Timothy J. Rudolph, Esq.
General Counsel
Midwest Bus Corporation
1940 Stewart Street
Owosso, MI 48867

RE: Buy America Compliance Investigation of the Midwest Bus Corporation

Dear Mr. Rudolph:

I write in response to your letter dated March 15, 2010, requesting reconsideration of the Federal Transit Administration’s (“FTA”) decision determining that the Midwest Bus Corporation (“Midwest Bus”) failed to comply with FTA’s Buy America requirements of 49 U.S.C. 5323(J), as implemented at 49 CFR Part 661, when it supplied Byk-Rak brand bus-mounted bicycle racks to the Milwaukee County Transit System (“MCTS”). FTA’s decision resulted from an investigation that FTA initiated on July 16, 2009, after receiving a petition from Sportworks Northwest, Inc. (“Sportworks”). By letter dated March 1, 2010, FTA determined that the Byk-Rak brand bicycle racks you supplied to MCTS failed to meet the “manufactured products” standard of 49 CFR 661.5(d). Inasmuch as you have presented no new matters of fact or points of law that were not known or available to you during the investigation, this letter upholds FTA’s March 1, 2010, decision.

Legal Standard

“FTA will only reconsider a decision if the party requesting reconsideration has submitted new matters of fact or points of law that were not known or available to the party during the investigation.” [1]

Discussion

Your letter suggests that two matters of law were not known or available to you during the investigation: (1) you stated that “Sportworks petition never alleged that manufacturing at the compone nt level was an essential requirement for compliance”; and (2) you assert that requiring MCTS to come into compliance is unconstitutional.

Midwest Bus knew or should have known that Buy America requires that manufacturing processes take place in the United States for all manufactured products. Information on FTA’s requirements was included in Sportworks’ petition to FTA, in its response to Midwest Bus’s letter to FTA, and in the Final Rule FTA published on [insert date of FR Notice]. Moreover, based on the fact that Midwest Bus has contacted FTA for guidance in the past, I find that you knew and had available to you the resources to determine how to comply with the manufactured products standard contained in FTA’s Buy America requirements.

For your reference, here is a list of documents where information about the manufactured products standard was available to you:

With respect to your assertion that FTA lacks authority to compel compliance, and that requiring MCTS and Midwest Bus to come into compliance is unconstitutional, I direct your attention to the following language at 49 CFR 661.17:

If a successful bidder or offeror fails to demonstrate that it is in compliance with its certification, it will be required to take the necessary steps in order to achieve compliance. If a bidder or offeror takes these necessary steps, it will not be allowed to change its original bid price or the price of its final offer. If a bidder or offeror does not take the necessary steps . . . it is in breach of contract if a contract has been awarded.

Moreover, please take note that a “willful refusal to comply with a certification by a successful bidder or offeror may lead to the initiation of debarment or suspension proceedings.” 49 CFR 661.19.

In addition to the points outlined above, it appears that you have misinterpreted FTA’s March, 1, 2010, decision. The following clarifies FTA’s Buy America requirements with respect to manufactured products.

Part 661.5(d) of title 49 of the Code of Federal Regulations sets forth FTA’s manufactured products standard:

For manufactured products 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.

To satisfy the manufactured product standard, a component must be produced as a result of a manufacturing process that occurs in the United States. A manufacturing process requires the alteration of materials or elements resulting in either added value or transformation of those materials or elements into a functionally different end product. [5] FTA has stated that sufficient alteration activities include “forming, extruding, material removal, welding, soldering, etching, plating, material deposition, pressing, permanent adhesive joining, shot blasting, brushing, grinding, lapping, finishing, vacuum impregnating and, in electrical and electronic pneumatic, or mechanical products, the collection, interconnection, and testing of various elements.” [6]

You provided no evidence that the Byk-Rak brand bicycle racks you supplied to MCTS underwent sufficient manufacturing processes in the United States. Although subcomponents may be of foreign origin, there must be some manufacturing processes applied to them at the component level within the United States in order for the manufactured products standard to be satisfied. The alteration required is not satisfied through the activities you have described: combining parts, removing blasting media, installing plastic caps, securing rack to bus, and applying decals; these activities are mere assembly. [7] Any interpretation which attempts to circumvent this requirement would undermine the purpose of Buy America, which is to ensure a healthy and vibrant domestic manufacturing industry.

Conclusion

In view of the foregoing, FTA finds that you have presented no evidence of new facts or points of law warranting a reversal of the March 1, 2010, decision. Therefore, I hereby deny your request for reconsideration. This decision constitutes the final administrative action on this matter.

Should you have any questions, please contact Jayme Blakesley at jayme.blakesley@dot.gov.

Sincerely,

Dorval R. Carter, Jr.

Cc: Anita Gulotta-Connelly, Managing Director, Milwaukee County Transit System

Edward J. Gill, Jr., Esq., Thompson Coburn LLP

[1] 49 C.F.R. 661.15(o)
[2] June 16, 2009, letter from Edward J. Gill, Jr., to FTA Deputy Chief Counsel Scott A. Biehl.
[3] August 24, 2009, letter from Edward J. Gill, Jr., to FTA Deputy Chief Counsel Scott A. Biehl.
[4] 72 Fed. Reg. 53688at 53692 (Sept. 20, 2007).
[5] 49 C.F.R. 661.3
[6] This explanation of the nature of “manufacture” is made in 56 Fed. Reg. 926 (January 9, 1991) with reference to rolling stock, but is applicable to manufactured products as well.
[7] The assemblies listed in Appendix B are engineering terms of art, and do in fact require some manufacturing.