Recent Buy America Developments
At the end of 2015, two modal administrations of the United States Department of Transportation (US DOT) have encountered changes to their Buy America programs. Both the Federal Transit Administration (FTA) and the Federal Highway Administration (FHWA) have had changes imposed upon their Buy America procedures – the FTA by Congress through provisions in the Fixing America’s Surface Transportation Act (or, FAST Act) and the FHWA through a recent opinion in the United States District Court for the District of Columbia (United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Works International Union, et al. v. Federal Highway Administration, case number 13-cv-01301).
Federal Transit Administration
The most recent long-term surface transportation reauthorization bill, the FAST Act, was signed into law on December 4, 2015. The FAST Act is a five-year bill that reauthorizes programs to improve surface transportation infrastructure and enhance surface transportation safety programs. The FAST Act generally covers roads and bridges, transit, and passenger rail.
The FAST Act includes changes to the FTA’s Buy America program at Section 3011. The changes include:
- Increasing the domestic content requirement for rolling stock from 60%, the current requirement through Fiscal Year (FY) 2017, to 70% in FY 2020 and thereafter. It should be noted that the term “rolling stock” applies not only to rail vehicles, buses, and ferries, but also to train control, communication, and traction power equipment, including prototypes.
- If rolling stock vehicle frames or car shells are components that are not produced in the United States, and if the average cost of the rolling stock vehicle is more than $300,000, the FAST Act permits the inclusion of the cost of steel or iron that is produced in the US and included in the frames or car shells in the calculation of domestic content in the rolling stock vehicle. The inclusion is permitted regardless of where the frame or car shell is produced, including in a foreign country. This provision changes the current calculation of component domestic content used to determine whether a rolling stock vehicle is a domestic product.
- If a request for Buy America waiver is denied, the FAST Act requires the Secretary of the US DOT (through the FTA) to certify in writing that the steel, iron, or manufactured good is produced in the US in a sufficient and reasonably available amount and that the item produced in the US is of satisfactory quality. The Secretary must also identify a list of known manufacturers in the US from which the item can be obtained. This certification must be made public on a US DOT Web site. Currently, there is no such requirement placed on the US DOT or the FTA.
- Clarifying that the small purchase threshold that applies to the general public interest waiver set forth at 49 C.F.R. § 661.7, Appendix A, paragraph (c), is $150,000. This matches the small purchase threshold identified in the Common Grant Rule.
Federal Highway Administration
Also at the end of 2015, the United States District Court for the District of Columbia issued an opinion in United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Works International Union, et al. v. Federal Highway Administration (hereinafter “United Steel”) regarding an FHWA Buy America policy. The opinion invalidates the FHWA’s 2012 memorandum that clarified the following two broad Buy America public interest waivers regarding:
- Steel or iron manufactured products; and
- Miscellaneous steel or iron products.
In December 1997, the FHWA issued its first memorandum regarding a public interest waiver for manufactured products. The FHWA determined that it was in the public interest to waive Buy America requirements for manufactured products other than steel and iron manufactured products. The 2012 memorandum subsequently clarified that in order for a manufactured product to be subject to Buy America, it must be manufactured predominantly of steel or iron. The FHWA then assigned a 90% steel or iron content to determine whether a manufactured product is “predominantly” steel or iron.
In addition, the 2012 memorandum extended the original public interest waiver to miscellaneous steel or iron components and subcomponents that are commonly available as of-the-shelf products. The 2012 memorandum identified examples of these “miscellaneous products,” including cabinets, covers, shelves, clamps, fittings, sleeves, washers, bolts, nuts, screws, tie wire, spacers, chairs, lifting hooks, faucets, light bulbs, and door hinges.
The court in United Steel determined that the 90% content threshold articulated in the 2012 memorandum was a substantive rule implemented without appropriate notice and comment, in violation of Section 553 of the Administrative Procedure Act (APA), and was an arbitrary and capricious action in violation of Section 706 of the APA. Further, the court in United Steel determined that the miscellaneous products exemption violated Sections 553 and 706 of the APA because it was a substantive rule implemented without appropriate notice and comment as required by law.
Subsequent to the issuance of the opinion in United Steel, the FHWA has rescinded its 2012 memorandum.
Buy America continues to evolve, and it is in the interest of public agencies and contractors and manufacturers to be versed in the changes made to the program.