Notice of Granted Buy America Waiver

Printer Friendly Number 66 FR 32412

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[Federal Register:  June 14, 2001  (Volume 66, Number 115)]
[Page 32412-32413]
From the Federal Register Online via GPO Access []
Federal Transit Administration
Notice of Granted Buy America Waiver
AGENCY: Federal Transit Administration (FTA), DOT.
ACTION: Notice of dear colleague letter.
SUMMARY: The Federal Transit Administration (FTA) issued a ``Dear 
Colleague'' letter on March 30, 2001, addressing inquiries regarding 
its Buy America regulations that focused on the calculation of the cost 
of the components and subcomponents of rolling stock. In order to 
ensure wide dissemination of this letter, it is published below, 
together with further explanation in this preamble.
of Chief Counsel, Room 9316, (202) 366-4011 (telephone) or (202) 366-
3809 (fax).
SUPPLEMENTARY INFORMATION: FTA has received inquiries about the transit 
industry's calculation of the cost of components and subcomponents of 
rolling stock under the Buy America provisions. See 49 U.S.C. 5323(j) 
and 49 CFR 661.11. More specifically, based on information in a 1995 
FTA Buy America handbook, there was concern that grantees were 
identifying the entire propulsion system as one component for purposes 
of calculating the domestic content of rolling stock. As a result, on 
March 30, 2001, FTA issued a ``Dear Colleague'' letter explaining the 
applicability of the Buy America requirements to the procurement of 
rolling stock.
    A propulsion system normally consists of a traction motor, 
propulsion gearbox, acceleration and breaking resistors, and propulsion 
controls. According to the appendices of the Buy America regulations 
applicable to rolling stock, each of these items should
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be considered a component. See 49 CFR 661.11, Appendix B and C.
    Section 5323(j)(2)(C) of Title 49, U.S.C., sets forth the general 
requirements for the procurement of rolling stock: The cost of the 
components and subcomponents produced in the United States must be at 
least 60 percent of the aggregate cost of all components and the 
rolling stock must undergo final assembly in the U.S. For a component 
to be considered domestic, 60 percent of its subcomponents must be of 
domestic origin and the component itself must be manufactured in the 
U.S. 49 CFR 661.11(g). A subcomponent is of domestic origin if it is 
manufactured in the U.S. 49 CFR 661.11(h). Because the standards for 
designation as ``domestic'' are different for components and 
subcomponents, and the requirements for components more stringent, the 
distinction between the two is important. It is for this reason that 
FTA included a list of items considered typical components in the 
appendices of the rolling stock regulations. See Appendix B and C, 49 
CFR 661.11. As noted above, this list includes items that are generally 
included in a propulsion system. To the extent that the 1995 FTA 
handbook identified the items listed in these appendices as something 
other than components, it was wrong for purposes of calculating 
domestic content under 49 CFR 661.11.
    To more fully explain the Buy America calculation, we provide the 
following simplified example: Assume that the aggregate cost of all 
components on a bus is $100. In order to comply with Buy America, more 
than $60 worth of the components must be of domestic origin. To 
determine which components count as domestic, the origin of the 
subcomponents must be reviewed. If a component has a cost of $10 and 
more than $6 worth of its subcomponents are manufactured in the U.S., 
then the entire $10 cost of the component is considered domestic and 
counts toward the required aggregate domestic content of more than $60.
    The Buy America analysis begins with identification of the end 
product being procured. From that determination flows the discussion of 
which items are components and which are subcomponents and whether the 
procurement is governed by the general requirements found at 49 CFR 
661.5 or the rolling stock requirements found at 49 CFR 661.11. An end 
product is ``any item * * * that is to be acquired by a grantee, as 
specified in the overall project contract.'' 49 CFR 661.11(s). If a 
grantee is procuring a new rail car, the car is the end product and the 
traction motor would be a component of the end product. If that same 
grantee procures a replacement traction motor for an existing rail car, 
then the traction motor would be the end product for purposes of Buy 
America analysis.
    The regulation does not require which components be of U.S. origin, 
only that more than 60 percent of their aggregate cost derive from 
domestically produced components. The manufacturer determines which 
costs will be used to reach that required threshold. The ``Dear 
Colleague'' letter is consistent with this premise.
    The above-referenced ``Dear Colleague'' letter reads as follows:
March 30, 2001.
    Dear Colleague:
    Under the relevant Buy America requirements, when procuring 
rolling stock under 49 U.S.C. Chapter 53, the cost of the components 
and subcomponents produced in the United States must be at least 60 
percent of the cost of all components of the rolling stock. In 
addition, final assembly of the rolling stock must occur in the 
United States. 49 U.S.C. 5323(j)(2)(C). Under the regulations, a 
component is considered of domestic origin if the total cost of its 
subcomponents meets the 60 percent domestic content requirement 
mandated by law, and the component is manufactured in the United 
States. 49 CFR 661.11(g).
    To assist grantees with the distinction between the terms 
``component'' and ``subcomponent'' in the context of rolling stock 
procurements, the Federal Transit Administration included as 
appendices to its Buy America regulations, the lists of major 
components identified by Congress in its committee report 
accompanying the Surface Transportation and Uniform Relocation 
Assistance Act of 1987 (STURAA), Pub. L. 97-424. H.R. CONF. REP. 
100-27. For example, included in the list of major components of 
rail rolling stock are traction motors, propulsion gearboxes, 
acceleration and braking resistors, and propulsion controls. 
Consequently, the domestic content value of the subcomponents for 
these components, or any other elements that may be considered 
components of rolling stock, must be more than 60 percent, and the 
component must be manufactured in the United States in order to 
satisfy the Buy America requirements.
    In summary, all items included in the list of major components 
at 49 CFR 661.11, App. B and C, should be considered components, not 
subcomponents, for the purposes of calculating domestic content for 
rolling stock procurements.
    If you have any questions, please contact our Office of Chief 
Counsel at (202) 366-4011.
Hiram J. Walker,
Acting Deputy Administrator.
    Issued on: June 11, 2001.
Hiram J. Walker,
Acting Deputy Administrator, Federal Transit Administration.
[FR Doc. 01-15023 Filed 6-13-01; 8:45 am]