E7-5480. Defense Federal Acquisition Regulation Supplement; Prohibition on Acquisition from Communist Chinese Military Companies (DFARS Case 2006-D007)

AGENCY:

Defense Acquisition Regulations System, Department of Defense (DoD).

ACTION:

Final rule.

SUMMARY:

DoD has adopted as final, without change, an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement Section 1211 of the National Defense Authorization Act for Fiscal Year 2006. Section 1211 prohibits DoD from acquiring United States Munitions List items from Communist Chinese military companies.

EFFECTIVE DATE:

March 27, 2007.

FOR FURTHER INFORMATION CONTACT:

Ms. Amy Williams, Defense Acquisition Regulations System, OUSD(AT&L)DPAP(DARS), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone [phone]; facsimile [phone]. Please cite DFARS Case 2006-D007.

SUPPLEMENTARY INFORMATION:

A. Background

DoD published an interim rule at 71 FR 53045 on September 8, 2006, to implement Section 1211 of the National Defense Authorization Act for Fiscal Year 2006 (Public Law 109-163). Section 1211 prohibits DoD from acquiring goods or services, through a contract or a subcontract with a Communist Chinese military company, if the goods or services being acquired are on the munitions list of the International Trafficking in Arms Regulations (the United States Munitions List (USML) at 22 CFR Part 121).

One source submitted comments on the interim rule. That source recommended addition of an exception to the policy that, before issuance of a solicitation, the requirements activity must notify the contracting officer whether the items to be acquired are on the USML. The exception would apply to items that include critical military technology, since those items are already subject to controls that limit issuance of the solicitation and the associated technical data package to United States and Canadian firms.

DoD does not agree with the recommended change. A company located in the United States or Canada could fall within the definition of a Communist Chinese military company if it is owned or controlled by, or affiliated with, an element of the Government or armed forces of the People's Republic of China. Also, the prohibition applies to subcontracts as well as contracts. An item of critical military technology could contain a subcontracted component that is not subject to the same controls as the end item, but is on the USML. Therefore, the contracting officer needs the specified notification from the requirements activity to identify all USML items and to ensure that the clause at DFARS 252.225-7007 is included in solicitations and contracts for those items.

This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

DoD certifies 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 the rule affects only those entities that are a part of the industrial base of the People's Republic of China or that are owned or controlled by, or affiliated with, an element of the Government or armed forces of the People's Republic of China.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply, because the rule does not impose any 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

Michele P. Peterson,

Editor, Defense Acquisition Regulations System.

Interim Rule Adopted as Final Without Change

Accordingly, the interim rule amending 48 CFR Parts 225 and 252, which was published at 71 FR 53045 on September 8, 2006, is adopted as a final rule without change.