1.  Nonavailablity

Comment: One respondent commented that, in some cases, it is necessary to import foreign bearings.

Response: Noted. This rule does not make any change in the existing ability to waive the restriction on a case-by-case basis by certifying that adequate domestic supplies are not available and that the acquisition must be made in order to acquire capability for national security purposes.

Comment: Another respondent was of the opinion that there is not really a shortage of bearings compliant with 10 U.S.C. 2534(a)(5), just an unwillingness on the part of distributors and wholesalers to devote the time to market research and tracking the supply chain to demonstrate the availability of compliant bearings.

Response: Commercial bearings manufacturers make business decisions based on the market. Many suppliers of commercial bearings and bearing components are unwilling to track the origin of bearings components and subcomponents because the Government does not have enough market leverage for it to be in the business interest of the manufacturers and suppliers to do so. Therefore, many bearings must be treated as nondomestic because the manufacturer is unable to certify to domestic sourcing of the components.

Comment: This respondent recommended retaining the requirement for 100 per cent domestic content for the following reasons:

a.  According to the respondent, changing the rules now to allow cheaper sources after using public law to create domestic sourcing would be detrimental to the companies that have recently invested in capacity.

Response: The reason for changing the rule is statutory change. 10 U.S.C. 2534(a)(5) is no longer in effect because Congress allowed the restriction to expire.

Furthermore, the experience of Government buyers indicates that, in general, the current regulation has not prevented the loss of domestic sources, due to lack of Government leverage with regard to acquisition of commercial bearings. The Government continues to issue more and more waivers in the instances when bearings are no longer available that the manufacturer or distributor can certify as having 100 percent domestic components. Bearings manufacturers have stated that manufacture of the retainer, inner race, and outer race are not core competencies.

Therefore, more and more bearings manufacturers obtain these components from foreign sources, which are significantly cheaper, and then do the complex manufacture of the bearing in this country. The advantage of changing the regulation to allow some foreign components without the need for a waiver is that fewer waivers will be required and then the requirement for manufacture in the United States and 50 percent domestic components remains in effect.

b.  According to the respondent, quality of components is very critical to eliminating latent defects. The respondent stated that retaining a fully domestic source will make it easier to track the components and determine the cause of any failure.

Response: Nothing in this rule alters DoD procedures for ensuring the quality of the products it purchases.

c.  The respondent considered that retaining all of this skill set is critical to maintaining a viable industrial base. According to the respondent, there is potential in the near future to have difficulty getting bearings even from qualifying countries, leaving China as the sole source of this critical component. The respondent was concerned that China may manipulate the market if there is no ready domestic supplier of bearings.

Response: DoD has existing authority under 10 U.S.C. 2304(c)(3) and implementing DFARS provisions to restrict procurements to domestic sources when it determines that a particular industrial capability must be protected for national security reasons, and can use this authority for bearings if it proves necessary.

d.  The respondent stated that the fact that the rule affects any small business supplier is worthy of consideration, not just when it affects a significant number.

Response: The language in the preamble to the proposed rule relating to impact on small business entities is based on the statutory requirement to assess whether the rule will have a significant impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act (5 U.S.C. 601, et seq.). The analysis, however, did assess both positive and negative impact on small business entities.