When the FY2007 National Defense Authorization Act was passed, members of the electronics supply chain were “cautiously optimistic” because for the first time since the Berry Amendment was enacted, an exemption from the specialty metals acquisition restriction was made for electronic components. The victory, however, may be short-lived.
While the 2007 Act stated that “certain commercially available electronic components whose specialty metal content was de minimis” in value compared to the overall system would be exempt, th e 2008 National Defense Authorization bill (H.R. 1585/S. 1547) is in the works, and the specialty metals debate is once again raging. The House Armed Services Committee of the U.S. House of Representatives has approved its version of the bill, with the inclusion of four provisions (Sections 808, 809, 845 and 846) relating to domestic sourcing of specialty metals by the Department of Defense (DoD). If included in the final 2008 defense budget, the provisions not only nullify last year’s legislation, but could potentially make compliance even more costly and time-consuming, according the Specialty Metals Availability Reform Team (SMART) coalition. The SMART coalition is a cooperative effort of 13 major industry associations, including the National Electronic Distributors Association, the Electronic Industries Alliance, the Semiconductor Industry Association and the Information Technology Association of America.
In a letter to the chairman of the House Armed Services Committee Ike Skelton, SMART stated: “Proposed provisions contained in the House markup would substantially reduce the already limited flexibility granted in last year’s legislation regarding the procurement of specialty metals. In particular, the language would restrict the [DoD] secretary’s long-standing flexibility to rapidly issue waivers when materials are not available so that items can be delivered to the warfighter when needed.” SMART contends that application of the 2007 legislation has enabled the DoD and the defense industrial base to deliver essential equipment to the warfighter, without endangering the domestic specialty metals industry.
The House’s efforts to strengthen the specialty metals sourcing restrictions are likely the result of pressure from members of the metals industry, says Barney Martin, vice president of Industry Practices, National Electronic Distributors Association (NEDA), Alpharetta, Ga. While there is some rationality to applying restrictions to large-scale equipment like tanks, battleships and metal racks, “to apply the metals restriction to capacitors and fasteners doesn’t seem to make a lot of sense,” he says.
Logical or not, if the exemption for electronic components is withdrawn, members of the supply chain need to be ready, advises David Moore, director of business development for Avnet Electronics Marketing Americas Defense Aerospace Business unit, Phoenix. “Avnet tends to be a conservative company when it comes to legal interpretations, so we are in full preparation to determine exactly what the process is we need to follow to make sure we are compliant.”
For now, it appears that lobbying measures of SMART and the Acquisition Reform Working Group, as well as individual trade associations have made an impact on the Senate Armed Services Committee. The committee’s markup of the Senate version of the 2008 Defense budget upholds the directives laid out in Section 822 of the 2007 budget. The bill has been forwarded to the full Senate for approval. However, due to conflicts concerning amendments unrelated to the specialty metals issue, the Senate has tabled its vote until after its August recess.
“If Congress reverses course, our military services will lose access to many technological advances, and other important programs will be delayed,” says Phil Bond, president and CEO of the Information Technology Association of America (ITAA). “As a result, the operational readiness of our forces will be materially reduced, not improved — all because of an inconsequential amount of specialty metals contained in electronics equipment.”
For more information on the Berry Amendment, see: Berry Update: Congress Repeals Berry Amendment; Grants Electronics Exemption
