Exceptions to the specialty metals rule

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1. Acquisitions outside the restriction

The specialty metals restriction in the Defense Federal Acquisition Regulation Supplement (DFARS), covered in what counts as a specialty metal, has several groups of exceptions in DFARS 225.7003-3. The first group takes whole categories of acquisition outside the restriction (DFARS 225.7003-3(a)). They are acquisitions at or below the simplified acquisition threshold, and acquisitions outside the United States in support of combat operations. Acquisitions in support of contingency operations are also excepted.

Three more categories complete the list (DFARS 225.7003-3(a)(4) to DFARS 225.7003-3(a)(6)). One is an acquisition where other than competitive procedures were approved because of unusual and compelling urgency under FAR 6.302-2. Another is items bought specifically for commissary resale. The last is items for test and evaluation under the foreign comparative testing program, 10 U.S.C. 2350a(g), though that exception does not reach follow-on production contracts.

2. Exceptions for parts of an item

The second group can apply to an end item or component under a prime contract or a subcontract at any tier (DFARS 225.7003-3(b)). The first is electronic components (DFARS 225.7003-3(b)(1)). The Secretary of Defense can remove this exception for a particular electronic component by determining, on the recommendation of the Strategic and Critical Materials Board of Directors, that its domestic availability is critical to national security. An electronic component operates by controlling the flow of electrons or other charged particles in circuits (DFARS 225.7003-1). It does not include structural or mechanical parts of an assembly that contains one, or any high performance magnets used in it. The clause at DFARS 252.225-7009 lists electronic components among its exceptions without adding that condition (DFARS 252.225-7009(c)(1)).

3. Commercial off-the-shelf items and their limits

Commercially available off-the-shelf (COTS) items containing specialty metals are excepted, but not in every form (DFARS 225.7003-3(b)(2)(i)). The restriction still applies to contracts or subcontracts for specialty metal mill products, such as bar, billet, slab, wire, plate and sheet, that have not been built into end items, subsystems, assemblies or components (DFARS 225.7003-3(b)(2)(i)(A)). Specialty metal supply contracts issued by COTS producers are not subcontracts for this exception. Forgings or castings of specialty metal are also still restricted unless incorporated into COTS end items, subsystems or assemblies.

The same applies to commercially available high performance magnets containing specialty metal, unless built into COTS end items or subsystems (DFARS 225.7003-3(b)(2)(i)(C)). A high performance magnet is a permanent magnet that gets most of its magnetic properties from rare earth metals such as samarium (DFARS 225.7003-1). COTS fasteners are restricted too, unless they are built into COTS end items, subsystems or assemblies, or qualify for the fastener exception below (DFARS 225.7003-3(b)(2)(i)(D)). If the COTS exception is used for COTS end items valued at $5 million or more each, the buying agency must report annually to the Principal Director, Defense Pricing, Contracting, and Acquisition Policy (DFARS 225.7003-3(b)(2)(ii)).

4. When a COTS item stays excepted

The clause at DFARS 252.225-7009 explains when a COTS item is without modification. It is if the item is not modified before contractual acceptance by the next higher tier in the supply chain (DFARS 252.225-7009(c)(2)(ii)). Specialty metals in a COTS item accepted without modification stay excepted even if a piece is later removed, such as the end of a COTS screw (DFARS 252.225-7009(c)(2)(ii)(A)). Specialty metals added after acceptance, such as a reinforced specialty metal handle, are subject to the restriction (DFARS 252.225-7009(c)(2)(ii)(B)).

If two or more COTS items are combined into something that is not a COTS item, only the specialty metals used to join them are restricted (DFARS 252.225-7009(c)(2)(ii)(C)). Items sold commercially with various options remain COTS items with those options (DFARS 252.225-7009(c)(2)(ii)(D)). An option not normally offered commercially, such as a military-unique installation kit on an aircraft, is subject to the restriction unless another exception applies.

5. Fasteners and qualifying countries

Fasteners that are commercial products are excepted when bought from their manufacturer, if the manufacturer certifies a minimum domestic purchase (DFARS 225.7003-3(b)(3)). The certification is that, in the relevant calendar year, it will buy domestically melted or produced specialty metal in the required form for fastener production for the Department and other customers. That amount must be at least 50 percent of all the specialty metal it will buy to produce such fasteners for all customers.

Items in the six listed categories that are manufactured in a qualifying country, or contain specialty metals melted or produced in one, are also excepted (DFARS 225.7003-3(b)(4)). The clause defines a qualifying country by reference to the list at DFARS 225.003 (DFARS 252.225-7009). The clause states the qualifying country rule in its own terms: the restriction does not apply to items manufactured in a qualifying country (DFARS 252.225-7009(c)(4)). The clause also excepts specialty metals for which the government has determined under DFARS 225.7003-3 that compliant metal cannot be acquired as and when needed in satisfactory quality, quantity and form (DFARS 252.225-7009(c)(5)).

6. The 2 percent minimal content rule

End items containing a minimal amount of otherwise noncompliant specialty metal are excepted (DFARS 225.7003-3(b)(6)). The test is that the total weight of noncompliant specialty metal does not exceed 2 percent of the total weight of all specialty metal in the end item. Noncompliant here means specialty metal not melted or produced in the United States and not covered by another exception in that paragraph. Determinations, commercial derivative military articles and waivers are further exceptions in the same section. The exception does not apply to high performance magnets containing specialty metals.

Under the clause, the contractor estimates in good faith the weights compared against the 2 percent limit (DFARS 252.225-7009(c)(6)). When the clause flows down to subcontracts, the contractor may modify the minimal content paragraph only as needed to manage the exception at the prime contract level (DFARS 252.225-7009(e)(2)(i)). Nonavailability determinations, commercial derivative military articles and national security waivers are covered in specialty metals waivers and determinations.

Key terms

Category exceptions	Whole acquisitions outside the rule, such as small purchases and combat operations abroad.
Electronic component	An item that works by controlling electron flow, excluding structural parts and magnets.
Without modification	A COTS item not modified before acceptance by the next tier up.
Fastener certification	A manufacturer’s commitment to buy at least half its fastener metal domestically.
Minimal content	Noncompliant specialty metal of no more than 2 percent of total specialty metal weight.

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This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.

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