[Federal Register Volume 60, Number 176 (Tuesday, September 12, 1995)]
[Proposed Rules]
[Pages 47442-47445]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22499]
[[Page 47441]]
_______________________________________________________________________
Part II
Department of Transportation
_______________________________________________________________________
Federal Transit Administration
_______________________________________________________________________
49 CFR Part 661
Buy America Requirements; Proposed Rule
Federal Register / Vol. 60, No. 176 / Tuesday, September 12, 1995 /
Proposed Rules
[[Page 47442]]
DEPARTMENT OF TRANSPORTATION
Federal Transit Administration
49 CFR Part 661
[Docket No. FTA-95-471]
RIN 2132-AA42
Buy America Requirements
AGENCY: Federal Transit Administration, DOT.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This notice of proposed rulemaking seeks to implement section
1048 of the Intermodal Surface Transportation Efficiency Act of 1991
(Public Law 102-240) (ISTEA), which amended the Federal Transit
Administration's (FTA) Buy America requirements. FTA requests comments
on its proposed implementation of the statutory provisions and on other
proposed amendments intended to update and clarify its Buy America
regulation, 49 CFR Part 661.
DATES: Comments must be received on or before November 13, 1995.
ADDRESSES: All comments concerning these proposed regulations should be
sent to Docket Clerk, Docket No. FTA-95-471, Department of
Transportation, Room PL-401, 400 Seventh Street SW., Washington, DC
20590.
FOR FURTHER INFORMATION CONTACT:
Rita Daguillard, Office of the Chief Counsel, (202) 366-1936.
SUPPLEMENTARY INFORMATION:
I. The ISTEA Amendments
A. Addition of ``Iron'' (Secs. 661.5(a)-(c))
Section 1048 of ISTEA amends 49 U.S.C. 5323(j) by adding ``iron''
to the products covered, and by inserting two new subsections
concerning waivers of the Buy America requirements. By adding the word
``iron,'' Congress has extended Buy America protection to iron and iron
products, in addition to steel and manufactured products, which were
previously protected. FTA intends to amend 49 CFR 661.5 (a) and (b) to
reflect this statutory amendment. FTA also proposes to amend 49 CFR
661.5(c) to specify that both the iron and steel requirements apply to
items made primarily from those materials and used in construction and
rail projects. These items include, but are not limited to, structural
steel or iron, steel or iron beams and columns, running rail and
contact rail. These requirements do not apply to steel or iron used as
components or subcomponents of other manufactured products or rolling
stock. FTA seeks comment on this proposed amendment of 49 CFR 661.5(c).
B. Intentional Violations (Sec. 661.18)
Section 1048(b) amends 49 U.S.C. 5323(j) by inserting subsection
(5), which states that any person determined by a Federal agency or
court to have affixed a false ``Made In America'' label to or
misrepresented the origin of a foreign product, shall be ineligible to
receive contracts funded by ISTEA, pursuant to suspension and debarment
proceedings. FTA intends to add new section 661.18 to implement this
statutory change.
C. Limitation on Applicability of Waivers (Sec. 661.7)
Section 1048(b) also amends 49 U.S.C. 5323(j) by adding subsection
(4), which provides that if a foreign country is party to an agreement
with the United States under which the Buy America requirements are
waived, and the foreign country violates the agreement by
discriminating against U.S. goods, products from that country shall not
be eligible for waivers under 49 U.S.C. 5323(j). FTA notes that there
is currently no agreement between the United States and a foreign
country which waives the Buy America requirements. FTA therefore
considers this provision inoperative at the present time. FTA intends
to amend 49 CFR 661.7 to add a new subsection that will reflect this
statutory change, and seeks comment on whether its conclusion that 49
U.S.C. 5323(j)(4) is not applicable at this time requires further
discussion or expansion.
II. Amendments to Update and Clarify the Buy America Regulation
FTA also seeks to update the regulation by removing provisions that
are no longer applicable, and to clarify certain other provisions.
A. Definition of ``Component'' (Sec. 661.3)
49 CFR Part 661, consistent with the Surface Transportation
Assistance Act of 1982 (STAA) and the Surface Transportation and
Uniform Relocation Assistance Act (STURAA), establishes separate
requirements for manufactured products and for rolling stock. To be
considered domestic, rolling stock must be assembled in the United
States and 60 percent of its components, by cost, must be of U.S.
origin. For a manufactured product to be considered domestic, all
manufacturing processes must take place in the United States and all of
its components must be of U.S. origin. In both cases, then, to
determine compliance with the Buy America requirements, it is necessary
to identify those parts of a product which may be considered
components.
Section 661.11, which sets out the separate requirements for
rolling stock, defines, at subsection (e), component as ``any article,
material, or supply, whether manufactured or unmanufactured, that is
directly incorporated into the end product at the final assembly
location.''
However, many suppliers of manufactured products have pointed out
to the FTA that neither section 661.3 (general definitions) nor section
661.5 (requirements for manufactured products) contains a similar
definition of component. They have therefore asked FTA for guidance in
determining what constitutes a component of a manufactured product.
FTA notes that the definition of component of subsection 661.11(e)
parallels that of the Federal Acquisition Regulations implementing the
Buy American Act of 1933 (49 U.S.C. Sec. 10a-d), which applies to
manufactured products generally. FTA therefore considers that it is
appropriate to apply this definition to components of manufactured
products as well as to components of rolling stock. Accordingly, FTA
proposes to add it to the definitions provision of the regulation,
section 661.11(3).
B. Component Requirement for Manufactured Products (Sec. 661.5(d)(2))
Section 165(b)(3) of the STAA, as amended by section 337 of STURAA,
imposes domestic preference requirements on the subcomponents of
components of rolling stock and associated equipment. No such similar
statutory changes were made to section 165(a) for manufactured
products. Therefore, the agency concluded that a manufactured product
is of domestic origin if it is manufactured in the United States. In
other words, in determining the origin of a component of a manufactured
product governed by section 165(a), FTA will look only to where the
product is manufactured, and will not look to the origin of the various
materials included in the product during the manufacturing process.
However, subsection 661.5(d)(2) of the regulation provides that for
a manufactured product to be considered of U.S. origin, ``all items or
material used in the product must be of United States origin.'' In
FTA's experience, the language of this provision has often created the
incorrect assumption that in determining the origin of a manufactured
product, FTA will consider all of its material content, even at the
subcomponent level and below. In order to correct this misperception,
FTA proposes to amend subsection 661.5(d)(2) to state that for a
[[Page 47443]]
manufactured product to be considered of domestic origin, all of its
components must be of United States origin. This amended provision will
also state that a component will be considered of U.S. origin if it is
manufactured in the United States, regardless of the origin of its
subcomponents.
C. Determination of Grandfathered Companies (Sec. 661.10)
Section 337 of the STURAA provided for a gradual increase in the
domestic content requirements for buses and other rolling stock from 50
percent to 60 percent. Section 337(a)(2)(B) of STURAA stated that these
revised requirements would not apply to any contract entered into prior
to April 1, 1992, with any supplier or contractor or any successor in
interest or assignee which had complied with the previous domestic
content requirements. Section 661.10 of the regulation sets out the
criteria for determining whether a company could qualify for
grandfather treatment.
Since the April 1, 1992, deadline has elapsed, and since there is
little likelihood that contracts for rolling stock executed prior to
that date are still outstanding, FTA will delete this grandfather
provision from its Buy America regulation.
D. Domestic Content Requirements for Rolling Stock (Secs. 661.11(a)-
(d))
As indicated above, section 337 of STURAA provided for a gradual
increase in the domestic content for rolling stock from the previous 50
percent level to 55 percent for contracts entered into after October 1,
1989, and to 60 percent for contracts entered into after October 1,
1991, and after April 1, 1992, for grandfathered companies. 49 CFR
661.11 (b) and (c) implemented these statutory provisions. Since the 60
percent domestic content requirement is now in effect for all contracts
executed after April 1, 1992, FTA intends to delete subsections 661.11
(b) and (c) and to amend subsection 661.11(a) to reflect this change.
Subsections (k) and (n) will also be revised to indicate that the 60
percent domestic content requirements also apply to components of
rolling stock. The remaining subsections of 49 CFR 661.11 will be re-
numbered accordingly.
E. Request for Comments
FTA requests comments on any of the amendments proposed today. In
addition to those matters, FTA requests recommendations or proposals
for other amendments which could further clarify the regulation or
facilitate its implementation.
III. Regulatory Impacts
A. Executive Order 12866
FTA has determined that this action is not significant under
Executive Order 12866 or the regulatory policies and procedures of
Department of Transportation regulatory policies and procedures. Since
this final rule makes only technical amendments to current regulatory
language, it is anticipated that the economic impact of this rulemaking
will be minimal; therefore, a full regulatory evaluation is not
required.
B. Regulatory Flexibility Act
In accordance with 5 U.S.C. 603(a), as added by the Regulatory
Flexibility Act, Pub. L. 96-354, FTA certifies that this rule will not
have a significant impact on a substantial number of small entities
within the meaning of the Act.
C. Paperwork Reduction Act
This action does not contain a collection of information
requirement for purposes of the Paperwork Reduction Act of 1980, 44
U.S.C. 3501, et seq.
D. Executive Order 12612
This action has been reviewed under Executive Order 12612 on
Federalism and FTA has determined that it does not have implications
for principles of Federalism that warrant the preparation of a
Federalism Assessment. If promulgated, this rule will not limit the
policy making or administrative discretion of the States, nor will it
impose additional costs or burdens on the States, nor will it affect
the States' abilities to discharge the traditional State governmental
functions or otherwise affect any aspect of State sovereignty.
IV. List of Subjects in 49 CFR Part 661
Buy America, Domestic preference requirement, Government contracts,
Grant programs-Transportation, Mass transportation.
V. Proposed Amendments to 49 CFR Part 661
Accordingly, for the reasons described in the preamble, it is
proposed that Part 661 of Title 49 of the Code of Federal Regulations
be amended as follows:
PART 661--[AMENDED]
1. By revising the authority citation to read as follows:
Authority: 49 U.S.C. 5323(j) (formerly Sec. 165, Pub. L. 97-424;
as amended by sec. 337, Pub. L. 100-17 and sec. 1048, Pub. L. 102-
240); 49 CFR 1.51.
2. By adding in alphabetical order a definition of ``Component'' to
Sec. 661.3 to read as follows:
Sec. 661.3 Definitions.
* * * * *
Component means any article, material, or supply, whether
manufactured or unmanufactured, that is directly incorporated into the
end product at the final assembly location.
* * * * *
3. By revising Sec. 661.5 to read as follows:
Sec. 661.5 General requirements.
(a) Except as provided in Secs. 661.7 and 661.11 of this part, no
funds may be obligated by FTA for a grantee project unless all iron,
steel, and manufactured products used in the project are produced in
the United States.
(b) All steel and iron manufacturing processes must take place in
the United States, except metallurgical processes involving refinement
of steel additives.
(c) The steel and iron requirements apply to all items made
primarily of steel and iron including, but not limited to, structural
steel or iron, steel or iron beams and columns, running rail and
contact rail. These requirements do not apply to steel or iron used as
components or subcomponents of other manufactured products or rolling
stock.
(d) 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 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.
4. By adding new 661.7(h) to read as follows:
Sec. 661.7 Waivers.
* * * * *
(h) The provisions of this section shall not apply to products
produced in a foreign country if the Secretary, in consultation with
the United States Trade Representative, determines that:
(1) That foreign country is party to an agreement with the United
States pursuant to which the head of an agency of the United States has
waived the requirements of this section; and
(2) That foreign country has violated the terms of the agreement by
discriminating against products covered by this section that are
produced in the United States and are covered by the agreement.
[[Page 47444]]
Sec. 661.10 [Removed]
5. By deleting Sec. 661.10.
6. By revising Sec. 661.11 to read as follows:
Sec. 661.11 Rolling stock procurements.
(a) The provisions of Sec. 661.5 do not apply to the procurement of
buses and other rolling stock (including train control, communication,
and traction power equipment), if the cost of components produced in
the United States is more than 60 percent of the cost of all components
and final assembly takes place in the United States.
(b) The domestic content requirements in paragraph (a) of this
section also apply to the domestic content requirements for components
set forth in paragraphs (i),(j), and (l) of this section.
(c) A component is any article, material, or supply, whether
manufactured or unmanufactured, that is directly incorporated into an
end product at the final assembly location.
(d) A component may be manufactured at the final assembly location
if the manufacturing process to produce the component is a separate and
distinct activity from the final assembly of the end product.
(e) A component is considered to be manufactured if there are
sufficient activities taking place to advance the value or improve the
condition of the subcomponents of that component; that is, if the
subcomponents have been substantially transformed or merged into a new
and functionally different article.
(f) Except as provided in paragraph (k) of this section, a
subcomponent is any article, material, or supply, whether manufactured
or unmanufactured, that is one step removed from a component (as
defined in paragraph (c) of this section) in the manufacturing process
and that is incorporated directly into a component.
(g) For a component to be of domestic origin, more than 60 percent
of the subcomponents of that component, by cost, must be of domestic
origin and the manufacture of the component must take place in the
United States. If, under the terms of this part, a component is
determined to be of domestic origin, its entire cost may be used in
calculating the cost of domestic content of an end product.
(h) A subcomponent is of domestic origin if it is manufactured in
the United States.
(i) If a subcomponent manufactured in the United States is exported
for inclusion in a component that is manufactured outside the United
States and it receives tariff exemptions under the procedures set forth
in 19 CFR 10.11 through 10.24, the subcomponent retains its domestic
identity and can be included in the calculation of the domestic content
of an end product even if such a subcomponent represents less than 60
percent of the cost of a particular component.
(j) If a subcomponent manufactured in the United States is exported
for inclusion in a component manufactured outside the United States and
it does not receive tariff exemption under the procedures set forth in
19 CFR 10.11 through 10.24, the subcomponent loses its domestic
identity and cannot be included in the calculation of the domestic
content of an end product.
(k) Raw materials produced in the United States and then exported
for incorporation into a component are not considered to be a
subcomponent for the purpose of calculating domestic content. The value
of such raw materials is to be included in the cost of the foreign
component.
(l) If a component is manufactured in the United States, but
contains less than 60 percent domestic subcomponents, by cost, the cost
of the domestic subcomponents and the cost of manufacturing the
component may be included in the calculation of the domestic content of
the end product.
(m) For purposes of this section, except as provided in paragraph
(o) of this section:
(1) The cost of a component or a subcomponent is the price that a
bidder or offeror must pay to a subcontractor or supplier for that
component or subcomponent. Transportation costs to the final assembly
location must be included in calculating the cost of a component.
Applicable duties must be included in determining the cost of foreign
components and subcomponents.
(2) If a component or subcomponent is manufactured by the bidder or
offeror, the cost of the component is the cost of labor and materials
incorporated into the component or subcomponent, an allowance for
profit, and the administrative and overhead costs attributable to that
component or subcomponent under normal accounting principles.
(n) The cost of a component of foreign origin is set at the time
the bidder or offeror executes the appropriate Buy America certificate.
(o) The cost of a subcomponent that retains its domestic identity
consistent with paragraph (j) of this section shall be the cost of the
subcomponent when last purchased, f.o.b. United States port of
exportation or point of border crossing as set out in the invoice and
entry papers or, if no purchase was made, the value of the subcomponent
at the time of its shipment for exportation, f.o.b. United States port
of exportation or point of border crossing, as set out in the invoice
and entry papers.
(p) In accordance with 49 U.S.C. 5323(j), labor costs involved in
final assembly shall not be included in calculating component costs.
(q) The actual cost, not the bid price, of a component is to be
considered in calculating domestic content.
(r) Final assembly is the creation of the end product from
individual elements brought together for that purpose through
application of manufacturing processes. If a system is being procured
as the end product by the grantee, the installation of the system
qualifies as final assembly.
(s) An end product means any item subject to 49 U.S.C. 5323(j),
that is to be acquired by a grantee, as specified in the overall
project contract.
(t) Train control equipment includes, but is not limited to, the
following equipment:
(1) Mimic board in central control.
(2) Dispatcher's console.
(3) Local control panels.
(4) Station (way side) block control relay cabinets.
(5) Terminal dispatcher machines.
(6) Cable/cable trays.
(7) Switch machines.
(8) Way side signals.
(9) Impedance bonds.
(10) Relay rack bungalows.
(11) Central computer control.
(12) Brake equipment.
(13) Brake systems.
(u) Communication equipment includes, but is not limited to, the
following equipment:
(1) Radios.
(2) Space station transmitter and receivers.
(3) Vehicular and hand-held radios.
(4) PABX telephone switching equipment.
(5) PABX telephone instruments.
(6) Public address amplifiers.
(7) Public address speakers.
(8) Cable transmission system cable.
(9) Cable transmission system multiplex equipment.
(10) Communication console at central control.
(11) Uninterruptible power supply inverters/rectifiers.
(12) Uninterruptible power supply batteries.
(13) Data transmission system central processors.
(14) Data transmission system remote terminals.
(15) Line printers for data transmission system.
[[Page 47445]]
(16) Communication system monitor test panel.
(17) Security console at central control.
(v) Traction power equipment includes, but is not limited to the
following:
(1) Primary AC switch gear.
(2) Primary AC transformers (rectifier).
(3) DC switch gear.
(4) Traction power console and CRT display system at central
control.
(5) Bus ducts with buses (AC and DC).
(6) Batteries.
(7) Traction power rectifier assemblies.
(8) Distribution panels (AC and DC).
(9) Facility step-down transformers.
(10) Motor control centers (facility use only).
(11) Battery chargers.
(12) Supervisory control panel.
(13) Annunciator panels.
(14) Low voltage facility distribution switch board.
1(5) DC connect switches.
(16) Negative bus boxes.
(17) Power rail insulators.
(18) Power cables (AC and DC).
(19) Cable trays.
(20) Instrumentation for traction power equipment.
(21) Connectors, tensioners, and insulators for overhead power wire
systems.
(22) Negative drainage boards.
(23) Inverters.
(24) Traction motors.
(25) Propulsion gear boxes.
(26) Third rail pick-up equipment.
(27) Pantographs.
(w) The power or third rail is not considered traction power
equipment and is thus subject to the requirements of 49 U.S.C. 5323(j)
and the requirements of Sec. 661.5.
(x) A bidder on a contract for an item covered by 49 U.S.C. 5323(j)
who will comply with section 165(b)(3) and regulations in this section
is not required to follow the application for waiver procedures set out
in Sec. 661.9. In lieu of these procedures, the bidder must submit the
appropriate certificate required by Sec. 661.12.
7. By adding Sec. 661.18 to read as follows:
Sec. 661.18 Intentional violations.
Any person shall be ineligible to receive any contract or
subcontract made with funds authorized under the Intermodal Surface
Transportation Efficiency Act of 1991 pursuant to the debarment and
suspension proceedings under part 29 of this title if it has been
determined by a court or Federal agency that any person intentionally--
(a) Affixed a label bearing a ``Made in America'' inscription, or
an inscription with the same meaning, to a product not made in the
United States, but sold in or shipped to the United States and used in
projects to which this section applies, or
(b) Otherwise represented that any such product was produced in the
United States.
Issued on: September 5, 1995.
Gordon J. Linton,
Administrator.
[FR Doc. 95-22499 Filed 9-11-95; 8:45 am]
BILLING CODE 4910-57-M
