Construction

Buy America
Application to Federal-aid Highway Construction Projects
July 9, 2002

Background:

There are two separate and distinct domestic purchase programs that affect FHWA operations. The first program was created in 1933 as the "Buy American" policy for all direct Federal procurements; this program affects the Federal Lands highway program. The second program was created in 1982 as the "Buy America" requirements for the Federal-aid highway program. "Buy America" focuses on iron and steel products while "Buy American" affects procurement of approximately 100 products. The two programs have very different requirements and processes.

The Surface Transportation Assistance Act of 1982 (STAA), Section 165 contains the basic Buy America statute applying to Federal-aid highway construction projects. Section 165 requires that Federal-aid funds may not be obligated for a project unless steel, cement and manufactured products used in such projects are produced in the United States.

FHWA published the final rule implementing Section 165 in the January 17, 1983 Federal Register. In the preamble, FHWA noted that its previous Buy America regulation had never covered "all manufactured products" and Congress had not specifically directed a policy change in the STAA. Therefore, the FHWA found it in the public interest to waive the Buy America requirements for all manufactured products except steel manufactured products.

Cement was deleted from the list of products by P.L. 98-2299 enacted March 9, 1984.

Sections 1041(a) and 1048 of the Intermodal Surface Transportation Efficiency Act (ISTEA) of 1991 further expanded Buy America coverage to include iron and clarified Congressional intent that the application of a coating is a manufacturing process.

Talking Points:

• 23 CFR 635.410(b) (as amended by enactment of the 1991 ISTEA), contains the basic rule for Buy America coverage. All Federal-aid construction projects must either require no permanently incorporated steel and/or iron materials, or require that all steel and iron materials used in the project be manufactured in the United States. "Manufactured in the United States" means that all manufacturing processes starting with the initial mixing and melting through the final shaping and coating processes must be undertaken in the United States.
• The only exceptions permitted are:
  1. If the State permits alternate bids for foreign vs domestic steel and iron materials, and the total bid for the contract using foreign steel and iron materials is lower by more than 25 percent than the total bid using domestic source materials;
  2. If the amount of foreign steel and iron materials is minimal, meaning it does not exceed 0.1 percent of the total contract value, or $2,500, whichever is greater; or
  3. If the FHWA approves a State requested waiver to permit use of foreign steel and/or iron materials.
• Guidance given to the FHWA field offices regarding Buy America application follows:
  1. All steel and iron materials are covered by Buy America regardless of the percentage they comprise in a manufactured product or form they take.
  2. Minimal amounts of foreign steel and iron materials - less than $2,500 total for steel and iron materials per project, or 0.1 percent of the total contract value, whichever is greater - may be used on Federal-aid projects.

  3. The manufacturing process for steel or iron materials is complete, and a steel or iron product/component is produced when all grinding, drilling, and finishing of the steel or iron material has been accomplished. The steel or iron product may then be ready for use as such (i.e., fencing, posts, girders, pipe, manhole cover, etc.) or may be incorporated as a component in a further manufacturing process (i.e., prestressed concrete girders, reinforced concrete pipe, traffic control devices, bearing pads, etc.).

     Example: shapes produced domestically from foreign source steel billets are not acceptable under Buy America since the initial melting and mixing of alloys to create the steel occurred in a foreign country.

     Example: all welding must take place domestically since the welding rod is an iron/steel product and the welding process substantially alters the rod.

  4. Applying a coating to a finished steel or iron product/component is now subject to Buy America. Coating includes epoxy coating, galvanizing, painting, and any other coating that protects or enhances the value of the coated steel or iron product/component.
  5. A product containing both steel and/or iron components and other components, may be assembled outside the United States and meet Buy America requirements if the constituent steel and iron components (in excess of the minimal amounts permitted) were manufactured domestically and are not modified at the assembly location prior to final assembly.
  6. Likewise, the final product could be assembled in the United States of foreign and domestic source components, provided that the "value as delivered to the project site" of the foreign components includes some pro-rata share of the shipping, assembly and testing costs.
  7. With prior concurrence from Headquarters, the FHWA Division Administrator may grant a waiver for a specific product, project, geographic area, or combination if:
     1. following Buy America requirements is inconsistent with the public interest; or
     2. insufficient quantities of satisfactory quality domestic products are available.
     3. Only the Federal Highway Administrator may grant nationwide waivers, usually through the public rulemaking process.

Nationwide Waivers:

• A Nationwide waiver for specific ferryboat equipment was granted in the February 9, 1994 Federal Register. The waiver covered marine diesel engines, electrical switchboards and switchgear, electric motors, pumps, ventilation fans, boilers, electrical controls, and electronic equipment. Items not specifically covered by the waiver are subject to Buy America requirements.
• A nationwide waiver for pig iron and processed, pelletized, and reduced iron ore was granted in the March 24, 1995 Federal Register. This waiver allows the use of foreign pig iron and processed, pelletized, and reduced iron ore to be incorporated into domestic steel and/or iron products that are used in Federal-aid projects. The waiver also permits foreign source raw alloys to be incorporated into domestic steel and/or iron products that are used in Federal-aid projects. The waiver was granted because insufficient quantities of quality domestic pig iron; processed, pelletized, and reduced iron ore; and raw alloys are available.