Information Memorandum No. 08-143
Subject: Class Deviation 2008-O0002 - Implementation of New Specialty Metals Restriction in FY08 National Defense Authorization Act (INFORMATION)
Date:  January 31, 2008
Target Audience:  CMO Commanders, Directors and Deputies, ACOs, QARs

New Information/Guidance/Tools:

  1. The electronic component exception has been broadened to cover all electronic components.  It is no longer limited to commercially available electronic components, and it applies regardless of the amount of specialty metal contained in the electronic component.

  2. An exemption is added for commercially available off-the-shelf (COTS) items, excluding high performance magnets and fasteners, unless the magnets or fasteners are incorporated into COTS items.

  3. The COTS item exemption is applied when the COTS item is first purchased at the lowest level of the subcontractor/supplier chain.  If that COTS item is subsequently modified or tailored by the purchaser or a higher tier, the metals in the original COTS item remain exempt.  Any specialty metal material added to the original COTS item must be compliant or otherwise independently exempt.

  4. Commercial fasteners not incorporated into COTS items can be considered exempt if the fastener manufacturer certifies in good faith that it will purchase, during the relevant calendar year, a minimum amount of domestically melted specialty metal in the required form.  The amount is to be purchased for use in production of such fasteners for sale to all customers, and must be not less than 50% of the total amount of specialty metal that the manufacturer will purchase to carry out the production of those fasteners for all customers.  This is referred to as the market basket approach to compliance.

  5. A new two percent by weight de minimis exception is provided.  If the weight of non-compliant specialty metal (that is not otherwise exempt) does not exceed 2% of the total weight of specialty metal, DoD may accept the item. .

  6. A new exception for Commercial Derivative Military Articles (CDMA) allows contractors to certify compliance based on equivalent purchases of domestic specialty metal.  The contractor or subcontractor must agree, based on good faith estimate, to purchase domestic metals for use during the contract period in an amount that is at least equivalent to the greater of:  (a) 120% of the specialty metal required to produce the CDMA; or (b) 50% of the specialty metal required to produce both the CDMA and the related commercial article, during the period of contract performance at all contract and subcontract levels.

  7. A new national security waiver is available for USD (AT&L) approval.  This authority applies only to a non-compliance discovered after contract award.

  8. DoD can no longer interpret “required form” in Domestic Non-Availability determinations (DNAD) to mean anything other than in the form of mill products such as bar, billet, slab, wire, plate or sheet in the grade appropriate for the production of a finished end item or a finished component for delivery to DoD.

  9. Class or broad based DNADs requiring USD (AT&L) review and approval now include any DNAD to be applied to more than one contract.

  10. Previously approved DNADs are under review and will be adjusted to comply with the new statute within 180 days from its enactment.  The DNADs for circuit card assemblies, fasteners, needle roller bearings, and diesel engines will expire for use on new contracts on 26 July 2008.  Contracts open or awarded while a DNAD was in effect retain their coverage even if a DNAD is reduced in scope, canceled or allowed to expire.

  11. The term "component" is defined to apply to parts and assemblies incorporated into the end item at any tier.  It eliminates the Class Deviation 2006-O0004 distinctions between applicability of the statute to work breakdown structure tiers, therefore all spares and repair parts must be compliant or otherwise exempt

Up to five different sets of rules could apply to identical specialty metals items depending on prime contract award dates because there is no retroactive application authority in the new statute.  An approach similar to Single Process Initiatives is being considered to assist contracting officers in making necessary contract modifications and to lessen the administrative impact of these multiple standards.

  1. Contracts awarded on/after 29 JAN 2008:  The FY08 NDAA changes and COTS exemption are applicable and are implemented within DoD by Class Deviation 2008-O0002.

  2. Contracts awarded from 8 NOV 2007 through 29 JAN 2008:  The earlier FY07 NDAA changes and the 8 NOV 2007 COTS exemption are applicable and are implemented within DoD by the 26 OCT 2007 Class Deviation 2007-O0011.

  3. Contracts awarded from 26 OCT 2007 through 7 NOV 2007:  The earlier FY07 NDAA changes and the 26 OCT 2007 Class Deviation COTS exemption are applicable and are implemented within DoD by the 26 OCT 2007 Class Deviation 2007-O0011.

  4. Contracts awarded from 16 NOV 2006 through 25 OCT 2007:  The earlier FY07 NDAA changes are applicable and are implemented within DoD by the 6 DEC 2006 Class Deviation 2006-O0004.

  5. Contracts awarded prior to 16 NOV 2006:  These contracts are subject to the "original" specialty metals restrictions of 10 USC 2533a (the terms existing prior to the FY2007 and FY2008 NDAA changes).  The restrictions are implemented by the October 2006 Class Deviation and earlier DFAR

This information is applicable to the Specialty Metals Clause Compliance interim instruction.
 

Points of Contact for Further Information

Signature:
Executive Director, Contracts