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Federal Register / Vol. 86, No. 165 / Monday, August 30, 2021 / Proposed Rules
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domestic or foreign under the Buy American statute 41 U.S.C. chapter 83.
Section 2ai of E.O. 13881 is not inconsistent with E.O. 14005, Ensuring the Future Is Made in All of America by All of Americas Workers, which supersedes E.O. 13881 to the extent that it is inconsistent with E.O. 14005. E.O.
13881 calls for more aggressive implementation of the Buy American statute to maximize the Governments procurement of American-made goods, products, and materials. The Buy American statute requires the purchase of domestic products both end products and construction materials, except for instances when the domestic product is not available, the domestic product is only available at an unreasonable cost, or it would not be in the public interest to buy the domestic product.
E.O. 13881 supersedes E.O. 10582, Prescribing Procedures for Certain Determinations under the Buy American Act, to the extent that it is inconsistent with E.O. 13881, by establishing that under the Buy American statute a product is foreign if the cost of the foreign components used in such end product constitutes 45 percent or more of the cost of all products used in such end products, except that iron and steel products are foreign if the cost of foreign iron and steel equals or constitutes 5
percent of the cost of all products used in iron and steel end products.
In order to promote economic and national security, stimulate economic growth, and create jobs, this rule proposes to strengthen domestic preferences under the Buy American statute by changing how a domestic product is defined, while also maintaining the exception to the statutory requirement for qualifying countries.
II. Discussion and Analysis The Buy American statute is implemented in Federal Acquisition Regulation FAR part 25. Revisions to the FAR to implement E.O. 13881 have been accomplished under FAR Case 2019016, published in the Federal Register on January 19, 2021 86 FR
6180. This rule proposes revisions to DFARS part 225 and the associated clauses to implement the DoD-unique requirements and conforming changes associated with implementation of E.O.
13881.
Revisions are proposed to the definitions of domestic end product and domestic construction material.
Specifically, these definitions are each broken into two paragraphs to differentiate between end products and construction material that consist wholly or predominantly of iron or steel
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or a combination of both, and those that do not. Per the revised definition of domestic end product, an end product that consists wholly or predominantly of iron or steel, or a combination of both, is only considered a domestic end product if the end product is manufactured in the United States, and the cost of iron and steel not produced in the United States, or a qualifying country, constitutes less than 5 percent of the cost of all the materials used in the end product. For domestic construction material, if the construction material consists wholly or predominantly of iron or steel, or a combination of both, then the cost of iron and steel not produced in the United States excluding fasteners must constitute less than 5 percent of the cost of all the components used in the construction material. As explained in the definition of foreign iron and steel at FAR 25.003, produced in the United States means that all manufacturing processes of the iron or steel must take place in the United States, from the initial melting stage through the application of coatings, except metallurgical processes involving refinement of steel additives.
The definition of a domestic end product is further revised to stipulate that if the end product does not consist wholly or predominantly of iron or steel, or a combination of both, then it is only considered a domestic end product if the end product is manufactured in the United States, and the cost of its qualifying country components and its components that are mined, produced, or manufactured in the United States exceeds 55 percent an increase from 50 percent of the cost of all its components. Similarly, for domestic construction material that does not consist wholly or predominantly of iron or steel, or a combination of both, the cost of its components mined, produced, or manufactured in the United States must exceed 55 percent an increase from 50
percent of the cost of all its components. In both cases, components of unknown origin are treated as foreign.
Conforming changes are made throughout the DFARS to implement the revised definitions, to include revisions to the description of the two-part test for domestic end products at DFARS
225.101. This rule also proposes definitions for the terms predominantly of iron or steel or a combination of both and steel, which are used in the revised definitions of domestic end product and domestic construction material.
Conforming changes are also made to redesignate paragraph numbers to
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reflect current drafting conventions in definitions for a number of clauses that are being updated.
No changes are proposed in this rule to implement the E.O. 13881 change to the percentage factor used to determine whether the offered price of material of domestic origin is unreasonable or inconsistent with public interest. E.O.
13881 increases the percentage factor from 6 percent to 20 percent for entities other than small businesses, and from 12 percent to 30 percent for small businesses. However, DoD already uses a 50 percent factor for both large and small businesses, so no change is necessary for DoD to comply with the increased percentage factors in E.O.
13881. In addition, E.O. 13881 does not remove any existing exemptions to the Buy American statute for products of qualifying countries; therefore, this rule does not include any proposed changes to the exemptions.
III. Applicability to Contracts at or Below the Simplified Acquisition Threshold and for Commercial Items, Including Commercially Available OffThe-Shelf Items This proposed rule does not add any new provisions or clauses, nor change the applicability of existing provisions or clauses to contracts at or below the simplified acquisition threshold and contracts for the acquisition of commercial items, including commercially available off-the-shelf items.
IV. Expected Impact of the Rule The current FAR contract clauses implementing the Buy American statute apply to a narrow set of procurements.
In addition, because the Federal Acquisition Regulatory Council retained the commercially available off-the-shelf COTS items exception for most COTS
items in its implementation of the E.O.
in the FAR, the heightened domestic content requirements will not be applicable to those procurements. See the final rule for FAR Case 2019016
published at 86 FR 6180 on January 19, 2021. This proposed DFARS rule takes the same approach.
Domestic industries supplying domestic end products are likely to benefit from a competitive advantage as a result of the FAR and DFARS
implementation. Based on the E.O., it is unclear if the pool of qualified suppliers would be reduced, resulting in less competition and a possible increase in prices that the Government will pay to procure these products. At least three arguments point to the likelihood that any increase in burden on contractors would be small, if not de minimis:

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