Based on a comments process mandated by Section 823 of the FY 2011 National Defense Authorization Act (NDAA), the Department of Defense (DoD) recently proposed to modify the definition of “produce” as it applies to the production of “specialty metals” (certain steel, titanium and other metal alloys). 77 Fed. Reg. 43474 (July 24, 2012). The proposed change is the latest development in the long evolution of sourcing restrictions on specialty metals.
The legislation commonly known as the Berry Amendment, 10 U.S.C. 2533a, generally prohibits the use of DoD appropriated funds to acquire a variety of items, including certain foods, fabrics, natural and synthetic fibers, and hand tools. For many years, it also included source restrictions relating to specialty metals. But the FY 2007 NDAA deleted the specialty metals restrictions from 10 U.S.C. 2533a and moved them to a separate section at 10 U.S.C. 2533b.
This newer provision prohibits DoD from acquiring specialty metals that are “not melted or produced in the United States” (and end items containing such metals), but it does not include a definition of the term, “produce” as it relates to specialty metals. To fill the gap, DoD initially defined “produce” to mean “the application of forces or processes to a specialty metal to create the desired physical properties through quelching or tempering of steel plate, gas atomization or spluttering of titanium, or final consolidation of non-melt derived titanium powder or titanium alloy powder.” 74 Fed. Reg. 37626 (July 29, 2009).
In July 2011, DoD requested comments regarding the definition of “produce” as it applies to the production of specialty metals. 76 Fed. Reg. 44308 (July 25, 2011). The seventeen sources that submitted responses focused almost exclusively on whether processes such as quelching and tempering should continue to be considered methods of production for thin specialty metal steel armor plate. Based on these comments (including some containing proprietary information), as well as current technologies for the production of specialty metals other than titanium, DoD has now proposed to amend the definition of “produce” by eliminating “the phrase ‘quelching and tempering’ of armor steel plate” and expanding “the application of other listed technologies, currently restricted just to titanium and titanium alloys, to any specialty metal that could be formed by such technologies.” 77 Fed. Reg. at 43474. Under this approach, the term “produce” will mean “the gas atomization, sputtering, or final consolidation of non-melt derived metal powders.” Id. at 43477.
DoD considered and rejected a number of commenter assertions by noting they were improperly focused on the statute and legal authorities as they existed prior to the law’s change in 2009 (some commenters simply dusted off comments from the commenting period in 2009). Compare, e.g., 77 Fed. Reg. at 43474, with 74 Fed. Reg. at 37630. According to DoD, one of the reasons for the “new” statute in 2009 was to differentiate specialty metals from other items covered by the Berry Amendment. 77 Fed. Reg. at 43474. Furthermore, DoD believes the “melted or produced” language in 10 U.S.C. 2533b clearly permits the consideration of processes other than melting. Id.
Nevertheless, while not required by law to make the change, DoD has decided that the “quelching and tempering” elements of the definition have essentially served their purpose and may now be removed without impacting domestic capacity to meet its specialty metals requirements. Id. at 43475-76. From DoD’s perspective, given the recent growth in the U.S. industrial base for specialty metals, the proposed rule will spur innovation and provide new opportunities for smaller manufacturers without adversely impacting the nation’s ability to meet its critical need for armor steel plate and other specialty metals. Id.
These are laudable goals. Let’s hope DoD’s assessment is correct.
Eric Whytsell is the attorney responsible for the content of this article.