Buy America Requirements
Number 56 FR 926 01-09-91
DEPARTMENT OF TRANSPORTATION
Urban Mass Transportation Administration
AGENCY: Urban Mass Transportation Administration, DOT.
49 CFR Part 661
Buy America Requirements
[Docket No. 88-G]
56 FR 926
January 9, 1991
ACTION: Final rule.
SUMMARY: This final rule implements section 337 of the Surface Transportation and Uniform Relocation Assistance Act of 1987 (the STURAA) (Pub. L. No. 100-17), which amended the Urban Mass Transportation Administration's (UMTA) Buy America requirements. In this final rule, UMTA implements the statutory changes and makes other amendments based on UMTA's experience in enforcing and implementing the existing regulation. Certain changes are required by law, while others are being made to increase the usability of the regulation.
EFFECTIVE DATE: February 8, 1991.
FOR FURTHER INFORMATION CONTACT: Rita Daguillard, Attorney-Advisor, Office of the Chief Counsel, room 9316, 400 Seventh Street, SW., Washington, DC 20590, (202) 366-1936.
TEXT: SUPPLEMENTARY INFORMATION:
I. Statutory Background
The Surface Transportation Assistance Act of 1978 (the 1978 STAA) (Pub. L. No. 95-599) included a Buy America provision applicable for the first time to the UMTA program. The provision was not an absolute prohibition against the procurement of foreign products, but established a preference for products mined, produced or manufactured in the United States. This initial provision only applied to contracts of UMTA grantees over $500,000.
Section 165 of the Surface Transportation Assistance Act of 1982 (1982 STAA) (Pub. L. No. 97-424) made significant changes to the Buy America requirements by eliminating the $500,000 applicability threshold. It also provided that no Federal funds could be obligated for mass transportation projects unless steel, cement, and manufactured products used in these projects are produced in the United States, with four exceptions. Section 10 of Public Law 96-229, enacted on March 9, 1984, amended section 165(a) of the STAA by striking "cement" from the materials and products covered under section 165.
The first exception allowed a waiver if the materials and products being procured are in the public interest. The second exception provided that the requirement would not apply if materials and products being procured are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality. The third exception provided that the requirement would not apply if the inclusion of domestic material will increase the cost of the overall project contract by more than 10 percent in the case of projects for the acquisition of buses and other rolling stock or 25 percent in the case of other projects.
The fourth exception, in essence, established an entire second program with its own requirements. This exception provided that the Buy America provisions would not apply to the procurement of buses and other rolling stock (including train control, communications, and traction power equipment) if the cost of components produced in the United States was more than 50 percent of the cost of all components of the vehicles or equipment, and if final assembly took place in the United States.
Section 337 of the Surface Transportation and Uniform Relocation Assistance Act of 1987 (the STURAA) (Pub. L. No. 100-17) made further significant changes to UMTA's Buy America requirements for buses and other rolling stock. First, section 337 requires that more than 50 percent of the cost of a component's subcomponents be of U.S. origin for the component itself to be considered of U.S. origin. In addition, the domestic content requirement was increased from 50 to 55 percent on October 1, 1989, and to 60 percent on October 1, 1991. (However, any company that has met the existing Buy America requirement as of April 2, 1987, 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.
Today's final rule incorporates the most recent changes mandated by the STURAA into the Buy America requirements.
II. The Notice of Proposed Rulemaking
On August 29, 1988, UMTA issued a notice of proposed rulemaking (NPRM) seeking comments on the proposed amendments. The NPRM reflected both the statutory changes and UMTA's experience in enforcing and implementing the existing regulation (See 53 FR 32994).
In the preamble to the NPRM, UMTA discussed at length the statutory changes and the proposed revisions to the existing regulation, and invited the public to submit comments and data on specific issues. The initial 60-day comment period ended on October 28, 1988, but was extended until November 14, 1988, in response to requests from the public.
Thirty-three (33) commenters submitted their views to the NPRM docket. The breakdown among commenter categories is as follows:
12 Manufacturers of rolling stock and related equipment.
6 UMTA recipients.
5 State Departments of Transportation.
4 Trade Associations.
2 Foreign Governments.
2 Engineering Firms.
III. Specific Comments and UMTA's Response
This section discusses the comments on the NPRM, and UMTA's specific response to them.
A. Procurement of Manufactured Products (§ 661.3(d).)
A number of commenters addressed the proposed requirements for the procurement of manufactured products. Some commenters supported UMTA's proposed revisions to the requirements concerning manufactured products, while others opposed the proposal.
The procurement of manufactured products is governed by section 165(a) of the 1982 STAA. The implementing UMTA regulation (§ 661.3(d)) defines a manufactured product as a "product produced as a result of [a] manufacturing process." Manufacturing is defined in § 661.3(e) of the regulation as the application of processes to alter the form or function of materials or of elements of the product adding value and transforming those materials or elements so that they represent a new product functionally different from that which would result from mere assembly of the materials or elements.
As indicated in the NPRM, compliance with the Buy America provisions requires that a manufactured product be produced in the United States from original items or material originating in the United States. In other words, an item is considered to be 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 of U.S. origin. UMTA proposed amending the regulations to reflect this position.
Commenters opposed to the proposal argued that neither section 165(a) of the 1982 STAA nor UMTA's existing regulations at 49 CFR part 661 require a manufactured product to contain a minimum domestic content. The commenters argue that the statutory requirement would be satisfied as long as an item is produced in the United States by a manufacturing process.
Section 401(a) of the 1978 STAA, UMTA's original Buy America requirement, provided that "Only * * * manufactured articles, materials, and supplies as have been manufactured in the United States substantially all from articles, materials, and supplies mined, produced, or manufactured * * * in the United States" could be used in UMTA-funded contracts. (Emphasis supplied.) Section 165(a) of the 1982 STAA requires that manufactured products used in an UMTA-funded project must be "produced in the United States," without further elaboration.
The legislative history of section 165 does not provide any guidance on why the term "substantially all" was dropped when the Buy America provision was revised. However, UMTA has taken the position since 1982 that the manufactured product requirements of section 165(a) are unambiguous -- all manufacturing processes for the product must take place in the United States and all of the components of the product must be of U.S. origin.
Even if the language of the section was ambiguous, however, other provisions in the 1982 STAA, as well as other Buy America legislation, confirm UMTA's view of the terminology. For example, the Buy America Act of 1933 (41 U.S.C. 10b) contains a "substantially all" provision, which has been administered by the Federal Government as meaning over fifty percent domestic content. Moreover, section 165(b)(3) of the STAA (applicable to procurement of rolling stock and other associated equipment) explicitly provides for a fifty percent domestic content requirement in determining compliance with the statutory requirements. Since rolling stock and associated equipment are an expected category to the general domestic preference requirements, the agency believes that this supports its view that Congress intended manufactured products to be held to a higher standard of domestic content -- 100 percent.
Some commenters also questioned whether section 165(a) requires merely that all of the components of a manufactured product be of U.S. origin, or whether UMTA is required to examine the origin of all of the subcomponents that go into the manufacture of that component.
Again, UMTA looks to the statute for guidance. Section 165(b)(3) of the 1982 STAA, as amended by section 337(b) of the STURAA, imposes domestic preference requirements on the subcomponents of components of rolling stock and associated equipment. No similar statutory changes were made to section 165(a) for manufactured products. Therefore, the agency concluded that a component of a manufactured product is of U.S. origin if it is manufactured in the United States. (As indicated above, the manufactured product must be manufactured in the United States from items all of U.S. origin.) In other words, in determining the origin of a component of a manufactured product governed by section 165(a), UMTA will look only to where that component is manufactured, and will not look to the origin of the various materials included in that product during the manufacturing process.
B. Increase in Price Differential Waiver (§ 661.7(d).)
Two commenters suggested that UMTA not raise the price differential waiver for rolling stock from 10 percent to 25 percent until the agency has a change to analyze more fully the effect of the change on rolling stock procurements. UMTA has no discretion in this matter since the increase in the price differential was mandated by statute, and has thus revised § 661.7(d) of the regulation to reflect this increase.
C. Application of Price Differential Waiver (§ 661.7(d).)
In the NPRM, UMTA indicated 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. UMTA proposed to amend § 661.7(d) to reflect this and to clarify that the price differential is not to be applied to the overall contract between the grantee and its supplier, but to the comparative costs of each individual item being supplied.
UMTA received several comments on both sides of this proposal. Some of the commenters opposing the proposal thought that UMTA indicated that it should apply to the procurement of a vehicle containing several sub-systems. This is not the case. There have been many situations in which a grantee was purchasing multiple manufactured products and only one or two were of foreign origin. The calculation of the price differential waiver is applied only to the comparative costs of the items for which both foreign and domestic bids were received. The application of the waiver to the over-all bid could skew the entire bid process, especially in the case where the foreign item is of low cost compared to all of the other items being procured.
This interpretation is consistent with the statutory terms, because the inclusion of domestic material in the overall project contract still is considered before a waiver is granted. The regulation amendment will only affect directly the determination of adjusted bid price in the case of a single contract for multiple items. A single contract for a single items will not be affected by the amendment. Accordingly, the amendment is adopted as proposed.
D. Requests for Waivers (§ 661.9.)
One commenter questioned why all waivers under § 661.9 are approved at UMTA Headquarters, rather than at the Regional level. UMTA is concerned with maintaining strict uniformity in the granting of waivers, and will continue its current practice of approving all waivers at the Headquarters level. All waiver requests are coordinated with the appropriate Regional Office.
E. General Waivers -- (§ 661.7 -- Appendix A.)
One commenter suggested that UMTA revise the waiver in appendix A to § 661.7 concerning the incorporation of exceptions from the Federal Acquisition Regulation to incorporate the correct citation. In a separate rulemaking, UMTA already made this revision, and it is reflected in the revised Part 661.
F. Waivers for Prototype Vehicles (§ 661.9.)
One commenter suggested UMTA consider a general waiver for cases in which a grantee wishes to procure a prototype vehicle for testing and evaluation. Prototype vehicles are considered rolling stock, and are subject to the requirements of section 165(b)(3) of STURAA. While UMTA does not consider it appropriate to grant a general waiver for such procurements, UMTA has granted waivers for such procurements on a case-by-case basis.
G. General Waiver for Audio-Visual Equipment (§ 661.9.)
One State Department of Transportation sought a general non-availability waiver for audio-visual equipment. On May 23, 1988, UMTA published a request for comments on a general waiver to the Buy America requirements to permit the procurement of certain audio-visual training equipment produced outside the United States (53 FR 18320). The agency received insufficient information on which to base a determination supporting a general waiver. However, UMTA has granted a number of individual non-availability waivers for audio-visual equipment and will continue to do so as appropriate. The agency will reconsider granting a general waiver if changed conditions warrant.
H. Determination of End Product in a Particular Procurement (§ 661.11(u).)
One commenter questioned how UMTA determines the end product in each procurement. An end product is "any item * * * that is to be acquired by a grantee, as specified in the overall project contract." (See § 661.11(u).) The key determinant is the grantee's specification. For example, if a grantee is procuring a new rail car, the car is the end product and the propulsion motor could be a component of the end product. If that same grantee is procuring a replacement propulsion motor for an existing rail car, that propulsion motor would be the end product. In the case of a contract for several items, each item may be a different end product.
I. Applicability of Buy America Requirements to Turn-Key Projects (§ 661.11(u).)
One commenter questioned how UMTA applies the Buy America requirements when a grantee procures an entire system (a turn-key project). In purchasing systems, it is industry practice to have a contract broken down by sub-systems. As just mentioned, UMTA has defined end product as "any item or items * * * to be acquired by a grantee, as specified in the overall project contract." (Emphasis supplied.) (See § 661.11(u).) Accordingly, each sub-system identified in the contract is an end product and subject to the Buy America requirement.
For example, UMTA has determined in the past that an entire people mover system has six sub-systems to be supplied by the contractor (under the terms of a particular contract) and that each sub-system is an individual end product. The six sub-systems are: the guideway surfaces and equipment; the vehicles; the traction power system; the command and control system; the communications system; and the maintenance facility and equipment. This means that six separate products must meet the Buy America requirements.
J. Determination of Grandfathered Companies (§ 661.10)
A substantial number of commenters responded to the questions raised in the NPRM on the grandfathering provisions of section 337(a)(2)(B) of the STURAA. Specifically, that section 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 section 165(b)(3) of the Surface Transportation Assistance Act of 1982 prior to (April 2,1987)."
The first question concerned the scope of a grandfather determination -- whether a company can be grandfathered on a nationwide basis, or whether the company is limited to previous contracts with a specific transit authority. If a company qualifies for the grandfathered treatment, this will be done on a nationwide basis. In other words, if a company entered into a single contract which qualified it for grandfathered status, it receives that status for all contracts entered into in the timeframes set forth in the statutory provisions.
Second, commenters asked whether a company which provided an item complying with section 401 of the 1978 STAA, but did not provide an item complying with section 165(b)(3) of the 1982 STAA, qualifies for grandfathered status. A company that provided an item complying with section 401 would qualify for grandfathering status, even though the company did not supply an item complying with section 165(b)(3). The agency's reasoning follows.
Section 401 did not mandate specific requirements concerning the procurement of rolling stock, but UMTA implementing regulations provided that rolling stock would be considered domestic if more than 50 percent of its components, by cost, were of U.S. origin and final assembly took place in the United States. Section 165(b)(3) of the 1982 STAA essentially made these regulatory requirements statutory. Therefore, a company that complied with the requirements of section 401 (for the procurement of rolling stock and associated equipment) meets the domestic content requirements in the STURAA's grandfather provisions, section 337(a)(2)(B). Accordingly, section 661.11 of the regulations now reflects this position.
Third, commenters asked how UMTA will determine company eligibility to be grandfathered, including: (1) What must a company do to prove that it qualifies for the grandfather provision; and (2) what must a company show to demonstrate that it is a successor in interest to a grandfathered company.
With regard to qualifying for the grandfather provision, two commenters suggested that a company be allowed to certify that it qualifies to be grandfathered. UMTA agrees that this is an appropriate process and has added regulatory language to this effect. (See § 661.10.)
A company may receive grandfather treatment under the statute if the company is a successor in interest to a qualifying company. With regard to determining who is a successor in interest, several commenters suggested solutions. One commenter recommended that a company be considered a successor in interest if the company provides a like product or service, maintains the same assurances to the contracting party, and ensures compliance with the contract terms and conditions. Another commenter suggested that a successor in interest be "any entity which is duly contracted within the specified time and for which a duplicate or similar activity or service is required as that of the assignor."
A third commenter suggested that a successor in interest be a "U.S. corporation with ownership of more than 50 percent of the assets of the original U.S. entity that is being acquired or to which an interest is being assigned". This commenter also recommended that the supplier be required to show that it has been in compliance continuously with the requirements of section 165(b)(3) of the 1982 STAA and has served essentially the same market without a significant lapse of time in business. UMTA's reading of the legislative history of section 337(a)(2)(B) finds no support for this position.
UMTA believes that Congress intended to apply the increased domestic content requirements on an accelerated basis to firms entering the marketplace after April 2, 1987, and that it intended to grandfather existing firms that had complied with previous Buy America requirements regardless of the number of contracts or the product supplied (e.g. a bus versus a rail car).
A fourth commenter suggested that a successor in interest include a "wholly-owned U.S. subsidiary of overseas companies."
A fifth suggestion, UMTA believes, offers a reasonable approach. The commenter recommends that the determination focus on the transfer of substantial assets such as "contracts and work in progress, designs and technology, manufacturing plants and staff." The commenter noted that the "mere acquisition of an established trade name by an existing unrelated business enterprise normally would not qualify the newly named enterprise as a successor in interest of the business which previously operated under that trade name." The commenter also suggested that maintaining continuity in ownership and assets should qualify an entity as a successor in interest, whether or not the name of the predecessor company was adopted. UMTA agrees with this comment and has made appropriate changes in the regulation (§ 661.10(b)).
Further, the regulation provides that a company claiming to be a successor in interest must supply UMTA with documentation to support its claim. UMTA will evaluate this material and publish a notice in the Federal Register concerning its determination.
One commenter indicated that the grandfather provision may give a competitive advantage to some companies. UMTA does not dispute this claim, but it appears that Congress intended to give an advantage to companies which had complied with previous Buy America requirements.
K. Requirements Applicable to the Manufacture of a Component (§ 661.11(g).)
UMTA received a number of comments on the manufacture of components requirements. Several commenters were concerned particularly with UMTA's position that mere assembly was not sufficient. As indicated below, one commenter suggested that UMTA look to the definition of a product of the United States as defined by the Customs Service in its Tariff regulations, while others suggested that the definition make reference to sufficient activities to advance or improve the conditions of the subcomponents, or adding value.
UMTA agrees that the requirement must be more explicit, and that the phrase "mere assembly of a component" may be a bit confusing. Accordingly, the regulations have been modified to clarify and expand on the steps that are needed for a component to be considered manufactured (see § 661.11(g)). The key element of this definition is the alteration of subcomponents to form a new product. The processes of alteration may include forming, extruding, material removal, welding, soldering, etching, plating, material deposition, pressing, permanent adhesive joining, shot blasting, brushing, grinding, lapping, finishing, vacuum impregnating, and, in electrical and electronic pneumatic, or mechanical products, the collection, interconnection, and testing of various elements.
L. Application of Requirements to Major Components (§ 661.11.)
In the NPRM, UMTA sought comment on whether the domestic content requirements should apply to all components of rolling stock and associated equipment, or just to the major components of these items. Comments on this issue were mixed. The Conference Report states that section 337 of STURAA is intended to cover only "major components" and "primary subcomponents." UMTA therefore considers that the requirements of section 337 of STURAA apply to all "major components" and "primary subcomponents" of rolling stock and related equipment.
M. Inclusion of List of Components of Buses and Rail Rolling Stock; Discussion of "Components" and "Subcomponents" (§ 661.11.)
The Conference Report to the STURAA lists major components of both buses and rail rolling stock. In the preamble to the NPRM, UMTA repeated the complete lists, but indicated that it had developed general language on the identification of components for the rule itself. UMTA requested comments on whether the complete listing from the Conference Report should be included in the regulation.
The commenters' views varied on this issue -- some suggested the entire list be incorporated into the regulation, while some suggested inclusion in the regulation for illustrative purposes only. Still others opposed any inclusion, since such lists "appear to be an inconsistent and incomplete mixture of systems, components and subcomponents".
UMTA believes that the intent of Congress in implementing section 337 of STURAA was to increase the overall domestic content of rolling stock by requiring that all prime components have a domestic content of at least 50 percent.
As indicated above, section 165(b)(3) of STAA provided that rolling stock would meet the domestic content requirements only if "the cost of components which are produced in the United States is more than 50 per centum of the cost of all components * * * and final assembly takes place in the United States." Section 337 of STURAA amended this provision by adding "and subcomponents."
The Conference Report to the STURAA states that "(b)y including the term subcomponent, 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." Therefore, under the regulation, a component is considered of domestic origin if the total cost of its subcomponents meet the domestic content requirements mandated by section 337 of STURAA, and the component is manufactured in the United States. In the example provided by the Conference Report for "grandfathered" companies, this means that a component will be considered domestic only if the domestic content value of its subcomponents is at least 50 percent. In the case of all other companies, as of October 1, 1989, a component meets the domestic content requirements if it has a domestic content value of at least 55 percent.
In the NPRM, UMTA sought comment on whether Congress intended that UMTA look to the origin of the parts of the subcomponents, or the "sub-subcomponents."
The Conference Report points out that section 337 of STURAA is intended to cover only "major components" and "primary subcomponents." UMTA concludes from this, and from the lack of any specific mention of the origin of sub-subcomponents, that the conferees intended that only components and subcomponents be counted toward the domestic content requirements. It is therefore UMTA's position that the origin of sub-components is immaterial and that to be considered domestic, a subcomponent need only be manufactured in the United States.
Clearly, then, to be considered domestic, components must meet a more stringent test than subcomponents, since in addition to manufacture in the United States, they must have a domestic content value of at least 50 percent.
It is therefore important to distinguish between the terms "component" and "subcomponent" for the purpose of establishing Buy America compliance. To assist grantees and manufacturers in making this distinction, and to prevent possible abuses resulting from an over-classification of vehicles parts as subcomponents, UMTA believes that it is useful to include the Conference Report list of major components in the regulations. Accordingly, UMTA includes the listings as appendices to the regulations concerning the procurement of rolling stock, specifying that they are not exhaustive.
N. Definition of Subcomponent (§ 661.11(h).)
One commenter noted that UMTA proposed a definition of component, but it did not propose a definition of a subcomponent. This commenter offered a definition, drawing on the language of the Conference Report referring to subcomponents as "one step removed" from components. UMTA agrees that such a definition should be included, and has adopted the commenter's definition.
O. Origin of Sub-Subcomponents
As indicated above, in the NPRM UMTA indicated that it believed that Congress did not intend that the origin of sub-subcomponents be examined when calculating the cost of subcomponents and components. All of the comments received on this issue supported UMTA's position. Accordingly, the regulation will not contain any requirements concerning the origin of sub-subcomponents.
P. Use of Tariff Exemption (§ 661.11(k).)
UMTA proposed using an existing tariff procedure to trace subcomponents of domestic origin which are exported from the United States, and then imported as part of a component. All of the commenters on this issue supported the proposal. One commenter suggested that it would be useful for UMTA to make clear that the standard for determining whether a subcomponent is domestic is the same standard imposed by the Customs Regulations for determining whether an item is a product of the United States (and therefore entitled to a tariff exemption under 19 CFR 10.10-10.24). The NPRM proposed that a subcomponent be considered to be of domestic origin if it is manufactured in the United States, but the NPRM did not provide requirements concerning manufacturing in the United States. One commenter recommended that UMTA adopt the Custom Service's requirements for defining the manufacture of a component or subcomponent (see discussion concerning manufacturing of components).
This commenter also indicated that UMTA should make clear that U.S.-origin subcomponents, installed overseas but retaining their domestic indentity, will be valued for Buy America purposes in the same way they are valued for purposes of tariff exemption. UMTA proposed that the cost of a subcomponent is "the price that a bidder or offeror must pay to a subcontractor or supplier" for that subcomponent. The commenter suggested that UMTA amend the rule to specify that the cost of a subcomponent retaining its domestic identity under the Tariff Exemptions will be determined as provided in the Customs Service regulation. UMTA agrees with this suggestion, and has included the appropriate definition in the regulation.
Q. Domestic Materials that Lose Physical Identity (§ 661.11(l).)
Two commenters disagreed with or questioned UMTA's position on domestic materials that are shipped abroad and lose their physical identity. The commenters believe that UMTA's position would discourage foreign manufacturers from using domestic suppliers. While UMTA agrees that foreign manufacturers may not utilize domestic sources for some materials, it is UMTA's position that it would be extremely difficult to trace such materials. The Customs approach that UMTA proposed is an established Federal procedure. In addition, since certain items will retain their domestic identity, UMTA believes that foreign manufacturers will use such items to meet the domestic content requirements. UMTA has not revised the regulations to permit domestically produced items or materials that are shipped abroad and lose their physical identity to be included when calculating domestic content. The final rule adopts the Customs Service procedure outlined in the NPRM.
R. Setting Cost for Foreign Components (§ 661.11(p).)
One commenter stated that the determination of Buy America compliance is affected by the currency exchange rates, and recommended that the regulations provide that compliance be determined on the basis of rates prevailing at a fixed point in time. UMTA agrees with the suggestion, and the regulations have been revised to reflect that the cost of a component of foreign origin will be set at the time the appropriate Buy America certificate is executed (See § 661.11(p)).
S. Final Assembly Requirements (§ 661.10(t).)
In the NPRM, UMTA proposed eliminating the regulatory provision that sufficient final assembly activity would be presumed to exist if the cost of final assembly is at least 10 percent of the overall project contract cost -- indicating that its experience was that the 10 percent figure was arbitrary and that several manufacturers of rolling stock were performing adequate final assembly requirements, but the cost of such final assembly did not reach the 10 percent level.
UMTA received four comments on this issue. Two supported the proposal, while two opposed the elimination of a set percentage to test final assembly.
The issue of determining what is adequate final assembly is one of the most difficult UMTA has faced. Since the Buy America requirements apply to such a vast number of products, it is extremely difficult for UMTA to develop a single definition to address all products.
UMTA had used the 10 percent test because it provided some yardstick against which manufacturers could measure their performance. Unfortunately, a number of suppliers spent considerable effort trying to determine what to include in the cost of final assembly in order to meet the artificially set standard of 10 percent of the total contract cost.
UMTA recognizes that, in the vast majority of cases that it has examined, there has been adequate and sufficient final assembly regardless of the cost of such activities. Additionally, UMTA has found that there has been little, if any, abuse of the regulations in this regard. UMTA believes that significant assembly operations are taking place without the imposition of an artificial threshold requirement. Accordingly, the final regulation contains no specific minimum cost requirement for final assembly.
Nonetheless, in order to clarify the required operations and to provide guidance for manufacturers and grantees, UMTA has defined "final assembly" in § 661.10(t) as "the creation of the end product from different elements brought together for that purpose through the application of manufacturing processes." These manufacturing processes may include joining, welding, installing, interconnecting (wire, fibers, or tube), filling, finishing, cutting, trimming, inspecting and testing. In the case of the manufacture of a new rail car, for instance, "final assembly" would include, as a minimum, the following operations: installation and interconnection of propulsion control equipment, propulsion cooling equipment, brake equipment, energy sources for auxiliaries and controls, heating and air conditioning, communications equipment, motors, wheels and axles, suspensions and frames; the inspection and verification of all installation and interconnection work; and, the testing in plant of the stationary product to verify all functions.
T. Train Control, Communications, and Traction Power Equipment (§ 661.11(u).)
The regulation contains non-inclusive listings of train control, communications, and traction power equipment governed by the requirements of section 165(b)(3) of the 1982 STAA. UMTA sought comments and suggestions on items that should be added to the lists and specifically sought comment on whether pantographs should be included as traction power equipment.
The comments on pantographs were mixed. Commenters opposing the inclusion did so since they believe that a pantograph is a component of rail rolling stock, and should not be listed. While UMTA agrees that a pantograph can be a component, it also can be an end product if it is supplied as a spare or replacement part. Therefore, UMTA agrees with those comments suggesting inclusion in the appropriate listing.
One commenter suggested that the contact rail be included as an item of traction power equipment. Those favoring inclusion did so since they felt that the contact rail is essential to the provision of power to rail rolling stock. While UMTA cannot disagree that the contact rail may be essential, UMTA agrees with the commenter that said the manufacturing of a contact rail does not differ from the manufacturing of a running rail, and that the purpose of the rail should not be dispositive of determining Buy America applicability. Accordingly, the regulations will continue to indicate that contact rail is not to be considered as traction power equipment. (See a Federal Register notice of February 11, 1986 (51 FR 5139), requesting comment on this issue.)
Another request to the agency outside the context of this rulemaking recommended that automatic door control systems for rail rolling stock be considered to be part of train control equipment since the vehicle cannot operate if the automatic door control system is not operating, or if the doors are not closed. While UMTA does not disagree with the purpose of the automatic door control system, the agency believes that the tie-in between the automatic door control system and the operation of a rail vehicle is for safety purposes, and the automatic door control system is not part of the actual train control system. Accordingly, this item will not be added to the listing of train control equipment.
U. Certifications by Component and Subcomponent Manufacturers (§ 661.11(z).)
Several commenters suggested that UMTA require component and subcomponent manufacturers to submit certifications of compliance with the Buy America requirements. While UMTA is aware that the end product supplier must rely on component and subcomponent manufacturers in making its certification to UMTA grantees, UMTA does not believe that it is appropriate for UMTA to mandate that component and subcomponent manufacturers submit certifications. The ultimate supplier is responsible for determining how it will comply with the Buy America requirements, and is, in fact, free to use non-domestic sources as long as the minimum domestic content requirements are met. UMTA believes that it is more appropriate for the ultimate supplier of a product to ensure that its suppliers are providing domestic materials through contractual terms than to use federally mandated certification.
V. Update of Certifications and Contracts (§ 661.12)
One commenter suggested that UMTA's Buy America certifications set out in § § 661.6 and 661.12 be updated to reflect current requirements. The certifications in § 661.6 were not affected by the 1987 statutory change, and do not need to be revised. The certification in § 661.12 are being revised to reflect the 1987 statutory change. In addition, UMTA will revise its standard contract terms and conditions to reflect the 1987 statutory changes.
W. Investigations (§ 661.15)
All commenters on investigations supported the proposed revision permitting UMTA to initiate an investigation and conduct site visits.
The proposed revision to the regulation specified that an investigated party could correspond directly with UMTA concerning an investigation as long as the affected grantee informed UMTA that this process would be used. The intent of this proposal is two-fold: (1) To facilitate the procurement process by expediting the investigation; and (2) to protect the confidentiality of information presented by the investigated party.
UMTA believes that its grantee should concur in having an investigated party correspond directly with UMTA since the grantee is bound contractually under its grant contract with UMTA to ensure that the Buy America requirements are met. The proposal did not require that all information go through the grantee, but intended the grantee be aware that the investigated party is corresponding directly with UMTA.
The final rule reflects the proposed rule's original intent.
IV. The Final Rule
This final rule implements section 337 of the STURAA, which amended UMTA's Buy America requirements. Section 337 of the STURAA made significant changes to UMTA's Buy America requirements for buses and other rolling stock. First, section 337 requires that more than 50 percent of the cost of a component's subcomponents be of U.S. origin for the component to be considered of U.S. origin. In addition, the domestic content requirement was increased from 50 to 55 percent on October 1, 1989, and to 60 percent on October 1, 1991. (However, any company that has met the domestic Buy America requirement as of April 2, 1987, would be exempted from these increases for all contracts entered into before April 1, 1992). Finally the rolling stock price differential was increased from 10 percent to 25 percent.
UMTA has also included, as appendices to the regulation, the listings of major components of buses and rail rolling stock set out in the Conference Report to the STURAA. UMTA has included these listings in order to assist grantees and manufacturers in distinguishing between the terms "components" and "subcomponents" for the purpose of establishing Buy America compliance, and to prevent possible abuse resulting from an over-classification of vehicle parts as subcomponents. These listings are not exhaustive.
The final rule also includes certain changes made to increase the usability of the regulation. Amendments have been made, for instance, in § 661.15, to clarify the investigation process.
Finally, it should be noted that the U.S.-Canada Free Trade Agreement does not exempt Canadian-made products from the UMTA Buy America requirements. Products manufactured in Canada are considered foreign goods, and are entitled to no special treatment under the UMTA Buy America provisions.
V. Impact analyses
A. Executive Order 12291
This action has been reviewed under Executive Order 12291, and UMTA has determined that it is not a major rule. The rule will not result in an annual effect on the economy of $100 million or more, nor would it create a major increase in costs or prices for consumers, individual industries, or geographic regions, nor have significant adverse effects on competition, employment, investment, innovation or the ability of United States-based enterprises in domestic or export markets. The agency has prepared a Regulatory Evaluation for the rulemaking, which is on file in the public docket.
B. DOT Policies and Procedures on Improving Governmental Regulations.
This regulation is a "significant" rule, as defined by the Department's Regulatory Policies and Procedures on Improving Governmental Regulations, because it involves important departmental policy and it generates substantial public interest. UMTA has prepared a Regulatory Evaluation in support of this rulemaking, which is on file as part of the docket to this rulemaking. The regulatory evaluation responds to comments received in response to the agency's request for data on the potential economic impact of the rule.
C. Regulatory Flexibility Act.
Consistent with the Regulatory Flexibility Act (5 U.S.C. 605(b)), 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 and given OMB control number 2132-0544. In addition, the regulation requires two new certification processes (i.e., for grandfathered companies and successor-in-interest companies), which certification requirements will be submitted to OMB for review.
This rule has been reviewed under Executive Order 12612 on Federalism, and UMTA has determined that it does not have implications for principles of Federalism that warrant the preparation of a Federalism assessment. The rule will not limit the policymaking and administrative discretion of the States, nor will it affect the States' abilities to discharge traditional State government functions or otherwise affect any aspects of State sovereignty.
List of Subjects in Part 661
Buy America, Domestic preference requirements, Grant programs -- transportation, Mass transportation.
Accordingly, for the reasons set out in the preamble to this document, 49 CFR chapter VI is amended by revising part 661 to read as follows:
PART 661 -- BUY AMERICA REQUIREMENTS -- SURFACE TRANSPORTATION ASSISTANCE ACT OF 1982, AS AMENDED
661.5 General requirements for steel and manufactured products.
661.6 Certification requirement for procurement of steel or manufactured products.
661.9 Application for waivers.
661.10 Determination of qualification under section 337(a)(2)(B) of the STURAA.
661.11 Rolling stock procurement.
661.12 Certification requirement for procurement of buses, other rolling stock and associated equipment.
661.13 Grantee responsibility.
661.15 Investigation procedures.
661.17 Failure to comply with certification.
661.20 Rights of third parties.
661.21 State Buy America provisions.
Authority: Sec. 165, Pub. L. 97-424, as amended by Sec. 337, Pub. L. 100-17 (49 U.S.C. 1602 note); 49 CFR 1.51.
§ 661.1 Applicability.
Unless otherwise noted, this part applies to all federally assisted procurements using funds authorized by the Urban Mass Transportation Act of 1964, as amended; 23 U.S.C. 103(e)(4); and section 14 of the National Capital Transportation Act of 1969, as amended.
§ 661.3 Definitions.
As used in this part:
Act means the Surface Transportation Assistance Act of 1982 (Pub. L. 97-424), as amended by section 337 of the Surface Transportation and Uniform Relocation Assistance of 1987 (Pub. L. 100-17).
Administrator means the Administrator of UMTA, or designee.
Grantee means any entity that is a recipient of UMTA funds.
Manufacutured product means an item produced as a result of manufacturing process.
Manufacturing process means the application of processes to alter the form or function of materials or of elements of the product in a manner adding value and transforming those materials or elements so that they represent a new end product functionally different from that which would result from mere assembly of the elements or materials.
Rolling stock means transit vehicles such as buses, vans, cars, railcars, locomotives, trolley cars and buses, and ferry boats, as well as vehicles used for support services.
STURAA means the Surface Transportation and Uniform Relocation Assistance Act of 1987 (Pub. L. No. 100-17).
UMTA means the Urban Mass Transportation Administration.
United States means the several States, the Commonwealth of Puerto Rico, the District of Columbia, Guam, American Samoa, the Virgin Islands, and the Commonwealth of the Northern Mariana Islands.
§ 661.5 General requirements for steel and manufactured products.
(a) Except as provided in § § 661.7 and 661.11 of this part, no funds may be obligated by UMTA for a grantee project unless all steel and manufactured products used in the project are produced in the United States.
(b) All steel manufacturing processes must take place in the United States, except metallurgical processes involving refinement of steel additives.
(c) The steel requirements apply to all steel items including, but not limited to, structural steel, running rail and contact rail.
(d) For a manufactured product to be considered 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.
§ 661.6 Certification requirement for procurement of steel or manufactured products.
If steel or manufactured products (as defined in § § 661.3 and 661.5 of this part) are being procured, the appropriate certificate as set forth below shall be completed and submitted by each bidder in accordance with the requirement contained in § 661.13(b) of this part.
Certificate of Compliance With Section 165(a)
The bidder hereby certifies that it will comply with the requirements of section 165(a) of the Surface Transportation Assistance Act of 1982, as amended, and the applicable regulations in 49 CFR part 661.
Certificate for Non-Compliance With Section 165(a)
The bidder hereby certifies that it cannot comply with the requirements of section 165(a) of the Surface Transportation Assistance Act of 1982, as amended, but it may qualify for an exception to the requirement pursuant to section 165 (b)(2) or (b)(4) of the Surface Transportation Assistance Act of 1982 and regulations in 49 CFR 661.7.
§ 661.7 Waivers.
(a) Section 165(b) of the Act provides that the general requirements of section 165(a) shall not apply in four specific instances. This section sets out the conditions for the three statutory waivers based on public interest, non-availability, and price-differential. Section 661.11 of this part sets out the conditions for the fourth statutory waiver governing the procurement of rolling stock and associated equipment.
(b) Under the provision of section 165(b)(1) of the Act, the Administrator may waive the general requirements of section 165(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 section 165(b)(2) of the Act, the Administrator may waive the general requirements of section 165(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 satisfactory quality.
(1) 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.
(2) 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 section 165(b)(4) of the Act, the Administrator may waive the general requirements of section 165(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 than 25 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 section 165(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 section 165(b)(3) of the Act (requirements for rolling stock). If a waiver is granted for a component or a subcomponent, that component or subcomponent will be considered to be of domestic origin for the purposes of § 661.11 of this part.
(g) The waivers described in paragraphs (b) and (c) of this section may be granted for 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) of this part. If such a waiver is granted to such a specific item or material, that item or material will be treated as being of domestic origin.
Appendix A to § 661.7 -- General Waivers
(a) All waivers published in 48 CFR 25.108 which establish excepted articles, materials, and supplies for the Buy American Act of 1933 (41 U.S.C. 10a-d), as the waivers may be amended from time to time, apply to this part under the provisions of § 661.7 (b) and (c).
(b) Under the provisions of § 661.7(b) of this part, 15 passenger vans produced by Chrysler Corporation are exempt from the requirement that final assembly of the vans take place in the United States (49 FR 13944, April 9, 1984).
(c) Under the provisions of § 661.7(b) of this part, 15 Passenger Wagons produced by Chrysler Corporation are exempt from the requirement that final assembly of the wagons take place in the United States (letter to Chrysler Corporation dated May 13, 1987.)
(d) Under the provisions of § 661.7 (b) and (c) of this part, microcomputer equipment, including software, of foreign origin can be procured by grantees (50 FR 18760, May 2, 1985 and 51 FR 36126, October 8, 1986).
§ 661.9 Application for waivers.
(a) This section sets out the application procedures for obtaining all waivers, except those general exceptions set forth in this part for which individual applications are unnecessary and those covered by section 165(b)(3) of the Act. The procedures for obtaining an exception covered by section 165(b)(3) are set forth in § 661.11 of this part.
(b) A bidder who seeks to establish grounds for an exception must seek the exception, in a timely manner, through the grantee.
(c) Except as provided in paragraph (d) of this section, only a grantee may request a waiver. The request must be in writing, include facts and justification to support the waiver, and be submitted to the Administrator through the appropriate Regional Office.
(d) UMTA will consider a request for a waiver from a potential bidder or supplier only if the waiver is being sought under § 661.7 (f) or (g) of this part.
(e) The Administrator will issue a written determination setting forth the reasons for granting or denying the exception request. Each request for an exception, and UMTA's action on the request, are available for public inspection under the provisions of 49 CFR part 601, subpart C.
§ 661.10 Determination of qualification under section 337(a)(2)(B) of the STURAA.
(a) A supplier or contractor that qualifies under the provisions of section 337(a)(2)(B) because it had supplied an item that complied with the provisions of section 165(b)(3) of the Surface Transportation Assistance Act of 1982 or under section 401 of the Surface Transportation Assistance Act of 1978 must certify to this qualification when its bid or offer is submitted. Such certification must accompany the certification set forth in § 661.12 of this part.
(b) A supplier or contractor that qualifies as a successor in interest or assignee under the provisions of section 337(a)(2)(b) of the STURAA is one to which has been transferred the substantial assets, such as contracts and work in progress, designs and technology, and manufacturing plants and staff, of a previously existing company. The mere acquisition of an established trade name by an existing business enterprise does not qualify as a successor in interest. A supplier or contractor adoption of a new corporate name while maintaining continuity in ownership and assets qualifies the supplier or contractor as a successor in interest.
(c) Any supplier or contractor wishing to claim that it is a successor in interest or assignee under the provisions of paragraph (b) of this section must provide UMTA with sufficient documentation to support its claim. If UMTA determines that a supplier or contractor does qualify as a successor in interest or assignee, UMTA will publish notice of this determination in the Federal Register.
§ 661.11 Rolling stock procurement.
(a) The provisions of § 661.5 of this part do not apply to the procurement of buses and other rolling stock (including train control, communication, and traction power equipment), if the cost of components which are produced in the United States is more than 50 percent of the cost of all of the components and final assembly takes place in the United States.
(b) Except as provided in paragraph (c) of this section, the domestic content requirement is 55% for contracts entered into after October 1, 1989, and is 60% for contracts entered into after October 1, 1991.
(c) The domestic content requirement will be 60% for contracts entered into after April 1, 1992, with any supplier or contractor or any successor in interest or assignee, as determined under the provisions of § 661.10 of this part, which complied with the requirements of section 165(b)(3) of the Surface Transportation Assistance Act of 1982 or section 401 of the Surface Transportation Assistance Act of 1978 before April 2, 1987.
(d) The increased domestic content requirements in paragraphs (b) and (c) of this section also apply to the domestic content requirements for the components set forth in paragraphs (i), (k), and (n) of this section.
(e) A component is any article, material, or supply, whether manufactured or unmanufactured, that is directly incorporated into an end product at the final assembly location.
(f) A component may be manufactured at the final assembly location if the manufacturing process to produce the component is a separate and distinct activity from the final assembly of the end product.
(g) A component is considered to be manufactured if there are sufficient activities taking place to advance the value or improve the condition of the subcomponents of that component; that is, if the subcomponents have been substantially transformed or merged into a new and functionally different article.
(h) Except as provided in paragraph (m) of this section, a subcomponent is any article, material, or supply, whether manufactured or unmanufactured, that is one step removed from a component (as defined in paragraph (e) of this section) in the manufacturing process and that is incorporated directly into a component.
(i) For a component to be of domestic origin, more than 50 percent of the subcomponents of that component, by cost, must be of domestic origin and the manufacture of the component must take place in the United States. If, under the terms of this part, a component is determined to be of domestic origin, its entire cost may be utilized in calculating the cost of domestic content of an end product.
(j) A subcomponent is of domestic origin if it is manufactured in the United States.
(k) If a subcomponent manufactured in the United States is exported for inclusion in a component that is manufactured outside of the United States and it receives tariff exemptions under the procedures set forth in 19 CFR 10.11-10.24, the subcomponent retains its domestic identity and can be included in the calculation of the domestic content of an end product even if a such a subcomponent represents less than 50% of the cost of a particular component.
(l) If a subcomponent manufactured in the United States is exported for inclusion in a component manufactured outside of the United States and it does not receive tariff exemption under the procedures set forth in 19 CFR 10.11-10.24, the subcomponent loses its domestic identity and cannot be included in the calculation of the domestic content of an end product.
(m) Raw materials produced in the United States and then exported for incorporation into a component are not considered to be a subcomponent for the purposes of calculating domestic content. The value of such raw materials is to be included in the cost of the foreign component.
(n) If a component is manufactured in the United States but contains less than 50% domestic subcomponents, by cost, the cost of the domestic subcomponents and the cost of manufacturing the component may be included in the calculation of the domestic content of the end product.
(o) For purposes of this section, except as provided in paragraph (q) of this section:
(1) The cost of a component or a subcomponent is the price that a bidder or offeror must pay to a subcontractor or supplier for that component or subcomponent. Transportation costs to the final assembly location must be included in calculating the cost of a component. Applicable duties must be included in determining the cost of foreign components and subcomponents.
(2) If a component or subcomponent is manufactured by the bidder or offeror, the cost of the component is the cost of labor and materials incorporated into the component or subcomponent, an allowance for profit, and the administrative and overhead costs attributable to that component or subcomponent under normal accounting principles.
(p) The cost of a component of foreign origin is set at the time the bidder or offeror executes the appropriate Buy America certificate.
(q) The cost of a subcomponent which retains its domestic identity consistent with paragraph (l) of this section shall be the cost of the subcomponent when last purchased, f.o.b. United States port of exportation or point of border crossing as set out in the invoice and entry papers, or, if no purchase was made, the value of the subcomponent at the time of its shipment for exportation, f.o.b. United States port of exportation or point of border crossing, as set out in the invoice and entry papers.
(r) In accordance with section 165(c) of the Act, labor costs involved in final assembly shall not be included in calculating component costs.
(s) The actual cost, not the bid price, of a component is to be considered in calculating domestic content.
(t) Final assembly is the creation of the end product from individual elements brought together for that purpose through application of manufacturing processes. If a system is being procured as the end product by the grantee, the installation of the system qualifies as final assembly.
(u) An end product means any item subject to section 165(b)(3) of the Act, that is to be acquired by a grantee, as specified in the overall project contract.
(v) Train control equipment includes, but is not limited to, the following equipment:
(1) Mimic board in central control.
(2) Dispathers console.
(3) Local control panels.
(4) Station (way side) block control relay cabinets.
(5) Terminal dispatcher machines.
(6) Cable/cable trays.
(7) Switch machines.
(8) Way side signals.
(9) Impedance bonds.
(10) Relay rack bungalows.
(11) Central computer control.
(12) Brake equipment.
(13) Brake systems.
(w) Communication equipment includes, but is not limited to, the following equipment:
(2) Space station transmitter and receivers.
(3) Vehicular and hand-held radios.
(4) PABX telephone switching equipment.
(5) PABX telephone instruments.
(6) Public address amplifiers.
(7) Public address speakers.
(8) Cable transmission system cable.
(9) Cable transmission system multiplex equipment.
(10) Communication console at central control.
(11) Uninterruptible power supply inverters/rectifiers.
(12) Uninterruptible power supply batteries.
(13) Data transmission system central processors.
(14) Data transmission system remote terminals.
(15) Line printers for data transmission system.
(16) Communication system monitor test panel.
(17) Security console at central control.
(x) Traction power equipment includes, but is not limited to, the following:
(1) Primary AC switch gear.
(2) Primary AC transformers (rectifier).
(3) DC switch gear.
(4) Traction power console and CRT display system at central control.
(5) Bus ducts with buses (AC and DC).
(7) Traction power rectifier assemblies.
(8) Distribution panels (AC and DC).
(9) Facility step-down transformers.
(10) Motor control centers (facility use only).
(11) Battery chargers.
(12) Supervisory control panel.
(13) Annunciator panels.
(14) Low voltage facility distribution switch board.
(15) DC connect switches.
(16) Negative bus boxes.
(17) Power rail insulators.
(18) Power cables (AC and DC).
(19) Cable trays.
(20) Instrumentation for traction power equipment.
(21) Connectors, tensioners, and insulators for overhead power wire systems.
(22) Negative drainage boards.
(24) Traction motors.
(25) Propulsion gear boxes.
(26) Third rail pick-up equipment.
(y) The power or third rail is not considered traction power equipment and is thus subject to the requirements of section 165(a) of the Act and the requirements of § 661.5 of this part.
(z) A bidder on a contract for an item covered by section 165(b)(3) of the Act who will comply with section 165(b)(3) and regulations in this section is not required to follow the application for waiver procedures set out in § 661.9 of this part. In lieu of these procedures, the bidder must submit the appropriate certificate required by § 661.12 of this part.
Appendix A to § 661.11 -- General Waivers
(a) The provisions of § 661.11 of this part do not apply when foreign sourced spare parts for buses and other rolling stock (including train control, communication, and traction power equipment) whose total cost is 10 percent or less of the overall project contract cost are being procured as part of the same contract for the major capital item.
Appendix B to § 661.11 -- Typical Components of Buses
The following is a list of items that typically would be considered components of a bus. This list is not all-inclusive.
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 assembles, air conditioning compressor assemblies, air conditioning 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.
Appendix C to § 661.11 -- Typical Components of Rail Rolling Stock
The following is a list of items that typically would be considered components of rail rolling stock. This list is not all-inclusive.
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, articulation 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.
§ 661.12 Certification requirement for procurement of buses, other rolling stock and associated equipment.
If buses or other rolling stock (including train control, communication, and traction power equipment) are being procured, the appropriate certificate as set forth below shall be completed and submitted by each bidder in accordance with the requirement contained in § 661.13(b) of this part.
Certificate of Compliance With Section 165(b)(3)
The bidder hereby certifies that it will comply with the requirements of section 165(b)(3), of the Surface Transportation Assistance Act of 1982, as amended, and the regulations of 49 CFR 661.11.
Certificate for Non-Compliance with Section 165(b)(3)
The bidder hereby certifies that it cannot comply with the requirements of section 165(b)(3) of the Surface Transportation Assistance Act of 1982, as amended, but may qualify for an exception to the requirement consistent with section 165(b)(2) or (b)(4) of the Surface Transportation Assistance Act, as amended, and regulations in 49 CFR 661.7.
§ 661.13 Grantee responsibility.
(a) The grantee shall adhere to the Buy America clause set forth in its grant contract with UMTA.
(b) The grantee shall include in its bid specification for procurement within the scope of these regulations an appropriate notice of the Buy America provision. Such specifications shall require, as a condition of responsiveness, that the bidder or offeror submit with the bid a completed Buy America certificate in accordance with § 661.6 or § 661.12 of this part, as appropriate.
(c) Whether or not a bidder or offeror certifies that it will comply with the applicable requirement, such bidder or offerer is bound by its original certification and is not permitted to change its certification after bid opening. A bidder or offeror that certifies that it will comply with the applicable Buy America requirements is not eligible for a waiver of those requirements.
§ 661.15 Investigation procedures.
(a) It is presumed that a bidder who has submitted the required Buy America certificate is complying with the Buy America provision. A false certification is a criminal act in violation of 18 U.S.C. 1001.
(b) Any party may petition UMTA to investigate the compliance of a successful bidder with the bidder's certification. That party ("the petitioner") must include in the petition a statement of the grounds of the petition and any supporting documentation. If UMTA determines that the information presented in the petition indicates that the presumption in paragraph (a) of this section has been overcome, UMTA will initiate an investigation.
(c) In appropriate circumstances, UMTA may determine on its own to initiate an investigation without receiving a petition from a third party.
(d) When UMTA determines under paragraph (b) or (c) of this section to conduct an investigation, it requests that the grantee require the successful bidder to document its compliance with its Buy America certificate. The successful bidder has the burden of proof to establish that it is in compliance. Documentation of compliance is based on the specific circumstances of each investigation, and UMTA will specify the documentation required in each case.
(e) The grantee shall reply to the request under paragraph (d) of this section within 15 working days of the request. The investigated party may correspond directly with UMTA during the course of investigation, if it informs the grantee that it intends to do so, and if the grantee agrees to such action in writing. The grantee must inform UMTA, in writing, that the investigated party will respond directly to UMTA. An investigated party may provide confidential or proprietary information (see paragraph (l) of this section) directly to UMTA while providing other information required to be submitted as part of the investigation through the grantee.
(f) Any additional information requested or required by UMTA must be submitted within 5 working days after the receipt of such request unless specifically exempted by UMTA.
(g) The grantee's reply (or that of the bidder) will be transmitted to the petitioner. The petitioner may submit comments on the reply to UMTA within 10 working days after receipt of the reply. The grantee and the low bidder will be furnished with a copy of the petitioner's comments, and their comments must be received by UMTA within 5 working days after receipt of the petitioner's comments.
(h) The failure of a party to comply with the time limits stated in this section may result in resolution of the investigation without consideration of untimely filed comments.
(i) During the course of an investigation, with appropriate notification to affected parties, UMTA may conduct site visits of manufacturing facilities and final assembly locations as it considers appropriate.
(j) UMTA will, upon request, make available to any interested party information bearing on the substance of the investigation which has been submitted by the petitioner, interested parties or grantees, except to the extent that withholding of information is permitted or required by law or regulation.
(k) If a party submitting information considers that the information submitted contains proprietary material which should be withheld, a statement advising UMTA of this fact may be included, and the alleged proprietary information must be identified wherever it appears. Any comments on the information provided shall be submitted within a maximum of ten days.
(l) For purposes of paragraph (j) of this section, confidential or proprietary material is any material or data whose disclosure could reasonably be expected to cause substantial competitive harm to the party claiming that the material is confidential or proprietary.
(m) When a petition for investigation has been filed before award, the grantee will not make an award before the resolution of the investigation, unless the grantee determines that:
(1) The items to be procured are urgently required;
(2) Delivery of performance will be unduly delayed by failure to make the award promptly; or
(3) Failure to make prompt award will otherwise cause undue harm to the grantee or the Federal Government.
(n) In the event that the grantee determines that the award is to be made during the pendency of an investigation, the grantee will notify UMTA before to making such award. UMTA reserves the right not to participate in the funding of any contract awarded during the pendency of an investigation.
(o) Initial decisions by UMTA will be in written form. Reconsideration of an initial decision of UMTA may be requested by any party involved in an investigation. UMTA will only reconsider a decision only if the party requesting reconsideration submits new matters of fact or points of law that were not known or available to the party during the investigation. A request for reconsideration of a decision of UMTA shall be filed not later than ten (10) working days after the initial written decision. A request for reconsideration will be subject to the procedures in this section consistent with the need for prompt resolution of the matter.
§ 661.17 Failure to comply with certification.
If a successful bidder fails to demonstrate that it is in compliance with its certification, it will be required to take the necessary steps in order to achieve compliance. If a bidder takes these necessary steps, it will not be allowed to change its original bid price. If a bidder does not take the necessary steps, it will not be awarded the contract if the contract has not yet been awarded, and it is in breach of contract if a contract has been awarded.
§ 661.19 Sanctions.
A willful refusal to comply with a certification by a successful bidder may lead to the initiation of debarment or suspension proceedings under part 29 of this title.
§ 661.20 Rights of third parties.
The sole right of any third party under the Buy America provision is to petition UMTA under the provisions of § 661.15 of this part. No third party has any additional right, at law or equity, for any remedy including, but not limited to, injunctions, damages, or cancellation of the Federal grant or contracts of the grantee.
§ 661.21 State Buy America provisions.
(a) Except as provided in paragraph (b) of this section, any State may impose more stringent Buy America or buy national requirements than contained in section 165 of the Act and the regulations in this part.
(b) UMTA will not participate in contracts governed by the following:
(1) State Buy America or Buy National preference provisions which are not as strict as the Federal requirements.
(2) State and local Buy National or Buy America preference provisions which are not explicitly set out under State law. For example, administrative interpretations of non-specific State legislation will not control.
(3) State and local Buy Local preference provisions.
Issued: January 3, 1991.
Brian W. Clymer,
This material is reprinted with the permission of LEXIS-NEXIS, a division of Reed Elsevier Inc. No copyright is claimed as to any part of the original work prepared by a government officer or employee as part of that person's official duties.