September 08, 2004

John A. Howell, Esq.
Dorsey & Whitney, LLP
Suite 400 South
1001 Pennsylvania Avenue, NW
Washington, D.C. 20004-2533

Dear Mr. Howell:

This letter responds to your correspondence of August 27, 2004, and the June 24, 2004 letter from your client, North American Bus Industries, Inc. (NABI), requesting a non-availability waiver of the Buy America requirements for the procurement of Hubner Manufacturing Corporation (Hubner) articulated joints, used in articulated buses. 

Applicable Law

The Federal Transit Administration’s (FTA) requirements concerning domestic preference for federally funded transit projects are set forth in 49 U.S.C. 5323(j).  Section 5323(j)(2)(C) addresses the general requirements for the procurement of rolling stock. This section provides that all rolling stock procured with FTA funds must have a domestic content of at least 60 percent and must undergo final assembly in the U.S.  You request a waiver under 49 U.S.C. 5323(j)(2)(B), which states the Buy America requirements shall not apply if the item or items are not produced in the U.S. in sufficient and reasonably available quantities or are not of a satisfactory quality.  The implementing regulation provides that non-availability waivers may be granted for a component and if granted, the component will be considered of domestic origin when calculating domestic content for the purposes of 49 C.F.R. 661.11.  49 C.F.R. §661.7(f).

Background and NABI Arguments

FTA granted a waiver to both New Flyer of America and NABI for the Hubner joint in 2001, allowing both bus manufacturers to use the foreign joint and count it as a domestic component when calculating domestic content.  In those waivers, FTA directed NABI and New Flyer to work with domestic suppliers to develop alternative sources for these parts.  In 2003, NABI and New Flyer came back to FTA and explained that there was still no domestic source for the articulated joint.  FTA granted a new waiver, anticipating that Hubner planned to relocate all manufacturing process from Germany to South Carolina by the end of 2003.

NABI now requests a new waiver, explaining that Hubner has stated that it cannot achieve compliance, as originally stated, absent a “[s]ufficient market demand and a purchase commitment for one of its new systems.”  New Flyer also requested a new waiver, but later withdrew that request and chose to count the joint as part of the 40 percent foreign content permitted under the statute.  NABI explains that the joint is still not available from a domestic source, and, unlike New Flyer, it has to pay higher shipping costs for its foreign components because they come from Hungary, and therefore, it would be more difficult to comply without the waiver. 

Summary of Comments

FTA posted a summary of this waiver request on its website and requested comment. We received 14 comments, eight against and six in favor of granting the waiver. Neoplan argued that it uses the Hubner joint and has not requested a waiver; instead, it uses other domestic components to achieve the necessary 60 percent.  El Dorado National, California; El Dorado National, Kansas; Champion Bus; and General Couch America, each suggested that NABI should count the joint as foreign and use other domestic components to achieve the 60 percent. Gillig argued that in granting these waivers, FTA is effectively raising the 40 percent foreign content permitted by the statute.  Gillig also argued that if the waiver is granted, the joint should at least be counted as content-neutral, not domestic.  Bluebird argued that the 40 percent foreign content should be enough to accommodate the joint and further, that Hubner and NABI failed to do what FTA asked and should not be rewarded.

Phoenix Public Transit Department; Trillium, LLC; LTK Engineering; Victor Valley Transit Authority; Southeastern Pennsylvania Transportation Authority; and the Washington Group International all state that since there is no domestic source for the joint, a waiver should be granted.

Decision

You state that the circumstances necessitating the current waiver remain unchanged and therefore, a waiver should be granted.  However, two critical factors have changed, the first is that FTA has now been notified that both Neoplan and New Flyer will use this same equipment without seeking a waiver. The second is that Hubner has not relocated all of its manufacturing to the U.S., as was discussed in the last waiver request.  Congress allowed up to 40 percent foreign component content in rolling stock. There is not a need, on top of that allowance, to grant a waiver here and give NABI a competitive advantage over New Flyer and Neoplan, especially when it is clear that this joint could be manufactured in the U.S.  Accordingly, this waiver request is denied.

If you have any questions, please contact Meghan Ludtke at (202) 366-1936.

Very truly yours,

Gregory B. McBride
Deputy Chief Counsel