Homeland Security Acquisition Regulation, Restrictions on Foreign Acquisition Update (HSAR Case 2024-002)

AGENCY:

Office of the Chief Procurement Officer, Department of Homeland Security (DHS).

ACTION:

Proposed rule.

SUMMARY:

DHS is proposing to amend the Homeland Security Acquisition Regulation (HSAR) provisions that relate to the Kissell Amendment, a section of the American Recovery and Reinvestment Act of 2009 that deals with the acquisition of certain clothing, canvas or textile products and natural and synthetic fabrics. DHS believes these proposed changes would help reduce confusion and provide clarity to the requirements under the Kissell Amendment.

DATES:

Comments on the proposed rule should be submitted in writing to one of the addresses shown below on or before September 23, 2024, to be considered in the formation of the final rule.

ADDRESSES:

Submit comments identified by HSAR Case 2024-002, Restrictions on Foreign Acquisition Update, using any of the following methods:

• Regulations.gov: http://www.regulations.gov .

Submit comments via the Federal eRulemaking portal by entering “HSAR Case 2024-002” under the heading “Enter Keyword or ID” and select “Search.” Select the link “Submit a Comment” that corresponds with “HSAR Case 2024-002.” Follow the instructions provided at the “Submit a Comment” screen. Please include your name, company name (if any), and “HSAR Case 2024-002” on your attached document.

• Fax: (202) 447-0520.
• Mail: Department of Homeland Security, Office of the Chief Procurement Officer, MS 0080, ATTN: Ms. Nancy Harvey, 6595 Springfield Center Dr., Springfield, VA 20598-0080.

Comments received generally will be posted without change to http://www.regulations.gov, including any personal information provided. To confirm receipt of your comment(s), please check www.regulations.gov, approximately two to three days after submission to verify posting (except allow 30 days for posting of comments submitted by mail).

FOR FURTHER INFORMATION CONTACT:

Nancy Harvey, Department of Homeland Security, Office of the Chief Procurement Officer, Acquisition Policy and Legislation, at (202) 282-8000 or email at HSAR@hq.dhs.gov. Include HSAR Case 2024-002 in the subject line.

SUPPLEMENTARY INFORMATION:

I. Background

The Buy American Act of 1933, as amended (BAA), addresses preferences in Federal procurement. The BAA provides a preference for the purchase of domestic supplies (or domestic end products) and domestic construction materials.

In 2009, the American Recovery and Reinvestment Act of 2009 (Recovery Act), was enacted. Section 604 of the Recovery Act is also, known as the Kissell Amendment. The Kissell Amendment requires, with limited exceptions, that funds appropriated or otherwise available to DHS may not be used for the procurement of certain textiles, clothing and footwear, if that item is directly related to the national security interests of the United States, unless the item is grown, reprocessed, reused, or produced in the United States. One of the exceptions is a De Minimis Exception, which allows the Secretary of Homeland Security to accept delivery of the aforementioned textiles, clothing and footwear “that contain non-compliant fibers if the total value of non-compliant fibers contained in the end item does not exceed 10 percent of the total purchase price of the end item.”

The Kissel Amendment further requires DHS to apply it in a manner consistent with United States obligations under international agreements. As DHS has explained in prior notices, this includes free trade agreements and the World Trade Organization Agreement on Government Procurement. These requirements apply with respect to contracts entered into by DHS on or after August 16, 2009.

The implementing regulations for the BAA are in the Federal Acquisition Regulation (FAR). Chapter 30 of 48 CFR, known as the Homeland Security Acquisition Regulation (HSAR), applies specifically to DHS.

In 2009, DHS published an interim rule with request for comments (“2009 Interim Rule”) amending the HSAR at 48 CFR part 3025, Foreign Acquisitions, and part 3052, Solicitation Provisions and Contract Clauses, incorporating the Kissell Amendment requirements. In 2010, DHS published a final rule (“2010 Final Rule”) adopting the 2009 Interim Rule as final without change. The 2009 Interim Rule made amendments to the HSAR “to add solicitation provisions, contract clauses and related policy statements implementing these requirements and exceptions for certain DHS contracts, option exercises and orders.” The provisions of 48 CFR 3025.70 were limited to “exercising of an option and orders entered into on or after August 16, 2009 with funds appropriated or otherwise provided on or before February 17, 2009.”

The 2009 Interim Rule, among other changes, also created regulatory definitions, such as the term “end product” which, for purposes of 48 CFR 3025.70, and under 48 3052.225-70 “means supplies delivered under a line item of a contract.” The term `end product' was further referenced throughout these parts.

The regulations also provide a list of the types of textile items included in the restriction (such as certain yarn, wool, and cotton), explain the specific application of trade agreements, and require, with some exceptions, the use of domestic goods for procurement of Kissell-covered items. One such exception is for “incidental amounts of cotton, other natural fibers, or wool incorporated in an end product, for which the estimated value of the cotton, other natural fibers, or wool is not more than 10 percent of the total price of the end product.”

DHS notes that the DHS Chief Procurement Officer can issue HSAR deviations when necessary to allow components to deviate from the HSAR. On March 5, 2013, DHS issued a deviation regarding the applicability of the Kissell Amendment (Deviation 13-01). As discussed above, the provisions of 48 CFR 3025.70 were limited to “exercising of an option and orders entered into on or after August 16, 2009 with funds appropriated or otherwise provided on or before February 17, 2009.” Under Deviation 13-01, DHS deviates from the language of 48 CFR 3025.7000 that restricted application of certain Kissell provisions to those actions with funds appropriated or otherwise provided on or before February 17, 2009.

In addition, on March 14, 2013, DHS issued an amendment to Deviation 13-01 (“Deviation Amendment 1”). Under Deviation Amendment 1, the De Minimis Exception described above was to be read as applying to “incidental amounts of non-compliant fibers if the total value of non-compliant fibers contained in the end item does not exceed 10 percent of the total purchase price of the end item . . .”. Deviation 13-01 and Deviation Amendment 1 were both effective immediately at the time of their publication in 2013 and are still in effect.

DHS is proposing amendments to the HSAR at 48 CFR part 3025, Foreign Acquisitions, and at 48 CFR part 3052, Solicitation Provisions and Contract Clauses, to codify guidance in Deviation 13-01 and Deviation Amendment 1, and make additional revisions consistent with it.

II. Discussion and Analysis

DHS is proposing to amend the HSAR to better clarify how DHS complies with the Kissell Amendment, including proposing to codify certain guidance from Deviation 13-01 and Deviation Amendment 1.

DHS is also proposing to define the term `end item' to mean “supplies delivered under a line item of a contract.” See proposed48 CFR 3025.7001(c). DHS notes the proposed definition of `end item' is the current regulatory definition of end product. DHS is further proposing to replace the term “end product” with “end item” throughout 48 CFR part 3025 to reduce potential confusion through use of terminology consistent with the Kissell Amendment. As “end item” is the term used in the Kissell Amendment, DHS believes that defining and using the statutory term `end item' instead of the term `end product' in the HSAR provisions applicable to the Kissell Amendment would also provide clarity.

DHS is further proposing to amend 48 CFR 3025.7000, to explain that this provision applies to the Kissell Amendment, the subject of this subpart; and it would also amend the description of the type of funds to which the Kissell Amendment applies consistent with current practice and Deviation 13-01. The Kissell Amendment applies “with respect to contracts entered into by the Department of Homeland Security 180 days after February 17, 2009.” However, DHS, as part of the 2009 Interim Final Rule interpreted the restriction as applying to contracts, options and orders entered into on or after August 16, 2009, with funds appropriated or otherwise provided on or before February 17, 2009. This meant that DHS applied the restriction to only those awards supported by funding appropriated or otherwise made available to DHS on or before February 17, 2009, including those funds that were no-year or multi-year. After reevaluating DHS's prior interpretation, DHS determined initial assessment of the funds to which the restriction applies was too limiting and excluded contracts that could be covered by the statute. DHS issued Deviation 13-01 on March 5, 2013, announcing DHS would deviate from the current HSAR and that the Kissell Amendment would apply to “contracts, exercising of an option and orders entered into on or after August 16, 2009.”

Therefore, DHS is proposing to amend HSAR section 3025.7000, to remove the regulatory text added by the 2009 Interim Rule that restricted applicability of the Kissell Amendment to contracts, options and orders entered into on or after August 16, 2009 with funds appropriated or otherwise provided on or before February 17, 2009. This proposed change is consistent with current practice and Deviation 13-01.

DHS is also proposing to revise the introductory text of 48 CFR 3025.7002-1, Restrictions, to codify that the Kissell Amendment applies to all contracts, options and orders entered into on or after August 16, 2009. This proposed change is consistent with current practice and Deviation 13-01.

Similar to the proposed changes discussed above to replace the term `end product' with `end item' DHS is proposing to amend 48 CFR 3025.7002-2, and update the provisions impacting the De Minimis Exception. As discussed above, the De Minimis Exception uses the term end item. But the 2009 Interim Rule uses the term `end product' in the regulatory provisions that apply to the De Minimis Exception. Since Deviation Amendment 1 was effective, DHS has read the provision as using the term `end item'. To reduce confusion, DHS is proposing to replace the term `end product' with `end item' and also make additional changes consistent with Deviation Amendment 1. See proposed48 CFR 3025.7002-2(g) and 3052.225-70(d)(2). Therefore, DHS is proposing these to reduce confusion and codify the current practice as directed by Deviation Amendment 1.

In addition DHS is proposing to make a technical amendment, amending 48 CFR 3025.7002-2(h), to fix a typographical error, and reference 48 CFR 3025.7003-3 when mentioning the regulatory provision for specific application of trade agreements.

III. Regulatory Analyses

A. Executive Orders 12866, 13563, and 14094

Executive Order 12866 (Regulatory Planning and Review), as amended by Executive Order 14094 (Modernizing Regulatory Review), and Executive Order 13563 (Improving Regulation and Regulatory Review) direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility.

The Office of Management and Budget (OMB) has not designated this rule a significant regulatory action under section 3(f) of Executive Order 12866, as amended by Executive Order 14094. Accordingly, OMB has not reviewed this regulatory action.

Need for the Rule

This proposed rule would codify requirements as set forth in the Deviation 13-01 and Deviation Amendment 1. To provide clarity and consistency, DHS proposes this HSAR revision to align with existing DHS practice. DHS is not newly implementing the Kissell Amendment, but is, as described above, amending the existing regulation to clarify the type of funds to which the Kissell Amendment, including the De Minimis Exception, applies.

Benefits and Costs of the Proposed Rule

The benefits and costs of a regulation are generally measured against a no-action baseline, which is a reasonable forecast of the way the world would look absent the regulatory action being assessed. This proposed rule would not result in new costs since DHS has implemented the proposed changes through Deviation 13-01 and Deviation Amendment 1, both issued in 2013. The proposed changes would promote clarity and fuller understanding of the Kissell Amendment regulatory requirements by agency contracting officers as well as potential DHS vendors. This additional clarity would be a benefit to industry as improved contracting officer understanding of the regulatory requirements helps ensure that DHS applies standards similarly across contracting actions, making it easier for industry to comply with DHS requirements. A summary of the costs and benefits of the rule is shown below in Exhibit 1.

B. Regulatory Flexibility Act

The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as amended by the Small Business Regulatory Enforcement Fairness Act of 1996, Public Law 104-121, (Mar. 29, 1996), requires Federal agencies to consider the potential impact of regulations on small businesses, small governmental jurisdictions, and small organizations during the development of their rules. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, or governmental jurisdictions with populations of less than 50,000. The proposed rule would provide clarity and consistency between the HSAR and existing DHS practice as set forth in Deviation 13-01 and Deviation Amendment 1. This proposed rule does not directly mandate any actions or requirements that would result in burdens for small entities. Therefore, DHS certifies this proposed rule would 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. DHS invites comments from members of the public regarding potential direct economic impacts on small entities.

C. Paperwork Reduction Act

The rule does not contain any information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. 3501-35210).

D. National Environmental Policy Act

Section 102 of the National Environmental Policy Act of 1969 (NEPA), Public Law 91-190, 83 Stat. 852 (Jan. 1, 1970) (42 U.S.C. 4321 et seq.), as amended, requires Federal agencies to evaluate the impacts of a proposed major Federal action that may significantly affect the human environment, consider alternatives to the proposed action, provide public notice and opportunity to comment, and properly document its analysis. DHS and its agency components analyze proposed actions to determine whether NEPA applies to them and, if so, what level of documentation and analysis is required.

DHS Directive 023-01, Rev. 01 and DHS Instruction Manual 023-01-001-01, Rev. 01 (Instruction Manual) establish the policies and procedures DHS and its component agencies use to comply with NEPA and the Council on Environmental Quality regulations for implementing NEPA codified in 40 CFR parts 1500-1508. The CEQ regulations allow Federal agencies to establish, in their implementing procedures, with CEQ review and concurrence, categories of actions (“categorical exclusions”) that experience has shown do not, individually or in the aggregate, have a significant effect on the human environment and, therefore, do not require preparation of an environmental assessment or environmental impact statement. 40 CFR 1501.4, 1507.3(e)(2)(ii). Appendix A of the Instruction Manual lists the DHS categorical exclusions.

Under DHS NEPA implementing procedures, for an action to be categorically excluded, it must satisfy each of the following three conditions: (1) the entire action clearly fits within one or more categorical exclusions; (2) the action is not a piece of a larger action; and (3) no extraordinary circumstances exist that create the potential for a significant environmental effect.

The proposed rule, if finalized, would amend the HSAR to better clarify how DHS complies with the Kissell Amendment. This would include codifying certain guidance from Deviation 13-01 and Deviation Amendment 1 that is currently in effect.

DHS is not aware of any significant impact on the environment, or any change in environmental effect that will result from this proposed rule. DHS finds promulgation of the rule clearly fits within categorical exclusion A3, established in the Department's NEPA implementing procedures.

This proposed rule is a standalone rule and is not part of any larger action. This proposed rule would not result in any major Federal action that would significantly affect the quality of the human environment. Furthermore, DHS has determined that no extraordinary circumstances exist that would create the potential for significant environmental effects. Therefore, this proposed rule is categorically excluded from further NEPA review and documentation.

List of Subjects in 48 CFR Parts 3025 and 3052

• Government procurement

Accordingly, for the reasons set forth in the preamble, DHS proposes to amend 48 CFR parts 3025 and 3052 as follows:

PART 3025—FOREIGN ACQUISITION

1. The authority citation for part 3025 continues to read as follows:

Authority: 5 U.S.C. 301-302, 41 U.S.C. 1303, 41 U.S.C. 1707, 41 U.S.C. 1702, and 48 CFR subpart 1.3.

2. Revise section 3025.7000 to read as follows:

3. In section 3025.7001 revise paragraphs (a) through (d) to read as follows:

4. Revise the introductory text to read as follows:

5. In section 3025.7002-2 revise paragraphs (d), (g), and (h) to read as follows:

PART 3052—SOLICITATION PROVISIONS AND CONTRACT CLAUSES

6. The authority citation for part 3052 continues to read as follows:

Authority: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, 41 U.S.C. 1303(a)(2), 48 CFR part 1, subpart 1.3, and DHS Delegation Number 0702.

7. In section 3052.225-70 revise the clause, date, paragraphs (a)(1) through (4), (b) introductory text, (c) introductory text, and (d)(2) to read as follows: