Buy America Requirements; Permanent Waiver for Microcomputers

Printer Friendly Number 68 FR 9801

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[Federal Register:  February 28, 2003  (Volume 68, Number 40)]
[Proposed Rules]               
[Page 9801-9802]
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[[Page 9801]]

Federal Transit Administration
49 CFR Part 661
[Docket No. FTA-99-5709]
RIN 2132-AA68
Buy America Requirements; Permanent Waiver for Microcomputers
AGENCY: Federal Transit Administration (FTA), DOT.
ACTION: Withdrawal of proposed rulemaking.
SUMMARY: This document withdraws the Federal Transit Administration's 
(FTA) October 8, 1999, advanced notice of proposed rulemaking (ANPRM) 
in which it sought public comment on whether the permanent waiver of 
the Buy America requirements for microcomputers should be retained, 
revoked, or modified. Based on a review of the comments to the ANPRM, 
FTA has concluded that a change is not warranted. Accordingly, FTA 
hereby withdraws the rulemaking.
FOR FURTHER INFORMATION CONTACT: Meghan G. Ludtke, Office of Chief 
Counsel, Department of Transportation, Federal Transit Administration, 
Room 9316, 400 Seventh Street, SW., Washington, DC 20590, 202-366-1936 
(telephone) or 202-366-3809 (fax).
ADDRESSES: All documents pertaining to this regulatory action, 
including the comments to the ANPRM, may be viewed and copied at the 
Docket Management Facility, U.S. DOT Dockets, Room PL-401, Department 
of Transportation, 400 7th St., SW., Washington, DC 20590-0001 between 
10 a.m. and 5 p.m., E.S.T., Monday through Friday, except Federal 
holidays. An electronic version of this document, and all documents 
entered into this docket, are available on the World Wide Web at http:/
 To read the comments on the Internet, take the following 
steps: Go to the Docket Management System (``DMS'') Web page of the 
Department of Transportation ( On that page, click 
on ``search.'' On the next page (, type in 
the four-digit docket number. The docket number for this rulemaking is 
5709. After typing the docket number, click on ``search.'' On the next 
page, which contains docket summary information for the docket you 
selected, click on the desired comments. You may download the comments. 
Electronic access to this proposed rule and other Buy America guidance 
material is located at
I. Background
    FTA's Buy America regulations, which can be found at 49 CFR part 
661, apply to all federally-assisted procurements using funds 
authorized by the Federal transit laws, 49 U.S.C. Chapter 53. Under 
those regulations, all manufactured products procured for projects 
funded under the Federal transit laws must be manufactured in the 
United States.
    In 1985, in response to a request from the American Association of 
State Highway and Transportation Officials, FTA solicited public 
comment and subsequently amended its Buy America rule to grant a one-
year waiver of the requirements for the purchase of microcomputers. 50 
FR 1156 (Jan. 9, 1985). In 1986, FTA granted a permanent waiver for 
microcomputer equipment of foreign origin and software of foreign 
origin. 51 FR 36126 (Oct. 8, 1986). FTA noted that many product 
components were still made and assembled abroad, and it would be 
difficult to determine when, if ever, microcomputer manufacturing would 
be relocated to the United States. The definition for Microcomputers 
    A computer system whose processing unit is a microprocessor. A 
basic microcomputer includes a microprocessor, storage, and input/
output facility, which may or may not be on one chip.
    The same source defines computer system as: A functional unit 
consisting of one or more computers and associated software, that 
uses common storage for all or part of a program and also for all or 
part of the date necessary for the execution of the program; 
executes user-written or user-designated programs; performs user-
designated data manipulation, including arithmetic operations and 
logic operations; and that can execute programs that modify 
themselves during their executions. A computer system may be a 
stand-alone unit or may consist of several interconnected units. 
Synonymous with ADP system, computing system.
50 FR 18760 (May 2, 1985).
    FTA received a request from Prima Facie, Inc. (petitioner) to re-
examine the permanent waiver for microcomputers. Prima Facie requested 
that FTA determine whether the basis for the waiver still existed, and 
if not, whether it would be appropriate for FTA to revoke the general 
waiver. In addition, petitioner asked that FTA seek comment on whether 
the waiver should be modified to include only certain types of 
microcomputer equipment and whether the inclusion of a microcomputer in 
a manufactured product should result in the entire product being 
considered a microcomputer.
    In response, FTA issued an ANPRM, which can be found at 64 FR 54855 
(Oct. 8, 1999). FTA invited public comment on the issues raised by 
II. Summary of Comments
    FTA received nine written comments in response to its ANPRM. There 
were three responses from transit authorities; one from the American 
Public Transit Association (APTA); four from private companies, 
including the transportation systems and software industries; and one 
from a professional engineer.
    A majority of the commenters, six of the nine, supported retention 
of the microcomputer waiver. They overwhelmingly emphasized that the 
waiver should remain in place because microcomputer equipment is still 
manufactured primarily in non-U.S. markets. They explained that while 
the technology marketplace has changed over the last fifteen years, 
there does not appear to have been a change in manufacturing location. 
According to the commenters, the situation that necessitated the 
regulation--i.e., the lack of microprocessor suppliers in the U.S.--is 
still present. They explained that the majority of microchips and other 
necessary components are still manufactured overseas and unavailable 
from U.S. sources.
    Two commenters also addressed the original intent of the waiver. 
They explained that with the waiver revoked and only foreign sources 
available, buyers would be forced to request individual waivers from 
FTA for each related procurement. This, in turn, would generate a 
steady stream of waiver requests from grantees. The 1986 regulation was 
promulgated to prevent such a burden on our grantees.
    Of those commenters in favor of the waiver, two did indicate that 
some modifications of the waiver might be warranted. One commenter 
noted that there is ``some confusion about the scope of the waiver,'' 
further stating that it is unclear whether the waiver applies to final 
manufactured products which contain a microprocessor as only an 
incidental part. Another commenter advocated a reevaluation of the 
definition of ``minicomputer.'' The commenter explained that the 1986 
definition of minicomputer was intended to facilitate the easier 
procurement of desktop computers. Today, however, that definition has 
become inadequate because it does not address the many modern 
procurements that are filled with microchips and control chips (e.g., 
fare collection equipment, bus destination signs).
[[Page 9802]]
    Of the nine responses to the ANPRM, three commenters were opposed 
to the waiver as it currently exists. Those comments came from the 
petitioner, a software company, and a professional engineer. All three 
argued that the current waiver is out-of-date. Petitioner explained 
that the waiver is out-of-date because the non-availability problems of 
1985-86 no longer exist. Petitioner believes that if there is a 
permanent waiver, it should be extremely limited in scope, and not be 
extended to equipment simply because the equipment contains a 
    Another commenter, the software company, requested that 
``software'' not be included in the waiver because the term is far too 
broad, and its inclusion does not support the original intent of the 
Buy America requirement. The waiver was intended to support American 
software businesses, which were few in number in the technology 
marketplace of 1985-86. Today, according to the company, there are 
several American software companies that develop and sell the software 
needed by transit properties and at a price affordable to transit 
properties, even smaller ones. As a result, the waiver, in effect, 
``opens the U.S. applications software market to competition from some 
very large and well-established foreign firms who market enterprise 
wide, fully integrated software packages.''
    Finally, the professional engineer agreed with petitioner's 
position but raised several other issues. He suggested that several 
additional topics should be opened up for comment, such as the 
interplay between public safety and microcomputers, the replacement and 
maintenance problems that arise when components come from foreign 
sources, the negative economic consequences of a blanket waiver, and 
the problem of obsolescence in the domestic market with regards to 
III. Analysis
    At petitioner's request, FTA issued this ANPRM and opened the 
record. Based on the record developed from this ANPRM, FTA has 
determined that the permanent waiver for microcomputers should not be 
    FTA received only nine comments, one of which came from petitioner. 
That is a particularly small number of comments, especially for an 
issue that has such broad implications. In addition, the three 
responses in favor of revoking the waiver, as a whole, did not provide 
a sufficiently substantive discussion of petitioner's questions. While 
some of the comments mention or address some of petitioner's issues, 
the comments did not provide thorough discussions of petitioner's four 
    Moreover, the majority of comments did not support petitioner's 
position; specifically, only two commenters shared petitioner's 
position. Most of the commenters who support the current waiver 
strongly agreed that the U.S. technology marketplace has not changed 
enough to warrant a change. Notably, APTA, which consists of over 1,250 
member organizations, took that position. Based on the responses from 
its members, APTA wrote that ``it would seem that the U.S. marketplace 
has not changed that significantly since 1986.'' If this is, in fact, 
the case (i.e., that the technology marketplace has not changed), then 
there is no basis to alter the existing rule. Altering the rule would 
only create the problems discussed by other commenters, for example, 
generating a steady stream of waiver requests to FTA, decreasing 
choices available to transit systems, and increasing costs for transit 
    Finally, the absence of responses from the U.S. microprocessor 
industry is notable. Presumably, that industry would have emphatically 
responded in support of the revocation of the waiver. The waiver 
greatly impacts their industry, as it opens them up to a great deal of 
foreign competition, at least with respect to government transit 
contracts. However, as FTA lacks information from the U.S. 
microprocessor industry, FTA is left with little basis upon which to 
support a change in the existing rule.
    Given the small number of responses, the lack of support of the 
public, and the lack of substantive grounding, FTA has decided to 
withdraw the ANPRM.
IV. Conclusion
    FTA will not revoke or modify the microcomputer waiver as it is set 
forth in Appendix A of 49 CFR 661.7. However, it should be noted that 
FTA does not apply the waiver to an entire product because it contains 
a microcomputer. The parameters of the waiver as it currently exists 
are that if the end product is itself a microcomputer or software as 
defined above, Buy America is waived. If, however, the end product 
contains a microcomputer (e.g., a farecard system), that microcomputer 
is exempt from the requirements of Buy America, but the rest of the end 
product must be in compliance. Due to the small number of responses to 
the ANPRM, the lack of public support for the proposed change, and the 
lack of substantive arguments to justify the change, FTA has concluded 
that a change is not warranted at this time.
    Issued on: February 21, 2003.
Jennifer L. Dorn,
[FR Doc. 03-4552 Filed 2-27-03; 8:45 am]