Qualifying Country exception for specialty metals

[Fara Fasat]

Do qualifying countries still have the large loophole that allowed them to use specialty metal from any source, whereas a US manufacturer has to use specialty metal from the US or a qualifying country? I thought this was one of the features of the pre-2009 version of the regs that the changes were supposed to address, because it created an uneven playing field between a US and a qualifying country manufacturer?

However, the current version of the clause (252.225-7009 still says there is an exception for "items manufactured in a qualifying country" which is nearly the same as the old wording, and which covered any item -- end item, part component, etc. This, despite the DFARS text which states the exception is only for the the six items listed in 252.7003-2(a) (tanks, ships, etc.), which presumably would only except one of those end items if it were manufactured in a qualifying country.

Did something get lost in translation between the text and the clause? Was the old loophole intentionally preserved?

[ron vogt]

A topic that silences even this forum? Is B_ _ _ _ A_ _ _ _ _ _ _ _ the name that none dare speak? Is no one willing to stake their name and reputation on an answer?

OK, here goes. First, the text of the law itself (10 USC 2533b) provides little help. It simply says there is an exception for purchases in furtherance of agreements with foreign countries.

Next, the DFARS text and the clause do not appear to match. The text states: "The restrictions in 225.7003-2 do not apply to the following: ... (4) Items listed in 225.7003-2(a), manufactured in a qualifying country...." The items listed in 2(a) are the 6 major end items, aircraft, missiles, ships, etc. Replacing "items listed" with an item would make it read as follows: "The restrictions in 225.7003-2 do not apply to aircraft manufactured in a qualifying country. This sounds like the exception only applies to an end item manufactured in a qualifying country.

But something happened on the way to the clause. The clause reads: "The restriction in paragraph ( B ) of this clause does not apply to -- ... (4) Items manufactured in a qualifying country." An end item is defined in the clause, but not an item. This would lead one to conclude that an item is different than an end item, and that the exception applies to any item manufactured in a qualifying country. This would mean that the uneven playing field was retained.

Apparently others think so as well. DoD's FAQs on specialty metals, in questions 18, 20, and 23, indicate that the qualifying country exception applies to parts and components of end items. Articles written about the new law and regulations say the same thing. Finally, in the Federal Register notice of the final rule (74 FR 37626), in response to a concern about the uneven playing field created by the qualifying country exception (comment 9), DoD's response was basically 'it's not a big deal.'

So I would have to conclude that the clause still allows an item manufactured in a qualifying country to use specialty metal from any source, while a US manufacturer of the same part could not. I wouldn't mind hearing a counter-argument, since this is a big problem for US manufacturers.