Determination Concerning Request for Public Interest Waiver of Buy America Requirements


Printer Friendly Number 53 FR 22418
06-15-88

DEPARTMENT OF TRANSPORTATION
Urban Mass Transportation Administration
AGENCY: Urban Mass Transportation Administration, DOT.
[Docket No. 88-A]
53 FR 22418
June 15, 1988

Determination Concerning Request for Public Interest Waiver of Buy America Requirements

ACTION: Notice -- denial of waiver.

SUMMARY: The Urban Mass Transportation Administration (UMTA) sought comments on whether a public interest waiver to the "Buy America" requirements should be granted to permit the procurement of bus tires produced at several locations in Europe by Michelin Tire Corporation in order to allow increased competition in the bus tire supply industry. This notice announced UMTA's decision concerning the waiver request.

FOR FURTHER INFORMATION CONTACT: Edward J. Gill, Jr., Office of the Chief Counsel, Room 9316, 400 Seventh Street, SW., Washington, DC. 20590, (202) 366-4063.

TEXT: SUPPLEMENTARY INFORMATION: Section 165(a) of the Surface Transportation Assistance Act of 1982 (STAA) provides that Federal funds may not be obligated for the purchase of manufactured products unless such products are produced in the United States. Section 165(b)(1) of the STAA provides that the general requirements of section 165(a) may be waived in their application would be inconsistent with the public interest. The implementing regulations at 49 CFR 661.7(b) provide that "[i]n determining whether th[e] exception will be granted, [UMTA] will consider all appropriate factors on a case by case basis."

In the preamble to the "Buy America" regulations published in the Federal Register on September 15, 1983 (48 FR 41462), UMTA indicated that in certain circumstances in which a public interest waiver is sought under section 165(b)(1), the proposed waiver would be published in the Federal Register for comment. Such a procedure is not mandatory before a public interest waiver is granted, but UMTA uses the procedure where the public interest waiver involves important policy considerations or is controversial. It is UMTA's position that these circumstances existed in this case.

On April 13, 1988, the Urban Mass Transportation Administration (UMTA) published a notice in the Federal Register (53 FR 12223) seeking comments on whether a public interest waiver to the "Buy America" requirements should be granted to permit the procurement of bus tires produced at several locations in Europe by Michelin Tire Corporation in order to allow increased competition in the bus tire supply industry. The comment period closed on May 13, 1988.

Michelin argues that if the "Buy America" requirements are applied to its bus tires manufactured in various locations in Europe, Michelin is effectively excluded from the U.S. marketplace. Michelin argues that granting a waiver to permit the procurement of Michelin tires produced in Europe would foster competition in the marketplace, and increase the possibility of reduced prices for tires to the recipients of Federal grant funds. In addition, Michelin argues that such a waiver would allow UMTA grant recipients to take advantage of technological advances in the bus tire industry by giving them the opportunity to acquire radial tires as well as the traditional bias-ply tires manufactured in the United States by other companies.

Before determining whether a "public interest" waiver under section 165(b)(1) should be issued, UMTA sought public comment from all interested parties. A total of 26 comments were received from transit authorities or operators of public mass transportation systems, private citizens, unions, members of Congress, and bus manufacturers. Extensive comments were submitted by counsel representing Michelin and representing Firestone and Goodyear, the two principal domestic suppliers of tires for buses.

The private citizen and the union opposed the waiver on grounds that Federal funds should not be made available to foreign manufacturers if domestic manufacturers are present. Of the transit authorities which commented, all but one supported the waiver although a number of the larger transit authorities do not use radial tires on their buses. The two bus manufacturers supported the waiver based on potential technological advances in bus manufacturing which could possibly utilize radial tires. Firestone and Goodyear strongly opposed the waiver.

The thrust of the Firestone/Goodyear objections are as follows:

There is sufficient competition in the marketplace presently, thus there is no need to waive the Buy America requirements in order to provide competition. In this regard, Firestone and Goodyear argue that Michelin could choose to manufacture the radial bus tire at one of its facilities in the U.S thereby increasing competiton without waiving an important Federal statute.

There is no need for a general waiver since the vast majority of transit authorities use bias-ply rather than radial tires. If a transit authority wanted to use a radial tire produced by Michelin in Europe, case-by-case waivers are available under the "Buy America" requirements.

UMTA Analysis

It appears, after reviewing all of the comments received with special emphasis on those received from counsel for the three tire manufacturers, that UMTA is faced with being asked to grant a waiver of a statutory requirement for what is, in essence, a strict commercial argument as to which technology is best for the standard urban transit vehicle. Firestone and Goodyear argue that bias-ply tires are better, while Michelin obviously argues that radial tires are better.

UMTA's overriding concern in this matter is that the granting of a general public interest waiver to allow the use of a foreign product in competition with domestic products would send the wrong message concerning UMTA's enforcement and implementation of the "Buy America" requirements. The intent of the Buy America provision is to foster and encourage production of materials in the United States for use in federally funded mass transit project. The granting of a general waiver to allow a foreign produced item to have equal competitive status with domestically produced items is contrary to the clear intent of the statutory provision.

Michelin has indicated that it would utilize the waiver to determine if a market for its bus tire exists in the United States. Once a determination concerning this market is made by Michelin, Michelin has stated that it would consider establishing a production line for radial bus tires in the United States.

It is UMTA's position that Congress intended that the public interest waiver provision of the Surface Transportation Assistance Act of 1982 be utilized in extremely limited situations. It is UMTA's position that such a waiver was not intended to be used to allow a product manufactured outside of the United States to be market-tested in the United States while the manufacturer of such product made a marketing determination concerning whether it was economically feasible to initiate full-scale production of such product in the United States. Therefore, UMTA is hereby denying Michelin's request for a general public interest waiver to permit the procurement of its radial bus tires produced in various locations in Europe.

UMTA's action in denying this waiver request does not preclude Michelin tires from being considered for any waiver on a case-by-case, individual procurement basis; nor does this action indicate any position of UMTA relative to the merits of a radial bus tire as opposed to a bias-ply bus tire.

Dated: June 10, 1988.

Edward J. Babbitt,

Chief Counsel.

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