June 03, 2003

Mr. Stephen Van Ogle
Commercial Contract Manager
Siemens Transportation Systems, Inc.
7464 French Road
Sacramento, California 95828

Dear Mr. Van Ogle:

This letter responds to your request that the Federal Transit Administration (FTA) reconsider its August 15, 2002, determination concerning Siemens’ proposed Buy America component calculation for the vehicle shell. You also request a ruling, as permitted by our March 18, 1997, Dear Colleague letter, that Siemens is in compliance with FTA’s final assembly requirements. When FTA first reviewed these matters, they were raised by the Metropolitan Transit Authority of Harris County, in consultation with Siemens. At that time, Siemens had the opportunity to submit a comprehensive argument, and FTA issues this second finding only to provide further guidance for future procurements, including one by San Diego Metropolitan Transit Development Board. In the original decision, FTA found that the "car frame" is not a properly designated subcomponent of the component car body, and that assembly of the vehicle truck or bogey is inconsistent with the final assembly requirements of Buy America. In order to reconsider these issues, my staff completed a thorough review of the materials submitted in support of the request for reconsideration.

Issue One: Car Body as a Domestic Component

The Buy America regulations treat car shells as typical components of rail rolling stock. 49 C.F.R. 661.11, App. C. For purposes of this letter, we will consider that the car body as discussed in the correspondence is the same as the car shell, as provided in the regulation. Siemens suggests that the car body is a component of the vehicle and that the front frame, roof, front mask, and "car frame" are subcomponents. Under this analysis, the "car frame" is made up of the sub-subcomponent underframe, sidewalls, and end portals, while the underframe consists of three separate underframe sections. FTA previously determined, and now affirms, that the car body is a component and all primary elements of the car body are subcomponents of the car body, including the sidewalls, end portals, underframe, front mask, front frame, and roof sections.

A subcomponent is an item one step removed from a component in the manufacturing process and incorporated directly into the component. 49 C.F.R. 661.11(f). And the "[m]anufacturing process means 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.

The key element of this definition of "manufacturing process" is the alteration of subcomponents to form a new product. The processes of 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. 56 Fed. Reg. 926, 929 (Jan. 9, 1991).

Manufacturing processes have evolved over the period that FTA has been providing guidance on Buy America requirements for transit projects. When FTA first implemented the Buy America procedures, there were two primary methods of joining or assembling metal pieces together into a product such as a transit vehicle, namely bolting and welding. At that time, bolting was often the most economical procedure to join metal pieces. Welding was the most economical method for altering raw steel materials into subcomponents as part of the manufacturing process and was rarely used for assembling subcomponents.

Since then, welding procedures have gone from Shielded Metal Arc Welding or SMAW to Gas Metal Arc Welding, GMAW or inert gas welding. In SMAW, significant labor is expended in setting up the pieces, pre-heating the metal, and often placing weldments in a precise manner and sequence, controlled by detailed, formal procedures. Currently, GMAW techniques offer an economical alternative to other welding techniques such as SMAW.

Because welding can serve to alter the material as part of a step in the manufacturing process or merely serve as an aid to assembling the subcomponents, FTA reviewed the manufacturing plan to determine what was accomplished in the Sacramento facility. In reviewing the submitted materials, staff noted that the materials delivered to the Sacramento plant were highly manufactured. This is apparent in the tolerancing given for assembling these "panels." They must be aligned to within several millimeters over 20 to 30 feet in order to receive the final weldments. These weldments, however, are to be performed in a welding jig assembly that holds the frames in position for their final welding. This GMAW welding serves to economically join the frames together in a cost efficient manner consistent with manufacturing processes in current practice. Given the close tolerances of the delivered products to Sacramento and the use of welding solely for purposes of joining the metal pieces together, staff determined that this was an act of mere assembly, not a step in the manufacturing process that altered the pieces to produce a new product.

FTA does not consider the work performed at the Sacramento facility on the "car frame" to be manufacturing; it is, instead, "mere assembly." FTA, therefore, does not consider the "car frame" to be properly designated as a subcomponent of the car body. However, Siemens is not prohibited from performing the work in the manner suggested in its materials as long as the component and subcomponent content are properly calculated.

Issue Two: Final Assembly of Trucks as Part of Vehicle Final Assembly

The second issue concerns the proposal to manufacture complete truck assemblies outside the U.S. and attach them to the car bodies at the final assembly location. In our August 15, 2002, letter, FTA determined that this process would not comport with the final assembly requirements, as described in FTA’s Dear Colleague Letter of March 18, 1997. The Dear Colleague letter also provides that "[i]f a manufacturer's final assembly processes do not include all the activities that are typically considered the minimum requirements, it can request an [FTA] determination of compliance. FTA will review these requests on a case-by-case basis to determine compliance with Buy America." You request such a determination. The assembly of the bogey, or truck, is integral to the final assembly of the vehicle. The Dear Colleague letter states that final assembly would typically include installation and interconnection of the motors, wheels, axles, suspensions and frames. You have not provided a basis that would permit a finding of compliance with the final assembly standard; therefore, we must deny your request.

Thank you for bringing these questions to our attention. If you have any questions, please contact Meghan G. Ludtke at 202-366-1936.
 

Very truly yours,
 

(Signed)
Gregory B. McBride
Deputy Chief Counsel

cc: Leslie Rogers, Region 10 Administrator
Dennis Hough, Metropolitan Transit Authority of Harris County
Metropolitan Transit Development Board