Steven D. Miller, Esq.
Hanson Bridgett LLP
425 Market Street, 26th Floor
San Francisco, CA 94105
Dear Mr. Miller:
The Golden Gate Bridge, Highway & Transportation District ("District") has asked for guidance from the Federal Transit Administration ("FTA") regarding the applicability of Buy America provisions (49 U.S.C. § 5323(j), as implemented by 49 C.F.R. Part 661) to the District's planned rebuild of its ferry boat fleet. Specifically, the District has asked whether its planned rebuild would be considered a procurement of rolling stock, and could thus apply the rolling stock waiver of 49 U.S.C. § 5323(j)(2)(C), as implemented by 49 C.F.R. § 661.11. [FN1] It is FTA's opinion that the District's planned rebuild of its ferry boat fleet would be considered a procurement of rolling stock subject to Section 661.11. My reasoning is explained in greater detail below.
I understand the District is planning to use Federal funds to rebuild its Spaulding fleet, which consist of three ferry boats-the M.S. San Francisco, M.S. Marin and the M.S. Sonoma. The rebuild work for the M.S. San Francisco will consist of stripping that ferry boat down to its aluminum hull, modifying the hull, and installing new seating, flooring, engines, navigation equipment and other equipment. According to the District, the rebuild work for the M.S. Marin and M.S. Sonoma would be less extensive. However, I understand that, after the M.S. San Francisco, M.S. Marin and M.S. Sonoma are rebuilt, they will be "like new" with a useful life equal to a new ferry boat.
With limited exceptions, Federal funds may not be obligated for a project unless all iron, steel and manufactured products used in that project are produced in the United States. [FN2] A statutory waiver exempts rolling stock procurements from these general requirements. [FN3] For "rolling stock," which includes ferry boats, [FN4] the cost of rolling stock components produced in the United States must be more than sixty percent (60%) of the cost of all components and final assembly must take place in the United States. [FN5]
There is no direct law and minimal FTA guidance on the application of Buy America requirements to rolling stock rebuilds. Indeed, Buy America's statutory provision (49 U.S.C. § 5323(j)) and implementing regulations (49 C.F.R. Part 661) do not include the term "rebuild." Furthermore, FTA Circulars lack explicit instructions on how to apply Buy America requirements to rolling stock rebuilds. However, those circulars do define "rebuild" as "[a] recondition at the end of useful life that creates additional useful life" and "a capital expense incurred at or near the end of the rolling stock's useful life that results in a new useful life of the rolling stock that is consistent with the extent of the rebuilding." [FN6]
FTA's intent in issuing guidance on purchasing rolling stock replacement parts when it updated its Buy America regulations in 2007 also provides some instruction. [FN7] In that guidance, FTA, with the purpose of simplifying country-of-origin rules for the procurement of replacement parts, adopted "non-shifting" characterizations of replacement parts as components or subcomponents and stated that a procurement of
replacement parts would be considered a procurement of manufactured products:
Under the new approach, procurements for replacement parts, whether components or subcomponents of the original end product, would retain their characterization and the requirements applicable to manufactured products would apply. This new approach would apply consistently to the procurement of replacement parts for rolling stock as well as to manufactured products. [FN8]
FTA intended that guidance to apply to rolling stock overhauls, a category of activity that differs from rebuilds, and intended to treat rebuilds as procurements of rolling stock. [FN9]
FTA plans to confirm this interpretation by publishing a policy statement in the Federal Register and allowing for public comment in accordance with 49 United States Code section 5334(1).
Here, the District plans to rebuild the M.S. San Francisco, M.S. Marin and M.S. Sonoma. All those vessels are ferry boats and, therefore, fall within the definition of"rolling stock." [FN10] Furthermore, we understand that after the M.S. San Francisco, M.S. Marin and M.S. Sonoma are rebuilt, they will be "like new" with an extended useful life that meets FTA's useful life policy set forth in FTA Circular 5010.1D, Chapter IV, Section 3.f. Based on these facts, FTA considers the rebuilds of the M.S. San Francisco, M.S. Marin and M.S. Sonoma to be procurements of rolling stock. As a result, the rolling stock standard would apply, and the cost of components produced in the United States must be more than sixty percent (60%) of the cost of all components used to rebuild each ferry boat, and final assembly of each ferry boat must take place in the United States. [FN11].
Should you have any questions or wish to discuss this matter, please contact Jayme Blakesley, Acting Assistant Chief Counsel for General Law, at (202) 366-0204 or firstname.lastname@example.org.
Dorval R. Carter
FN1. Unless otherwise noted, all references to "Section" are to Title 49 of the Code of Federal Regulations.
FN2. 49 C.F.R. § 661.5(a).
FN3. Id. § 661.11(a).
FN4. Id. § 661.3.
FN5. Id. § 661.11(a).
FN6. FTA Circular 5010.10, Ch. I, § 5.bbb (Nov. 11, 2008).
FN7. See 72 Fed. Reg. 53,688; 72 Fed. Reg. 55,102 (amending 72 Fed. Reg. 53,688).
FN8. 72 Fed. Reg. 53,688, 53,692.
FN9. An "overhaul" is a form of preventive maintenance involving "systematic replacement or upgrade of systems whose useful life is less than the useful life of the entire vehicle in a programmed manner" FTA Circular 5010.1D, Ch. I, § 5.qq. (Nov. 11, 2008). An overhaul, unlike a rebuild, does not extend the useful life of the vehicle. Instead, an overhaul focuses on the useful lives of systems that comprise the vehicle, enabling the entire vehicle to perform to the end of its original useful life. Id., Ch. IV, § 3 .h.
FN10. 49 C.F.R. § 661.3.
FN11. 49 C.F.R. § 661.11(a).
Applicability of Buy America provisions to planned ferry boat rebuild.