A. ACQUISITION OF FOREIGN MACHINE TOOLS OR VALVES
     A.Machine tools and valves listed in paragraph B. of this clause acquired by the Seller, title to which will vest with the Government, shall be manufactured in the United States or Canada.

     B.The requirement for acquisition of machine tools manufactured in the United States or Canada applies to those listed in Federal Supply Classes of metalworking machinery numbered 3408, 3410-3419, 3426, 3433,3441-3443, 3446, 3448, 3449, 3460 and 3461.  The requirement for acquisition of valves manufactured in the United States or Canada applies to those listed in Federal Supply Classes of 4810 and 4820.

     C. A machine tool or valve shall be considered to have been manufactured in the United States or Canada if the cost of its components manufactured in the United States or Canada exceeds fifty percent (50%) of the cost of all its components.  The cost of components shall include transportation costs to the place of incorporation into the end product and duty (whether or not a duty-free certificate may be issued).

     D. Acquisition of machine tools or valves as described in paragraph B. above, manufactured in a country other than the United States or Canada, if required to meet the delivery schedule or other requirements of this Purchase Order, shall be approved in advance by the Government.

B. REFUNDS (SPARES AND SUPPORT EQUIPMENT)
     A. In the event that the price of a spare part or item of support equipment delivered under this Purchase Order significantly exceeds its intrinsic value, the Seller agrees to refund the difference.  Refunds will only be made for the difference between the intrinsic value of the item at the time an agreement on price was reached and the Purchase Order price.  Refunds will not be made to recoup the amount of cost decreases that occur over time due to productivity gains (beyond economic purchase quantity considerations) or changes in market conditions.

     B. For purposes of this article, the intrinsic value of an item is defined as follows:

1. If the item is one which is sold is substantially similar or functionally equivalent to one that is sold in substantial quantities to the general public, intrinsic value is the established catalog or market price, plus the value of any unique requirements, including delivery terms, inspection, packaging, or labeling.
2. If there is no comparable item sold in substantial quantities to the general public, intrinsic value is defined as the price an individual would expect to pay for the item based upon an economic purchase quantity as defined in FAR 52.207-4, plus the value of any unique requirements, including delivery terms, inspection packaging or labeling.

     C. At any time up to two (2) years after delivery of a spare part or item of support equipment, the Buyer's Contracting Officer may notify the Seller that based on all information available at the time of the notice, the price of the part or item apparently exceeds its intrinsic value. If notified in accordance with paragraph C. above, the Seller agrees to enter into good faith negotiations with the government to determine if and in what amount, the Government is entitled to a refund.

     D. If agreement pursuant to paragraph D. above cannot be reached, and the Navy's return of the new or unused item to the Seller is practical the Navy, subject to the Seller's agreement, may elect to return the item to the Seller.  Upon return of the item to its original point of Government acceptance, the Seller shall refund in full the price paid.  If no agreement pursuant to paragraph D. above is reached, and return of the item by the Navy is impractical, the Buyer's Contracting Officer may, with the approval of the Head of the Contracting Activity, issue a Contracting Officer's final decision on the matter, subject to seller appeal as provided in the "Disputes" article.

     E. The Seller will make refunds as required under this clause, in accordance with instructions from the Buyer's Contracting Officer.

     F. The Seller shall not be liable for a refund if the Seller advised the Buyer in a timely manner that the price it would propose for a spare part or item of support equipment exceeded its intrinsic value, and with such advice, specified the estimated proposed price, the estimated intrinsic value and known alternative sources or items, if any, that can meet the requirements.

     G. This article does not apply to any spare parts or items of support equipment whose price is determined through adequate price competition.  This article also does not apply to any spare part or item of support equipment with a unit price in excess of $100,000; or in excess of $25,000 if the Seller submitted, and certified the currency, accuracy and completeness of cost or pricing data applicable to the item.

C. Article entitled "REQUIRED SOURCES FOR PRECISION COMPONENTS FOR MECHANICAL TIME DEVICES" is modified by deleting the first four lines under Paragraph A. and substituting the following in lieu thereof:
     A. For the purpose of this article:  Domestic manufacturer means manufacture in the United States or Canada, and, when mechanical timing assembly is involved, all materials used in, and processes performed on, precision components of the assembly must also have been manufactured (come from and have been performed) in the United States or Canada.

D. Add the following paragraph I to Article entitled "FEDERAL, STATE, AND LOCAL TAXES"
     H. For purposes of this Purchase Order, "After-Imposed Federal Tax" as covered by this clause shall be deemed to include any Federally mandated Value Added, Ad Valorem, or similar tax implemented during the period of performance of this Purchase Order. Therefore, the Seller shall be entitled to an equitable adjustment in accordance with the provisions of this clause for any such implementation of a Federally mandated Value Added, Ad Valorem, or similar tax during the period of performance of this Purchase Order which results in an increase or decrease in the Seller's cost of performing the work under this Purchase Order.

E. Article entitled "VALUE ENGINEERING" is modified by adding the following paragraph:
     N. This clause does not apply to any work under this Purchase Order in connection with the nuclear propulsion plant, its associated components and systems which are under the technical cognizance of Navsea Code 08.

F.  Article entitled "TECHNICAL DATA - WITHHOLDING OF PAYMENT", is modified by deleting "ten percent (10%)" and substituting "two percent (2%)".

F. Article entitled "LIMITATION OF LIABILITY" is modified by the following:

1. In the fifth line of paragraph A. add the phrase "vessel for which the" after the phrase "acceptance of the
2. In third line of paragraph B. add the phrase "fraud or such gross mistake as amount to fraud, faulty workmanship or faulty materials," after the phrase "the supplies results from".

G. Article entitled "preference for Privately Owned U.S. Flag Commercial Vessels" is modified by deleting paragraphs A. and B. and substituting the following paragraphs A. and B.:
     A. Except as provided in paragraph B. below, the Seller shall use privately owned U.S.-flag commercial vessels, and no others, in the ocean transportation of any supplies to be furnished under this Purchase Order.

     B. If such vessels are not available for timely shipment at rates that are fair and reasonable for privately owned U.S.-flag commercial vessels, the Seller shall notify the Buyer and request (1) authorization to ship in foreign-flag vessels or (2) designation of available U.S.-flag vessels.  If the Seller is authorized in writing by the Buyer to ship the supplies in foreign-flag vessels, the Purchase Order price shall be equitably adjusted to reflect the difference in costs of shipping the supplies in privately owned U.S.-flag commercial vessels and in foreign-flag vessels.