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Sec.

Part 1455

1455.1

Introduction.

Permissive Exemptions From Renegotiation

1455.2 Prime contracts and subcontracts to be per-
formed outside of the United States.
1455.3 Contracts under which profits can be deter-
mined at time contract price is established.
1455.4 Contracts when contractual provisions ade-
quate to prevent excessive profits.

1455.5 Contracts and subcontracts of a secret nature.
1455.6 Subcontracts as to which it is not administra-
tively feasible to segregate profits.
1455.7 Subcontracts related to exempt prime con-
tracts and subcontracts.

1455.8 Renegotiation clause in exempt contracts.

AUTHORITY: Sections 1455.1 to 1455.8 issued under section 109, Pub. Law 9, 82d Cong. Interpret or apply section 106, Pub. Law 9, 82d Cong.

1455.1 Introduction.-Section 106 (d) of the act authorizes the Board in its discretion to exempt from some or all of the provisions of Title I of the act certain prime contracts and subcontracts described therein both individually and by general classes or types. This part sets forth the specific statutory authority to make such permissive exemptions and describes the prime contracts and subcontracts which have been exempted by the Board thereunder.

1455.2 Prime contracts and subcontracts to be performed outside of the United States. (a) Statutory authority.-Section 106 (d) (1) of the act authorizes the Board in its discretion to exempt from some or all of the provisions of Title I of the act the following:

States, its territories and possessions, and (ii) the prime contractor or subcontractor is a foreign corporation or a foreign national or is a partnership or joint venture, all the members of which are foreign corporations or foreign nationals.

(1) any contract or subcontract to be performed outside of the territorial limits of the continental United States or in Alaska;

(2) All prime contracts of the Panama Canal Company and the Canal Zone Government, and related subcontracts, whenever such prime contracts of subcontracts are for products manufactured in the Republic of Panama.

(b) Exemption through June 30, 1956.Subject to the limitation provided in paragraph (c) of this section, the Board has exempted from the provisions of the act, with respect to amounts received or accrued to and including June 30, 1956, the following:

(c) Limitation on exemption.-No prime contract or subcontract of any class or type set forth in paragraph (b) of this section is exempt under section 106 (d) (1) of the act if, upon the recommendation of the Department making the prime contract involved, the Board determines before October 1, 1954, that such prime contract or subcontract shall not be exempt under paragraph (b) (1) of this section. A recommendation of a Department pursuant to the provisions of this paragraph shall be made by the head of such Department or by a person responsible directly to such head and specifically authorized to make such recommendation.

(1) All prime contracts and subcontracts for materials or construction, and services connected therewith, or for maintenance, repair or rehabilitation, whenever (i) performance and delivery are to be effected outside the United

(c-1) Exemption after June 30, 1956.—(1) The Board has exempted from the provisions of the act, with respect to amounts received or accrued after June 30, 1956, all prime contracts and subcontracts wholly performed outside the United States by any person who is not engaged in a trade or business in the United States and is

(i) An individual who is not a national of the United States;

(ii) A partnership or joint venture in which individuals who are not nationals of the United States or corporations which are not domestic corporations are entitled to more than 50 percent of the profits; or

(iii) A corporation (other than a domestic corporation) more than 50 percent of the voting stock of which is owned directly or indirectly by persons described in subdivisions (i) and (ii) of this subparagraph.

For the purposes of this paragraph, the term "United States", when used in a geographical sense, includes the Territories and possessions of the United States, the Commonwealth of Puerto Rico, and the Canal Zone, and the term "domestic corporation" means a corporation organized under the laws of the United States or of any State, any Territory or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or the Canal

Zone.

(2) Interpretation and illustrations: The exemption provided in this paragraph will not apply unless all of the requirements described in subparagraph (1) of this paragraph are met at all times during the performance of the contract. If the contractor fails to meet any of these requirements at any time during the performance of the contract, the entire amount received or accrued under the contract will be subject to renegotiation. For example:

(i) The exemption will not apply to any prime contract or subcontract for sea or air transportation or cargo carriage from any point in the United States to a point outside the United States, or vice versa.

(ii) An individual who is not a national of the United States enters into a prime contract with the Navy requiring three years to perform. The contract is wholly performed outside the United States, but during the last month of performance the contractor becomes a national of the United States. The exemption does not apply and the entire receipts or accruals under the contract, if not otherwise exempt, are subject to renegotiation.

(iii) A partnership in which one member is a national of the United States and two members are nationals of Canada enters into a prime contract with the Navy. If at any time during the performance of the contract the United States national becomes entitled to more than 50 percent of the profits, the exemption does not apply and the entire receipts or accruals under the contract, if not otherwise exempt, are subject to renegotiation.

(iv) A corporation, all of the shares of which are owned by nationals of the United States, is incorporated in Canada. The corporation forms a wholly owned Canadian subsidiary. No prime contract or related subcontract of the

subsidiary, even though wholly performed outside the United States, is exempt under this paragraph.

(v) A corporation, all of the shares of which are owned by Canadian nationals, is incorporated in Canada. All of the property of the corporation is located in Canada and all of its business is conducted in Canada, with the exception of a sales office in the United States. The exemption does not apply to any prime contract or related subcontract of the corporation, even though wholly performed in Canada.

(d) Specific exemption of prime contracts and subcontracts.-The Board has exempted and will in the future exempt individual prime contracts or subcontracts, or the prime contracts or subcontracts related to a particular authorized procurement program, when such prime contracts or subcontracts are to be performed outside the territorial limits of the continental United States or in Alaska, and when the Department responsible for procurement establishes to the satisfaction of the Board that (1) the prime contracts or subcontracts involved in the request are to be placed with foreign nationals or foreign corporations whom it is not practicable to subject to renegotiation; (2) the provisions of the prime contracts or subcontracts are otherwise sufficient to prevent excessive profits; (3) the program is of direct and immediate concern to the defense of the United States and refusal to grant the exemption would jeopardize the success of the program; or (4) the contract or group of contracts should be exempted for any combination of the foregoing Prime conreasons or for any other reason. tractors or subcontractors who believe that their prime contracts or subcontracts should be exempted under this provision should address their requests to the Departments entering into the prime contracts involved.

1455.3 Contracts under which profits can be determined at time contract price is established. (a) Statutory authority-Section 106 (d) (2) of the act authorizes the Board in its discretion to exempt from some or all of the provisions of Title I of the act the following:

(2) any contracts or subcontracts under which, in the opinion of the Board, the profits can be determined with reasonable certainty when the contract price is established, such as certain classes of (A) agreements for personal services or for the purchase of real prop

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erty, perishable goods, or commodities the minimum price for the sale of which has been fixed by a public regulatory body, (B) leases and license agreements, and (C) agreements where the period of performance under such contract or subcontract will not be in excess of thirty days.

(b) Exemptions.-In the opinion of the Board the profits from the following contracts can be determined with reasonable certainty when the contract price is established, and the Board has accordingly exempted such contracts from the provisions of the act:

(1) Certain service contracts.-All prime contracts with natural persons (not partnerships, joint ventures or corporations) entered into under authority of any law, which call for the performance of services, whether personal or professional, by the individual contractor in person under the supervision of the Government, and which are paid for on a time basis. (2) Real estate contracts.-Prime contracts for the sale or rental of any interest in existing real estate. (See sec. 1452.5 (a) pertaining to subcontracts.)

to avoid waste or spoilage, customarily require distribution and consumption within a short period. This category includes (but is not limited to) all fresh, smoked, frozen or refrigerated food products, meats and meat products, dairy and poultry products, waterfoods, fruits, vegetables, fruit juices and concentrates.

(3) Contracts for property used in trade or business of vendor.-Prime contracts and subcontracts for the sale or exchange of tangible property used in the trade or business of the vendor, with respect to which depreciation is allowable under section 23 (1) of the Internal Revenue Code (not including stock in trade of the vendor or other property which would properly be included in the inventory of the vendor if on hand at the close of its fiscal year, or property held by the vendor primarily for sale in its trade or business).

(ii) Perishable subsistence supplies exemption list.-The Board has determined that the items shown on the following list are "perishable subsistence supplies" when such items are in a state described in subdivision (i) of this subparagraph. A prime contract or subcontract for an item listed will not, however, be deemed exempt when such item is packed or processed so that it is not in such a state. For example, although tomatoes are listed, canned tomatoes will not be deemed perishable subsistence supplies.

(i) Application of exemption.-The exemption set forth in this subparagraph (3) extends only to contracts under which the price is a fixed or determinable amount at the time the contract is entered into, and does not apply to any contract under which the price, at the time the contract is entered into, is contingent upon a subsequent event or is thereafter to be determined by reference to a variable element.

(4) Perishable subsistence supplies.-Prime contracts and subcontracts for perishable subsistence supplies.

Fruits: Apples.

Apricots.

Avocados.

(i) Application of exemption.-For the purposes of this exemption, the term "perishable subsistence supplies" includes all foods in such a state that they require storage under controlled refrigeration and humidity for preservation or,

Perishable Subsistence Supplies

Fruits-Con. Raspberries:

Black

Red Rhubarb.

Strawberries.

Bananas.

Blackberries. Blueberries. Cantaloupes. Cherries. Cranberries. Currants. Dates. Dewberries. Figs, fresh. Gooseberries.

Grapefruit.

Grapes.

Lemons.

Limes.

Logan blackberries.
Melons:
Casaba.

Honeydew.

Honeyball.
Muskmelons.
Persian.

Watermelons.

Olives.

Oranges.

Peaches.
Pears.

Persimmons.

Plums, including fresh prunes. Quinces.

Tangerines.

Vegetables:

Artichokes:
Globe.
Jerusalem.
Asparagus.
Beans:

Green.

Lima.

Snap.

Beets:

Bunch.

Topped.

Broccoli, sprouting.

Brussels sprouts.

Cabbage.

Carrots:

Bunch.

Topped.

Cauliflower.

Celeriac.

Celery.

Corn: Sweet.

Cucumbers.

Endive (escarole).

Greens (collards,

etc.). Kale.

Kohlrabi,

Leeks: Green.

Lettuce.

Vegetables-Con.

Mushrooms.

Onions:

Dry.

Green.

Parsnips.

Peas: Green.

Peppers:

Chili (dry).

Sweet green.

Potatoes:

Dairy products.-Con.

Eggs Continued

Fermented albumen.
Ice cream and

cream mix.

Milk:

Fresh.

Concentrated.

flavored

Frozen.
Recombined.
Chocolate
drink.
Sherbets and ices.
Yoghurt.

Irish.

Sweet.

Pumpkins.

Radishes.

Poultry:

Rutabagas.

Chicken.

Salisify.

Duck.

Spinach.

Turkey.

Squashes.

Meats:

Tomatoes:

Mature green.

[blocks in formation]

Bacon.
Frankfurters.

Beef.
Fatbacks.

Hams.

Shoulders.

Lamb.

Pork.

Sausage casings (ex-
cept synthetic).

Veal.

Lamb and mutton.
Lard and lard substi-
tutes.

Dried yolk.

Dried spray

albu

men.

Offals.
Rabbits.

[blocks in formation]

ice

subject to this exemption if the period of performance will not exceed thirty days, to be measured as described in this subparagraph (5), and the renegotiation clause shall not be required in any such prime contract. In arriving at "the aggregate amount involved", there shall be included all supplies and services which would properly be grouped together in a single transaction and which would be included in a single advertisement for bids if the procurement were being effected by formal advertisement. Purchases or contracts aggregating more than $1,000 shall not be broken down into several purchases or contracts which are less than $1,000 each, nor shall customary purchasing or contracting procedures be altered, merely for the purpose of avoiding renegotiation under this exemption.

(6) Subcontracts for architectural, design or
engineering services.-Subcontracts described
in section 103 (g) (3) (A) and (B) of the act
for architectural, design or engineering serv-
ices, no part of which services is or was related
to the effecting or procuring of a contract with
a Department or a subcontract, if the aggregate
renegotiable business of the subcontractor hold-
ing such subcontracts and all persons under
control of or controlling or under common con-
trol with such subcontractor during a fiscal year
of 12 months is not more than $250,000, in the
case of a fiscal year ending before June 30, 1953,
or $500,000, in the case of a fiscal year ending
on or after June 30, 1953, or $1,000,000, in the
case of a fiscal year ending after June 30, 1956,
or, during a fiscal year which is a fractional
part of 12 months, is not more than the same
fractional part of $250,000, $500,000, or $1,000,-
000, as the case may be: Provided, however,
That such subcontractor is not exempted from
the provisions of the first sentence of section
105 (e) (1) of the act which require the filing
of the Standard Form of Contractor's Report
prescribed in § 1470.3 (a) of this subchapter,
if such provisions are otherwise applicable to
such subcontractor.

(7) Contracts entered into with non-profit-
making agency for the blind.-Any contract en-
tered into with a non-profit-making agency for
the blind pursuant to the act of June 25, 1938
(52 Stat. 1196; 41 U. S. C. 46-48), at the then
current prices established by the Committee on

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in the form of subsidy payments. It does not exempt renegotiable receipts or accruals otherwise derived, including payments by shippers for freight charges.

(2) Defense Minerals Exploration Administration.-All exploration project contracts entered into by the Defense Minerals Exploration Administration of the Department of Interior, pursuant to delegation from the Defense Materials Procurement Administration, under the authority of section 303 of the Defense Production Act of 1950, as amended, 50 U. S. C. App. 2093, and Defense Minerals Exploration Administration Order No. 1 (17 F. R. 2090).

(c) Exemption of individual prime contracts and subcontracts.-The Board will exempt an individual prime contract or subcontract, or performance thereunder during a specified period or periods if, in the opinion of the Board, the profits under such prime contract or subcontract can be determined with reasonable certainty when the contract price is established. The Board will make such an exemption only after it has received from the agency entering into the prime contract sought to be exempted, or the prime contract to which the subcontract sought to be exempted relates, a request for the exemption of such prime contract or subcontract and information which would support the conclusion that the profits thereunder can be determined with reasonable certainty when the contract price is established. Accordingly, prime contractors or subcontractors who believe that their prime contracts or subcontracts should be exempted under this provision should address requests to the agencies entering into the prime contracts involved.

(3) Small Defense Plants Administration.— All prime contracts entered into by the Small Defense Plants Administration under the authority of section 714 (b) (1) (B) of the Defense Production Act of 1950, as amended, 50 U.S. C. App. 2163 (b) (1) (B) with any of the Departments named in or designated pursuant to section 103 of the act. This exemption shall not extend to subcontracts related to such prime contracts.

1455.4 Contracts when contractual provisions adequate to prevent excessive profits.(a) Statutory authority.-Section 106 (d) (8) of the act authorizes the Board in its discretion to exempt from some or all of the provisions of the act the following:

(3) any contract or subcontract or performance thereunder during a specified period or periods if, in the opinion of the Board, the provisions of the contract are otherwise adequate to prevent excessive profits;

(b) Exemptions.-Pursuant to the foregoing authority, the Board has exempted from renegotiation the following:

(4) Small Business Administration.-All prime contracts entered into by the Small Business Administration under the authority of section 207 (c) of the Small Business Act of 1953, Public Law 163, 83d Congress, First Session, with any of the Departments named in or designated pursuant to section 103 of the act. This exemption shall not extend to subcontracts related to such prime contracts.

(1) Maritime Administration.-All operating differential subsidy contracts of the Maritime Administration which are let under authority of 46 U. S. C. 1171, 1173, as amended, whenever such contracts contain or incorporate by reference or are subject to the redetermination and recapture provisions of 46 U. S. C. 1176. This exemption applies only to receipts and accruals derived from the United States

(c) Exemption of individual prime contracts and subcontracts.-The Board will exempt an individual prime contract or subcontract, or performance thereunder during a specified period or periods if, in the opinion of the Board, the provisions of the contract are otherwise adequate to prevent excessive profits. The Board will make such an exemption only after it has received from the agency entering into the prime contract sought to be exempted, or the prime contract to which the subcontract sought to be exempted relates, a request for the exemption of such prime contract or subcontract and information which would support the conclusion that the provisions of the prime contract or subcontract are otherwise adequate to prevent excessive profits. Accordingly, prime contractors or subcontractors who believe that their

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