Buy America Requirements -- Amendments (August 1988)


Printer Friendly Number 53 FR 32994
08-29-88

Urban Mass Transportation Administration|
AGENCY: Urban Mass Transportation Administration, DOT.
DEPARTMENT OF TRANSPORTATION
49 CFR Part 661

Buy America Requirements -- Amendments
[Docket No. 88-G]
RIN 2132-AA15
53 FR 32994
August 29, 1988

ACTION: Notice of proposed rulemaking.

SUMMARY: This notice of proposed rulemaking is issued by the Urban Mass Transportation Administration (UMTA) to implement section337 of the Surface Transportation And Uniform Relocation Assistance Act of 1987. Section337 amends UMTA's "Buy America" domestic preference provision (section165 of the Surface Transportation Assistance Act of 1982). The purpose of this document is to seek comments on the amendments to the existing "Buy America" regulation that UMTA is proposing to implement these statutory changes, and on other amendments that UMTA is proposing based on experience in implementing the existing regulation.

DATE: Comments should be received by October 28, 1988.

ADDRESS: Comments should be addressed to: Department of Transportation, Urban Mass Transportation Administration, Office of the Chief Counsel, Docket No. 88-G, 400 Seventh Street SW., Room 9316, Washington, DC 20590. Comments will be available for review by the public at this address from 9:00 a.m. through 5:00 p.m., Monday through Friday.

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

TEXT: SUPPLEMENTARY INFORMATION:

I. Discussion

A. Background

The Surface Transportation Assistance Act of 1978 included a Buy America provision applicable to the UMTA program. That provision was not an absolute prohibition against the procurement of foreign products, rather it established a preference for products mined, produced or manufactured in the United States, and applied to all contracts or UMTA grantees over $500,000.

Section165 of the Surface Transportation Assistance Act of 1982 (section165) made significant changes to the Buy America requirements by eliminating the $500,000 threshold for applicability and setting up essentially two separate programs. One governed the procurement of steel and manufactured products, and the other governed the procurement of rolling stock and certain kinds of enumerated associated equipment such as traction power, train control, and communications equipment.

Section337 of the Surface Transportation and Uniform Relocation Assistance Act of 1987 (STURAA) made further changes to the Buy America requirements by amending section165. The principal change was to require that more than50 percent of the cost of a component's subcomponents (for buses and other rolling stock) be of U.S. origin in order for the component itself to be considered to be of U.S. origin. In addition, the domestic content requirement for buses, rolling stock and associated equipment will be increased from 50 to 55 percent effective October 1, 1989, and to 60 percent effective October 1, 1991, except that any company that has met the existing Buy America requirement would be exempted from these increases for all contracts entered into before April 1, 1992. Finally, the rolling stock price differential waiver was increased from 10 percent to 25 percent.

In addition to proposing to amend the "Buy America" regulation to implement these statutory changes, UMTA is also proposing a number of amendments to the existing regulation which reflect UMTA's experience in enforcing and interpreting the existing regulation since its issuance in1983. Comments are specifically sought on both the proposed amendments implementing the new statutory provisions and on the proposed amendments to the existing regulation.

B. Implementation of Section337 of the STURAA

1. Increase in Domestic Content

As indicated above, section337 provides for a gradual increase of the domestic content requirement for rolling stock and associated equipment. UMTA is proposing to revise § 661.11 to reflect the increase in domestic content. Section337(a)(2)(B) provides that the revised requirements shall not apply to any contract entered into prior to April 1, 1992, with "any supplier or contractor or any successor in interest or assignee which qualified under the provision of section165(b)(3) of the Surface transportation Assistance Act of 1982 prior to [April 2, 1987]." UMTA specifically seeks comments on how it should define a "successor in interest or assignee" and how it should determine whether a supplier or contractor qualified under the provision of section165(b)(3). It is UMTA's position that a company which complied with the domestic content requirements of section165(b)(3) by supplying rolling stock or equipment to an entity that utilized UMTA funding for the procurement would be considered a "grandfathered" company under section337(a)(2)(B). UMTA specifically seeks comments on whether a company which provided rolling stock which complied with the requirements of section401 of the Surface Transportation Assistance Act of 1978 and its implementing regulations at 49 CFR part 660, but which did not provide rolling stock which complied with the requirements in section165(b)(3) or did not provide any rolling stock since the enactment of section165(b)(3) should be treated as a "grandfathered" company under section337(a)(2)(B).

2. Price Differential Waiver

Section317(c) of the STURAA amends section165(b)(4) by eliminating the 10 percent price differential waiver that applied to the procurement of rolling stock and associated equipment and expanding the existing 25 percent price differential waiver that has applied to the procurement of steel and manufactured products to all procurements. Accordingly, UMTA is proposing to amended § 661.7(d) to reflect this statutory change. In addition, UMTA is proposing other changes to § 661.7(d) which are discussed below.

3. Procurement of Rolling Stock

Basic Requirements. Before discussing the implementation of the statutory change set forth in section337(b) which expands the domestic content requirements relative to the procurement of rolling stock and associated equipment to include "subcomponents", it is important to set forth UMTA's position relative to the "manufacture" of components, and the "final assembly" of the "end product".

Prior to the STURAA, section165(b)(3) provided, in essence, that in the procurement of rolling stock, the rolling stock would be considered to be of domestic origin and in compliance with the "Buy America" requirements if "the cost of components (of the rolling stock) which are produced in the United States is more than50 per centum of the cost of all components of the vehicle * * * and final assembly of the vehicle * * * has taken place in the United States."

UMTA's existing regulations define a component as "any article, material, or supply, whether manufactured or unmanufactured, that is directly incorporated into an end product at the final assembly location" (49 CFR 661.11(b)). Final assembly is defined as being "the effort expended at the final assembly point to manufacture the end-product" (49 CFR 661.11(f)).

The key question in determining whether a supplier is complying with the "50 percent component" test is one of determining the identification of the "components." In order to determine if the regulatory definition of "component" has been met, UMTA must first make a determination as to what constitutes the "final assembly location" and then look to what is "directly incorporated into the end-product at the final assembly location" (49 CFR 661.11(b)). The existing regulation does not contemplate a single building or facility being the "final assembly location" or "final assembly point." (see discussion below concerning proposed revision to the existing regulation).

Origin of Components and Subcomponents. As noted above, section337(b) of STURAA expands the domestic content requirements relative to the procurement of rolling stock and associated equipment to include "subcomponents." UMTA's review of the Joint Explanatory Statement of the Committee of Conference which accompanied the enactment of STURAA in House Report 100-27 (the Conference Report) indicates that Congress intended that a "component" is to be considered a "domestic" item if more than50 percent of the "subcomponents" of the component, by cost, are of domestic origin and if the manufacture of the component takes place in the United States. It is UMTA's position that if a "component" meets this test, and is determined to be "domestic", the entire cost of the component is counted as being of U.S. origin in evaluating the cost of the "components" of the "end product." It is UMTA's position that a "subcomponent" is considered "domestic" if it is manufactured in the United States. There is nothing in section337 or in the Conference Report to indicate that Congress intended that UMTA look to the origin of the parts of the "subcomponents." To carry the statutory language to its logical extension, the origin of "sub-sub-components" is immaterial in determining whether a "subcomponent" is manufactured in the United States.

The Conference Report indicates that "[b]y including the terms subcomponents, the conferees intend that major components, systems, or assemblies of buses and rail rolling stock be counted towards meeting the Buy America domestic content standard if the components, systems, or assemblies themselves would meet the domestic content requirement." The Conference Report also includes language that provides that "[i]n the case of both rail cars and buses, the conferees intend to cover only subcomponents that are one step removed from the major components, systems or assemblies, such as those listed [elsewhere in the Statement], and which are clearly recognized as primary subcomponents in the industry." UMTA specifically seeks comments of whether the regulation should provide that the origin of "sub-sub-components" should be examined in calculating domestic content.

The Conference report states that "[m]ajor components, systems, or assemblies of buses include, but are not limited to, items such as engines, transmissions, front axle assemblies, rear axle assemblies, drive shaft assemblies, front suspension assemblies, rear suspension assemblies, air compressor and pneumatic systems, generator/alternator and electrical systems, steering system assemblies, front and rear air brake assemblies, air conditioning compressor assemblies, air conditioninig evaporator/condenser assemblies, heating systems, passenger seats, driver's seat assemblies, window assemblies, entrance and exit door assemblies, door control systems, destination sign assemblies, interior lighting assemblies, front and rear end cap assemblies, front and rear bumper assemblies, specialty steel (structural steel tubing, etc.), aluminum extrusions, aluminum, steel or fiberglass exterior panels, and interior trim, flooring, and floor coverings."

The Conference Report also states that "[m]ajor components, systems, or assemblies of rail rolling stock include, but are not limited to, items such as car shells, main transformer, pantographs, traction motors, propulsion gear boxes, interior linings, acceleration and braking resistors, propulsion controls, low voltage auxiliary power supplies, air conditioning equipment, air brake compressors, brake controls, foundation brake equipment, aritculation assemblies, train control systems, window assemblies, communication equipment, lighting, seating, doors, door actuators and controls, couplers and draft gear, trucks, journal bearings, axles, diagnostic equipment, and third rail pick-up equipment."

In drafting the proposed regulation, UMTA has developed very general language concerning identification of subcomponents. This language follows on UMTA's previous general language concerning the definition of components, and reflects the Conference Report language cited above that the conferees only intend to cover subcomponents that are one step removed from the major components. UMTA specifically seeks comments on its proposed requirements concerning subcomponents, and on whether the listings from the Conference Report quoted above should be included, in toto, in the regulation. In addition, UMTA specifically seeks comments on whether the domestic content requirements should only be applied to major components as contained in the two quoted lists, or should continue to be applied to all components of end products as currently required in the regulation.

Export of Domestic Subcomponents. There are a number of issues that have been raised with UMTA relative to the treatment of exported domestic "subcomponents" and none of these issues are specifically addressed in section337(b) nor by UMTA's general position discussed in the preceding paragraph.

Section337(b) does not specifically address the treatment of "subcomponents" which are of U.S. origin, exported and manufactured into a component. However, the Conference Report indicates that "[t]he conferees * * * intend that American subcomponents incorporated into foreign components should be counted towards meeting the domestic content requirement." Therefore, UMTA is faced with determining how to account for the cost or value of a subcomponent manufactured in the United States which is incorporated into a component outside the United States.

UMTA is proposing to permit U.S. origin subcomponents that receive tariff exemptions to retain their domestic identity for purposes of determining origin if they met an existing United States Customs Service procedure. This procedure implements a legislative exemption from customs duties for those items produced in the United States which are: (1) Exported in condition ready for assembly without further fabrication; (2) have not lost their physical identity by change in form, shape, or otherwise; and (3) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process such as cleaning, lubricating, and painting.

This proposal is a dramatic change from UMTA's existing procedures in that previously any U.S. content of a foreign component would not have been included in any calculation of domestic content requirements. It is important to note that this proposal would only have an impact on end products that receive final assembly in the United States. End products which do not receive final assembly in the United States are not domestic for purposes of the Buy America requirements, and the origin of their components and subcomponents is actually immaterial.

When UMTA issued regulations to implement section165 of the STAA (48 FR 41564, September 15, 1983), it proposed the same procedure discussed above. Although UMTA did not implement this proposal as a final rule, it is again proposing to do so in connection with the implementation of section337.

The duty imposed on such manufactured articles is computed by subtracting the cost or value of the United States products from the duty that is applicable to the full value of the imported articles. The Customs Service regulations implementing this procedure are set out at 19 CFR 10.11 through 10.24. An importer who desires to take advantage of this exception files documentation identifying the United States components in the assembled product. Thus, in incorporating this procedure, UMTA will not be imposing any additional paperwork requirements on suppliers.

Under this proposal, United States subcomponents that receive tariff exemptions would retain their domestic identity for purposes of determining the domestic content of both components and end products. The cost of subcomponents that receive tariff exemption would be included in the computation of domestic content regardless of whether the component itself would be considered domestic. For example, if a subcomponent that receives tariff exemption is 20% of the value of the entire component and the remaining 80% of the value of the entire component is of foreign origin, this 20% can be included in calculating the domestic content of the end product while the 80% foreign content would continue to be considered foreign content for the overall end product.

It is UMTA's position that materials produced in the United States cannot be counted a U.S. content if they have lost their physical identity during a manufacturing process which takes place outside of the United States. It is also UMTA's position that such materials are not "subcomponents" for purposes of applying the "Buy America" requirements. This case can be distinguished from the discussion of the "subcomponents" above wherein those "subcomponents" do not undergo further machining after they are exported, but are merely subject to the assembly process necessary to "manufacture" the component. Similarly, it is UMTA's position that raw material, such as aluminum or steel, that is produced in the United States and then exported for incorporation into a component cannot be counted as U.S. content.

Components With Less Than Fifty Percent U.S. Content. UMTA is also proposing to amend the regulations to provide that if a component which is manufactured in the United States contains less than50 percent domestic subcomponents, by cost, the cost of the domestic subcomponents plus the cost of manufacturing the component in the United States may be included in the calculation of the domestic content of the end product.

C. Proposed Revisions to Existing Regulation

1. General

The authority citation for Part 661 is being revised to include the Surface Transportation and Uniform Relocation Assistance Act of 1987.

Section661.1 of the existing regulations is proposed to be amended to simplify the explanation of the applicability of the regulations set forth in Part 661. Specifically the reference to programs administered by the Federal Highway Administration is being deleted because the program is now administered by UMTA; and paragraphs (b) and (c) of the existing regulations are being deleted because they were transition provisions for the implementation of section165 of the STAA which are no longer necessary.

The definition of "overall project contract" is being deleted because UMTA has found the concept to be confusing to grantees. References to the term "overall project contract" in the text of the regulation have all been changed to spell out the actual contractual relationship being referred to.

2. Manufactured Products

Section165(a) provides, in essence, that no Federal funds may be used in a procurement unless all manufactured products purchased through that procurement are of United States origin. The existing regulations, at § 661.3(d), define a "manufactured product" as a "product produced as a result of [a] manufacturing process." "Manufacturing process" is defined at § 661.3(e) as "a process whereby an original material is changed or transformed into an article which, because of the process, is different from the original product." It is UMTA's position that in order for a "manufactured product" to comply with the "Buy America" requirements, the product must be produced in the United States from original items or material originating in the United States. In other words, an item is "produced in the United States" if all of the manufacturing processes for the item take place in the United States, and the "components" of that item are all of U.S. origin. The existing regulations do not set forth any specific requirements concerning "manufactured products." Accordingly, UMTA is proposing to amend § 661.5 to reflect its position concerning what is required in order for a "manufactured product" to be considered of U.S. origin. The existing definitions of "manufactured product" and "manufacturing process" will remain.

3. Waivers to Statutory Requirements

Section661.7 of the existing regulation provides procedures for obtaining exceptions to the general requirements set forth in section165(a) of the STAA. The words "exception" and "waiver" have the same meaning for the purposes of this section, and UMTA is revising the regulation to use the term "waiver" throughout in order to avoid confusion.

Non-Availability Waiver. The existing regulations concerning the non-availability waiver under section165(b)(2) of the STAA is written in terms of a bid or bids actually being received by a grantee. It is also possible that the grounds for a non-availability waiver can exist if there is a sole source procurement. UMTA is proposing to revise § 661.7(c) to reflect that a non-availability waiver can be granted in the case of a sole source procurement if the grantee provides UMTA with sufficient information to show that the grounds for the waiver exist. In this regard, UMTA has determined that the procurement of an item from an original supplier is not, in and of itself, sufficient grounds to grant a non-availability waiver. UMTA has encouraged grantees to enter into free and open competition to obtain such items. UMTA has been requested to grant a number of such waivers in the case of the procurement of replacement parts for rolling stock within the original part was a component of foreign origin supplied by the original vehicle manufacturer.

Price Differential Waiver. UMTA has received a number of questions concerning the mechanics of applying the provisions of section165(b)(4) to a bid when multiple items are being procured under one contract. Section165(b)(4), as amended, provides that a waiver can be granted if "inclusion of domestic material will increase the cost of the overall project contract by more than25 percent." The existing regulation, both in § 661.7 and in the definitions in § 661.3., utilize the term "overall project contract."

It is UMTA's position that the price differential must be applied independently to each individual item even if there is a single contract for all of these items. The bid for each non-domestic item must be adjusted by the differential and then the adjusted bid price for the foreign item compared to the lowest responsive and responsible bid for a domestic item to determine if the grounds for a waiver exist. Accordingly, UMTA is proposing to amend § 661.7(d) to reflect this position, and to clarify that the price differential is not be applied to the overall contract between the grantee and its supplier but to the comparative costs of each individual item being supplied.

UMTA believes that such a position is consistent with the statutory terms because the inclusion of domestic material in the overall project contract is still considered before a waiver is granted. The proposed amendment to the regulations will only directly affect the determination of adjusted bid price in the case of a single contract for multiple items, whereas a single contract for a single item will not be affected by the proposed amendment. UMTA seeks comments on this proposed amendment.

Waivers for Components. Section661.7(f) of the existing regulations provides that a public interest or a non-availability waiver can be granted for a "component" as that term is defined in § 661.11, and that if such a waiver is granted, the "component" is treated as domestic for the purposes of calculating domestic content. UMTA also has determined on a number of occasions that it is appropriate to grant a non-availability waiver to an item or material included in a manufactured product. Accordingly, UMTA is proposing to add a new paragraph (g) to § 661.7 to reflect that such a waiver can be granted.

General Waivers. Appendix A to § 661.7 sets forth General Exceptions that have been granted by UMTA. UMTA has granted a number of such General Exceptions, and the Appendix is being revised to reflect these exceptions.

UMTA specifically seeks comments on whether it should grant any General Exception waivers in addition to those listed in Appendix A to § 661.7. In addition to those exceptions listed, UMTA has, for example, received a request for a general exception for a waiver to permit the procurement of audio visual equipment that does not meet the requirements of section165(a). UMTA recognizes that there are a significant number of manufactured products procured by its grantees which do not comply with the strict domestic content requirements of section165(a). Grantees are able to obtain individual "non-availability" waivers under section165(b)(2), but the process for obtaining such waivers may be administratively burdensome especially when it is recognized that no product of the type being procured is produced or available in the United States that meets the strict requirements of section165(a).

Application for Waivers. Although, § 661.9(c) provides that only a grantee may request a waiver from UMTA, in a very limited number of cases, UMTA has granted waivers to potential bidders, especially waivers applicable to a single "component" of rolling stock or to a single item or material of a manufactured product. Accordingly, UMTA is proposing to revise § 661.9(c) to reflect its current policy in this regard.

4. Manufacturing of Components

UMTA has been faced with a number of questions concerning what constitutes the "manufacture" of a component. For example if a bus manufacturer buys engines, transmissions, and drive units from various sources that deliver these items to the bus manufacturer's plant, the question is whether the manufacture of a power unit at such plant can be considered the domestic manufacture of the power unit as a component or whether such activity is actually part of the final assembly of the bus, which is also taking place at the same plant.

In this scenario, the principal question that must be addressed is whether the "manufacturing" of the power unit is an activity separate and apart from the "final assembly" of the bus.

It has been UMTA's position that the manufacturing of a component in an off-line fabrication area located in or at the same facility wherein final assembly takes place is not sufficient, in and of itself, to mean that such activity is component manufacture as opposed to part of final assembly. UMTA's current regulations do not define final assembly in terms of an assembly line but rather in terms of a point where final assembly is taking place. UMTA is proposing to clarify the existing regulations in this regard.

In the scenario set out above, it is possible that UMTA would conclude that a final assembly point could include a fabrication area not included within the final assembly process where the "manufacture" of a component appears to be taking place. The regulations define a "component" as that which is "directly incorporated into the end-product at the final assembly location." Thus, depending on the actual activities taking place, one would have to determine whether the power unit is "directly incorporated" into the bus or whether the engine, transmission and drive units are "directly incorporated" into the bus. If the power unit is "directly incorporated" into the bus, the power unit is considered to be a component. If the engine, transmission and drive units are "directly incorporated" into the bus, each of these items would be considered to be a component.

In the case of components, the key issue is whether the supplier is actually "manufacturing" the component rather than merely assembling the component. Where the manufacturing of the component takes place and the cost of the actual manufacturing are not the critical questions -- the critical question is whether or not the activities which take place are sufficient to constitute the actual manufacture of the component in question. If a component is manufactured at the same site as the final assembly of the end product, there is no reason why this component cannot be considered to be a domestic component. The labor cost devoted to the manufacture of a component should be included in the calculation of the domestic content of that component even if it occurs at the plant in which final assembly occurs. Therefore, UMTA is proposing to amend § 661.11 to provide that a component can be manufactured at the final assembly point.

It is extremely difficult to define the level of effort need to qualify activities as the manufacture of a component. At a minimum, it is UMTA's position that there must be more than mere assembly of subcomponents to form a component. There must be sufficient activities to advance the value or improve the condition of subcomponents. UMTA is proposing general requirements to reflect this position, but specifically seeks comments to assist it in providing an adequate definition of manufacturing as it applies to components.

5. Final Assembly Requirements

The existing regulations (49 CFR 661.11(f)) define final assembly as "the effort expended at the final assembly point to manufacture the end-product." The regulations further provide, at 49 CFR 661.11(g), that "[t]he final assembly requirement will be presumed to have been met if the cost of final assembly is at least 10 percent of the overall project contract cost." UMTA does not require that final assembly cost be 10 percent of the overall project contract cost, but has presumed that if a supplier's costs for final assembly are 10 percent of the overall project contract cost, it is performing sufficient work to constitute legitimate final assembly. If a supplier's costs for final assembly do not meet the 10 percent presumption, UMTA has taken the position that the final assembly activities must be examined on a case-by-case basis to determine if sufficient activities are being performed to constitute "final assembly." The key issue is whether a supplier is performing adequate work to constitute legitimate "final assembly". UMTA has found that in a majority of cases, the final assembly does not meet the 10 percent presumption, but that adequate final assembly is taking place. Accordingly, UMTA is proposing to delete existing § 661.11(g) that provides that the final assembly requirement will be presumed to have been met if the cost of such assembly is at least 10 percent of the overall project cost.

6. Train Control, Communications, and Traction Power Equipment

The listing for train control equipment, communications equipment and traction power equipment (§ 661.11 (h), (i), and (j)) are not all inclusive lists of equipment included in each category. UMTA is proposing to add items to two of the lists in response to inquiries that have arisen since the regulation was issued. In addition, UMTA seeks comments and suggestions on items that should be added to the lists and specifically seeks comments on whether pantographs should be included as traction power equipment.

7. Certifications

UMTA has been faced with a number of questions relative to whether a bidder is bound by its original certification even if it later indicates that it erred in signing the original certification. The proper operation of the regulation set forth in Part 661 requires that it be absolutely clear, at the time of bid opening, whether a bidder will comply with the applicable "Buy America" requirements. A bidder who certifies that it will meet the "Buy America" requirements is on notice that it cannot receive a waiver if it becomes apparent after bid opening that the grounds for a waiver exist. Conversely, a bidder who certifies that it cannot meet the applicable "Buy America" requirements is on notice that it cannot be awarded a contract unless the grounds for a waiver exist, and such bidder cannot, after bid opening, change its certification to one of compliance with the applicable requirements.

Regardless of the certification submitted, each and every bidder is bound by its original certification. No bidder is given the opportunity to later indicate that it will or will not comply with the applicable "Buy America" requirements after bid opening when it is determined that the grounds for a waiver are not present, or that such grounds may be available to the bidder. To allow such a bidder to modify its certification, would give the bidder the best of both worlds -- it could bid and then decide, based on the competing bids, whether it will supply a foreign or domestic "end product". The intent of the bidder must be based on the certification alone -- if a bidder mistakenly executes the wrong certification, it is bound by that certification.

Therefore, UMTA is proposing to amend § 661.13 to clearly provide that a bidder is bound by its original certification and cannot be permitted to change its certification after bid opening.

8. Investigations

UMTA has conducted a number of investigations under § 661.15 and proposes to make a number of changes to this section to reflect its experience in those investigations. First, it is proposed that § 661.15(b) be revised to provide that UMTA can initiate a Buy America investigation on its own. Although the existing regulation provides that any party may petition UMTA to conduct an investigation, UMTA has the inherent authority, under the statute, to ensure that the requirements are being met, and can thus initiate an investigation on its own without a request from an interested party. Second, it is proposed that § 661.15(d) be revised to reflect that an investigated party can correspond directly to UMTA rather than through the grantee. However, such action can only be taken with the concurrence of the grantee. In a number of instances, grantees have requested that this process be followed in order to expedite the investigation. Third, UMTA is proposing to amend § 661.15(h) to more clearly reflect what is meant by confidential information. A number of parties have requested that information be treated as confidential, and UMTA has been faced with making a determination of whether all such information is actually confidential. The proposed definition will clarify this matter, and place the burden on the party claiming confidentiality to prove that the information falls under the proposed definition. Fourth, a new paragraph is proposed to reflect that UMTA, when appropriate, will conduct site visits during the course investigation. UMTA has been conducting such site visits, and the regulation is proposed to be amended to reflect current practice.

9. Suspension and Debarment

Section661.19 is being up-dated to reflect that the Department of Transportation's suspension and debarment regulations have been issued as a final rule.

10. Pre-Award and Post-Delivery Audits

Section319 of the STURAA requires UMTA to issue regulations requiring pre-award and post-delivery audits of rolling stock purchases made with funds available under the Urban Mass Transportation Act of 1964, as amended. One of the items that is to be addressed under such audits is compliance with the applicable Buy America requirements. UMTA will issue a separate notice of proposed rulemaking seeking comments on UMTA's proposed implementation of this statutory requirement.

D. Request for Comments

Above, UMTA has asked for comments on several particular matters. UMTA also requests comments on any of the amendments proposed today. In addition to those matters, UMTA specifically requests comments and data in response to the following questions:

  1. What, if any, will be the economic impact resulting from the elimination of the ten percent price differential waiver previously applicable to the acquisition of rolling stock and associated equipment?
  2. What will be the economic impact resulting from the increase of the domestic content requirement from fifty percent to fifty-five percent and eventually to sixty percent? Specifically, UMTA is interested in receiving comments and data from manufacturers who currently meet the fifty percent requirement as to the steps that will be necessary for them to meet the increased domestic content requirements, and the economic impacts of these steps. UMTA is also specifically interested in receiving comments on whether any manufacturers will drop out of the domestic market as a result of the increased domestic content requirements.
  3. What will be the economic impact resulting from the requirement that more than fifty percent of the cost of a component's subcomponents be of U.S. origin in order for the component itself to be considered to be of U.S. origin? Specifically, UMTA is interested in receiving comments and data from manufacturers as to the steps that will be necessary for them to meet this requirement, and the economic impacts of these steps. UMTA is also specifically interested in receiving comments on whether any manufacturers will drop out of the domestic market as a result of the expansion of domestic content requirements to subcomponents.

Commentors wishing acknowledgement of their comments should include a self-addressed, stamped postcard with their comments. The Docket Clerk will stamp the card with date and time the comments are received and return the card to the commentor.

II. Regulatory Impacts

A. Executive Order 12291

This action has been reviewed under Executive Order 12291. UMTA believes that the rule will not result in an annual effect on the economy of $100 million or more, and is therefore not a major rule under Executive Order 12291. However, in this NPRM, UMTA specifically asks for data on the economic impact of this proposed rule. The final Regulatory Evaluation will reflect any data brought to UMTA's attention through the docket.

B. Departmental Significance

This proposed regulation would be a "significant" rule, as defined by the Department's Regulatory Policies and Procedures on Improving Governmental Regulations, because it involves important departmental policy and will generate substantial public interest. UMTA has prepared a preliminary Regulatory Evaluation in support of this rulemaking which is on file as part of the docket to this rulemaking.

C. Regulatory Flexibility Act

In accordance with 5 U.S.C. 605(b), as added by the Regulatory Flexibility Act, Pub. L. 96-354, UMTA certifies that this rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Act.

D. Paperwork Reduction Act

Collection of information under the Buy America regulations in Part 661 has been approved by the Office of Management and Budget (Approval Number 2132-0544). This approval expires on September 30, 1989. UMTA does not anticipate any additional collection of information required by the regulations proposed in this document that is subject to the Paperwork Reduction Act, Pub. L. 96-511, 44 U.S.C. Chapter 35. However, if the rule does result in an increased paperwork burden, that increase will be calculated when the collection of information is submitted for renewal to the Office of Management and Budget prior to the expiration date.

E. Federalism

This proposed regulation has been reviewed under Executive Order 12612 on Federalism and UMTA has determined that this action does not have implications for principles of federalism that warrant the preparation of a Federalism Assessment. If promulgated, this rule will not limit the policy making and administrative discretion of the States, nor will it impose additional costs or burdens on the States, nor will it affect the States' abilities to discharge traditional State governmental functions or otherwise affect any aspect of State sovereignty.

List of Subjects in49 CFR Part 661

Buy America, Domestic preference requirement, Government contracts, Grant programs -- Transportation, Mass transportation.

III. Proposed Amendment to 49 CFR Part 661

Accordingly, for the reasons described in the preamble, it is proposed that Part 661 of Title 49 of the Code of Federal Regulations be amended as follows:

PART 661 -- [AMENDED]

  1. By reviewing the authority citation for Part 661 to read as follows:

    Authority: Sec. 165, Pub. L. 97-424, as amended by sec. 337, Pub. L. 100-17; 49 CFR 1.51.

  2. By revising § 661.1 to read as follows:
    • § 661.1 Applicability.
      • Except as otherwise provided in this section, this part applies to all federally assisted procurements utilizing funds authorized by the Urban Mass Transportation Act of 1964, as amended; 23 U.S.C. 103(e)(4); and section14 of the National Capital Transportation Act of 1969, as amended, and which are obligated by the Urban Mass Transportation Administration after January 6, 1983.
    • § 661.3 [A 5mended 0]
  3. By removing § 661.3(f).
  4. By adding a new § 661.5(d) to read as follows:
    • § 661.5 General 5r 0equirements.
      • * * * * *
      • (d) In order for a manufactured product to be considered to be produced in the United States:
        • (1) All of the manufacturing processes for the product must take place in the United States; and
        • (2) All items or material used in the product must be of United States origin.
  5. By revising the text in § 661.7 and adding paragraph (b), (c), and (d) to the Appendix to read as follows:
    • § 661.7 Waivers.
      • (a) Section165(b) of the Act provides that the general requirements of section165(a) shall not apply in four specific instances. This section sets out the conditions for three of the four statutory waivers based on public interest, non-availability, and price-differential. Section661.11 sets out the conditions for the fourth statutory waiver governing the procurement of rolling stock and associated equipment.
      • (b) Under the provision of section165(b)(1) of the Act, the Administrator may waive the general requirements of section165(a) if the Administrator finds that their application would be inconsistent with the public interest. In determining whether the conditions exist to grant this public interest waiver, the Administrator will consider all appropriate factors on a case-by-case basis, unless a general exception is specifically set out in this part.
      • (c) Under the provision of section165(b)(2) of the Act, the Administrator may waive the general requirements of section165(a) if the Administrator finds that the materials for which a waiver is requested are not produced in the United States in sufficient and reasonably available quantities and of a satisfacory quality. It will be presumed that the conditions exist to grant this non-availability waiver if no responsive and responsible bid is received offering an item produced in the United States. In the case of a sole source procurement, the Administrator will grant this non-availability waiver only if the grantee provides sufficient information which indicates that the item to be procured is only available from a single source or that the item to be procured is not produced in sufficient and reasonably available quantities of a satisfactory quality in the United States.
      • (d) Under the provision of section165(b)(4) of the Act, the Administrator may waive the general requirements of section165(a) if the Administrator finds that the inclusion of a domestic item or domestic material will increase the cost of the contract between the grantee and its supplier of that item or material by more than25 percent. The Administrator will grant this price-differential waiver if the amount of the lowest responsive and responsible bid offering the item or material that is not produced in the United States multiplied by 1.25 is less than the amount of the lowest responsive and responsible bid offering the item or material produced in the United States.
      • (e) The four statutory waivers of section165(b) of the Act as set out in this part shall be treated as being separate and distinct from each other.
      • (f) The waivers described in paragraphs (b) and (c) of this section may be granted for a component or subcomponent in the case of the procurement of the items governed by section165(b)(3) of the Act. If a waiver is granted for a component or a subcomponent, that component or subcomponent shall be considered to be of domestic origin for the purposes of § 661.11.
      • (g) The waivers described in paragraphs (b) and (c) of this section may be granted to a specific item or material that is used in the production of a manufactured product that is governed by the requirements of § 661.5(d). If such a waiver is granted to such a specific item or material, that item or material shall be treated as being of domestic origin.

 

Appendix A -- General Exceptions

Dated: August 23, 1988.

Alfred A. DelliBovi,

Administrator.


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