The Specialty Metal Provision and the Berry
Amendment: Issues for Congress
Valerie Bailey Grasso
Specialist in Defense Acquisition
October 5, 2010
Congressional Research Service
7-5700
www.crs.gov
RL33751
CRS Report for Congress
P
repared for Members and Committees of Congress
The Specialty Metal Provision and the Berry Amendment: Issues for Congress
Summary
In order to protect the U.S. industrial base during periods of adversity and war, Congress passed a
set of domestic source restrictions which became known as the Berry Amendment. Specialty
metal represented one of fourteen items previously covered under the Berry Amendment.
Congress took action in the FY2007 National Defense Authorization Act (P.L. 109-364) to move
the specialty metal provision from the Berry Amendment (Title 10, United States Code [U.S.C.]
2533a) into a separate section of Title 10 (10 U.S.C. 2533b). Specialty metals are defined in Title
10 United States Code (U.S.C.) Section 2533b, and the definition is restated in the Defense
Federal Acquisition Regular Supplement (DFARS).
The range of specialty metals include steel, metal alloys, titanium and titanium alloys, and
zirconium and zirconium base alloys. Thousands of products used for defense, aerospace,
automotive, and renewable energy technologies rely on specialty metals for which there are often
few, if any, substitutes. The availability of sources of supply of some specialty metals, particularly
the access to rare earth metals, is an issue raised in recent news reports and congressional
hearings.
Effective July 2009, the Department of Defense (DOD) issued a final rule to amend the Defense
Federal Acquisition Regulation Supplement (DFARS) to implement Section 842 of the FY2007
National Defense Authorization Act and Sections 804 and 884 of the FY2008 National Defense
Authorization Act, P.L. 110-181. The FY2008 National Defense Authorization Act (P.L. 110-181)
contained several provisions which may impact the procurement of specialty metal. Section 803
required the Strategic Materials Protection Board to perform an assessment of the viability of
domestic producers of strategic materials; Section 804 changed the requirement that DOD
procure all specialty metal from domestic sources. This provision does not apply to contracts or
subcontracts for the acquisition of commercially available “off-the-shelf” items (with certain
exceptions), as defined in the Office of Federal Procurement Policy Act, Section 35(c); and
Section 884 requires DOD to publish a notice on the Federal Business Opportunities website
before making any “nonavailability” determinations that would apply to multiple contracts.
The specialty metal provision raises several questions, among them: (1) to what extent do United
States national security interests and industrial base concerns justify waiver of the specialty metal
provision, (2) if the United States does not produce a 100% domestic specialty metal, should
DOD restrict procurement from foreign sources, and (3) what factors should drive the
determination of which specialty metals should fall under the specialty metal provision? Debate
over the specialty metal provision invites and renews a debate over the efficacy of domestic
source restrictions and whether the rationale for every restriction represents a balanced and
reasonable approach.
This report examines the specialty metal provision, potential oversight issues for Congress, and
options that Congress may choose to consider.
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The Specialty Metal Provision and the Berry Amendment: Issues for Congress
Contents
Introduction ................................................................................................................................ 1
Definition of Specialty Metals............................................................................................... 1
Specialty Metals and Rare Earth Metals ................................................................................ 1
History of Revisions to Existing Specialty Metal Rules ......................................................... 2
Annual Industrial Capabilities Report to Congress................................................................. 3
FY2008 National Defense Authorization Act and Revisions to Existing Specialty
Metal Rules........................................................................................................................ 4
Strategic Materials Protection Board ............................................................................... 4
FY2007 National Defense Authorization Act and the Enactment of a New Specialty
Metal Provision.................................................................................................................. 5
Rationale for the Proposed House and Senate Versions of the Specialty Metal
Provision ..................................................................................................................... 6
Background on Specialty Metal Provision ................................................................................... 7
Application ..................................................................................................................... 7
Origin of the Specialty Metal Provision in the Berry Amendment .................................... 7
The Test of Reasonableness............................................................................................. 7
DOD’s Actions................................................................................................................ 7
Original Congressional Intent.......................................................................................... 8
Oversight Issues for Congress ..................................................................................................... 8
Competition .......................................................................................................................... 9
Effect on the Defense Industrial Base .............................................................................. 9
Competition Affects Suppliers Differently ....................................................................... 9
Doing Business with DOD Could Mean Maintaining Separate Production Lines .......... 10
Competition Between Foreign and Domestic Firms Is Affected by the Berry
Amendment Because the United States Is Not a “Qualifying Country” Under
the Berry Amendment ................................................................................................ 10
Administration/Enforcement ............................................................................................... 10
Administration .............................................................................................................. 10
Waivers......................................................................................................................... 11
Effect on Joint Ventures and Partnerships ...................................................................... 12
The Administrative Burden ........................................................................................... 12
Enforcement ................................................................................................................. 13
Reliability ........................................................................................................................... 13
In Urgent Situations and Times of War .......................................................................... 13
Maintaining a Productive and Profitable Domestic Base................................................ 14
Domestic Restrictions Protect the U.S. Industrial Base .................................................. 14
Options for Congress ................................................................................................................ 14
Eliminate the Specialty Metal Provision .............................................................................. 15
Combine the Berry Amendment and the Buy American Act ................................................. 15
Enforce the New Specialty Metal Provision......................................................................... 16
Amend the Defense Federal Acquisition Regulation Supplement, Part 225.872-1 ............... 16
Limit the Use of Non-Compliant Specialty Metal ................................................................ 16
Require More Congressional Oversight ............................................................................... 17
Congress Could Require Congressional Approval Before Non-Compliant
Specialty Metal Can Be Used in Certain Defense Contracts........................................ 17
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The Specialty Metal Provision and the Berry Amendment: Issues for Congress
Require More Transparency and Openness in the Use of Specialty Metal for All
Defense Contracts Regarding Costs and Performance................................................. 17
Require DOD to Publicly Disclose When Waivers Are Granted ..................................... 18
Require a Congressional Report for Each Platform/Component Where Foreign
Specialty Metals Are Used in Defense Contracts ........................................................ 18
Grant a Time-Limited Period of Acceptance Under the Specialty Metal Provision
to Give DOD and Congress Time to Study the Upturns and Downturns in the
Market ....................................................................................................................... 18
Grant Prime Contractors the Authority to Conditionally Accept Non-Compliant
End Items Without Fear of Substantial Penalties......................................................... 18
Encourage the Use of Domestic Specialty Metal............................................................ 19
Appoint a Blue-Ribbon Specialty Metal Commission .................................................... 19
Contacts
Author Contact Information ...................................................................................................... 20
Congressional Research Service
The Specialty Metal Provision and the Berry Amendment: Issues for Congress
Introduction
This report examines the specialty metal provision, which was originally part of the Berry
Amendment;1 the potential oversight issues for Congress; and options that Congress may wish to
consider. The debate over the specialty metal provision may also renew interest in the debate over the
viability of other domestic source restrictions. There is congressional interest in the specialty metal
provision because (1) the specialty metal restriction affects major defense contractors who produce
components for commercial weapons systems; (2) some prime defense contractors as well as
subcontractors on the second, third, and fourth tiers have stated that they are unable to comply with
the Berry Amendment specialty metal requirement; (3) DOD has authorized the use of waivers to
purchase non-compliant items (non-compliant specialty metals are metals that do not meet the 100%
domestic source requirement of the Berry Amendment); and (4) the long-term impact of the specialty
metal provision on the costs of defense equipment and programs, particularly on the requirement that
weapon system components be certified as made in the United States.
Definition of Specialty Metals
The current definition of specialty metals can be found in 10 U.S.C. 2533b, as described here.
Specialty Metal Defined.— In this section, the term “specialty metal” means any of the
following:
(1) Steel—
(A) with a maximum alloy content exceeding one or more of the following limits:
manganese, 1.65 percent; silicon, 0.60 percent; or copper, 0.60 percent; or
(B) containing more than 0.25 percent of any of the following elements: aluminum,
chromium, cobalt, columbium, molybdenum, nickel, titanium, tungsten, or vanadium.
(2) Metal alloys consisting of nickel, iron-nickel, and cobalt base alloys containing a total of
other alloying metals (except iron) in excess of 10 percent.
(3) Titanium and titanium alloys.
(4) Zirconium and zirconium base alloys.2
Specialty Metals and Rare Earth Metals
Some specialty metals are rare earth metals, but not all rare earth metals are specialty metals. As
defined by the International Union of Pure and Applied Chemistry (IUPAC), rare earth metals
(also referred to as rare earth elements or minerals) can be found in 17 elements within the
chemical elements in the periodic table including yttrium, scandium, and 15 elements called
1 The specialty metal provision of the Berry Amendment was enacted in the 1973 DOD Appropriations Act, P.L. 92-570.
For more information on the Berry Amendment, see CRS Report RL31236, The Berry Amendment: Requiring Defense
Procurement to Come from Domestic Sources, by Valerie Bailey Grasso.
2 For the latest DOD information on specialty metals, see Defense Logistics Agency, Information on Specialty Metals,
http://www.dla.mil/J-7/metals.asp#changes.
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lanthanides. The lanthanides consist of the following: lanthanum, cerium, praseodymium,
neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium,
erbium, thulium, ytterbium, and lutetium.3
Thousands of products used for defense, aerospace, automotive, and renewable energy
technologies rely on a range of specialty metals for which there are often few, if any, substitutes.
The availability and sources of supply of some specialty metals, particularly those metals that are
rare earth metals, is an issue raised in recent news reports and legislation before Congress. DOD’s
Office of Industrial Policy is expected to released a report to Congress in October 2010 that will
assess the current state of the rare earth minerals supply.4
History of Revisions to Existing Specialty Metal Rules
As early as March 2006, DOD had learned that some items containing foreign specialty metal
were being delivered under some DOD contracts. As a result, the Defense Contract Management
Agency issued interim instructions which detailed a policy and process for how DOD would
provide contractors a “conditional acceptance” for such metals.5
In July 2008, DOD proposed to amend the Defense Federal Acquisition Regulation Supplement
(DFARS) to implement three provisions: Section 842 of the FY2007 National Defense
Authorization Act, and Sections 804 and 884 of the FY2008 National Defense Authorization Act
P.L. 110-181.6 Comments for the proposed rule were accepted through September 19, 2008.
Effective July 2009, the Department of Defense (DOD) issued a final rule.7
On February 23, 2009, the Office of the Deputy Under Secretary of Defense for Industrial Policy
published an analysis of the national security issues associated with the domestic source
restrictions imposed on the use of specialty metals. Based on the recommendations of the
Strategic Materials Protection Board, DOD has determined that specialty metals no longer require
3 For a discussion on rare earth metals, see CRS Report R41347, Rare Earth Elements: The Global Supply Chain, by
Marc Humphries.
4Recent legislation affecting rare earth metals include: H.R. 4866, Rare Earths Supply Chain Technology and
Resources Transformation Act (RESTART) of 2010, was introduced on March 17, 2010 and referred to both the House
Armed Services Committee and House Ways and Means Subcommittee on Trade; and H.R. 6160, Rare Earth and
Critical Materials Revitalization Act of 2010, was introduced on September 22, 2010 and referred to the Senate
Committee on Natural Resources. S. 3521, a companion bill to H.R. 4866, was introduced on June 22, 2010 and
referred to the Committee on Energy and Natural Resources, Subcommittee on Energy. H.R. 5136, the proposed
FY2011 National Defense Authorization Act, contains a provision (Section 835) that would require the Secretary of
Defense to conduct a review of the defense supply chain to determine which rare earth metals, if any, should be
classified as either “critical” or “strategic.” For published news and other reports on rare earth metals, see GAO-10-
617R, Rare Earth Materials in the Defense Supply Chain, Government Accountability Office, April 14, 2010; Hsu,
Jeremy. U.S. Military Supply of Rare Earths Not Secure. Tech News Daily, April 14, 2010; Drajem, Mark. China Rare
Earth Limits Said to be Targeted by U.S. Bloomberg Business Week, June 22, 2010; also, see “Lack of Rare Earth
Metals Could Cause Major Problems, Voice of America News, September 27, 2010, at
http://www.voanews.com/english/news/asia/Lack-of-Rare-Earth-Could-Cause-Major-Problems-103898893.html.
5 Defense Contract Management Agency. Specialty Metals Clause Compliance. March 10, 2006 (revised) at
http://guidebook.dcma.mil/225/instructions.htm.
6 Proposed Rule. Defense Federal Acquisition Regulation Supplement: Restriction on Acquisition of Specialty Metals
(DFARS Case 2008-D003). Federal Register, Vol. 73, No. 140, July 21, 2008.
7 Federal Register, 74 FR 37626, Vol. 74, No. 144, July 29, 2009.
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domestic source protection. The board issued a report to Congress in December 2008. The report
reached the following conclusion, as described below in excerpts from the report.
The key finding of this analysis is that specialty metals, as defined in 10 U.S.C. 2533b, are
not “materials critical to national security” for which only a U.S. source should be used; and
there is no national security reason for the Department to take action to ensure a long term
domestic supply of these specialty metals. The “criticality” of a material is a function of its
importance in DOD applications, the extent to which DOD actions are required to shape and
sustain the market, and the impact and likelihood of supply disruption. The analysis showed
that specialty metals are “strategic materials” which may require special monitoring and
attention/action; but not, in general, a domestic source restriction. Should reliable
supplies/capacities be insufficient to meet potential requirements for a projected conflict,
other risk mitigation options, including stockpiling, could represent an effective alternative.
High purity beryllium, however, is a critical material. Even in peacetime, defense
applications dominate the market; it is essential for important defense systems and unique in
the function it performs. In addition, domestic production capabilities have atrophied, and
there are no reliable foreign suppliers. Accordingly, the Department should continue to take
those special actions necessary to maintain a long term domestic supply of high purity
beryllium. In fact, the Department has established a Title III of the Defense Production Act
project with U.S. supplier Brush-Wellman to build and operate a new high purity beryllium
production facility.
The Strategic Materials Protection Board (SMPB) should review and validate any internal or
external recommendations that identify strategic materials that are essential for a wide
variety of important defense applications and for which there is a relatively high potential for
supply disruption. For example, a relatively high potential for supply disruption would be
represented by a situation in which reliable supplies (U.S. or non-U.S.) are projected to be
insufficient to support the defense needs of the United States during peacetime and/or during
a conflict. In such circumstances, DOD market intervention such as increasing or
establishing reliable production capability and/or stockpiling may bean effective risk
mitigation strategy.8
Annual Industrial Capabilities Report to Congress
A discussion of the findings of the Strategic Materials Protection Board is highlighted in the 2009
Annual Industrial Capabilities Report to Congress. Title 10 of the United States Code, Section
2504, requires the Secretary of Defense to report to the House and Senate Armed Services
Committees on the viability of the defense industrial base including the following information:
(1) A description of the departmental guidance prepared pursuant to section 2506 of this
Title.
(2) A description of the methods and analyses being undertaken by the Department of
Defense alone or in cooperation with other Federal agencies, to identify and address
concerns regarding technological and industrial capabilities of the national technology and
industrial base.
8 Office of the Under Secretary of Defense (Acquisition, Technology & Logistics), Deputy Under Secretary of Defense
(Industrial Policy), and the Executive Secretary to the Strategic Materials Protection Board. Report of the Meeting of
the Department of Defense Strategic Materials Board. December 12, 2008, p. 5-6. A summary of the Board’s analysis
and conclusions were published in the Federal Register, Vol. 74. No. 34, February 23, 2009, pages 8061-8064.
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The Specialty Metal Provision and the Berry Amendment: Issues for Congress
(3) A description of the assessments prepared pursuant to section 2505 of this Title and other
analyses used in developing the budget submission of the Department of Defense for the next
fiscal year.
(4) Identification of each program designed to sustain specific essential technological and
industrial capabilities and processes of the national technology and industrial base.”9
FY2008 National Defense Authorization Act and Revisions to
Existing Specialty Metal Rules
P.L. 110-181, the FY2008 National Defense Authorization Act, contained two new provisions
which impact the specialty metal provision. Section 803 required the Strategic Materials
Protection Board to perform an assessment of the viability of domestic producers of strategic
materials, the purpose of which is to assess which domestic producers are investing, or plan to
invest on a sustained basis, in the development of a continued domestic production capability of
strategic materials to meet national defense requirements. Such an assessment would be evaluated
and weighted in any decision to grant future waivers to the specialty metal provision. Another
provision, Section 804, amended the specialty metal provision to make flexible the requirement
that all specialty metal come from domestic sources. With several exceptions noted, this provision
does not apply to contracts or subcontracts for the acquisition of commercially available “off-the-
shelf” items, as defined in the Office of Federal Procurement Policy Act, Section 35(c). Within
180 days, DOD is required to review and amend existing rules for the domestic nonavailability
determinations that apply to the existing specialty metal provision. The long-term impact of these
new changes may not become evident until the Strategic Materials Protection Board completes its
assessment and DOD has determined how decisions will be made regarding the use of such
waivers.
Finally, Section 884 requires DOD to publish a notice on the Federal Business Opportunities
website before making any “nonavailability” determinations that would apply to multiple
contracts, and that DOD publishes such notices on the Federal Business Opportunities website
(http://www.fedbizopps.gov).
Strategic Materials Protection Board
Section 843 of FY2007 National Defense Authorization Act required the creation of a Strategic
Materials Protection Board to determine which items should be designated as critical to national
security, and to recommend changes for future domestic source restrictions. The board held its
first meeting on July 17, 2007. In the first meeting, the board reached the following decisions, as
described below.
• the term “materials critical to national security” would be taken to mean
“strategic materials critical to national security” or simply “strategic materials,”
and would include those specialty metals listed in 10 U.S.C. 2533b, and any
other materials that the board chose to so designate;
9 Office of Under Secretary of Defense for Acquisition, Technology & Logistics Industrial Policy. Annual Industrial
Capabilities Report to Congress, March 2009. See http://www.acq.osd.mil/ip/docs/annual_ind_cap_rpt_to_congress-
2009.pdf
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The Specialty Metal Provision and the Berry Amendment: Issues for Congress
• the board should initially focus its efforts on determining the need to take action
to ensure a long term domestic supply of specialty metals as designated in 10
U.S.C. 2533b;
• the board should adopt certain Terms of Reference (Appendix) to shape its
deliberations; and
• the board directed its executive secretary to conduct an initial analysis of national
security issues associated with strategic materials; and to report the results of that
analysis at the next SMPB meeting.10
The board held its second meeting on December 12, 2008, and reached the following decisions,
as described below.
• the definitions of “strategic material” and “critical material” proposed by the
executive secretary were discussed and approved by the board;
• the board reviewed and validated the work of the Strategic and Critical Materials
Working Group in response to congressionally directed requirements of H.Rept.
109-89 and S.Rept. 110-55;
• the board validated an “Initial Analysis of National Security Issues Associated
with Strategic Materials” and authorized its publication in the Federal Register;
and
• the board revised the Terms of Reference to reflect their new definitions for
strategic and critical materials, providing the board with more flexibility to
examining future issues, and broadening their scope to address additional matters
associated with strategic materials.11
FY2007 National Defense Authorization Act and the Enactment of a
New Specialty Metal Provision
Congress enacted provisions in the FY2007 National Defense Authorization Act that changed the
statutory authority for the special metal provision. P.L. 109-364 created a new specialty metal
provision separate from the Berry Amendment, moving it into a separate section of Title 10.12
Also, Section 842b established a one-time waiver of the Berry Amendment for non-compliant
specialty metal incorporated into items produced, manufactured, or assembled in the United
States before the date of the act’s enactment. DOD can grant waivers provided the noncompliance
was not knowing or willful.13
10 Office of the Under Secretary of Defense (Acquisition, Technology & Logistics.) First meeting of the Strategic
Materials Protection Board, September 2007, p. 2.
11 Office of the Under Secretary of Defense (Acquisition, Technology & Logistics), Deputy Under Secretary of
Defense (Industrial Policy), and the Executive Secretary to the Strategic Materials Protection Board. Report of the
Meeting of the Department of Defense Strategic Protection Materials Board. December 12, 2008, pages 1-4.
12 10 U.S.C. 2533b.
13 FARS 225.7003-4.
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Rationale for the Proposed House and Senate Versions of the Specialty
Metal Provision
The House version of the proposed FY2007 National Defense Authorization bill, H.Rept. 109-
452, contained a provision that would move the statutory requirements for the procurement of
specialty metal from the Berry Amendment to a separate section of Title 10. H.Rept. 109-452
offered new language to clarify that the Berry Amendment applied to prime contracts as well as
subcontracts. H.Rept. 109-452 stated that allowing foreign contractors to purchase specialty
metal, from any source, not only would defeat the intent of the Berry Amendment, but also create
a grave risk to national security. The report noted that the committee was aware that certain
suppliers claimed that they were inadvertently non-compliant with the specialty metal
requirement. The House provision would have allowed a 12-month period for suppliers to
become compliant with the specialty metal requirement. It was the intent of the House that all
current exceptions and waivers to the Berry Amendment would remain.
The Senate version of the bill, S.Rept. 109-254, proposed an amendment to codify the specialty
metal requirement in a newly created section of Title 10. Facing the dilemma of how to supply
equipment needed to fight the war, the Senate drew upon the original intent and purpose of the
specialty metal provision, as interpreted in a memorandum by then-Secretary of Defense Melvin
Laird. This memorandum gave DOD the authority to exercise some administrative flexibility in
acquiring critical equipment and components for military systems. The Laird memorandum is a
key to understanding how and why the provision came to be, as discussed in the original
memorandum here:
The bulk of these specialty metals which are used in one form or another in myriad items
purchased by the Department of Defense are actually procured at the subcontract level—
often many subcontract tiers removed from the prime contract—so as to make impracticable
any precise evaluation of all such purchases, even at enormous expense in both money and
time. It is apparent, from the legislative history of this provision, that it was not intended that
this Department achieve or attempt to achieve the impossible in its implementation. Rather,
it is clear that its purpose is to afford reasonable protection to the specialty metals industry to
help preserve our domestic production capacity to satisfy mobilization requirements, without
forcing a massive disruption of our existing procurement methods and programs. An
accommodation is therefore needed to give maximum effect to this new requirement without
losing sight of other Congressional objectives that the Department of Defense function in an
efficient and economical manner in meeting its mission.14
S.Rept. 109-254 acknowledged that specialty metal suppliers were required by DOD to certify
that their products or components were compliant with the Berry Amendment.
14 Memorandum for Secretaries of the Military Departments and Directors of the Defense Agencies, by Melvin Laird,
Secretary of Defense. November 30, 1972. Excerpts of the Laird memorandum appeared under “Items of Special
Interest—Application and Interpretation of the Berry Amendment” in P.L. 109-364, the FY2007 National Defense
Authorization Act. This and related research was conducted by Ann Eschete and M-J. Oboroceanu of the Knowledge
Services Group, Foreign Affairs, Defense and Trade Division, Congressional Research Service.
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Background on Specialty Metal Provision
In order to protect the U.S. industrial base during periods of adversity and war, Congress passed a
set of domestic source restrictions which became known as the Berry Amendment. Specialty
metal represented one of fourteen different items that were covered under the Berry
Amendment.15
Application
Specialty metals are used in components procured through DOD contracts, primarily for military
aircraft, weapons, and equipment, and within integrated circuits, wiring, and electrical
components. The Berry Amendment did not apply to purchases of specialty metal by
subcontractors, at any tier, except if used in producing items for six applications: aircraft, missile
and space systems, ships, tanks, weapons, and ammunition. These six applications were identified
in the Laird memorandum; when enacted as part of the Berry Amendment, DOD estimated that
the great bulk of the specialty metal procured fell within these six major classes of programs.
DOD concluded that any attempt to identify and control the use of such metal, for the remaining
small quantities involved in other procurement, would not be cost-effective nor justify the effort.
Origin of the Specialty Metal Provision in the Berry Amendment
The specialty metal provision first appeared in the 1973 Defense Appropriations Act.16 Congress
was concerned with protecting domestic source materials for the Vietnam War. At that time, the
domestic specialty metal sector was hurt by subsidized imports into the United States. In order to
insure an adequate domestic base for domestic items, Congress provided a guarantee to domestic
suppliers for a portion of DOD’s specialty metal business.
The Test of Reasonableness
From the inception of the specialty metal provision, both Congress and DOD emphasized that a
test of reasonableness would be applied; that the specialty metal provision should not pose an
administrative burden upon DOD contractors nor the federal government.
DOD’s Actions
In a March 7 hearing before the Air and Land Forces Subcommittee of the House Armed Services
Committee, Lieutenant General Donald J. Hoffman, Air Force Military Deputy, asked that
Congress give its support to relieving the Air Force from the more arduous aspects of the
specialty metal waiver process, as discussed below:
15 For a history of the Berry Amendment, see CRS Report RL31236, The Berry Amendment: Requiring Defense
Procurement to Come from Domestic Sources, by Valerie Bailey Grasso.
16 P.L. 92-570, the 1973 DOD Appropriations Act, was amended to add the following text: “Wood (whether in the form
of fiber or yarn or contained in fabrics, materials, or manufactured articles), or specialty metals not grown, reprocessed,
reused, or produced in the United States or its possessions.”
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I would ask for the Committee’s continued help in one area, and that is the area of specialty
metals. In last year’s authorization act, Congress provided some relief in the area of
electronic components, where the source of minute amounts of specialty metals cannot be
traced throughout the commercial production supply chain. This relief is certainly helpful,
but I would ask that there be further consideration for relief in the area of commercial
products. Tracing the source of metals and commercial products is very problematic for
industry, particularly where DOD is a very small part of their market. The cost of creating a
separate supply chain that is able to trace specialty metals down to the lowest tier, such as
fasteners, is something industry has been unwilling to accept if it is to remain commercially
competitive.
While the Congress has authorized a waiver process, the justification and support of the
waivers can be very labor intensive. As an example, the waiver process last year for the
AMRAM (Advanced Medium Range Air-to-Air) missile, the government contractor spent
over 2,200 man hours to review 4,000 parts, and produced a documentation to justify the
waiver. This documentation was eight inches tall in printed form. All this work was to justify
a waiver for $14,000 on an item that is valued at $566,000.17
Original Congressional Intent
Beginning with the 1973 Defense Appropriations Act, the objective of Congress was to use a
thoughtful and reasonable approach in adding specialty metal to the list of items covered under
the Berry Amendment. In the initial debate over the specialty metal provision, Senator Jacob
Javits observed that the implementation of the provision would require thought and
reasonableness, as discussed here:
As an example, I would certainly hope that the Department of Defense in administering this
provision would take into consideration the fact that it would be a virtual impossibility for a
company participating in a defense contract to try to ascertain for itself, let alone for the
myriad of suppliers of small component metals parts, that there was no small amount of
metals used which would come within the definition of specialty metals. I would hope that
the Department of Defense in the administration of this provision, while seeking to carry out
the broad intent of protecting the special metals industry, would have sufficient flexibility
and discretion under this provision so that they would not be required to go to ridiculous
extremes which would result in an almost impossible administrative burden placed upon
Government contractors, and the addition of needless expenses to the Government in
carrying out its procurement practices.18
Oversight Issues for Congress
The specialty metal provision of the Berry Amendment prohibits DOD from procuring metal that
is not produced in the United States.19 Such a policy alone is difficult to manage; when coupled
with the Secretary of Defense’s waiver authority and a myriad of exceptions written into the law,
17 Statement of Lieutenant General Donald J. Hoffman, Military Deputy, Office of the Assistant Secretary of the Air
Force for Acquisition, before the Subcommittee of Air and Land Forces, House Armed Services Committee, March 7,
2007.
18 Excerpt from Senator Jacob Javits’ remarks on the passage of H.R. 16593, Making Appropriations for the Defense
Establishment for Fiscal Year 1973. 118 Congressional Record S17967 (October 13, 1972).
19 10 U.S.C. § 2533a, Requirement to Buy Certain Articles from American Sources; Exceptions.
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the policy became difficult to execute. The very nature of the specialty metal provision itself
creates unanticipated consequences for DOD and the defense industry.
Three issues stand out as policy questions that Congress may choose to consider in its oversight
role. First, how does the specialty metal provision affect competition among the different
contractor tiers in the U.S. defense industrial base? Second, what are the factors that contribute to
the success or failure of the administration and enforcement of the specialty metal provision?
Third, how does one weigh the reliability of having a domestic supplier base in times of urgent
and compelling need, coupled with the desire to promote global trade?
Competition
Effect on the Defense Industrial Base
Competition for defense work is affected by the availability of sufficient quantity and quality of
specialty metal; such metal may be critical and vital to the war-fighting effort if it is used for
“high-tech” electronics and communications like personal digital assistants. Creating separate
electronic chips for military use only, with no foreign content, would be an expensive
undertaking, and some companies have elected not to do so even if it means not being able to sell
to DOD.
Competition Affects Suppliers Differently
Some members of the defense industry often describe the specialty metal issue as a debate
between companies that advocate for global trade versus those that advocate for a dedicated
domestic industrial supplier base. On the one hand, some view major aerospace companies as
eager to seek waivers of domestic source restrictions because doing so would increase their
access to foreign markets for specialty metal. Some industry leaders have maintained a view that
domestic source restrictions like the Berry Amendment are inconsistent with a policy to
encourage global competition. Yet some believe that the presence of competition, particularly
from the foreign markets, makes it more difficult for domestic suppliers to survive. Each supplier
in the defense industrial base views competition differently.
For example, major defense contractors contend that global competition for commercial and
defense work requires establishing and developing foreign trading partners, and that the capacity
of domestic suppliers to meet the needs of major defense contractors is insufficient. Some
contractors, especially those whose primary market is the U.S. defense industry, know their client
base, what they have to buy, and thus are locked into one dedicated supply chain. Yet many other
contractors, particularly at the third and fourth tiers of the supply chain, market to both military
and commercial sectors; they find that carrying separate supply chains is cost-prohibitive and
poses a significant administrative burden. Some companies may not know who the ultimately
purchaser of their product will be, so they cannot be certain whether the end use is for a
commercial or military application. For a military customer, each item or parts of an item must be
traced to a 100% domestic content.
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Doing Business with DOD Could Mean Maintaining Separate
Production Lines
The specialty metal provision as contained in the Berry Amendment required a 100% compliance;
there was no provision for non-compliant metal. As an example, when DOD purchased avionics,
electronics, components, and subassemblies, items with specialty metal were required to be 100%
domestic. However, the integration of the global supply chain meant that cheaper, foreign metal
could make up virtually all products, and that there were fewer companies that could certify that
all of the metal used in the production of their items was wholly domestic in origin. Suppliers
who wanted to sell to DOD and to the commercial sector could be forced to maintain two
separate production lines; this would raise DOD’s costs.
Competition Between Foreign and Domestic Firms Is Affected by the Berry
Amendment Because the United States Is Not a “Qualifying Country” Under
the Berry Amendment
The Berry Amendment permits the procurement of products from certain qualifying countries.
Qualifying countries are defined as countries that have a Memorandum of Understanding or other
international agreement with the United States.20 Under the Berry Amendment, qualifying
countries are allowed to sell products to DOD, because DOD has determined that it is not in the
public interest to restrict the procurement of products from qualifying countries. This decision
affects U.S. companies in this way: the United States is not listed as a qualifying country under
the Berry Amendment. For this reason, the Berry Amendment would appear to prohibit any U.S.
company from selling items to DOD, unless the company can certify that any items, composed of
any non-compliant specialty metal, are from qualifying countries only. This posed a hardship for
some domestic companies that could not meet this requirement.
The Berry Amendment also allowed for the procurement of specialty metal melted in a qualifying
country or incorporated in an article manufactured in a qualifying country. If an item was made
overseas in a qualifying country and incorporated specialty metal not melted in America (or in a
qualifying country), then DOD may purchase that foreign-made item. The effect of this rule
meant that qualifying countries could use metal from any source, even a non-qualifying country,
and sell products to DOD.
Administration/Enforcement
Administration
Can DOD administer and properly execute the new specialty metal provision? The new specialty
metal provision may not be entirely enforceable, because it may be nearly impossible to
determine to any degree of certainty whether the smallest of the nuts, bolts, screws, and fasteners
that make up DOD weapons systems and equipment are of 100% domestic content.
20 DFARS 225.872-1.
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Waivers
Other problems include the use of waivers. The use of waivers to accommodate both DOD and
defense contractors suggests that the Berry Amendment may be difficult to enforce. In April
2004, the Secretary of the Air Force approved a permanent waiver of the requirements of the
Berry Amendment for 23 commercial aircraft systems, representing more than 1,200 aircraft in
the Air force’s inventory. The first waiver was granted in October 2002, when the Senate voted to
grant Boeing a waiver of the Berry Amendment to purchase Russian titanium on more than 100 of
its 767 air refueling tankers that were to be leased to the Air Force. At the time, DOD and the
Senate affirmed that this was an exception, that the Berry Amendment would be consistently
enforced in the future; yet another waiver was granted in December 2002, allowing United
Technologies Corporation to purchase Russian titanium to manufacture jet engines for the Boeing
C-17.21 The Government Accountability Office (GAO) later found that the Air Force granted
waivers without a thorough analysis of all available options.22
The debate over the specialty metal provision was largely fueled by voluntary disclosures, made
by companies who sell to DOD, that the companies were in violation of the Berry Amendment
specialty metal requirement. For example, the National Semiconductor Corporation disclosed that
specialty metal used in its products does not meet the requirement. “To the best of our knowledge,
no other semiconductor manufacturer currently is capable of meeting that standard,” wrote Gerry
Fields, vice president; Texas Instruments and the Intel Corporation made similar disclosures.
Each company has stated that, due to the global supply chain for its production line, it would be
unable to meet present and future specialty metal requirements.23 The Semiconductor Industry
Association (SIA), which represents about 85% of U.S.-based semiconductor industry, states that
integrated circuits from products made by SIA member companies may contain small quantities
of non-compliant specialty metal. Such quantities constitute a small percentage of the item’s
overall metal content. Further, SIA opines that the application of a domestic preference to
specialty metal, as currently applied by DOD and the FY2007 Defense Authorization bill, does
not take into account the economic realities that have shaped the development of the specialty
metal industry and indeed the entire global technology sector.24
21 Haflich, Frank. “Latest Buy America” Waiver Fuels Probe of Metals Impact, American Metals Market, March 25,
2003.
22 Government Accountability Office. Defense Procurement: Air Force Did Not Fully Evaluate Options in Waiving
Berry Amendment for Selected Aircraft. GAO-05-957, September 2005, 21 p. A list of Berry Amendment waivers
granted by DOD since June 2003 appear in the Appendices of this report.
23 Memorandum on Berry Amendment/Buy American Act - DFARS Clause 252.225-7014, Gerry Fields, Vice-
President, Worldwide Quality Network and New Product Execution. National Semiconductor Corporation, March 7,
2006; also, Request for Confirmation of Compliance with the Berry Amendment, by Brent Thornton, Quality
Assurance Manager, HiRel, Defense, and Aerospace Products, March 23, 2006; Memorandum on Domestic Preference
for Specialty Metals, Texas Instruments, May 12, 2006.
24 SIA’s Position on the Berry Amendment, May 9, 2006. Since 1977, SIA has identified itself as a leading voice for
the semiconductor industry. SIA member companies comprise more than 85% of the U.S. semiconductor industry.
Collectively, the chip industry employs a domestic workforce of 225,000 people. According to SIA, over 70% of U.S.
manufacturing facilities are on U.S. soil, but greater than 75% of the industry revenue is affected by specialty metal
provisions. These provisions affect military contracts and the availability of commercial products for the military. SIA
points out that procurement regulations affect semiconductors in two ways: first, the military relies on a commercial
off-the-shelf (COTS) acquisition model for many components. Second, semiconductors are used in downstream
products supplied under military contracts and subcontracts. Because of these trends, they note their customers have a
more direct exposure to government procurement than do semiconductor companies themselves. Accessed online at
http://www.sia-online.org.
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During FY2007, DOD approved a “Domestic Non-Availability Determination (DNAD)” to
permit the procurement of non-compliant (non-domestic) fasteners.25 As several suppliers
voluntarily disclosed their use of non-compliant specialty metal in defense weapon systems, DOD
proposed a temporary modification to the specialty metal provision through a series of interim
instructions. On March 10, 2006, the Defense Contract Management Agency issued guidance to
its contracting officials on how to handle the acceptance of non-compliant specialty metal, until a
long-term solution could be developed. On June 1, 2006, the Under Secretary of Defense for
Acquisition, Technology, and Logistics issued a memorandum which authorized a “conditional
acceptance and withholding of payment” based on two considerations: (1) a financial
consideration (or offset to the federal government) to support the conditional acceptance, and (2)
a comprehensive corrective action plan provided by the contractor.26
Effect on Joint Ventures and Partnerships
Many of the companies that signaled their inability to meet the specialty metal requirement were
part of the Berry Amendment Reform Coalition, an organization of industry associations that
represents thousands of companies that provide products, services, and personnel to the federal
government. The coalition asserts that the specialty metal provision can have a harmful effect on
the ability of defense contractors to partner with other companies. Prime contractors who rely on
small and mid-size companies to deliver components, such as fasteners and components from
electronic circuit boards, find compliance with the Berry Amendment may be nearly impossible.
According to the coalition, because of Berry Amendment requirements, the cost of a fastener for a
military plane can be as much as five times more than the cost of a fastener for a commercial
airplane. Additionally, the cost of using domestic titanium (for a U.S. company) can be as much
as 40% higher than the cost of using non-domestic titanium.27
The Administrative Burden
The cost of compliance with administrative requirements of the specialty metal provision could
be unsustainable. Many companies report that they are unable to develop a compliance measure
that would support a 100% across the board systematic reporting system of every type of metal
that is used in the melting process. Such a system of compliance would be difficult, if not
impossible to maintain. Further, since contractors have smaller percentages of their business line
25 http://www.dcma.mil/dnad/. DOD has issued DNADs for a number of items. In the Fastener DNAD, it was
determined that satisfactory quality and sufficient quantity of specialty metal in the form of fasteners could not be
procured as and when needed. Subsection (b) of 10 U.S.C. 2533b states that if such a determination is made, subsection
(a) does not apply. Thus, the restriction in subsection (a) of 10 U.S.C. 2533b does not apply to fasteners. Contracting
officers may procure end items, and components thereof, containing fasteners, notwithstanding the country where the
specialty metals contained in such items were melted or produced. DOD will revisit the basis for this DNAD if it learns
that the circumstances which formed the basis of the determination have changed. Thus, the DNAD will be revised if
and when compliant specialty metal of satisfactory quality and sufficient quantity, in the required form, can be
procured as and when needed.
26 Defense Contract Management Agency, Interim Instruction, Non-compliance with the Preference for Domestic
Specialty Metals Provision, DFARS 252.225-7014, revised March 10, 2006, 4 p.; and OUSD(A&TL). Memorandum
on Berry Amendment Compliance for Specialty Metals, by Kenneth J. Krieg, June 1, 2006, 2 p.
27 Senate Berry Amendment Streamlining Proposal: Myth versus Reality. A position paper of the Berry Amendment
Reform Coalition. July 18, 2006, 4 p. The Berry Amendment Reform Coalition is an organization of about a dozen
industry associations that reportedly support alternative approaches that promote a reasonable and balanced solution.
http://www.nedassoc.org/.
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devoted to DOD contracts, it is not cost-effective for contractors to develop such a system. Many
have signaled that if forced to do so, they would terminate their business relationship with DOD
and increase their capacity for commercial work.
Enforcement
Failure to adhere to the specialty metal provision can be costly to DOD contractors. For example,
federal law required that parts made for the F-15 Eagle and the F/A-18 Hornet fighters be
composed entirely of domestic titanium. Boeing was required to use domestically melted titanium
in C-17 transport plans, F-15 fighters and F/A-18 fighter and attack planes during the 1990s, but
failed to do so. The federal government maintained that the delivery of non-conforming aircraft
violated the False Claims Act.28 Boeing was charged with violating the False Claims Act because
it used Russian-melted titanium in the manufacture of military aircraft. While the case was under
investigation, the federal government withheld a $9.6 million contract payment from Boeing.
Boeing and the federal government reached a $6 million settlement. Boeing also agreed to forfeit
the remaining $3.6 million of the contract payment.29
Reliability
In Urgent Situations and Times of War
The issue of reliability has been the cornerstone of why domestic source restrictions, like the
specialty metal provision, are viewed by some as essential to the viability of the domestic defense
industrial base. Central to the issue of reliability is the basic premise upon which the Berry
Amendment was first adopted. The Berry Amendment, which dates from the eve of World War II,
was established for a narrowly defined purpose: to ensure that U.S. troops wore military uniforms
wholly produced within the United States and to ensure that U.S. troops were fed with food
products solely produced in the United States.30 There were at least two congressional concerns:
(1) that the United States maintain a vibrant domestic industrial base by requiring that military
troops wear uniforms made in the United States, and consume food produced in the United States;
and (2) that the nation be prepared in the event of adversity or war. So the dominant congressional
belief has maintained that the United States has an obligation to see that domestic industries
remain productive.
Many view domestic source restrictions, like the specialty metal provision, as a way to insure
that, in urgent situations and times of war, the United States will have access to critical items
needed to ensure national security. Those who advocate for maintaining a robust capability
28 Title 31, U.S.C. 3729-3733. Under the False Claims Act, those who knowingly submit, or cause another person or
entity to submit, false claims for payment of government funds are liable for three times the government’s damages,
plus civil penalties of $5,500 to $11,000 per false claim.
29 “Boeing to pay $6 million to settle Russian titanium charges.” St. Louis Journal, September 29, 2004; and “Boeing
reaches $6 million titanium settlement.” Metals Place, September 29, 2004.
30 On April 5, 1941, the Berry Amendment was enacted as part of the Fiscal Year (FY) 1941 Fifth Supplemental
National Defense Appropriations Act, P.L. 77-29, 10 U.S.C. § 2241 note. The Berry Amendment was made permanent
when P.L. 102-396, Section 9005, was amended by P.L. 103-139, Section 8005. Since then, Congress has regularly
added or subtracted Berry Amendment provisions. On December 13, 2001, passage of the FY2002 National Defense
Authorization Act codified the Berry Amendment, repealing Sections 9005 and 8109 of the above-mentioned bills. The
Berry Amendment is now codified at 10 U.S.C. 2533a.
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The Specialty Metal Provision and the Berry Amendment: Issues for Congress
among the domestic sources for titanium, as an example, argue that these companies will ensure
that, should a global shortage of titanium develop or if the United States loses a key trading
partner, the United States will not become unduly dependent on another country for a critical
item. Furthermore, having domestic suppliers who have the protection of the Berry Amendment
may ensure that domestic production lines remaining open and viable.
Maintaining a Productive and Profitable Domestic Base
An argument that is often raised is that, as an example, the three domestic titanium producers
would not be viable if the Berry Amendment did not exist. Yet a look at the three domestic
titanium producers reveals that they are robust companies that have different income streams, and
are not wholly dependent on the Berry Amendment. Industry estimates are that the domestic
titanium producers have about 16% of the defense market, worldwide, and about 99% of the
DOD market. One company, Allegheny Technologies, recently announced a $325 million
investment in a titanium sponge facility; this will help the company to increase its capacity to
handle additional work, particularly its melt capacity, with the result of increasing its worldwide
market share.31
Domestic Restrictions Protect the U.S. Industrial Base
There is a third reason often expressed—that products consumed by Americans should be made at
home, and that the Berry Amendment represents jobs for the smaller, domestic companies in
America. However, when compared to the jobs generated by the major defense contractors in the
global supply chain, the number of local jobs is proportionately smaller.
Options for Congress
It is important to note that the specialty metal provision in the Berry Amendment had been in
place since 1972. Any change in the law will likely have both upstream and downstream effects.
How will the change affect prime contractors and subcontractors on the second, third, and fourth
tiers, as well as U.S. domestic suppliers? It may take some time for DOD to implement the
change in policy.
Six possible options for policymakers to consider are listed below: (1) eliminate the specialty metal
provision, or eliminate the Berry Amendment; (2) combine the Berry Amendment and the Buy
American Act into one statute; (3) enforce a new specialty metal provision; (4) limit the inclusion of
non-compliant specialty metal; (5) require more congressional oversight; and (6) convene a blue-
ribbon panel, a “Specialty Metal Commission.”
31 A Roundtable on the Buy American Act and Berry Amendment. Moderated by Robert Dickman, Executive Director
of the American Institute of Aeronautics and Astronautics, September 2006.
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The Specialty Metal Provision and the Berry Amendment: Issues for Congress
Eliminate the Specialty Metal Provision
Congress could eliminate the specialty metal provision. Congress could also eliminate the Berry
Amendment. Some question whether the Berry Amendment is still a good policy, given the global
supply chain; others question whether each item needs the protection of a domestic source policy.
The effect: Eliminating the specialty metal provision or the Berry Amendment would be met with
fierce opposition, particularly from domestic suppliers without a strong foreign market. Domestic
source restrictions like the Berry Amendment, to some extent, do help to insure that there is a
dedicated domestic source for DOD products.
Combine the Berry Amendment and the Buy American Act
One option is to combine the Berry Amendment and the Buy American Act (BAA) into one
statute. The Berry Amendment is often confused with the BAA; often the two legislative
initiatives are referred to interchangeably. BAA is the major domestic preference statute of the
federal government, and prohibits the federal government from procuring items that are less than
50% domestic in origin.32 The BAA governs all federal government procurement, not just DOD’s
procurement. Since the Berry Amendment and BAA have similar goals, one solution would be to
create one standard—to marry the Berry Amendment and BAA into one domestic source
standard. For example, since the Berry Amendment requires a 100% compliance, and the Buy
American Act requires a 51% compliance, one alternative would be that the combined Berry
Amendment/BAA could have a 65% compliance requirement.
Legislative initiatives have been introduced to change the BAA. One example, the Buy American
Improvement Act of 2005, was introduced during the first session of the 109th Congress; if
enacted into law, this bill would have raised the Buy American Act’s minimum domestic content
standard from 51% to 75%, an amount much closer to the 100% standard of the Berry
Amendment. Senator Feingold introduced this bill and offered the following comments:
The bill that I am introducing today, the Buy American Improvement Act, focuses on the
Federal Government’s responsibility to support domestic manufacturers and workers and on
the role of Federal procurement policy in achieving this goal. The reintroduction of this bill,
which I first introduced in 2003, is part of my ongoing effort to find ways to stem the flow of
manufacturing jobs abroad.... This (Buy American Act of 1933) is an important law but,
regrettably, it contains a number of loopholes that make it too easy for government agencies
to buy foreign-made goods. My bill, the Buy American Improvement Act, would strengthen
the existing act by tightening its waiver provisions. Secondly, my bill would increase the
minimum American content standard qualification under the Act from the current 50 percent
to 75 percent. The definition of what qualifies as an American-made product has been a
source of much debate. To me, it seems clear that American-made means manufactured in
this country. This classification is a source of pride for manufacturing workers around our
country. The current 50 percent standard should be raised to a minimum of 75 percent.33
The effect: Although the bill did not survive, there was some support in Congress for raising the
Buy American Act minimum domestic content standard. While combining the two legislative
32 See CRS Report 97-765, The Buy American Act: Requiring Government Procurements to Come from Domestic
Sources, by John R. Luckey.
33 S. 395, The Buy American Improvement Act of 2005.
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The Specialty Metal Provision and the Berry Amendment: Issues for Congress
initiatives appears to be a simpler solution, DOD would likely object because, with a more
restrictive requirement, procurement costs for the federal government’s goods and services would
likely increase.
Enforce the New Specialty Metal Provision
One new specialty metal provision became effective in the FY2007 National Defense
Authorization Act, while modifications to these provisions were enacted in the FY2008 National
Defense Authorization Act. The first provision prohibits DOD from using funds for “end items or
components” for aircraft, missile and space systems, ships, tank and automotive items, weapon
systems, or ammunition containing a specialty metal not melted or produced in the United
States.34 This provision grants the Secretary of Defense the authority to give a “one-time waiver”
of the specialty metal domestic source requirement, under certain conditions.35
Amend the Defense Federal Acquisition Regulation Supplement,
Part 225.872-1
Congress could recommend that DOD amend the “List of Qualifying Countries” by adding the
United States as a “qualified country.” In this way, domestic companies would have an
opportunity to compete on an equal basis in the global supply chain for specialty metal, and not
have to pay more for materials nor undergo a rigorous accounting of its sources for metal.
Limit the Use of Non-Compliant Specialty Metal
Congress could limit the use of non-compliant specialty metal. One approach is the application of
a market-based standard—so that DOD can tie the amount of non-compliant specialty metal
permitted to the percentage of business that the contractor has with DOD—so if a contractor
acquires 16% of the DOD market, it will be permitted to use compliant specialty metal for at least
16% of its total market needs.
34 This provision prohibits DOD or a prime contractor from purchasing metal not wholly domestic. A number of
exceptions may be granted under the new provision. The exceptions are: (1) when the available quantity and quality are
insufficient; (2) for “unusual and compelling circumstances;” (3) for existing reciprocal and offsetting trade agreements
with foreign governments; (4) with the requirements of section 36 of the Arms Export Control Act (22 U.S.C. 2776)
and with 10 U.S.C. 2457; (5) for commissaries, exchanges, and other nonappropriated fund instrumentalities; (6) for
purchases under the simplified acquisition threshold; (7) for purchases of electronic components where the degree of
specialty metal content is “de minimis” in value, compared to the overall value of the lowest level electronic
component produced that contains such specialty metal.
35 The conditions are: (1) the metals were incorporated into items produced, manufactured, or assembled in the United
States before the date of enactment of this Act, and (2) contracting officials determine that the contractor is not in
compliance with the specialty metals provision; that it would not be practical or economical to remove the non-
compliant specialty metals; and, that the contractor has submitted a plan to ensure compliance with the specialty metals
requirement; (3) the non-compliance is not knowing or willful, and (4) the Under Secretary of Defense for Acquisition,
Technology, and Logistics or the military service acquisition executive gives final approval.
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Require More Congressional Oversight
Congress Could Require Congressional Approval Before Non-Compliant
Specialty Metal Can Be Used in Certain Defense Contracts
As an example set forth in 10 U.S.C. 2306(b) Congress enacted six legal criteria that must be met
for the Multi-Year Procurement Program (MYP) to be operational.36 Such a set of conditions
could determine under what circumstances non-compliant specialty metal could be used in
defense contracts, and might include the following criteria:
• That the use of non-compliant specialty metal will result in a substantial savings
of the total anticipated costs throughout the life of the contract;
• That the percentage of specialty metal used for the weapons program is expected
to remain substantially unchanged during the contract period, in terms of rate of
production and procurement, and total quantities;
• That the contract for the use of non-compliant specialty metal will be subject to
re-competition on a five-year basis, to give the domestic specialty metal industry
an opportunity to develop the capacity and capability to meet future program
requirements;
• That the estimates of both the cost of the contract and the anticipated cost
avoidance are realistic and supportable through independent audits and
investigations;
• That there is a reasonable expectation that throughout the life of the contemplated
contract period, the head of the military service will request funding for the
contract, at the level required, to avoid contract cancellation; and
• That the use of such non-compliant specialty metal, in this particular weapons
system, is critical to the national security of the United States.
The effect: Congress has used six criteria to evaluate each weapon program’s appropriateness for
MVP status, and has reached conclusions as to when a weapons program does not meet all of the
requirements for MVP. The process has been perceived, for the most part, as fair and balanced.
Require More Transparency and Openness in the Use of Specialty Metal for
All Defense Contracts Regarding Costs and Performance
Congress could require that all Request for Proposals37 for defense contracts include the specialty
metal provision, where applicable, and publish the rules governing the use of non-compliant
specialty metal on the Federal Business Opportunities website. Once the contracts are awarded,
Congress could require that any modifications or changes to the program that impact on the six
36 According to the Defense Acquisition University, a multi-year procurement (MYP) is “a method of competitively
purchasing up to 5 years’ requirements in one contract, funded annually as appropriations permit.” Congress set up
specific rules that must be met before a program gains MYP status.
37 A Request for Proposal is a formal process for companies to submit bids for contracts.
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The Specialty Metal Provision and the Berry Amendment: Issues for Congress
designated criteria must be reported to Congress within 30 days (rather than wait until the next
cycle of congressionally directed hearings).
Require DOD to Publicly Disclose When Waivers Are Granted
Congress could require publication of the number and types of waivers granted to purchase items
that are non-compliant, and tighten the waiver process so that waivers are not granted for
inappropriate or arbitrary reasons.
The effect: Requiring more transparency and openness may pose more of an administrative
burden on DOD. However, more transparency engenders more public confidence in the process.
Require a Congressional Report for Each Platform/Component Where Foreign
Specialty Metals Are Used in Defense Contracts
One approach that Congress may consider is to require DOD to produce a separate report for each
platform or component of a weapons program where foreign specialty metal are used. For
example, in the Future Combat System, where there are about 20-24 separate platforms, each
platform would be supported by a separate report which calculates the sources, types, and
percentages of specialty metal content, both foreign and domestic.
The effect: Examining the specialty metal content by platform will get at data that is often buried
in the aggregate numbers of larger reports on the entire weapons program. The level and
specificity of detail could pose an administrative burden on DOD and defense contractors.
Grant a Time-Limited Period of Acceptance Under the Specialty Metal
Provision to Give DOD and Congress Time to Study the Upturns and
Downturns in the Market
A time-limited period of acceptance would mean a periodic review of the specialty metal
provision and its effect on the industrial base on each protected item. It may be that all domestic
source items need the protection of the Berry Amendment or other domestic source restrictions,
but not all of the time, nor at the same time. Such granting of protection could be based on market
forces and more tied to forecasts of upturns or downswings in the market.
This would also give Congress an opportunity to study the effect of the Berry Amendment and the
specialty metal provision on socioeconomic subsidy programs for small and minority-owned
businesses.
The effect: It is difficult to predict the effect because the Berry Amendment has never been tied to
market forces or to the state of the economy.
Grant Prime Contractors the Authority to Conditionally Accept Non-
Compliant End Items Without Fear of Substantial Penalties
Congress could shift the authority and responsibility to the prime contractor, rather than to DOD,
to provide a type of conditional acceptance of certain items. Congress could also give the prime
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contractor the authority, under a prescribed set of circumstances, to waive the responsibility of the
“downstream contractor” on the second, third, or fourth tiers of the supply chain, meaning that
these contractors would not have to account for the accounting of the percentages of non-
compliant specialty metal used in end items.
Encourage the Use of Domestic Specialty Metal
Congress could develop steps to further support a stronger domestic specialty metal industry; one
way is by encouraging the development technological capabilities and advances by providing tax
incentives for investment in scientific and manufacturing technology. Congress could create a
socioeconomic subsidy program to support the domestic specialty metal suppliers; one approach
would be to create a partnership between DOD and domestic suppliers. Such an approach was
described as a way to develop a greater capacity to meet the delivery requirements for aviation
parts in the military, as noted in the FY2007 National Defense Appropriations Act, P.L. 109-289),
where the increased demand for domestic steel suppliers was highlighted:
The Department of Defense’s demand for iron-based alloy aviation specialty steels has
dramatically increased as a result of continuing deployments to the overseas theaters of
operation. Today, there is only one domestic supplier for a unique process which utilizes
vacuum inducted melt/vacuum arc re-melt, the process which gives aviation grade steels
their required properties. These specialty steels are critical to building high technology U.S.
military weapon systems. Further, there has been a related and dramatic increase in the raw
material needed to make these specialty steels. Lead times for these raw materials have
grown from 3 months to 1 year. According to the Army, the overall effect on lead times for
spare part deliverables has swelled in some cases to greater than 24 months. As such, the
conferees encourage the Department of Defense to partner with domestic industry to develop
a greater capacity to meet the delivery requirements for aviation parts to the military within
an acceptable time frame. The conferees suggest that the Department explore a 50/50 cost
share project between the Federal government, private industry, and/or state governments as
the best means to create this capacity as rapidly as possible.38
Appoint a Blue-Ribbon Specialty Metal Commission
Congress could follow the example of the Packard Commission by creating an independent body
to study the specialty metal provision and its impact on the defense industry.39 The advantage of
an independent body is that it can include members of the public and private sectors,
congressional, defense industry, and other experts. However, the body has to be perceived as
being independent, with the power to change existing policy.
38 H.Rept. 109-676.
39 In July 1985, President Reagan asked David Packard, chairman of the Hewlett-Packard Corporation and a former
Deputy Secretary of Defense, to chair an independent Blue Ribbon Commission which came to be known as the
Packard Commission. The Packard Commission was directed to conduct a broad study of defense management
including the budget process, procurement, organization and operation, and legislative oversight, and to make
recommendations for streamlining and improving defense management. Executive Order 12526, July 15, 1986.
Congressional Research Service
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The Specialty Metal Provision and the Berry Amendment: Issues for Congress
Author Contact Information
Valerie Bailey Grasso
Specialist in Defense Acquisition
vgrasso@crs.loc.gov, 7-7617
Congressional Research Service
20