C.  Trade Agreements--Peru

The Peruvian Free Trade Agreement was initially implemented by DFARS Case 2008-D046, Trade Agreement--Costa Rica and Peru, that was published as an interim rule with a request for public comment (74 FR 37650). No public comments were received and the interim rule was converted to a final rule without change on July 29, 2009 (75 FR 179). This final rule added Peru to the definition of "Free Trade Agreement country" in DFARS clauses 252.225-7021, 252.225-7036, and 252.225-7045.

In order to make some further implementation of the Peru Free Trade Agreement in the trade agreements clauses, DoD utilized the final rule issued under DFARS Case 2009-D012, although the issue of the Peru Free Trade Agreement was peripheral to the main purpose of that case. DoD added a definition of Peruvian end products and added Peruvian end products to the Free Trade Agreement country end products that are not eligible products in the provision and clause at DFARS 252.225-7035 and 252.225-7036. This is consistent with the Peru Free Trade Agreement and the FAR, and ensures that Peruvian end products are not erroneously treated as eligible products in acquisitions that do not exceed the World Trade Organization Government Procurement Agreement threshold.

This change, however, created an inconsistency between Alternate I and the basic clause 252.225-7035. The basic clause now includes in paragraph (b)(2) the phrase "Free Trade Agreement country end products other than Bahrainian end products or Moroccan end products, or Peruvian end products." The Alternate I, which limits the applicable Free Trade Agreements to just Canada, misquotes the phrase that is to be removed and replaced with the phrase "Canadian end products." Alternate I still quotes the old unrevised phrase as "Free Trade Agreement country end products other than Bahrainian end products or Moroccan end products" and leaves off "or Peruvian end products" that was added by 2009-D012 final rule. Even though this phrase is being removed by Alternate I, the misquote creates an inconsistency, which might cause some confusion, although all of the corresponding regulations make it clear that the Peruvian Trade Agreement does not apply below the threshold of $70,079, when Alternate I is used (see threshold at FAR 25.402(b), clause prescription at DFARS 225.1101(10)(i), and comparable FAR clause 52.225-3 Alternate I).

These DFARS changes are characterized as clarifications and corrections to DFARS language that do not constitute significant revisions, as defined in FAR 1.501-1, because they do not alter the substantive meaning of the coverage.