April 30, 2014
Mr. Douglas Bauder
Vice President/Chief Procurement Officer
Southern California Edison
8631 Rush Street
Rosemead, CA 91770
Dear Mr. Bauder:
I write in response to Southern California Edison’s (SCE or utility company) several inquiries to the Federal Transit Administration (FTA) regarding how to apply the Agency’s Buy America requirements to work to be performed by SCE on FTA-funded projects. FTA has been working with SCE over the past several months to provide the utility company assistance on interpreting Buy America. This letter summarizes our exchanges and explains the conclusions reached by FTA. The interpretations contained in this letter apply to FTA-funded projects on which SCE will perform utility work and may be used by others for informational purposes.
SCE’s questions arose from work it is performing on FTA-funded projects sponsored by the Los Angeles County Metropolitan Transportation Authority (LACMTA) and Omnitrans in San Bernardino, California. After receiving unsatisfactory answers from the project sponsors, SCE sought clarification from FTA on how to apply the Buy America rules. FTA answered SCE’s questions by e-mail, and followed its response by holding several conference calls with attorneys and engineers from SCE, LACMTA, and Omnitrans. These conversations took place from August 2013 to February 2014. The following is a summary of these discussions:
On August 16, 2013, LACMTA and SCE submitted a list of Buy America questions to FTA.
On October 31, 2013,  FTA responded to SCE and LACMTA’s questions by e-mail. SCE requested a meeting to discuss FTA’s answers and provided a list of follow-up questions on November 6, 2013. FTA reviewed the questions and agreed to a series of discussions to educate SCE about Buy America and to provide additional guidance as needed.
FTA and SCE held many telephone discussions between November 7, 2013 and the present (many of these calls lasted several hours), during which FTA and SCE discussed, among other things, the Buy America rules generally, the applicability of Buy America to the entire scope of an FTA-funded project, the “small purchases exemption” at Appendix A to 49 C.F.R. § 661.7, certification requirements, applicability of the steel and iron requirements, and differences between FTA and the Federal Highway Administration (FHWA) Buy America requirements.
On November 15, 2013, SCE provided a generic list of various items and parts that it often uses in its utility work. When it sent the list, SCE indicated a need for quick answers from FTA to avoid delay on several FTA-funded projects. SCE stated it would not proceed with its work on these projects until it had a better understanding of Buy America.
Based on SCE’s stated intent to halt work on FTA-funded projects, FTA expedited its review.
On December 4, 2013, upon completing its analysis, FTA held a teleconference with SCE to explain which items on its list must be produced in the United States to comply with Buy America.
By letter dated December 5, 2013, SCE informed Omnitrans that it would halt work on the FTA-funded Omnitrans sbX E Street Corridor BRT Project (Omnitrans sbX Project) and that it would not certify compliance with Buy America until it determined that it was able to do so. Under this project, there are at least 41 remaining work orders, to which SCE sought to apply the small purchases exemption, which is currently set at $100,000. SCE further stated that it was developing a Buy America compliance program, and that it would not proceed with the utility work for the Omnitrans sbX Project until it was certain that it would be able to comply with Buy America.
On December 5, 2013, SCE sent FTA a system diagram and more documentation on its materials.
On December 9, 2013, FTA held another teleconference with SCE. SCE sent updated documentation, which included comments from its engineers.
On December 19, 2013, FTA and SCE finished discussing the list of items that would need to be produced in the United States. SCE asked whether the small purchases exemption would apply to each individual work order with Omnitrans. FTA asked to review sample work orders. SCE provided one work order for FTA’s review. FTA requested additional work orders so that it could compare and sufficiently understand the various types of work orders that SCE used.
SCE did not send FTA additional sample work orders until January 28, 2014.
On February 6, 2014, FTA held a teleconference with Omnitrans to discuss the status of the Omnitrans sbX Project and how Buy America and SCE’s utility work was affecting the project. Although SCE stopped its work on the project, OmniTrans avoided delays by developing a work-around solution to keep the project on schedule pending resolution of SCE’s concerns.
On February 7, 2014, FTA informed SCE by email that it could not apply the small purchases exemption to its work on the Omnitrans sbX Project because FTA’s Buy America requirements apply at the project level. 49 U.S.C. § 5323(j)(1). While the small purchases exemption may apply to individual contracts, FTA does not permit work to be split into multiple contracts for purposes of avoiding Buy America requirements. The sum of the work performed by SCE on the Omnitrans project far exceeds the current $100,000 small purchase threshold. Therefore, FTA informed SCE that it could not use the small purchases exemption and stated that it would follow up with this letter.
On the same day, February 7, 2014, SCE objected to FTA’s decision to issue a letter of interpretation that memorialized the information that FTA provided to SCE during the numerous teleconferences without a chance for SCE to review the information. FTA responded on February 11, 2014, by stating that, based upon its numerous and months-long communications with SCE, issuing this letter would permit SCE to complete work on FTA-funded projects with clarity about how to apply the Buy America rules. FTA invited SCE to send any additional information it would like FTA to consider in preparing this letter.
On February 14, 2014, SCE provided additional information. FTA has reviewed and considered all of the information submitted by SCE.
On February 20, 2014, you, on behalf of SCE, sent a letter to FTA Deputy Administrator Therese McMillan objecting to the issuance of formal guidance until FTA received further information from the rest of the industry. In this same letter, among other things, SCE reiterated its objection to FTA’s determination regarding the small purchases exemption. 
II. Buy America
By law, all contracts needed to complete an FTA-funded project, including utility contracts, must comply with the Buy America rules of 49 U.S.C. § 5323(j), as implemented by 49 C.F.R. part 661. Buy America requires that all steel, iron, and manufactured products must be produced in the United States. 
A. Manufactured Products
For manufactured products to be considered produced in the United States:
- All of the manufacturing processes for that product must take place in the United States;
- All of the components of that 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 . . . 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. Thus, based upon this definition of an end product, a system also may be an end product under Buy America.
A system is a “machine, product, or device, or a combination of such equipment, consisting of individual components, whether separate or interconnected by piping, transmission devices, electrical cables or circuitry, or by other devices, which are intended to contribute together to a clearly defined function . . . .” Id. In determining whether a system is an end product or consists of multiple end products, FTA looks at various factors, including “whether products performed on an integrated basis with other products in a system, or are operated independently of associated products in the system, or whether transit agencies routinely procure a product separately (other than as replacement or spare parts.” Id.; see also 72 Fed. Reg. 53688, 53693 (Sept. 20, 2007).
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).
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.” 
B. Steel and Iron Requirements
FTA’s Buy America requirements also apply to steel and iron used in FTA-funded projects. 49 U.S.C. § 5323(j)(1). The steel and iron rules are set forth in 49 C.F.R. § 661.5(b) and (c) and are as follows:
All steel and iron manufacturing processes must take place in the United States, except metallurgical processes involving refinement of steel additives. 49 C.F.R. § 661.5(b). However:
[T]he steel and iron requirements apply only to construction materials that are made primarily of steel or iron and used in infrastructure projects such as transit or maintenance facilities, rail lines, and bridges. These items include, but are not limited to, structural steel or iron, steel or iron beams and columns, running rail and contact rail. These requirements do not apply to steel or iron used as components or subcomponents of other manufactured products or rolling stock, or to bimetallic power rail incorporating steel or iron components.
49 C.F.R. § 661.5(c).
C. Utility Work
FTA’s Buy America requirements always have applied to the entire scope of the FTA-funded project, including utility work such as utility relocation. In a September 7, 2012 letter to the New Starts Working Group, FTA clearly re-stated the statutory requirement that Buy America applies to the full scope of the FTA-funded project, and that all utility contracts necessary to complete a project must comply with Buy America.
On August 8, 2013, after considerable discussions with AT&T, FTA issued a letter to the City of Charlotte regarding utility work performed by AT&T on the FTA-funded Blue Line Extension (BLE) project. FTA instructed the City of Charlotte and AT&T about how to apply the manufactured products rule to AT&T’s utility work for the project, including direction regarding what constituted the end product, components, and subcomponents. In that case, FTA identified the communications network as the end product; and the poles, manholes, handholes, conduits, cables, pedestals, and the Video Ready Access Device (VRAD) and cross-connect cabinets as the components. FTA determined that the connectors, clamps, and fittings were subcomponents of the component conduit; the lashing wire, strand, grip strand, terminals, connectors, closures, splice boxes, anchors, clamps, fittings, washers, screws, nuts, and bolts were subcomponents of the component cable; and the electronics, shelves, nuts, screws, bolts, batteries, and concrete pads were subcomponents of the component cabinets.
On August 21, 2013, FTA issued a similar letter to LACMTA regarding utility work to be performed by AT&T on its Regional Connector and Westside Subway Extension projects. In that letter, FTA determined that the manholes, conduits, air pipes, copper cables of various sizes, and fiber cables were components of the communications network (a system end product); and the closure fiber splices, closure copper splices, endplates for the copper splices, ground clamps, ground straps, zip ties, fiber connectors, splicing modules and sealing tape were subcomponents of the communications network.
Over the course of several months, FTA has worked closely with SCE to review and discuss every Buy America question that SCE asked. These questions are quoted verbatim or paraphrased below. I expect this letter will provide sufficient guidance for SCE to decide how to proceed with its work on the LACMTA and Omnitrans projects.
A. When do FTA’s Buy America requirements apply?
FTA’s Buy America requirements apply to all FTA-funded projects. 49 U.S.C. § 5323(j)(1). Moreover, the Buy America requirements apply to the entire scope of an FTA-funded project, regardless of whether Federal funds are used to pay for all costs associated with the project.  If, however, the work is outside the scope of the FTA-funded project, then Buy America generally would not apply. Whether the work falls within the scope of the FTA-funded project depends on a variety of factors; however, the major factors include the approved project budget and the terms in the Underlying Agreement between the FTA grantee and FTA,  which generally means the amount of funds that FTA and the FTA grantee will use for a project and project activities. Utility work generally would fall within the scope of an FTA-funded project if the FTA grantee is reimbursing SCE for the costs of purchasing materials for SCE’s utility work under the FTA-funded project; SCE is charging the FTA grantee for certain costs, including existing material that is moved from one location for use in another location; materials from SCE’s general inventory for which SCE receives reimbursement from the FTA grantee; or certain “spare” or “maintenance” materials that SCE purchases after it completes the utility work pursuant to an agreement with the FTA grantee and for which SCE charges the FTA grantee for reimbursement. It is also important to note that FTA would view limiting the scope of the work orders or other agreements between SCE and the FTA grantee, for example, by excluding material costs and increasing service costs, as an unacceptable attempt to avoid Buy America requirements.
1. There are Different Buy America Rules for FTA- and FHWA-Funded Projects
There are significant differences between FTA and FHWA Buy America requirements. FTA’s Buy America requirements are codified at 49 U.S.C. § 5323(j). FHWA’s Buy America requirements are codified at 23 U.S.C. § 313. Because of these differences, FTA recommends that SCE carefully review both sets of Buy America rules. However, I note that pursuant to the Moving Ahead for Progress in the 21st Century Act,  for any project for which FHWA obligates funds after October 1, 2012, FHWA now applies its Buy America requirements to utility contracts for such projects if the utility work is within the scope of the project evaluated pursuant to the National Environmental Policy Act.
2. Unforeseen or Unexpected Circumstances
Buy America generally applies to the FTA-funded project regardless of potentially unforeseen or unexpected circumstances. In these cases, FTA may review the circumstances and provide technical assistance in order for the utility company and the FTA grantee to come to a resolution. 
3. When the Utility Company is Prohibited from Seeking Reimbursement from the FTA-Grantee
If the utility company is prohibited from seeking reimbursement from the FTA grantee or another source of local share of the FTA-funded project, then FTA does not consider the costs to be part of the FTA-funded project, and therefore, Buy America does not apply.
4. Temporary Installations
The extent to which Buy America applies to temporary installations will depend upon the result and use of those temporary installations. As with all of the issues discussed in this letter, FTA cannot list all possible scenarios involving temporary installations. However, assuming that temporary installations are those installations of materials that will be removed and not be included as part of the utility company’s final product or work under the FTA-funded project, and the FTA grantee is not reimbursing the utility company for the temporary installation materials, then FTA likely will consider the purchase of such materials to be outside the scope of the FTA-funded project.
5. Responsibility of the Utility Company When the FTA Grantee Provides the Materials for Use in the Utility Work
As stated above, FTA’s Buy America requirements apply to the entire FTA-funded project. Ultimately, the FTA grantee is responsible for ensuring compliance with Buy America and flowing down this requirement to the utility company. In a case where the FTA grantee is providing the materials for use by the utility company in the utility work pursuant to the project, however, the utility company will not be held responsible for those materials. As a matter of prudence, FTA strongly encourages both the FTA grantee and SCE to check the source of the materials given that a finding of non-compliance or a violation of Buy America could result in requiring that some or all of the utility work be redone.
SCE specifically asks whether Buy America applies to “betterments.” SCE defines a betterment as when it upgrades its facilities at its own expense without charging the FTA grantee and is not part of the utility work that the FTA grantee needs done as part of the FTA-funded project. FTA agrees that this definition of a betterment is outside the scope of an FTA-funded project and, as such, Buy America does not apply.
B. Small Purchases Exemption
Appendix A to 49 C.F.R. § 661.7 provides a list of Buy America waivers, which includes a waiver for “small purchases” (small purchases exemption). The small purchases exemption is currently set at $100,000 and may apply to individual contracts. 60 Fed. Reg. 37930, 37931 (July 24, 1995). If the contract is directly between the FTA grantee and the utility company and the contract price is less than $100,000, then the small purchases exemption applies. However, FTA grantees and utility companies may not split up a procurement that exceeds the threshold in order to avoid the Buy America rules that would otherwise apply. Id.
As FTA stated in its February 7, 2013 email, FTA finds that the small purchases exemption does not apply to SCE’s individual work orders when the cumulative value of the work orders exceeds $100,000. FTA’s decision is based upon the sample work orders SCE provided as well as descriptions of its work orders. Each individual work order appears very limited in scope and is limited according to a variety of factors, which mostly appear to be based upon business judgment.
According to SCE, SCE issues multiple work orders for a single transit project based upon a variety of factors, including the segment of the overall work performed, timing, location, and the type of work performed (i.e., transmission, distribution, substation, network & telecom, and carrier solutions). This practice can result in a significant number of work orders per transit project (e.g., 40 or more). Moreover, the combined number of SCE-issued work orders for a particular FTA-funded project often results in costs much greater than $100,000. In those cases, the small purchases exemption does not apply. While the small purchases exemption may apply to individual contracts, based upon the sample work orders SCE provided, FTA finds that the sheer number of work orders per FTA-funded project, the limited scope of each work order, and the bases for which these work orders are issued constitutes segmentation of the utility work necessary for this FTA-funded project. To apply the small purchases exemption under these circumstances, therefore, would contravene FTA’s Buy America requirements. Accordingly, FTA finds that the small purchases exemption does not apply to SCE’s individual work orders when the cumulative value of the work orders exceeds $100,000.
C. Buy America Steel and Iron Requirements Applicability
1. When do the Buy America Steel and Iron Requirements Apply?
The Buy America rules for steel and iron apply to construction materials made primarily of steel or iron and used in infrastructure projects. 49 U.S.C. § 5323(j)(1); 49 C.F.R. § 661.5(c). These rules, which are set forth above, generally apply to those construction materials that are structural and load-bearing. See, e.g., 49 C.F.R. § 661.5(c). For example, a steel tower would be considered structural, i.e., load-bearing, given that it is used to support some form of overhead power lines. A pole made of steel or iron falls under the steel and iron requirements depending upon its functionality and significance in the overall system. If it provides a load-bearing, structural, or support function, it will fall within the scope of 49 C.F.R. § 661.5(b)-(c).
2. Raw Materials
The Buy America rules for steel and iron require that all steel and iron processes take place in the United States. 49 C.F.R. § 661.5(b). However, these requirements do not extend to the metallurgical processes involving refinement of steel additives. Id. Therefore, the Buy America requirements exclude the raw materials that make up the steel and iron used in the FTA-funded project.
3. FTA Does Not Have a Specific Percentage Threshold for Applicability of the Steel and Iron Requirements
Unlike FHWA, which only applies its steel and iron requirement to products that are at least 90 percent steel or iron, FTA does not attach a specific percentage to its requirements. In its notice of Final Rule issued on February 16, 1996, 61 Fed. Reg. 6299, FTA explained that it did not believe it was appropriate to attach a percentage for 49 C.F.R. § 661.5(c), “since the percentage of steel or iron in a particular item may vary according to an individual producer’s refinement or manufacturing processes.” This policy has not changed and there has been no indication that a lack of a percentage threshold for applicability of the steel and iron requirements has created confusion. FTA will answer questions regarding specific items as they arise.
D. Designation of Components and Subcomponents
Based upon the information provided in SCE’s document submissions and the numerous conversations between SCE and FTA, the Agency agrees with the majority of SCE’s classifications with slight modifications as provided below and in the Attachment. FTA finds that the electric utility SCE provides is divided into two system end products: (1) Transmission System, and (2) Distribution System.
1. Transmission System
SCE asserts that for the transmission system end product, the poles, conductors, switches, and vaults are the components.
FTA, however, has determined that the poles, wires (such as conductor wires), cables, switches, vaults, cabinets, meters, and barometers are the components of the transmission system. 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. The wires, cables, cabinets, meters, and barometers are directly incorporated into the transmission system at the final assembly location. Moreover, with respect to the wires and cables, SCE states that these items are subcomponents of the conductor. However, FTA finds that the wires and cables are the conductors themselves. Therefore, FTA finds that these items are components.
Regarding the poles, if they are made of steel or iron and function in a load-bearing, support, or structural capacity, then the steel or iron requirements under 49 C.F.R. § 661.5(b) and (c) apply. In addition, the routers, radios, and processors appear to be, at a minimum, components (not listed in the Attachment), but would fall under the general public interest waiver for microprocessors, computers, micro-computers, or software (microprocessor waiver) if used solely for the purpose of processing or storing data per Appendix A to 49 C.F.R. § 661.7. All other listed materials or items shown in the Attachment are subcomponents. Note that FTA has also removed other items from SCE’s subcomponent list because they are components or duplicates and SCE had already listed them as components. See Attachment (PDF).
2. Distribution System
SCE asserts that for the distribution system end product, the poles, conductors, recloser, switches, operator switch, transmission tower, concrete vaults, transformers, capacitor banks, luminaires, meters, circuit breakers, and switch gears are components.
Based upon the information SCE provided, FTA has determined that the poles, wires, cables, recloser, switches, operator switch, transmission tower, concrete vaults, cabinets, switches, lightning arrestor, transformers, capacitor banks, luminaires, meters, circuit breakers, and switch gears are components. While SCE believes the wires, cables, cabinets, and lighting arrestor are subcomponents, these items are directly incorporated into the distribution system end product. See 49 C.F.R. § 661.3 (definition of component). Moreover, as stated above, with respect to the wires and cables, SCE states that these items are subcomponents of the conductor. However, FTA finds that the wires and cables are the conductors themselves. Therefore, FTA finds that these items are components.
Similar to the poles used in the transmission system, if the poles for the distribution system are made of steel or iron and function in a load-bearing, support, or structural capacity similar to a steel tower, then the steel or iron requirements under 49 C.F.R. § 661.5(b) and (c) apply. In addition, the transmission tower, if made of steel or iron, must also follow the steel and iron requirements under 49 C.F.R. § 661.5(b) and (c). All other listed materials or items shown in the chart below are subcomponents based upon the information SCE has provided. However, please note that SCE referenced various subcomponent lists from its transmission system (e.g., miscellaneous encasements, electronics and hardware) that FTA has revised based upon its determinations with respect to the components of the transmission system (see above discussion). The revised lists apply. See Attachment (PDF).
E. Certification Requirements
The Buy America certification requirements are intended to be a self-certification process. FTA only requires certification by the utility company and the FTA grantee must ensure that it receives this certification. Certification language is found at 49 C.F.R. § 661.6.
With respect to Buy America certification by component and subcomponent suppliers, FTA does not require such certification. However, the utility company is bound by its original certification. 49 C.F.R. § 661.13(c). Therefore, FTA encourages the utility company to obtain, among other things, Buy America certification from its suppliers and vendors to ensure the accuracy of its own Buy America certification.
F. Document Retention Period
A utility company performing work pursuant to an FTA-funded project must retain certification documents as well as other documentation related to the utility work for the FTA-funded project for three years after the FTA-grantee makes the final payments to the utility company and all other pending matters are closed. 49 C.F.R. § 18.36(i)(11).
This letter is intended to provide direction specifically to SCE on the application of Buy America to its utility work for LACMTA and Omnitrans. I understand that there may be unique or certain circumstances that require more than the generally applicable guidance provided herein. Finally, FTA plans to convene a Buy America working group involving the electric utility industry in order to develop more comprehensive guidance that would apply to the entire industry.
If you have any questions, please contact Mary J. Lee at (202) 366-0985 or firstname.lastname@example.org.
Deputy Chief Counsel
Cc: Jeff Kagan, Principal Manager, Corporate Center Supply Management/Buy America Compliance Program, Southern California Edison
 FTA’s response was delayed because the majority of FTA staff was furloughed from October 1, 2013, until October 17, 2013, as well as the large number of questions to which FTA responded.
 On February 20, 2014, Mr. Thomas R. Kuhn, President of Edison Electric Institute, also wrote a letter to FTA’s Deputy Administrator requesting that FTA delay guidance until FTA receives further input from the rest of the electric utility industry. FTA will not issue guidance applicable generally to the electric utility industry without conducting industry outreach.
 49 U.S.C. § 5323(j)(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.
 Id.; see, e.g., Memorandum from Kerry L. Miller, Assistant Chief Counsel, Federal Transit Administration (FTA), Jayme L. Blakesley, Attorney-Advisor, FTA, Stephen F. Pereira, Attorney-Advisor, FTA, and Richard L. Wong, Attorney-Advisor, FTA, to Dorval R. Carter, Chief Counsel, FTA, re Report of Investigation, Houston METRO—Buy America & Procurement, § V.a (Sept. 3, 2010), available at https://www.transit.dot.gov/regulations-and-guidance/buy-america/report-....
 See, e.g., FTA Master Agreement §§ 1.c(1)-(2), 46.b(1) (Oct. 1, 2013), available at https://www.transit.dot.gov/funding/grantee-resources/sample-fta-agreeme.... However, FTA reserves the right to consider information other than data included in the Approved Project Budget to determine the scope of the project. Id. at §§ 1.c(3)-(4), 46.b(2).
 The Moving Ahead for Progress in the 21st Century Act, Pub. L. 112-141 § 1518.
 For example, if the material or item at issue is a subcomponent, then it need not be domestically manufactured. 49 C.F.R. § 661.5(d)(2). In addition, under limited circumstances, FTA may issue waivers as necessary. See 49 U.S.C. 5323(j)(2); 49 C.F.R. § 661.7.