Nextek Corporation

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March 15, 2013


Mr. Norman Diamond
President
Nextek Corporation
60 Greenbriar Drive
Deerfield, IL 60015

Re: Request for Buy America Waiver for TNSi Bill Handling Equipment

Dear Mr. Diamond:

This letter is in response to your October 2, 2012 request on behalf of Nextek Corporation (Nextek) to the Federal Transit Administration (FTA) for a Buy America waiver for dollar bill (banknote) handling equipment to be used in transit ticket vending machines (TVM). More specifically, you request a Buy America waiver for the (1) Toyo Networks & Systems Integration, Ltd. (TNSi) BV-6200G- Banknote Validator, (2) TNSi BV-6200LG-Banknote Validator, and (3) TNSi BR-7200-Banknote Recycler. For the reasons set forth below, I find that these banknote handling units are subcomponents of TVMs, which are components of a fare collection system. Therefore, a waiver is unnecessary for these aforementioned products.

I. Background

In the past, FTA has granted non-availability waivers pursuant to 49 U.S.C. § 5323(j)(2)(B) for various banknote handling units manufactured for use in TVMs on a case-by-case basis.1 Banknote handling units have various functions depending upon the model and unit, but are typically characterized to validate and hold dollar bills for and used during ticket transactions. FTA previously found that these products were not domestically manufactured. Thus, FTA granted these waivers, but on the condition that the waiver requests be renewed every two years. One such renewed request is for Nextek's TNSi BV-6000AG Currency Validator.2

On May 7, 2012, FT A published a notice in the Federal Register on this waiver request. 77 FED. REG. 26723. In this notice, FTA sought public comments on whether the waiver should be extended or whether FT A should extend the non-shift approach adopted in its 2007 Buy America Final Rule to the procurement of these units. Many of the waivers granted for the various banknote handling units predate the 2007 Final Rule and the waivers have continued to be considered and extended since then without applying the non-shift approach. Only three comments were received to the docket at the time of review. One comment was made in error to the wrong docket. The other two comments were made by individuals and generally supported a non-availability waiver for these products because of the products' non-availability in the United States.

On October 2, 2012, you requested a Buy America waiver for the described products as follows:

  • (1) TNSi BV-62000- Banknote Validator

    This product is:

    [A] self contained item of equipment which is able to accept all U.S. currency, determine its validity and the escrow up to 15 bills until the transaction in progress in the TVM has been successfully completed. If successful, the bills are transported to a secure cashbox. If successful, the bills are transported to a secure cashbox. If the transaction is not successful, the very same bills as inserted are returned to the customer. The cashbox associated with this validator can hold up to 1,000 bills.

    The TNSI BV-62000 Banknote Validator was granted a waiver on July 2 1, 2010, and your request is for a continued extension.3

  • (2) TNSi BV-6200LO- Banknote Validator

    This product is similar to the TNSI BV -6200G Banknote Validator described above, but is capable of accepting 2,000 bills.

  • (3) TNSi BR-7200- Banknote Recycler

    This product is "new and innovative'' to the United States (although used in Europe and Asia), according to Nextek, and verifies and places into escrow inserted bills. The bills, "upon successful completion of a [ticket vending machine (TVM)] transaction[,] are deposited into individual compartments by denomination and used for subsequent transactions to make change in lieu of coins only."

II. Buy America

With certain limited exceptions, FTA may not obligate funds for a project unless the manufactured products used in the project are produced in the United States.4 To be considered produced in the United States:

  • (1) All of the manufacturing processes for the product must take place in the United States; and

  • (2) All of the components of the product must be 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.5

On September 20, 2007, FTA published its Final Rule on Buy America. 72 Fed. Reg. 53688. In issuing its Final Rule, FTA adopted the non-shift approach whereby "end products do not shift and components and subcomponents retain their designation" regardless of the procurement at hand. Id. at 53691. An end product is defined to include a "system" at 49 C.F.R. § 661.3 and a fare collection system is listed in Appendix A to § 661.3 as an end product. However, depending upon the scope of the system, even a fare collection system can be broken out into several end products. 72 Fed. Reg. at 53693.

III. Discussion

Banknote handling units such as the TNSi BV-6200G-Banknote Validator, TNSi BV-6200LG-Banknote Validator, and TNSi BR-7200- Banknote Recycler are subcomponents of fare collection systems. As stated above, a fare collection system is considered an end product under FTA's Buy America regulations, but may be comprised of several end products notwithstanding. However, while a fare collection system may be broken out into several end products, a ticket vending machine of a fare collection system is a generally component of the fare collection system as an end product.6 A banknote handling unit such as the banknote validator and the banknote recycler are installed into the ticket vending machine. The banknote handling unit therefore, is a subcomponent of the component ticket vending machine, and FTA Buy America regulations do not require that subcomponents be of domestic origin. 49 C.F.R. § 661.5( d)(2). Application of the non-shift approach means that this designation does not change from procurement to procurement.

IV. Conclusion

For the foregoing reasons, I find that banknote handling units such as those described above are subcomponents of TVMs, which are components of a fare collection system. As subcomponents, a non-availability waiver for banknote handling units is not required as the origin of such parts is not considered under FTA Buy America law. Accordingly, a notice in the Federal Register allowing for public comment on this decision pursuant to 49 U.S.C. § 5323(j)(3) is not necessary.

Please contact Mary J. Lee at (202) 366-0985 or mary.j.lee@dot.gov with any questions.


Dorval R. Carter, Jr.

Chief Counsel


1 See, e.g., Letter from Scott A. Biehl, Acting Chief Counsel, FTA, to Alex Litchfield, Sales Director of Transit & Parking, MEl (Feb. 23, 2009); Letter from David B. Horner, Chief Counsel, FTA, to Sim Bielek, Vice President Sales & Marketing, CashCode Company, Inc. (Oct. 11, 2005); Letter from Gregory B. McBride, Deputy Chief Counsel, FTA, to Alex Litchfield, National OEM Manager, MEl (Nov. 12, 2004); Letter from Gregory B. McBride, Deputy Chief Counsel, FTA, to Brian Batzloft: Director of Compliance, JCM American Corporation; Letter from Gregory B. McBride, Deputy Chief Counsel, FTA, to Val Levitan, Senior Vice President of Sales & Marketing, Cash Code (June 11, 2003); Letter from Gregory B. McBride, Deputy Chief Counsel, FTA, to Fumihiko Hagiwara, Sales Supervisor, Toyocom U.S.A., Inc. (Dec. 13, 2002).

2 See 77 FED. REG. 26723 (May 7, 20I2). The notice also included waiver requests for the Mars Electronic Internation (MEl) Sodeco BNA57/542 Bill Handling Unit and the MEl BNY3-XX & BNR5-XX Bank Note Recycler Products.

3 Letter from Dorval R. Carter, Jr., Chief Counsel, Federal Transit Administration, to Norman Diamond, President of Nextek Corporation (July 21, 2010).

4 49 U.S.C. § 5323(j); 49 C.F.R. § 661.5(a).

5 49 C.F.R. § 661.5(d).

6 See Letter from Gregory B. McBride, Deputy Chief Counsel, Federal Transit Administration, to Michael H. Mulhern, General Manager, Massachusetts Bay Transportation Authority (Nov. 14, 2002). While this decision was issued prior to the 2007 adoption of the non-shift approach to Buy America, once a manufactured product is designated as an end product, component, or subcomponent, the subsequent analysis is the same under both approaches. Thus, if the end product is an automated fare collection system, for example, then the components and subcomponents of that system are the same under both the shifting approach and the non-shifting approach. See also Letter from Scott A. Biehl, Acting Chief Counsel, Federal Transit Administration, to Daniel Grabauskas, General Manager, Massachusetts Bay Transportation Authority (April 29, 2009).

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