[Federal Register Volume 83, Number 228 (Tuesday, November 27, 2018)]
[Rules and Regulations]
[Pages 60729-60732]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-25815]



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 Rules and Regulations
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 This section of the FEDERAL REGISTER contains regulatory documents 
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  Federal Register / Vol. 83, No. 228 / Tuesday, November 27, 2018 / 
Rules and Regulations  

[[Page 60729]]



DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1787

RIN 0572-AC42


``Buy American'' Requirement

AGENCY: Rural Utilities Service, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Rural Utilities Service (RUS), a Rural Development Agency 
of the United States Department of Agriculture (USDA), hereinafter 
referred to as RUS or the Agency, is issuing a final rule to amend its 
regulations to address its ``Buy American'' requirement. This will 
codify long-standing RUS requirements which Agency borrowers have been 
required to follow pursuant to statute, bulletin, and contract as early 
as the 1950s. RUS will rescind Bulletin 43-9:344-3, `` `Buy American' 
Requirement,'' when this regulation becomes effective.

DATES: This rule is effective November 27, 2018.

FOR FURTHER INFORMATION CONTACT: Norris Nicholson, Electric Program, 
Rural Utilities Service, U.S. Department of Agriculture, 1400 
Independence Ave. SW, Washington, DC 20250, Email: 
[email protected]; telephone number: (202) 720-1979. 
Kenneth Kuchno, Telecommunications Program, Rural Utilities Service, 
U.S. Department of Agriculture, 1400 Independence Ave. SW, Washington, 
DC 20250, email: [email protected], phone number: 202-720-
9424.

SUPPLEMENTARY INFORMATION: 

Executive Order 12372, Intergovernmental Consultation

    This final rule is excluded from the scope of Executive Order 
12372, Intergovernmental Consultation, which may require consultation 
with State and local officials. A Notice of Final Rule titled 
Department Programs and Activities Excluded from Executive Order 12372 
(50 FR 47034) exempts RUS loans and loan guarantees to governmental and 
nongovernmental entities from coverage under this Order.

Executive Order 12866, Regulatory Planning and Review

    This final rule has been determined to be not significant for the 
purposes of Executive Order 12866, Regulatory Planning and Review, and 
therefore has not been reviewed by the Office of Management and Budget 
(OMB).

Executive Order 12988, Civil Justice Reform

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. RUS has determined that this final rule meets the 
applicable standards provided in section 3 of the Executive Order. In 
addition, all State and local laws and regulations that are in conflict 
with this rule will be preempted, no retroactive effort will be given 
to this rule, and, in accordance with Sec. 212(e) of the Department of 
Agriculture Reorganization Act of 1994 (7 U.S.C. Sec. 6912(e)), 
administrative appeal procedures, if any, must be exhausted before an 
action against the Department or its agencies may be initiated.

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    This final rule has been reviewed in accordance with the 
requirements of Executive Order 13175, ``Consultation and Coordination 
with Indian Tribal Governments.'' Executive Order 13175 requires 
Federal agencies to consult and coordinate with tribes on a government-
to-government basis on policies that have tribal implications, 
including regulations, legislative comments or proposed legislation, 
and other policy statements or actions that have substantial direct 
effects on one or more Indian tribes, on the relationship between the 
Federal Government and Indian tribes or on the distribution of power 
and responsibilities between the Federal Government and Indian tribes. 
The policies contained in this final rule do not have Tribal 
implications that preempt Tribal law. The Agency will continue to work 
directly with Tribes and Tribal applicants to improve access to Agency 
programs. This includes providing focused outreach to Tribes regarding 
implementation of this rule change. Additionally, the Agency will 
respond in a timely and meaningful manner to all Tribal government 
requests for consultation concerning this rule. For further information 
on the Agency's Tribal consultation efforts, please contact Rural 
Development's Native American Coordinator at (720) 544-2911 or 
[email protected].

Regulatory Flexibility Act Certification

    The Agency has determined that this final rule will not have a 
significant economic impact on a substantial number of small entities, 
as defined in the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), 
given that the amendment is only an administrative act on the 
government's part to codify a statute with respect to obligation of 
funds.

Information Collection and Recordkeeping Requirements

    In accordance with the Paperwork Reduction Act, the paperwork 
burden associated with this final rule has been approved by the Office 
of Management and Budget (OMB) under the currently approved OMB Control 
Numbers 0572-0107. The Agency has determined that this regulatory 
action does not change any current data collection that would require 
approval under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 
35).

Catalog of Federal Domestic Assistance

    The programs described by this rule are listed in the Catalog of 
Federal Domestic Assistance programs under No. 10.850, Rural 
Electrification Loans and Loan Guarantees; No. 10.851, Rural Telephone 
Loans and Loan Guarantees; and No. 10.852, Rural Telephone Bank Loans 
and No. 10.886, Rural Broadband Access Loans and Loan Guarantees. All 
active CFDA programs can be found at www.cfda.gov. The Catalog is 
available on the internet at http://www.cfda.gov and the General 
Services Administration's (GSA's) free CFDA website at http://www.cfda.gov. The CFDA website also contains a PDF file version of the 
Catalog that, when printed, has the same layout as the printed document 
that the Government Publishing Office (GPO) provides. GPO prints and 
sells the CFDA to interested buyers. For information about purchasing 
the Catalog of Federal Domestic Assistance from GPO, call the

[[Page 60730]]

Superintendent of Documents at 202-512-1800 or toll free at 866-512-
1800, or access GPO's online bookstore at http://bookstore.gpo.gov.

Unfunded Mandate

    This final rule contains no Federal mandates (under the regulatory 
provisions of Title II of the Unfunded Mandates Reform Act of 1995) for 
state, local, and tribal governments or the private sector. Therefore, 
this final rule is not subject to the requirements of sections 202 and 
205 of the Unfunded Mandates Reform Act of 1995.

National Environmental Policy Act Certification

    The Administrator of RUS has determined that this final rule will 
not significantly affect the quality of the human environment as 
defined by the National Environmental Policy Act of 1969 (42 U.S.C. 
4321 et seq.). Therefore, this action does not require an environmental 
impact statement or assessment.

E-Government Act Compliance

    The Agency is committed to the E-Government Act, which requires 
Government agencies in general to provide the public the option of 
submitting information or transacting business electronically to the 
maximum extent possible.

USDA Non-Discrimination Policy

    In accordance with Federal civil rights law and U.S. Department of 
Agriculture (USDA) civil rights regulations and policies, the USDA, its 
Agencies, offices, and employees, and institutions participating in or 
administering USDA programs are prohibited from discriminating based on 
race, color, national origin, religion, sex, gender identity (including 
gender expression), sexual orientation, disability, age, marital 
status, family/parental status, income derived from a public assistance 
program, political beliefs, or reprisal or retaliation for prior civil 
rights activity, in any program or activity conducted or funded by USDA 
(not all bases apply to all programs). Remedies and complaint filing 
deadlines vary by program or incident.
    Persons with disabilities who require alternative means of 
communication for program information (e.g., Braille, large print, 
audiotape, American Sign Language, etc.) should contact the responsible 
Agency or USDA's TARGET Center at (202) 720-2600 (voice and TTY) or 
contact USDA through the Federal Relay Service at (800) 877-8339. 
Additionally, program information may be made available in languages 
other than English.
    To file a program discrimination complaint, complete the USDA 
Program Discrimination Complaint Form, AD-3027, found online at http://www.ascr.usda.gov/complaint_filing_cust.html and at any USDA office or 
write a letter addressed to USDA and provide in the letter all of the 
information requested in the form. To request a copy of the complaint 
form, call (866) 632-9992. Submit your completed form or letter to USDA 
by: (1) Mail: U.S. Department of Agriculture, Office of the Assistant 
Secretary for Civil Rights, 1400 Independence Avenue SW, Washington, DC 
20250-9410; (2) fax: (202) 690-7442; or (3) email: 
[email protected].
    USDA is an equal opportunity provider, employer, and lender.

Background

    The Rural Electrification Act requires that in making loans 
pursuant to the Rural Electrification Act of 1936, the Secretary of 
Agriculture shall require that, to the extent practicable and the cost 
of which is not unreasonable, the borrower agrees to use in connection 
with the expenditure of such funds only such unmanufactured articles, 
materials, and supplies, as have been mined or produced in the United 
States or in any eligible country, and only such manufactured articles, 
materials, and supplies as have been manufactured in the United States 
or in any eligible country, substantially all from articles, materials, 
or supplies mined, produced or manufactured, as the case may be, in the 
United States or any eligible country. This regulation will codify 
long-standing RUS requirements which Agency borrowers have been 
required to follow pursuant to statute, bulletin, and contract as early 
as the 1950s, but which were inadvertently never codified when all 
existing RUS bulletins were incorporated into regulation. Nothing in 
this regulation will change or modify those procedures with respect to 
borrowers' responsibilities in complying with the Buy American 
requirement, such as the waiver process, but will simplify compliance 
by compiling all such existing requirements into a single document.

List of Subjects in 7 CFR Part 1787

    Communications equipment, Electric power, Loan programs--
communications, Loan programs--energy, Reporting and recordkeeping 
requirements, Rural areas, Telephone.


0
For the reasons set out in the preamble, RUS amends 7 CFR chapter XVII 
by adding part 1787 to reads as follows:

PART 1787--THE ``BUY AMERICAN'' REQUIREMENT

Sec.
1787.1 General.
1787.2 Definitions.
1787.3 Products constituting a portion of a purchase order or 
contract.
1787.4 Unmanufactured articles, materials, and supplies.
1787.5 Eligible countries.
1787.6 Nondomestic products.
1787.7 Components.
1787.8 Purchase of nondomestic products.
1787.9 Waivers.
1787.10 Application for specific waivers.
1787.11 Cost differential.
1787.12 Non-availability or shortages.
1787.13 Public interest or impracticality.
1787.14 General waivers.
Appendix A to Part 1787--Product Procurement

    Authority: 7 U.S.C. 903.


Sec.  1787.1   General.

    (a) The ``Buy American'' provision of the Rural Electrification Act 
of 1936 (RE Act) requires, to the extent practicable and the cost of 
which is not unreasonable, that RUS Borrowers use loan funds only for 
such manufactured articles, materials, and supplies as have been 
manufactured in the United States or in any eligible country, 
substantially all from articles, materials, or supplies mined, produced 
or manufactured, as the case may be, in the United States or any 
eligible country.
    (b) Each RUS Borrower is responsible for assuring that its use of 
loan funds complies with this requirement, and that the contracts it 
enters into for construction, materials and equipment, and purchases 
with vendors contain the Buy American requirement, along with 
certification as to compliance, made through RUS Form 213.


Sec.  1787.2   Definitions.

    For purpose of this part, the following terms have the following 
meanings:
    Administrator. The Administrator of the RUS, or his/her designee.
    Buy American. A provision of the RE Act requiring that loan funds 
only be used to purchase products made in the U.S. or an eligible 
country.
    Component. Any article, material, or supply, whether manufactured 
or unmanufactured, that is directly incorporated into the end product 
at the final assembly location.
    Domestic product. A product or like product which both:
    (1) Is manufactured in the United States or in any eligible 
country; and
    (2) Contains components manufactured in the United States or in

[[Page 60731]]

any eligible country consisting of more than 50 percent of the total 
cost of all components used in the product.
    Eligible country. Any country that the United States Trade 
Representative determines as having corporations located therein, as 
eligible to enter into contract with an RUS Borrower, under which loan 
funds will be provided for unmanufactured and manufactured goods.
    Loan funds. Funds provided under an RUS direct or guaranteed loan.
    Manufactured. The application of processes to alter the form or 
function of materials or of elements of the product such that value is 
added or the materials or elements are transformed into a new end 
product functionally different from that which would result from mere 
assembly of the materials or elements.
    Nondomestic bid. An offer to sell a nondomestic product to an RUS 
borrower.
    Nondomestic product. Any product other than a domestic product or 
product from an eligible country.
    Product. An item of manufactured material or assembled components, 
which is complete and capable of performing an intended practical 
purpose.
    RE Act. Rural Electrification Act of 1936, as amended (7 U.S.C. 901 
et seq.).
    RUS. The Rural Utilities Service.
    RUS Borrower. Any organization that has an outstanding RUS loan 
made or guaranteed by RUS pursuant to the RE Act.
    Telecommunications. Any communication service for the transmission 
or reception of voice, data, sounds, signals, pictures, writings, or 
signs of all kinds, by wire, fiber, radio, light, or other visual or 
electromagnetic means, including all telephone lines, facilities, or 
systems used in the rendition of such service; but shall not be deemed 
to mean message telegram service or community antenna television system 
services or broadcasting facilities other than those intended 
exclusively for educational purposes, or radio broadcasting services or 
facilities within the meaning of section 3(o) of the Communications Act 
of 1934, as amended.
    Unmanufactured. With respect to articles, materials, or supplies, 
refers to such goods that have not been manufactured.


Sec.  1787.3   Products constituting a portion of a purchase order or 
contract.

    Where a supplier or contractor offers or furnishes several products 
under a purchase order or contract, the provisions of this part apply 
to each product individually.


Sec.  1787.4   Unmanufactured articles, materials, and supplies.

    The Buy American requirement also applies to unmanufactured 
articles, materials, and supplies to be financed with RUS loan funds, 
and will be considered domestic if mined or produced in the United 
States or in an eligible country.


Sec.  1787.5   Eligible countries.

    The United State Trade Representative (USTR) determines what 
countries are eligible countries with respect to purchases made by 
electric borrowers or telecommunications borrowers. A particular 
country may be determined to be an eligible country for purchases made 
by telecommunications borrowers, for electric borrowers, or both. RUS 
maintains the latest Federal Register notice on its website which sets 
out the list of Eligible Countries for each RUS program at https://www.rd.usda.gov/files/UEP_Engineering_EligibleCountries.pdf.


Sec.  1787.6   Nondomestic products.

    A product is considered to be nondomestic for the purpose of 
compliance with the ``Buy American'' requirement if:
    (a) The product is manufactured outside the United States or any 
eligible country; or
    (b) The product is manufactured in the United States or in any 
eligible country, but the cost of nondomestic components used therein 
constitutes 50 percent or more of the cost of all components. The cost 
of components shall be determined on a comparable basis, so that only 
the cost of domestic and nondomestic components, up to the point where 
they are combined and manufactured into a complete product shall be 
considered.
    (1) The determination of the cost of the nondomestic components of 
a product shall include:
    (i) The price paid to the nondomestic source;
    (ii) The cost of shipment to the port of entry into the United 
States;
    (iii) Applicable tariffs or duties;
    (iv) The cost of transportation from the port of entry to the 
distributor's plant or warehouse; and
    (v) Profit, overhead, and commissions of domestic and nondomestic 
suppliers and subcontractors of the components.
    (2) The following items shall not be considered in determining the 
cost of components, although they are proper elements in the 
determination of the final selling price of the product:
    (i) Fabrication or processing costs, if any, of nondomestic or 
domestic components at the assembly plant, or any other place of 
fabrication in the United States or any eligible country;
    (ii) Testing costs at the assembly plant or at the installation 
site;
    (iii) Direct profit, overhead, and commissions of the domestic 
distributor; and
    (iv) Cost of transportation from the domestic assembly point to the 
installation site.


Sec.  1787.7  Components.

    Where a component is manufactured only determines whether the 
component is classified as domestic or nondomestic even if all the 
materials and subcomponents comprising the component are manufactured 
in ineligible countries. A component manufactured in the United States 
or in an eligible country shall be considered domestic when determining 
whether a product is classified as domestic or nondomestic. A component 
manufactured in an ineligible country shall be considered nondomestic.


Sec.  1787.8  Purchase of nondomestic products.

    An RUS Borrower may only use loan funds to purchase a nondomestic 
product if a waiver pursuant to Sec.  1787.10 has been received by the 
Administrator before entering into a contract with the vendor. Should 
the Administrator deny the waiver request, the RUS Borrower must use 
its own funds for the expenditure.


Sec.  1787.9  Waivers.

    Under limited circumstances the Administrator may waive the Buy 
American requirement with respect to a specific contract entered into 
between an RUS Borrower and a third party which will be paid for with 
loan funds, subject to Sec. Sec.  1787.10 through 1787.14.


Sec.  1787.10  Applications for specific waivers.

    RUS borrowers may request a specific waiver of the Buy American 
requirement through a written, detailed explanation showing that:
    (a) The cost between the nondomestic product and domestic product 
is unreasonable;
    (b) There is a non-availability of domestic products; or
    (c) It is not in the public interest or impractical for the RUS 
Borrower to purchase a domestic product.


Sec.  1787.11  Cost differential.

    By application pursuant to Sec.  1787.10, the Administrator may 
waive the Buy American requirement if the cost of the domestic product 
is unreasonable. Given that RUS loans terms normally range from 20 to 
35 years, and that

[[Page 60732]]

additional costs will be magnified with interest over these terms, the 
Administrator has determined that if the lowest bid or offered price is 
a nondomestic bid that is at least 6percent lower than the next lowest 
bid or offered price, the RUS Borrower may request a cost differential 
waiver. With respect to contracts that are not required to be bid, 
prices of market-available, domestic products must be used for 
comparison in a request for waiver.


Sec.  1787.12  Non-availability or shortages.

    By application pursuant to Sec.  1787.10, the Administrator may 
waive the Buy American requirement upon a showing that there is no 
domestic product available in the market in sufficient and reasonable 
quantities and of satisfactory quality, and that such shortage of 
suitable domestic alternatives jeopardizes the project being completed 
on budget and/or according to scheduled planning. A lack of responsive 
and responsible bids to a well-publicized request for bids will be 
presumed to meet the conditions of a non-availability waiver. With 
respect to contracts that are not required to be bid, sufficient 
evidence must be presented to the Administrator in order to make a 
determination.


Sec.  1787.13  Public interest or impracticality.

    (a) By application pursuant to Sec.  1787.10, the Administrator may 
waive the Buy American requirement upon a showing that application of 
the requirement would be inconsistent with the public interest or 
impractical for the RUS Borrower. With respect to impracticality, an 
RUS Borrower may request a waiver upon a showing that the domestic 
product is incompatible or impractical to integrate with existing, 
significant capital infrastructure or existing, critical software 
already in use. Notwithstanding, the burden shall rest with the RUS 
Borrower to present how the use of the domestic product would create a 
hardship or negatively impact its project.
    (b) With respect to contracts that were approved by RUS based on a 
bidder or offer that originally certified compliance with the Buy 
America requirements, but which can no longer comply with such 
certification, the Administrator may grant an impracticality waiver 
based on a showing that the original certification was made in good 
faith and that the product cannot now be obtained domestically due to 
commercial impossibility or impracticability, or without undue hardship 
or a negative impact to the project.
    (c) In determining whether to issue any public interest waiver, the 
Administrator will consider all appropriate factors on a case-by-case 
basis, unless a general waiver has already been issued by the 
Administrator with respect to the product.


Sec.  1787.14  General waivers.

    (a) The Administrator may issue a general waiver for all RUS 
Borrowers for a determinate period, if the Administrator finds that 
such manufactured or unmanufactured goods are in shortage regionally or 
nationally, so as to avoid the administrative burden of issuing 
individual, specific waivers.
    (b) The Administrator has determined that it is in the best 
interest of RUS to issue a permanent general public interest waiver 
from the Buy America requirements for ``small purchases,'' which shall 
be published in the Federal Register for each program under the RE Act 
and amended as needed from time to time. In carrying out this 
exception, however, the Administrator shall ensure that contracts are 
not artificially fragmented.

Appendix A to Part 1787--Product Procurement

    This appendix shows an example of how the 6 percent differential is 
applied to determine award of a bid. In response to a request for bids 
for a digital central office a borrower receives four responsive bids 
to the specification, three domestic bids and one nondomestic bid. The 
nondomestic bid is the apparent low bid. We will consider in our 
analysis the nondomestic bid and the lowest domestic bid as shown in 
the following table.

------------------------------------------------------------------------
                                            Nondomestic
                                                bid        Domestic  bid
------------------------------------------------------------------------
Total materials.........................        $895,000        $920,000
Installation............................         155,000         177,000
Freight.................................          +1,000          +1,500
                                         -------------------------------
    Total bid...........................      $1,051,000      $1,098,500
------------------------------------------------------------------------

    Please note that once the product has been determined as 
nondomestic, the 6 percent cost differential shall be applied to all 
the material content in the nondomestic bid, even if the nondomestic 
product includes domestic components.
    In this example, 6 percent of the total material content in the 
nondomestic bid ($895,000) equals $53,700. This cost differential is 
added to the total nondomestic bid as shown in the following table.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Total of the nondomestic bid............................      $1,051,000
6% of the all material cost.............................         +53,000
                                                         ---------------
    Total evaluated bid.................................      $1,104,700
------------------------------------------------------------------------

    This total evaluated bid, (that is the nondomestic bid plus the 6% 
of the cost of its material content), is compared with all the domestic 
bids for award of the bid. In our example the domestic bid ($1,098,500) 
is lower than the nondomestic evaluated bid ($1,104,700).
    The domestic bid becomes the low bid and the domestic bidder gets 
award of the bid. This product is classified as domestic since the cost 
of the domestic components used in the product constitutes more than 50 
percent of the cost of all the components used.

    Dated: November 6, 2018.
Christopher A. McLean,
Acting Administrator, Rural Utilities Service.
[FR Doc. 2018-25815 Filed 11-26-18; 8:45 am]
 BILLING CODE 3410-15-P