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FHWA eliminates waiver allowing foreign products for federally funded projects, aligning with Biden's domestic manufacturing push. New rule requires 55% of components in manufactured products to be made in US by 2026, aiming to boost American jobs and investment in infrastructure. Industry concerns about cost impacts and availability of US-made products persist.
Tue January 23, 2024 - National Edition #3
In mid-January, FHWA published a final rule on the 1983 waiver of the regulation on the use of American-manufactured products on federal projects. The waiver limited application of the agency's Buy America requirements to iron and steel. That allowed contractors on FHWA projects to seek other products from foreign sources. And that waiver flies in the face of former President Joe Biden's goal to boost domestic manufacturing in transportation.
The Biden administration sought to discontinue the Reagan-era waiver by directing agencies to review and reconsider waivers of general applicability.
In 1983, FHWA determined it would be in the public interest to waive Buy America requirements for manufactured products. Under the Manufactured Products General Waiver manufactured products incorporated into federal-aid projects did not need to be produced domestically.
That stood apart from predominantly iron or steel components of manufactured products.
During the Biden administration, FHWA determined the thought behind the waiver was no longer applicable. As a result, the agency proposed revising regulations to "harmonize" the Buy America program with its Build America Buy America (BABA) requirements.
In the Reagan years, FHWA concluded that manufactured products were used in insufficient quantity on highway construction projects. It was felt that the practice failed to incentivize domestic manufacturing, resulting in little benefit to applying the protections afforded under Buy America.
With BABA provisions a part of the bipartisan IIJA infrastructure law, FHWA sought to align the highway program with government-wide standards. The agency said by placing greater value on domestic manufacturing for highway construction, the new rule will encourage investment in this sector. It also will protect and expand domestic manufacturing and increase reliance on U.S.-made products. Finally, it will ensure federal highway projects benefit from the broader domestic manufacturing base created by BABA for all fed programs.
"As we rebuild America's infrastructure, we want federal highway projects to use domestically manufactured products," said Pete Buttigieg, Biden transportation secretary.
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The agency wants to see products "that create good-paying jobs and promote private sector investment and small business opportunity," he said.
"The final rule we're announcing today is right in line with the work … done over the past four years to boost domestic manufacturing and support livelihoods."
This reverses decades-old policy that allowed taxpayer dollars to purchase foreign products for domestic purposes, said Gloria Shepherd, FHWA acting deputy administrator.
"American businesses now have a unique opportunity to take advantage of the broader federal government market," she said.
The new rule aims to maximize use of domestically produced manufactured products permanently incorporated in federal-aid highway and bridge projects."
The rule will be rolled out in two project obligation
phases:
• For projects obligated on or after Oct. 1, 2025, final assembly of all manufactured projects must occur in the United States.
• For projects obligated on or after Oct. 1, 2026, in addition to the final assembly requirement, the cost of components of products that are mined, produced or manufactured in the United States must be greater than 55 percent of the total cost of all components of the manufactured product.
From there rules for manufactured products will match those prescribed by BABA with one important exception, said law firm Crowell & Moring.
Concrete products and cabinets or other enclosures of transportation systems that incorporate steel or iron will still be separately subjected to Buy America requirements for iron and steel.
That means all manufacturing processes for the iron and steel occur in the United States.
However, iron and steel components of other manufactured products are not subject to this requirement.
Bottom line, the new rule does not change the Buy America requirements that currently apply to iron or steel products. It differentiates between products that must comply with Buy America for iron and steel and those that must comply with rules for manufactured products.
Updating its members on the final rule, ARTBA said FHWA will begin applying Buy America requirements later this year.
"Since 1983, the agency has used its waiver authority to exempt this wide array of items used on federal-aid highway projects," said the association.
That item list includes electronics, ITS hardware, electrical equipment, signal boxes, pumps and many more.
"This action represents … likely one of the final initiatives of the outgoing Biden administration to strengthen domestic manufacturing capabilities," said ARTBA.
As the association noted, IIJA maintained domestic requirements for iron and steel incorporated into federal-aid highway and bridge products.
But the law also added certain categories of construction materials to Buy America coverage.
The bipartisan IIJA requires federal agencies to periodically review these types of waivers. That combined with Biden's broad tightening of domestic preference mandates moved FHWA to reconsider the waiver over two years ago.
ARTBA argued that rescinding the waiver would risk increased project costs and delays.
"Ultimately, the administration chose to prioritize its manufacturing agenda," ARTBA said.
FHWA estimates that compliance with the new policy will cost up to $8.5 billion over the next 10 years.
Lamenting the rising cost of construction materials since the coronavirus pandemic, last year the AGC noted that prices rose faster than contractors' bids.
"Inflexible rules" for sourcing materials could drive up prices for federally aided projects such as highways, Ken Simonson, AGC chief economist, warned.
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ARTBA and the AGC tracked the impacts of the rollback through an industry survey last year.
Some 69 percent of respondents said their bids would reflect the cost uncertainties of Buy America-compliant materials.
"This reality usually results in higher project costs and diluted benefits from federal investment," Simonson said at the time.
"In addition, if FHWA rolls back its waiver, respondents expect significant challenges in complying with Buy America requirements," he added.
Less than 15 percent of those surveyed thought these products would easy or possible to acquire. They listed numerous additional products that would be difficult or impossible to source without waivers.
"Federal officials are attempting to shut down a diversified global supply chain … before enough domestic supply exists," said Jeffrey D. Shoaf, CEO of the AGC. "That's a recipe for higher costs and delayed projects that will harm both the U.S. economy and highway safety."
Under the 2025 revised rule, manufactured products will need to be assembled in the United States. And, more than 55 percent of components of those products must be made in the United States.
In analyzing the effects of the waiver rollback, Wiley Law said the extent of the impact is unclear.
FHWA recognizes if not implemented carefully, the new rule may mean "cost increases, project delays and product unavailability."
The agency also acknowledged that some manufactured products may not currently be produced in the United States, noted Wiley.
"As a result, FHWA indicated that it intends to consider whether to issue ‘targeted waivers' for specific products," said the firm.
FHWA issued an accompanying RFI requesting information on whether certain manufactured products are not and cannot be produced in the United States. That allows the agency to determine whether targeted waivers for those products are warranted.
FHWA said it will work with manufacturers and state transportation agencies to identify products that may require short-term waivers going forward.
During its first term, the Trump administration strongly supported domestic preference requirements and will likely do so again, noted ARTBA.
The association said it will "continue recommending improvements to the waiver process and other policies."
The goal is "to better achieve the twin priorities of short-term infrastructure improvements and long-term manufacturing enhancements."
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The waiver recission represents the latest rollback of well-established exceptions to federal Buy America policy, said Crowell & Moring. The new administration continues to seek ways to promote domestic manufacturing, said the law firm.
"Contractors should be prepared for additional changes in the coming months and years," the firm cautioned.
In fact, when Trump tapped Sean Duffy, former Wisconsin representative, his choice for secretary of transportation it was with marching orders.
"The president has given me a directive — to build big projects," Duffy told the senate commerce committee.
Among other highlights, he said he wants to work with other committee members to strengthen safety measures for highway construction workers.
Duffy promised to respond to questions, including his stand on Buy America, and to cut red tape at the agency, according to ARTBA.
Asked by Sen. Tammy Baldwin of Wisconsin whether he supported the waiver rollback, Duffy said he's in favor of domestic materials production.
ARTBA reported he expressed support for getting American-made products into transportation projects. But Duffy "refrained from commenting on the directive until he reviews it," said the association.
Another Biden goal, growing the national EV infrastructure network, was addressed with the potential transportation secretary.
Sen. Deb Fischer of Nebraska asked Duffy if EVs should pay into the financially strapped Highway Trust Fund.
He said he believes "they should pay for use of our roads," but "how to do that is a bit more challenging."
Duffy also was asked how committed he is to funding infrastructure projects already begun by the Biden administration.
"I want to look at what funding has gone out, but I'd imagine those good projects that are under way we would continue." CEG
Lucy Perry has 30 years of experience covering the U.S. construction industry. She has served as Editor of paving and lifting magazines, and has created content for many national and international construction trade publications. A native of Baton Rouge, Louisiana, she has a Journalism degree from Louisiana State University, and is an avid fan of all LSU sports. She resides in Kansas City, Missouri, with her husband, who has turned her into a major fan of the NFL Kansas City Chiefs. When she's not chasing after Lucy, their dachshund, Lucy likes to create mixed-media art.