B-152352, SEP. 27, 1963, 43 COMP. GEN. 306

B-152352: Sep 27, 1963

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BIDS - BUY AMERICAN ACT - FOREIGN PRODUCT DETERMINATION IN DETERMINING IF THE FOREIGN PROCURED BULK CHLORINATED LIME PACKED IN 20 -POUND PAILS MANUFACTURED IN THE UNITED STATES OFFERED BY THE LOW BIDDER UNDER AN INVITATION INCORPORATING THE BUY AMERICAN CLAUSE PRESCRIBED BY PARAGRAPH 6-104.5 OF THE ARMED SERVICES PROCUREMENT REGULATION IS DOMESTIC END PRODUCT WHICH MAY BE CONSIDERED FOR AWARD. THE "COMPONENTS" DIRECTLY INCORPORATED IN THE END PRODUCT ARE THE FOREIGN PROCURED LIME AND THE DOMESTICALLY MANUFACTURED PAIL. THE PAIL NOT REPRESENTING A COST WHICH IS GREATER THAN 50 PERCENT OF THE TOTAL COST OF ALL THE COMPONENTS. - THE PAIL IN WHICH THE LIME IS PACKED. THE END PRODUCT OFFERED IS A FOREIGN PRODUCT UNDER THE BUY AMERICAN ACT.

B-152352, SEP. 27, 1963, 43 COMP. GEN. 306

BIDS - BUY AMERICAN ACT - FOREIGN PRODUCT DETERMINATION IN DETERMINING IF THE FOREIGN PROCURED BULK CHLORINATED LIME PACKED IN 20 -POUND PAILS MANUFACTURED IN THE UNITED STATES OFFERED BY THE LOW BIDDER UNDER AN INVITATION INCORPORATING THE BUY AMERICAN CLAUSE PRESCRIBED BY PARAGRAPH 6-104.5 OF THE ARMED SERVICES PROCUREMENT REGULATION IS DOMESTIC END PRODUCT WHICH MAY BE CONSIDERED FOR AWARD, THE LABOR, ADMINISTRATION, AND OVERHEAD COSTS INVOLVED IN PACKAGING THE LIME NOT BEING FOR CONSIDERATION, THE "COMPONENTS" DIRECTLY INCORPORATED IN THE END PRODUCT ARE THE FOREIGN PROCURED LIME AND THE DOMESTICALLY MANUFACTURED PAIL, AND THE PAIL NOT REPRESENTING A COST WHICH IS GREATER THAN 50 PERCENT OF THE TOTAL COST OF ALL THE COMPONENTS, THE FOREIGN COST OF THE LIME, OCEAN FREIGHT AND DUTY GREATLY EXCEEDING THE COST OF THE DOMESTIC COMPONENT--- THE PAIL IN WHICH THE LIME IS PACKED--- AND CONSTITUTING 50 PERCENT OR MORE OF THE COST, THE END PRODUCT OFFERED IS A FOREIGN PRODUCT UNDER THE BUY AMERICAN ACT, 41 U.S.C. 10A-D.

TO THE DIRECTOR, DEFENSE SUPPLY AGENCY, SEPTEMBER 27, 1963:

BY LETTER DATED AUGUST 21, 1963, WITH ENCLOSURES, YOUR ASSISTANT COUNSEL REQUESTED OUR OPINION ON THE PROTEST OF THE CHEMICAL COMPOUNDING CORPORATION AGAINST A DETERMINATION MADE THAT THE END PRODUCTS OFFERED BY IT UNDER INVITATION FOR BIDS NO. AMC/A/-30-070-63 165 ARE FOREIGN END PRODUCTS UNDER THE BUY AMERICAN ACT.

THE INVITATION DATED APRIL 17, 1963, REQUESTED BIDS FOR FURNISHING ESTIMATED QUANTITIES OF CHLORINATED LIME PACKED IN 20-POUND PAILS. THE INVITATION INCORPORATED BY REFERENCE THE BUY AMERICAN ACT CLAUSE PRESCRIBED BY ASPR 6-104.5. IN RESPONDING TO THE INVITATION, CHEMICAL COMPOUNDING OFFERED TO FURNISH CHLORINATED LIME OF FOREIGN ORIGIN AND INDICATED IN THEIR LOW BID THAT THE COST OF THE LIME REPRESENTED 46 PERCENT OF THE BID PRICE. THE BASIC ISSUE STATED TO BE WHAT COST ELEMENTS ARE TO BE CONSIDERED IN DETERMINING WHETHER THE END PRODUCT OFFERED BY CHEMICAL COMPOUNDING IS FOREIGN OR DOMESTIC. ON THE BASIS OF INFORMATION FURNISHED BY CHEMICAL COMPOUNDING, THE COST OF THE END PRODUCT IS AS FOLLOWS:

TABLE

1. BULK CHLORINATED LIME $1.1460

2. OCEAN FREIGHT .2000

3. DUTY .0540

4. TRUCKING .1000

5. CONTAINER .7969

6. PROCESSING .4000

7. OVERHEAD .2300

-------- TOTAL COST

$2.9269

CHEMICAL COMPOUNDING ALLEGES THAT THE COST OF THE FIRST THREE ITEMS TOTALING $1.40 SHOULD BE CONSIDERED FOREIGN AND THEREFORE CONCLUDES THAT ITS BID SHOULD BE CONSIDERED AS ONE OFFERING AN END PRODUCT MANUFACTURED IN THE UNITED STATES SINCE THE COST OF THE LAST FOUR ITEMS TOTALING $1.5269 IS INCURRED IN THE UNITED STATES AND EXCEEDS BY 50 PERCENT THE COST OF ALL ITS COMPONENTS ($2.9269).

THE BUY AMERICAN ACT (41 U.S.C. 10A) PROVIDES THAT---

NOTWITHSTANDING ANY OTHER PROVISION OF LAW, AND UNLESS THE HEAD OF THE DEPARTMENT OR INDEPENDENT ESTABLISHMENT CONCERNED SHALL DETERMINE IT TO BE INCONSISTENT WITH THE PUBLIC INTEREST, OR THE COST TO BE UNREASONABLE, * * * ONLY SUCH MANUFACTURED ARTICLES, MATERIALS, AND SUPPLIES AS HAVE BEEN MANUFACTURED IN THE UNITED STATES SUBSTANTIALLY ALL FROM ARTICLES, MATERIALS, OR SUPPLIES MINED, PRODUCED, OR MANUFACTURED, AS THE CASE MAY BE, IN THE UNITED STATES, SHALL BE ACQUIRED FOR PUBLIC USE. * * *.

IN ORDER THAT THE PROVISIONS OF THE ACT BE UNIFORMLY ADMINISTERED, AND FOR OTHER PURPOSES, THE PRESIDENT ISSUED EXECUTIVE ORDER NO. 10582, WHICH PROVIDES IN PERTINENT PART, AS FOLLOWS:

SEC. 2 (A) FOR THE PURPOSES OF THIS ORDER MATERIALS SHALL BE CONSIDERED TO BE OF FOREIGN ORIGIN IF THE COST OF THE FOREIGN PRODUCTS USED IN SUCH MATERIALS CONSTITUTES FIFTY PERCENTUM OR MORE OF THE COST OF ALL THE PRODUCTS USED IN SUCH MATERIALS.

CLAUSE 14 OF THE STANDARD SUPPLY CONTRACT PROVISIONS INCORPORATED IN THE IFB WHICH IS IDENTICAL TO THAT CONTAINED IN ASPR 6-104.5 READS IN PERTINENT PART THAT:

(A) IN ACQUIRING END PRODUCTS, THE BUY AMERICAN ACT (41 U.S.C. 10 A D) PROVIDES THAT THE GOVERNMENT GIVE PREFERENCE TO DOMESTIC SOURCE END PRODUCTS. FOR THE PURPOSE OF THIS CLAUSE:

(I) "COMPONENTS" MEANS THOSE ARTICLES, MATERIALS, AND SUPPLIES, WHICH ARE DIRECTLY INCORPORATED IN THE END PRODUCTS;

(II) "END PRODUCTS" MEANS THOSE ARTICLES, MATERIALS, AND SUPPLIES WHICH ARE TO BE ACQUIRED UNDER THIS CONTRACT FOR PUBLIC USE; AND

(III) A "DOMESTIC SOURCE END PRODUCT" MEANS (A) AN UNMANUFACTURED END PRODUCT WHICH HAS BEEN MINED OR PRODUCED IN THE UNITED STATES AND (B) AN END PRODUCT MANUFACTURED IN THE UNITED STATES IF THE COST OF THE COMPONENTS THEREOF WHICH ARE MINED, PRODUCED, OR MANUFACTURED IN THE UNITED STATES OR CANADA EXCEEDS 50 PERCENT OF THE COST OF ALL ITS COMPONENTS. * * *.

AS WE INDICATED IN 39 COMP. GEN. 435, THE QUESTION AS TO WHAT CONSTITUTES THE "MANUFACTURE" OF AN ITEM IS BY NO MEANS EASY TO DETERMINE. CONCLUDED THERE THAT TWISTING OPERATIONS TO BE PERFORMED BY A BIDDER USING FOREIGN MATERIALS IN THE PRODUCTION OF WIRE ROPE MAY BE REGARDED AS MANUFACTURING.

THE INSTANT INVITATION CONTEMPLATES THE FURNISHING OF CHLORINATED LIME PACKAGED IN A 20-POUND PAIL AS THE END ITEM. THUS, IT APPEARS THAT THE PROCEDURE INVOLVED IN PLACING THE LIME IN THE CONTAINER CONSTITUTES "MANUFACTURE" WITHIN THE TERMS OF THE BUY AMERICAN ACT. WHETHER THIS DOMESTIC MANUFACTURING PROCESS YIELDS A "DOMESTIC SOURCE END PRODUCT" MUST BE DETERMINED IN THE LIGHT OF THE ABOVE DEFINITIONS OF COMPONENTS AND END PRODUCTS. IN VIEW OF THE ABOVE-QUOTED DEFINITIONS IT IS OUR VIEW THAT THE "COMPONENTS" DIRECTLY INCORPORATED IN THE END PRODUCT ARE THE CHLORINATED LIME AND A 20-POUND PAIL. THEREFORE, FOR THE END PRODUCT OFFERED BY CHEMICAL COMPOUNDING TO BE A "DOMESTIC SOURCE END PRODUCT," WE THINK THAT THE 20-POUND PAIL WHICH IS MANUFACTURED IN THE UNITED STATES MUST REPRESENT A COST WHICH IS GREATER THAN 50 PERCENT OF THE TOTAL COST OF ALL THE COMPONENTS, THAT IS, THE CHLORINATED LIME AND THE CONTAINER. WHILE WE AGREE WITH CHEMICAL COMPOUNDING THAT THE COSTS OF THE BULK CHLORINATED LIME, OCEAN FREIGHT AND DUTY SHOULD BE FOREIGN COSTS WE DO NOT AGREE THAT THE LABOR COSTS AND OTHER COSTS SUCH AS ADMINISTRATION AND OVERHEAD INVOLVED IN THE PACKAGING OF THE LIME ARE FOR CONSIDERATION. IN 35 COMP. GEN. 7 WE STATED THAT SINCE THE COMBINING OF THE FOREIGN COMPONENTS WITH THE DOMESTIC COMPONENTS CAN TAKE PLACE ONLY AFTER THE COMPONENTS HAVE BEEN MANUFACTURED, IT APPEARS THAT ANY COSTS RELATING THERETO MUST BE EXCLUDED FROM THE BID PRICE. IN VIEW THEREOF AND SINCE THE COST OF THE LIME PLUS THE OCEAN FREIGHT AND DUTY IS $1.40 AND THE COST OF THE CONTAINER IS $0.7969 MAKING A TOTAL COST OF $2.1969 FOR THE COMPONENTS IT IS APPARENT THAT THE COST OF THE DOMESTIC COMPONENT (THE 20-POUND PAIL) IS NOT GREATER THAN 50 PERCENT OF THE COST OF ALL THE COMPONENTS.

ACCORDINGLY, IT MUST BE CONCLUDED THAT THE MATERIAL OFFERED BY CHEMICAL COMPOUNDING IS NOT A ,DOMESTIC END PRODUCT.'