DOD Tightens Domestic Specialty Metals Requirements

Since the early 1940s, the Berry Amendment has imposed restrictions on the purchase of certain non-U.S. articles, supplies and materials, both to protect U.S. national security interests and to ensure the existence of certain essential domestic industries necessary for the national defense. The domestic source restrictions cover such items as food, clothing, fabrics, and tools. In 1973, Congress extended the Berry Amendment's coverage to certain designated "specialty metals," such as steel, certain metal alloys, titanium and titanium alloys, and zirconium and zirconium-base alloys. See Sentinel, Spring 2006, for a complete discussion of these specialty metals.

The Department of Defense ("DOD") recently issued guidance implementing revisions to the specialty metal sourcing restriction regulations. Those revisions, included in the FY 2007 National Defense Authorization Act, serve to codify several provisions previously contained in the Defense Federal Acquisition Regulation Supplement ("DFARS"). The basic premise of the specialty metal sourcing restriction regulations is that specialty metals must be melted in either the United States or, if permitted in the contract, in a defined list of "qualifying countries."

The following are the major revisions put into effect by the DOD guidance.

Definition of "Components"

The restrictions on specialty metal sourcing apply to the metal used in both end products and "components," which are defined as parts and assemblies incorporated into end products or other components. The new provisions limit the definition of "components" to parts and assemblies incorporated into: (1) an end product; and (2) a first-tier assembly. In other words, parts and assemblies incorporated below the second tier are not "components," and therefore need not comply with specialty metal sourcing restrictions.

The DOD guidance, however, does provide that where the acquisition is for any one of six types of products, the specialty metal sourcing restrictions must be flowed down to all subcontractors of parts and assemblies, regardless of tier. Those categories of products are:

aircraft

missile and space systems

ships

tanks and automotive items

weapon systems

ammunition

Further, the DOD clarifies that regulated components must be compliant with the regulations, even when the government purchases them separately.

One-Time Waiver Provision

Recognizing that many contractors have inadvertently failed to comply with specialty...