Items tied to the national industrial base

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1. The industrial base rule

Section 225.7004 of the Defense Federal Acquisition Regulation Supplement (DFARS) implements 10 U.S.C. 4864, a restriction on procuring certain goods from outside the national technology and industrial base (DFARS 225.7004-0). The listed items may not be acquired, as end products or components, unless the manufacturer is part of the national technology and industrial base (DFARS 225.7004-2).

The national technology and industrial base is defined by statute, at 10 U.S.C. 4801 (DFARS 225.7004-1). It means the persons and organizations engaged in production activities conducted within the United States, Australia, Canada, New Zealand and the United Kingdom. A star tracker is a navigational tool used in a satellite weighing more than 400 pounds whose principal purpose is to support the national security, defense or intelligence needs of the United States Government.

2. The items covered

The first item is buses, where multipassenger motor vehicles are bought, leased, rented or provided under contracts for transportation services (DFARS 225.7004-2(a)). The second is components for naval vessels, to the extent they are unique to marine applications (DFARS 225.7004-2(b)). They are gyrocompasses, electronic navigation chart systems, steering controls, propulsion and machinery control systems, totally enclosed lifeboats, and welded shipboard anchor and mooring chain.

The third is large medium-speed diesel engines for new construction of auxiliary ships, using National Defense Sealift Fund or Shipbuilding and Conversion, Navy funds (DFARS 225.7004-2(c)). The fourth covers T-AO 205 and T-ARC class vessels (DFARS 225.7004-2(d)). For them the rule reaches auxiliary equipment, including pumps, for all shipboard services, and propulsion system components such as engines, reduction gears and propellers. It also reaches shipboard cranes and their spreaders. The last item is star trackers (DFARS 225.7004-2(e)).

3. Exceptions

The restrictions do not apply to a contract or subcontract that does not exceed the simplified acquisition threshold (DFARS 225.7004-3(a)). Buses have three further exceptions (DFARS 225.7004-3(b)). One is temporary use where buses from the national technology and industrial base are not available for a requirement that cannot be postponed, for no longer than the lead time to get compliant buses. Another is a requirement that is itself temporary, such as a special, nonrecurring need or a sporadic and infrequent recurring one, for no longer than the special need lasts. The last is where buses made outside the base are available at no cost to the government.

The naval vessel restriction does not apply to spare or repair parts needed to support components made outside the United States (DFARS 225.7004-3(c)). Support includes buying spare gyrocompasses, chart systems, steering and control systems, lifeboats and anchor and mooring chain. The engine restriction does not apply to large medium-speed engines for icebreakers or special mission ships (DFARS 225.7004-3(d)). The star tracker restriction does not apply to programs that received Milestone A approval before 1 October 2021, as documented by the requiring activity (DFARS 225.7004-3(e)). The contracting officer puts that documentation in the contract file.

4. Naval vessel components and anchor chain

10 U.S.C. 4864(h) prohibits using contract clauses or certifications to implement the naval vessel component restriction (DFARS 225.7004-4(a)). Agencies instead use management and oversight techniques that meet the objectives without imposing a significant management burden on the government or the contractor (DFARS 225.7004-4(b)).

Welded shipboard anchor and mooring chain carries a further restriction from Defense appropriations acts, starting with section 8041 of the Fiscal Year 1991 act (DFARS 225.7004-5(a)). The chain must be manufactured in the United States, including cutting, heat treating, quality control, testing and welding, including the forging and shot blasting processes. The cost of components manufactured in the United States must also exceed 50 percent of the total cost of components. Where the chain is a naval vessel component, the appropriations act restriction takes precedence over the 10 U.S.C. 4864 restriction (DFARS 225.7004-5(b)).

5. Waivers

For anchor and mooring chain, the secretary of the department responsible for the acquisition may waive the restrictions case by case under section 8016 of the Consolidated Appropriations Act, 2023 (DFARS 225.7004-6(a)(1)). Two conditions must both be met: sufficient domestic suppliers are not available in time, and the acquisition is necessary to acquire capability for national security purposes. The waiver is documented in a written determination and findings with a certification to that effect (DFARS 225.7004-6(a)(2)). A copy goes to the House and Senate Committees on Appropriations (DFARS 225.7004-6(a)(3)).

For other items, the Under Secretary of Defense for Acquisition and Sustainment may, without delegating, waive a restriction for a particular item and foreign country on one of two findings (DFARS 225.7004-6(c)(1)(i)). One is that domestic producers would not be jeopardized by that country’s competition. The other is that the restriction would impede cooperative programs or reciprocal procurement under a memorandum of understanding. Either way, that country must not discriminate against American defense items more than the United States discriminates against its items.

Notice of such a waiver must be published in the Federal Register and sent to the congressional defense committees at least 15 days before it takes effect (DFARS 225.7004-6(c)(1)(ii)). It may last no more than 1 year (DFARS 225.7004-6(c)(1)(iii)). For star trackers, the Under Secretary may delegate the country waiver to the service acquisition executive, without power of redelegation (DFARS 225.7004-6(b)).

The head of the contracting activity may waive a restriction case by case through a determination and findings (DFARS 225.7004-6(c)(2)). The grounds are unreasonable delay, no satisfactory quality items from the base, a single remaining source, that the restriction is not in the national security interests of the United States, or adverse effect on an American company. A restriction is waived when it would cause unreasonable costs, meaning the item from the base costs more than 150 percent of the offered price, inclusive of duty, of items from outside it (DFARS 225.7004-6(c)(3)).

6. Clauses

Solicitations and contracts above the simplified acquisition threshold that require one of these items use a separate clause for it, unless a waiver applies or, for engines and star trackers, an exception applies (DFARS 225.7004-7). They are DFARS 252.225-7019 for anchor and mooring chain, 252.225-7062 for large medium-speed diesel engines, 252.225-7063 for T-AO 205 and T-ARC class components, and 252.225-7064 for star trackers. The list has no clause for naval vessel components, which the statute bars from being implemented by clause (DFARS 225.7004-4(a)).

Key terms

National technology and industrial base	Producers in the United States, Australia, Canada, New Zealand and the United Kingdom.
Star tracker	A navigational tool in a national security satellite over 400 pounds.
Anchor chain rule	United States manufacture and more than 50 percent domestic component cost.
Country waiver	A waiver for one item and one country, lasting no more than 1 year.
150 percent test	A base-origin item is unreasonable in cost if it exceeds 150 percent of the foreign offered price, and the rule is then waived.

Every statement above links to the document behind it. The full source list for this piece is on the sources page.

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.

How Sentfore supports this

Industrial base rules shape what can be supplied to programs abroad. Sentfore works at the delivery end of defense programs in difficult environments, providing secure movement, protective security, facilities and life support. Requirements can be sent through the contact page.