar exception was issued for U.S.-made information technology products on May 16, 1997. Interested parties are invited to submit written comments or recommendations relative to this proposed public interest exception.

DATES:

Comments must be received no later than September 24, 2001.

ADDRESSES:

Send all comments to Domenico C. Cipicchio, Deputy Director, Defense Procurement, Contract Start Printed Page 41562Policy & Administration, OUSD (AT&L), 3060 Defense Pentagon, Washington, DC 20301-3060.

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FOR FURTHER INFORMATION CONTACT:

Susan M. Hildner, Procurement Analyst, Defense Procurement, Defense Systems Procurement Strategies, OUSD (AT&L), 3060 Defense Pentagon, Washington, DC 20301-3060, (703) 695-4258, or e-mail to Susan.Hildner@osd.mil.

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SUPPLEMENTARY INFORMATION:

The BAA requires the Government to purchase for public use only domestic end products. For a manufactured end product, this means a product that has been manufactured in the United States substantially all from articles, materials, or supplies in mind, produced, or manufactured in the United States. DoD considers a product to be “substantially all from articles, materials, or supplies mined, produced, manufactured in the United States” if the cost of its qualifying country components and its components that are mined, produced, or manufactured in the United States exceeds 50 percent of the cost of all its components. Under the TAA, the BAA is waived for eligible products from certain designated countries. The country of origin for eligible products is the country in which the articles/components (wherever the origin) have been substantially transformed into an article of commerce with a name, character, or use distinct from that of the articles from which it was transformed. Since the TAA applies only to products of foreign countries, the BAA is not waived for products substantially transformed in the United States from mostly foreign components, i.e., U.S.-made end products that do not qualify as domestic end products. This results in treating such U.S.-made end products less favorably than designated country end products, which might encourage companies to manufacture products or locate manufacturing facilities in a designated foreign country rather than in the United States. Because of the different rules of origin, U.S.-made end products that do not qualify as domestic end products are at a competitive disadvantage against designated foreign countries when competing for DoD procurements (because of the application of the 50 percent evaluation factor to U.S.-made end products that do not qualify as domestic end products). Additionally, the different rules of origin result in a disproportionately burdensome record-keeping requirement on firms offering both domestic and U.S.-made end products. Because of the component content requirement of the BAA, vendors must determine, control, and track the source of components. In today's global economy, this has become an extremely difficult, if not impossible, task and create a disincentive for commercial companies to sell to DoD. On the other hand, this burden does not apply to vendors from designated countries, because the TAA substantial transformation rule of origin does not require tracking the origin of components. This is especially true for commercial items. Given the impact of the different rules of origin, it seems appropriate to determine that application of the BAA to commercial U.S.-made end products is inconsistent with the public interest in procurements subject to the TAA. The proposed exception will eliminate the burdensome record-keeping requirements for U.S. companies, allow DoD to procure U.S.-made commercial items if they are lower in cost, allow DoD access to state-of-the-art commercial technology, and reduce the incentive to move end product manufacturing facilities to a designated foreign country.

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Michele P. Peterson,

Executive Editor, Defense Acquisition Regulations Council.

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[FR Doc. 01-19915 Filed 8-7-01; 8:45 am]

BILLING CODE 5000-04-M