[Federal Register Volume 60, Number 141 (Monday, July 24, 1995)]
[Rules and Regulations]
[Pages 37930-37932]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-18105]
[[Page 37929]]
_______________________________________________________________________
Part III
Department of Transportation
_______________________________________________________________________
Federal Transit Authority
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49 CFR Part 661
Buy America Requirements; Final Rule
Federal Register / Vol. 60, No. 141 / Monday, July 24, 1995 / Rules
and Regulations
[[Page 37930]]
DEPARTMENT OF TRANSPORTATION
Federal Transit Administration
49 CFR Part 661
[Docket No. 94-A]
RIN 2132-AA42
Buy America Requirements
AGENCY: Federal Transit Administration (FTA), DOT.
ACTION: Final rule; General public interest waiver from Buy America
requirements for small purchases.
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SUMMARY: FTA is issuing a general public interest waiver from the Buy
America requirements for ``small purchases'' made by FTA grantees with
capital, planning, or operating assistance.
EFFECTIVE DATE: This waiver is effective July 24, 1995.
FOR FURTHER INFORMATION CONTACT: Gregory B. McBride, Deputy Chief
Counsel, Office of Chief Counsel, (202) 366-4063.
SUPPLEMENTARY INFORMATION:
Background
On March 15, 1995, FTA issued a general public interest waiver,
under 49 U.S.C. Sec. 5323(j)(2)(A) and 49 CFR 661.7(b), from its Buy
America requirements for purchases of $2,500 or less (known as ``micro-
purchases'') made with FTA financial assistance, including capital,
planning, and operating assistance. 60 FR 14174 (March 15, 1995). FTA
found this waiver to be in the public interest because it simplifies
government procedures and streamlines government procurement
requirements, consistent with the President's National Performance
Review, Executive Order 12931 (Federal Procurement Reform), and the
Federal Acquisition Streamlining Act of 1994 (FASA), Public Law 103-
355, 108 Stat. 3243 (October 13, 1994).
Also on March 15, 1995, FTA proposed in a separate notice to issue
a general public interest waiver under the same authority for ``small
purchases'' made by its grantees with FTA financial assistance,
including capital, planning, and operating assistance, and for all
purchases by FTA grantees with operating assistance. After considering
the comments received, FTA is hereby issuing a general public interest
waiver for small purchases, as defined in the grants management common
rule at 49 CFR 18.36(d), as recently amended by the Office of
Management and Budget (60 FR 19639 (April 19, 1995)), made by FTA
grantees with capital, planning, or operating assistance. The recent
amendment raised the threshold for a ``small purchase'' to $100,000.
The Buy American Act of 1933, 41 U.S.C. Sec. 10a-d, established a
preference for domestically produced goods in direct Federal
procurements. The first Buy America legislation applicable to the
expenditure of Federal funds by recipients under FTA and Federal
Highway Administration (FHWA) grant programs was enacted in 1978:
Section 401 of the Surface Transportation Assistance Act of 1978 (Pub.
L. 95-599, 92 Stat. 2689) established a domestic preference for
``articles, materials, supplies mined, produced, or manufactured'' in
the United States and costing more than $500,000.
In January 1983, Congress repealed section 401 and substituted
section 165 of the Surface Transportation Assistance Act of 1982, Pub.
L. 97-424, 96 Stat. 2097. This action, among other things, eliminated
the $500,000 threshold. Congress prohibited the expenditure of FTA or
FHWA funds on steel, cement, and ``manufactured products,'' but as
discussed below, included four exceptions permitting the statute to be
waived. In 1984, Congress removed cement from section 165, and in 1991
added iron (see section 337 of the Surface Transportation Assistance
and Uniform Relocation Act of 1987 (Pub. L. 100-17, 101 Stat. 32) and
section 1048 of the Intermodal Surface Transportation Efficiency Act of
1991 (Pub. L. 102-204, 105 Stat. 1914)).
The current Buy America requirement, recently codified at 49 U.S.C.
Sec. 5323(j), applies to purchases made with Federal transit and
highway funds:
(j) BUY AMERICA.--(1) The Secretary of Transportation may
obligate an amount that may be appropriated to carry out this
chapter for a project only if the steel, iron, and manufactured
goods used in the project are produced in the United States.
(2) The Secretary of Transportation may waive paragraph (1) of
this subsection if the Secretary finds that--
(A) Applying paragraph (1) would be inconsistent with the public
interest;
(B) 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;
(C) When procuring rolling stock (including train control,
communication, and traction power equipment) under this chapter--
(i) The cost of components and subcomponents produced in the
United States is more than 60 percent of the cost of all components
of the rolling stock; and
(ii) Final assembly of the rolling stock has occurred in the
United States; or
(D) Including domestic material will increase the cost of the
overall project by more than 25 percent.
FTA issued regulations implementing this provision at 49 CFR Part
661. These regulations specify that ``for a manufactured product 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 items or material used in the product must be of United States
origin.'' 49 CFR 661.5(d). In contrast, the regulation implementing the
1933 Buy American Act requires that manufactured products contain only
a 51 percent domestic content.
These requirements have resulted in individual Buy America waiver
requests from grantees for thousands of items. As a general rule, most
grantees have many more procurements for small items than for large
items. Many involve purchases of less than $20, with unit prices under
one dollar and often less than one cent. The volume of these waiver
requests has resulted in significant delays in grantees' procurement
processes. They consume an inordinate amount of grantee and FTA staff
time, since documentation for each waiver request must be developed and
submitted to FTA, where it is reviewed and acted on. Large grantees
handle thousands of individual procurements each year. FTA's triennial
reviews reveal that many grantees have difficulty in complying with Buy
America requirements with respect to their small procurements.
Analysis and Comments
During the comment period, FTA received 62 comments, most from
transit authorities, state and local governments, manufacturers, and
suppliers. The commenters, who were nearly unanimous in their support
of the issuance of this public interest waiver, raised a number of key
issues:
Cost savings. Most transit authorities indicated that one to eleven
extra procurement staff are necessary to comply fully with Buy America
requirements, at a cost of up to $540,000 per grantee annually. In
addition, transit authorities spend more than they need to because they
are not able to buy supplies as needed, on a ``just-in-time'' basis.
Instead, because purchasing is difficult under Buy America
requirements, transit authorities are obliged to lump purchases
together and maintain a larger inventory than is needed or practical.
Transit authorities noted that if Buy America requirements were
waived, they would be able to realize further savings by purchasing
more often
[[Page 37931]]
through cooperative state and local government purchasing agreements.
In addition, several commenters believe that a greater number of
vendors will participate in the bidding process if the vendors do not
have to supply Buy America documentation. More vendors should mean more
competition, which should lead to lower overall prices on purchases
made by FTA grantees.
Administrative Burdens
Transit authorities noted that current Buy America requirements
impose a significant administrative burden because each purchase
requires its own Buy America waiver if the purchase involves a possible
non-U.S. product. Several recent initiatives, including Executive Order
12931 of October 13, 1994, on Federal Procurement Reform (60 FR 52387
(April 19, 1995)), direct federal agencies to remove administrative
burdens in procurement processes. In fact, section 1(e) of this
Executive Order directs agency heads to ``ensure that simplified
acquisition procedures are used, to the maximum extent practicable, for
procurements under the simplified acquisition threshold in order to
reduce administrative burdens and more effectively support the
accomplishment of agency missions.'' The Federal Highway
Administration, the only other agency within the U.S. Department of
Transportation with a regulation implementing section 165 of the STAA,
already considers factors such as cost, administrative burden, and
delay when it decides whether to issue a public interest waiver from
Buy America requirements. 23 CFR 635.410(c)(7).
FTA's current Buy America regulation, as applied to purchases under
the simplified acquisition threshold, does not effectively support the
accomplishment of FTA's missions, since the regulation imposes a burden
on small purchases without conferring a commensurate benefit.
Non-Availability of Domestic Products
As noted above, 49 CFR 661.5(d) provides that goods must be 100
percent ``made in the U.S.A.'' to be considered domestic under this
regulation.
This is a difficult and often impossible standard to meet, given
the highly integrated, international nature of manufacturing today.
Most products incorporate at least one foreign component or some
overseas manufacturing. Nearly all FTA waivers are now granted because
domestically produced goods, as defined in the regulations, are not
available. These waivers are based on the determination that ``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.'' 49 U.S.C. Sec. 5323(j)(2)(B).
FTA has issued general public interest waivers in the past based on
the difficulty of obtaining goods that are 100 percent made in the
United States. Microcomputers and software were granted a general
public interest waiver because many product components, particularly
microchips, are still made and assembled abroad. FTA also recognized
that the computer industry is becoming increasingly multinational in
nature. Since it is unduly burdensome on transit operators to procure
domestically produced microcomputers and software, FTA issued a general
public interest waiver for these products. 51 FR 36126 (October 8,
1986).
Fifteen-passenger Chrysler vans and wagons were also given a
general public interest waiver even though final assembly took place in
Canada. Commenters pointed out that Ford would be the only entity able
to supply vans and wagons under the Buy America regulation. FTA
concluded that the public had an important interest in competition and
issued the waiver. 49 FR 13944 (April 9, 1984).
Non-availability and public interest are related concepts. If a
domestic product is nearly impossible to procure, it is not in the
public interest to require grantees to give a justification each time
they purchase a non-domestic product. This requirement results in
excess cost, administrative burden, and delay. The consideration of
non-availability in public interest waivers is demonstrated in two
recent FHWA general public interest waivers--one for pig iron and
processed, pelletized, and reduced iron ore (60 FR 15478 (March 24,
1995)), and the other for certain ferryboat equipment and machinery (59
FR 6080, February 9, 1994)). In both cases, the basis for the
nationwide waiver was that the waived product was not produced in the
United States in sufficient and reasonably available quantities which
are of a satisfactory quality. Therefore, FHWA reasoned, imposing Buy
America requirements on these materials is not in the public interest.
The same reasoning may be applied to small purchases by FTA
grantees that are subject to Buy America regulations. Since domestic
goods (as defined in the Buy America regulations) are rarely available
to FTA grantees making small purchases, it is not in the public
interest to impose the Buy America requirements on them.
Clarification of the Term ``Small Purchase''
Several commenters indicated that the definition of ``small
purchase'' needs to be clarified, questioning whether the value of a
small purchase should be determined by a ``unit'' price or a
``contract'' price. The Federal Acquisition Streamlining Act, in which
the small purchase threshold is discussed (see 60 FR 19639), uses
contract price to determine the value of small purchases; accordingly,
for the purposes of this Buy America general public interest waiver,
``contract price'' will be the measure for determining whether a
procurement is a ``small purchase.'' Note, however, that grantees may
not split procurements for requirements that exceed the threshold in
order to avoid Buy America rules that would otherwise apply.
Purchases Over $100,000 Made With Operating Assistance
Several commenters indicated that FTA went too far by proposing to
waive purchases over $100,000 made with operating assistance. They
argued that such a waiver might lead to shifting funds between
operating and capital budgets simply to circumvent Buy America
requirements for purchases over $100,000. After careful consideration,
we agree that operating assistance should be treated the same as
capital and planning assistance for this purpose.
Recent initiatives, including the Federal Procurement Reform
(Executive Order 12931 dated October 13, 1994); the Federal Acquisition
Streamlining Act of 1994; and OMB's final rule applying the $100,000
simplified acquisition threshold for direct Federal purchases to
purchases by Federal recipients of financial assistance under the
common grant rule (60 FR 19639), indicate that streamlining small
purchases is in the public interest. These initiatives, however, do not
indicate that it is in the public interest to expedite larger, more
significant procurements in the same way. In fact, the legislative
history of Buy America indicates that Congress has traditionally been
concerned about developing domestic sources for large procurements.
Complete Waiver of Buy America Requirements
We note that several suppliers of manufactured goods, primarily
Canadian companies, argued that Buy America requirements should be
waived for all transit purchases, since the transit supply industry in
the United
[[Page 37932]]
States is highly integrated. However, as discussed above, Congress and
the Executive Branch have indicated, via several legislative and
regulatory initiatives, that streamlining small purchases is in the
public interest. They have not yet indicated through legislative or
regulatory initiatives that streamlining all transit purchases is in
the public interest.
Concern About Unfairly Priced or Shoddy Foreign Goods
A few commenters (U.S. manufacturers) expressed concern that waiver
of Buy America requirements for small purchases would result in a flood
of unfairly priced or shoddily made foreign goods into the U.S. market.
These concerns are better addressed by solutions other than the
imposition of Buy America requirements. Determination of whether goods
conform to the standards set out in individual contracts and
enforcement of those contract provisions are best left to FTA grantees.
Problems involving unfair trade practices or foreign government
subsidies are addressed by import laws such as Title VII of the Tariff
Act of 1930, as amended (19 U.S.C. Secs. 1671 and 1673 (Imposition of
Countervailing Duties and Antidumping Duties, respectively)). These
problems are beyond the scope of what Buy America was intended to
accomplish.
Impact Analysis
Executive Order 12866 requires that a regulatory impact analysis be
prepared for significant rules, which are defined in the Order as rules
that have an annual effect on the national economy of $100 million or
more, or certain other specified effects.
FTA does not believe that this action will have an annual impact of
$100 million or more or the other effects listed in the Order. For this
reason, FTA has determined that this waiver would not create a major
rule within the meaning of this order.
Regulatory Flexibility Act of 1980
The Regulatory Flexibility Act (5 U.S.C. Sec. 605(b)) requires
that, for each rule with a ``significant economic impact on a
substantial number of small entities,'' an analysis must be prepared
describing the impact of the rule on small entities and identifying any
significant alternatives to the rule that would minimize the economic
impact on small entities.
FTA certifies that this waiver will not have a significant economic
impact on a substantial number of small entities. Instead, it modifies
and updates an administrative and procedural requirement in order to
reduce burden on small entities.
Paperwork Reduction Act
FTA certifies that this action does not impose any additional
reporting or recordkeeping requirements under the Paperwork Reduction
Act of 1980, 44 U.S.C. Chapter 35; in fact, it should reduce the
paperwork required to procure goods.
Public Interest Waiver
In light of these considerations, FTA believes that application of
its Buy America rule to small purchases is not consistent with the
public interest; accordingly, FTA hereby issues a general public
interest waiver under 49 U.S.C. Sec. 5323(j)(2)(A) and 49 CFR 661.7(b)
to exempt from its Buy America requirements all ``small purchases,'' as
defined in the common grant rule, 49 CFR 18.36(d), made by its grantees
with FTA financial assistance, including capital, planning, or
operating assistance.
List of Subjects in 49 CFR Part 661
Buy America, Grant programs--tranportation, Mass Transportation,
Reporting and recordkeeping requirements.
Amendment to 49 CFR Part 661
Accordingly, for the reasons described above, title 49, Code of
Federal Regulations, part 661, is amended as follows:
PART 661--BUY AMERICA REQUIREMENTS--SURFACE TRANSPORTATION
ASSISTANCE ACT OF 1982, AS AMENDED
1. The authority citation for part 661 continues to read as
follows:
Authority: 49 U.S.C. 5323(j) (Pub. L. No. 103-272); 49 CFR 1.51.
2. Appendix A to Sec. 661.7 is amended by revising paragraph (e) to
read as follows:
Appendix A to Sec. 661.7--General Waivers
* * * * *
(e) Under the provisions of Sec. 661.7(b) of this part, a
general public interest waiver from the Buy America requirements for
``small purchases'' (as defined in the ``common grant rule,'' at 49
CFR 18.36(d)) made by FTA grantees with capital, planning, or
operating assistance.
Issued on: July 19, 1995.
Gordon J. Linton,
Administrator.
[FR Doc. 95-18105 Filed 7-21-95; 8:45 am]
BILLING CODE 4910-57-P
