Applicability of Buy America Requirements to Tires Manufactured in Canada; Decision


Printer Friendly Number 52 FR 23734
06-24-87

DEPARTMENT OF TRANSPORTATION
Urban Mass Transportation Administration
AGENCY: Urban Mass Transportation Administration, DOT.
52 FR 23734
June 24, 1987

Applicability of Buy America Requirements to Tires Manufactured in Canada; Decision

ACTION: Notice of decision.

SUMMARY: On May 19, 1986, UMTA issued an opinion to Firestone Tire and Rubber Company which provided that the "Buy America" requirements of the Surface Transportation Assistance Act of 1982 did not apply to Firestone tires manufactured in Canada since at least two of the components of the tires were exempted from these requirements. Goodyear Tire and Rubber Company challenged UMTA's decision by arguing that the "Buy America" provisions required that tires be "produced in the United States." In a decision dated May 20, 1987, UMTA reversed its earlier decision by finding that the "Buy America" requirements do apply to tires produced in Canada and that these tires cannot be categorized as complying with the applicable "Buy America" requirements.

FOR FURTHER INFORMATION CONTACT:Edward J. Gill, Jr., Office of the Chief Counsel, Room 9228, 400 Seventh Street, SW., Washington, DC 20590. (202) 366-4063.

TEXT: SUPPLEMENTARY INFORMATION:

UMTA Decision -- May 19, 1986

UMTA first determined that a tire is a "manufactured product" for purposes of applicability of the "Buy America" requirements. Once it was determined that a tire is a "manufactured product" for purposes of "Buy America" applicability, the next question that UMTA addressed was whether a general waiver has been granted for tires. Appendix A to § 661.7 of the regulations provides that "[A]ll waivers published in 41 CFR 12-6.105 which establish excepted articles, materials, and supplies for the Buy American Act of 1933 (41 U.S.C. 10a-d) are incorporated by reference under the provisions of § 661.7(b) [public interest] and (c) [non-availability]." Two of the excepted items listed in 41 CFR 12-6.105 are rubber and petroleum products. Section 12-6.105 further provides that any excepted items may be regarded as being of domestic origin for purposes of determining origin.

Hence, it was UMTA's position that, since rubber tires are "manufactured products" consisting mainly of rubber and petroleum, tires are granted the waiver set forth in Appendix A to 49 CFR 661.7. Since the two components of the tire are excepted materials, UMTA concluded that the tire itself can be treated as though it were an excepted item.

Goodyear Position

Goodyear's position was that UMTA erred in concluding that tires are exempt from "Buy America" coverage. While Goodyear conceded that the listing in 41 CFR 12-6.105 includes rubber and petroleum products, they argued that section 165(a) deals with the site of manufacture and clearly provides that "manufactured products" must be "produced in the United States." Goodyear stated that "while rubber and certain petroleum products are to be treated as if they were domestic components under section 165, the status of such components as domestic does not make end items manufactured abroad into domestic end products." Goodyear concluded that, for purposes of section 165(a), listed items may be considered as domestic in determining the domestic content of a "manufactured product" but such an inclusion does not alter the basic requirement that all manufacturing processes must take place in the United States.

UMTA Decision -- May 20, 1987 -- Determination of Applicability of "Buy America"

The first issue which UMTA addressed in its May 20th decision was UMTA's statutory authority to promulgate the exception set forth in Appendix A to 49 CFR 661.7. Section 165(b)(2) of the Surface Transportation Assistance Act of 1982 provides that the general requirements of section 165(a) concerning domestic preference shall not apply if the item or items being procured "are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality." The Federal Government has already determined that the items listed in 41 CFR 12-6.105 "are not mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities of a satisfactory quality." Rather than attempting to issue waivers on a case-by-case basis, UMTA (under authority of section 165(b)(2)) incorporated the listing of exempted articles, materials, and supplies already established under the Buy American Act of 1933 (41 U.S.C. 10a-s). Therefore, the determination that rubber and petroleum products were excepted from coverage under section 165 remains corrected.

Once it is determined that two components of a tire are exempt from "Buy America" coverage, the question is whether the tire itself is exempt. The issue is whether the unavailability of a component of an item relieves the manufacturer of that item from the obligation of manufacturing the item in the United States.

Based on the arguments presented by Firestone, Goodyear and Michelin Tire Corporation, UMTA concluded that its May 19, 1986 decision was incorrect under the applicable statute and regulations. The fact that a "Buy America" waiver is granted for a component of an item is irrelevant in determining whether the item itself must meet other applicable "Buy America" requirements. UMTA's "Buy America" regulations at 49 CFR 661.7(f) provide that if a "component" of an "end product" governed by the rolling stock requirements of section 165(b)(3) is granted a waiver, that component is considered "domestic" in calculating the cost of all components. However, the end product must still meet applicable "Buy America" requirements.

UMTA does not agree with the Firestone position that the granting of an exception under section 165(b) waives all of the requirements of section 165(a). In the case of tires, there is a "Buy America" waiver granted to some of a tire's components under section 165(b)(2). If the waiver were applicable to the item being procured, Firestone would be correct in arguing that the requirements of section 165(a) would no longer apply. However, granting a waiver to a component does not waive the requirements otherwise applicable to the product delivered to the UMTA grantee.

UMTA agreed with Goodyear's argument that in order for a manufactured product to meet the requirements of section 165(a), all manufacturing processes of a product must take place in the United States. The fact that some of the components of a manufactured product have been granted a "non-availability" "Buy America" waiver is not controlling. The manufacturing processes for the manufactured product (the tire itself) are not affected by the waiver. A tire, or any other manufactured product is "produced in the United States" if all of the manufacturing processes for the tire take place in the United States. A tire manufactured in Canada cannot meet this statutory requirement. The granting of a non-availability waiver to Firestone for some of the components of its tire does not relieve Firestone of the obligation to manufacture its tires in the United States.

Except for specific cases in which UMTA has granted a "public interest" waiver under section 165(b)(1), the determination set forth on May 20, 1987, concerning the applicability of the "Buy America" requirements to tires applies to any contract or lease for bus tires entered into by an UMTA grantee after May 20, 1987.

Dated: June 19, 1987.

Joseph A. LaSala, Jr.,

Chief Counsel.

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