§ 2500. Definitions

In this chapter:

• (1) The term “national technology and industrial base” means the persons and organizations that are engaged in research, development, production, integration, services, or information technology activities conducted within the United States, the United Kingdom of Great Britain and Northern Ireland, Australia, and Canada.
• (2) The term “dual-use” with respect to products, services, standards, processes, or acquisition practices, means products, services, standards, processes, or acquisition practices, respectively, that are capable of meeting requirements for military and nonmilitary applications.
• (3) The term “dual-use critical technology” means a critical technology that has military applications and nonmilitary applications.
• (4) The term “technology and industrial base sector” means a group of public or private persons and organizations that engage in, or are capable of engaging in, similar research, development, production, integration, services, or information technology activities.
• (5) The terms “Federal laboratory” and “laboratory” have the meaning given the term “laboratory” in section 12(d)(2) of the Stevenson-Wydler Technology Innovation Act of 1980 ( 15 U.S.C. 3710a(d)(2) ), except that such terms include a federally funded research and development center sponsored by a Federal agency.
• (6) The term “critical technology” means a technology that is—
  • (A) a national critical technology; or
  • (B) a defense critical technology.
• (7) The term “national critical technology” means a technology that appears on the list of national critical technologies contained in the most recent biennial report on national critical technologies submitted to Congress by the President pursuant to section 603(d) 1 1 See References in Text note below. of the National Science and Technology Policy, Organization, and Priorities Act of 1976 ( 42 U.S.C. 6683(d) ).
• (8) The term “defense critical technology” means a technology that is identified under section 2505 of this title as critical for attaining the national security objectives set forth in section 2501(a) of this title .
• (9) The term “eligible firm” means a company or other business entity that, as determined by the Secretary of Commerce—
  • (A) conducts a significant level of its research, development, engineering, manufacturing, integration, services, and information technology activities in the United States; and
  • (B) is a company or other business entity the majority ownership or control of which is by United States citizens or is a company or other business of a parent company that is incorporated in a country the government of which—
    • (i) encourages the participation of firms so owned or controlled in research and development consortia to which the government of that country provides funding directly or provides funding indirectly through international organizations or agreements; and
    • (ii) affords adequate and effective protection for the intellectual property rights of companies incorporated in the United States.
• (10) The term “manufacturing technology” means techniques and processes designed to improve manufacturing quality, productivity, and practices, including quality control, shop floor management, inventory management, and worker training, as well as manufacturing equipment and software.
• (11) The term “Small Business Innovation Research Program” means the program established under the following provisions of section 9 of the Small Business Act ( 15 U.S.C. 638 ):
  • (A) Paragraphs (4) through (7) of subsection (b).
  • (B) Subsections (e) through ( l ).
• (12) The term “Small Business Technology Transfer Program” means the program established under the following provisions of such section:
  • (A) Paragraphs (4) through (7) of subsection (b).
  • (B) Subsections (e) and (n) through (p).
• (13) The term “significant equity percentage” means—
  • (A) a level of contribution and participation sufficient, when compared to the other non-Federal participants in the partnership or other cooperative arrangement involved, to demonstrate a comparable long-term financial commitment to the product or process development involved; and
  • (B) any other criteria the Secretary may consider necessary to ensure an appropriate equity mix among the participants.
• (14) The term “person of a foreign country” has the meaning given such term in section 3502(d) of the Primary Dealers Act of 1988 ( 22 U.S.C. 5342(d) ).
• (15) The term “integration” means the process of providing systems engineering and technical direction for a system for the purpose of achieving capabilities that satisfy program requirements.

§ 2501. National security strategy for national technology and industrial base

• (a) The Secretary of Defense shall develop a national security strategy for the national technology and industrial base. The Secretary shall submit such strategy to Congress not later than 180 days after the date of submission of the national security strategy report required under section 108 of the National Security Act of 1947 ( 50 U.S.C. 3043 ). Such strategy shall be based on a prioritized assessment of risks and challenges to the defense supply chain and shall ensure that the national technology and industrial base is capable of achieving the following national security objectives:
  • (1) Supplying, equipping, and supporting the force structure of the armed forces that is necessary to achieve—
    • (A) the objectives set forth in the national security strategy report submitted to Congress by the President pursuant to section 108 of the National Security Act of 1947 ( 50 U.S.C. 3043 );
    • (B) the policy guidance of the Secretary of Defense provided pursuant to section 113(g) of this title ; and
    • (C) the future-years defense program submitted to Congress by the Secretary of Defense pursuant to section 221 of this title .
  • (2) Sustaining production, maintenance, repair, logistics, and other activities in support of military operations of various durations and intensity.
  • (3) Maintaining advanced research and development activities to provide the armed forces with systems capable of ensuring technological superiority over potential adversaries.
  • (4) Reconstituting within a reasonable period the capability to develop, produce, and support supplies and equipment, including technologically advanced systems, in sufficient quantities to prepare fully for a war, national emergency, or mobilization of the armed forces before the commencement of that war, national emergency, or mobilization.
  • (5) Providing for the development, manufacture, and supply of items and technologies critical to the production and sustainment of advanced military weapon systems within the national technology and industrial base.
  • (6) Providing for the generation of services capabilities that are not core functions of the armed forces and that are critical to military operations within the national technology and industrial base.
  • (7) Providing for the development, production, and integration of information technology within the national technology and industrial base.
  • (8) Maintaining critical design skills to ensure that the armed forces are provided with systems capable of ensuring technological superiority over potential adversaries.
  • (9) Ensuring reliable sources of materials that are critical to national security, such as specialty metals, essential minerals, armor plate, and rare earth elements.
  • (10) Reducing, to the maximum extent practicable, the presence of counterfeit parts in the supply chain and the risk associated with such parts.
• (b) The Secretary of Defense shall ensure that the United States attains the national technology and industrial base objectives set forth in subsection (a) through acquisition policy reforms that have the following objectives:
  • (1) Relying, to the maximum extent practicable, upon the commercial national technology and industrial base that is required to meet the national security needs of the United States.
  • (2) Reducing the reliance of the Department of Defense on technology and industrial base sectors that are economically dependent on Department of Defense business.
  • (3) Reducing Federal Government barriers to the use of commercial products, processes, and standards.

§ 2502. National Defense Technology and Industrial Base Council

• (a) There is a National Defense Technology and Industrial Base Council.
• (b) The Council is composed of the following members:
  • (1) The Secretary of Defense, who shall serve as chairman.
  • (2) The Secretary of Energy.
  • (3) The Secretary of Commerce.
  • (4) The Secretary of Labor.
  • (5) Such other officials as may be determined by the President.
• (c) The Council shall have the responsibility to ensure effective cooperation among departments and agencies of the Federal Government, and to provide advice and recommendations to the President, the Secretary of Defense, the Secretary of Energy, the Secretary of Commerce, and the Secretary of Labor, concerning—
  • (1) the capabilities of the national technology and industrial base to meet the national security objectives set forth in section 2501(a) of this title ;
  • (2) programs for achieving such national security objectives; and
  • (3) changes in acquisition policy that strengthen the national technology and industrial base.
• (d) Notwithstanding subsection (c), the President may assign the responsibilities of the Council to another interagency organization of the executive branch that includes among its members the officials specified in paragraphs (1) through (4) of subsection (b).

§ 2503. National defense program for analysis of the technology and industrial base

• (a) The Secretary of Defense shall establish a program for analysis of the national technology and industrial base.
• (b) The Secretary of Defense shall carry out the program through the Under Secretary of Defense for Research and Engineering and the Under Secretary of Defense for Acquisition and Sustainment. In carrying out the program, the Under Secretaries shall consult with the Secretary of Energy, the Secretary of Commerce, and the Secretary of Labor.
• (c) The functions of the program shall include, with respect to the national technology and industrial base, the following:
  • (1) The assembly of timely and authoritative information.
  • (2) Initiation of studies and analyses.
  • (3) Provision of technical support and assistance to—
    • (A) the Secretary of Defense for the preparation of the periodic assessments required by section 2505 of this title ;
    • (B) the defense acquisition university structure and its elements; and
    • (C) other departments and agencies of the Federal Government in accordance with guidance established by the Council.
  • (4) Dissemination, through the National Technical Information Service of the Department of Commerce, of unclassified information and assessments for further dissemination within the Federal Government and to the private sector.

§ 2504. Annual report to Congress

The Secretary of Defense shall transmit to the Committee on Armed Services of the Senate and the Committee on Armed Services of the House of Representatives by March 1 of each year a report which shall include the following information:

• (1) A description of the departmental guidance prepared pursuant to section 2506 of this title .
• (2) A description of the assessments prepared pursuant to section 2505 of this title and other analyses used in developing the budget submission of the Department of Defense for the next fiscal year.
• (3) Based on the strategy required by section 2501 of this title and on the assessments prepared pursuant to Executive order or section 2505 of this title —
  • (A) a map of the industrial base;
  • (B) a prioritized list of gaps or vulnerabilities in the national technology and industrial base, including—
    • (i) a description of mitigation strategies necessary to address such gaps or vulnerabilities;
    • (ii) the identification of the Secretary concerned or the head of the Defense Agency responsible for addressing such gaps or vulnerabilities; and
    • (iii) a proposed timeline for action to address such gaps or vulnerabilities; and
  • (C) any other steps necessary to foster and safeguard the national technology and industrial base.
• (4) Identification of each program designed to sustain specific essential technological and industrial capabilities and processes of the national technology and industrial base.

§ 2504a. Unfunded priorities of the national technology and industrial base: annual report

• (a) Not later than 10 days after the date on which the budget of the President for a fiscal year is submitted to Congress pursuant to section 1105 of title 31 , the Under Secretary of Defense for Acquisition and Sustainment shall submit to the Secretary of Defense, the Chairman of the Joint Chiefs of Staff, and the congressional defense committees a report on the unfunded priorities to address gaps or vulnerabilities in the national technology and industrial base.
• (b)
  • (1) Each report under subsection (a) shall specify, for each unfunded priority covered by such report, the following:
    • (A) A summary description of such priority, including the objectives to be achieved if such priority is funded (whether in whole or in part).
    • (B) The additional amount of funds recommended in connection with the objectives under subparagraph (A).
    • (C) Account information with respect to such priority, including the following (as applicable):
      • (i) Line Item Number (LIN) for applicable procurement accounts.
      • (ii) Program Element (PE) number for applicable research, development, test, and evaluation accounts.
      • (iii) Sub-activity group (SAG) for applicable operation and maintenance accounts.
  • (2) Each report shall present the unfunded priorities covered by such report in order of urgency of priority.
• (c) In this section, the term “unfunded priority”, in the case of a fiscal year, means a program, activity, or mission requirement of the national technology and industrial base that—
  • (1) is not funded in the budget of the President for the fiscal year as submitted to Congress pursuant to section 1105 of title 31 ;
  • (2) is necessary to address gaps or vulnerabilities in the national technology and industrial base; and
  • (3) would have been recommended for funding through the budget referred to in paragraph (1) if—
    • (A) additional resources had been available for the budget to fund the program, activity, or mission requirement; or
    • (B) the program, activity, or mission requirement had emerged before the budget was formulated.

§ 2505. National technology and industrial base: periodic defense capability assessments

• (a) Each fiscal year, the Secretary of Defense shall prepare selected assessments of the capability of the national technology and industrial base to attain the national security objectives set forth in section 2501(a) of this title . The Secretary of Defense shall prepare such assessments in consultation with the Secretary of Commerce and the Secretary of Energy.
• (b) The Secretary of Defense shall ensure that technology and industrial capability assessments—
  • (1) describe sectors or capabilities, their underlying infrastructure and processes;
  • (2) analyze present and projected financial performance of industries supporting the sectors or capabilities in the assessment;
  • (3) determine the extent to which the requirements associated with defense acquisition programs can be satisfied by the present and projected performance capacities of industries supporting the sectors or capabilities in the assessment, evaluate the reasons for any variance from applicable preceding determinations, and identify the extent to which those industries are comprised of only one potential source in the national technology and industrial base or have multiple potential sources;
  • (4) determine the extent to which the requirements associated with defense acquisition programs can be satisfied by the present and projected performance capacities of industries that do not actively support Department of Defense acquisition programs and identify the barriers to the participation of those industries;
  • (5) identify technological and industrial capabilities and processes for which there is potential for the national industrial and technology base not to be able to support the achievement of national security objectives; and
  • (6) consider the effects of the termination of major defense acquisition programs (as the term is defined in section 2430 of this title ) or major automated information system programs (as defined in section 2445a 1 1 See References in Text note below. of this title) in the previous fiscal year on the sectors and capabilities in the assessment.
• (c) Each assessment under subsection (a) shall include a separate discussion and presentation regarding the extent to which the national technology and industrial base is dependent on items for which the source of supply, manufacture, or technology is outside of the United States and Canada and for which there is no immediately available source in the United States or Canada. The discussion and presentation regarding foreign dependency shall—
  • (1) identify cases that pose an unacceptable risk of foreign dependency, as determined by the Secretary; and
  • (2) present actions being taken or proposed to be taken to remedy the risk posed by the cases identified under paragraph (1), including efforts to develop a domestic source for the item in question.
• (d) Each assessment under subsection (a) shall include an examination of the extent to which the national technology and industrial base is affected by foreign boycotts. If it is determined that a foreign boycott (other than a boycott addressed in a previous assessment) is subjecting the national technology and industrial base to significant harm, the assessment shall include a separate discussion and presentation regarding that foreign boycott that shall, at a minimum—
  • (1) identify the sectors that are subject to such harm;
  • (2) describe the harm resulting from such boycott; and
  • (3) identify actions necessary to minimize the effects of such boycott on the national technology and industrial base.
• (e) The Secretary of Defense shall ensure that consideration of the technology and industrial base assessments is integrated into the overall budget, acquisition, and logistics support decision processes of the Department of Defense.

§ 2506. Department of Defense technology and industrial base policy guidance

• (a) The Secretary of Defense shall prescribe departmental guidance for the attainment of each of the national security objectives set forth in section 2501(a) of this title .
• (b) The guidance prescribed pursuant to subsection (a) shall provide for technological and industrial capability considerations to be integrated into the strategy, management, budget allocation, acquisition, and logistics support decision processes.

§ 2507. Data collection authority of President

• (a) The President shall be entitled, by regulation, subpoena, or otherwise, to obtain such information from, require such reports and the keeping of such records by, make such inspection of the books, records, and other writings, premises or property of, and take the sworn testimony of, and administer oaths and affirmations to, any person as may be necessary or appropriate, in the President’s discretion, to the enforcement or the administration of this chapter and the regulations issued under this chapter.
• (b) The President shall issue regulations insuring that the authority of this section will be used only after the scope and purpose of the investigation, inspection, or inquiry to be made have been defined by competent authority and it is assured that no adequate and authoritative data are available from any Federal or other responsible agency.
• (c) Any person who willfully performs any act prohibited or willfully fails to perform any act required by the provisions of subsection (a), or any rule, regulation, or order thereunder, shall be fined under title 18 or imprisoned not more than one year, or both.
• (d) Information obtained under subsection (a) which the President deems confidential or with reference to which a request for confidential treatment is made by the person furnishing such information shall not be published or disclosed unless the President determines that the withholding thereof is contrary to the interest of the national defense. Any person who willfully violates this subsection shall be fined under title 18 or imprisoned not more than one year, or both.
• (e) The President may make such rules, regulations, and orders as he considers necessary or appropriate to carry out the provisions of this section. Any regulation or order under this section may be established in such form and manner, may contain such classification and differentiations, and may provide for such adjustments and reasonable exceptions as in the judgment of the President are necessary or proper to effectuate the purposes of this section, or to prevent circumvention or evasion, or to facilitate enforcement of this section, or any rule, regulation, or order issued under this section.
• (f) In this section:
  • (1) The term “person” includes an individual, corporation, partnership, association, or any other organized group of persons, or legal successor or representative of the foregoing, and includes the United States or any agency thereof, or any other government, or any of its political subdivisions, or any agency of any of the foregoing, except that no punishment provided by this section shall apply to the United States, or to any such government, political subdivision, or government agency.
  • (2) The term “national defense” means programs for military and atomic energy production or construction, military assistance to any foreign nation, stockpiling, space, and directly related activity.

§ 2508. Industrial Base Fund

• (a) The Secretary of Defense shall establish an Industrial Base Fund (in this section referred to as the “Fund”).
• (b) The Fund shall be under the control of the Under Secretary of Defense for Acquisition and Sustainment, acting through the Deputy Assistant Secretary of Defense for Manufacturing and Industrial Base Policy.
• (c) The Fund shall consist of amounts appropriated or otherwise made available to the Fund.
• (d) Subject to subsection (e), the Fund shall be used—
  • (1) to support the monitoring and assessment of the industrial base required by this chapter;
  • (2) to address critical issues in the industrial base relating to urgent operational needs;
  • (3) to support efforts to expand the industrial base; and
  • (4) to address supply chain vulnerabilities.
• (e) The authority of the Secretary of Defense to use the Fund under this section in any fiscal year is subject to the availability of appropriations for that purpose.
• (f) The Secretary shall establish procedures for expending monies in the Fund in support of the uses identified in subsection (d), including the following:
  • (1) Direct obligations from the Fund.
  • (2) Transfers of monies from the Fund to relevant appropriations of the Department of Defense.

§ 2509. Modernization of acquisition processes to ensure integrity of industrial base

• (a) The Secretary of Defense shall streamline and digitize the existing Department of Defense approach for identifying and mitigating risks to the defense industrial base across the acquisition process, creating a continuous model that uses digital tools, technologies, and approaches designed to ensure the accessibility of data to key decision-makers in the Department.
• (b)
  • (1) The Under Secretary of Defense for Acquisition and Sustainment, in coordination with the Director of the Defense Counterintelligence and Security Agency and the heads of other elements of the Department of Defense as appropriate, shall develop an analytical framework for risk mitigation across the acquisition process.
  • (2) The analytical framework required under paragraph (1) shall include the following elements:
    • (A) Characterization and monitoring of supply chain risks, including—
      • (i) material sources and fragility, including the extent to which sources, items, materials, and articles are mined, produced, or manufactured within or outside the United States;
      • (ii) telecommunications services or equipment (other than optical transmission components);
      • (iii) counterfeit parts;
      • (iv) cybersecurity of contractors;
      • (v) video surveillance services or equipment;
      • (vi) vendor vetting in contingency or operational environments;
      • (vii) other electronic or information technology products and services; and
      • (viii) other risk areas as determined appropriate.
    • (B) Characterization and monitoring of risks posed by contractor behavior that constitute violations of laws or regulations, including those relating to—
      • (i) fraud;
      • (ii) ownership structures;
      • (iii) trafficking in persons;
      • (iv) workers’ health and safety;
      • (v) affiliation with the enemy;
      • (vi) foreign influence; and
      • (vii) other risk areas as deemed appropriate.
    • (C) Characterization and assessment of the acquisition processes and procedures of the Department of Defense, including—
      • (i) market research;
      • (ii) responsibility determinations, including consideration of the need for special standards of responsibility to address the risks described in subparagraphs (A) and (B);
      • (iii) facilities clearances;
      • (iv) the development of contract requirements;
      • (v) the technical evaluation of offers and contract awards;
      • (vi) contractor mobilization, including hiring, training, and establishing facilities;
      • (vii) contract administration, contract management, and oversight;
      • (viii) contract audit for closeout;
      • (ix) suspension and debarment activities and administrative appeals activities;
      • (x) contractor business system reviews; and
      • (xi) other relevant processes and procedures.
    • (D) Characterization and monitoring of the health and activities of the defense industrial base, including those relating to—
      • (i) balance sheets, revenues, profitability, and debt;
      • (ii) investment, innovation, and technological and manufacturing sophistication;
      • (iii) finances, access to capital markets, and cost of raising capital within those markets;
      • (iv) corporate governance, leadership, and culture of performance; and
      • (v) history of performance on past Department of Defense and government contracts.
• (c) The Secretary of Defense shall designate the roles and responsibilities of organizations and individuals to execute activities under this section, including—
  • (1) the Under Secretary of Defense for Acquisition and Sustainment, including the Office of Defense Pricing and Contracting and the Office of Industrial Policy;
  • (2) service acquisition executives;
  • (3) program offices and procuring contracting officers;
  • (4) administrative contracting officers within the Defense Contract Management Agency and the Supervisor of Shipbuilding;
  • (5) the Defense Counterintelligence and Security Agency;
  • (6) the Defense Contract Audit Agency;
  • (7) each element of the Department of Defense which own or operate systems containing data relevant to contractors of the Department;
  • (8) the Under Secretary of Defense for Research and Engineering;
  • (9) the suspension and debarment official of the Department;
  • (10) the Chief Information Officer; and
  • (11) other relevant organizations and individuals.
• (d)
  • (1)
    • (A) The Under Secretary of Defense for Acquisition and Sustainment, in consultation with the Chief Data Officer of the Department of Defense and the Director of the Defense Counterintelligence and Security Agency, shall assess the extent to which existing systems of record relevant to risk assessments and contracting are producing, exposing, and timely maintaining valid and reliable data for the purposes of the Department’s continuous assessment and mitigation of risks in the defense industrial base.
    • (B) The assessment required under subparagraph (A) shall include the following elements:
      • (i) Identification of the necessary source data, to include data from contractors, intelligence and security activities, program offices, and commercial research entities.
      • (ii) A description of the modern data infrastructure, tools, and applications and what changes would improve the effectiveness and efficiency of mitigating the risks described in subsection (b)(2).
      • (iii) An assessment of the following systems owned or operated outside of the Department of Defense that the Department depends upon or to which it provides data:
        • (I) The Federal Awardee Performance and Integrity Information System (FAPIIS).
        • (II) The System for Award Management (SAM).
        • (III) The Federal Procurement Data System–Next Generation (FPDS–NG).
        • (IV) The Electronic Data Management Information System.
        • (V) Other systems the Secretary of Defense determines appropriate.
      • (iv) An assessment of systems owned or operated by the Department of Defense, including the Defense Counterintelligence and Security Agency and other defense agencies and field activities used to capture and analyze the status and performance (including past performance) of vendors and contractors.
  • (2) Based on the findings pursuant to paragraph (1), the Secretary of Defense shall develop a unified set of activities to modernize the systems of record, data sources and collection methods, and data exposure mechanisms. The unified set of activities should feature—
    • (A) the ability to continuously collect data on, assess, and mitigate risks;
    • (B) data analytics and business intelligence tools and methods; and
    • (C) continuous development and continuous delivery of secure software to implement the activities.
• (e) Nothing in this section shall be construed to limit or modify any other procurement policy, procedure, requirement, or restriction provided by law.
• (f) The Secretary of Defense shall carry out the implementation phases set forth in, and submit to the congressional defense committees the items of information required by, the following paragraphs:
  • (1) Not later than 90 days after the date of the enactment of this section, an implementation plan and schedule for carrying out the framework established pursuant to subsection (b), including—
    • (A) a discussion and recommendations for any changes to, or exemptions from, laws necessary for effective implementation, including updating the definitions in section 2339a(e) of this title relating to covered procurement, covered system, and covered item of supply, and any similar terms defined in other law or regulation; and
    • (B) a process for an entity to contact the Department after the entity has taken steps to remediate, mitigate, or otherwise address the risks identified by the Department in conducting activities under subsection (b).
  • (2) Not later than one year after the date of the submission of the implementation plan and schedule required under paragraph (1), a report on the actions taken to implement the framework established pursuant to subsection (b).
• (g)
  • (1) Not later than February 15, 2020 , the Comptroller General of the United States shall brief the congressional defense committees on Department of Defense efforts over the previous 5 years to continuously assess and mitigate risks to the defense industrial base across the acquisition process, and a summary of current and planned efforts.
  • (2) The Comptroller General shall submit to the congressional defense committees three periodic assessments of Department of Defense progress in implementing the framework required under subsection (b), to be provided not later than October 15, 2020 , March 15, 2022 , and March 15, 2024 .

§ 2511. Defense dual-use critical technology program

• (a) The Secretary of Defense shall conduct a program to further the national security objectives set forth in section 2501(a) of this title by encouraging and providing for research, development, and application of dual-use critical technologies. The Secretary may make grants, enter into contracts, or enter into cooperative agreements and other transactions pursuant to section 2371 of this title in furtherance of the program. The Secretary shall identify projects to be conducted as part of the program.
• (b) The Secretary of Defense may provide technical and other assistance to facilitate the achievement of the purposes of projects conducted under the program. In providing such assistance, the Secretary shall make available, as appropriate for the work to be performed, equipment and facilities of Department of Defense laboratories (including the scientists and engineers at those laboratories) for purposes of projects selected by the Secretary.
• (c)
  • (1) The total amount of funds provided by the Federal Government for a project conducted under the program may not exceed 50 percent of the total cost of the project. However, the Secretary of Defense may agree to a project in which the total amount of funds provided by the Federal Government exceeds 50 percent if the Secretary determines the project is particularly meritorious, but the project would not otherwise have sufficient non-Federal funding or in-kind contributions.
  • (2) The Secretary may prescribe regulations to provide for consideration of in-kind contributions by non-Federal Government participants in a project conducted under the program for the purpose of calculating the share of the project costs that has been or is being undertaken by such participants. In such regulations, the Secretary may authorize a participant that is a small business concern to use funds received under the Small Business Innovation Research Program or the Small Business Technology Transfer Program to help pay the costs of project activities. Any such funds so used may be considered in calculating the amount of the financial commitment undertaken by the non-Federal Government participants unless the Secretary determines that the small business concern has not made a significant equity percentage contribution in the project from non-Federal sources.
  • (3) The Secretary shall consider a project proposal submitted by a small business concern without regard to the ability of the small business concern to immediately meet its share of the anticipated project costs. Upon the selection of a project proposal submitted by a small business concern, the small business concern shall have a period of not less than 120 days in which to arrange to meet its financial commitment requirements under the project from sources other than a person of a foreign country. If the Secretary determines upon the expiration of that period that the small business concern will be unable to meet its share of the anticipated project costs, the Secretary shall revoke the selection of the project proposal submitted by the small business concern.
• (d) Competitive procedures shall be used in the conduct of the program.
• (e) The criteria for the selection of projects under the program shall include the following:
  • (1) The extent to which the proposed project advances and enhances the national security objectives set forth in section 2501(a) of this title .
  • (2) The technical excellence of the proposed project.
  • (3) The qualifications of the personnel proposed to participate in the research activities of the proposed project.
  • (4) An assessment of timely private sector investment in activities to achieve the goals and objectives of the proposed project other than through the project.
  • (5) The potential effectiveness of the project in the further development and application of each technology proposed to be developed by the project for the national technology and industrial base.
  • (6) The extent of the financial commitment of eligible firms to the proposed project.
  • (7) The extent to which the project does not unnecessarily duplicate projects undertaken by other agencies.
• (f) The Secretary of Defense shall prescribe regulations for the purposes of this section.

§ 2514. Encouragement of technology transfer

• (a) The Secretary of Defense shall encourage, to the extent consistent with national security objectives, the transfer of technology between laboratories and research centers of the Department of Defense and other Federal agencies, State and local governments, colleges and universities, and private persons in cases that are likely to result in accomplishing the objectives set forth in section 2501(a) of this title .
• (b) The Secretary shall examine and implement methods, in addition to the encouragement referred to in subsection (a) and the program described in subsection (c), that are consistent with national security objectives and will enable Department of Defense personnel to promote technology transfer.
• (c)
  • (1) The Secretary of Defense shall establish and implement a program to be known as the Federal Defense Laboratory Diversification Program (hereinafter in this subsection referred to as the “Program”). The purpose of the Program shall be to encourage greater cooperation in research and production activities carried out by defense laboratories and by private industry of the United States in order to enhance and improve the products of such research and production activities.
  • (2) Under the Program, the defense laboratories, in coordination with the Office of Technology Transfer in the Office of the Secretary of Defense, shall carry out cooperative activities with private industry in order to promote (by the use or exchange of patents, licenses, cooperative research and development agreements and other cooperative agreements, and the use of symposia, meetings, and other similar mechanisms) the transfer of defense or dual-use technologies from the defense laboratories to private industry, and the development and application of such technologies by the defense laboratories and private industry, for the purpose of the commercial utilization of such technologies by private industry.
  • (3) The Secretary of Defense shall develop and annually update a plan for each defense laboratory that participates in the Program under which plan the laboratory shall carry out cooperative activities with private industry to promote the transfers described in subsection (b).
  • (4) In this subsection, the term “defense laboratory” means any laboratory owned or operated by the Department of Defense that carries out research in fiscal year 1993 in an amount in excess of $50,000,000.

§ 2518. Overseas foreign critical technology monitoring and assessment financial assistance program

• (a) The Secretary of Defense may establish a foreign critical technology monitoring and assessment program. Under the program, the Secretary may enter into cooperative arrangements with one or more eligible not-for-profit organizations in order to provide financial assistance for the establishment of foreign critical technology monitoring and assessment offices in Europe, Pacific Rim countries, and such other countries as the Secretary considers appropriate.
• (b) Any not-for-profit industrial or professional organization that has economic and scientific interests in research, development, and applications of dual-use critical technologies is eligible to enter into a cooperative arrangement referred to in subsection (a).

§ 2519. Federal Defense Laboratory Diversification Program

• (a) The Secretary of Defense shall conduct a program in accordance with this section for the purpose of promoting cooperation between Department of Defense laboratories and industry on research and development of dual-use technologies in order to further the national security objectives set forth in section 2501(a) of this title .
• (b)
  • (1) The Secretary shall provide for the establishment under the program of cooperative arrangements (hereinafter in this section referred to as “partnerships”) between a Department of Defense laboratory and eligible firms and nonprofit research corporations. A partnership may also include one or more additional Federal laboratories, institutions of higher education, agencies of State and local governments, and other entities, as determined appropriate by the Secretary.
  • (2) For purposes of this section, a federally funded research and development center shall be considered a Department of Defense laboratory if the center is sponsored by the Department of Defense.
• (c)
  • (1) The Secretary may make grants, enter into contracts, enter into cooperative agreements and other transactions pursuant to section 2371 of this title , and enter into cooperative research and development agreements under section 12 of the Stevenson-Wydler Technology Innovation Act of 1980 ( 15 U.S.C. 3710a ) in order to establish partnerships.
  • (2) Subject to subsection (d), the Secretary may provide a partnership with technical and other assistance in order to facilitate the achievement of the purpose of this section.
• (d)
  • (1) The Secretary shall ensure that the non-Federal Government participants in a partnership make a substantial contribution to the total cost of partnership activities. The amount of the contribution shall be commensurate with the risk undertaken by such participants and the potential benefits of the activities for such participants.
  • (2) The regulations prescribed pursuant to section 2511(c)(2) of this title shall apply to in-kind contributions made by non-Federal Government participants in a partnership.
• (e) Competitive procedures shall be used in the establishment of partnerships.
• (f) The criteria for the selection of a proposed partnership for establishment under this section shall include the criteria set forth in section 2511(e) of this title .
• (g) The Secretary shall prescribe regulations for the purposes of this section.

§ 2521. Manufacturing Technology Program

• (a) The Secretary of Defense shall establish a Manufacturing Technology Program to further the national security objectives of section 2501(a) of this title through the development and application of advanced manufacturing technologies and processes that will reduce the acquisition and supportability costs of defense weapon systems and reduce manufacturing and repair cycle times across the life cycles of such systems. The Secretary shall use the joint planning process of the directors of the Department of Defense laboratories in establishing the program. The Under Secretary of Defense for Research and Engineering shall administer the program.
• (b) The Secretary of Defense shall use the program—
  • (1) to provide centralized guidance and direction (including goals, milestones, and priorities) to the military departments and the Defense Agencies on all matters relating to manufacturing technology;
  • (2) to direct the development and implementation of Department of Defense plans, programs, projects, activities, and policies that promote the development and application of advanced technologies to manufacturing processes, tools, and equipment;
  • (3) to improve the manufacturing quality, productivity, technology, and practices of businesses and workers providing goods and services to the Department of Defense;
  • (4) to focus Department of Defense support for the development and application of advanced manufacturing technologies and processes for use to meet manufacturing requirements that are essential to the national defense, as well as for repair and remanufacturing in support of the operations of systems commands, depots, air logistics centers, and shipyards;
  • (5) to disseminate information concerning improved manufacturing improvement concepts, including information on such matters as best manufacturing practices, product data exchange specifications, computer-aided acquisition and logistics support, and rapid acquisition of manufactured parts;
  • (6) to sustain and enhance the skills and capabilities of the manufacturing work force;
  • (7) to promote high-performance work systems (with development and dissemination of production technologies that build upon the skills and capabilities of the work force), high levels of worker education and training; and
  • (8) to ensure appropriate coordination between the manufacturing technology programs and industrial preparedness programs of the Department of Defense and similar programs undertaken by other departments and agencies of the Federal Government or by the private sector.
• (c)
  • (1) The Secretary may carry out projects under the program through the Secretaries of the military departments and the heads of the Defense Agencies.
  • (2) In the establishment and review of requirements for an advanced manufacturing technology or process, the Secretary shall ensure the participation of those prospective technology users that are expected to be the users of that technology or process.
  • (3) The Secretary shall ensure that each project under the program for the development of an advanced manufacturing technology or process includes an implementation plan for the transition of that technology or process to the prospective technology users that will be the users of that technology or process.
  • (4) In the periodic review of a project under the program, the Secretary shall ensure participation by those prospective technology users that are the expected users for the technology or process being developed under the project.
  • (5) In order to promote increased dissemination and use of manufacturing technology throughout the national defense technology and industrial base, the Secretary shall seek, to the maximum extent practicable, the participation of manufacturers of manufacturing equipment in the projects under the program.
  • (6) In this subsection, the term “prospective technology users” means the following officials and elements of the Department of Defense:
    • (A) Program and project managers for defense weapon systems.
    • (B) Systems commands.
    • (C) Depots.
    • (D) Air logistics centers.
    • (E) Shipyards.
• (d)
  • (1) In accordance with the policy stated in section 2374 of this title , competitive procedures shall be used for awarding all grants and entering into all contracts, cooperative agreements, and other transactions under the program.
  • (2) Under the competitive procedures used, the factors to be considered in the evaluation of each proposed grant, contract, cooperative agreement, or other transaction for a project under the program shall include the extent to which that proposed transaction provides for the proposed recipient to share in the cost of the project. For a project for which the Government receives an offer from only one offeror, the contracting officer shall negotiate the ratio of contract recipient cost to Government cost that represents the best value to the Government.
• (e)
  • (1) There is in the Department of Defense the Joint Defense Manufacturing Technology Panel.
  • (2)
    • (A) The Chair of the Joint Defense Manufacturing Technology Panel shall be the head of the Panel. The Chair shall be appointed, on a rotating basis, from among the appropriate personnel of the military departments and Defense Agencies with manufacturing technology programs.
    • (B) The Panel shall be composed of at least one individual from among appropriate personnel of each military department and Defense Agency with manufacturing technology programs. The Panel may include as ex-officio members such individuals from other government organizations, academia, and industry as the Chair considers appropriate.
  • (3) The purposes of the Panel shall be as follows:
    • (A) To identify and integrate requirements for the program.
    • (B) To conduct joint planning for the program.
    • (C) To develop joint strategies for the program.
  • (4) In carrying out the purposes specified in paragraph (3), the Panel shall perform the functions as follows:
    • (A) Conduct comprehensive reviews and assessments of defense-related manufacturing issues being addressed by the manufacturing technology programs and related activities of the Department of Defense.
    • (B) Execute strategic planning to identify joint planning opportunities for increased cooperation in the development and implementation of technological products and the leveraging of funding for such purposes with the private sector and other government agencies.
    • (C) Ensure the integration and coordination of requirements and programs under the program with the Office of the Secretary of Defense and other national-level initiatives, including the establishment of information exchange processes with other government agencies, private industry, academia, and professional associations.
    • (D) Conduct such other functions as the Under Secretary of Defense for Research and Engineering shall specify.
  • (5) The Panel shall report to and receive direction from one or more individuals designated by the Under Secretary of Defense for Research and Engineering for purposes of this paragraph on manufacturing technology issues of multi-service concern and application.
  • (6) The administrative expenses of the Panel shall be borne by each military department and Defense Agency with manufacturing technology programs in such manner as the Panel shall provide.
• (f)
  • (1) The Secretary shall develop a plan for the program that includes the following:
    • (A) The overall manufacturing technology goals, milestones, priorities, and investment strategy for the program.
    • (B) The objectives of, and funding for, the program for each military department and each Defense Agency that shall participate in the program during the period of the plan.
  • (2) The Secretary shall include in the plan mechanisms for assessing the effectiveness of the program under the plan.
  • (3) The Secretary shall update the plan not less frequently than once every four years.
  • (4) Each plan, and each update to the plan, shall cover a period of five fiscal years.

§ 2522. Armament retooling and manufacturing

The Secretary of the Army is authorized by chapter 764 of this title to carry out programs for the support of armaments retooling and manufacturing in the national defense industrial and technology base.

§ 2531. Defense memoranda of understanding and related agreements

• (a) In the negotiation, renegotiation, and implementation of any existing or proposed memorandum of understanding, or any existing or proposed agreement related to a memorandum of understanding, between the Secretary of Defense, acting on behalf of the United States, and one or more foreign countries (or any instrumentality of a foreign country) relating to research, development, or production of defense equipment, or to the reciprocal procurement of defense items, the Secretary of Defense shall—
  • (1) consider the effects of such existing or proposed memorandum of understanding or related agreement on the defense technology and industrial base of the United States; and
  • (2) regularly solicit and consider comments and recommendations from the Secretary of Commerce with respect to the commercial implications of such memorandum of understanding or related agreement and the potential effects of such memorandum of understanding or related agreement on the international competitive position of United States industry.
• (b) Whenever the Secretary of Commerce has reason to believe that an existing or proposed memorandum of understanding or related agreement has, or threatens to have, a significant adverse effect on the international competitive position of United States industry, the Secretary may request an inter-agency review of the memorandum of understanding or related agreement. If, as a result of the review, the Secretary determines that the commercial interests of the United States are not being served or would not be served by adhering to the terms of such existing memorandum or related agreement or agreeing to such proposed memorandum or related agreement, as the case may be, the Secretary shall recommend to the President the renegotiation of the existing memorandum or related agreement or any modification to the proposed memorandum of understanding or related agreement that he considers necessary to ensure an appropriate balance of interests.
• (c) A memorandum of understanding or related agreement referred to in subsection (a) may not be entered into or implemented if the President, taking into consideration the results of the inter-agency review, determines that such memorandum of understanding or related agreement has or is likely to have a significant adverse effect on United States industry that outweighs the benefits of entering into or implementing such memorandum or agreement.

§ 2532. Offset policy; notification

• (a) The President shall establish, consistent with the requirements of this section, a comprehensive policy with respect to contractual offset arrangements in connection with the purchase of defense equipment or supplies which addresses the following:
  • (1) Transfer of technology in connection with offset arrangements.
  • (2) Application of offset arrangements, including cases in which United States funds are used to finance the purchase by a foreign government.
  • (3) Effects of offset arrangements on specific subsectors of the industrial base of the United States and for preventing or ameliorating any serious adverse effects on such subsectors.
• (b)
  • (1) No official of the United States may enter into a memorandum of understanding or other agreement with a foreign government that would require the transfer of United States defense technology to a foreign country or a foreign firm in connection with a contract that is subject to an offset arrangement if the implementation of such memorandum or agreement would significantly and adversely affect the defense industrial base of the United States and would result in a substantial financial loss to a United States firm.
  • (2) Paragraph (1) shall not apply in the case of a memorandum of understanding or agreement described in paragraph (1) if the Secretary of Defense, in consultation with the Secretary of Commerce and the Secretary of State, determines that a transfer of United States defense technology pursuant to such understanding or agreement will result in strengthening the national security of the United States and so certifies to Congress.
  • (3) If a United States firm is required under the terms of a memorandum of understanding, or other agreement entered into by the United States with a foreign country, to transfer defense technology to a foreign country, the United States firm may protest the determination to the Secretary of Defense on the grounds that the transfer of such technology would adversely affect the defense industrial base of the United States and would result in substantial financial loss to the protesting firm. The Secretary of Defense, in consultation with the Secretary of Commerce and the Secretary of State, shall make the final determination of the validity of the protesting firm’s claim.
• (c) If at any time a United States firm enters into a contract for the sale of a weapon system or defense-related item to a foreign country or foreign firm and such contract is subject to an offset arrangement exceeding $50,000,000 in value, such firm shall notify the Secretary of Defense of the proposed sale. Notification shall be made under this subsection in accordance with regulations prescribed by the Secretary of Defense in consultation with the Secretary of Commerce.
• (d) In this section:
  • (1) The term “United States firm” means a business entity that performs substantially all of its manufacturing, production, and research and development activities in the United States.
  • (2) The term “foreign firm” means a business entity other than a United States firm.

§ 2533. Determinations of public interest under chapter 83 of title 41

• (a) In determining under section 8302 of title 41 whether application of chapter 83 of such title is inconsistent with the public interest, the Secretary of Defense shall consider the following:
  • (1) The bids or proposals of small business firms in the United States which have offered to furnish American goods.
  • (2) The bids or proposals of all other firms in the United States which have offered to furnish American goods.
  • (3) The United States balance of payments.
  • (4) The cost of shipping goods which are other than American goods.
  • (5) Any duty, tariff, or surcharge which may enter into the cost of using goods which are other than American goods.
  • (6) A need to ensure that the Department of Defense has access to advanced, state-of-the-art commercial technology.
  • (7) The need to protect the national technology and industrial base, to preserve and enhance the national technology employment base, and to provide for a defense mobilization base.
  • (8) A need to ensure that application of different rules of origin for United States end items and foreign end items does not result in an award to a firm other than a firm providing a product produced in the United States.
  • (9) Any need—
    • (A) to maintain the same source of supply for spare and replacement parts for an end item that qualifies as an American good; or
    • (B) to maintain the same source of supply for spare and replacement parts in order not to impair integration of the military and commercial industrial base.
  • (10) The national security interests of the United States.
• (b) In this section, the term “goods which are other than American goods” means—
  • (1) an end product that is not mined, produced, or manufactured in the United States; or
  • (2) an end product that is manufactured in the United States but which includes components mined, produced, or manufactured outside the United States the aggregate cost of which exceeds the aggregate cost of the components of such end product that are mined, produced, or manufactured in the United States.

§ 2533a. Requirement to buy certain articles from American sources; exceptions

• (a) Except as provided in subsections (c) through (h), funds appropriated or otherwise available to the Department of Defense may not be used for the procurement of an item described in subsection (b) if the item is not grown, reprocessed, reused, or produced in the United States.
• (b) An item referred to in subsection (a) is any of the following:
  • (1) An article or item of—
    • (A) food;
    • (B) clothing and the materials and components thereof, other than sensors, electronics, or other items added to, and not normally associated with, clothing (and the materials and components thereof);
    • (C) tents (and the structural components thereof), tarpaulins, or covers;
    • (D) cotton and other natural fiber products, woven silk or woven silk blends, spun silk yarn for cartridge cloth, synthetic fabric or coated synthetic fabric (including all textile fibers and yarns that are for use in such fabrics), canvas products, or wool (whether in the form of fiber or yarn or contained in fabrics, materials, or manufactured articles); or
    • (E) any item of individual equipment manufactured from or containing such fibers, yarns, fabrics, or materials.
  • (2) Hand or measuring tools.
  • (3) 1 1 See Delayed Applicability and Repeal of Subsection (b)(3) and (4) note below. Stainless steel flatware.
  • (4) 1 Dinnerware.
• (c) Subsection (a) does not apply to the extent that the Secretary of Defense or the Secretary of the military department concerned determines that satisfactory quality and sufficient quantity of any such article or item described in subsection (b) grown, reprocessed, reused, or produced in the United States cannot be procured as and when needed at United States market prices.
• (d) Subsection (a) does not apply to the following:
  • (1) Procurements outside the United States in support of combat operations or procurements of any item listed in subsection (b)(1)(A) or (b)(2) in support of contingency operations.
  • (2) Procurements by vessels in foreign waters.
  • (3) Emergency procurements or procurements of perishable foods by, or for, an establishment located outside the United States for the personnel attached to such establishment.
  • (4) Procurements of any item listed in subsection (b)(1)(A) or (b)(2) for which the use of procedures other than competitive procedures has been approved on the basis of section 2304(c)(2) of this title , relating to unusual and compelling urgency of need.
• (e) Subsection (a) does not preclude the procurement of chemical warfare protective clothing produced outside the United States if—
  • (1) such procurement is necessary—
    • (A) to comply with agreements with foreign governments requiring the United States to purchase supplies from foreign sources for the purposes of offsetting sales made by the United States Government or United States firms under approved programs serving defense requirements; or
    • (B) in furtherance of agreements with foreign governments in which both such governments agree to remove barriers to purchases of supplies produced in the other country or services performed by sources of the other country; and
  • (2) any such agreement with a foreign government complies, where applicable, with the requirements of section 36 of the Arms Export Control Act ( 22 U.S.C. 2776 ) and with section 2457 of this title .
• (f) Subsection (a) does not preclude the procurement of the following:
  • (1) Foods manufactured or processed in the United States.
  • (2) Waste and byproducts of cotton and wool fiber for use in the production of propellants and explosives.
• (g) Subsection (a) does not apply to items purchased for resale purposes in commissaries, exchanges, or nonappropriated fund instrumentalities operated by the Department of Defense.
• (h) Subsection (a) does not apply to purchases for amounts not greater than the simplified acquisition threshold referred to in section 2304(g) of this title .
• (i) This section is applicable to contracts and subcontracts for the procurement of commercial products notwithstanding section 1906 of title 41 .
• (j) In this section, the term “United States” includes the possessions of the United States.
• (k) In the case of any contract for the procurement of an item described in subparagraph (B), (C), (D), or (E) of subsection (b)(1), if the Secretary of Defense or of the military department concerned applies an exception set forth in subsection (c) or (e) with respect to that contract, the Secretary shall, not later than 7 days after the award of the contract, post a notification that the exception has been applied on the Internet site maintained by the General Services Administration known as FedBizOpps.gov (or any successor site).

§ 2533b. Requirement to buy strategic materials critical to national security from American sources; exceptions

• (a) Except as provided in subsections (b) through (m), the acquisition by the Department of Defense of the following items is prohibited:
  • (1) The following types of end items, or components thereof, containing a specialty metal not melted or produced in the United States: aircraft, missile and space systems, ships, tank and automotive items, weapon systems, or ammunition.
  • (2) A specialty metal that is not melted or produced in the United States and that is to be purchased directly by the Department of Defense or a prime contractor of the Department.
• (b)
  • (1) Subsection (a) does not apply to the extent that the Secretary of Defense or the Secretary of the military department concerned determines that compliant specialty metal of satisfactory quality and sufficient quantity, and in the required form, cannot be procured as and when needed. For purposes of the preceding sentence, the term “compliant specialty metal” means specialty metal melted or produced in the United States.
  • (2) This subsection applies to prime contracts and subcontracts at any tier under such contracts.
• (c) Subsection (a) does not apply to the following:
  • (1) Acquisitions outside the United States in support of combat operations or in support of contingency operations.
  • (2) Acquisitions for which the use of procedures other than competitive procedures has been approved on the basis of section 2304(c)(2) of this title , relating to unusual and compelling urgency of need.
• (d) Subsection (a)(1) does not preclude the acquisition of a specialty metal if—
  • (1) the acquisition is necessary—
    • (A) to comply with agreements with foreign governments requiring the United States to purchase supplies from foreign sources for the purposes of offsetting sales made by the United States Government or United States firms under approved programs serving defense requirements; or
    • (B) in furtherance of agreements with foreign governments in which both such governments agree to remove barriers to purchases of supplies produced in the other country or services performed by sources of the other country; and
  • (2) any such agreement with a foreign government complies, where applicable, with the requirements of section 36 of the Arms Export Control Act ( 22 U.S.C. 2776 ) and with section 2457 of this title .
• (e) Subsection (a) does not apply to items purchased for resale purposes in commissaries, exchanges, and nonappropriated fund instrumentalities operated by the Department of Defense.
• (f) Subsection (a) does not apply to acquisitions in amounts not greater than the simplified acquisition threshold referred to in section 2304(g) of this title .
• (g) Subsection (a) does not apply to acquisitions of electronic components, unless the Secretary of Defense, upon the recommendation of the Strategic Materials Protection Board pursuant to section 187 of this title , determines that the domestic availability of a particular electronic component is critical to national security.
• (h)
  • (1) Except as provided in paragraphs (2) and (3), this section applies to acquisitions of commercial products, notwithstanding sections 1906 and 1907 of title 41.
  • (2) This section does not apply to contracts or subcontracts for the acquisition of commercially available off-the-shelf items, as defined in section 104 of title 41 , other than—
    • (A) contracts or subcontracts for the acquisition of specialty metals, including mill products, such as bar, billet, slab, wire, plate and sheet, that have not been incorporated into end items, subsystems, assemblies, or components;
    • (B) contracts or subcontracts for the acquisition of forgings or castings of specialty metals, unless such forgings or castings are incorporated into commercially available off-the-shelf end items, subsystems, or assemblies;
    • (C) contracts or subcontracts for commercially available high performance magnets unless such high performance magnets are incorporated into commercially available off-the-shelf-end items or subsystems; and
    • (D) contracts or subcontracts for commercially available off-the-shelf fasteners, unless such fasteners are—
      • (i) incorporated into commercially available off-the-shelf end items, subsystems, assemblies, or components; or
      • (ii) purchased as provided in paragraph (3).
  • (3) This section does not apply to fasteners that are commercial products that are purchased under a contract or subcontract with a manufacturer of such fasteners, if the manufacturer has certified that it will purchase, during the relevant calendar year, an amount of domestically melted specialty metal, in the required form, for use in the production of such fasteners for sale to the Department of Defense and other customers, that is not less than 50 percent of the total amount of the specialty metal that it will purchase to carry out the production of such fasteners.
• (i)
  • (1) Notwithstanding subsection (a), the Secretary of Defense or the Secretary of a military department may accept delivery of an item containing specialty metals that were not melted in the United States if the total amount of noncompliant specialty metals in the item does not exceed 2 percent of the total weight of specialty metals in the item.
  • (2) This subsection does not apply to high performance magnets.
• (j)
  • (1) Subsection (a) shall not apply to an item acquired under a prime contract if the Secretary of Defense or the Secretary of a military department determines that—
    • (A) the item is a commercial derivative military article; and
    • (B) the contractor certifies that the contractor and its subcontractors have entered into a contractual agreement, or agreements, to purchase an amount of domestically melted specialty metal in the required form, for use during the period of contract performance in the production of the commercial derivative military article and the related commercial article, that is not less than the greater of—
      • (i) an amount equivalent to 120 percent of the amount of specialty metal that is required to carry out the production of the commercial derivative military article (including the work performed under each subcontract); or
      • (ii) an amount equivalent to 50 percent of the amount of specialty metal that is purchased by the contractor and its subcontractors for use during such period in the production of the commercial derivative military article and the related commercial article.
  • (2) For the purposes of this subsection, the amount of specialty metal that is required to carry out the production of the commercial derivative military article includes specialty metal contained in any item, including commercially available off-the-shelf items, incorporated into such commercial derivative military article.
• (k)
  • (1) Notwithstanding subsection (a), the Secretary of Defense may accept the delivery of an end item containing noncompliant materials if the Secretary determines in writing that acceptance of such end item is necessary to the national security interests of the United States.
  • (2) A written determination under paragraph (1)—
    • (A) may not be delegated below the level of the Deputy Secretary of Defense or the Under Secretary of Defense for Acquisition and Sustainment;
    • (B) shall specify the quantity of end items to which the waiver applies and the time period over which the waiver applies; and
    • (C) shall be provided to the congressional defense committees prior to making such a determination (except that in the case of an urgent national security requirement, such certification may be provided to the defense committees up to 7 days after it is made).
  • (3)
    • (A) In any case in which the Secretary makes a determination under paragraph (1), the Secretary shall determine whether or not the noncompliance was knowing and willful.
    • (B) If the Secretary determines that the noncompliance was not knowing or willful, the Secretary shall ensure that the contractor or subcontractor responsible for the noncompliance develops and implements an effective plan to ensure future compliance.
    • (C) If the Secretary determines that the noncompliance was knowing or willful, the Secretary shall—
      • (i) require the development and implementation of a plan to ensure future compliance; and
      • (ii) consider suspending or debarring the contractor or subcontractor until such time as the contractor or subcontractor has effectively addressed the issues that lead to such noncompliance.
• (l) In this section, the term “specialty metal” means any of the following:
  • (1) Steel—
    • (A) with a maximum alloy content exceeding one or more of the following limits: manganese, 1.65 percent; silicon, 0.60 percent; or copper, 0.60 percent; or
    • (B) containing more than 0.25 percent of any of the following elements: aluminum, chromium, cobalt, columbium, molybdenum, nickel, titanium, tungsten, or vanadium.
  • (2) Metal alloys consisting of nickel, iron-nickel, and cobalt base alloys containing a total of other alloying metals (except iron) in excess of 10 percent.
  • (3) Titanium and titanium alloys.
  • (4) Zirconium and zirconium base alloys.
• (m) In this section:
  • (1) The term “United States” includes possessions of the United States.
  • (2) The term “component” has the meaning provided in section 105 of title 41 .
  • (3) The term “acquisition” has the meaning provided in section 131 of title 41 .
  • (4) The term “required form” shall not apply to end items or to their components at any tier. The term “required form” means in the form of mill product, such as bar, billet, wire, slab, plate or sheet, and in the grade appropriate for the production of—
    • (A) a finished end item delivered to the Department of Defense; or
    • (B) a finished component assembled into an end item delivered to the Department of Defense.
  • (5) The term “commercially available off-the-shelf”, has the meaning provided in section 104 of title 41 .
  • (6) The term “assemblies” means items forming a portion of a system or subsystem that can be provisioned and replaced as an entity and which incorporates multiple, replaceable parts.
  • (7) The term “commercial derivative military article” means an item procured by the Department of Defense that is or will be produced using the same production facilities, a common supply chain, and the same or similar production processes that are used for the production of articles predominantly used by the general public or by nongovernmental entities for purposes other than governmental purposes.
  • (8) The term “subsystem” means a functional grouping of items that combine to perform a major function within an end item, such as electrical power, attitude control, and propulsion.
  • (9) The term “end item” means the final production product when assembled or completed, and ready for issue, delivery, or deployment.
  • (10) The term “subcontract” includes a subcontract at any tier.

§ 2533c. Prohibition on acquisition of sensitive materials from non-allied foreign nations

• (a) Except as provided in subsection (c), the Secretary of Defense may not—
  • (1) procure any covered material melted or produced in any covered nation, or any end item that contains a covered material manufactured in any covered nation, except as provided by subsection (c); or
  • (2) sell any material from the National Defense Stockpile, if the National Defense Stockpile Manager determines that such a sale is not in the national interests of the United States, to—
    • (A) any covered nation; or
    • (B) any third party that the Secretary reasonably believes is acting as a broker or agent for a covered nation or an entity in a covered nation.
• (b) Subsection (a) shall apply to prime contracts and subcontracts at any tier.
• (c) Subsection (a) does not apply under the following circumstances:
  • (1) If the Secretary of Defense determines that covered materials of satisfactory quality and quantity, in the required form, cannot be procured as and when needed at a reasonable price.
  • (2) To the procurement of an end item described in subsection (a)(1) or the sale of any covered material described under subsection (a)(1) by the Secretary outside of the United States for use outside of the United States.
  • (3) To the purchase by the Secretary of an end item containing a covered material that is—
    • (A) a commercially available off-the-shelf item (as defined in section 104 of title 41 ), other than—
      • (i) a commercially available off-the-shelf item that is 50 percent or more tungsten by weight; or
      • (ii) a mill product, such as bar, billet, slab, wire, cube, sphere, block, blank, plate, or sheet, that has not been incorporated into an end item, subsystem, assembly, or component;
    • (B) an electronic device, unless the Secretary of Defense, upon the recommendation of the Strategic Materials Protection Board pursuant to section 187 of this title , determines that the domestic availability of a particular electronic device is critical to national security; or
    • (C) a neodymium-iron-boron magnet manufactured from recycled material if the milling of the recycled material and sintering of the final magnet takes place in the United States.
• (d) In this section:
  • (1) The term “covered material” means—
    • (A) samarium-cobalt magnets;
    • (B) neodymium-iron-boron magnets;
    • (C) tungsten metal powder;
    • (D) tungsten heavy alloy or any finished or semi-finished component containing tungsten heavy alloy; and
    • (E) tantalum metals and alloys.
  • (2) The term “covered nation” means—
    • (A) the Democratic People’s Republic of North Korea;
    • (B) the People’s Republic of China;
    • (C) the Russian Federation; and
    • (D) the Islamic Republic of Iran.
  • (3) The term “end item” has the meaning given in section 2533b(m) of this title .

§ 2534. Miscellaneous limitations on the procurement of goods other than United States goods

• (a) The Secretary of Defense may procure any of the following items only if the manufacturer of the item satisfies the requirements of subsection (b):
  • (1) Multipassenger motor vehicles (buses).
  • (2) Chemical weapons antidote contained in automatic injectors (and components for such injectors).
  • (3)
    • (A) The following components:
      • (i) Air circuit breakers.
      • (ii) Welded shipboard anchor and mooring chain with a diameter of four inches or less.
      • (iii) Vessel propellers with a diameter of six feet or more.
    • (B) The following components of vessels, to the extent they are unique to marine applications: gyrocompasses, electronic navigation chart systems, steering controls, pumps, propulsion and machinery control systems, and totally enclosed lifeboats.
  • (4) Items in the following categories:
    • (A) Powered and non-powered valves in Federal Supply Classes 4810 and 4820 used in piping for naval surface ships and submarines.
    • (B) Machine tools in the Federal Supply Classes for metal-working machinery numbered 3405, 3408, 3410 through 3419, 3426, 3433, 3438, 3441 through 3443, 3445, 3446, 3448, 3449, 3460, and 3461.
  • (5) Ball bearings and roller bearings, in accordance with subpart 225.71 of part 225 of the Defense Federal Acquisition Regulation Supplement, as in effect on October 23, 1992 , except ball bearings and roller bearings being procured for use in an end product manufactured by a manufacturer that does not satisfy the requirements of subsection (b) or in a component part manufactured by such a manufacturer.
  • (6) Subject to subsection (k), 1 1 So in original. Probably means the subsec. (k) enacted by Pub. L. 116–92 , related to implementation of auxiliary ship component limitation. See 2019 Amendment note below. large medium-speed diesel engines.
• (b)
  • (1) A manufacturer meets the requirements of this subsection if the manufacturer is part of the national technology and industrial base.
  • (2) In the case of a procurement of chemical weapons antidote referred to in subsection (a)(2), a manufacturer meets the requirements of this subsection only if the manufacturer—
    • (A) meets the requirement set forth in paragraph (1);
    • (B) is an existing producer under the industrial preparedness program at the time the contract is awarded;
    • (C) has received all required regulatory approvals; and
    • (D) when the contract for the procurement is awarded, has in existence in the national technology and industrial base the plant, equipment, and personnel necessary to perform the contract.
  • (3) In the case of a procurement of vessel propellers referred to in subsection (a)(3)(A)(iii), the manufacturer of the propellers meets the requirements of this subsection only if—
    • (A) the manufacturer meets the requirements set forth in paragraph (1); and
    • (B) all castings incorporated into such propellers are poured and finished in the United States.
• (c)
  • (1) Subsection (a) does not apply to a procurement of spare or repair parts needed to support components for naval vessels produced or manufactured outside the United States.
  • (2)
    • (A) Contracts to which subsection (a) applies include the following contracts for the procurement of items described in paragraph (4) of such subsection:
      • (i) A contract for procurement of such an item for use in property under the control of the Department of Defense, including any Government-owned, contractor-operated facility.
      • (ii) A contract that is entered into by a contractor on behalf of the Department of Defense for the purpose of providing such an item to another contractor as Government-furnished equipment.
    • (B) In any case in which a contract for items described in subsection (a)(4) includes the procurement of more than one Federal Supply Class of machine tools or machine tools and accessories, each supply class shall be evaluated separately for purposes of determining whether the limitation in subsection (a) applies.
    • (C) Subsection (a)(4) and this paragraph shall cease to be effective on October 1, 1996 .
  • (3) Subsection (a)(5) and this paragraph shall cease to be effective on October 1, 2005 .
  • (4) Subsection (a)(3)(A)(iii) and this paragraph shall cease to be effective on February 10, 1998 .
  • (5) Subsections (a)(2) and (b)(2) shall cease to be effective on October 1, 2018 .
• (d) The Secretary of Defense may waive the limitation in subsection (a) with respect to the procurement of an item listed in that subsection if the Secretary determines that any of the following apply:
  • (1) Application of the limitation would cause unreasonable costs or delays to be incurred.
  • (2) United States producers of the item would not be jeopardized by competition from a foreign country, and that country does not discriminate against defense items produced in the United States to a greater degree than the United States discriminates against defense items produced in that country.
  • (3) Application of the limitation would impede cooperative programs entered into between the Department of Defense and a foreign country, or would impede the reciprocal procurement of defense items under a memorandum of understanding providing for reciprocal procurement of defense items that is entered into under section 2531 of this title , and that country does not discriminate against defense items produced in the United States to a greater degree than the United States discriminates against defense items produced in that country.
  • (4) Satisfactory quality items manufactured by an entity that is part of the national technology and industrial base (as defined in section 2500(1) of this title ) are not available.
  • (5) Application of the limitation would result in the existence of only one source for the item that is an entity that is part of the national technology and industrial base (as defined in section 2500(1) of this title ).
  • (6) The procurement is for an amount less than the simplified acquisition threshold and simplified purchase procedures are being used.
  • (7) Application of the limitation is not in the national security interests of the United States.
  • (8) Application of the limitation would adversely affect a United States company.
• (e)
  • (1) The Secretary of Defense may not procure a sonobuoy manufactured in a foreign country if United States firms that manufacture sonobuoys are not permitted to compete on an equal basis with foreign manufacturing firms for the sale of sonobuoys in that foreign country.
  • (2) The Secretary may waive the limitation in paragraph (1) with respect to a particular procurement of sonobuoys if the Secretary determines that such procurement is in the national security interests of the United States.
  • (3) In this subsection, the term “United States firm” has the meaning given such term in section 2532(d)(1) of this title .
• (f) A provision of law may not be construed as modifying or superseding the provisions of this section, or as requiring funds to be limited, or made available, by the Secretary of Defense to a particular domestic source by contract, unless that provision of law—
  • (1) specifically refers to this section;
  • (2) specifically states that such provision of law modifies or supersedes the provisions of this section; and
  • (3) specifically identifies the particular domestic source involved and states that the contract to be awarded pursuant to such provision of law is being awarded in contravention of this section.
• (g)
  • (1) This section does not apply to a contract or subcontract for an amount that does not exceed the simplified acquisition threshold.
  • (2) Paragraph (1) does not apply to contracts for items described in subsection (a)(5) (relating to ball bearings and roller bearings), notwithstanding section 1905 of title 41 .
• (h) In implementing subsection (a)(3)(B), the Secretary of Defense—
  • (1) may not use contract clauses or certifications; and
  • (2) shall use management and oversight techniques that achieve the objective of the subsection without imposing a significant management burden on the Government or the contractor involved.
• (i)
  • (1) The Secretary of Defense may exercise the waiver authority described in paragraph (2) only if the waiver is made for a particular item listed in subsection (a) and for a particular foreign country.
  • (2) This subsection applies to the waiver authority provided by subsection (d) on the basis of the applicability of paragraph (2) or (3) of that subsection.
  • (3) The waiver authority described in paragraph (2) may not be delegated below the Under Secretary of Defense for Acquisition, Technology, and Logistics.
  • (4) At least 15 days before the effective date of any waiver made under the waiver authority described in paragraph (2), the Secretary shall publish in the Federal Register and submit to the congressional defense committees a notice of the determination to exercise the waiver authority.
  • (5) Any waiver made by the Secretary under the waiver authority described in paragraph (2) shall be in effect for a period not greater than one year, as determined by the Secretary.
• (j)
  • (1) This section does not apply with respect to a contract or subcontract to purchase items described in subsection (a)(5) (relating to ball bearings and roller bearings) for which—
    • (A) the amount of the purchase does not exceed $2,500;
    • (B) the precision level of the ball or roller bearings to be procured under the contract or subcontract is rated lower than the rating known as Annual Bearing Engineering Committee (ABEC) 5 or Roller Bearing Engineering Committee (RBEC) 5, or an equivalent of such rating;
    • (C) at least two manufacturers in the national technology and industrial base that are capable of producing the ball or roller bearings have not responded to a request for quotation issued by the contracting activity for that contract or subcontract; and
    • (D) no bearing to be procured under the contract or subcontract has a basic outside diameter (exclusive of flange diameters) in excess of 30 millimeters.
  • (2) Paragraph (1) does not apply to a purchase if such purchase would result in the total amount of purchases of ball bearings and roller bearings to satisfy requirements under Department of Defense contracts, using the authority provided in such paragraph, to exceed $200,000 during the fiscal year of such purchase.
• (k)
  • (1) The Secretary of Defense shall administer a process to analyze and assess potential items for consideration to be required to be procured from a manufacturer that is part of the national technology and industrial base.
  • (2) The application process required under paragraph (1) shall include the following elements:
    • (A) The Secretary shall designate an official within the Office of the Secretary of Defense responsible for administration of the limitation on certain procurements application process and associated policy.
    • (B) A person or organization that meets the definition of national technology and industrial base under section 2500(1) of this title shall have the opportunity to apply for status as an item required to be procured from a manufacturer that is part of the national technology and industrial base. The application shall include, at a minimum, the following information:
      • (i) Information demonstrating the applicant meets the criteria of a manufacturer in the national technology and industrial base under section 2500(1) of this title .
      • (ii) For each item the applicant seeks to be required to be procured from a manufacturer that is part of the national technology and industrial base, the applicant shall include the following information:
        • (I) The extent to which such item has commercial applications.
        • (II) The number of such items to be procured by current programs of record.
        • (III) The criticality of such item to a military unit’s mission accomplishment.
        • (IV) The estimated cost and other considerations of reconstituting the manufacturing capability of such item, if not maintained in the national technology and industrial base.
        • (V) National security regulations or restrictions imposed on such item that may not be imposed on a non-national technology and industrial base competitor.
        • (VI) Non-national security-related Federal, State, and local government regulations imposed on such item that may not be imposed on a non-national technology and industrial base competitor.
        • (VII) The extent to which such item is fielded in current programs of record.
        • (VIII) The extent to which cost and pricing data for such item has been deemed fair and reasonable.
  • (3)
    • (A) The official designated pursuant to paragraph (2)(A) shall be responsible for providing complete applications submitted pursuant to this subsection to the appropriate component acquisition executive for consideration not later than 15 days after receipt of such application.
    • (B) Not later than 120 days after receiving a complete application, the component acquisition executive shall review such application, make a determination, and return the application to the official designated pursuant to paragraph (2)(A).
    • (C) The determination required under subparagraph (B) shall, for each item proposed pursuant to paragraph (2)(B)(ii)—
      • (i) recommend inclusion under this section;
      • (ii) recommend inclusion under this section with further modifications; or
      • (iii) not recommend inclusion under this section.
    • (D) The determination required under subparagraph (B) shall also include the rationale and justification for the determination.
  • (4) For applications recommended under subsection (3), the official designated pursuant to paragraph (2)(A) shall be responsible for preparing a legislative proposal for consideration by the Secretary.
• (k) Subsection (a)(6) applies only with respect to contracts awarded by the Secretary of a military department for new construction of an auxiliary ship after the date of the enactment of the National Defense Authorization Act for Fiscal Year 2020 using funds available for National Defense Sealift Fund programs or Shipbuilding and Conversion, Navy. For purposes of this subsection, the term ‘auxiliary ship’ does not include an icebreaker or a special mission ship.

§ 2535. Defense Industrial Reserve

• (a) It is the intent of Congress—
  • (1) to provide a comprehensive and continuous program for the future safety and for the defense of the United States by providing adequate measures whereby an essential nucleus of Government-owned industrial plants and an industrial reserve of machine tools and other industrial manufacturing equipment may be assured for immediate use to supply the needs of the armed forces in time of national emergency or in anticipation thereof;
  • (2) that such Government-owned plants and such reserve shall not exceed in number or kind the minimum requirements for immediate use in time of national emergency, and that any such items which shall become excess to such requirements shall be disposed of as expeditiously as possible;
  • (3) that to the maximum extent practicable, reliance will be placed upon private industry for support of defense production; and
  • (4) that machine tools and other industrial manufacturing equipment may be held in plant equipment packages or in a general reserve to maintain a high state of readiness for production of critical items of defense materiel, to provide production capacity not available in private industry for defense materiel, or to assist private industry in time of national disaster.
• (b)
  • (1) To execute the policy set forth in subsection (a), the Secretary of Defense shall—
    • (A) determine which industrial plants and installations (including machine tools and other industrial manufacturing equipment) should become a part of the Defense Industrial Reserve;
    • (B) designate what excess industrial property shall be disposed of;
    • (C) establish general policies and provide for the transportation, handling, care, storage, protection, maintenance, repair, rebuilding, utilization, recording, leasing and security of such property;
    • (D) direct the transfer without reimbursement of such property to other Government agencies with the consent of such agencies;
    • (E) direct the leasing of any of such property to designated lessees;
    • (F) authorize the disposition in accordance with existing law of any of such property when in the opinion of the Secretary such property is no longer needed by the Department of Defense; and
    • (G) notwithstanding chapter 5 of title 40 and any other provision of law, authorize the transfer to a nonprofit educational institution or training school, on a nonreimbursable basis, of any such property already in the possession of such institution or school whenever the program proposed by such institution or school for the use of such property is in the public interest.
  • (2)
    • (A) The Secretary of a military department to which equipment or other property is transferred from the Defense Industrial Reserve shall reimburse appropriations available for the purposes of the Defense Industrial Reserve for the full cost (including direct and indirect costs) of—
      • (i) storage of such property;
      • (ii) repair and maintenance of such property; and
      • (iii) overhead allocated to such property.
    • (B) The Secretary of Defense shall prescribe regulations establishing general policies and fee schedules for reimbursements under subparagraph (A).
• (c) In this section:
  • (1) The term “Defense Industrial Reserve” means—
    • (A) a general reserve of industrial manufacturing equipment, including machine tools, selected by the Secretary of Defense for retention for national defense or for other emergency use;
    • (B) those industrial plants and installations held by and under the control of the Department of Defense in active or inactive status, including Government-owned/Government-operated plants and installations and Government-owned/contractor-operated plants and installations which are retained for use in their entirety, or in part, for production of military weapons systems, munitions, components, or supplies; and
    • (C) those industrial plants and installations under the control of the Secretary which are not required for the immediate need of any department or agency of the Government and which should be sold, leased, or otherwise disposed of.
  • (2) The term “plant equipment package” means a complement of active and idle machine tools and other industrial manufacturing equipment held by and under the control of the Department of Defense and approved by the Secretary for retention to produce particular defense materiel or defense supporting items at a specific level of output in the event of emergency.

§ 2536. Award of certain contracts to entities controlled by a foreign government: prohibition

• (a) A Department of Defense contract or Department of Energy contract under a national security program may not be awarded to an entity controlled by a foreign government if it is necessary for that entity to be given access to information in a proscribed category of information in order to perform the contract.
• (b)
  • (1) The Secretary concerned may waive the application of subsection (a) to a contract award if—
    • (A) the Secretary concerned determines that the waiver is essential to the national security interests of the United States; or
    • (B) in the case of a contract awarded for environmental restoration, remediation, or waste management at a Department of Defense or Department of Energy facility—
      • (i) the Secretary concerned determines that the waiver will advance the environmental restoration, remediation, or waste management objectives of the department concerned and will not harm the national security interests of the United States; and
      • (ii) the entity to which the contract is awarded is controlled by a foreign government with which the Secretary concerned is authorized to exchange Restricted Data under section 144 c. of the Atomic Energy Act of 1954 ( 42 U.S.C. 2164(c) ).
  • (2) The Secretary concerned shall notify Congress of any decision to grant a waiver under paragraph (1)(B) with respect to a contract. The contract may be awarded only after the end of the 45-day period beginning on the date the notification is received by the committees.
• (c) In this section:
  • (1) The term “entity controlled by a foreign government” includes—
    • (A) any domestic or foreign organization or corporation that is effectively owned or controlled by a foreign government; and
    • (B) any individual acting on behalf of a foreign government,
  • (2) The term “proscribed category of information” means a category of information that—
    • (A) with respect to Department of Defense contracts—
      • (i) includes special access information;
      • (ii) is determined by the Secretary of Defense to include information the disclosure of which to an entity controlled by a foreign government is not in the national security interests of the United States; and
      • (iii) is defined in regulations prescribed by the Secretary of Defense for the purposes of this section; and
    • (B) with respect to Department of Energy contracts—
      • (i) is determined by the Secretary of Energy to include information described in subparagraph (A)(ii); and
      • (ii) is defined in regulations prescribed by the Secretary of Energy for the purposes of this section.
  • (3) The term “Secretary concerned” means—
    • (A) the Secretary of Defense, with respect to Department of Defense contracts; and
    • (B) the Secretary of Energy, with respect to Department of Energy contracts.

§ 2537. Improved national defense control of technology diversions overseas

• (a) The Secretary of Defense and the Secretary of Energy shall each collect and maintain a data base containing a list of, and other pertinent information on, all contractors with the Department of Defense and the Department of Energy, respectively, that are controlled by foreign persons. The data base shall contain information on such contractors for 1988 and thereafter in all cases where they are awarded contracts exceeding $10,000,000 in any single year by the Department of Defense or the Department of Energy.
• (b)
  • (1) If the Secretary of Defense is acting as a designee of the President under section 721(a) 1 1 See References in Text note below. of the Defense Production Act of 1950 ( 50 U.S.C. 4565(a) ) and if the Secretary determines that a proposed or pending merger, acquisition, or takeover may involve a firm engaged in the development of a defense critical technology or is otherwise important to the defense industrial and technology base, then the Secretary shall require the appropriate entity or entities from the list set forth in paragraph (2) to conduct an assessment of the risk of diversion of defense critical technology posed by such proposed or pending action.
  • (2) The entities referred to in paragraph (1) are the following:
    • (A) The Defense Intelligence Agency.
    • (B) The Army Foreign Technology Science Center.
    • (C) The Naval Maritime Intelligence Center.
    • (D) The Air Force Foreign Aerospace Science and Technology Center.

§ 2538. Industrial mobilization: orders; priorities; possession of manufacturing plants; violations

• (a) In time of war or when war is imminent, the President, through the head of any department, may order from any person or organized manufacturing industry necessary products or materials of the type usually produced or capable of being produced by that person or industry.
• (b) A person or industry with whom an order is placed under subsection (a), or the responsible head thereof, shall comply with that order and give it precedence over all orders not placed under that subsection.
• (c) In time of war or when war is imminent, the President, through the head of any department, may take immediate possession of any plant that is equipped to manufacture, or that in the opinion of the head of that department is capable of being readily transformed into a plant for manufacturing, arms or ammunition, parts thereof, or necessary supplies for the armed forces if the person or industry owning or operating the plant, or the responsible head thereof, refuses—
  • (1) to give precedence to the order as prescribed in subsection (b);
  • (2) to manufacture the kind, quantity, or quality of arms or ammunition, parts thereof, or necessary supplies, as ordered by the head of such department; or
  • (3) to furnish them at a reasonable price as determined by the head of such department.
• (d) The President, through the head of any department, may manufacture products that are needed in time of war or when war is imminent, in any plant that is seized under subsection (c).
• (e) Each person or industry from whom products or materials are ordered under subsection (a) is entitled to fair and just compensation. Each person or industry whose plant is seized under subsection (c) is entitled to a fair and just rental.
• (f) Whoever fails to comply with this section shall be imprisoned for not more than three years and fined under title 18.

§ 2539. Industrial mobilization: plants; lists

• (a) The Secretary of Defense may maintain a list of all privately owned plants in the United States, and the territories, Commonwealths, and possessions of the United States, that are equipped to manufacture for the armed forces arms or ammunition, or parts thereof, and may obtain complete information of the kinds of those products manufactured or capable of being manufactured by each of those plants, and of the equipment and capacity of each of those plants.
• (b) The Secretary of Defense may maintain a list of privately owned plants in the United States, and the territories, Commonwealths, and possessions of the United States, that are capable of being readily transformed into factories for the manufacture of ammunition for the armed forces and that have a capacity sufficient to warrant conversion into ammunition plants in time of war or when war is imminent, and may obtain complete information as to the equipment of each of those plants.
• (c) The Secretary of Defense may prepare comprehensive plans for converting each plant listed pursuant to subsection (b) into a factory for the manufacture of ammunition or parts thereof.

§ 2539a. Industrial mobilization: Board on Mobilization of Industries Essential for Military Preparedness

The President may appoint a nonpartisan Board on Mobilization of Industries Essential for Military Preparedness, and may provide necessary clerical assistance, to organize and coordinate operations under sections 2538 and 2539 of this title.

§ 2539b. Availability of samples, drawings, information, equipment, materials, and certain services

• (a) The Secretary of Defense and the Secretaries of the military departments, under regulations prescribed by the Secretary of Defense and when determined by the Secretary of Defense or the Secretary concerned to be in the interest of national defense, may each—
  • (1) sell, rent, lend, or give samples, drawings, and manufacturing or other information (subject to the rights of third parties) to any person or entity;
  • (2) sell, rent, or lend government equipment or materials to any person or entity—
    • (A) for use in independent research and development programs, subject to the condition that the equipment or material be used exclusively for such research and development; or
    • (B) for use in demonstrations to a friendly foreign government;
  • (3) make available to any person or entity, at an appropriate fee, the services of any government laboratory, center, range, or other testing facility for the testing of materials, equipment, models, computer software, and other items; and
  • (4) make available to any person or entity, through leases, contracts, or other appropriate arrangements, facilities, services, and equipment of any government laboratory, research center, or range, if the facilities, services, and equipment provided will not be in direct competition with the domestic private sector.
• (b) The results of tests performed with services made available under subsection (a)(3) are confidential and may not be disclosed outside the Federal Government without the consent of the persons for whom the tests are performed.
• (c) Fees made available under subsections (a)(3) and (a)(4) shall be established in the regulations prescribed pursuant to subsection (a). Such fees may not exceed the amount necessary to recoup the direct and indirect costs involved, such as direct costs of utilities, contractor support, and salaries of personnel that are incurred by the United States to provide for the testing.
• (d) Fees received under subsections (a)(3) and (a)(4) may be credited to the appropriations or other funds of the activity making such services available.

§ 2540. Establishment of loan guarantee program

• (a) In order to meet the national security objectives in section 2501(a) of this title , the Secretary of Defense shall establish a program under which the Secretary may issue guarantees assuring a lender against losses of principal or interest, or both principal and interest, arising out of the financing of the sale or long-term lease of defense articles, defense services, or design and construction services to a country referred to in subsection (b).
• (b) The authority under subsection (a) applies with respect to the following countries:
  • (1) A member nation of the North Atlantic Treaty Organization (NATO).
  • (2) A country designated as of March 31, 1995 , as a major non-NATO ally pursuant to section 2350a(i)(3) of this title , as in effect on that date.
  • (3) A country in Central Europe that, as determined by the Secretary of State—
    • (A) has changed its form of national government from a nondemocratic form of government to a democratic form of government since October 1, 1989 ; or
    • (B) is in the process of changing its form of national government from a nondemocratic form of government to a democratic form of government.
  • (4) A noncommunist country that was a member nation of the Asia Pacific Economic Cooperation (APEC) as of October 31, 1993 .
• (c) The Secretary may guarantee a loan under this subchapter only to such extent or in such amounts as may be provided in advance in appropriations Acts.

§ 2540a. Transferability

A guarantee issued under this subchapter shall be fully and freely transferable.

§ 2540b. Limitations

• (a) In issuing a guarantee under this subchapter for a medium-term or long-term loan, the Secretary may not offer terms and conditions more beneficial than those that would be provided to the recipient by the Export-Import Bank of the United States under similar circumstances in conjunction with the provision of guarantees for nondefense articles and services.
• (b) No payment may be made under a guarantee issued under this subchapter for a loss arising out of fraud or misrepresentation for which the party seeking payment is responsible.
• (c) The Secretary of Defense may not accelerate any guaranteed loan or increment, and may not pay any amount, in respect of a guarantee issued under this subchapter, other than in accordance with the original payment terms of the loan.

§ 2540c. Fees charged and collected

• (a) The Secretary of Defense shall charge a fee (known as “exposure fee”) for each guarantee issued under this subchapter.
• (b) To the extent that the cost of the loan guarantees under this subchapter is not otherwise provided for in appropriations Acts, the fee imposed under subsection (a) with respect to a loan guarantee shall be fixed in an amount that is sufficient to meet potential liabilities of the United States under the loan guarantee.
• (c) The fee under subsection (a) for each guarantee shall become due as the guarantee is issued. In the case of a guarantee for a loan which is disbursed incrementally, and for which the guarantee is correspondingly issued incrementally as portions of the loan are disbursed, the fee shall be paid incrementally in proportion to the amount of the guarantee that is issued.
• (d)
  • (1) The Secretary of Defense shall charge a fee for each guarantee issued under this subchapter to reflect the additional administrative costs of the Department of Defense that are directly attributable to the administration of the program under this subchapter. Such fees shall be credited to a special account in the Treasury. Amounts in the special account shall be available, to the extent and in amounts provided in appropriations Acts, for paying the costs of administrative expenses of the Department of Defense that are attributable to the loan guarantee program under this subchapter.
  • (2)
    • (A) If for any fiscal year amounts in the special account established under paragraph (1) are not available (or are not anticipated to be available) in a sufficient amount for administrative expenses of the Department of Defense for that fiscal year that are directly attributable to the administration of the program under this subchapter, the Secretary may use amounts currently available for operations and maintenance for Defense-wide activities, not to exceed $500,000 in any fiscal year, for those expenses.
    • (B) The Secretary shall, from funds in the special account established under paragraph (1), replenish operations and maintenance accounts for amounts expended under subparagraph (A) as soon as the Secretary determines practicable.

§ 2540d. Definitions

In this subchapter:

• (1) The terms “defense article”, “defense services”, and “design and construction services” have the meanings given those terms in section 47 of the Arms Export Control Act ( 22 U.S.C. 2794 ).
• (2) The term “cost”, with respect to a loan guarantee, has the meaning given that term in section 502 of the Congressional Budget and Impoundment Control Act of 1974 ( 2 U.S.C. 661a ).

§ 2541. Establishment of loan guarantee program

• (a) In order to meet the national security objectives in section 2501(a) of this title , the Secretary of Defense shall establish a program under which the Secretary may issue guarantees assuring lenders against losses of principal or interest, or both principal and interest, for loans made to qualified commercial firms to fund, in whole or in part, any of the following activities:
  • (1) The improvement of the protection of the critical infrastructure of the commercial firms.
  • (2) The refinancing of improvements previously made to the protection of the critical infrastructure of the commercial firms.
• (b) For purposes of this section, a qualified commercial firm is a company or other business entity (including a consortium of such companies or other business entities, as determined by the Secretary) that the Secretary determines—
  • (1) conducts a significant level of its research, development, engineering, and manufacturing activities in the United States;
  • (2) is a company or other business entity the majority ownership or control of which is by United States citizens or is a company or other business of a parent company that is incorporated in a country the government of which—
    • (A) encourages the participation of firms so owned or controlled in research and development consortia to which the government of that country provides funding directly or provides funding indirectly through international organizations or agreements; and
    • (B) affords adequate and effective protection for the intellectual property rights of companies incorporated in the United States;
  • (3) provides technology products or services critical to the operations of the Department of Defense;
  • (4) meets standards of prevention of cyberterrorism applicable to the Department of Defense; and
  • (5) agrees to submit the report required under section 2541d of this title .
• (c) The maximum amount of loan principal guaranteed during a fiscal year under this section may not exceed $10,000,000, with respect to all borrowers.
• (d) The Secretary shall prescribe regulations setting forth goals for the use of the loan guarantees provided under this section and standards for evaluating whether those goals are met by each entity receiving such loan guarantees.
• (e) The Secretary may guarantee a loan under this subchapter only to such extent or in such amounts as may be provided in advance in appropriations Acts.

§ 2541a. Fees charged and collected

• (a) The Secretary of Defense shall assess a fee for providing a loan guarantee under this subchapter.
• (b) The amount of the fee shall be not less than 75 percent of the amount incurred by the Secretary to provide the loan guarantee.
• (c)
  • (1) Such fees shall be credited to a special account in the Treasury.
  • (2) Amounts in the special account shall be available, to the extent and in amounts provided in appropriations Acts, for paying the costs of administrative expenses of the Department of Defense that are attributable to the loan guarantee program under this subchapter.
  • (3)
    • (A) If for any fiscal year amounts in the special account established under paragraph (1) are not available (or are not anticipated to be available) in a sufficient amount for administrative expenses of the Department of Defense for that fiscal year that are directly attributable to the administration of the program under this subchapter, the Secretary may use amounts currently available for operations and maintenance for Defense-wide activities, not to exceed $500,000 in any fiscal year, for those expenses.
    • (B) The Secretary shall, from funds in the special account established under paragraph (1), replenish operations and maintenance accounts for amounts expended under subparagraph (A).

§ 2541b. Administration

• (a) The Secretary of Defense may enter into one or more agreements, each with an appropriate Federal or private entity, under which such entity may, under this subchapter—
  • (1) process applications for loan guarantees;
  • (2) administer repayment of loans; and
  • (3) provide any other services to the Secretary to administer this subchapter.
• (b) The costs of such agreements shall be considered, for purposes of the special account established under section 2541a(c), to be costs of administrative expenses of the Department of Defense that are attributable to the loan guarantee program under this subchapter.

§ 2541c. Transferability, additional limitations, and definition

The following provisions of subchapter VI of this chapter apply to guarantees issued under this subchapter:

• (1) Section 2540a, relating to transferability of guarantees.
• (2) Subsections (b) and (c) of section 2540b, providing limitations.
• (3) Section 2540d(2), providing a definition of the term “cost”.

§ 2541d. Reports

The Secretary of Defense shall require each qualified commercial firm for which a loan is guaranteed under this subchapter to submit to the Secretary a report on the improvements financed or refinanced with the loan. The report shall include an assessment of the value of the improvements for the protection of the critical infrastructure of that commercial firm. The Secretary shall prescribe the time for submitting the report.