Berry Amendment Act

Complying with the Berry Amendment Act

Among the hardest compliance challenges facing government contractors is the maze of domestic preference programs, including the Buy American Act, Trade Agreements Act, General Agreement on Tariffs and Trade, Free Trade Agreements, Defense Authorization Acts and Appropriations Acts, and the Berry Amendment.

For ethics and compliance program purposes, certain intertwined laws add complications.
For example, the Buy American Act and Berry Amendment may allow a contractor to import anchor chain but the annual defense appropriations bill routinely bars spending appropriated funds on anchor chain.

Navigating these intricacies is central to any corporate compliance program.
Companies must understand the source of their supplies and products because violations, even if unintended, can be extremely costly in time and money.

Of all domestic preference laws and regulations, the Berry Amendment may concern defense contractors most.
Named after a 1950s congressman, the Berry Amendment limits the use of government funds to acquire foreign origin food products, clothing, fabrics, fibers, yarns, hand tools, measuring tools, and specialty metals, including components of these commodities.
For specialty metals, Berry requires the metal to be melted in a U.S. facility.

The Berry Amendment includes few of the generous exceptions allowed for end products and components of U.S. allies and trading partners found in other domestic preference laws such as the Buy American Act and Trade Agreements Act.

The most notable exception is unavailability of suitable U.S. goods in sufficient quantities at U.S. market prices.

This Berry exception requires a written domestic non-availability determination from a Defense Department or military department official.
Another Berry exception allows items procured outside the United States in support of combat, contingency or emergency operations, but not U.S. procurements even if intended for combat operations.
For instance, defense acquisition managers view the body armor protection systems covered by Berry Amendment restrictions.

Another exception:

 Specialty metals melted in or incorporated into an article manufactured in a qualifying country — generally U.S. NATO allies and a few other countries included for foreign policy reasons.
As these exceptions demonstrate, compliance with Berry is fact specific and requires careful analysis and staff training by companies selling Berry-covered products.

Berry’s restrictions on foreign-sourced specialty metals incorporated in many critical end items are of particular concern to many defense contractors.
The fiscal 2007 National Defense Authorization Act modified specialty metals coverage, sometimes complicating and sometimes simplifying compliance. Significant changes include:

• A specialty metals definition to include a number of steel alloys, other metal alloys, titanium and titanium alloys, and Zirconium and zirconium base alloys.

• A de minimus exception for specialty metals incorporated into commercially available electronic components.

• Six classes of covered defense programs (aircraft, missile and space systems, ships, tank and automotive items, weapon systems, and ammunition), and expanding coverage to components as well as end items.

• A limited, one-time waiver for items produced, manufactured or assembled in the United States before the law became effective.

The law still applies the specialty metals restrictions to many commercial items, including those purchased by the Defense Department through the General Services Administration federal supply schedules program, and qualifying country exceptions still remain. The 2007 National Defense Authorization Act permits the Defense Department to exclude from Berry’s restrictions purchases where specialty metal melted or produced in the United States cannot be procured in satisfactory quality and sufficient quantity, in the required form when needed. This new provision clarifies the term “required form” to include mill products instead of finished end items or components, and price no longer justifies a waiver.

The Defense Department may issue such waivers following a Domestic Non-Availability Determination (DNAD) for a class of items or an individual procurement. A class DNAD is a determination as to availability. In the last year, the Defense Department issued three Class DNADs. Of these, the most controversial was the April 20 DNAD covering metal fasteners, which allows contracting officers to procure end items, and components thereof, containing fasteners despite specialty metal content that was melted or produced in a nonqualifying foreign country such as Japan or South Korea — two noted producers of milled metal products.

The specialty metal provisions remain controversial. The version of the fiscal 2008 Defense Authorization Act as passed by the House further tightens specialty metal restrictions, which would almost certainly overturn the current metal fastener DNAD. In contrast, the Senate version supports the Defense Department’s specialty metals DNAD. The Senate committee report openly supports Defense Department discretion under the law, including the non-availability exception, to ensure that the military can timely purchase weapon systems. The final outcome of these very different versions of legislation is difficult to predict.

Failure to comply with these important provisions exposes a company to great legal risks including contract default, compliance actions up to and including suspension or debarment, and civil and criminal penalties.

John Stafford (staffordj@gtlaw.com) is an attorney at the international law firm of Greenberg Traurig and Joe Corrigan (corriganj@gtlaw.com) is director of governmental affairs. The opinions expressed here are solely those of the authors and are not intended to provide legal advice or represent the view of NDIA or the NDIA Ethics Committee.

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2017

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