80 FR 38306 - Federal Acquisition Regulation; Prohibition on Contracting With Inverted Domestic Corporations-Representation and Notification
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION Federal Register Volume 80, Issue 127 (July 2, 2015)
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
Federal Register Volume 80, Issue 127 (July 2, 2015)
| Page Range | 38306-38307 | |
| FR Document | 2015-16208 |
[Federal Register Volume 80, Number 127 (Thursday, July 2, 2015)] [Rules and Regulations] [Pages 38306-38307] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-16208] ----------------------------------------------------------------------- DEPARTMENT OF DEFENSE GENERAL SERVICES ADMINISTRATION NATIONAL AERONAUTICS AND SPACE ADMINISTRATION 48 CFR Parts 1 and 52 [FAC 2005-83; FAR Case 2015-006; Item II; Docket No. 2015-0006, Sequence No. 1] RIN 9000-AM85 Federal Acquisition Regulation; Prohibition on Contracting With Inverted Domestic Corporations--Representation and Notification AGENCIES: Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA). ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: DoD, GSA, and NASA are issuing a final rule amending the Federal Acquisition Regulation (FAR) to require additional actions by contractors to assist contracting officers in ensuring compliance with the Governmentwide statutory prohibition on the use of appropriated (or otherwise made available) funds for contracts with any foreign incorporated entity that is an inverted domestic corporation or to any subsidiary of such entity. DATES: Effective: November 1, 2015. FOR FURTHER INFORMATION CONTACT: Mr. Michael O. Jackson, Procurement Analyst, at 202-208-4949, for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at 202-501-4755. Please cite FAC 2005-83, FAR Case 2015- 006. SUPPLEMENTARY INFORMATION: I. Background DoD, GSA, and NASA published a proposed rule in the Federal Register at 79 FR 74558 on December 15, 2014, to revise the provisions of the FAR that address the continuing Governmentwide statutory prohibition (in effect since fiscal year 2008) on the use of appropriated (or otherwise made available) funds for contracts with any foreign incorporated entity that is an inverted domestic corporation (under section 835 of the Homeland Security Act of 2002, codified at 6 U.S.C. 395) or any subsidiary of such entity. The rule modifies the existing representation and adds a requirement to notify the contracting officer if the contractor becomes an inverted domestic corporation, or a subsidiary of an inverted domestic corporation, during performance of the contract. One respondent submitted a comment in response to the proposed rule. II. Discussion and Analysis The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (the Councils) reviewed the comments in the development of the final rule. A discussion of the comments is provided as follows: A. Summary of Significant Changes There is no change from the proposed rule in response to the public comment received. B. Analysis of Public Comments Comment: The respondent stated that a particular contract is in violation of Federal law, because the contractor merged with a corporation outside the United States. Response: The Councils are not enforcement agencies, and are not in a position to assess whether the merger of two companies resulted in an entity that meets all the criteria in the applicable definition of ``inverted domestic corporation.'' This comment does not address the substance of the proposed rule, which proposed to require additional actions by contractors to assist contracting officers in ensuring compliance with the Governmentwide statutory prohibition on the use of appropriated (or otherwise made available) funds for contracts with any foreign incorporated entity that is an inverted domestic corporation (under 6 U.S.C. 395) or to any subsidiary of such entity. Contractors with the modified clause in their contracts will be required to make a positive representation with the offer as to their status as an inverted domestic corporation, and notify the contracting officer if they become an inverted domestic corporation during contract performance, as defined in the statute. The contracting activity will take appropriate action if the contractor notifies the Government in accordance with the clause that it has become an inverted domestic corporation, or if investigation by the appropriate Government agency determines that the contractor became an inverted domestic corporation during contract performance and failed to notify the Government of its change in status. III. Executive Orders 12866 and 13563 Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all 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). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804. IV. Regulatory Flexibility Act DoD, GSA, and NASA certify that this 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 this rule will only impact an offeror that is an inverted domestic corporation or a subsidiary of an inverted domestic corporation and wants to do business with the Government. It is expected that the number of small entities impacted by this rule will be minimal. Small business concerns are unlikely to have been incorporated in the United States (or, if a partnership, established in the United States) and then subsequently incorporated in a foreign country; the major participants in these transactions are reportedly large multinational corporations. For the definition of ``small business'', the Regulatory Flexibility Act refers to the Small Business Act, which in turn allows the U.S. Small Business Administration (SBA) Administrator to specify detailed definitions or standards (5 U.S.C. 601(3) and 15 U.S.C. 632(a)). The SBA regulations at 13 CFR 121.105 discuss who is a small business: ``(a)(1) Except for small agricultural cooperatives, a business concern eligible for assistance from SBA as a small business is a business entity organized for profit, with a place of business located in the United States, and which operates primarily within the United States or which makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor''. V. Paperwork Reduction Act The Paperwork Reduction Act (44 U.S.C. Chapter 35) applies. The rule contains information collection requirements. OMB has cleared this information collection requirement under OMB Control Number 9000-0190, [[Page 38307]] titled: Prohibition on Contracting with Inverted Domestic Corporations--Representation and Notification. List of Subjects in 48 CFR Parts 1 and 52 Government procurement. Dated: June 18, 2015. William F. Clark, Director, Office of Government-wide Acquisition Policy, Office of Acquisition Policy, Office of Government-wide Policy. Therefore, DoD, GSA, and NASA amend 48 CFR parts 1 and 52 as set forth below: 0 1. The authority citation for 48 CFR parts 1 and 52 continues to read as follows: Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 U.S.C. 20113. PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM 1.106 [Amended] 0 2. Amend section 1.106 in the table following the introductory text, by adding in numerical sequence, ``52.209-10'' and its corresponding OMB Control Number ``9000-0190''. PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES 0 3. Amend section 52.209-2 by revising the date of provision and paragraph (c) to read as follows: 52.209-2 Prohibition on Contracting With Inverted Domestic Corporations--Representation. * * * * * Prohibition on Contracting with Inverted Domestic Corporations-- Representation (Nov 2015) * * * * * (c) Representation. The Offeror represents that-- (1) It [squ] is, [squ] is not an inverted domestic corporation; and (2) It [squ] is, [squ] is not a subsidiary of an inverted domestic corporation. (End of provision) 0 4. Amend section 52.209-10 by revising the date of the clause; and adding paragraph (d) to read as follows: 52.209-10 Prohibition on Contracting with Inverted Domestic Corporations. * * * * * Prohibition on Contracting With Inverted Domestic Corporations (Nov 2015) * * * * * (d) In the event the Contractor becomes either an inverted domestic corporation, or a subsidiary of an inverted domestic corporation during contract performance, the Contractor shall give written notice to the Contracting Officer within five business days from the date of the inversion event. (End of clause) 0 5. Amend section 52.212-3 by revising the date of the provision and paragraph (n)(2) to read as follows: 52.212-3 Offeror Representations and Certifications--Commercial Items. * * * * * Offeror Representations and Certifications--Commercial Items (Nov 2015) * * * * * (n) * * * (2) Representation. The Offeror represents that-- (i) It [squ] is, [squ] is not an inverted domestic corporation; and (ii) It [squ] is, [squ] is not a subsidiary of an inverted domestic corporation. * * * * * 0 6. Amend section 52.212-5 by revising the date of the clause and paragraph (a)(1) to read as follows: 52.212-5 Contract Terms and Conditions Required to Implement Statutes or Executive Orders--Commercial Items. * * * * * Contract Terms and Conditions Required to Implement Statutes or Executive Orders--Commercial Items (Nov 2015) * * * * * (a) * * * (1) 52.209-10, Prohibition on Contracting with Inverted Domestic Corporations (Nov 2015). * * * * * [FR Doc. 2015-16208 Filed 7-1-15; 8:45 am] BILLING CODE 6820-EP-P
![38306 Federal Register / Vol. 80, No. 127 / Thursday, July 2, 2015 / Rules and Regulations
[FR Doc. 2015–16206 Filed 7–1–15; 8:45 am] contracting officer if the contractor and benefits of available regulatory
BILLING CODE 6820–EP–C becomes an inverted domestic alternatives and, if regulation is
corporation, or a subsidiary of an necessary, to select regulatory
inverted domestic corporation, during approaches that maximize net benefits
DEPARTMENT OF DEFENSE performance of the contract. (including potential economic,
One respondent submitted a comment environmental, public health and safety
GENERAL SERVICES in response to the proposed rule. effects, distributive impacts, and
ADMINISTRATION equity). E.O. 13563 emphasizes the
II. Discussion and Analysis
importance of quantifying both costs
NATIONAL AERONAUTICS AND The Civilian Agency Acquisition and benefits, of reducing costs, of
SPACE ADMINISTRATION Council and the Defense Acquisition harmonizing rules, and of promoting
Regulations Council (the Councils) flexibility. This is not a significant
48 CFR Parts 1 and 52 reviewed the comments in the regulatory action and, therefore, was not
[FAC 2005–83; FAR Case 2015–006; Item
development of the final rule. A subject to review under section 6(b) of
II; Docket No. 2015–0006, Sequence No. 1] discussion of the comments is provided E.O. 12866, Regulatory Planning and
as follows: Review, dated September 30, 1993. This
RIN 9000–AM85 rule is not a major rule under 5 U.S.C.
A. Summary of Significant Changes
804.
Federal Acquisition Regulation; There is no change from the proposed
Prohibition on Contracting With rule in response to the public comment IV. Regulatory Flexibility Act
Inverted Domestic Corporations— received. DoD, GSA, and NASA certify that this
Representation and Notification rule will not have a significant
B. Analysis of Public Comments
AGENCIES: Department of Defense (DoD), economic impact on a substantial
Comment: The respondent stated that number of small entities within the
General Services Administration (GSA),
a particular contract is in violation of meaning of the Regulatory Flexibility
and National Aeronautics and Space
Federal law, because the contractor Act, 5 U.S.C. 601, et seq., because this
Administration (NASA).
merged with a corporation outside the rule will only impact an offeror that is
ACTION: Final rule. United States. an inverted domestic corporation or a
SUMMARY: DoD, GSA, and NASA are Response: The Councils are not subsidiary of an inverted domestic
issuing a final rule amending the enforcement agencies, and are not in a corporation and wants to do business
Federal Acquisition Regulation (FAR) to position to assess whether the merger of with the Government. It is expected that
require additional actions by contractors two companies resulted in an entity that the number of small entities impacted
to assist contracting officers in ensuring meets all the criteria in the applicable by this rule will be minimal. Small
compliance with the Governmentwide definition of ‘‘inverted domestic business concerns are unlikely to have
statutory prohibition on the use of corporation.’’ This comment does not been incorporated in the United States
appropriated (or otherwise made address the substance of the proposed (or, if a partnership, established in the
available) funds for contracts with any rule, which proposed to require United States) and then subsequently
foreign incorporated entity that is an additional actions by contractors to incorporated in a foreign country; the
inverted domestic corporation or to any assist contracting officers in ensuring major participants in these transactions
subsidiary of such entity. compliance with the Governmentwide are reportedly large multinational
statutory prohibition on the use of corporations. For the definition of
DATES: Effective: November 1, 2015.
appropriated (or otherwise made ‘‘small business’’, the Regulatory
FOR FURTHER INFORMATION CONTACT: Mr. available) funds for contracts with any Flexibility Act refers to the Small
Michael O. Jackson, Procurement foreign incorporated entity that is an Business Act, which in turn allows the
Analyst, at 202–208–4949, for inverted domestic corporation (under 6 U.S. Small Business Administration
clarification of content. For information U.S.C. 395) or to any subsidiary of such (SBA) Administrator to specify detailed
pertaining to status or publication entity. Contractors with the modified definitions or standards (5 U.S.C. 601(3)
schedules, contact the Regulatory clause in their contracts will be required and 15 U.S.C. 632(a)). The SBA
Secretariat at 202–501–4755. Please cite to make a positive representation with regulations at 13 CFR 121.105 discuss
FAC 2005–83, FAR Case 2015–006. the offer as to their status as an inverted who is a small business: ‘‘(a)(1) Except
SUPPLEMENTARY INFORMATION: domestic corporation, and notify the for small agricultural cooperatives, a
contracting officer if they become an business concern eligible for assistance
I. Background
inverted domestic corporation during from SBA as a small business is a
DoD, GSA, and NASA published a contract performance, as defined in the business entity organized for profit,
proposed rule in the Federal Register at statute. The contracting activity will with a place of business located in the
79 FR 74558 on December 15, 2014, to take appropriate action if the contractor United States, and which operates
revise the provisions of the FAR that notifies the Government in accordance primarily within the United States or
address the continuing with the clause that it has become an which makes a significant contribution
Governmentwide statutory prohibition inverted domestic corporation, or if to the U.S. economy through payment of
(in effect since fiscal year 2008) on the investigation by the appropriate taxes or use of American products,
use of appropriated (or otherwise made Government agency determines that the materials or labor’’.
asabaliauskas on DSK5VPTVN1PROD with RULES
available) funds for contracts with any contractor became an inverted domestic
foreign incorporated entity that is an V. Paperwork Reduction Act
corporation during contract
inverted domestic corporation (under performance and failed to notify the The Paperwork Reduction Act (44
section 835 of the Homeland Security Government of its change in status. U.S.C. Chapter 35) applies. The rule
Act of 2002, codified at 6 U.S.C. 395) or contains information collection
any subsidiary of such entity. The rule III. Executive Orders 12866 and 13563 requirements. OMB has cleared this
modifies the existing representation and Executive Orders (E.O.s) 12866 and information collection requirement
adds a requirement to notify the 13563 direct agencies to assess all costs under OMB Control Number 9000–0190,
VerDate Sep<11>2014 21:24 Jul 01, 2015 Jkt 235001 PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 E:\FR\FM\02JYR3.SGM 02JYR3](https://thefederalregister.org/doc/80_FR_38433/page/1.svg)
![Federal Register / Vol. 80, No. 127 / Thursday, July 2, 2015 / Rules and Regulations 38307
titled: Prohibition on Contracting with corporation during contract performance, the ACTION: Final rule.
Inverted Domestic Corporations— Contractor shall give written notice to the
Representation and Notification. Contracting Officer within five business days SUMMARY: DoD, GSA, and NASA are
from the date of the inversion event. issuing a final rule amending the
List of Subjects in 48 CFR Parts 1 and Federal Acquisition Regulation (FAR) to
52 (End of clause)
correct the terminology relating to
Government procurement. ■ 5. Amend section 52.212–3 by preparation and transmittal of synopses
revising the date of the provision and and update the descriptions of Federal
Dated: June 18, 2015.
paragraph (n)(2) to read as follows: product and service codes related to
William F. Clark,
52.212–3 Offeror Representations and exemptions from service contract labor
Director, Office of Government-wide
Acquisition Policy, Office of Acquisition Certifications—Commercial Items. standards, to conform to the current
Policy, Office of Government-wide Policy. * * * * * Federal Procurement Data System
Product and Service Codes Manual.
Therefore, DoD, GSA, and NASA Offeror Representations and
amend 48 CFR parts 1 and 52 as set DATES: Effective: August 3, 2015.
Certifications—Commercial Items (Nov
forth below: 2015) FOR FURTHER INFORMATION CONTACT: Mr.
■ 1. The authority citation for 48 CFR Michael O. Jackson, Procurement
* * * * *
parts 1 and 52 continues to read as (n) * * *
Analyst, at 202–208–4949 for
follows: (2) Representation. The Offeror represents clarification of content. For information
Authority: 40 U.S.C. 121(c); 10 U.S.C. that— pertaining to status or publication
chapter 137; and 51 U.S.C. 20113. (i) It b is, b is not an inverted domestic schedules, contact the Regulatory
corporation; and Secretariat Division at 202–501–4755.
PART 1—FEDERAL ACQUISITION (ii) It b is, b is not a subsidiary of an Please cite FAC 2005–83, FAR Case
REGULATIONS SYSTEM inverted domestic corporation. 2015–008.
* * * * * SUPPLEMENTARY INFORMATION:
1.106 [Amended]
■ 6. Amend section 52.212–5 by
■ 2. Amend section 1.106 in the table revising the date of the clause and I. Background
following the introductory text, by paragraph (a)(1) to read as follows:
adding in numerical sequence, ‘‘52.209– DoD, GSA, and NASA are revising the
10’’ and its corresponding OMB Control 52.212–5 Contract Terms and Conditions FAR to amend 5.207 and 22.1003–4 to
Number ‘‘9000–0190’’. Required to Implement Statutes or correct the terminology and update the
Executive Orders—Commercial Items. descriptions of the Federal product and
PART 52—SOLICITATION PROVISIONS * * * * * service codes to conform to the Federal
AND CONTRACT CLAUSES Procurement Data System Product and
Contract Terms and Conditions Service Codes Manual, August 2011
■ 3. Amend section 52.209–2 by Required to Implement Statutes or Edition. There is no change to the
revising the date of provision and Executive Orders—Commercial Items groups covered, and the new
paragraph (c) to read as follows: (Nov 2015) descriptions better reflect product
* * * * * coverage.
52.209–2 Prohibition on Contracting With
Inverted Domestic Corporations— (a) * * * II. Publication of This Final Rule for
Representation. (1) 52.209–10, Prohibition on Contracting
Public Comment Is Not Required by
with Inverted Domestic Corporations (Nov
* * * * * 2015). Statute
Prohibition on Contracting with * * * * * ‘‘Publication of proposed
Inverted Domestic Corporations— [FR Doc. 2015–16208 Filed 7–1–15; 8:45 am] regulations’’, 41 U.S.C. 1707, is the
Representation (Nov 2015) BILLING CODE 6820–EP–P statute which applies to the publication
* * * * * of the Federal Acquisition Regulation.
(c) Representation. The Offeror represents Paragraph (a)(1) of the statute requires
that— DEPARTMENT OF DEFENSE that a procurement policy, regulation,
(1) It b is, b is not an inverted domestic procedure, or form (including an
corporation; and GENERAL SERVICES amendment or modification thereof)
(2) It b is, b is not a subsidiary of an ADMINISTRATION must be published for public comment
inverted domestic corporation. if it relates to the expenditure of
NATIONAL AERONAUTICS AND appropriated funds, and has either a
(End of provision) SPACE ADMINISTRATION significant effect beyond the internal
■ 4. Amend section 52.209–10 by operating procedures of the agency
revising the date of the clause; and 48 CFR Parts 5 and 22 issuing the policy, regulation,
adding paragraph (d) to read as follows: procedure, or form, or has a significant
[FAC 2005–83; FAR Case 2015–008; Item
52.209–10 Prohibition on Contracting with III; Docket No. 2015–0008, Sequence No. cost or administrative impact on
Inverted Domestic Corporations. 1] contractors or offerors. This final rule is
* * * * * not required to be published for public
asabaliauskas on DSK5VPTVN1PROD with RULES
RIN 9000–AN08 comment, because it does not change
Prohibition on Contracting With the Federal Supply Groups covered. It
Federal Acquisition Regulation:
Inverted Domestic Corporations (Nov only updates the descriptions of the
Update to Product and Service Codes
2015) listed product service groups to reflect
* * * * * AGENCIES: Department of Defense (DoD), the current Product and Service Codes
(d) In the event the Contractor becomes General Services Administration (GSA), Manual. It does not impact which
either an inverted domestic corporation, or a and National Aeronautics and Space products are subject to the service
subsidiary of an inverted domestic Administration (NASA). contract labor standards.
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Document Created: 2015-12-15 13:15:21
Document Modified: 2015-12-15 13:15:21
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Rules and Regulations | |
| Action | Final rule. | |
| Dates | Effective: November 1, 2015. | |
| Contact | Mr. Michael O. Jackson, Procurement Analyst, at 202-208-4949, for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at 202-501-4755. Please cite FAC 2005-83, FAR Case 2015- 006. | |
| FR Citation | 80 FR 38306 | |
| RIN Number | 9000-AM85 | |
| CFR Citation | 48
CFR
1 48 CFR 52 |
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