Julie A. Sherman, Esq.
Hanson Bridgett LLP
425 Market Street, 26th Floor
San Francisco, CA 94105

Re: Buy America - Santa Cruz Metropolitan Transit District, Polycarbonate Panels

Dear Ms. Sherman:

This letter serves as the Federal Transit Administration's (FTA) Buy America determination regarding the Santa Cruz Metropolitan Transit District's (SCMTD) use of CPI Daylighting Inc.'s (CPI) polycarbonate panels for the Judy K. Souza Operations Building (Operations Building). Based on the facts discussed below, I find that the finished polycarbonate panels at issue are components of the Operations Building and are Buy America compliant because they are of U.S. origin.

I. Background

SCMTD's general contractor constructing the Operations Building contacted FTA and asked whether certain polycarbonate panels and cement composite panels, both of which were of foreign origin, complied with Buy America. Subsequently, FTA brought this potential Buy America issue to the attention of and requested additional product and manufacturing information from SCMTD.

After becoming aware of the potential Buy America issue, SCMTD confirmed it found alternative cement composite panels that complied with Buy America. SCMTD also confirmed it found alternate polycarbonate panels, but sought FTA guidance on whether those panels complied with Buy America. Specifically, SCMTD sought guidance on whether the polycarbonate panels at issue were components of the Operations Building and whether they were of U.S. origin.

SCMTD provided the following information regarding the polycarbonate panels for the Operations Building:

• The polycarbonate panels will be used to construct a translucent wall to be installed over a staircase sub-structure and walls of the Operations Building.
• CPI will fabricate the translucent wall in a manufacturing facility in Chicago, Illinois.
• The translucent wall primarily is comprised of the poly carbonate panels, which are held in place by a frame.
• CPI will purchase raw polycarbonate panels at stock lengths (23 5/8' × 40') from a foreign vendor. The total value of the raw polycarbonate panels for the translucent wall is $2,512.00.
• The raw polycarbonate panels are subjected to the following processes at CPI's manufacturing facility in Chicago, IL: (1) custom cutting and sizing the raw polycarbonate panels into 8' × 29' and 20' × 29' panels; (2) notching and slotting panels to accommodate proprietary aluminum extrusions used to achieve the water proofing level required by the manufacturing designs; (3) proprietary heat treatment to improve performance and resistance to cracking and deformation; ( 4) sealing the polycarbonate by heat machining, which involves melting and compressing together parts of the polycarbonate panel to eliminate capillary reactions caused by water and condensation intrusion; (5) fabricating the polycarbonate into aluminum extrusions and parts; (6) cleaning, polishing, vent taping and adding protection layers; and (7) final inspection and testing of the completely fabricated translucent wall.
• The total value of the completely fabricated translucent wall is $26,234.21.
• CPI will provide a 10-year, single-sourced manufactured product warranty for the translucent wall.
• The fully fabricated translucent wall is delivered to the construction site for installation in the Operations Building.

II. Buy America

With certain limited exceptions, FTA may not obligate funds for a project unless the manufactured products used in the project are produced in the United States. 49 U.S.C. § 5323(j)(1); 49 C.F.R. § 661.5(a). 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. 49 C.F.R. § 661.5(d).

An "end product" means:

Any vehicle, structure, product, article, material, supply, or system, which directly incorporates constituent components at the final assembly location, that is acquired for public use under a federally-funded thirdparty contract, and which is ready to provide its intended end function or use without any further manufacturing or assembly change(s).

49 C.F.R. § 661.3.

Appendix A to§ 661.3 (of 49 C.F.R.) provides that infrastructure projects not made primarily of steel or iron, including structures, are manufactured end products and therefore subject to 49 C.F.R. § 661.5(d). Appendix A further states that these structures include "terminals, depots, garages, and bus shelters." Thus, the Operations Building would be considered an end product. To satisfy Buy America, a component must be produced as a result of a manufacturing process that occurs in the United States.

A "component" is defined as "any article, material, or supply, whether manufactured or unmanufactured, that is directly incorporated into the end product at the final assembly location." 49 C.F.R. § 661.3. FTA defines "manufacturing process" to mean:

The application of processes to alter the form or function of materials or of elements of the product in a manner adding value and transforming those materials or elements so that they represent a new end product functionally different from that which would result from mere assembly of the elements or materials. 49 C.F.R. § 661.3.

Alteration may 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." [1]

III. Discussion

I find that the finished polycarbonate panels are components of the Operations Building, which is the defined end product. As stated above, a component is any article, material, or supply that is directly incorporated into the end product at the final assembly location. 49 C.F .R. § 661.3. Here, the translucent wall to be installed at the Operations Building is almost entirely composed of various polycarbonate panels that are directly incorporated into the Operations Building, without undergoing a physical change in form or function. It also requires a special warranty separate and apart from the Operations Building. Thus, the finished polycarbonate panels rise to the level of a component of the Operations Building.

Because the finished polycarbonate panels are components, they must be of U.S. origin—manufactured in the United States. CPI receives the raw polycarbonate panels in its manufacturing facility in Chicago, Illinois, and alters them by applying the manufacturing processes discussed above. Those processes substantially alter the form and function of materials and elements of the raw polycarbonate panels in a manner adding value and transforming those raw panels into finished panels that form a translucent wall, which is a new end product functionally different from that which would result from mere assembly of the raw polycarbonate panels. Indeed, the significance of the alteration-inducing processes is underscored by the difference in value between the raw polycarbonate panels ($2,512) and the finished product ($26,234.21). There are substantial domestic manufacturing activities performed on the polycarbonate panels sufficient to consider those panels to be of U.S. origin.

IV. Conclusion

Based upon the foregoing, I find that the finished polycarbonate panels are components of the Operations Building under Buy America. Therefore, those panels must be of U.S. origin to satisfy FTA's Buy America rules. The raw polycarbonate panels here are subject to a substantial amount of domestic manufacturing activities, sufficient to consider those panels to be of U.S. origin. The finished polycarbonate panels for the Operations Building satisfy FTA's Buy America rules.

Please note that this decision is based solely upon the representations made by SCMTD and CPI to FTA. This decision will not apply if the actions of either party deviates from the manufacturing processes that were communicated to FTA. In addition, FTA reserves the right to verify that SCMTD and CPI do, in fact, comply with Buy America rules and with the manufacturing plan outlined in communications with FTA, and to pursue all available remedies in the event that either party fails to comply.

If you have any questions, please contact Joonsik Maing at ( 415) 744-2737 or joonsik.maing@dot.gov.

Sincerely,

Dana C. Nifosi
Acting Chief Counsel

[1] 56 Fed. Reg. 926, 929 (Jan. 9, 1991). It is important to note that while the regulation permits subcomponents to be produced outside the United States, this does not except an end product or its components from the requirement that all manufacturing processes occur in the United States. If no manufacturing processes occur at the component level, then those processes must occur in the U.S. at the subcomponent level. See Letter from Dorval R. Carter, Jr. , Chief Counsel, Federal Transit Administration, to Timothy J. Rudolph, General Counsel, Midwest Bus Corporation (Aug. 11, 2010). Mere assembly is insufficient to satisfy the manufactured product requirements of 49 C.F.R. 661.5.