
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 10USC2327]

 
                         TITLE 10--ARMED FORCES
 
                    Subtitle A--General Military Law
 
                PART IV--SERVICE, SUPPLY, AND PROCUREMENT
 
                   CHAPTER 137--PROCUREMENT GENERALLY
 
Sec. 2327. Contracts: consideration of national security 
        objectives
        
    (a) Disclosure of Ownership or Control by a Foreign Government.--The 
head of an agency shall require a firm or a subsidiary of a firm that 
submits a bid or proposal in response to a solicitation issued by the 
Department of Defense to disclose in that bid or proposal any 
significant interest in such firm or subsidiary (or, in the case of a 
subsidiary, in the firm that owns the subsidiary) that is owned or 
controlled (whether directly or indirectly) by a foreign government or 
an agent or instrumentality of a foreign government, if such foreign 
government is the government of a country that the Secretary of State 
determines under section 6(j)(1)(A) of the Export Administration Act of 
1979 (50 U.S.C. App. 2405(j)(1)(A)) has repeatedly provided support for 
acts of international terrorism.
    (b) Prohibition on Entering Into Contracts Against the Interests of 
the United States.--Except as provided in subsection (c), the head of an 
agency may not enter into a contract with a firm or a subsidiary of a 
firm if--
        (1) a foreign government owns or controls (whether directly or 
    indirectly) a significant interest in such firm or subsidiary (or, 
    in the case of a subsidiary, in the firm that owns the subsidiary); 
    and
        (2) such foreign government is the government of a country that 
    the Secretary of State determines under section 6(j)(1)(A) of the 
    Export Administration Act of 1979 (50 U.S.C. App. 2405(j)(1)(A)) has 
    repeatedly provided support for acts of international terrorism.

    (c) Waiver.--(1)(A) If the Secretary of Defense determines under 
paragraph (2) that entering into a contract with a firm or a subsidiary 
of a firm described in subsection (b) is not inconsistent with the 
national security objectives of the United States, the head of an agency 
may enter into a contract with such firm or subsidiary after the date on 
which such head of an agency submits to Congress a report on the 
contract.
    (B) A report under subparagraph (A) shall include the following:
        (i) The identity of the foreign government concerned.
        (ii) The nature of the contract.
        (iii) The extent of ownership or control of the firm or 
    subsidiary concerned (or, if appropriate in the case of a 
    subsidiary, of the firm that owns the subsidiary) by the foreign 
    government concerned or the agency or instrumentality of such 
    foreign government.
        (iv) The reasons for entering into the contract.

    (C) After the head of an agency submits a report to Congress under 
subparagraph (A) with respect to a firm or a subsidiary, such head of an 
agency is not required to submit a report before entering into any 
subsequent contract with such firm or subsidiary unless the information 
required to be included in such report under subparagraph (B) has 
materially changed since the submission of the previous report.
    (2) Upon the request of the head of an agency, the Secretary of 
Defense shall determine whether entering into a contract with a firm or 
subsidiary described in subsection (b) is inconsistent with the national 
security objectives of the United States. In making such a 
determination, the Secretary of Defense shall consider the following:
        (A) The relationship of the United States with the foreign 
    government concerned.
        (B) The obligations of the United States under international 
    agreements.
        (C) The extent of the ownership or control of the firm or 
    subsidiary (or, if appropriate in the case of a subsidiary, of the 
    firm that owns the subsidiary) by the foreign government or an agent 
    or instrumentality of the foreign government.
        (D) Whether payments made, or information made available, to the 
    firm or subsidiary under the contract could be used for purposes 
    hostile to the interests of the United States.

    (d) List of Firms Subject to Prohibition.--(1) The Secretary of 
Defense shall develop and maintain a list of all firms and subsidiaries 
of firms that the Secretary has identified as being subject to the 
prohibition in subsection (b).
    (2)(A) A person may request the Secretary to include on the list 
maintained under paragraph (1) any firm or subsidiary of a firm that the 
person believes to be owned or controlled by a foreign government 
described in subsection (b)(2). Upon receipt of such a request, the 
Secretary shall determine whether the conditions in paragraphs (1) and 
(2) of subsection (b) exist in the case of that firm or subsidiary. If 
the Secretary determines that such conditions do exist, the Secretary 
shall include the firm or subsidiary on the list.
    (B) A firm or subsidiary of a firm included on the list may request 
the Secretary to remove such firm or subsidiary from the list on the 
basis that it has been erroneously included on the list or its ownership 
circumstances have significantly changed. Upon receipt of such a 
request, the Secretary shall determine whether the conditions in 
paragraphs (1) and (2) of subsection (b) exist in the case of that firm 
or subsidiary. If the Secretary determines that such conditions do not 
exist, the Secretary shall remove the firm or subsidiary from the list.
    (C) The Secretary shall establish procedures to carry out this 
paragraph.
    (3) The head of an agency shall prohibit each firm or subsidiary of 
a firm awarded a contract by the agency from entering into a subcontract 
under that contract in an amount in excess of $25,000 with a firm or 
subsidiary included on the list maintained under paragraph (1) unless 
there is a compelling reason to do so. In the case of any subcontract 
requiring consent by the head of an agency, the head of the agency shall 
not consent to the award of the subcontract to a firm or subsidiary 
included on such list unless there is a compelling reason for such 
approval.
    (e) Distribution of List.--The Administrator of General Services 
shall ensure that the list developed and maintained under subsection (d) 
is made available to Federal agencies and the public in the same manner 
and to the same extent as the list of suspended and debarred contractors 
compiled pursuant to subpart 9.4 of the Federal Acquisition Regulation.
    (f) Applicability.--(1) This section does not apply to a contract 
for an amount less than $100,000.
    (2) This section does not apply to the Coast Guard or the National 
Aeronautics and Space Administration.
    (g) Regulations.--The Secretary of Defense, after consultation with 
the Secretary of State, shall prescribe regulations to carry out this 
section. Such regulations shall include a definition of the term 
``significant interest''.

(Added Pub. L. 99-500, Sec. 101(c) [title X, Sec. 951(a)(1)], Oct. 18, 
1986, 100 Stat. 1783-82, 1783-164, and Pub. L. 99-591, Sec. 101(c) 
[title X, Sec. 951(a)(1)], Oct. 30, 1986, 100 Stat. 3341-82, 3341-164; 
Pub. L. 99-661, div. A, title IX, formerly title IV, Sec. 951(a)(1), 
Nov. 14, 1986, 100 Stat. 3944, renumbered title IX, Pub. L. 100-26, 
Sec. 3(5), Apr. 21, 1987, 101 Stat. 273; amended Pub. L. 100-180, div. 
A, title XII, Sec. 1231(8), Dec. 4, 1987, 101 Stat. 1160; Pub. L. 100-
224, Sec. 5(b)(2), Dec. 30, 1987, 101 Stat. 1538; Pub. L. 105-85, div. 
A, title VIII, Sec. 843, Nov. 18, 1997, 111 Stat. 1844.)

                          Codification

    Pub. L. 99-591 is a corrected version of Pub. L. 99-500.
    Pub. L. 99-500, Pub. L. 99-591, and Pub. L. 99-661 added identical 
sections.


                            Prior Provisions

    A prior section 2327 was renumbered section 2347 of this title.


                               Amendments

    1997--Subsecs. (d) to (g). Pub. L. 105-85 added subsecs. (d) and (e) 
and redesignated former subsecs. (d) and (e) as (f) and (g), 
respectively.
    1987--Subsecs. (a), (b)(2). Pub. L. 100-224 substituted ``50 U.S.C. 
App.'' for ``50 U.S.C.'' in parenthetical after ``Export Administration 
Act of 1979''.
    Subsec. (d)(1). Pub. L. 100-180 inserted par. (1) designation.


                             Effective Date

    Section 101(c) [title X, Sec. 951(c)] of Pub. L. 99-500 and Pub. L. 
99-591, and section 951(c) of title IX, formerly title IV, of Pub. L. 
99-661, renumbered title IX, Pub. L. 100-26, Sec. 3(5), Apr. 21, 1987, 
101 Stat. 273, provided that: ``Section 2327 of title 10, United States 
Code (as added by subsection (a)(1)), shall apply to contracts entered 
into by the Secretary of Defense after the end of the 90-day period 
beginning on the date of the enactment of this Act [Oct. 18, 1986].''


   Reports by Defense Contractors of Dealings With Terrorist Countries

    Pub. L. 103-160, div. A, title VIII, Sec. 843, Nov. 30, 1993, 107 
Stat. 1720, as amended by Pub. L. 103-355, title VIII, Sec. 8105(j), 
Oct. 13, 1994, 108 Stat. 3393, provided that:
    ``(a) Report Requirement.--(1) Whenever the Secretary of Defense 
proposes to enter into a contract with any person for an amount in 
excess of $5,000,000 for the provision of goods or services to the 
Department of Defense, the Secretary shall require that person--
        ``(A) before entering into the contract, to report to the 
    Secretary each commercial transaction which that person has 
    conducted with the government of any terrorist country during the 
    preceding three years or the period since the effective date of this 
    section, whichever is shorter; and
        ``(B) to report to the Secretary each such commercial 
    transaction which that person conducts during the course of the 
    contract (but not after the date specified in subsection (h)) with 
    the government of any terrorist country.
    ``(2) The requirement contained in paragraph (1)(B) shall be 
included in the contract with the Department of Defense.
    ``(3) This section does not apply with respect to a contract for the 
procurement of a commercial item (as defined in section 4(12) of the 
Office of Federal Procurement Policy Act (41 U.S.C. 403(12))).
    ``(b) Regulations.--The Secretary of Defense shall prescribe such 
regulations as may be necessary to carry out this section.
    ``(c) Annual Report to Congress.--The Secretary of Defense shall 
submit to the Congress each year by December 1 a report setting forth 
those persons conducting commercial transactions with terrorist 
countries that are included in the reports made pursuant to subsection 
(a) during the preceding fiscal year, the terrorist countries with which 
those transactions were conducted, and the nature of those transactions. 
The version of the report made available for public release shall 
exclude information exempt from public disclosure under section 552 of 
title 5, United States Code (commonly known as the Freedom of 
Information Act).
    ``(d) Liability.--This section shall not be interpreted as imposing 
any liability on a person for failure to comply with the reporting 
requirement of subsection (a) if the failure to comply is caused solely 
by an act or omission of a third party.
    ``(e) Person Defined.--For purposes of this section, the term 
`person' means a corporate or other business entity proposing to enter 
or entering into a contract covered by this section. The term does not 
include an affiliate or subsidiary of the entity.
    ``(f) Terrorist Country Defined.--A country shall be considered to 
be a terrorist country for purposes of a contract covered by this 
section if the Secretary of State has determined pursuant to law, as of 
the date that is 60 days before the date on which the contract is 
signed, that the government of that country is a government that has 
repeatedly provided support for acts of international terrorism.
    ``(g) Effective Date.--This section shall apply with respect to 
contracts entered into after the expiration of the 90-day period 
beginning on the date of the enactment of this Act [Nov. 30, 1993], or 
after the expiration of the 30-day period beginning on the date of 
publication in the Federal Register of the final regulations referred to 
in subsection (b), whichever is earlier.
    ``(h) Termination.--This section expires on September 30, 1996.''
