Federal Highway Administration Announces Proposed Rule Ending Longstanding Buy America Waiver for Manufactured Products

On March 7, 2024, the Department of Transportation's ("DOT") Federal Highway Administration ("FHWA") announced a proposed rule to rescind a longstanding general waiver of Buy America requirements for manufactured products (the "Manufactured Products Waiver"). If finalized, this would be a major change for the agency, reversing a policy that has been in place for more than 40 years.

FHWA has imposed Buy America requirements for domestic iron and steel on its projects since 1978 (see 23 U.S.C. § 313; 23 CFR § 635.410), but in 1983, the agency determined that it was in the public interest to waive the requirement as to manufactured products based on the agency's belief that manufactured products were not used in federal highway projects in sufficient quantities to have an effect on the overall cost of a project and therefore did not require Buy America protections. That general waiver has been in place ever since.

This change in policy comes in the wake of the 2021 Infrastructure Investment and Jobs Act's Build America, Buy America ("BABA") provisions, which expanded Buy America coverage broadly in federal financial assistance programs for infrastructure. BABA requires that all steel, iron, construction materials, and manufactured products used in such products be "produced in the United States." BABA also discourages the use of general applicability waivers like FHWA's Manufactured Products Waiver and required review of existing waivers.

FHWA sought comments on its longstanding manufactured products waiver in March 2023 and received over 9,400 comments from the public. Commenters included manufacturers, labor organizations, construction contractors, industry associations, State departments of transportation, and even members of Congress. Based on a consideration of this feedback and in recognition of other domestic content policies, including Executive Order 14005, "Ensuring the Future Is Made in All of America by All of America's Workers," FHWA is proposing to discontinue its Manufactured Products Waiver and modify its regulations to include domestic content requirements for manufactured products.

Manufactured Products

In order to standardize its requirements with BABA, FHWA is proposing that its manufactured products requirements mirror the standards set out in the final guidance and regulations implementing BABA. This means that under the proposed rule, manufactured products used in FHWA projects must (1) be manufactured in the United States, and (2) have a cost of components mined, produced, or manufactured in the United States be greater than 55 percent of the total cost of all components of the manufactured product. FHWA is proposing that the definitions of component, manufactured product, and manufacturer be substantially similar to those used in the BABA implementing rule, only making minor changes to account for FHWA's category of "excluded materials" discussed below.

Iron and Steel

FHWA is not proposing changes to its existing requirements for iron and steel, but proposes adopting the definitions of "iron and steel products" and "predominantly iron or steel or a combination of both" from the BABA regulations in order to distinguish iron and steel products from manufactured products. In other words, for articles, materials, and supplies where the cost of iron or steel is more than 50% of the total cost of all components, the article, material, or supply should be analyzed under FHWA's separate iron or steel test (rather than the above-referenced manufactured product test).

Excluded Materials

FHWA's proposed rule addresses a category of "excluded materials," which includes cement and cementitious materials; aggregates such as stone, sand, or gravel; or aggregate binding agents or additives. The proposed rule clarifies that standing alone, excluded materials are not manufactured products and Buy America requirements do not apply, but when combined with other materials, they may become a component of a manufactured product. The proposed rule expressly provides that concrete and asphalt mixtures delivered to a job site without final form for incorporation into a project are not manufactured products.

Deviations from BABA

FHWA's rule proposes deviating from BABA for two specific materials: (1) precast concrete products and (2) electronic hardware systems like intelligent transportation systems. For precast concrete products, FHWA is proposing that any iron or steel elements that are components of such a product must meet FHWA's existing requirements for iron and steel. For intelligent transportation systems and other electronic hardware systems installed into the highway right-of-way or other real property, which would be classified as manufactured products, FHWA is proposing that any iron or steel enclosures of the systems must meet FHWA's existing requirements for iron and steel. FHWA proposes that the domestic iron and steel in those manufactured products would count towards the 55% domestic component threshold.

Request for Information

In parallel with its proposed rule, FHWA has also issued a Request for Information ("RFI") seeking information on the domestic availability of specific manufactured products commonly used in FHWA-funded projects. The proposed rule states that as appropriate, FHWA intends to consider time-limited targeted waivers in place of its general Manufactured Products Waiver, and the RFI will provide information to support those newer and more targeted waivers.

FHWA is specifically requesting information on the following products that it understands may be broadly unavailable from Buy America-compliant sources:

• Retroreflective sheeting
• LED lamps/lighting systems
• Utility products
• ITS hardware
• Traffic signals and controllers
• Traffic cameras
• Changeable message signs
• Vehicle detection equipment

The RFI also poses a series of questions related to five topic areas: (1) domestic materials sourcing and manufacturing, (2) market readiness, (3) delivery lead times, (4) pricing, and (5) other considerations. Comments on the RFI are open until May 13, 2024.

Conclusion

Rescinding FHWA's Manufactured Products Waiver marks a major change in agency policy, but one that brings it into alignment with other agencies that have implemented BABA's requirements over the last few years. FHWA's proposed rule recognizes the significance of this shift for federally-funded highway projects, and as a result the agency notes that it is considering whether a transition period is required to give contractors time to come into compliance. We will continue to monitor developments on this proposed rule and the related RFI.

Public link

Please use the above public link if you want to share this noodl on another website.