On July 29, 2009, the Department of Defense (DoD) issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to address statutory restrictions on the acquisition of specialty metals not melted or produced in the United States. See 74 Fed. Reg. 37,626 (July 29, 2009). The rule implements 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 (FY07 and FY08 NDAAs). The effective date of the final rule is July 29, 2009.
Section 842 of the FY07 NDAA added provisions to 10 U.S.C. § 2533b addressing requirements for the purchase of specialty metals from domestic sources. To implement these statutory requirements, DFARS 225.7003-2(a) requires that if the following items, or any components therein, contain specialty metals, those metals must be melted or produced in the United States: aircraft, missile or space systems, ships, tank or automotive parts, weapon systems, and ammunition. DFARS 225.7003-2(b) restricts acquisition of "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." DFARS 225.7003-2(b) further provides that the 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."
Section 804 of the FY08 NDAA amended 10 U.S.C. § 2533b regarding applicability of the specialty metals restriction to commercial items, electronic components, items containing minimal amounts of specialty metals, items necessary in the interest of national security, and items not available domestically in the required form. As amended, DFARS 225.7003-3 and DFARS clause 252.225-7009(c) set out a number of exceptions to the specialty metals restrictions of end items or components, including but not limited to, exceptions for:
- Acquisitions outside the United States in support of combat operations;
- Acquisitions in support of contingency operations;
- Electronic components, unless domestic availability is deemed critical to national security;
- Commercial off-the-shelf (COTS) items, unless it is for the acquisition of certain items, including specialty metal mill products; forging or casing of specialty metals; commercially available high performance magnets unless the high performance magnet is incorporated into COTS end items, subsystems, and assemblies; and COTS fasteners under certain circumstances;
- Items manufactured in qualifying countries;
- Items that cannot be acquired as and when needed at a fair and reasonable price in satisfactory quality, a sufficient quantity, and the required form (i.e., a domestic non-availability determination) either domestically or from a qualifying country; and
- Specialty metals with less than 2% non-compliant metal by total weight of all specialty metal in the item, as estimated by the contractor in good faith.
DFARS 225.7003-4 also allows for a "one-time waiver" of the specialty metal restrictions provided the following conditions are met:
- Final acceptance takes place prior to September 2010;
- The specialty metals were incorporated into items produced, manufactured, or assembled in the United States before October 17, 2006;
- The contracting officer determines that it would not be practical to remove the specialty metal and the contractor or subcontract has plans in place to comply with specialty metal regulations for future production items;
- The non-compliance was not knowing or willful; and
- The determination is approved by the Under Secretary of Defense (Acquisition, Technology, and Logistics) or the service acquisition executive of the military department concerned.
- The contracting officer posts a notice of the waiver on the Federal Business Opportunities website (www.FedBizOpps.gov).
The final rule also includes implementing clauses at DFARS 252.225-7008 (Restriction on Acquisition of Specialty Metals) and 252.225-7009 (Restriction on Acquisition of Certain Articles Containing Specialty Metals). DFARS clause 252.225-7009 defines several key terms, including "assembly," "commercial derivative military article," "COTS item," "component," "electronic component," "produce," "required form," and "specialty metal." It also identifies the compliance requirements for commercial derivative military articles and the flow down of the clause to subcontractors.
Finally, in accordance with Section 884 of the FY08 NDAA, DFARS 225.7003-3 requires DoD to publish a notice on www.FedBizOpps.gov 30 days before making a domestic non-availability determination that would apply to more than one contract.