Buy America Requirements; Permanent Waiver for Microcomputers

DEPARTMENT OF TRANSPORTATION

Federal Transit Administration

49 CFR Part 661

[Docket No. FTA-99-5709]

RIN 2132-AA68

Buy America Requirements; Permanent Waiver for Microcomputers

AGENCY: Federal Transit Administration, DOT.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: In 1986, the Federal Transit Administration (FTA) adopted a

waiver of its Buy America requirements for the purchase of

microcomputers. FTA has been asked to review whether this waiver should

be retained, revoked, or modified in light of changes in the computer

industry since then. This Advance Notice of Proposed Rulemaking (ANPRM)

solicits public comment on this question.

DATES: Comments on this ANPRM must be submitted by December 7, 1999.

ADDRESSES: Written comments must refer to the docket number appearing

above and must be submitted to the Docket Clerk, United States

Department of Transportation, Central Dockets Office, PL-401, Nassif

Building, 400 Seventh Street SW, Washington, DC 20590. All comments

received will be available for examination at the above address. Docket

hours at the Nassif Building are from 10:00 a.m. to 5:00 p.m., Monday

through Friday, except Federal holidays. Those desiring agency

notification of receipt of their comments should include a self-

addressed stamped envelope or postcard with their comments.

FOR FURTHER INFORMATION CONTACT: For legal issues: Meghan G. Ludtke,

Office of Chief Counsel, Federal Transit Administration, Room 9316,

(202) 366-4011 (telephone) or (202) 366-3809 (fax) program/technical

issues: Spiro M. Colivas, Office of Program Management, Acting

Director, Office of Engineering, Federal Transit Administration, same

address, Room 9311, (202) 493-0107 (telephone) or (202) 366-7951 (fax).

Electronic access to this and other rules may be obtained through the

FTA World Wide Web home page at http://www.fta.dot.gov, or by using the

Universal Resources Locator (URL); both services are available seven

days a week.

SUPPLEMENTARY INFORMATION:

I. Background

In section 401 of the Surface Transportation Assistance Act of 1978

(Pub. L. 95-594, 92 Stat. 2689), Congress first enacted the Buy America

legislation applicable to the expenditure of Federal funds by

recipients under FTA grant programs. FTA's implementing regulation was

issued at 49 Part CFR 661. In January 1983, Congress repealed section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). On July 5,

1994, section 165 was codified at 49 U.S.C. 5323(j).

The FTA Buy America Regulations, 49 CFR Part 661, apply to all

federally assisted procurements using funds authorized by the Federal

transit laws, 49 U.S.C. Chapter 53. The general Buy America requirement

is that all manufactured products procured in projects funded under the

Federal transit laws be produced in the United States. In 1986 under 49

U.S.C. 5323(j)(2)(A) and (B) and the implementing regulations at 49 CFR

661.7(b) and (c). FTA granted a general waiver of the Buy America

requirements for microcomputer equipment and software of foreign

origin. 49 CFR 661.7, Appendix A(d).

On February 26, 1999, FTA received a request from Prima Facie, Inc.

(petitioner) to re-examine the permanent waiver for microcomputers to

determine if the basis for the subject waiver still exists, and, if

not, whether it is appropriate for FTA to revoke the general waiver.

Additionally, petitioner requests that FTA seek comments on whether

modification of the waiver to include only selected types of

microcomputer equipment is necessary and whether the inclusion of a

microcomputer (chip) in a manufactured product should result in the

entire product's being considered a microcomputer.

[[Page 54856]]

II. Petition for Removal or Modification of Permanent Waiver for

Microcomputers

A. History of the Permanent Waiver

Under 49 U.S.C. 5323(j), FTA may not obligate Federal funds for

mass transportation projects unless all iron, steel, and manufactured

products used in the project are produced in the United States. This

requirement can be waived if, inter alia, its application would be

inconsistent with the public interest (section 5323(j)(2)(A)) or if the

goods are not reasonably available from domestic sources (section

5323(j)(2)(3)).

On January 5, 1985, in response to a request from the American

Association of State Highway and Transportation Officials (AASHTO), FTA

solicited comments from interested parties regarding the question of

whether its grantees were experiencing difficulty in purchasing

domestically produced microcomputer equipment appropriate to their

needs (50 FR 1156). AASHTO requested that FTA amend its Buy America

rule, arguing that small transit systems were unable to procure

domestically produced equipment because chips and some other major

components were not made in the United States. Because the rule

required transit systems to obtain individual non-availability waivers,

which was burdensome, AASHTO requested a general waiver. After

reviewing the comments received, FTA provided a one-year waiver from

the Buy America requirement for microcomputers because of the rapid

technological changes in an expanding market for domestically produced

computers (50 FR 18760). That waiver was extended for a second comment

period a year later and subsequently made permanent (51 FR 19653, 51 FR

36126). FTA noted that while new technology had increased the

availability of hardware and software components, many product

components were still made and assembled abroad, and it would be

difficult to determine when, if ever, microcomputer component

manufacturing would be relocated to the United States.

B. The Petition

The petition from Prima Facie, Inc. is as follows:

ECKERT SEAMANS CHERIN & MELLOT, LLC

February 26, 1999

Patrick Reilly,

Chief Counsel, Federal Transit Administration, 400 7th Street,

SW, Washington, DC 20590.

Dear Mr. Reilly: Under the provisions of 49 U.S.C.

5323(j)(3)(2)(A) and (B) and implementing regulations set forth at

49 CFR 661.7(b) and (c), the Federal Transit Administration (FTA)

has granted a general waiver of the Buy America requirements for

microcomputer equipment of foreign origin. This waiver is set forth

in Appendix A of 49 CFR 661.7.

It is clear that, without the waiver, microcomputer equipment

would have to meet the requirements of 49 U.S.C. 5323(j)(1) and the

implementing regulations at 49 CFR 661.5 which require that no FTA

funds may be obligated for the procurement of manufactured products

unless such manufactured products are produced in the United States.

On behalf of Prima Facie, Inc., this letter will serve as a

petition to the FTA to re-examine the subject waiver to determine if

the basis for the waiver that existed at the time it was originally

granted still exists; and, if not, whether it is appropriate for the

FTA to revoke the general waiver.

The original petition for the general waiver was made by the

American Association of State Highway and Transportation Officials

(AASHTO) to FTA's predecessor agency (the Urban Mass Transportation

Administration [UMTA]) in 1985. The petition was based on the fact

that many smaller transit systems were using microcomputers for

their daily transit planning and daily programming needs and were

unable to procure domestically produced equipment since chips and

some major components were not made in the United States. AASHTO

indicated that the public interest would be best served by the

granting of a general public interest waiver. AASHTO stated that

since transit systems were required to seek individual ``non-

availability'' waivers, the purchasing process for transit systems

who would need or expect to need microcomputer equipment would be

streamlined by the granting of the general waiver.

It should be noted that UMTA originally granted the public

interest waiver for a one-year period because of the ``rapid

technological changes in an expanding market for domestically

produced computers.''

The waiver was made permanent in 1986, and has not been re-

examined since that time. At the time that the permanent waiver was

granted, UMTA stated that the waiver was being made permanent

because ``although new technology had increased the availability of

hardware and software components, many product component(s)

(microchips) are still made and assembled abroad.'' UMTA further

stated that it would be difficult to estimate when, if ever,

microcomputer component manufacturing would be relocated to the

United States.

``Microcomputer'' was defined in the original waiver as ``[a]

computer system whose processing unit is a microprocessor. A basic

microcomputer includes a microprocessor, storage, and input/output

facility, which may or may not be on one chip.'' In addition,

``computer system'' was defined as

``[a] functional unit consisting of one or more computers and

associated software that uses common storage for all or part of a

program and also for all or part of the data necessary for the

execution of the program; executes user-written or user-designated

programs; performs user-designated data manipulation, including

arithmetic operations and logic operations; and that can execute

programs that modify themselves during their executions. A computer

system may be a stand-alone unit or may consist of several

interconnected units. Synonymous with ADP system, computing

system.''

Prima Facie believes that it is appropriate to re-examine the

permanent waiver at this time for several reasons. First, the state

of the microcomputer and microprocessor industry in the United

States today is significantly different than when the waiver was

originally issued in 1985/86. Second, the original intent of the

waiver was to address the procurement of a significantly different

type of equipment (the traditional ``desk-top'' computer) than

recent application of the waiver by FTA (i.e., digital recording

equipment). Third, the definition cited above may not be appropriate

for the myriad of products to which the general waiver now applies

under FTA's current application.

A logical extension of FTA's current application of the waiver

would be that any manufactured product that contains a data storage

or processing unit should be granted a waiver from the Buy America

requirements. This, in effect, would mean the almost total waiving

of the Buy America requirements since the vast majority of products

used today by transit systems contain some type of microprocessor

which is significantly different than the microcomputer that was

granted a waiver in 1985 (e.g., the following types of equipment all

contain microprocessors--fare collection equipment; bus destination

signs; rail car train control systems; radios; and bus diesel

engines). As indicated above, in granting the original waiver, UMTA

was examining the traditional ``desk-top'' computer--it was not

examining the types of equipment cited in the previous sentence

because the usage of microprocessors in that equipment just simply

did not exist in general, broad application in 1985.

In petitioning for the re-examination of the general waiver,

Prima Facie specifically requests that FTA seek public comment on

the following issues:

Is the waiver out of date?

Should the waiver, apply, if at all, only to selected

types of microcomputer equipment?

Is there any necessity for a waiver since the domestic

market has changed so dramatically since 1985?

Should the inclusion of a microcomputer (chip) in a

manufactured product result in the entire product being considered

as a microcomputer?

Prima Facie certainly appreciates your immediate attention to

this request. If I can provide any more information at this time,

please do not hesitate to contact me.

Sincerely,

Edward J. Gill, Jr.

On Behalf of Prima Facie, Inc.

cc: Shawn Marcell

[[Page 54857]]

III. Issues for Comment

FTA invites public comment on the following issues:

A. Is the microcomputer waiver out of date? The Petitioner believes

that the state of the microcomputer as well as the microcomputer

industry in the United States is significantly different today that

when the waiver was issued in 1986.

B. What are these differences, and are they relevant to the

existing waiver?

C. Should the permanent microcomputer waiver apply only to selected

types of microcomputer equipment? The Petitioner asserts that the

original intent of the waiver was to address the procurement of a

significantly different type of equipment, specifically, the ``desk-

top'' computer. The recent application of the microcomputer waiver has

been extended to such items as digital recording equipment.

D. How is the use to which a microcomputer is put relevant to FTA's

Buy America requirements?

E. Petitioner asserts that the logical extension of FTA's current

application of the permanent microcomputer waiver would be that any

manufactured product that contains a data storage or processing unit

qualifies for the permanent microcomputer waiver from the Buy America

requirements. Further, petitioner asserts that such an application by

FTA is essentially a total waiving of Buy America requirements, since

the vast majority of manufactured products used by transit systems

contain some type or form of microprocessor, and that is radically

different than the microcomputer waiver that was granted by FTA in

1985.

IV. Regulatory Analyses and Notices

It does not appear, at this point, that any regulatory action with

respect to the existing microcomputer waiver would be significant under

Executive order 12866 or under the Department's Regulatory Policies and

Procedures. We further believe that such action would require the

preparation of a Federalism Assessment. We also do not believe that it

would have a significant economic impact on a substantial number of

transit systems because of the changes in the computer industry. This

notice does not propose or contemplate new information collection

requirements for purposes of the Paperwork Reduction Act of 1995, 44

U.S.C. 3501-3520, nor would any subsequent action pursuant to this

notice likely do so.

Issued on: October 4, 1999.

Gordon J. Linton,

Administrator.

[FR Doc. 99-26285 Filed 10-7-99; 8:45 am]

BILLING CODE 4910-57-U