Buy America Policy |
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Victor M. Mendez
Federal Highway Administration
July 10, 2013
[Federal Register Volume 78, Number 132 (Wednesday, July 10, 2013)]
[Notices]
[Pages 41492-41496]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-16554]
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DEPARTMENT OF TRANSPORTATION
Federal Highway Administration
[FHWA Docket No. FHWA-2013-0041]
Buy America Policy
AGENCY: Federal Highway Administration (FHWA), DOT.
ACTION: Notice and request for comments.
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SUMMARY: The FHWA is seeking comments regarding the continued need, in
whole or in part, for the general waivers from Buy America for
manufactured products; for ferry boat equipment; and for pig iron and
processed, pelletized, and reduced iron ores. These waivers have been
in effect since 1983, 1994, and 1995, respectively. The FHWA is also
seeking comment on the continuing need for the FHWA's minimal use
threshold (currently established at $2,500 or 1/10 of 1 percent of the
total contract value, whichever is greater).
DATES: Comments must be received on or before August 9, 2013. Late
comments will be considered to the extent practicable.
ADDRESSES: Mail or hand deliver comments to the U.S. Department of
Transportation, Dockets Management Facility, Room W12-140, 1200 New
Jersey Avenue SE., Washington, DC 20590, or submit electronically at
http://www.regulations.gov or fax comments to (202) 493-2251. All
comments should include the docket number that appears in the heading
of this document. All comments received will be available for
examination and copying at the above address from 9 a.m. to 5 p.m.,
e.t., Monday through Friday, except Federal holidays. Those desiring
notification or receipt of comments must include a self-addressed,
stamped postcard or you may print the acknowledgment page that appears
after submitting comments electronically. You may review DOT's complete
Privacy Act Statement in the Federal Register published on April 11,
2000 (Volume 65, Number 70, Page 19477-78).
FOR FURTHER INFORMATION CONTACT: Mr. Gerald Yakowenko, Contract
Administration Team Leader, Office of Program Administration, (202)
366-1562, or Mr. Michael Harkins, Office of the Chief Counsel, (202)
366-4928, Federal Highway Administration, 1200 New Jersey Avenue SE.,
Washington, DC 20590. Office hours are from 8 a.m. to 4:30 p.m., e.t.,
Monday through Friday, except Federal holidays.
SUPPLEMENTARY INFORMATION:
Electronic Access and Filing
This document and all comments received may be viewed online
through the Federal eRulemaking portal at: http://www.regulations.gov.
Regulations.gov is available 24 hours each day, 365 days each year.
Electronic submission and retrieval help and guidelines are available
under the help section of the Web site. An electronic copy of this
document may also be downloaded by accessing the Office of the Federal
Register's home page at: http://www.archives.gov/federal-register/, or
the Government Printing Office's Web page at: http://www.gpo.gov/fdsys.
Regulatory Background
The FHWA's Buy America policy in 23 CFR 635.410 requires a domestic
manufacturing process for any steel or iron products (including
protective coatings) that are permanently incorporated into a Federal-
aid highway construction project. The regulation is based on the
statutory authority in 23 U.S.C. 313(a) which states: ``Notwithstanding
any other provision of law, the Secretary of Transportation shall not
obligate any funds authorized to be appropriated to carry out the
Surface Transportation Assistance Act of 1982 (96 Stat. 2097) or this
title and administered by the Department of Transportation, unless
steel, iron, and manufactured products used in such project are
produced in the United States.''
The statute provides for the application of the Buy America
requirements to any project using Title 23 funding; however, exceptions
are provided where the Secretary finds that: (1) The application of the
requirement would be inconsistent with the public interest, (2) where
materials and products are not produced in the United States in
sufficient and reasonably available quantities and of a satisfactory
quality; or (3) that inclusion of domestic material will increase the
cost of the overall project contract by more than 25 percent.
Based on the Secretary's authority to grant waivers from Buy
America, the FHWA has issued three general waivers from Buy America.
These waivers pertain to manufactured products, ferry boat equipment,
and pig iron and processed, pelletized, and reduced iron ores, and have
been in effect since 1983, 1994, and 1995, respectively. With this
notice, the FHWA is seeking comment regarding whether these waivers
continue to be necessary, in whole or in part, and, if so, what limits
should be placed on these waivers. Additionally, FHWA's regulations at
23 CFR 635.410(b)(4) permit the incorporation of foreign steel and iron
into a project if the cost of such items does not exceed one-tenth of
one percent (0.1 percent) of the total contract cost or $2,500,
whichever is greater. The FHWA is also seeking comment on the
continuing need for the provision and, if so, whether the threshold is
appropriate.
Manufactured Products
General Manufactured Products
Section 165 of the Surface Transportation Assistance Act (STAA) of
1982, Public Law 97-424 (1983), is the source legislation for FHWA's
Buy America requirements.\1\ This statute
[[Page 41493]]
replaced an earlier statutory version of Buy America from Section 401
of the STAA of 1978, Public Law 95-599 (1978), that applied to the
Federal-aid highway program. Section 165 of the STAA of 1982 was
implemented with a November 25, 1983, final rule which implemented
FHWA's Buy America regulatory policies now found in 23 CFR 635.410. In
the preamble to the 1983 final rule (48 FR 53099), the FHWA summarized
and addressed more than 560 public comments, including comments on the
FHWA's interim decision to waive the application of Buy America to
manufactured products (48 FR 1946), and found that it was in the public
interest to waive application of Buy America to manufactured products
other than steel and iron manufactured products.
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\1\ Congress codified Section 165 of the STAA of 1982, as
amended, at 23 U.S.C. 313 with the enactment of Section 1903 of the
Safe, Accountable, Flexible, Efficient Transportation Equity Act: A
Legacy for Users (SAFETEA-LU), Public Law 109-59 (2005).
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In discussing the rationale for continuing the general waiver for
manufactured products in the preamble to the1983 final rule, the FHWA
stated that the agency had issued an identical general waiver for
manufactured products in implementing the 1978 Buy America provisions.
In issuing the waiver for the 1978 Buy America statute (43 FR 53717 and
45 FR 77455), the FHWA explained that steel was the only significant
foreign commodity having a significant nationwide effect on the cost of
Federal-aid highway construction projects.\2\ While natural materials
(e.g., sand, stone, gravel, and earth materials) and petroleum-based
products (e.g., fuels, lubricants, and bituminous products) are also
used in large amounts in Federal-aid highway construction projects,
foreign competition in natural materials was not significant due to
their high cost in transportation and petroleum-based products were not
available from domestic sources in sufficient and reasonable
quantities.
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\2\ Note that the 1983 final rule did not use the term ``general
waiver.'' Instead, the 1983 final rule simply said that the FHWA
found it in the public interest to waive the application of Buy
America to manufactured products other than steel and cement
manufactured products. The term ``general waiver'' is being used for
purposes of this notice to help clarify that the waiver issued for
manufactured products in the 1983 final rule is a waiver of general
applicability that is not subject to a project-by-project
determination.
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In examining the legislative history of the 1983 Buy America
statute, the FHWA found that Congress considered which products should
specifically be covered (such as steel, cement, and asphalt), and
focused solely on steel and cement. Therefore, the FHWA determined that
the best interpretation of congressional intent was that Congress, with
the enactment of Section 165 of the STAA of 1982, did not intend to
override the existing policy with respect to manufactured products that
applied to the 1978 Buy America statute. While Congress subsequently
modified the 1983 Buy America statute to repeal the statute's coverage
of cement (Pub. L. 98-229, Section 10 (1984) and to add coverage for
iron (Intermodal Surface Transportation Efficiency Act (ISTEA), Pub. L.
102-240, Section 1048(a) (1991)), Congress left the remaining
provisions intact.
Additionally, in the preamble to the 1983 final rule, the FHWA
noted, and agreed with, statements from commenters who noted the
difficulty in tracing the origin of various materials comprising
manufactured products. The FHWA further noted comments regarding the
difficulty of tracing the origin of steel components and subcomponents
of various manufactured products, such as traffic controllers. After
consideration of all the comments, the FHWA found that it was in the
public interest to waive the application of Buy America to manufactured
products other than steel and cement manufactured products.
Subsequently, in a December 12, 1997, memorandum, the FHWA reinforced
and clarified the concept of this public interest exclusion by stating
that Buy America requirements are applicable to the steel components of
predominantly steel products. However, that memo did not define the
term ``predominantly steel product.''
The American Recovery and Reinvestment Act of 2009 (Recovery Act)
brought a renewed interest from public and industry representatives in
ensuring that Federal funds were used to support domestic
manufacturing. While the ``Buy American'' provisions of the Recovery
Act Section 1605 did not apply to the Federal-aid highway program, the
FHWA took great efforts to ensure that Buy America provisions were
included and enforced on all Recovery Act projects.\3\
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\3\ Title XII of the Recovery Act specifically stated that
Recovery Act funded highway projects were to be administered as if
apportioned under chapter 1 of title 23 U.S.C. Therefore, Recovery
Act-funded highway projects were administered under the FHWA's
traditional Buy America requirements in 23 CFR 635.410 instead of
the Recovery Act specific Buy American provisions codified in 2 CFR
Part 172.
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As a result of this heightened awareness, construction project
inspection staff and audit representatives spent significant resources
in examining compliance with Buy America requirements for all steel or
iron products. Compliance issues were noted regarding manufactured
products that contained miscellaneous steel or iron components such as
light bulbs, sinks, toilets, faucets, tie wires, lifting hooks, traffic
controller mounting brackets, nuts, bolts, washers and screws. Many of
these products would typically have been labeled as miscellaneous steel
components or steel subcomponents comprising part of a manufactured
product that would have been subject to the general waiver granted in
the 1983 final rule.
Nevertheless, continuing requests for clarifications regarding Buy
America requirements during Recovery Act implementation and National
Review Team oversight efforts led the FHWA to issue a memorandum on
December 21, 2012. Moreover, given the broadened scope of the Federal-
aid highway program since 1983 as well as the evolution of
technologies, products, and construction methods used in highway and
bridge construction, the FHWA felt that issuing some guidance to
clarify the existence and use of this waiver was prudent. This December
2012 memorandum was intended to clarify the long-standing policy
regarding the application of Buy America requirements to steel or iron
manufactured products as it related to the waiver granted for
manufactured products in the 1983 final rule. Since the existence of
this waiver is found in the preamble of the 1983 rulemaking document
with very little other guidance available regarding its existence and
application, the FHWA wanted to ensure that FHWA Division Offices were
aware of the existence of the waiver and that the waiver was
consistently applied. The memorandum specifically identified a list of
products that are subject to Buy America requirements, defined the term
predominantly steel or iron manufactured product by a 90 percent
content requirement, and provided examples of miscellaneous steel or
iron products.
However, this correspondence has triggered opposition from various
groups in the manufacturing industry. Also, a bill has been introduced
in the House of Representatives (HR 949) that would require the FHWA to
reexamine the agency's standing nationwide Buy America waivers by
issuing a notice and request for public comments on the continuing need
for these waivers. While the FHWA maintains that the agency has not
changed the application or scope of the manufactured products waiver,
the FHWA agrees with the intent of HR 949 that, due to the age of the
manufactured products waiver, it is prudent to seek public comments as
part
[[Page 41494]]
of a review of the continued need for this waiver.
The FHWA supports the application of Buy America in the most
effective and efficient manner possible. The application of Buy America
is most effective and efficient whenever it is applied to products that
are available from domestically produced sources in sufficient and
reasonably available quantities and of a satisfactory quality. As
stated in the 1983 final rule, the FHWA found that the waiver of Buy
America to manufactured products does not have any significant impact
since manufactured products comprised a small percent of the highway
construction program. With this notice, the FHWA is reevaluating this
finding and requesting comments on the manufactured products waiver as
well as the needed parameters of the waiver if continued.
The most prevalent materials used in highway construction can be
included in four major material categories: Bituminous products,
Portland cement products, aggregates, and steel products. Based on a
report titled ``Distribution of Costs on Federal-aid Highway
Construction Contracts Over $1,000,000 on the National Highway System
Reported During Calendar Year 2004'' (the last year for which data was
available), the approximate value of the materials used as a percentage
of the overall value of all construction contract was as follows:
Bituminous products (7.8%), Portland cement products (0.7%), aggregates
(17.8%) and steel products (4.8%) (http://www.fhwa.dot.gov/policy/ohim/hs04/htm/costpie.htm#alt1). Of these materials, it appears that only
steel/iron products would be appropriate for consideration under the
public interest waiver provisions available under 23 U.S.C. 313.
The market conditions and assumptions that led to FHWA's decision
not to include oil products (bituminous products or asphaltic cement)
in the November 25, 1983, general waiver still exist today. Petroleum
and petroleum-based products that are permanently incorporated in a
project (such as asphalt cement) are generally not available from
domestic sources in sufficient and reasonably available quantities. In
the preamble to the 1983 final rule, the FHWA noted that over 200
comments were received regarding the application of Buy America
provisions to oil products and virtually all commenters asked that oil
and/or petroleum products and/or asphalt be exempt from coverage.
As noted above, Congress specifically modified the 1983 Buy America
statute to repeal the statute's coverage of cement. Aggregates and
other natural materials, such as sand, stone, and gravel are used in
large quantities in highway construction; however, foreign competition
is very limited due to the difficulty and high cost of transporting
these heavy materials over long distances. Thus, subjecting these
products to Buy America requirements will place an undue administrative
burden on State DOTs in ensuring Buy America compliance and could
unnecessarily delay, or even halt, projects for difficulties in tracing
the origin of all items used to manufacture these products. Moreover,
some of the ingredients used to make concrete products, such as
Portland cement in concrete or asphalt cement in bituminous concrete,
are not domestically manufactured in sufficient and reasonably
available quantities to meet the demand for these products.
Thus, the application of Buy America to only steel and iron
products seems to have the highest potential of realizing the intent of
the Buy America statutory provisions in protecting the domestic
manufacturing industry. The FHWA has applied, and intends to continue
to apply, Buy America to predominantly steel and iron products
delivered to a project site for permanent incorporation into that
project. This includes predominantly steel and iron products that are
incorporated into precast concrete products.
Additionally, for items that may be comprised of steel and iron
components or subcomponents, the application of Buy America to the
steel and iron in these items would have no impact because the
availability of these items are not driven by the demands of the needs
for highway construction. For example, some projects, such as in the
construction and improvement of rest areas, may involve the
incorporation of light bulbs. Light bulbs are not made special for
highway construction and, thus, there is no way to trace where the
steel and iron that is incorporated into a light bulb is manufactured.
The same problem is attendant with other products, also involved in the
construction and improvement of rest areas, such as faucets and door
hinges. The preamble to the 1983 final rule cited the example of a
traffic controller as a manufactured product, where it would be
inconsistent with the public interest to apply Buy America
requirements. In general, traffic controllers and traffic management
hardware and equipment are examples of manufactured products that are
composed of multiple components and subcomponents whose origins are
difficult, if not impossible to trace.
Vehicles
One example of the broadened scope of the Federal-aid highway
program involves the Congestion Mitigation and Air Quality Improvement
(CMAQ) Program. The CMAQ program was created under the Intermodal
Surface Transportation Efficiency Act (ISTEA) of 1991, Public Law 102-
240, and is codified at 23 U.S.C. 149. The CMAQ Program provides annual
apportionments to States for projects or programs that will contribute
to attainment or maintenance of the national ambient air quality
standards (NAAQS) for ozone, carbon monoxide (CO), and particulate
matter (PM). One type of CMAQ project that is being programmed at a
growing rate by State, local governments, and private sector sponsors
is acquisition of fuel efficient and low emission vehicles and
equipment. With recent developments in clean fuel and low emission
technologies as well as broader production and availability of these
types of vehicles in the U.S. market by the automotive industry, the
FHWA is seeing an increased demand to use CMAQ funds to purchase these
vehicles and associated items, such as construction equipment and
locomotives.
The FHWA currently has not established a Buy America policy for
these types of projects. While vehicles are a manufactured product,
with the increased use of CMAQ funds for these types of projects, the
FHWA has recently determined that the Buy America program is
appropriate to apply to these types of projects. For example, the FHWA
granted conditional waivers given to Alameda County, San Francisco
County, and Merced County, CA, for vehicle purchases on November 21,
2011, notices (76 FR 72027 and 76 FR 72028) and March 30, 2012 (77 FR
19410). These waivers were granted upon the condition that the final
assembly of the vehicles occur in the United States. However, the FHWA
did not apply a domestic content standard to these waivers. A vehicle
manufacturer relies on numerous international sources for various
components and it is virtually impossible to track the specific country
of origin for small steel components and subcomponents even though a
manufacturer can certify where the final assembly of the vehicle
occurs. The difficulty of tracing and documenting domestic
manufacturing processes for every manufacturing step for all
[[Page 41495]]
components and subcomponents illustrates the need for the public
interest exception provided by 23 U.S.C. 313(b).
The FHWA was, and remains, uncertain whether such a domestic
content requirement would further the objectives of the CMAQ Program in
encouraging State and local entities to pursue clean fuel technologies.
Moreover, the FHWA has no data to determine what such a content
standard should be. Also, the practicality of establishing such a limit
for just the iron and steel components in vehicles or equipment is
questionable. The FHWA is unaware of any method the agency can use to
determine where the components and subcomponents, including the steel
and iron contained in the steel and iron components of a vehicle, were
manufactured. Similarly, the FHWA has no basis for defining the point
of final assembly for vehicles as well as vehicle retrofit projects.
Ferry Boat Equipment
On February 9, 1994, FHWA published a notice in the Federal
Register (59 FR 6080) announcing a nationwide waiver of the Buy America
requirements for certain steel products used in the construction of
ferry boats. The FHWA granted this waiver after publishing a notice in
the Federal Register (58 FR 33295) and requesting comment for which two
comments were received. The items included in the waiver are marine
diesel engines, electrical switchboards and switchgear, electric
motors, pumps, ventilation fans, boilers, electrical controls, and
electronic equipment. Other steel and iron products used in the
construction of ferry boats that are manufactured domestically are not
waived, including steel and stainless steel plate and shapes, sheet
steel and stainless steel, steel and stainless steel pipe and tubing,
and galvanized steel products. The FHWA has not reevaluated the
continuing need for this waiver since it was issued in 1994. Based on
the FHWA's present knowledge, however, the FHWA has no information that
would lead us to believe that domestic manufacturers of the waived
ferry boat components are now available. The FHWA invites comments on
the continuing need for this nationwide waiver.
Pig Iron and Processed, Pelletized, and Reduced Iron Ores
On March 24, 1995, FHWA published a notice in the Federal Register
announcing a nationwide waiver of the Buy America requirements for
certain components used in the manufacturing process for steel and iron
products. The specific components include pig iron and processed,
pelletized, and reduced iron ores. The FHWA granted this waiver after
publishing a notice in the Federal Register (59 FR 43376) and
requesting comment for which 10 comments were received. Based on the
findings of a nationwide review, and a review of the comments submitted
in response to the waiver proposal, the FHWA believed that the supply
from domestic sources of pig iron and processed, pelletized, and
reduced iron ore was not adequate to permit full compliance with the
Buy America requirements. The FHWA has not reevaluated the continuing
need for this waiver since it was issued in 1995. Based on the FHWA's
present knowledge, however, the FHWA has no information that would lead
us to believe that the supply of domestic pig iron and processed,
pelletized, and reduced iron ore is adequate to meet the needs of
domestic steel and iron manufacturers. The FHWA invites comments on the
continuing need for this nationwide waiver.
Minimal Use Exclusion
One regulatory criterion that was addressed in the November 25,
1983, final rule to implement the public-interest exclusion provision
of 23 U.S.C. 313(b) is the minimal use provision in 23 CFR
635.410(b)(4). This provision allows for a minimal amount of non-
domestic steel to be incorporated if ``. . . the cost of such materials
used does not exceed one-tenth of one percent (0.1 percent) of the
total contract cost or $2,500, whichever is greater.'' However, this
provision requires the contracting agency to maintain a running list of
non-domestic steel or iron components or subcomponents as a
construction project proceeds. The threshold amounts have not been
revised since the November 25, 1983, final rule and managing the
documentation of compliance with this threshold can be problematic on
large, complex projects.
One potential method of easing the inspection and reporting burden
on contracting agencies for Buy America compliance would be to raise
the minimal use threshold; however, there is no clear approach for
doing so. Consideration could be given to raising the $2,500 threshold
by a multiplier related to relevant producer price indices for steel or
iron products or relevant cost indices for highway construction. In
either case, it is difficult to establish an index that is
representative of all of the iron and steel products that are used in
the Federal-aid highway program. The multiplier could be as high as 2.5
(based on the Producer Price Index Commodity information for iron and
steel products for the period 1983 to 2013 for group WPS101). (http://data.bls.gov/pdq/querytool.jsp?survey=wp). The FHWA invites comment on
the continuing need for the minimal use threshold contained in the
regulations. For commenters believing that this provision continues to
be needed, the FHWA requests comment on whether the monetary threshold
should be raised and the appropriate method of doing so.
Invitation for Public Comment
The FHWA requests public comment and input on issues related to the
application of Buy America requirements to manufactured products,
including various manufactured products that include steel or iron
subcomponents. Specifically, the FHWA invites public comment on the
following issues:
1. Has the nature of the Federal-aid highway program and the U.S.
steel/iron manufacturing industry changed to such a degree that FHWA
needs to reconsider its criteria for applying Buy America requirements
to manufactured products?
2. Are there specific or general types of manufactured products
that should not be covered by a public interest waiver and why?
3. Are there specific or general types of manufactured products
that should be covered by a public interest waiver and why?
4. Are there specific issues that should be considered for
manufactured products that include steel or iron components and
subcomponents? Should the FHWA continue to distinguish manufactured
products that are comprised predominantly of steel and iron for
purposes of requiring all manufacturing processes to occur in the
United States? How should a predominantly steel and iron product be
defined? Should the FHWA continue to consider a predominantly steel and
iron product as one comprising 90 percent steel and iron?
5. Should vehicles be subject to Buy America? If so, what types of
vehicles? How should the FHWA define vehicle? Should the definition of
vehicle include construction equipment, such as street sweepers,
backhoes, refuse trucks, dump trucks, graders, etc.? Should the FHWA
broaden the definition of vehicle to include bicycles, electric
bicycles, and neighborhood vehicles? Also, what standard should the
FHWA apply (i.e., final assembly in the U.S.)? For final assembly, what
constitutes final assembly? Should there be a domestic
[[Page 41496]]
content threshold? If so, what content should be covered (i.e., steel
and iron or all content comprising a vehicle) and what should the
percentages be? Should be there be different percentages for different
types of vehicles? What data is available to support the use of a
percentage? What types of vehicles would be available to State and
local agencies at any given percentage?
6. Should vehicle retrofits be subject to Buy America? If so, what
standard should be applied? Should the standard differ from that of a
whole vehicle (i.e., if final assembly is the standard for a vehicle,
should the FHWA be concerned about Buy America when an engine is
purchased on its own for incorporation into a vehicle)?
7. What standard should apply to locomotives, rail cars, and
locomotive parts that are purchased for locomotive retrofits? Should
the FHWA require the application of the Federal Railroad
Administration's policy, which views locomotives and rail cars as ``end
products'' that must be assembled in the United States and all
components (including components purchased for retrofits) be
manufactured in the United States?
8. Do the minimal use threshold provisions of 23 CFR 635.410(b)(4)
represent reasonable criteria for expressing the public interest
exclusion limitations for the Federal-aid highway program, and present
an appropriate balance between an undue administrative burden in
accounting for every steel and iron item in a project versus giving
effect to the intent of Buy America?
9. Are there any domestic suppliers available that can domestically
produce pig iron and processed, pelletized, and reduced iron ores in
sufficient quantities of a satisfactory quality to supply the entire
need for Federal-aid highway projects?
10. Are there any domestic suppliers available that can
domestically produce ferry boat equipment in compliance with the FHWA's
Buy America requirements?
11. If any of the general waivers (manufactured products, ferry
boat equipment, and pig iron) to Buy America are rescinded, what would
be the implications to administering Federal-aid highway projects?
12. What would be the potential advantages or disadvantages of FHWA
adopting a policy for manufactured products similar to that used by
many Federal agencies who implemented the Recovery Act Buy America
requirements? (Note: 2 CFR 176.70(a)(2)(i) states: ``Production in the
United States of the iron or steel used in the project requires that
all manufacturing processes must take place in the United States,
except metallurgical processes involving refinement of steel additives.
These requirements do not apply to iron or steel used as components or
subcomponents of manufactured goods used in the project.'')
Issued on: July 3, 2013.
Victor M. Mendez,
Federal Highway Administrator.
[FR Doc. 2013-16554 Filed 7-9-13; 8:45 am]
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