[Federal Register Volume 77, Number 98 (Monday, May 21, 2012)]
[Proposed Rules]
[Pages 29953-29955]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-9698]


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DEPARTMENT OF TRANSPORTATION

Federal Transit Administration

49 CFR Part 661

[Docket No. FTA-2012-0019]


Application of Buy America Waivers to Rolling Stock Overhauls and 
Rebuilds

AGENCY: Federal Transit Administration (FTA), DOT.

ACTION: Notice of proposed statement of policy and request for comment.

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SUMMARY: This notice proposes a statement of policy regarding the 
application of the Federal Transit Administration's Buy America rules 
to procurements for the overhaul and rebuilding of rolling stock, and 
seeks comment from all interested parties.

DATES: Comments must be received by June 20, 2012. Late-filed comments 
will be considered to the extent practicable.

ADDRESSES: Please submit your comments by only one of the following 
means, identifying your submissions by docket number FTA-2012-0019. All 
electronic submissions must be made to the U.S. Government electronic 
site at http://www.regulations.gov. Commenters should follow the 
instructions below for mailed and hand-delivered comments:
    Federal e-Rulemaking Portal: Go to http://www.regulations.gov. 
Follow the online instructions for submitting comments.
    U.S. Mail: U.S. Department of Transportation, Docket Operations, 
West Building, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 
20590.
    Hand Delivery: U.S. Department of Transportation, Docket 
Operations, West Building, Room W12-140, 1200 New Jersey Avenue SE., 
Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, 
except Federal holidays.
    Fax: (202) 493-2251.
    Instructions: All submissions must make reference to the ``Federal 
Transit Administration'' and include docket number FTA-2012-0019. Due 
to security procedures in effect since October 2001, mail received 
through the U.S. Postal Service may be subject to delays. Parties 
making submissions responsive to this notice should consider using an 
express mail firm to ensure the prompt filing of any submissions not 
filed electronically or by hand. Note that all submissions received, 
including any personal information therein, will be posted without 
change or alteration to http://www.regulations.gov. For more 
information, you may review DOT's complete Privacy Act Statement in the 
Federal Register published on April 11, 2000 (65 FR 19477), or visit 
http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Jayme L. Blakesley at (202) 366-0304 
or [email protected].

SUPPLEMENTARY INFORMATION:

I. Introduction

    The purpose of this notice is to propose a statement of policy that 
will

[[Page 29954]]

clarify how to apply FTA's Buy America requirements to procurements for 
the overhaul and rebuilding of rolling stock. Until now, the practice 
of FTA grantees has been to apply the statutory waiver of 49 U.S.C. 
5323(j)(2)(C) to all rolling stock procurements, including the purchase 
of new vehicles, overhauls, and rebuilds. The waiver allows up to 40 
percent foreign content per vehicle. This practice has continued 
despite FTA's intention in its latest rulemaking, for which the final 
rule was published at 72 FR 53688 on September 20, 2007, to start 
requiring 100 percent U.S. content for all rolling stock components 
purchased as part of an overhaul. To bring industry practices in line 
with the 2007 rulemaking, FTA proposes this statement of policy, the 
purpose of which is to clarify what FTA intended in 2007--to apply the 
manufactured products standard of 49 CFR 661.5 to the purchase of all 
components for rolling stock overhauls.

II. Background

A. Buy America's Requirements

    With few exceptions, Buy America prohibits FTA from funding a 
project unless ``the steel, iron, and manufactured goods used in the 
project are produced in the United States.'' 49 U.S.C. 5323(j)(1).These 
general requirements are waived for the procurement of rolling stock if 
the cost of the components produced in the United States is more than 
60 percent of the cost of all components of the rolling stock and final 
assembly takes place in the United States. 49 U.S.C. 5323(j)(2)(C) 
(implemented at 49 CFR 661.11).
    There is no direct law and little guidance on how to apply Buy 
America requirements to overhauls and rebuilds. The statutory provision 
on Buy America, 49 U.S.C. 5323(j), and implementing regulations, 49 CFR 
part 661, do not include the terms overhaul or rebuild. At least one 
FTA Circular discusses rebuilds and overhauls, but lacks explicit 
instructions for how to apply the Buy America requirements to each 
level of activity. FTA's Grant Management Circular 5010.1D discusses 
rebuilds and overhauls in the context of determining the useful life of 
a vehicle:
    Rebuild. A rolling stock rebuild is a reconditioning at the end of 
a vehicle's useful like that creates additional useful life. A vehicle 
to be rebuilt should have already reached the end of its minimum useful 
life. An eligible rail car rebuild must extend the vehicle's useful 
life by a minimum of ten years, and a bus rebuild must extend the 
vehicle's life by a minimum of four years. FTA Circular 5010.1D, ch. I 
section 5.bbb, ch. IV section 3.g.
    Overhaul. A rolling stock overhaul (sometimes called a 
refurbishment) is a form of preventative 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.Overhaul is performed as a planned or concentrated preventative 
maintenance activity and is intended to enable the rolling stock to 
perform to the end of the original useful life.'' Id. at ch. I section 
5.qq. In contrast to a rolling stock rebuild, an overhaul does not 
extend the useful life of the vehicle itself. Rather, it focuses on the 
useful lives of the systems that comprise the vehicle, enabling the 
entire vehicle to perform to the end of its original useful life. Id. 
at ch. I section 5.qq, ch. IV section 3.h.

B. FTA's 2007 Buy America Rulemaking

    In 2007, as part of its Final Rule on Buy America, FTA published in 
the Federal Register a description of how to apply Buy America to 
certain end products and components, including rolling stock. 72 FR 
53688, Sept. 20, 2007; 72 FR 55102, Sept. 28, 2007 (making a minor 
correction to 72 FR 53688). Although that rulemaking did not address 
rolling stock rebuilds and overhauls specifically, it did provide 
instructions for applying Buy America rules to the purchase of rolling 
stock replacement parts. With the purpose of simplifying country-of-
origin rules for the procurement of replacement parts, FTA adopted 
``non-shifting'' characterizations of replacement parts as components 
or sub-components and stated that a procurement of a replacement part 
for rolling stock would be considered consistent with the requirements 
for 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.

72 FR 53688, 53692, Sept. 20, 2007. The Buy America requirements for 
manufactured goods are found at 49 CFR 661.5.

    Through this statement, FTA intended to treat rolling stock 
overhauls as procurements of replacement parts, and therefore, to be 
subject to the domestic content rules that require 100 percent U.S. 
content for manufactured product components. However, FTA's rulemaking 
document was insufficiently clear on this point and the industry has 
continued its longstanding practice of treating overhauls as 
procurements of rolling stock, and thus eligible for the waiver of 49 
U.S.C. 5323(j)(2), as implemented at 49 CFR 661.11, that allows up to 
40 percent foreign components.

C. Application to Rebuilds and Overhauls

    The rebuild and overhaul processes are conducted for different 
purposes and must meet different standards to be eligible for FTA 
funding. A rebuild results in additional useful life of the vehicle 
that did not exist before, whereas an overhaul is performed to maintain 
a vehicle and enables it to achieve the useful life it was expected to 
provide when it was first purchased.
    It is this purchase of new useful life that makes a rebuild 
sufficiently like the procurement of new rolling stock to be able to 
apply the statutory waiver of 49 U.S.C. 5323(j)(2)(C) that allows up to 
40 percent foreign content per vehicle. In contrast, an overhaul is 
primarily the purchase of replacement parts plus labor, and is for the 
purpose of maintaining a vehicle, not the acquisition of new useful 
life. As such, FTA views the purchase of replacement parts for an 
overhaul the same as it views the purchase of individual replacement 
parts--the manufactured product requirements of 49 CFR 661.5 apply; all 
components must be produced in the United States.

III. Proposed Policy

    Based on the foregoing, FTA proposes to limit the application of 
the statutory rolling stock waiver of 49 U.S.C. 5323(j)(2)(C), as 
implemented at 49 CFR 661.11, to the purchase of new rolling stock and 
to a rebuild that adds useful life. New purchases and rebuilds may 
include up to 40 percent foreign components. In contrast, all 
components purchased as part of a rolling stock overhaul are subject to 
the manufactured products requirements of 49 CFR 661.5 and must be 
produced in the United States.
    FTA seeks comment from all interested parties. After consideration 
of the comments, FTA will publish a second notice in the Federal 
Register with a response to comments and a justification for the final 
statement of policy.


[[Page 29955]]


    Issued this 13th day, of April 2012.
Dorval R. Carter, Jr.,
Chief Counsel, Federal Transit Administration.
[FR Doc. 2012-9698 Filed 5-18-12; 8:45 am]
BILLING CODE P