Notice of Granted Buy America Waiver
Number 66 FR 32412
06-14-01
[PDF Format]
[Federal Register: June 14, 2001 (Volume 66, Number 115)]
[Notices]
[Page 32412-32413]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14jn01-145]
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DEPARTMENT OF TRANSPORTATION
Federal Transit Administration
Notice of Granted Buy America Waiver
AGENCY: Federal Transit Administration (FTA), DOT.
ACTION: Notice of dear colleague letter.
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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.
FOR FURTHER INFORMATION PLEASE CONTACT: Meghan G. Ludtke, FTA, Office
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
[[Page 32413]]
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.
Sincerely,
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]
BILLING CODE 4910-57-U
