• The More Things Change, the More They Stay the Same: Specialty Metal Restriction Finds a New Home
  • November 2, 2006 | Authors: Michael A. Hordell; Sean P. Bamford
  • Law Firm: Pepper Hamilton LLP - Washington Office
  • In our July 2006 article, “Nothing is Certain but Death, Taxes and Congressional Attempts to Amend the Berry Amendment,” we discussed two competing versions of the 2007 Defense Authorization Act. Both the Senate and the House versions sought to change the specialty metal restriction found at 10 U.S.C. § 2533a, otherwise known as the Berry Amendment (Berry). Through H.R. 5122, the House sought to expand Berry’s coverage; with S. 2766, the Senate wanted to reign in the amendment’s application in the area of specialty metals. The House and Senate met in the middle…sort of.

    Title VIII, Subtitle D, sec. 842, of the John Warner National Defense Authorization Act for Fiscal Year 2007 (Authorization Act), which is currently on the President’s desk, removed specialty metals from Berry and placed the restriction, with some changes, at 10 U.S.C. § 2533b. In many ways, the new section mirrors, to some degree, the old restriction found in Berry. When the Department of Defense (DOD) purchases an item that contains specialty metal, the specialty metal must be melted or produced (the term “produce” is not defined in the Authorization Act and was not included in the Berry Amendment) in the United States or a qualifying country. Since the language of 10 U.S.C. § 2533b essentially parrots the language found in the pre-FY 2007 Amendment, it is likely that a contractor would be in compliance with the “new restriction” if the specialty metal was melted or produced in the United States, a qualifying country, or non-qualifying country and was incorporated into an article manufactured in a qualifying country.

    Though the new restriction is similar in many regards to Berry restrictions, there are differences. For example, there is a de minimis exception for procurements of commercially available electronic components. Absent from the new restriction is a change in the disparate treatment of qualifying countries end item producers and U.S. end item producers. As under Berry, DOD still can purchase a tank engine that incorporates a specialty metal melted in Japan (non-qualifying country per DFARS 225.872-1) if it were incorporated into the tank engine manufactured in Belgium (a qualifying country). As in the past, however, DOD still can not purchase the same tank if the specialty metal were incorporated into the tank engine in the United States. The new restriction does contain a one time waiver, but this waiver only can be sought, for items produced, manufactured or assembled in the United States prior to the enactment of the Authorization Act.

    The real impact of the new restriction will not be known until DOD drafts and releases the implementing regulations. Furthermore, the new restriction only apples to contracts entered into 30 days after the enactment of the Authorization Act. We will keep you updated in future Government Contracts Updates on changes made concerning the implanting regulations in response to this new restriction.