80 FR 56939 - Defense Federal Acquisition Regulation Supplement: Detection and Avoidance of Counterfeit Electronic Parts-Further Implementation (DFARS Case 2014-D005)

DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System

Federal Register Volume 80, Issue 182 (September 21, 2015)

DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to further implement a requirement of the National Defense Authorization Act for Fiscal Year 2012, as modified by a section of the National Defense Authorization Act for Fiscal Year 2015, that addresses required sources of electronic parts for defense contractors and subcontractors.

[Federal Register Volume 80, Number 182 (Monday, September 21, 2015)]
[Proposed Rules]
[Pages 56939-56944]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-23516]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 202, 212, 246, and 252

[Docket No. 2015-0038]
RIN 0750-AI58


Defense Federal Acquisition Regulation Supplement: Detection and 
Avoidance of Counterfeit Electronic Parts--Further Implementation 
(DFARS Case 2014-D005)

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

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to further implement a requirement of the 
National Defense Authorization Act for Fiscal Year 2012, as modified by 
a section of the National Defense Authorization Act for Fiscal Year 
2015, that addresses required sources of electronic parts for defense 
contractors and subcontractors.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before November 20, 2015, to be 
considered in the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2014-D005, using 
any of the following methods:
    [cir] Regulations.gov: http://www.regulations.gov. Submit comments 
via the Federal eRulemaking portal by entering ``DFARS Case 2014-D005'' 
under the heading ``Enter keyword or ID'' and selecting ``Search.'' 
Select the link ``Submit a Comment'' that corresponds with ``DFARS Case 
2014-D005.'' Follow the instructions provided at the ``Submit a 
Comment'' screen. Please include your name, company name (if any), and 
``DFARS Case 2014-D005'' on your attached document.
    [cir] Email: [email protected]. Include DFARS Case 2014-D005 in 
the subject line of the message.
    [cir] Fax: 571-372-6094.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Ms. Amy 
G.

[[Page 56940]]

Williams, OUSD(AT&L)DPAP/DARS, Room 3B941, 3060 Defense Pentagon, 
Washington, DC 20301-3060.
    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: Ms. Amy G. Williams, telephone 571-
372-6106.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD is proposing to revise the DFARS to further implement section 
818 of the National Defense Authorization Act (NDAA) for Fiscal Year 
(FY) 2012 (Pub. L. 112-81), as modified by section 817 of the NDAA for 
FY 2015 (Pub. L. 113-291). On May 6, 2014, DoD published a final rule 
under DFARS Case 2012-D055, entitled ``Detection and Avoidance of 
Counterfeit Electronic Parts'' (78 FR 26092). That final rule 
constituted the initial partial implementation of section 818.
    After publication of the final rule under FAR Case 2012-D055, DoD 
published on May 9, 2014, a notice of a public meeting, which was held 
on June 16, 2014, to address further implementation of detections and 
avoidance of counterfeit electronic parts. There were 79 registered 
attendees and eight presenters at the public meeting, as well as robust 
discussion. Some of the issues raised at the public meeting are 
addressed in this proposed rule, such as--
     Removal of embedded software or firmware from the 
definition of ``electronic part'';
     Clarification of traceability expectations; and
     Additional guidance on determination of risk.

II. Discussion and Analysis

    The rule proposes amendments to DFARS 246.870 and a new clause at 
DFARS 252.246-70XX, Sources of Electronic Parts, to further implement 
paragraph (c)(3) of section 818 of the NDAA for FY 2012, as modified by 
section 817 of the NDAA for FY 2015, which requires DoD to issue 
regulations establishing requirements that DoD and DoD contractors and 
subcontractors, except in limited circumstances, shall acquire 
electronic parts from trusted suppliers in order to further address the 
avoidance of counterfeit electronic parts.
    Because of the complexities relating to use of trusted suppliers by 
DoD and the requirement of section 818, paragraph (c)(3)(C), to 
establish qualification requirements consistent with 10 U.S.C. 2319, 
those aspects of section 818 will be addressed in a separate DFARS Case 
2015-D020, DoD Use of Trusted Suppliers for Electronic Parts.
    This proposed rule addresses requirements for DoD contractors and 
subcontractors at all tiers, as set forth in paragraphs (c)(3)(A), (B), 
and (D). Although some paragraphs of section 818 only apply to 
contractors subject to the Cost Accounting Standards (CAS), paragraph 
(c)(3) applies to all DoD contractors and subcontractors, when 
obtaining electronic parts to be provided to DoD under a DoD contract.
    DoD proposes to include the new clause at DFARS 252.246-70XX, 
Sources of Electronic Parts, as prescribed at 246.870-3(b), whenever 
procuring--
    (1) Electronic parts;
    (2) End items, components, parts, or assemblies containing 
electronic parts; or
    (3) Services, if the contractor will supply electronic parts or 
components, parts, or assemblies containing electronic parts as part of 
the service.
    Unlike the clause at 252.246-7007, Contractor Counterfeit 
Electronic Part Detection and Avoidance System, this new clause is not 
limited to contractors subject to CAS and will apply to small business 
set-asides, since paragraph (c)(3) of section 818 applies to all DoD-
contractors and subcontractors at all tiers that are providing 
electronic parts or assemblies containing electronic parts. Therefore, 
the clause includes flowdown to subcontracts, including subcontracts 
for commercial items.
    DoD does not propose to expand the requirements of DFARS 252.246-
7007, or the associated clause DFARS 252.244-7001, Contractor 
Purchasing System Administration, Alternate I, to non-CAS covered prime 
contractors, because paragraph (e)(1) of section 818 specifically 
applies the requirements for a system for avoidance and detection of 
counterfeit parts to ``covered contractors.'' However, the DFARS flows 
down the system requirements to subcontractors regardless of CAS 
coverage.
    The clause DFARS 252.246-70XX includes new proposed definitions of 
``authorized dealer'' and ``trusted supplier.''
     DoD notes that ``authorized dealer'' does not equate to 
``authorized reseller.'' An authorized reseller is not bound to obtain 
parts from the original manufacturer. The reseller can obtain parts 
from an authorized dealer, an aftermarket manufacturer, or independent 
distributor, for example. An ``authorized dealer,'' however, has a 
contractual arrangement with the original manufacturer or current 
design activity, including an authorized aftermarket manufacturer, to 
buy, stock, repackage, sell, and distribute its product lines.
     The term ``trusted supplier'' includes not only the 
original manufacturer, an authorized dealer for the part, or a supplier 
that obtains the part exclusively from the original component 
manufacturer of the part or an authorized dealer, but also includes a 
supplier that a contractor or subcontractor has identified as a 
trustworthy supplier, using DoD-adopted counterfeit prevention industry 
standards and processes, including testing, in accordance with section 
818(c)(3)(A)(iii) and (D) of the NDAA for FY 2012, as modified by 
section 817 of the NDAA for FY 2015.
    In addition to the requirements to acquire electronic components 
from trusted suppliers, contractors and subcontractors that are not the 
original manufacturer are required to have a risk-based system to trace 
electronic parts from the original manufacturer to product acceptance 
by the Government. If such traceability is not feasible for a 
particular part, the contractor system must provide for the 
consideration of an alternative part or utilization of tests and 
inspections in order to avoid counterfeit electronic parts. If it is 
not possible to obtain an electronic part from a trusted supplier, the 
contractor is required to notify the contracting officer. The 
contractor is then responsible for inspection, testing, and 
authentication, in accordance with existing applicable industry 
standards, of electronic parts obtained from sources other than a 
trusted supplier.
    The rule also proposes a definition in DFARS 202.101 of ``original 
manufacturer'' to include the ``contract electronics manufacturer,'' 
the ``original component manufacturer,'' or the ``original equipment 
manufacturer,'' which are also defined. The term ``contract electronics 
manufacturer'' includes manufacturers that produce goods, using 
electronic parts, for other companies on a contract basis under the 
label or brand of the other organizations, or fabricate an electronic 
part under a contract with, or with the express written authority of, 
the original component manufacturer, based on the original components 
manufacturer's designs.

[[Page 56941]]

    In addition, the rule proposes to delete the sentence ``The term 
`electronic part' includes any embedded software or firmware'' from the 
definition of ``electronic part.'' Although electronic parts may 
include embedded software or firmware, the requirements of this rule 
are more applicable to hardware. Further industry standards are still 
under development to address testing of embedded software or firmware 
in electronic parts.
    There are conforming changes to DFARS clause 252.246-7007, 
Contractor Counterfeit Electronic Part Detection and Avoidance System, 
in the definitions and processes for traceability.
    This rule is part of DoD's retrospective plan, completed in August 
2011, under Executive Order 13563, ``Improving Regulation and 
Regulatory Review.'' DoD's full plan and updates can be accessed at: 
http://www.regulations.gov/#!docketDetail;D=DOD-2011-OS-0036.

III. Determinations of Applicability

    DoD intends to apply the requirements of section 818(c)(3) to 
contracts at or below the simplified acquisition threshold (SAT) and 
contracts for the acquisition of commercial items, including 
commercial-off-the-shelf (COTS) items.

A. Applicability to Contracts at or Below the SAT

    41 U.S.C. 1905 governs the applicability of laws to contracts or 
subcontracts in amounts not greater than the SAT. It is intended to 
limit the applicability of laws to such contracts or subcontracts. 41 
U.S.C. 1905 provides that if a provision of law contains criminal or 
civil penalties, or if the FAR Council makes a written determination 
that it is not in the best interest of the Federal Government to exempt 
contracts or subcontracts at or below the SAT, the law will apply to 
them. The Director, DPAP, is the appropriate authority to make 
comparable determinations for regulations to be published in the DFARS, 
which is part of the FAR system of regulations.
    DoD intends to determine that it is in the best interest of the 
Federal Government to apply the rule to contracts at or below the SAT, 
because a substantial percentage of electronic parts are valued below 
the SAT. An exception for contracts at or below the SAT would severely 
decrease the intended effect of the statute and increase the risk of 
receiving counterfeit parts, which may present a significant mission, 
security, or safety hazard.

B. Applicability to Contracts for the Acquisition of Commercial Items, 
Including COTS Items

    41 U.S.C. 1906 governs the applicability of laws to contracts for 
the acquisition of commercial items, and is intended to limit the 
applicability of laws to contracts for the acquisition of commercial 
items. 41 U.S.C. 1906 provides that if a provision of law contains 
criminal or civil penalties, or if the FAR Council makes a written 
determination that it is not in the best interest of the Federal 
Government to exempt commercial item contracts, the provision of law 
will apply to contracts for the acquisition of commercial items. 
Likewise, 41 U.S.C. governs the applicability of laws to COTS items, 
with the Administrator for Federal Procurement Policy the decision 
authority to determine that it is in the best interest of the 
Government to apply a provision of law to acquisitions of COTS items in 
the FAR. The Director, DPAP, is the appropriate authority to make 
comparable determinations for regulations to be published in the DFARS, 
which is part of the FAR system of regulations.
    Since electronic parts are generally COTS items, and studies have 
shown that a large proportion of proven counterfeit parts were 
purchased as commercial items, including COTS items, DoD intends to 
determine that it is in the best interest of the Federal Government to 
apply the rule to contracts for the acquisition of commercial items, 
including COTS items, as defined at FAR 2.101. An exception for 
contracts for the acquisition of commercial items, including COTS 
items, would severely decrease the intended effect of the statute and 
increase the risk of receiving counterfeit parts, which may present a 
significant mission, security, or safety hazard.

IV. 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 a significant regulatory action and, therefore, was 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.

V. Regulatory Flexibility Act

    DoD expects that this proposed rule may 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. Therefore, an 
initial regulatory flexibility analysis has been prepared and is 
summarized as follows:
    This proposed rule further implements section 818 of the National 
Defense Authorization Act (NDAA) for Fiscal Year (FY) 2012 (Pub. L. 
112-81), as modified by section 817 of the NDAA for FY 2015.
    The objective of this rule is to avoid acquisition of counterfeit 
electronic parts by requiring DoD contractors and subcontractors, 
except in limited circumstances, to buy electronic parts from trusted 
suppliers, in accordance with section 818(c)(3) of the NDAA for FY 
2012.
    Based on Federal Procurement Data System data for FY 2013 and 2014, 
DoD estimates that this rule will apply to approximately 33,000 small 
entities that have DoD prime contracts or subcontracts for electronic 
parts; end items, components, parts, or assemblies containing 
electronic parts; or services, if the contractor will supply electronic 
parts or components, parts, or assemblies containing electronic parts 
as part of the service.
    In addition to the requirements to acquire electronic components 
from trusted suppliers, contractors and subcontractors that are not the 
original manufacturer or authorized dealer are required have a risk-
based process to trace electronic parts from the original manufacturer 
to product acceptance by the Government. If that is not feasible, the 
Contractor shall have a process to complete an evaluation that includes 
consideration of alternative parts or utilization of tests and 
inspections commensurate with the risk. If it is not possible to obtain 
an electronic part from a trusted supplier, the contractor is required 
to notify the contracting officer. The contractor is responsible for 
inspection, testing, and authentication, in accordance with existing 
applicable industry standards, of electronic parts obtained from 
sources other than a trusted supplier. Notifying the contracting 
officer if it is not possible to obtain an electronic part from a 
trusted supplier would probably involve a mid-level of executive 
involvement.
    No relevant Federal rules duplicate, overlap, or conflict with the 
proposed rule.

[[Page 56942]]

    The rule does not duplicate, overlap, or conflict with any other 
Federal rules.
    DoD was unable to identify any significant alternatives that would 
reduce the economic impact on small entities and still fulfill the 
requirements of the statute.
    DoD invites comments from small business concerns and other 
interested parties on the expected impact of this rule on small 
entities.
    DoD will also consider comments from small entities concerning the 
existing regulations in subparts affected by this rule in accordance 
with 5 U.S.C. 610. Interested parties must submit such comments 
separately and should cite 5 U.S.C. 610 (DFARS Case 2014-D005), in 
correspondence.

VI. Paperwork Reduction Act

    The rule contains information collection requirements that require 
the approval of the Office of Management and Budget under the Paperwork 
Reduction Act (44 U.S.C. chapter 35). Accordingly, DoD has submitted a 
request for approval of a new information collection requirement 
concerning ``Detection and Avoidance of Counterfeit Electronic Parts--
Further Implementation'' to the Office of Management and Budget.
    A. Public reporting burden for this collection of information is 
estimated to average one hour per response, including the time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information.
    The annual reporting burden estimated as follows:
    Respondents: 1,000.
    Responses per Respondent: 1.
    Total Annual Responses: 1,000.
    Preparation Hours per Response: 1 hour.
    Total Response Burden Hours: 1,000.
    B. Request for Comments Regarding Paperwork Burden.
    Written comments and recommendations on the proposed information 
collection, including suggestions for reducing this burden, should be 
sent to Ms. Jasmeet Seehra at the Office of Management and Budget, Desk 
Officer for DoD, Room 10236, New Executive Office Building, Washington, 
DC 20503, or email [email protected], with a copy to the 
Defense Acquisition Regulations System, Attn: Ms. Amy G. Williams, 
OUSD(AT&L)DPAP/DARS, Room 3B941, 3060 Defense Pentagon, Washington, DC 
20301-3060. Comments can be received up to 60 days after the date of 
this notice, but comments to OMB will be most useful if received by OMB 
within 30 days after the date of this notice.
    Public comments are particularly invited on: Whether this 
collection of information is necessary for the proper performance of 
functions of the DFARS, and will have practical utility; whether our 
estimate of the public burden of this collection of information is 
accurate, and based on valid assumptions and methodology; ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and ways in which we can minimize the burden of the 
collection of information on those who are to respond, through the use 
of appropriate technological collection techniques or other forms of 
information technology.
    To request more information on this proposed information collection 
or to obtain a copy of the proposal and associated collection 
instruments, please write to the Defense Acquisition Regulations 
System, Attn: Ms. Amy G. Williams, OUSD(AT&L)DPAP/DARS, Room 3B941, 
3060 Defense Pentagon, Washington, DC 20301-3060, or email 
[email protected]. Include DFARS Case 2014-D005 in the subject line of 
the message.

List of Subjects in 48 CFR Parts 202, 212, 246, and 252

    Government procurement.

Jennifer L. Hawes,
Editor, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 202, 212, 246, and 252 are proposed to be 
amended as follows:

0
1. The authority citation for parts 202, 212, 246, and 252 continues to 
read as follows:

    Authority:  41 U.S.C. 1303 and 48 CFR chapter 1.

PART 202--DEFINITIONS OF WORDS AND TERMS

0
2. Amend section 202.101 by--
0
a. Adding, in alphabetical order, the definitions for ``Contract 
electronics manufacturer,'' ``Original component manufacturer,'' 
``Original equipment manufacturer,'' and ``Original manufacturer''; and
0
b. Revising the definition of ``Electronic part''.
    The additions and revision read as follows:


202.101  Definitions.

* * * * *
    Contract electronics manufacturer means an organization that--
    (1) Produces goods, using electronic parts, for other companies on 
a contract basis under the label or brand name of the other 
organization; or
    (2) Fabricates an electronic part under a contract with, or with 
the express written authority of, the original component manufacturer 
based on the original component manufacturer's designs, formulas, and/
or specifications.
* * * * *
    Electronic part means an integrated circuit, a discrete electronic 
component (including, but not limited to, a transistor, capacitor, 
resistor, or diode), or a circuit assembly (section 818(f)(2) of Pub. 
L. 112-81).
* * * * *
    Original component manufacturer means an organization that designs 
and/or engineers a part and is pursuing, or has obtained, the 
intellectual property rights to that part.
    Original equipment manufacturer means a company that manufactures 
products that it has designed from purchased components and sells those 
products under the company's brand name.
    Original manufacturer means the contract electronics manufacturer, 
the original component manufacturer, or the original equipment 
manufacturer.
* * * * *

PART 212--ACQUISITION OF COMMERCIAL ITEMS

0
3. Amend section 212.301 by adding paragraph (f)(xviii)(C) to read as 
follows:


212.301  Solicitation provisions and contract clauses for the 
acquisition of commercial items.

    (f) * * *
    (xviii) * * *
    (C) Use the clause at 252.246-70XX, Sources of Electronic Parts, as 
prescribed in 246.870-3(b), to comply with section 818(c)(3) of Public 
Law 112-81, as amended by section 817 of the National Defense 
Authorization Act for Fiscal Year 2015 (Pub. L. 113-291).
* * * * *

PART 246--QUALITY ASSURANCE

0
4. Revise section 246.870 heading to read as follows:


246.870  Contractor counterfeit electronic part detection and 
avoidance.


246.870-1  [Redesignated as 246.870-0]

0
5. Redesignate section 246.870-1 as 246.870-0.
0
6. In newly redesignated section 246.870-0, revise paragraph (a) to 
read as follows:


246.870-0  Scope.

* * * * *

[[Page 56943]]

    (a) Partially implements section 818(c) and (e) of the National 
Defense Authorization Act for Fiscal Year 2012 (Pub. L. 112-81), as 
amended by section 817 of the National Defense Authorization Act for 
Fiscal Year 2015 (Pub. L. 113-291); and
* * * * *
0
7. Add section 246.870-1 to read as follows:


246.870-1  Definitions.

    As used in this section--
    Authorized dealer means a supplier with a contractual arrangement 
with the original manufacturer or current design activity, including an 
authorized aftermarket manufacturer, to buy, stock, re-package, sell, 
and distribute its product lines.
    Trusted supplier means--
    (1) The original manufacturer of a part;
    (2) An authorized dealer for the part;
    (3) A supplier that obtains the part exclusively from the original 
component manufacturer of the part or an authorized dealer; or
    (4) A supplier that a contractor or subcontractor has identified as 
a trustworthy supplier, using DoD-adopted counterfeit prevention 
industry standards and processes, including testing (see https://assist.dla.mil).
0
8. Amend section 246.870-2 by--
0
a. Redesignating paragraphs (a) and (b) as paragraphs (b)(1) and (2), 
respectively;
0
b. In newly redesignated paragraph (b)(1), removing the paragraph 
heading and adding a comma after the second use of ``electronic 
parts'';
0
c. In the newly redesignated paragraph (b)(2), further redesignating 
paragraphs (1) through (12) as paragraphs (b)(2)(i) through (xii), 
respectively;
0
d. Adding paragraph (a);
0
e. Adding a paragraph (b) heading;
0
f. In newly redesignated paragraph (b)(2) introductory text, removing 
``see 252.246-7007'' and adding ``see the clause at 252.246-7007'' in 
its place; and
0
g. In newly redesignated paragraph (b)(2)(v), adding the phrase ``, or 
use of other trusted suppliers, as identified by the contractor (see 
paragraph (a)(1)(ii) of this section)'' at the end of the sentence, 
before the period.
    The additions read as follows:


246.870-2  Policy.

    (a) Sources of electronic parts. (1) Except as provided in 
paragraph (a)(2) of this section, the Government requires contractors 
and subcontractors at all tiers, to--
    (i) Obtain electronic parts that are in production or currently 
available in stock from--
    (A) The original manufacturers of the parts;
    (B) Their authorized dealers; or
    (C) Suppliers that obtain such parts exclusively from the original 
manufacturers of the parts or their authorized dealers;
    (ii) Obtain electronic parts that are not in production, or not 
currently available from stock, from suppliers identified by the 
contractor or subcontractor as trusted suppliers, provided that--
    (A) The contractor uses established counterfeit prevention industry 
standards and processes, including testing, for identifying such 
trusted suppliers;
    (B) The contractor or subcontractor assumes responsibility for the 
authenticity of parts provided by such suppliers (see 231.205-71); and
    (C) The selection of such trusted suppliers is subject to review 
and audit by appropriate Department of Defense officials.
    (iii) If authorized to purchase electronic parts from the Federal 
Supply Schedule, contractors and subcontractors are still required to 
comply with the requirements of paragraph (a)(1) or (2) of this 
section, as applicable.
    (2) If electronic parts are not available from trusted suppliers, 
the Government requires contractors and subcontractors to comply with 
the notification, inspection, testing, and authentication requirements 
of paragraph (c) of the clause at 252.246-70XX, Sources of Electronic 
Parts.
    (b) Contractor counterfeit electronic part detection and avoidance 
system.* * *
* * * * *
0
9. Amend section 246.870-3 by--
0
a. Redesignating paragraphs (a) and (b) as paragraphs (a)(1) and (2), 
respectively;
0
b. In the newly redesignated paragraph (a)(1), further redesignating 
paragraphs (1) through (3) as paragraphs (a)(1)(i) through (iii), 
respectively;
0
c. In newly redesignated paragraph (a)(1), removing ``paragraph (b)'' 
and adding ``paragraph (a)(2)'' in its place;
0
d. In newly redesignated paragraph (a)(1)(iii), removing ``Services 
where'' and adding ``Services, if'' in its place;
0
e. In newly redesignated paragraph (a)(2), removing ``set-aside'' and 
adding ``set aside'' in its place; and
0
f. Adding paragraph (b).
    The addition reads as follows:


246.870-3  Contract clause.

* * * * *
    (b) Use the clause at 252.246-70XX, Sources of Electronic Parts, in 
solicitations and contracts, including solicitations and contracts 
using FAR part 12 procedures for the acquisition of commercial items, 
when procuring--
    (1) Electronic parts;
    (2) End items, components, parts, or assemblies containing 
electronic parts; or
    (3) Services, if the contractor will supply electronic parts or 
components, parts, or assemblies containing electronic parts as part of 
the service.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
10. Amend section 252.246-7007 by--
0
a. In the introductory text, removing ``246.870-3'' and adding 
``246.870-3(a)'' in its place;
0
b. Removing the clause date ``(MAY 2014)'' and adding ``(DATE)'' in its 
place;
0
c. In paragraph (a)--
0
i. Adding, in alphabetical order, the definitions of ``Authorized 
dealer,'' ``Contract electronics manufacturer,'' ``Original component 
manufacturer,'' ``Original equipment manufacturer,'' ``Original 
manufacturer,'' and ``Trusted supplier''; and
0
ii. Revising the definition of ``Electronic part''; and
0
d. Revising paragraphs (c)(4) and (5).
    The additions and revisions read as follows:


252.246-7007  Contractor Counterfeit Electronic Part Detection and 
Avoidance System.

* * * * *
    (a) * * *
    Authorized dealer means a supplier with a contractual arrangement 
with the original manufacturer or current design activity, including an 
authorized aftermarket manufacturer, to buy, stock, re-package, sell, 
and distribute its product lines.
    Contract electronics manufacturer means an organization that--
    (1) Produces goods, using electronic parts, for other companies on 
a contract basis under the label or brand name of the other 
organization; or
    (2) Fabricates an electronic part under a contract with, or with 
the express written authority of, the original component manufacturer 
based on the original component manufacturer's designs, formulas, and/
or specifications.
* * * * *
    Electronic part means an integrated circuit, a discrete electronic 
component (including, but not limited to, a transistor, capacitor, 
resistor, or diode),

[[Page 56944]]

or a circuit assembly (section 818(f)(2) of Pub. L. 112-81).
* * * * *
    Original component manufacturer means an organization that designs 
and/or engineers a part and is pursuing, or has obtained, the 
intellectual property rights to that part.
    Original equipment manufacturer means a company that manufactures 
products that it has designed from purchased components and sells those 
products under the company's brand name.
    Original manufacturer means the contract electronics manufacturer, 
the original component manufacturer, or the original equipment 
manufacturer.
* * * * *
    Trusted supplier means--
    (1) The original manufacturer of a part;
    (2) An authorized dealer for the part;
    (3) A supplier that obtains the part exclusively from the original 
component manufacturer of the part or an authorized dealer; or
    (4) A supplier that a contractor or subcontractor has identified as 
a trustworthy supplier, using DoD-adopted counterfeit prevention 
industry standards and processes, including testing (see https://assist.dla.mil).
* * * * *
    (c) * * *
    (4) Processes to--
    (i) Enable tracking of electronic parts from the original 
manufacturer to product acceptance by the Government, whether the 
electronic parts are supplied as discrete electronic parts or are 
contained in assemblies; and
    (ii) If the Contractor cannot establish this traceability from the 
original manufacturer for a specific part, complete an evaluation that 
includes consideration of alternative parts or utilization of tests and 
inspections commensurate with the risk (see paragraph (c)(2) of this 
clause).
    (5) Use of trusted suppliers in accordance with the clause at 
252.246-70XX, Sources of Electronic Parts.
* * * * *
0
11. Add section 252.246-70XX to read as follows:


252.246-70XX  Sources of Electronic Parts.

    As prescribed in 246.870-3(b), use the following clause:

SOURCES OF ELECTRONIC PARTS (DATE)

    (a) Definitions. As used in this clause--
    Authorized dealer means a supplier with express written 
authority of a contractual arrangement with the original 
manufacturer or current design activity, including an authorized 
aftermarket manufacturer, to buy, stock, re-package, sell, and 
distribute its product lines.
    Contract electronics manufacturer means an organization that--
    (1) Produces goods, using electronic parts, for other companies 
on a contract basis under the label or brand name of the other 
organization; or
    (2) Fabricates an electronic part under a contract with, or with 
the express written authority of, the original component 
manufacturer based on the original component manufacturer's designs, 
formulas, and/or specifications.
    Electronic part means an integrated circuit, a discrete 
electronic component (including, but not limited to, a transistor, 
capacitor, resistor, or diode), or a circuit assembly (section 
818(f)(2) of Pub. L. 112-81).
    Original component manufacturer means an organization that 
designs and/or engineers a part and is pursuing, or has obtained, 
the intellectual property rights to that part.
    Original equipment manufacturer means a company that 
manufactures products that it has designed from purchased components 
and sells those products under the company's brand name.
    Original manufacturer means the contract electronics 
manufacturer, the original component manufacturer, or the original 
equipment manufacturer.
    Trusted supplier means--
    (1) The original manufacturer of a part;
    (2) An authorized dealer for the part;
    (3) A supplier that obtains the part exclusively from the 
original component manufacturer of the part or an authorized dealer; 
or
    (4) A supplier that a contractor or subcontractor has identified 
as a trustworthy supplier, using DoD-adopted counterfeit prevention 
industry standards and processes, including testing (see https://assist.dla.mil).
    (b) Trusted suppliers. In accordance with section 818(c)(3) of 
the National Defense Authorization Act for Fiscal Year 2012 (Pub. L. 
112-81), as amended by section 817 of the National Defense 
Authorization Act for Fiscal Year 2015 (Pub. L. 113-291), except as 
provided in paragraph (d) of this clause, the Contractor shall--
    (1) Obtain electronic parts that are in production or currently 
available in stock from--
    (i) The original manufacturers of the parts;
    (ii) Their authorized dealers; or
    (iii) Suppliers that obtain such parts exclusively from the 
original manufacturers of the parts or their authorized dealers; and
    (2) Obtain electronic parts that are not in production, or not 
currently available in stock, from suppliers identified by the 
Contractor as trusted suppliers, provided that--
    (i) The Contractor uses established counterfeit prevention 
industry standards and processes, including testing, for identifying 
such trusted suppliers;
    (ii) The Contractor assumes responsibility for the authenticity 
of parts provided by such suppliers (see DFARS 231.205-71); and
    (iii) The Contractor's selection of such trusted suppliers is 
subject to review and audit by appropriate Department of Defense 
officials.
    (c) Traceability. If the Contractor is not the original 
manufacturer of, or authorized dealer for, an electronic part, the 
Contractor shall have risk-based processes (taking into 
consideration the consequences of failure of an electronic part) 
that--
    (1) Enable tracking of electronic parts from the original 
manufacturer to product acceptance by the Government, whether the 
electronic part is supplied as a discrete electronic part or is 
contained in an assembly; and
    (2) If the Contractor cannot establish this traceability from 
the original manufacturer for a specific part, complete an 
evaluation that includes consideration of alternative parts or 
utilization of tests and inspections commensurate with the risk. 
Determination of risk shall be based on the assessed probability of 
receiving a counterfeit electronic part; the probability that the 
inspection or test selected will detect a counterfeit electronic 
part; and the potential negative consequences of a counterfeit 
electronic part being installed (e.g., human safety, mission 
success) where such consequences are made known to the Contractor.
    (d)(1) Non-trusted suppliers. If it is not possible to obtain an 
electronic part from a trusted supplier, as described in paragraph 
(b) of this clause, the Contractor shall notify the Contracting 
Officer. If an entire lot of assemblies require an obsolete 
component, the Contractor may submit one notification for the entire 
lot, providing identification of the assemblies containing the parts 
(e.g., serial numbers).
    (2) The Contractor is responsible for inspection, testing, and 
authentication, in accordance with existing applicable industry 
standards, of electronic parts obtained from sources other than 
those described in paragraph (b) of this clause.
    (e) Subcontracts. The Contractor shall include the substance of 
this clause, including this paragraph (e), in subcontracts, 
including subcontracts for commercial items that are for electronic 
parts or assemblies containing electronic parts.
    (End of clause)
[FR Doc. 2015-23516 Filed 9-18-15; 8:45 am]
BILLING CODE 5001-06-P