August 02, 2004
Mr. Stephen McKay
Quester Tangent Corporation
Marine Technology Centre
99-9865 West Saanich Road
Sidney, B.C. Canada V8L 5Y8
Dear Mr. McKay:
This responds to your June 16, 2004, letter requesting Federal Transit Administration (FTA) concurrence on Quester Tangent’s (Quester) designation of certain Monitoring and Diagnostic equipment as microcomputer equipment eligible for the Buy America waiver found at 49 C.F.R. 661.7, App. A(d). The equipment is to be purchased by Bombardier, for use in the New Jersey Transit Multi-level Passenger Rail Car Project.
The requirements concerning domestic preference for federally funded transit projects are set forth in 49 U.S.C. §5323(j). Section 5323(j)(2)(C) addresses the general requirements for the procurement of rolling stock. This section provides that all rolling stock procured with FTA funds must have a domestic content of at least 60 percent and must undergo final assembly in the United States.
The Buy America requirements may be waived if the item or items being procured are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality. 49 C.F.R. 661.7(c). All equipment subject to a waiver may be counted as domestic for the purposes of calculating overall domestic content of the vehicle. 49 C.F.R. §661.7(f).
There is a permanent waiver for microcomputer equipment and software. 49 C.F.R. 661.7, App. A(d). FTA has defined a “microcomputer” as
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 data 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 Fed. Reg. 18760 (May 2, 1985).]
When the waiver is properly applied, a manufacturer may use foreign microcomputer equipment without violating the Buy America requirements. For example, FTA determined that a Mobile Data Communication System was covered by the microcomputer waiver, and found that “[a]ll this equipment and associated software is linked together to a computer system at your headquarters with additional interfaces to other CDTA computer systems.” Capital District Transportation Authority letter, August 30, 2001.
Following that decision, FTA withdrew an outstanding advance notice of proposed rulemaking on the microcomputer waiver, and stated as follows:
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. [68 Fed. Reg. 9810 (Feb. 28, 2003).]
FTA applied that reasoning to subsequent decisions, finding for example, that some components of a fare collection system were subject to the waiver, but others were not. Specifically, we found that “[t]he bill and coin validator, and the printer, are not, themselves, microcomputers, although they may each contain embedded microprocessors.” CoinCard letter, May 23, 2003. See also, MTA letter, September 23, 2003, and Vansco Electronics letter, September 15, 2003.
Some of the Monitoring and Diagnostic system is microcomputer equipment subject to the waiver; however, some of it is not. As discussed in the definition, a microcomputer is a computer based on a microprocessor. A microprocessor is a computer whose central processing unit is contained on one or a small number of integrated circuits. Microcomputers may be stand-alone units or they may be embedded in other equipment. They must have, or be, controllers or communication processors and be capable of processing, storage, programming, and have input/output facilities. Microcomputers may be grouped within larger systems or equipment, consisting of several interconnected units each functioning as either stand-alone units or embedded equipment, or a mix of both. Related hardware and equipment that may be controlled by a microprocessor is not covered by the microcomputer waiver.
The Monitoring and Control Unit, as described in the Bill of Materials, contains software, a power supply, input/output module assembly, auxiliary function module assembly, MCU controller module assembly, blank faceplate assembly, chassis assembly, and a nameplate assembly. The blank faceplate and nameplate assemblies contain no microcomputer equipment, and are not subject to the waiver. The software and all of the embedded systems in the power supply, input/output module assembly, auxiliary function module assembly, MCU controller module assembly, and the chassis assembly, are subject to the waiver because those systems are controllers or communication processors and are capable of processing, storage, programming, and input/output facilities.
The Display Console, as described in the Bill of Materials, contains software, a bezel plate assembly, display controller assembly, chassis assembly, and a nameplate assembly. The bezel plate assembly, chassis assembly, and the nameplate assembly contain no microcomputer equipment, and are not subject to the waiver. The software and embedded systems in the display controller assembly are subject to the waiver because those systems are controllers or communication processors and are capable of processing, storage, programming, and input/output facilities.
Accordingly, Quester and Bombardier should calculate the content of this equipment by applying the waiver only to those items listed above as eligible. Bombardier may use foreign equipment not subject to the waiver, but must count it as foreign when calculating domestic content. If you have any questions, please contact Meghan Ludtke at (202) 366-1936.
Very truly yours,
Gregory B. McBride
Deputy Chief Counsel
cc: New Jersey Transit
Hans Pointdujour, Region 2
 I have not attempted to determine whether the Monitoring and Diagnostic equipment here should be treated by Bombardier as a single component or multiple components, or attempted to distinguish between its subcomponents and sub-subcomponents.