Allison Transmission

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April 22, 2014


Edward J. Gill, Jr., Esq.
Thompson Coburn LLP
1909 K Street, N.W.
Suite 600
Washington, D.C. 20006

Dear Mr. Gill:

I write in response to your renewed requests to the Federal Transit Administration (FTA) on behalf of your client, Allison Transmission Inc. (Allison), dated March 30, 2011, and May 7, 2013, for a Buy America "non-availability" waiver for Allison's Energy Storage Unit (ESU) subsystem. For the reasons set forth below, I must deny your request.

I. Background

On November 14,2008, and March 12,2009, Allison requested a Buy America waiver for its ESU, which is one of five subsystems used in Allison's hybrid-electric propulsion system known as the H 40/50 EP System. The ESU stores and supplies electrical energy for this H 40/50 EP System during normal motor-generator operation and during regenerative breaking. In Allison's request, it stated that the ESU was not available from a domestic source at that time, but that it was in the process of identifying a domestic manufacturer of ESUs and there were suppliers that indicated the possibility of opening domestic facilities for ESU manufacturing.1 According to Allison, this process would take approximately four to six years.

In an April 3, 2009 letter, FTA granted a Buy America waiver on the grounds that the ESU was not produced in the United States in a sufficient and reasonably available amount or not of a satisfactory quality.2 FTA's decision to grant a waiver to Allison was based upon the facts and circumstances surrounding Allison's request. However, this decision limited the waiver for a period of two years or until such time as a domestic supplier became available, whichever occurred first.

On March 30, 2011, just before this two-year waiver expired,3 Allison submitted two separate letters to FTA. One letter requested an extension of the waiver. According to Allison, it was in the process of searching for domestic manufacturers of the ESU technology, but it required until December 31, 2013 to complete its development/validation process to search for and qualify an ESU product produced in the United States that meets the design requirement specifications of Allison's current ESU. Because of the change from Nickel Metal Hydride (NiMH) batteries to Lithium Ion technology, which a greater number of U.S. manufacturers are now using, Allison indicated that some progress had been made in its search for a domestic supplier and one, in particular, had been found as a potential supplier. Allison, however, did not provide any specific information as to the supplier, the necessary steps and specific time frames for each of those steps to meet Allison's ESU specifications.

In its second March 30, 2011 letter, Allison requested that its original April 3, 2009 waiver be extended until a decision was made on the waiver request in its first March 30, 2011 letter. Allison based its request upon the Administrative Procedure Act (APA) and argued that a waiver was a "statutory exemption" and therefore a "license," which would continue in effect past its expiration date while an application was pending before the agency.4

On March 26, 2012, pursuant to Allison's request for an extension of its waiver until December 31, 2013, FTA published a notice in the Federal Register seeking comment on the proposed waiver extension.5 No comments were received to the docket. While the waiver request was pending, because of the length of time requested and various timing issues, FTA requested that Allison confirm that its waiver request was still valid. Allison indicated that its waiver request was still valid, but requested that the waiver be extended for an additional length of time.

On May 7, 2013, Allison formally requested another waiver that would extend until December 31,2015. In subsequent email communications, Allison indicated that the waiver need only be extended until December 31, 2014, but that the changing technologies and working with a different vendor required, among other things, additional testing and, therefore, necessitated the additional time. Although requested by FTA, Allison did not provide information regarding who the potential supplier is, the likelihood that this supplier would succeed, or the significant hardship that Allison may have faced without a Buy America waiver from April 2011 to May 2013.

II. Buy America

Under 49 U.S.C. § 5323(j)(1), FTA "may obligate an amount that may be appropriated to carry out this chapter [53] for a project only if the steel, iron, and manufactured goods used in the project are produced in the United States." Under limited circumstances, FTA has the discretion to waive these Buy America requirements. One of these circumstances include when FT A finds that "the steel, iron, and goods produced in the United States are not produced in a sufficient and reasonably available amount or are not of a satisfactory quality .... "6

While the statute provides FT A with some discretion to waive certain Buy America requirements, FTA has made it clear that it will closely scrutinize every waiver request and consider all alternatives before granting a waiver. In a February 16, 2011 Dear Colleague Letter, Administrator Rogoff emphasized that:

FTA has raised the bar for all Buy America waiver requests. All requests will be scrutinized. Most requests will result in FTA offering technical assistance to develop a solution that will not necessitate a waiver. Please be cautious about leading your projects down a path where a Buy America waiver will be needed, as it is unlikely to be granted.

III. Discussion

FTA will not grant another waiver request to Allison for its ESU. FTA issued one non-availability waiver to Allison for its ESU in 2009 for a period of two years or until a domestic supplier became available, whichever occurred first. Those two years have now passed. Allison requested an extension five days before the waiver was set to expire on April 3, 2011, and subsequently requested an additional extension until December 31,2015. However, FTA finds that the conditions do not exist for a non-availability waiver.

With certain exceptions, FTA's Buy America requirements prevent FTA from obligating an amount that may be appropriated to carry out its program for a project unless "the steel, iron, and manufactured goods used in the project are produced in the United States."7 A manufactured product is considered produced in the United States if: (1) all of the manufacturing processes for the product take place in the United States; and (2) all of the components of the product are of U.S. origin. A component is considered of U.S. origin if it is manufactured in the United States, regardless of the origin of its subcomponents.8 If, however, FTA determines that ''the steel, iron, and goods produced in the United States are not produced in a sufficient and reasonably available amount or are not of a satisfactory quality," then FTA may issue a waiver (non-availability waiver).9

In order to justify a waiver, FTA requires detailed information about the product and Allison's efforts to find a U.S. manufacturer. To this end, over the course of years, FTA asked Allison to supplement its waiver requests with detailed information about the EMU, the reasons for its lengthy qualification process, the specific actions it was taking to pre-qualify a U.S. manufacturer, and the identity of potential manufacturers. The information provided by Allison lacks sufficient detail to justify a waiver.10

IV. Conclusion

Based upon the foregoing, Allison's waiver request is denied. If you have any questions, please contact Mary J. Lee at (202) 366-0985 or mary.i.lee@dot.gov.

Sincerely,

Dana Nifosi
Deputy Chief Counsel


1 See Letter from Scott A. Biehl, Acting Chief Counsel, Federal Transit Administration, to Edward J. Gill, Jr., Esq., Thompson Coburn LLP, Outside Counsel for Allison Transmission, Inc. (April3, 2009).

2 49 U.S.C. 5323G)(2)(B); 49 C.F.R. 661.7(c).

3 The waiver expired on April 3, 2011.

4 In this March 30, 2011 letter, Allison cites 5 U.S.C. §§ 558(c) and 551(8) (definition of "license").

5 77 Fed. Reg. 17566.

6 49 U.S.C. § 5323(j)(2)(B).

7 49 U.S.C. 5323(j)(1).

8 49 C.F.R. § 661.5(d).

9 49 U.S.C. 5323(j)(2)(B); 49 CFR 661.7(c).

10 It appears from one of Allison's March 30, 2011 letters that it believed that the 2009 waiver was automatically extended because the waiver should be considered a "license" under the Administrative Procedure Act (APA), which includes a "statutory exemption." FTA disagrees with Allison's assertion that a Buy America non-availability waiver is a license. Under 5 U.S.C. § 558(c), among other things, only "[w]hen application is made for a license required by law ... " (emphasis added) is the Agency required to "set and complete proceedings required to be conducted in accordance with sections 556 and 557ofthis title [5 U.S.C. (which covers hearings when required under the APA)] or other proceedings required by law and shall make its decision." However, FTA is not required to provide a hearing or similar proceeding prior to determining whether to grant a Buy America waiver. Also, 49 U.S.C. § 5323(j)(2) states that "[t]he Secretary [of Transportation] may waive ... "(emphasis added) the Buy America requirements if certain conditions are met. Therefore, even if a Buy America waiver is a license subject to 5 U.S.C. § 558, FTA may grant a Buy America non-availability waiver as long as certain requirements are met, but is not required by law to do so, and FTA made clear in its April 3, 2009 decision that the waiver would expire no later than April 3, 2011. FT A treats every waiver request, even subsequent waiver requests for the same product, as a separate and individual waiver request. Therefore, the waiver issued on April 3, 2009, expired on April3, 2011 and was no longer valid. Moreover, after reviewing Allison's submissions in support of its waiver request, FTA now finds that the conditions for a waiver have not been met and denies the waiver.

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