[Federal Register Volume 61, Number 24 (Monday, February 5, 1996)]
[Proposed Rules]
[Pages 4240-4246]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-2288]
=======================================================================
-----------------------------------------------------------------------
INTERNATIONAL DEVELOPMENT COOPERATION AGENCY
Agency for International Development
22 CFR Part 228
Rules on Source, Origin and Nationality for Commodities and
Services Financed by the Agency for International Development
AGENCY: United States Agency for International Development (USAID),
IDCA.
ACTION: Notice of proposed rulemaking (NPRM).
-----------------------------------------------------------------------
SUMMARY: This proposed rule would add a new Part 228 to Title 22 of the
CFR which would codify the rules on source, origin and nationality for
commodities and services financed by USAID.
DATES: Comments on this proposed rule must be submitted on or before
April 5, 1996.
ADDRESSES: Comments should be mailed to the Procurement Policy Division
(M/OP/P), Office of Procurement, USAID, SA-14, Room 1600I, 320 21st
Street, NW., Washington, DC 20523-1435.
FOR FURTHER INFORMATION CONTACT:
Kathleen J. O'Hara, Office of Procurement, Procurement Policy Division
(M/OP/P), USAID, SA-14, Room 1600I, USAID, Washington, DC 20523-1435.
Telephone (703) 875-1534, Facsimile (703) 875-1243.
SUPPLEMENTARY INFORMATION: This proposed rule would codify USAID's
current rules (published as internal agency policy) on source, origin
and nationality for commodities and services with a few changes which
are explained below.
USAID's rules currently include a limitation on the value of
components from countries which are not authorized sources for
procurement which may be included in a produced commodity. The total
cost of such components to the producer of the commodity (delivered at
the point of production of the commodity) may not exceed 50 percent of
the lowest price (excluding the cost of ocean transportation and marine
insurance) at which the supplier makes the commodity available for
export sale (whether or not financed by USAID). As the U.S. economy has
become more global, this requirement concerning componentry has become
substantially more complex, and internal USAID audits have essentially
found it to be impracticable to implement and enforce.
Further, USAID has determined that the test of origin of the
commodity (i.e., the requirement that a commodity be mined, grown, or
produced in an authorized source country) provides sufficient assurance
that economic benefits will accrue to the country from which the
commodity is purchased. Therefore, for purposes of streamlining USAID
rules, removing unnecessary compliance burdens for government
contractors and ensuring that the government buys at the lowest
available price, the componentry requirement has been deleted from this
proposed rule.
Additionally, this proposed rule specifically excludes the
applicability of USAID's rules on nationality to commissions paid by
suppliers, bonds and guarantees, and liability insurance under
construction contracts, with the exception that no payments shall be
made to suppliers designated as ineligible in Section 228.36 of the
proposed regulation. These are considered miscellaneous services
transactions, which can be commodity-related, but may also be related
to contracts for professional, technical, or construction services. By
the nature of the services involved, it is not considered practical to
apply the nationality requirements to these services.
Public comments on this proposed rule are welcome.
USAID has determined that this proposed rule is not a significant
regulatory action under Executive Order 12866. The proposed rule has
been reviewed in accordance with the requirement of the Regulatory
Flexibility Act. USAID has determined that the proposed rule would not
have a significant economic impact on a substantial number of small
entities, and, therefore, a Regulatory Flexibility Analysis is not
required. There are no information collection requirements in this
proposed rule as contemplated by the Paperwork Reduction Act.
Lists of Subjects in 22 CFR Part 228
Commodity procurement, Grant programs--foreign relations,
Administrative practice and procedures.
Accordingly, Part 228 of Title 22 of the Code of Federal
Regulations is proposed to be added, consisting of Subparts A through
F, to read as follows:
PART 228--RULES ON SOURCE AND NATIONALITY FOR COMMODITIES AND
SERVICES FINANCED BY USAID
Subpart A--Definitions and Scope of This Part
Sec.
228.01 Definitions.
228.02 Scope and application.
228.03 Identification of principal geographic code numbers.
Subpart B--Conditions Governing Source and Nationality of Commodity
Procurement Transactions for USAID Financing
228.10 Purpose.
228.11 Source and origin of commodities.
228.12 Long-term leases.
228.13 Special source rules requiring procurement from the United
States.
228.14 Nationality of suppliers of commodities.
Subpart C--Conditions Governing the Eligibility of Commodity-Related
Services for USAID Financing
228.20 Purpose.
228.21 Ocean transportation.
228.22 Air transportation.
228.23 Eligibility of marine insurance.
228.24 Other delivery services.
228.25 Incidental services.
Subpart D--Conditions Governing the Nationality of Suppliers of
Services for USAID Financing
228.30 Purpose.
228.31 Privately owned commercial suppliers.
228.32 Nonprofit organizations.
228.33 Foreign government-owned organizations.
228.34 Joint ventures.
228.35 Construction services from foreign-owned local firms.
228.36 Ineligible suppliers.
228.37 Nationality of employees under contracts or subcontracts for
services.
228.38 Miscellaneous service transactions.
Subpart E--Conditions Governing Source and Nationality of Local
Procurement Transactions for USAID Financing
228.40 Local procurement.
Subpart F--Waivers
228.50 General.
228.51 Commodities.
228.52 Suppliers of commodities.
228.53 Suppliers of services--privately owned commercial suppliers
and nonprofit organizations.
228.54 Suppliers of services--foreign government-owned
organizations.
[[Page 4241]]
228.55 Delivery services.
228.56 Authority to approve waivers.
Authority: Sec. 621, Pub. L. 87-195, 75 Stat. 445 (22 U.S.C.
2381), as amended; E.O. 12163 of Sept. 29, 1979, (3 CFR, 1979 Comp.,
p. 435).
Subpart A--Definitions and Scope of This Part
Sec. 228.01 Definitions.
As used in this part, the following terms shall have the meanings
indicated below:
(a) Commodity means any material, article, supply, goods, or
equipment.
(b) Commodity-related services means delivery services and/or
incidental services.
(c) Component means any good that goes directly into the production
of a produced commodity.
(d) Cooperating country means the country receiving the USAID
assistance subject to this part 228.
(e) Delivery means the transfer to, or for the account of, an
importer of the right to possession of a commodity, or, with respect to
a commodity-related service, the rendering to, or for the account of,
an importer of any such service.
(f) Delivery service means any service customarily performed in a
commercial export transaction which is necessary to effect a physical
transfer of commodities to the cooperating country. Examples of such
services are the following: export packing, local drayage in the source
country (including waiting time at the dock), ocean and other freight,
loading, heavy lift, wharfage, tollage, switching, dumping and
trimming, lighterage, insurance, commodity inspection services, and
services of a freight forwarder. ``Delivery services'' may also include
work and materials necessary to meet USAID marking requirements.
(g) Implementing document means any document, including a letter of
commitment, issued by USAID which authorizes the use of USAID funds for
the procurement of services or commodities and/or commodity related
services, and which specifies conditions which apply to such
procurement.
(h) Incidental services means the installation or erection of
USAID-financed equipment, or the training of personnel in the
maintenance, operation and use of such equipment.
(i) Mission means the USAID Mission or representative in a
cooperating country.
(j) Origin means the country where a commodity is mined, grown or
produced. A commodity is produced when, through manufacturing,
processing, or substantial and major assembling of components, a
commercially recognized new commodity results that is significantly
different in basic characteristics or in purpose or utility from its
components.
(k) Services means the performance of identifiable tasks, rather
than the delivery of an end item of supply.
(l) Source means the country from which a commodity is shipped to
the cooperating country, or the cooperating country if the commodity is
located therein at the time of the purchase. Where, however, a
commodity is shipped from a free port or bonded warehouse in the form
in which received therein, ``source'' means the country from which the
commodity was shipped to the free port or bonded warehouse.
(m) State means the District of Columbia or any State,
Commonwealth, territory or possession of the United States.
(n) Supplier means any person or organization, governmental or
otherwise, who furnishes services, commodities and/or commodity related
services financed by USAID.
(o) United States means the United States of America, any State(s)
of the United States, the District of Columbia, and areas of U.S.
associated sovereignty, including commonwealths, territories and
possessions.
(p) USAID means the U.S. Agency for International Development or
any successor agency, including when applicable, each U.S.AID Mission
abroad.
(q) USAID Geographic Code means a code in the USAID Geographic Code
Book which designates a country, a group of countries, or an otherwise
defined area. The principal USAID geographic codes are described in
Sec. 228.03.
(r) USAID/W means the USAID in Washington, DC 20523, including any
office thereof.
Sec. 228.02 Scope and application.
This part is applicable to goods and services financed with USAID
project and program funds. The appropriate implementing documents will
indicate the authorized sources of procurement. Whenever this part 228
is applicable, those terms and conditions which are in effect on the
date of issuance of the contract or placement of an order will govern
for all procurements under that contract or order.
Sec. 228.03 Identification of principal geographic code numbers.
The USAID Geographic Code Book sets forth the official description
of all geographic codes used by USAID in authorizing or implementing
documents, to designate authorized source countries or areas. The
following are summaries of the principal codes:
(a) Code 000--The United States: The United States of America, any
State(s) of the United States, the District of Columbia, and areas of
U.S.-associated sovereignty, including commonwealths, territories and
possessions.
(b) Code 899--Free World: Any area or country, except the
cooperating country itself and the following countries: Afghanistan,
Libya, Vietnam, Cuba, Cambodia, Laos, Iraq, Iran, North Korea, Syria
and the People's Republic of China.
(c) Code 935--Special Free World: Any area or country in the Free
World, including the cooperating country.
(d) Code 941--Selected Free World: The United States and any
independent country in the Free World, except the cooperating country
itself and the following: Albania, Andorra, Angola, Armenia, Austria,
Australia, Azerbaijan, Bahamas, Bahrain, Belgium, Bosnia and
Herzegovina, Bulgaria, Byelarus, Canada, Croatia, Cyprus, Czech
Republic, Denmark, Estonia, Finland, France, Gabon, Georgia, Germany,
Greece, Hong Kong, Hungary, Iceland, Ireland, Italy, Japan, Kazakhstan,
Kuwait, Kyrgyzstan, Latvia, Liechtenstein, Lithuania, Luxembourg,
Macedonia*, Malta, Moldova, Monaco, Mongolia, Montenegro*, Netherlands,
New Zealand, Norway, Poland, Portugal, Qatar, Romania, Russia, San
Marino, Saudi Arabia, Serbia*, Singapore, Slovak Republic, Slovenia,
South Africa, Spain, Sweden, Switzerland, Taiwan*, Tajikistan,
Turkmenistan, Ukraine, United Arab Emirates, United Kingdom,
Uzbekistan, and Vatican City.
* Has the status of a ``Geopolitical Entity'', rather than an
independent country.
Subpart B--Conditions Governing Source and Nationality of Commodity
Procurement Transactions for USAID Financing
Sec. 228.10 Purpose.
Sections 228.11 through 228.14 set forth the rules governing the
eligible source of commodities and nationality of commodity suppliers
for USAID financing. These rules may be waived in accordance with the
provisions in subpart F of this part.
Sec. 228.11 Source and origin of commodities.
(a) The source and origin of a commodity shall be a country or
countries authorized in the
[[Page 4242]]
implementing document by name or by reference to a USAID geographic
code.
(b) Any component from a non-Free World country makes the commodity
ineligible for USAID financing.
(c) When the commodity being purchased is a kit (e.g., scientific
instruments, tools, or medical supplies packaged as a single unit), the
kit will be considered a produced commodity.
(d) When spare parts for vehicles or equipment are purchased, each
separate shipment will be considered a produced commodity, rather than
each individual spare or replacement part. The parts must be packed in
and shipped from an eligible country.
(e) When a package installation is procured as a single entity,
USAID may determine that the installation as a whole should be
considered a produced commodity.
Sec. 228.12 Long-term leases.
Any commodity obtained under a long-term lease agreement is subject
to the source and origin requirements of this subpart B. For purposes
of this subpart B, a long-term lease is defined as a single lease of
more than 180 days, or repetitive or intermittent leases under a single
project or program within a one-year period totalling more than 180
days, for the same type of commodity.
Sec. 228.13 Special source rules requiring procurement from the United
States.
(a) Agricultural commodities and products thereof must be procured
in the United States domestic price is less than parity, unless the
commodity cannot reasonably be procured in the United States in
fulfillment of the objectives of a particular assistance program under
which such commodity procurement is to be financed. (22 U.S.C. 2354)
(b) Motor vehicles must be manufactured in the United States to be
eligible for USAID financing. Also, any vehicle to be financed by USAID
under a long-term lease or where the sale is to be guaranteed by USAID
must be manufactured in the United States. (22 U.S.C. 2396) For
purposes of this section, motor vehicles are defined as self-propelled
vehicles with passenger carriage capacity, such as highway trucks,
passenger cars and buses, motorcycles, scooters, motorized bicycles and
utility vehicles. Also, for purposes of this section, a long-term lease
is defined as a single lease of more than 180 days, or repetitive or
intermittent leases under a single project or program within a one-year
period totalling more than 180 days. In addition to the above
requirements, passenger cars, light trucks, vans, minivans and utility
vehicles must be manufactured by either Chrysler, Ford or General
Motors and bear their nameplates, brand names or logos, to be eligible
for financing by USAID. The nameplate, brand name or logo requirements
do not apply when vehicles are procured under a source waiver.
(c) Pharmaceutical products must be manufactured in the United
States in order to be eligible for USAID financing.
Sec. 228.14 Nationality of suppliers of commodities.
(a) The rules on nationality of suppliers of commodities relate
only to the suppliers, and not to the commodities they supply. The
nationality of the supplier is an additional eligibility criterion to
the rules on source, origin and componentry.
(b) A supplier providing commodities must fit one of the following
categories for the transaction to be eligible for USAID financing:
(1) An individual who is a citizen or a lawfully admitted permanent
resident of a country or area included in the authorized geographic
source code, except as provided in paragraph (c) of this section;
(2) A corporation or partnership organized under the laws of a
country or area included in the authorized geographic source code and
with a place of business in such country;
(3) A controlled foreign corporation (within the meaning of section
957 et seq. of the Internal Revenue Code) as attested by current
information on file with the Internal Revenue Service of the United
States (on IRS Form 959, 2952, 3646, or on substitute or successor
forms) submitted by shareholders of the corporation; or
(4) A joint venture or unincorporated association consisting
entirely of individuals, corporations, or partnerships which are
eligible under either paragraph (b) (1), (2) or (3) of the section.
(c) Citizens of any country or area, or firms or organizations
located in, organized under the laws of, or owned in any part by
citizens or organizations of any country or area not included in
Geographic Code 935 are ineligible for financing by USAID as suppliers
of commodities. Limited exceptions to this rule are:
(1) Individuals lawfully admitted for permanent residence in the
United States are eligible, as individuals or owners, regardless of
their citizenship; and
(2) The USAID Deputy Assistant Administrator for Management (DAA/M)
may authorize the eligibility of organizations having minimal ownership
by citizens or organizations of non-Geographic Code 935 countries.
Subpart C--Conditions Governing the Eligibility of Commodity-
Related Services for USAID Financing
Sec. 228.20 Purpose.
Sections 228.21 through 228.25 set forth the rules governing the
eligibility of commodity-related services, both delivery services and
incidental services, for USAID financing. These rules may be waived in
accordance with the provisions in subpart F of this part. The rules on
delivery services apply whether or not USAID is also financing the
commodities being transported. In order to be identified and eligible
as incidental services, such services must be connected with a USAID-
financed commodity procurement.
Sec. 228.21 Ocean transportation.
The eligibility of ocean transportation services is determined by
the flag registry of the vessel.
(a) When the authorized source for procurement is Geographic Code
000 (U.S.A.), USAID will finance ocean transportation only on U.S. flag
vessels.
(b) When the authorized source for procurement is Geographic Code
941 (selected Free World), USAID will finance ocean transportation on
vessels under flag registry of the United States, other countries in
Geographic Code 941, and the cooperating country.
(c) When commodities whose eligibility is restricted to Geographic
Code 000 are purchased under agreements which authorize Geographic Code
941 for the procurement of all other commodities, USAID will finance
the ocean transportation in accordance with paragraph (b) of this
section.
(d) USAID will finance costs incurred on vessels under flag
registry of any Geographic Code 899 (Free World) country if the costs
are part of the total cost on a through bill of lading that is paid to
a carrier for initial carriage on a vessel which is eligible in
accordance with paragraphs (a), (b) or (c) of this section.
Sec. 228.22 Air transportation.
(a) The eligibility of air transportation is determined by the flag
registry of the aircraft. The term ``U.S.'' flag air carrier'' means
one of a class of air carriers holding a certificate under Section 401
of the Federal Aviation Act of 1958 (49 U.S.C. 1371) authorizing
operations between the United States or its territories and one or more
foreign countries.
[[Page 4243]]
(b) For air transport financed under USAID grants, there is a U.S.
Government statute that requires the use of U.S. flag air carriers for
all international air travel and transportation, unless such service is
not available. When U.S. flag air carriers are not available, any
Geographic Code 935 flag air carrier may be used.
(c) Different requirements may be authorized in the implementing
document if the transaction is financed under a USAID loan.
(d) The Comptroller General's memorandum (B-138942), dated March
31, 1981, entitled ``Revised Guidelines for Implementation of the Fly
America Act'', established criteria for determining when U.S. flag air
carriers are unavailable. See 48 CFR 47.403-1, or USAID Optional
Standard Provision on ``Air Travel and Transportation'' for grants and
cooperative agreement.
(e) While the Comptroller General's memorandum does not establish
specific criteria for determining when freight service is unavailable,
it is USAID's policy that such service is not available when the
following criteria are met:
(1) When no U.S. flag air carrier provides scheduled air freight
service from the airport serving the shipment's point of origin and a
non-U.S. flag carrier does;
(2) When the U.S. flag air carrier(s) serving the shipment's point
of origin decline to issue a through air waybill for transportation at
the shipment's final destination airport;
(3) When use of a U.S.-flag air carrier would result in delivery to
final destination at least seven days later than delivery by means of a
non-U.S. flag carrier;
(4) When the total weight of the consignment exceeds the maximum
weight per shipment which the U.S. flag air carrier will accept and
transport as a single shipment and a non-U.S. flag air carrier will
accept and transport the entire consignment as a single shipment;
(5) When the dimensions (length, width, or height) of one or more
of the items of a consignment exceed the limitations of the U.S. flag
aircraft's cargo door opening, but do not exceed the acceptable
dimensions for shipment on an available non-U.S. flag scheduled air
carrier.
Sec. 228.23 Eligibility of marine insurance.
The eligibility of marine insurance is determined by the country in
which it is ``placed''. Insurance is ``placed'' in a country if payment
of the insurance premium is made to, and the insurance policy is issued
by, an insurance company office located in that country. Eligible
countries for placement are governed by the authorized geographic code.
However, if Geographic Code 941 is authorized, the cooperating country
is also eligible to provide such services, unless the implementing
document specified otherwise based on the following:
(a) If a cooperating country discriminates against marine insurance
companies authorized to do business in any State of the United States,
then all USAID-financed goods for that country must be insured in the
United States against marine risk. The term ``authorized to do business
in any State of the United States'' means that foreign-owned insurance
companies licensed to do business in the United States (by any State)
are treated the same as comparable U.S.-owned companies.
(b) The prima facie test of discrimination is that a cooperating
country takes actions which hinder private importers in USAID-financed
transactions from making cost, insurance and freight (C.I.F.) or cost
and insurance (C.&I.) contracts with United States commodity suppliers,
or which hinder importers in instructing such suppliers to place marine
insurance with companies authorized to do business in the United
States.
(c) When discrimination is found to exist and the cooperating
country fails to correct the discriminatory practice, USAID requires
that all commodities procured with USAID funds be insured in the United
States against marine loss. The decision of any cooperating country to
insure all public sector procurements locally with a government-owned
insurance agency is not considered discrimination.
Sec. 228.24 Other delivery services.
No source or nationality rules apply to other delivery services,
such as export packing, loading, commodity inspection services, and
services of a freight forwarder. Such services are eligible in
connection with a commodity which is financed by USAID.
Sec. 228.25 Incidental services.
Source and nationality rules do not apply to suppliers of
incidental services specified in a purchase contract relating to
equipment. However, citizens or firms of any country not included in
USAID Geographic Code 935 are ineligible to supply incidental services,
except that individuals lawfully admitted for permanent residence in
the U.S. are eligible regardless of their citizenship.
Subpart D--Conditions Governing the Nationality of Suppliers of
Services for USAID Financing
Sec. 228.30 Purpose.
Sections 228.31 through 228.37 set forth the nationality rules
governing the eligibility for USAID financing of services which are not
commodity-related. These rules may be waived in accordance with the
provisions in subpart F of this part.
Sec. 228.31 Privately owned commercial suppliers.
(a) A supplier providing services must fit one of the following
categories to be eligible as a contractor (personal services
contractors are not included under the term ``contractor'' in this
section) or as a subcontractor. In the case of the categories described
in paragraphs (a)(2) (i) and (ii) of this section, the certification
requirements in paragraph (b) of this section must be met.
(1) The supplier is an individual who is a citizen of and whose
principal place of business is in a country or area included in the
authorized geographic code, or a non-U.S. citizen lawfully admitted for
permanent residence in the United States whose principal place of
business is in the United States;
(2) The supplier is a privately owned commercial (i.e., for profit)
corporation or partnership that is incorporated or legally organized
under the laws of a country or area included in the authorized
geographic code, has its principal place of business in a country or
area included in the authorized geographic code, and meets the criteria
set forth in either paragraph (a)(2) (i) or (ii) of this section.
(i) The corporation or partnership is more than 50 percent
beneficially owned by individuals who are citizens of a country or area
included in the authorized geographic code or non-U.S. citizens
lawfully admitted for permanent residence in the United States. In the
case of corporations, ``more than 50 percent beneficially owned'' means
that more than 50 percent of each class of stock is owned by such
individuals; in the case of partnerships, ``more than 50 percent
beneficially owned'' means that more than 50 percent of each category
of partnership interest (e.g., general, limited) is owned by such
individuals. (With respect to stock or interest held by companies,
funds or institutions, the ultimate beneficial ownership by individuals
is controlling.)
(ii) The corporation or partnership:
(A) Has been incorporated or legally organized in the United States
for more
[[Page 4244]]
than 3 years prior to the issuance date of the invitation for bids or
request for proposals,
(B) Has performed within the United States administrative and
technical, professional, or construction services, similar in
complexity, type and value to the services being contracted (under a
contract, or contracts, for services) and derived revenue therefrom in
each of the 3 years prior to the date described in the paragraph
(a)(2)(i)(A) of this section,
(C) Employs United States citizens and non-U.S. citizens lawfully
admitted for permanent residence in the United States in more than half
its permanent full-time positions in the United States and more than
half of its principal management positions, and
(D) Has the existing technical and financial capability in the
United States to perform the contract.
(3) The supplier is a joint venture or an unincorporated
association consisting entirely of individuals, corporations,
partnerships, or nonprofit organizations which are eligible under
paragraphs (a) or (b) of this section or Sec. 228.32.
(b) A duly authorized officer of a firm or nonprofit organization
shall certify that the participating firm or nonprofit organization
meets either the requirements of paragraphs (a)(2)(i) or (ii) of this
section or Sec. 228.32. In the case of corporations, the certifying
officer shall be the corporate secretary. With respect to the
requirements of paragraph (a)(2)(i) of this section, the certifying
officer may presume citizenship on the basis of the stockholders'
record address, provided the certifying officer certifies, regarding
any stockholder (including any corporate fund or institutional
stockholder) whose holdings are material to the corporation's
eligibility, that the certifying officer knows of no fact which might
rebut that presumption.
Sec. 228.32 Nonprofit organizations.
(a) Nonprofit organizations, such as educational institutions,
foundations, and associations, must meet the criteria listed in this
section and the certification requirement in Sec. 228.31(b) to be
eligible as contractors or subcontractors for services. Any such
institution must:
(1) Be organized under the laws of a country or area included in
the authorized geographic code;
(2) Be controlled and managed by a governing body, a majority of
whose members are citizens of countries or areas included in the
authorized geographic code; and
(3) Have its principal facilities and offices in a county or area
included in the authorized geographic code.
(b) International agricultural research centers and such other
international research centers as may be, from time to time, formally
listed as such by the USAID Assistant Administrator, Global Bureau, are
considered to be of U.S. nationality.
Sec. 228.33 Foreign government-owned organizations.
Firms operated as commercial companies or other organizations
(including nonprofit organizations other than public educational
institutions) which are wholly or partially owned by foreign
governments or agencies thereof are not eligible for financing by USAID
as contractors or subcontractors, except if their eligibility has been
established by a waiver approved by USAID in accordance with
Sec. 228.54. This does not apply to foreign government ministries or
agencies.
Sec. 228.34 Joint ventures.
A joint venture or unincorporated association is eligible only if
each of its members is eligible in accordance with Sec. 228.31,
Sec. 228.32, or Sec. 228.33.
Sec. 228.35 Construction services from foreign-owned local firms.
(a) When the estimated cost of a contract for construction services
is $5 million or less and only local firms will be solicited, a local
corporation or partnership which does not meet the test in
Sec. 228.31(b)(1) for eligibility based on ownership by citizens of the
cooperating country (i.e., it is a foreign-owned local firm) will be
eligible if it is determined by USAID to be an integral part of the
local economy. However, such a determination is contingent on first
ascertaining that no United States construction company with the
required capability is currently operating in the cooperating country
or, if there is such a company, that it is not interested in bidding
for the proposed contract.
(b) A foreign-owned local firm is an integral part of the local
economy provided:
(1) It has done business in the cooperating country on a continuing
basis for not less than three years prior to the issuance date of
invitations for bids or requests for proposals to be financed by USAID;
(2) It has a demonstrated capability to undertake the proposed
activity;
(3) All, or substantially all, of its directors of local
operations, senior staff and operating personnel are resident in the
cooperating country;
(4) Most of its operating equipment and physical plant are in the
cooperating country.
Sec. 228.36 Ineligible suppliers.
Citizens of any country or area not included in Geographic Code
935, and firms and organizations located in, organized under the laws
of, or owned in any part by citizens or organizations of any country or
area not included in Geographic Code 935 are ineligible for financing
by USAID as suppliers of services, or as agents in connection with the
supply of services. The limited exceptions to this rule are:
(a) Individuals lawfully admitted for permanent residence in the
United States are eligible, as individuals or owners, regardless of
their citizenship, and
(b) The USAID Deputy Assistant Administrator for Management (DAA/M)
may authorize the eligibility of organizations having minimal ownership
by citizens or organizations of non-Geographic Code 935 countries.
Sec. 228.37 Nationality of employees under contracts or subcontracts
for services.
(a) The rules set forth in Secs. 228.31 through 228.36 do not apply
to the employees of contractors or subcontractors. Such employees must,
however, be citizens of countries included in Geographic Code 935 or,
if they are not, have been lawfully admitted for permanent residence in
the United States.
(b) When the contractor on a USAID-financed construction project is
a United States firm, at least half of the supervisors and other
specified key personnel working at the project site must be citizens or
permanent legal residents of the United States. Exceptions may be
authorized by the USAID Mission in writing if special circumstances
exist which make compliance impractical.
Sec. 228.38 Miscellaneous service transactions.
This section sets forth rules governing certain services which may
be considered commodity-related, but may also relate to contracts for
professional, technical, or construction services.
(a) Commissions. The nationality rules in subparts C and D of this
part, with the exception of Sec. 228.36, do not apply to the payment of
commissions by suppliers. A commission is defined as any payment or
allowance by a supplier to any person for the contribution which the
person has made to securing the sale or contract for the supplier or
which that person makes to securing on a continuing basis similar sales
or contracts for the supplier.
[[Page 4245]]
(b) Bonds and guarantees. The nationality rules in subparts C and D
of this part, with the exception of Sec. 228.36, do not apply to surety
companies, insurance companies or banks who issue bonds or guarantees
under USAID-financed contracts.
(c) Liability insurance under construction contracts. The
nationality rules in subparts C and D of this part, with the exception
of Sec. 228.36, do not apply to firms providing liability insurance
under construction contracts.
Subpart E--Conditions Governing Source and Nationality of Local
Procurement Transactions for USAID Financing
Sec. 228.40 Local procurement.
Local procurement in the cooperating country involves the use of
appropriated funds to finance the procurement of goods and services
supplied by local businesses, dealers or producers, with payment
normally being in the currency of the cooperating country. Unless
otherwise specified in an implementing document, or a waiver is
approved by USAID in accordance with subpart F of this part, local
procurement is eligible for USAID financing only in the following
situations:
(a) Locally available commodities of U.S. origin, which are
otherwise eligible for financing, if the value of the transaction is
estimated not to exceed the local currency equivalent of $100,000
(exclusive of transportation costs).
(b) Commodities of Geographic Code 935 origin if the value of the
transaction does not exceed $5,000.
(c) Professional services contracts estimated not to exceed the
local currency equivalent of $250,000.
(d) Construction services contracts, including construction
materials required under the contract, estimated not to exceed the
local currency equivalent of $5,000,000.
(e) Under a fixed-price construction contract of any value, the
U.S. prime contractor may procure locally produced goods and services
under subcontracts.
(f) The following commodities and services which are only available
locally:
(1) Utilities, including fuel for heating and cooking, waste
disposal and trash collection;
(2) Communications--telephone, telex, facsimile, postal and courier
services;
(3) Rental costs for housing and office space;
(4) Petroleum, oils and lubricants for operating vehicles and
equipment;
(5) Newspapers, periodicals and books published in the cooperating
country;
(6) Other commodities and services (and related expenses) that, by
their nature or as a practical matter, can only be acquired, performed,
or incurred in the cooperating country, e.g., vehicle maintenance,
hotel accommodations, etc.
Subpart F--Waivers
Sec. 228.50 General.
USAID may expand the authorized source in order to accomplish
project or program objectives by processing a procurement source
waiver. When a waiver is processed to include a new source, procurement
is not limited to the added source, but may be from any country
included in the authorized source. All waivers must be in writing.
Sec. 228.51 Commodities.
(a) Waiver criteria. Any waiver must be based upon one of the
criteria listed below. Waivers to Geographic Code 899 or Code 935 which
are justified under paragraph (a) (2) or (3) of this section may only
be authorized on a case-by-case basis.
(1) Commodities required for assistance are of a type that are not
produced in and available for purchase in the United States, and for
waivers to Code 899 or Code 935, also not in the cooperating country,
or any country in Code 941.
(2) It is necessary to permit procurement in a country not
otherwise eligible in order to meet unforeseen circumstances, such as
emergency situations.
(3) It is necessary to promote efficiency in the use of United
States foreign assistance resources, including to avoid impairment of
foreign assistance objectives.
(4) For waivers to authorize procurement from Geographic Code 941
or the cooperating country:
(i) For assistance other than commodity import programs, when the
lowest available delivered price from the United States is reasonably
estimated to be 50 percent or more higher than the delivered price from
a country or area including in Geographic Code 941 or the cooperating
country.
(ii) For assistance other than commodity import programs, when the
estimated cost of U.S. construction materials (including transportation
and handling charges) is at least 50 percent higher than the cost of
locally produced materials.
(iii) For commodity import programs or similar sector assistance,
an acute shortage exists in the United States for a commodity generally
available elsewhere.
(iv) Persuasive political considerations.
(v) Procurement in the cooperating country would best promote the
objectives of the foreign assistance program.
(vi) Such other circumstances as are determined to be critical to
the success of project objectives.
(b) Additional requirements. A waiver to authorize procurement from
outside the United States of agricultural commodities, motor vehicles,
or pharmaceuticals (see Sec. 228.13, ``Special source rules requiring
procurement from the United States,'') must also meet requirements
established in USAID directives on commodity eligibility.
Sec. 228.52 Suppliers of commodities.
Geographic code changes authorized by waiver with respect to the
source of commodities automatically apply to the nationality of their
suppliers. A waiver to effect a change in the geographic code only with
respect to the nationality of the supplier of commodities, but not in
the source of the commodities, may be sought if the situation requires
it based on the appropriate criteria in Sec. 228.51.
Sec. 228.53 Suppliers of services--privately owned commercial
suppliers and nonprofit organizations. Waiver criteria.
Any waiver must be based upon one of the criteria listed in this
section. Waivers to Geographic Code 899 or Code 935 which are justified
under paragraphs (b) or (c) of this section may only be authorized on a
case-by-case basis.
(a) Services required for assistance are of a type that are not
available for purchase in the United States, and for waivers to Code
899 or Code 935, also not in the cooperating country, or any country in
Code 941.
(b) It is necessary to permit procurement in a country not
otherwise eligible in order to meet unforeseen circumstances, such as
emergency situations.
(c) It is necessary to promote efficiency in the use of United
States foreign assistance resources, including to avoid impairment of
foreign assistance objectives.
(d) For waivers to authorize procurement from Geographic Code 941
or the cooperating country:
(1) There is an emergency requirement for which non-USAID funds are
not available and the requirement can be met in time only from
suppliers in a country or area not included in the authorized
geographic code.
[[Page 4246]]
(2) No suppliers from countries or areas included in the authorized
geographic code are able to provide the required services.
(3) Persuasive political considerations.
(4) Procurement of locally available services would best promote
the objectives of the foreign assistance program.
(5) Such other circumstances as are determined to be critical to
the achievement of project objectives.
Sec. 228.54 Suppliers of services--foreign government-owned
organizations.
A waiver to make foreign government-owned organizations, described
in Sec. 228.33, eligible for financing by USAID must be justified on
the basis of the following criteria:
(a) The competition for obtaining a contract will be limited to
cooperating country firms/organizations meeting the criteria set forth
in Sec. 228.31 or Sec. 228.32.
(b) The competition for obtaining a contract will be open to firms
from countries or areas included in the authorized geographic code and
eligible under the provisions of Sec. 228.31 or Sec. 228.32, and it has
been demonstrated that no U.S. firm is interested in competing for the
contract.
(c) Services are not available from any other source.
(d) Foreign policy interests of the United States outweigh any
competitive disadvantage at which United States firms might be placed
or any conflict of interest that might arise by permitting a foreign
government-owned organization to compete for the contract.
Sec. 228.55 Delivery services.
(a) Ocean transportation. A waiver to expand the flag eligibility
requirements to allow the use of vessels under flag registry of the
cooperating country, Geographic Code 941, 899 or 935 countries may be
authorized when:
(1) It is necessary to assure adequate competition in the shipping
market in order to obtain competitive pricing, particularly in the case
of bulk cargoes and large cargoes carried by liners;
(2) Eligible vessels provide liner service, only by transshipment,
for commodities that cannot be containerized, and vessels under flag
registry of countries to be authorized by the waiver provide liner
service without transshipment;
(3) Eligible vessels are not available, and cargo is ready and
available for shipment, provided it is reasonably evident that delaying
shipment would increase costs or significantly delay receipt of the
cargo;
(4) Eligible vessels are found unsuitable for loading, carriage, or
unloading methods required, or for the available port handling
facilities;
(5) Eligible vessels do not provide liner service from the port of
loading stated in the procurement's port of export delivery terms,
provided the port is named in a manner consistent with normal trade
practices; or
(6) Eligible vessels decline to accept an offered consignment.
(b) Air transportation. The preferences for use of United States
flag air carriers or for use of United States, other Geographic Code
941 countries, or cooperating country flag air carriers are not subject
to waiver. Other free world air carriers may be used only as provided
in Sec. 228.05(b).
Sec. 228.56 Authority to approve waivers.
The authority to approve waivers of established policies on source,
origin and nationality are delegated authorities within USAID, as set
forth in its Handbooks.
Dated: December 6, 1995.
Michael D. Sherwin,
Deputy Assistant Administrator for Management.
[FR Doc. 96-2288 Filed 2-2-96; 8:45 am]
BILLING CODE 6116-01-M
