II. Discussion and Analysis

This interim rule adds the Republic of Korea to the definition of "Free Trade Agreement country" in multiple locations in the DFARS. The Republic of Korea was already listed as a designated country because it is party to the WTO GPA. The excluded services for Korea FTA are the same as for the WTO GPA. By implementation of this Korea FTA, eligible goods and services from Korea are now covered when valued at or above $100,000, rather than at or above the WTO GPA threshold of $202,000. The threshold for the Korea FTA for construction is the same as the threshold for the WTO GPA for construction.

The Korea FTA $100,000 threshold for supplies and services is higher than the threshold for supplies and services for most of the FTAs ($77,494), but not as high as the Bahrain, Morocco, and Peru FTA threshold for supplies and services ($202,000). Therefore, new alternates are required for the provision and clause for acquisition of photovoltaic devices (DFARS 252.225-7017 and 252.225-7018) and the Buy American Act--Free Trade Agreements--Balance of Payments Program provision and clause (DFARS 252.225-7035 and 252.225-7036) to cover acquisitions that are valued at $77,494 or more but less than $100,000.

In that dollar range, all FTAs are applicable, except for the Bahrain, Korea, Morocco, and Peru FTAs.

Because the Korea FTA construction threshold of $7,777,000 is the same as the WTO GPA threshold, no new clause alternates are required for the Balance of Payments Program--Construction Material under Trade Agreements clause (DFARS 252.225-7045).

There are also conforming changes to the clause prescriptions at DFARS 225.1101, Alternate A, Annual Representations and Certifications, and DFARS 252.212-7001, Contract Terms and Conditions required to Implement Statutes or Executive Orders Applicable to Defense Acquisitions of Commercial Items.

A minor correction was made to paragraph (c) of DFARS 252.225-7036, Buy American Act--Free Trade Agreements--Balance of Payments Program to add Peruvian end products to the list of end products not covered by the clause. The definition of "Peruvian end products" had been added to paragraph (a), but was not then added in paragraph (c). This makes paragraph (c) consistent with the trade agreement thresholds specified in FAR 25.402(b), as already implemented in paragraph (c) of Alternate II to DFARS 252.225-7036, as well as in the basic provision at DFARS 252.225-7035 and its Alternate II.