[Federal Register Volume 61, Number 200 (Tuesday, October 15, 1996)]
[Rules and Regulations]
[Pages 53615-53622]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26246]
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INTERNATIONAL DEVELOPMENT COOPERATION AGENCY
Agency for International Development
22 CFR Part 228
RIN 0412-AA28
Rules on Source, Origin and Nationality for Commodities and
Services Financed by the Agency for International Development
AGENCY: United States Agency for International Development (USAID),
IDCA.
ACTION: Final rule.
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SUMMARY: USAID published a proposed rule on February 5, 1996 (61 FR
4240) to add a new Part 228 to Title 22 of the CFR codifying USAID's
rules on source, origin and nationality for commodities and services
financed by USAID. This final rule adopts the provisions of the
proposed rule with some changes which are discussed below in
SUPPLEMENTARY INFORMATION.
DATES: The final rule is effective November 14, 1996.
FOR FURTHER INFORMATION CONTACT:
Kathleen J. O'Hara, Office of Procurement, Procurement Policy Division
(M/OP/P), USAID, Room 1600 A, SA-14, Washington, DC 20523-1435.
Telephone (703) 875-1534, facsimile (703) 875-1243.
SUPPLEMENTARY INFORMATION: USAID received three sets of comments in
response to its proposed rule on source, origin and nationality. The
American Maritime Congress (AMC), commenting on behalf of a large
number of maritime businesses and organizations, expressed concerns
that the proposed rule on ocean freight eligibility was waiving U.S.-
flag cargo preference laws, in contravention of legal requirements.
USAID has no intention to waive or modify cargo preference requirements
in any way; however, it is clear from AMC's comments that the
regulation needs to explain that the ocean freight flag eligibility
requirements apply in addition to cargo preference requirements. Cargo
preference requirements are applicable to all ocean shipments of USAID-
financed goods regardless of whether or not USAID finances the freight
costs. The ocean freight flag eligibility requirements are applied to
determine which freight costs USAID will finance. Section 228.21 on
Ocean Transportation is revised to clarify that cargo preference
requirements do apply.
AMC also expressed concern that the waiver criteria in Section
228.55 are
[[Page 53616]]
inappropriate, particularly Sec. 228.55(a)(1) which would allow for a
waiver in order to obtain competitive pricing. Section 228.20 and
Section 228.55(a) are amended to clarify that waivers will not reduce
the Cargo Preference Act requirement that the applicable percentage of
USAID cargoes be transported on U.S.-flag vessels under the waiver is
based on a determination of non-availability. USAID has used these
waiver criteria for many years. With the exception of the first one,
these criteria are also used to determine non-availability for Cargo
Preference purposes, and are very similar to those which the Maritime
Administration uses to determine non-availability for Export-Import
Bank transactions. The first waiver criterion was developed to
encourage price competition for large, bulk shipments; however, it is
always used in conjunction with the Cargo Preference requirements.
USAID may have an agreement with a recipient country which limits
financing to U.S. goods and services, including transportation
services, which would mean that even after Cargo Preference
requirements have been met, only U.S.-flag shipments would be eligible
for USAID financing. By allowing non-U.S. flag vessels to compete for a
portion of the cargo which is not required by Cargo Preference rules to
be on U.S.-flag vessels, the purchaser may be able to obtain a better
price. As the new language in Section 228.55(a) makes clear, this
waiver will not affect Cargo Preference requirements in any way unless
a determination of non-availability is also issued; and the competitive
pricing criterion is not a criterion for determining non-availability.
Section 228.21, Ocean Transportation, is also revised to implement
a change in policy on eligibility for USAID financing. Previously when
Code 941 (the United States and developing countries excluding Foreign
Policy Restricted countries [formerly the non-Free World]) was the
authorized source for procurement, ocean freight eligibility was also
restricted to vessels under flag registry of Code 941 countries. Since
the ownership of a vessel generally does not relate to the country in
which the vessel is registered, the Agency has decided that freight
eligibility will be expanded to Code 935 (the United States and all
other countries except Foreign Policy Restricted countries) when Code
941 is the authorized source for procurement.
Comments submitted by a Private Voluntary Organization suggested
that the current policy which exempts individual commodity transactions
not exceeding $5,000 from waiver requirements should be included.
Omitting the exemption was an oversight, and Section 228.51 is amended
to incorporate it. Also as a result of suggestions from the Private
Voluntary Organization several other changes have been made. Sec.
228.02 is clarified to state that the rule applies to direct costs, not
to indirect costs. The coverage on waivers in Sec. 228.56 is revised to
indicate that contractors and recipients may contact the contract or
agreement officer to request waivers. One suggestion the organization
made was not adopted. They requested that the codification clearly
state that nationality resides only with the immediate supplier. The
rules, however, do apply to sub-suppliers, so the change was not made.
A third set of comments made a number of suggestions which have
been adopted. These include: (1) A more specific definition of
implementing document in Sec. 228.01; (2) clarifying the scope and
application in Sec. 228.02 to state that the regulation applies to
goods and services financed under the Foreign Assistance Act of 1961,
as amended, and that if different conditions are authorized for a
program, the implementing document will indicate the terms and
conditions and will prevail in the event of conflict with Part 228; (3)
revising the definition of the Geographic Code in Sec. 228.03 to remove
the term ``non-Free World'' (the Agency now uses the term ``foreign
policy restricted countries''; (4) revising the coverage in Sec.
228.11(e) to use the term ``systems'' instead of package installations;
(4) adding language in Sec. 228.13(c) on the statutory prohibition on
pharmaceutical patent infringement; (5) revising the language on
suppliers of services in Secs. 228.30, 228.31, and 228.32 for clarity
and consistency, though the content has not changed; and (6) adding a
new section covering the special source rule for suppliers of
construction and engineering services.
Other changes include revising the definition of motor vehicles to
exclude vehicles which are not designed for general road travel,
substituting the Procurement Executive for the Deputy Assistant
Administrator for Management (DAA/M) for one approval since the DAA/M
position is not occupied, and a number of editorial corrections.
USAID has determined that this rule is not a significant regulatory
action under Executive Order 12866. The rule has been reviewed in
accordance with the requirement of the Regulatory Flexibility Act.
USAID has determined that the proposed rule will not have a significant
economic impact on a substantial number of small entities, and,
therefore, a Regulatory Flexibility Analysis is not required. There are
no information collection requirements in this rule as contemplated by
the Paperwork Reduction Act.
List of Subjects in 22 CFR Part 228
Administrative practice and procedure, Commodity procurement, Grant
programs--foreign relations.
Accordingly, Part 228 is added to Title 22 of the Code of Federal
Regulations to read as follows:
PART 228--RULES ON SOURCE, ORIGIN AND NATIONALITY FOR COMMODITIES
AND SERVICES FINANCED BY USAID
Subpart A--Definitions and Scope of This Part
Sec.
228.01 Definitions.
228.02 Scope and application.
228.03 Identification of principal geographic code numbers.
Subpart B--Conditions Governing Source and Nationality of Commodity
Procurement Transactions for USAID Financing
228.10 Purpose.
228.11 Source and origin of commodities.
228.12 Long-term leases.
228.13 Special source rules requiring procurement from the United
States.
228.14 Nationality of suppliers of commodities.
Subpart C--Conditions Governing the Eligibility of Commodity-Related
Services for USAID Financing
228.20 Purpose.
228.21 Ocean transportation.
228.22 Air transportation.
228.23 Eligibility of marine insurance.
228.24 Other delivery services.
228.25 Incidental services.
Subpart D--Conditions Governing the Nationality of Suppliers of
Services for USAID Financing
228.30 Purpose.
228.31 Individuals and privately owned commercial firms.
228.32 Nonprofit organizations.
228.33 Foreign government-owned organizations.
228.34 Joint ventures.
228.35 Construction services from foreign-owned local firms.
228.36 Ineligible suppliers.
228.37 Nationality of employees under contracts or subcontracts for
services.
228.38 Miscellaneous service transactions.
228.39 Special source rules for construction and engineering
services.
Subpart E--Conditions Governing Source and Nationality of Local
Procurement Transactions for USAID Financing
228.40 Local procurement.
[[Page 53617]]
Subpart F--Waivers
228.50 General.
228.51 Commodities.
228.52 Suppliers of commodities.
228.53 Suppliers of services--privately owned commercial suppliers
and nonprofit organizations.
228.54 Suppliers of services--foreign government-owned
organizations.
228.55 Delivery services.
228.56 Authority to approve waivers.
Authority: Sec. 621, Pub. L. 87-195, 75 Stat. 445 (22 U.S.C.
2381), as amended, E.O. 12163, Sept. 29, 1979, 44 FR 56673: 3 CFR
1979 Comp., p. 435.
Subpart A--Definitions and Scope of This Part
Sec. 228.01 Definitions.
As used in this part, the following terms shall have the following
meanings:
(a) Commodity means any material, article, supply, goods, or
equipment.
(b) Commodity-related services means delivery services and/or
incidental services.
(c) Component means any good that goes directly into the production
of a produced commodity.
(d) Cooperating country means the country receiving the USAID
assistance subject to this part 228.
(e) Delivery means the transfer to, or for the account of, an
importer of the right to possession of a commodity, or, with respect to
a commodity-related service, the rendering to, or for the account of,
an importer of any such service.
(f) Delivery service means any service customarily performed in a
commercial export transaction which is necessary to effect a physical
transfer of commodities to the cooperating country. Examples of such
services are the following: export packing, local drayage in the source
country (including waiting time at the dock), ocean and other freight,
loading, heavy lift, wharfage, tollage, switching, dumping and
trimming, lighterage, insurance, commodity inspection services, and
services of a freight forwarder. ``Delivery services'' may also include
work and materials necessary to meet USAID marking requirements.
(g) Implementing document means any document, such as a contract,
grant, letter of commitment, etc., issued by USAID which authorizes the
use of USAID funds for the procurement of services or commodities and/
or commodity related services, and which specifies conditions which
apply to such procurement.
(h) Incidental services means the installation or erection of
USAID-financed equipment, or the training of personnel in the
maintenance, operation and use of such equipment.
(i) Mission means the USAID Mission or representative in a
cooperating country.
(j) Origin means the country where a commodity is mined, grown or
produced. A commodity is produced when, through manufacturing,
processing, or substantial and major assembling of components, a
commercially recognized new commodity results that is significantly
different in basic characteristics or in purpose of utility from its
components.
(k) Services means the performance of identifiable tasks, rather
than the delivery of an end item of supply.
(l) Source means the country from which a commodity is shipped to
the cooperating country, or the cooperating country if the commodity is
located therein at the time of the purchase. Where, however, a
commodity is shipped from a free port or bonded warehouse in the form
in which received therein, ``source'' means the country from which the
commodity was shipped to the free port or bonded warehouse.
(m) State means the District of Columbia or any State,
commonwealth, territory or possession of the United States.
(n) Supplier means any person or organization, governmental or
otherwise, who furnishes services, commodities and/or commodity related
services financed by USAID.
(o) United States means the United States of America, any State(s)
of the United States, the District of Columbia, and areas of U.S.
associated sovereignty, including commonwealths, territories and
possessions.
(p) USAID means the U.S. Agency for International Development or
any successor agency, including when applicable, each USAID Mission
abroad.
(q) USAID Geographic Code means a code in the USAID Geographic Code
Book which designates a country, a group of countries, or an otherwise
defined area. The principal USAID geographic codes are described in
Sec. 228.03.
(r) USAID/W means the USAID in Washington, DC 20523, including any
office thereof.
Sec. 228.02 Scope and application.
This part is applicable to goods and services financed directly
with program funds under the Foreign Assistance Act of 1961, as
amended, unless otherwise provided by statute or regulation. If
different conditions apply to a USAID-financed procurement, by statute
or regulation, those conditions shall be incorporated in the
implementing document and shall prevail in the event of any conflict
with this part 228. The implementing documents will indicate the
authorized source of procurement. The terms and conditions applicable
to a procurement of goods or services shall be those in effect on the
date of the issuance of a contract for goods or services by USAID or by
the cooperating country.
Sec. 228.03 Identification of principal geographic code numbers.
The USAID Geographic Code Book sets forth the official description
of all geographic codes used by USAID in authorizing or implementing
documents, to designate authorized source countries or areas. The
following are summaries of the principal codes:
(a) Code 000--The United States: The United States of America, any
State(s) of the United States, the District of Columbia, and areas of
U.S.-associated sovereignty, including commonwealths, territories and
possessions.
(b) Code 899--Any area or country, except the cooperating country
itself and the following foreign policy restricted countries:
Afghanistan, Libya, Vietnam, Cuba, Cambodia, Laos, Iraq, North Korea,
Syria and People's Republic of China.
(c) Code 935--Any area or country including the cooperating
country, but excluding the foreign policy restricted countries.
(d) Code 941--The United States and any independent country
(excluding foreign policy restricted countries), except the cooperating
country itself and the following: Albania, Andorra, Angola, Armenia,
Austria, Australia, Azerbaijan, Bahamas, Bahrain, Belgium, Bosnia and
Herzegovina, Bulgaria, Belarus, Canada, Croatia, Cyprus, Czech
Republic, Denmark, Estonia, Finland, France, Gabon, Georgia, Germany,
Greece, Hong Kong, Hungary, Iceland, Ireland, Italy, Japan, Kazakhstan,
Kuwait, Kyrgyzstan, Latvia, Liechtenstein, Lithuania, Luxembourg,
Macedonia,* Malta, Moldova, Monaco, Mongolia, Montenegro,* Netherlands,
New Zealand, Norway, Poland, Portugal, Qatar, Romania, Russia, San
Marino, Saudi Arabia, Serbia,* Singapore, Slovak Republic, Slovenia,
South Africa, Spain, Sweden, Switzerland, Taiwan,* Tajikistan,
Turkmenistan, Ukraine, United Arab Emirates, United Kingdom,
Uzbekistan, and Vatican City.
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*Has the status of a ``Geopolitical Entity'', rather than an
independent country.
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[[Page 53618]]
Subpart B--Conditions Governing Source and Nationality of Commodity
Procurement Transactions for USAID Financing
Sec. 228.10 Purpose.
Sections 228.11 through 228.14 set forth the rules governing the
eligible source of commodities and nationality of commodity suppliers
for USAID financing. These rules may be waived in accordance with the
provisions in subpart F of this part.
Sec. 228.11 Source and origin of commodities.
(a) The source and origin of a commodity as defined in Sec. 228.01
shall be a country or countries authorized in the implementing document
by name or by reference to a USAID geographic code.
(b) Any component from a non-Free World country makes the commodity
ineligible for USAID financing.
(c) When the commodity being purchased is a kit (e.g., scientific
instruments, tools, or medical supplies packaged as a single unit), the
kit will be considered a produced commodity.
(d) When spare parts for vehicles or equipment are purchased, each
separate shipment will be considered a produced commodity, rather than
each individual spare or replacement part. The parts must be packed in
and shipped from an eligible country.
(e) Systems determination. When a system consisting of more than
one produced commodity is procured as a single, separately priced item,
USAID may determine that the system itself shall be considered a
produced commodity.
(f) In order to be eligible for USAID financing, when items are
considered produced commodities under paragraphs (c), (d), or (e) of
this section, the total cost (to the system supplier) of the
commodities making up the kit, spare parts, or system which were
manufactured in countries not included in the authorized geographic
code may not exceed 50 percent of the lowest price (not including ocean
transportation and marine insurance) at which the supplier makes the
final product available for export sale.
Sec. 228.12 Long-term leases.
Any commodity obtained under a long-term lease agreement is subject
to the source and origin requirements of this subpart B. For purposes
of this subpart B, a long-term lease is defined as a single lease of
more than 180 days, or repetitive or intermittent leases under a single
activity or program within a one-year period totalling more than 180
days, for the same type of commodity.
Sec. 228.13 Special source rules requiring procurement from the United
States.
(a) Agricultural commodities and products thereof must be procured
in the United States if the domestic price is less than parity, unless
the commodity cannot reasonably be procured in the United States in
fulfillment of the objectives of a particular assistance program under
which such commodity procurement is to be financed. (22 U.S.C. 2354)
(b) Motor vehicles must be manufactured in the United States to be
eligible for USAID financing. Also, any vehicle to be financed by USAID
under a long-term lease or where the sale is to be guaranteed by USAID
must be manufactured in the United States. (22 U.S.C. 2396) For
purposes of this section, motor vehicles are defined as self-propelled
vehicles with passenger carriage capacity, such as highway trucks,
passenger cars and buses, motorcycles, scooters, motorized bicycles and
utility vehicles. Excluded from this definition are industrial vehicles
for materials handling and earthmoving, such as lift trucks, tractors,
graders, scrapers, off-the-highway trucks (such as off-road dump
trucks) and other vehicles that are not designed for travel at normal
road speeds (40 kilometers per hour and above). Also, for purposes of
this section, a long-term lease is defined as a single lease of more
than 180 days, or repetitive or intermittent leases under a single
activity or program within a one-year period totalling more than 180
days. In addition to the above requirements, passenger cars, light
trucks, vans, minivans and utility vehicles must be manufactured by
either Chrysler, Ford or General Motors and bear their nameplates,
brand names or logos, to be eligible for financing by USAID. The
nameplate, brand name or logo requirements do not apply when vehicles
are procured under a source waiver.
(c) Pharmaceutical products must be manufactured in the United
States in order to be eligible for USAID financing. USAID shall not
finance any pharmaceutical product manufactured outside the United
States if the manufacture of such product in the United States would
involve the use of, or be covered by, a valid patent of the United
States unless such manufacture is expressly authorized by the owner of
such patent. (22 U.S.C. 2356)
Sec. 228.14 Nationality of suppliers of commodities.
(a) The rules on nationality of suppliers of commodities relate
only to the suppliers, and not to the commodities they supply. The
nationality of the supplier is an additional eligibility criterion to
the rules on source, origin and componentry.
(b) A supplier providing commodities must fit one of the following
categories for the transaction to be eligible for USAID financing:
(1) An individual who is a citizen or a lawfully admitted permanent
resident of a country or area included in the authorized geographic
source code, except as provided in paragraph (c) of this section;
(2) A corporation or partnership organized under the laws of a
country or area included in the authorized geographic source code and
with a place of business in such country;
(3) A controlled foreign corporation (within the meaning of section
957 et seq. of the Internal Revenue Code) as attested by current
information on file with the Internal Revenue Service of the United
States (on IRS Form 959, 2952, 3646, or on substitute or successor
forms) submitted by shareholders of the corporation; or
(4) A joint venture or unincorporated association consisting
entirely of individuals, corporations, or partnerships which are
eligible under either paragraph (b) (1), (2) or (3) of this section.
(c) Citizens of any country or area, or firms or organizations
located in, organized under the laws of, or owned in any part by
citizens or organizations of any country or area not included in
Geographic Code 935 are ineligible for financing by USAID as suppliers
of commodities. Limited exceptions to this rule are:
(1) Individuals lawfully admitted for permanent residence in the
United States are eligible, as individuals or owners, regardless of
their citizenship; and
(2) The USAID Deputy Assistant Administrator for Management (DAA/M)
may authorize the eligibility of organizations having minimal ownership
by citizens or organizations of non-Geographic Code 935 countries.
Subpart C--Conditions Governing the Eligibility of Commodity-
Related Services for USAID Financing
Sec. 228.20 Purpose.
Sections 228.21 through 228.25 set forth the rules governing the
eligibility of commodity-related services, both delivery services and
incidental services, for USAID financing. These rules may be waived in
accordance with the provisions in subpart F of this part. Waivers
granted pursuant to subpart F
[[Page 53619]]
for individual shipments requiring ocean transportation which are not
based on a determination of non-availability shall not reduce the
requirement that the applicable percentage of USAID cargoes be
transported on U.S.-flag vessels pursuant to the Cargo Preference Act
of 1954, Section 901(b)(1) of the Merchant Marine Act of 1936, as
amended, 46 U.S.C. 1241(b). The rules on delivery services apply
whether or not USAID is also financing the commodities being
transported. In order to be identified and eligible as incidental
services, such services must be connected with a USAID-financed
commodity procurement.
Sec. 228.21 Ocean transportation.
(a) The Cargo Preference Act of 1954, Section 901(b)(1) of the
Merchant Marine Act of 1936, as amended, 46 U.S.C. 1241(b)(1), is
applicable to ocean shipment of goods subject to this part.
(b) In addition to cargo preference requirements, ocean shipments
of USAID-financed goods must meet the requirements in paragraph (c) of
this section in order for the freight cost to be eligible for USAID
financing.
(c) The eligibility of ocean transportation services is determined
by the flag registry of the vessel.
(1) When the authorized source for procurement is Geographic Code
000 (U.S.A.), USAID will finance ocean transportation only on U.S. flag
vessels.
(2) When the authorized source for procurement is Geographic Code
941 (selected Free World), USAID will finance ocean transportation on
vessels under flag registry of any country in Code 935.
(3) When commodities whose eligibility is restricted to Geographic
Code 000 are purchased under agreements which authorize Geographic Code
941 for the procurement of all other commodities, USAID will finance
the ocean transportation in accordance with paragraph (c)(2) of this
section.
(4) USAID will finance costs incurred on vessels under flag
registry of any Geographic Code 935 country if the costs are part of
the total cost on a through bill of lading that is paid to a carrier
for initial carriage on a vessel which is eligible in accordance with
paragraph (c) (1), (2) or (3) of this section.
Sec. 228.22 Air transportation.
(a) The eligibility of air transportation is determined by the flag
registry of the aircraft. The term ``U.S. flag air carrier'' means one
of a class of air carriers holding a certificate under Section 401 of
the Federal Aviation Act of 1958 (49 U.S.C. 1371) authorizing
operations between the United States or its territories and one or more
foreign countries.
(b) For air transport financed under USAID grants, there is a U.S.
Government statute that requires the use of U.S. flag air carriers for
all international air travel and transportation, unless such service is
not available. When U.S. flag air carriers are not available, any
Geographic Code 935 flag air carrier may be used.
(c) Different requirements may be authorized in the implementing
document if the transaction is financed under a USAID loan.
(d) The Comptroller General's memorandum (B-138942), dated March
31, 1981, entitled ``Revised Guidelines for Implementation of the Fly
America Act'', established criteria for determining when U.S. flag air
carriers are unavailable. See 48 CFR 47.403-1, or USAID Optional
Standard Provision on ``Air Travel and Transportation'' for grants and
cooperative agreement.
(e) While the Comptroller General's memorandum does not establish
specific criteria for determining when freight service is unavailable,
it is USAID's policy that such service is not available when the
following criteria are met:
(1) When no U.S. flag air carrier provides scheduled air freight
service from the airport serving the shipment's point of origin and a
non-U.S. flag carrier does;
(2) When the U.S. flag air carrier(s) serving the shipment's point
of origin decline to issue a through air waybill for transportation at
the shipment's final destination airport;
(3) When use of a U.S.-flag air carrier would result in delivery to
final destination at least seven days later than delivery by means of a
non-U.S. carrier;
(4) When the total weight of the consignment exceeds the maximum
weight per shipment which the U.S. flag air carrier will accept and
transport as a single shipment and a non-U.S. flag air carrier will
accept and transport the entire consignment as a single shipment;
(5) When the dimensions (length, width, or height) of one or more
of the items of a consignment exceed the limitations of the U.S. flag
aircraft's cargo door opening, but do not exceed the acceptable
dimensions for shipment on an available non-U.S. flag scheduled air
carrier.
Sec. 228.23 Eligibility of marine insurance.
The eligibility of marine insurance is determined by the country in
which it is ``placed''. Insurance is ``placed'' in a country if payment
of the insurance premium is made to, and the insurance policy is issued
by, an insurance company office located in that country. Eligible
countries for placement are governed by the authorized geographic code.
However, if Geographic Code 941 is authorized, the cooperating country
is also eligible to provide such services, unless the implementing
document specified otherwise based on the following:
(a) If a cooperating country discriminates against marine insurance
companies authorized to do business in any State of the United States,
then all USAID-financed goods for that country must be insured in the
United States against marine risk. The term ``authorized to do business
in any State of the United States'' means that foreign-owned insurance
companies licensed to do business in the United States (by any State)
are treated the same as comparable U.S.-owned companies.
(b) The prima facie test of discrimination is that a cooperating
country takes actions which hinder private importers in USAID-financed
transactions from making cost, insurance and freight (C.I.F.) or cost
and insurance (C.&I.) contracts with United States commodity suppliers,
or which hinder importers in instructing such suppliers to place marine
insurance with companies authorized to do business in the United
States.
(c) When discrimination is found to exist and the cooperating
country fails to correct the discriminatory practice, USAID requires
that all commodities procured with USAID funds be insured in the United
States against marine loss. The decision of any cooperating country to
insure all public sector procurements locally with a government-owned
insurance agency is not considered discrimination.
Sec. 228.24 Other delivery services.
No source or nationality rules apply to other delivery services,
such as export packing, loading, commodity inspection services, and
services of a freight forwarder. Such services are eligible in
connection with a commodity which is financed by USAID.
Sec. 228.25 Incidental services.
Source and nationality rules do not apply to suppliers of
incidental services specified in a purchase contract relating to
equipment. However, citizens of firms of any country not included in
USAID Geographic Code 935 are ineligible to supply incidental services,
except that individuals lawfully admitted for permanent residence in
the
[[Page 53620]]
U.S. are eligible regardless of their citizenship.
Subpart D--Conditions Governing the Nationality of Supplies of
Services for USAID Financing
Sec. 228.30 Purpose.
Sections 228.31 through 228.37 set forth the nationality rules
governing the eligibility for USAID financing of suppliers of services
which are not commodity-related. These rules may be waived in
accordance with the provisions in subpart F of this part.
Sec. 228.31 Individuals and privately owned commercial firms.
(a) In order to be eligible for USAID financing as a supplier of
services, whether as a contractor or subcontractor at any tier, an
individual must meet the requirements of paragraph (a)(1) of this
section (except that individual personal services contractors are not
subject to this requirement), and a privately owned commercial firm
must meet the requirements in paragraph (a)(2) of this section. In the
case of the categories described in paragraphs (a)(2) (i) and (ii) of
this section, the certification requirements in paragraph (b) of this
section must be met.
(1) An individual must be a citizen of and have a principal place
of business in a country or area included in the authorized geographic
code, or a non-U.S. citizen lawfully admitted for permanent residence
in the United States whose principal place of business is in the United
States;
(2) A privately owned commercial (i.e., for profit) corporation or
partnership must be incorporated or legally organized under the laws of
a country or area included in the authorized geographic code, have its
principal place of business in a country or area included in the
authorized geographic code, and meet the criteria set forth in either
paragraph (a)(2)(i) or (ii) of this section:
(i) The corporation or partnership is more than 50 percent
beneficially owned by individuals who are citizens of a country or area
included in the authorized geographic code or non-U.S. citizens
lawfully admitted for permanent residence in the United States. In the
case of corporations, ``more than 50 percent beneficially owned'' means
that more than 50 percent of each class of stock is owned by such
individuals; in the case of partnerships, ``more than 50 percent
beneficially owned'' means that more than 50 percent of each category
of partnership interest (e.g., general, limited) is owned by such
individuals.
(With respect to stock or interest held by companies, funds or
institutions, the ultimate beneficial ownership by individuals is
controlling.)
(ii) The corporation or partnership:
(A) Has been incorporated or legally organized in the United States
for more than 3 years prior to the issuance date of the invitation for
bids or requests for proposals,
(B) Has performed within the United States administrative and
technical, professional, or construction services, similar in
complexity, type and value to the services being contracted (under a
contract, or contracts, for services) and derived revenue therefrom in
each of the 3 years prior to the date described in paragraph
(a)(2)(ii)(A) of this section,
(C) Employs United States citizens and non-U.S. citizens lawfully
admitted for permanent residence in the United States in more than half
its permanent full-time positions in the United States and more than
half of its principal management positions, and
(D) Has the existing technical and financial capability in the
United States to perform the contract.
(b) A duly authorized officer of a firm or nonprofit organization
shall certify that the participating firm or nonprofit organization
meets either the requirements of paragraph (a)(2) (i) or (ii) of this
section or Sec. 228.32. In the case of corporations, the certifying
officer shall be the corporate secretary. With respect to the
requirements of paragraph (a)(2)(i) of this section, the certifying
officer may presume citizenship on the basis of the stockholders'
record address, provided the certifying officer certifies, regarding
any stockholder (including any corporate fund or institutional
stockholder) whose holdings are material to the corporation's
eligibility, that the certifying officer knows of no fact which might
rebut that presumption.
Sec. 228.32 Nonprofit organizations.
(a) Nonprofit organizations, such as educational institutions,
foundations, and associations, must meet the criteria listed in this
section and the certification requirement in Sec. 228.31(b) to be
eligible as suppliers of services, whether as contractors or
subcontractors at any tier. Any such institution must:
(1) Be organized under the laws of a country or area included in
the authorized geographic code;
(2) Be controlled and managed by a governing body, a majority of
whose members are citizens of countries or areas included in the
authorized geographic code; and
(3) Have its principal facilities and offices in a country or area
included in the authorized geographic code.
(b) International agricultural research centers and such other
international research centers as may be, from time to time, formally
listed as such by the USAID Assistant Administrator, Global Bureau, are
considered to be of U.S. nationality.
Sec. 228.33 Foreign government-owned organizations.
Firms operated as commercial companies or other organizations
(including nonprofit organizations other than public educational
institutions) which are wholly or partially owned by foreign
governments or agencies thereof are not eligible for financing by USAID
as contractors or subcontractors, except if their eligibility has been
established by a waiver approved by USAID in accordance with
Sec. 228.54. This does not apply to foreign government ministries or
agencies.
Sec. 228.34 Joint ventures.
A joint venture or unincorporated association is eligible only if
each of its members is eligible in accordance with Secs. 228.31,
228.32, or 228.33.
Sec. 228.35 Construction services from foreign-owned local firms.
(a) When the estimated cost of a contract for construction services
is $5 million or less and only local firms will be solicited, a local
corporation or partnership which does not meet the test in
Sec. 228.31(a)(2)(i) for eligibility based on ownership by citizens of
the cooperating country (i.e., it is a foreign-owned local firm) will
be eligible if it is determined by USAID to be an integral part of the
local economy. However, such a determination is contingent on first
ascertaining that no United States construction company with the
required capability is currently operating in the cooperating country
or, if there is such a company, that it is not interested in bidding
for the proposed contract.
(b) A foreign-owned local firm is an integral part of the local
economy provided:
(1) It has done business in the cooperating country on a continuing
basis for not less than three years prior to the issuance date of
invitations for bids or requests for proposals to be financed by USAID;
(2) It has a demonstrated capability to undertake the proposed
activity;
(3) All, or substantially all, of its directors of local
operations, senior staff and operating personnel are resident in the
cooperating country;
[[Page 53621]]
(4) Most of its operating equipment and physical plant are in the
cooperating country.
Sec. 228.36 Ineligible suppliers.
Citizens of any country or area not included in Geographic Code
935, and firms and organizations located in, organized under the laws
of, or owned in any part by citizens or organizations of any country or
area not included in Geographic Code 935 are ineligible for financing
by USAID as suppliers of services, or as agents in connection with the
supply of services. The limited exceptions to this rule are:
(a) Individuals lawfully admitted for permanent residence in the
United States are eligible, as individuals or owners, regardless of
their citizenship, and
(b) The Procurement Executive may authorize the eligibility of
organizations having minimal ownership by citizens or organizations of
non-Geographic Code 935 countries.
Sec. 228.37 Nationality of employees under contracts or subcontracts
for services.
(a) The rules set forth in Secs. 228.31 through 228.36 do not apply
to the employees of contractors or subcontractors. Such employees must,
however, be citizens of countries included in Geographic Code 935 or,
if they are not, have been lawfully admitted for permanent residence in
the United States.
(b) When the contractor on a USAID-financed construction project is
a United States firm, at least half of the supervisors and other
specified key personnel working at the project site must be citizens or
permanent legal residents of the United States. Exceptions may be
authorized by the USAID Mission in writing if special circumstances
exist which make compliance impractical.
Sec. 228.38 Miscellaneous service transactions.
This section sets forth rules governing certain miscellaneous
services.
(a) Commissions. The nationality rules in subparts C and D of this
part, with the exception of Sec. 228.36, do not apply to the payment of
commissions by suppliers. A commission is defined as any payment or
allowance by a supplier to any person for the contribution which that
person has made to securing the sale or contract for the supplier or
which that person makes to securing on a continuing basis similar sales
or contracts for the supplier.
(b) Bonds and guarantees. The nationality rules in subparts C and D
of this part, with the exception of Sec. 228.36, do not apply to
sureties, insurance companies or banks who issue bonds or guarantees
under USAID-financed contracts.
(c) Liability insurance under construction contracts. The
nationality rules in subparts C and D of this part, with the exception
of Sec. 228.36, do not apply to firms providing liability insurance
under construction contracts.
Sec. 228.39 Special source rules for construction and engineering
services.
Advanced developing countries, eligible under Geographic Code 941,
which have attained a competitive capability in international markets
for construction services or engineering services are not eligible to
furnish USAID-financed construction and engineering services. There is
no waiver of this provision. (22 U.S.C. 2354)
Subpart E--Conditions Governing Source and Nationality of Local
Procurement Transactions for USAID Financing
Sec. 228.40 Local procurement.
Local procurement in the cooperating country involves the use of
appropriated funds to finance the procurement of goods and services
supplied by local businesses, dealers or producers, with payment
normally being in the currency of the cooperating country. Unless
otherwise specified in an implementing document, or a waiver is
approved by USAID in accordance with subpart F of this part, local
procurement is eligible for USAID financing only in the following
situations:
(a) Locally available commodities of U.S. origin, which are
otherwise eligible for financing, if the value of the transaction is
estimated not to exceed the local currency equivalent of $100,000
(exclusive of transportation costs).
(b) Commodities of Geographic Code 935 origin if the value of the
transaction does not exceed $5,000.
(c) Professional services contracts estimated not to exceed the
local currency equivalent of $250,000.
(d) Construction services contracts, including construction
materials required under the contract, estimated not to exceed the
local currency equivalent of $5,000,000.
(e) Under a fixed-price construction contract of any value, the
prime contractor may procure locally produced goods and services under
subcontracts.
(f) The following commodities and services which are only available
locally:
(1) Utilities, including fuel for heating and cooking, waste
disposal and trash collection;
(2) Communications--telephone, telex, facsimile, postal and courier
services;
(3) Rental costs for housing and office space;
(4) Petroleum, oils and lubricants for operating vehicles and
equipment;
(5) Newspapers, periodicals and books published in the cooperating
country;
(6) Other commodities and services (and related expenses) that, by
their nature or as a practical matter, can only be acquired, performed,
or incurred in the cooperating country, e.g., vehicle maintenance,
hotel accommodations, etc.
Subpart F--Waivers
Sec. 228.50 General.
USAID may expand the authorized source in order to accomplish
project or program objectives by processing a waiver. When a waiver is
processed to include a new country, area, or geographic code,
procurement is not limited to the added source(s), but may be from any
country included in the authorized geographic code. All waivers must be
in writing.
Sec. 228.51 Commodities.
(a) Waiver criteria. Any waiver must be based upon one of the
criteria listed in this section. Waivers to Geographic Code 899 or Code
935 which are justified under paragraph (a) (2) or (3) of this section
may only be authorized on a case-by-case basis.
(1) Commodities required for assistance are of a type that are not
produced in and available for purchase in the United States, and for
waivers to Code 899 or Code 935, also not in the cooperating country,
or any country in Code 941.
(2) It is necessary to permit procurement in a country not
otherwise eligible in order to meet unforeseen circumstances, such as
emergency situations.
(3) It is necessary to promote efficiency in the use of United
States foreign assistance resources, including to avoid impairment of
foreign assistance objectives.
(4) For waivers to authorize procurement from Geographic Code 941
or the cooperating country:
(i) For assistance other than commodity import programs, when the
lowest available delivered price from the United States is reasonably
estimated to be 50 percent or more higher than the delivered price from
a
[[Page 53622]]
country or area included in Geographic Code 941 or the cooperating
country.
(ii) For assistance other than commodity import programs, when the
estimated cost of U.S. construction materials (including transportation
and handling charges) is at least 50 percent higher than the cost of
locally produced materials.
(iii) For commodity import programs or similar sector assistance,
an acute shortage exists in the United States for a commodity generally
available elsewhere.
(iv) Persuasive political considerations.
(v) Procurement in the cooperating country would best promote the
objectives of the foreign assistance program.
(vi) Such other circumstances as are determined to be critical to
the success of project objectives.
(b) Additonal requirements. A waiver to authorize procurement from
outside the United States of agricultural commodities, motor vehicles,
or pharmaceuticals (see Sec. 228.13, ``Special source rules requiring
procurement from the United States,'') must also meet requirements
established in USAID directives on commodity eligibility. (USAID's
Automated Directives System Chapter 312.)
(c) Any individual transaction not exceeding $5,000 (not including
transportation) does not require a waiver.
Sec. 228.52 Suppliers of commodities.
Geographic code changes authorized by waiver with respect to the
source of commodities automatically apply to the nationality of their
suppliers. A waiver to effect a change in the geographic code only with
respect to the nationality of the supplier of commodities, but not in
the source of the commodities, may be sought if the situation requires
it based on the appropriate criteria in Sec. 228.51.
Sec. 228.53 Suppliers of services--privately owned commercial
suppliers and nonprofit organizations.
Waiver criteria. Any waiver must be based upon one of the criteria
listed in this section. Waivers to Geographic Code 899 or Code 935
which are justified under paragraph (b) or (c) of this section may only
be authorized on a case-by-case basis.
(a) Services required for assistance are of a type that are not
available for purchase in the United States, and for waivers to Code
899 or Code 935, also not in the cooperating country, or any country in
Code 941.
(b) It is necessary to permit procurement in a country not
otherwise eligible in order to meet unforeseen circumstances, such as
emergency situations.
(c) It is necessary to promote efficiency in the use of United
States foreign assistance resources, including to avoid impairment of
foreign assistance objectives.
(d) For waivers to authorize procurement from Geographic Code 941
or the cooperating country:
(1) There is an emergency requirement for which non-USAID funds are
not available and the requirement can be met in time only from
suppliers in a country or area not included in the authorized
geographic code.
(2) No suppliers from countries or areas included in the authorized
geographic code are able to provide the required services.
(3) Persuasive political considerations.
(4) Procurement of locally available services would best promote
the objectives of the foreign assistance program.
(5) Such other circumstances as are determined to be critical to
the achievement of project objectives.
Sec. 228.54 Suppliers of services--foreign government-owned
organizations.
A waiver to make foreign government-owned organizations, described
in Sec. 228.33, eligible for financing by USAID must be justified on
the basis of the following criteria:
(a) The competition for obtaining a contract will be limited to
cooperating country firms/organizations meeting the criteria set forth
in Secs. 228.31 or 228.32.
(b) The competition for obtaining a contract will be open to firms
from countries or areas included in the authorized geographic code and
eligible under the provisions of Secs. 228.31 or 228.32, and it has
been demonstrated that no U.S. firm is interested in competing for the
contract.
(c) Services are not available from any other source.
(d) Foreign policy interests of the United States outweigh any
competitive disadvantage at which United States firms might be placed
or any conflict of interest that might arise by permitting a foreign
government-owned organization to compete for the contract.
Sec. 228.55 Delivery services.
(a) Ocean transportation. A waiver to expand the flag eligibility
requirements to allow the use of vessels under flag registry of the
cooperating country, or Geographic Code 899 or 935 countries may be
authorized under the circumstances provided for in this section. Any
waiver granted under this section for a particular shipment which is
not based on a determination of non-availability does not reduce the
pool of cargo from which the applicable percentage required to be
shipped on U.S.-flag vessels under the Cargo Preference Act of 1954,
Section 901(b)(1) of the Merchant Marine Act of 1936, as amended, 46
U.S.C. 1241(b), is determined. A waiver to expand the flag registry of
any Code 935 country may be authorized when:
(1) It is necessary to assure adequate competition in the shipping
market in order to obtain competitive pricing, particularly in the case
of bulk cargoes and large cargoes carried by liners;
(2) Eligible vessels provide liner service, only by transshipment,
for commodities that cannot be containerized, and vessels under flag
registry of countries to be authorized by the waiver provide liner
service without transshipment;
(3) Eligible vessels are not available, and cargo is ready and
available for shipment, provided it is reasonably evident that delaying
shipment would increase costs or significantly delay receipt of the
cargo;
(4) Eligible vessels are found unsuitable for loading, carriage, or
unloading methods required, or for the available port handling
facilities;
(5) Eligible vessels do not provide liner service from the port of
loading stated in the procurement's port of export delivery terms,
provided the port is named in a manner consistent with normal trade
practices; or
(6) Eligible vessels decline to accept an offered consignment.
(b) Air transportation. The preferences for use of United States
flag air carriers or for use of United States, other Geographic Code
941 countries, or cooperating country flag air carriers are not subject
to waiver. Other free world air carriers may be used only as provided
in Sec. 228.22.
Sec. 228.56 Authority to approve waivers.
The authority to approve waivers of established policies on source,
origin and nationality are delegated authorities within USAID, as set
forth in the Automated Directives System Chapter 103 and any
redelegations. USAID contractors or recipients of assistance agreements
shall request any necessary waivers through the USAID contract or
agreement officer.
Dated: September 27, 1996.
Marcus L. Stevenson,
Procurement Executive.
[FR Doc. 96-26246 Filed 10-11-96; 8:45 am]
BILLING CODE 6116-71-M