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Buy America Requirements for Manufactured Products Publication: Federal Register Agency: Federal Highway Administration Byline: Shailen P. Bhatt Date: 12 March 2024 Subjects: American Government  , Roads & Highways
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[Federal Register Volume 89, Number 49 (Tuesday, March 12, 2024)]
[Proposed Rules]
[Pages 17789-17804]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-05182]
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DEPARTMENT OF TRANSPORTATION
Federal Highway Administration
23 CFR Part 635
[Docket No. FHWA-2023-0037]
RIN 2125-AG13
Buy America Requirements for Manufactured Products
AGENCY: Federal Highway Administration (FHWA), U.S. Department of
Transportation (DOT).
ACTION: Notice of proposed rulemaking; request for comments.
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SUMMARY: The FHWA is proposing to discontinue its general waiver of Buy
America requirements for manufactured products and in doing so require
FHWA recipients to start applying Buy America requirements to
manufactured products. The FHWA is also proposing standards for
applying Buy America to manufactured products should the waiver be
discontinued. The proposed standards for applying Buy America to
manufactured products are consistent with the Office of Management and
Budget's (OMB) guidance implementing the Build America, Buy America Act
(BABA) provisions of the Infrastructure Investment and Jobs Act (also
known as the Bipartisan Infrastructure Law (BIL)).
DATES: Comments must be received on or before May 13, 2024.
ADDRESSES: To ensure that you do not duplicate your docket submissions,
please submit comments by only one of the following means:
Federal eRulemaking Portal: Go to www.regulations.gov and
follow the online instructions for submitting comments.
Mail: Docket Management Facility, U.S. Department of
Transportation, 1200 New Jersey Avenue SE, Washington, DC 20590.
Hand Delivery: U.S. Department of Transportation, Docket
Operations, West Building Ground Floor, Room W12-140, 1200 New Jersey
Avenue SE, Washington, DC 20590, between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays. The telephone number is (202)
366-9329.
All submissions should include the agency name and the docket
number that appears in the heading of this document or the Regulation
Identifier Number (RIN) for the rulemaking. All comments received will
be posted without change to www.regulations.gov, including any personal
information provided.
FOR FURTHER INFORMATION CONTACT: For questions about this document,
please contact Mr. Brian Hogge, Office of Infrastructure, (202) 366-
1562, or via email at brian.hogge@dot.gov. For legal questions, please
contact Mr. David Serody, Office of the Chief Counsel, (202) 366-4241,
or via email at david.serody@dot.gov. 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 www.regulations.gov using the
docket number listed above. Electronic retrieval help and guidelines
are also available at www.regulations.gov. An electronic copy of this
document may also be downloaded from the Office of the Federal
Register's website at www.FederalRegister.gov and the U.S. Government
Publishing Office's website at www.GovInfo.gov.
All comments received before the close of business on the comment
closing date indicated above will be considered and will be available
for examination in the docket at the above address. Comments received
after the comment closing date will be filed in the docket and will be
considered to the extent practicable. In addition to late comments,
FHWA will also continue to file relevant information in the docket as
it becomes available after the comment period closing date and
interested persons should continue to examine the docket for new
material. A final rule may be published at any time
[[Page 17790]]
after the close of the comment period and after FHWA has had the
opportunity to review the comments submitted.
I. Executive Summary
A. Purpose of the Regulatory Action
The FHWA is required, by statute, to ensure that all FHWA-funded
projects only use steel, iron, and manufactured products that are
produced in the United States. 23 U.S.C. 313. The FHWA refers to these
requirements as ``Buy America'' requirements. The Buy America
requirement for manufactured products has existed in some form since
the enactment of the 1978 Surface Transportation Assistance Act (1978
STAA), Public Law 95-599 (1978), with those requirements being modified
by the 1983 Surface Transportation Assistance Act (1983 STAA), Public
Law 97-424 (1983),\1\ which provides the current Buy America
requirement for manufactured products. In 1983, following the passage
of the 1983 STAA, FHWA determined that it would be in the public
interest to waive the Buy America requirements for manufactured
products, creating the Manufactured Products General Waiver that
continues to this day. See 48 FR 1946 (Jan. 17, 1983); 48 FR 53099
(Nov. 25, 1983). Due to the Manufactured Products General Waiver,
manufactured products permanently incorporated into FHWA-funded
projects do not need to be produced domestically, apart from
predominantly iron or steel manufactured products and predominantly
iron or steel components of manufactured products.
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\1\ For clarity, while this law was enacted as the Surface
Transportation Assistance Act of 1982, because it was enacted on
January 6, 1983, it will be referred to as the ``1983 STAA.''
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On November 15, 2021, the President signed BIL (Pub. L. 117-58)
into law. The BIL includes the Buy America, Build America Act (BABA),
which expands the coverage and application of Buy America requirements
in Federal financial assistance programs for infrastructure. BIL, div.
G sections 70901-70953. Among other requirements, BABA mandates that
all iron, steel, manufactured products, and construction materials used
in projects supported by funds made available for a Federal financial
assistance program for infrastructure be produced in the United States.
BABA section 70914. BABA provides that this mandate applies to such
materials only to the extent that a domestic content procurement
preference that meets the requirements of section 70914 does not
already apply. BABA section 70917(a). As FHWA has an existing statutory
Buy America requirement for steel, iron, and manufactured products at
23 U.S.C. 313, BABA's savings provision means that FHWA's existing Buy
America requirements under 23 U.S.C. 313 apply to these products. The
BABA's savings provision, however, requires that any domestic content
procurement preference at least meets the requirements of section
70914. The requirements of section 70914 apply the definitions
contained in section 70912, including the definition of ``produced in
the United States.'' Accordingly, while FHWA does not directly apply
BABA's manufactured products requirements, FHWA interprets BABA as
requiring FHWA's Buy America requirements to be generally consistent
with the BABA requirements that are applicable to section 70914,
including the BABA definition of ``produced in the United States'' for
manufactured products at section 70912(6)(B).
BABA also expresses a general policy preference against general
applicability waivers like the Manufactured Products General Waiver.
Section 70914(d) of BABA requires Federal Agencies to review existing
general applicability waivers of Buy America requirements by publishing
in the Federal Register a notice that: (i) describes the justification
for the general applicability waiver; and (ii) requests public comments
for a period of not less than 30 days on the continued need for the
general applicability waiver. As described in further detail below,
FHWA has undergone that review.
Based on the contents of that review, and after considering the
President's policy, as embodied in Executive Order (E.O.) 14005,
``Ensuring the Future Is Made in All of America by All of America's
Workers,'' to maximize the use of goods, products, and materials
produced in the United States; the intent of Congress, as expressed in
BABA's preference against general applicability waivers; the purpose
and goals of domestic content procurement preferences and waivers; and
FHWA's original rationale for issuing the Manufactured Products General
Waiver compared to the current domestic manufacturing situation, FHWA
is proposing the discontinuation of the Manufactured Products General
Waiver. Simultaneously, FHWA is proposing to modify its current
regulations implementing Buy America at 23 CFR 635.410 to set forth the
standards for when a manufactured product will be considered to be
``produced in the United States'' and therefore Buy America-compliant.
For uniformity and consistency with BABA, FHWA is proposing that these
standards mirror the standards OMB has established for BABA's domestic
content procurement preference for manufactured products in its final
guidance implementing BABA at 2 CFR part 184 (part 184).\2\ 88 FR
57750.
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\2\ Throughout this document, references to part 184 refer to
both the text in 2 CFR part 184 and the Preamble published in the
Federal Register.
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B. Summary of the Major Provisions of the Regulatory Action in Question
The FHWA is proposing to set standards regarding its Buy America
requirement for manufactured products, defining when a manufactured
product is ``produced in the United States'' for the purposes of
complying with 23 U.S.C. 313. Under this definition, which mirrors the
definition at section 70912(6)(B) of BABA and in part 184, to be
produced in the United States, a manufactured product must be
manufactured in the United States and have the cost of components of
the product that are mined, produced, or manufactured in the United
States be greater than 55 percent of the total cost of all components
of the manufactured product. The FHWA is also proposing to mirror the
standard in part 184 for how to determine the cost of any component. To
provide clarity in presenting these standards, FHWA is also proposing
to define ``component,'' ``manufactured product,'' and
``manufacturer,'' with these definitions again proposed to be
substantially similar to those used in part 184.
In addition, FHWA is not proposing to modify its current Buy
America requirements for iron and steel.\3\ To distinguish between iron
and steel products, to which FHWA's existing Buy America requirements
will continue to apply, and manufactured products, FHWA is proposing to
adopt the definitions of ``iron or steel products'' and ``predominantly
of iron or steel or a combination of both'' found in part 184.
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\3\ The FHWA's longstanding Buy America requirements for iron
and steel require that all manufacturing processes of permanently
incorporated steel or iron materials, including application of a
coating, must occur in the United States. 23 CFR 635.410(b)(1). BABA
included domestic content procurement preferences for iron and steel
at section 70912(2)(A), which require that all manufacturing
processes, from the initial melting stage through the application of
a coating, occur in the United States. Since FHWA's requirements for
iron and steel meet BABA's requirements for iron and steel, FHWA
continues to apply its existing Buy America requirements unchanged.
The FHWA notes, however, that its current Buy America requirements
for iron and steel are substantially aligned with BABA's.
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In alignment with part 184, FHWA is also establishing a separate
classification for excluded materials,
[[Page 17791]]
referred to as section 70917(c) materials in part 184. These excluded
materials are cement and cementitious materials; aggregates such as
stone, sand, or gravel; or aggregate binding agents or additives. The
FHWA is proposing to make clear that, standing alone, these excluded
materials do not constitute a manufactured product for which a Buy
America requirement applies. Under FHWA's proposed regulations, such
excluded materials may constitute a component of a manufactured product
when combined with other materials, including other excluded materials;
however, FHWA is proposing to explicitly state that concrete and
asphalt mixtures delivered to a job site without final form for
incorporation into a project are not manufactured products.
In addition, for clarity, FHWA is proposing to make clear that a
product must either be classified as an iron or steel product, a
manufactured product, an excluded material, or another category
specified by law or in 2 CFR part 184, such as construction materials.
The FHWA believes that this, in concert with the new definitions, will
make clear how recipients of FHWA financial assistance should
differentiate between different materials and ensure that multiple
standards do not apply to a single material, with exceptions for two
specific manufactured products described below.
The FHWA proposes to deviate from the part 184 by applying FHWA's
existing Buy America requirements for iron and steel to two specific
types of materials that may be used as components of manufactured
products, with those manufactured products also required to conform
with FHWA's proposed Buy America requirements for manufactured
products.\4\ First, with respect to precast concrete products that are
classified as manufactured products, FHWA is proposing to require that
any iron or steel products that are components of the precast concrete
product must conform with FHWA's existing Buy America requirements for
iron and steel. Second, with respect to intelligent transportation
systems and other electronic hardware systems that are installed in the
highway right-of-way or other real property and classified as
manufactured products, FHWA is proposing to require that any iron or
steel enclosures of such systems conform with FHWA's existing Buy
America requirements for steel and iron. The FHWA is proposing these
two deviations from part 184 in order to continue FHWA's long-standing
policy of requiring the iron or steel in these specified products to
comply with the Buy America requirements for iron and steel, while also
limiting the number of products that must comply with two different Buy
America requirements. Along with these iron and steel requirements,
under FHWA's proposed standards, precast concrete and such electronic
hardware systems, when classified as manufactured products, would still
need to meet FHWA's proposed standards for manufactured products;
therefore, the cost of the iron and steel within the products shall
count toward the 55 percent domestic content threshold.
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\4\ Unlike these proposed regulations, under part 184, materials
should not be considered to fall into multiple categories, and only
need to meet the domestic content procurement preference for only
the single category in which it is classified. See 2 CFR 184.4(e),
(f).
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C. Benefits and Costs
The preliminary regulatory impact analysis (RIA) prepared pursuant
to Executive Order 12866, ``Regulatory Planning and Review,'' and
available in the rulemaking docket, analyzes the costs and benefits
associated with establishing Buy America requirements for manufactured
products. The RIA discusses anticipated benefits of the rule
qualitatively, as they could not be quantified. Expected benefits
include protecting and expanding domestic manufacturing, increasing
supply chain resiliency, and increasing consistency in applying
domestic content procurement preferences for manufactured products
between FHWA and other Federal Agencies that are subject to the
requirements of BABA. Expected costs of the proposed rule relate to
increased material costs for manufactured products used in highway
construction projects, project delay, and the administrative costs to
FHWA and recipients of FHWA financial assistance. At this time, FHWA is
only able to quantify costs for the increased material costs and the
administrative costs to FHWA. The FHWA estimates the increased material
costs for manufactured products permanently incorporated into FHWA-
funded projects to range from a high of roughly $737 million per year
to a low of $45 million per year. The FHWA further estimates an
additional $167,000 per year in increased FHWA administrative costs.
The other administrative costs to recipients of FHWA financial
assistance and the costs associated with project delivery delay have
not been quantified.
II. Background
A. History of FHWA's Manufactured Products Domestic Content Procurement
Preference and Manufactured Products General Waiver
The FHWA's Buy America requirements for the Federal-aid highway
program were first established in 1978 by Section 401 of the 1978 STAA,
which imposed a Buy America requirement to certain unmanufactured and
manufactured articles, materials, and supplies. Following enactment of
the 1978 STAA, FHWA issued an emergency rule to implement the Buy
America requirement of Section 401. See 43 FR 53717 (Nov. 17, 1978). In
that rule, FHWA determined that it was in the public interest to
temporarily waive the provisions of Section 401 of the 1978 STAA to all
products and materials other than structural steel. 43 FR at 53717. The
FHWA based this determination on its belief that the implementation of
the statutory text of Section 401 would have a major impact on the
Federal-aid highway program and that foreign structural steel was the
only foreign product with a significant nationwide effect on the cost
of Federal-aid highway construction projects. Id.
In 1980, following this emergency rule, FHWA issued an NPRM to
establish regulations implementing Section 401 of the 1978 STAA. 45 FR
77455 (Nov. 24, 1980). In that NPRM, FHWA proposed to extend the
coverage of Buy America requirements to all steel construction
materials used in highway construction projects, while excluding all
other materials and products from coverage under Section 401. 45 FR at
77455. Again, FHWA stated that because foreign steel was identified as
the only foreign commodity having a significant nationwide effect on
the cost of Federal-aid highway construction projects, it was only
necessary to implement Buy America requirements for steel products. Id.
The FHWA acknowledged that natural materials, such as sand, stone,
gravel, and earth materials; and petroleum and petroleum-based
products, such as fuels, lubricants, and bituminous products, were two
other commodities used in large amounts for Federal-aid highway
projects, but FHWA proposed not to apply Buy America requirements to
such materials. Id. The FHWA found that there was limited foreign
competition in natural materials because of the difficulty and high
cost of transporting them due to their bulk and weight; as these
materials were therefore usually domestically sourced, FHWA found it
unnecessary to apply Buy America requirements to them. Id.
[[Page 17792]]
For petroleum and petroleum-based products, FHWA determined that such
products were not available from domestic sources in sufficient and
reasonably available quantities, justifying their exemption from FHWA's
proposed Buy America requirements. Id. For all other manufactured
products covered by Section 401 of the 1978 STAA, FHWA determined that
they were not used in sufficient quantity to have any appreciable
effect on the overall cost of a project and did not require the
protection of Buy America. The FHWA therefore proposed in the 1980 NPRM
not to apply Buy America requirements to such products.
Prior to this rulemaking being finalized, Congress enacted the 1983
STAA, which repealed Section 401 of the 1978 STAA and instituted new
Buy America requirements that are similar to those that exist today.
Section 165(a) applied Buy America requirements to all steel, cement,
and manufactured products used on FHWA-funded projects.\5\ Subsection
165(b) provided that FHWA could waive the provisions of subsection
165(a) if their application would be inconsistent with the public
interest; if such materials and products are not produced in the United
States in sufficient and reasonable quantities and of a satisfactory
quality; or if the inclusion of domestic material(s) would increase the
cost of the overall project by more than 25 percent.\6\
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\5\ The Buy America requirement for cement was eliminated by
Congress in 1984. See Public Law 98-229. In addition, Congress added
a Buy America requirement for iron in 1991. See Public Law 102-240.
The FHWA's current Buy America requirements for steel, iron, and
manufactured products were codified at 23 U.S.C. 313 by Section 1903
of the Safe, Accountable, Flexible, Efficient Transportation Equity
Act: A Legacy for Users (SAFETEA-LU) in 2005. Public Law 109-59.
\6\ Section 165(b)(3) of the 1983 STAA also allowed for a waiver
of the provisions in subsection 165(a) in the case of the
procurement of bus and other rolling stock under the Urban Mass
Transportation Act of 1964 if the cost of components which are
produced in the United States is more than 50 percent of the cost of
all components of the vehicle or equipment; and final assembly of
the vehicle or equipment has taken place in the United States. This
use of components is referenced in subsection 165(c) of the 1983
STAA, which states that for the purposes of Section 165, in
calculating components' costs, labor costs involved in final
assembly cannot be included. Subsection 165(c) was modified by
Section 337 of the Surface Transportation and Uniform Relocation
Assistance Act of 1987 (Pub. L. 110-17), raising the threshold for
the cost of components. In addition, Section 337(b) of the Surface
Transportation and Uniform Relocation Assistance Act of 1987 amended
Section 165(b)(3) of the 1983 STAA to refer to the cost of all
subcomponents, as well as components. Section 165(b)(3) was
ultimately repealed by Section 4(r) of Public Law 103-272 in 1994;
however, subsection 165(c) of the 1983 STAA remains codified at 23
U.S.C. 313(c).
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Shortly after the enactment of the 1983 STAA, FHWA issued an
interim final rule implementing Section 165. 48 FR 1946 (Jan. 17,
1983). In this rule, FHWA again determined that it was in the public
interest to temporarily waive the provisions of Section 165 of the 1983
STAA as they applied to all manufactured products other than cement. 48
FR at 1946. The FHWA based this decision ``on the fact that sufficient
information is not yet available in order to adequately assess the
impacts of applying Buy America provisions to all manufactured products
and to all projects regardless of project cost.'' Id. The FHWA also
noted that applying a Buy America requirement for all manufactured
products would require tracing the origin of components used in
petroleum-based products, which FHWA stated was extremely difficult to
do. Id.
In late 1983, FHWA issued its final rule implementing Section 165
of the 1983 STAA, creating its current Buy America regulations at 23
CFR 635.410. 48 FR 53099 (Nov. 25, 1983). Once more, FHWA found that a
waiver of Buy America requirements for manufactured products was in the
public interest, thereby creating the Manufactured Products General
Waiver, which still remains in effect 40 years later.\7\ 48 FR at
53102. The FHWA found that most responses from product manufacturers
``recommended that manufactured products should be excluded from Buy
America and/or expressed only a passing interest in the regulation.''
48 FR at 53101. For manufacturers that wanted Buy America requirements
applied to manufactured products, FHWA stated that these manufacturers
primarily expressed this opinion because they opposed unfair foreign
trade practices, and that ``protectionism in terms of a Buy America
regulation on all manufactured products would not serve this purpose.''
Id. Rather than apply Buy America requirements for manufactured
products to remedy this concern, FHWA stated that unfair practices
could be instead addressed through import laws. Id. at 53102. Further,
FHWA determined that it was not the intent of Congress in enacting the
1983 STAA for FHWA to apply a Buy America requirement to manufactured
products; FHWA noted that it had consistently waived manufactured
products from coverage under Buy America laws and Congress did not
specifically direct a change in that policy in enacting 1983 STAA,
which FHWA interpreted to mean that not all manufactured products had
to be covered by the requirements of Section 165. Id. at 53101-02.
Finally, FHWA reiterated that materials and products other than steel,
cement, asphalt, and natural materials comprised a small percent of the
highway construction program; that other manufactured products were
minimally used and there would be little economic effect to applying
Buy America requirements to them; and that it would be difficult and
administratively burdensome to identify the various materials
comprising manufactured products and trace their origin. Id. at 53102.
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\7\ The FHWA's regulations implementing Buy America have also
remained consistent since 1983, apart from reacting to statutory
changes by removing a reference to a Buy America requirement for
cement (49 FR 18820 (May 3, 1984)) when Congress removed that Buy
America requirement and adding a reference to a Buy America
requirement for iron (58 FR 38973 (July 21, 1993)) after Congress
added that requirement.
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B. Current FHWA Buy America Requirements Under 23 U.S.C. 313
Currently, 23 U.S.C. 313(a) requires that all steel, iron, and
manufactured products used in FHWA-funded projects be produced in the
United States. Per 23 U.S.C. 313(h), these Buy America requirements
apply to all contracts that are eligible for FHWA assistance regardless
of the funding source if any contract within the scope of a
determination under the National Environmental Policy Act (NEPA)
involves an obligation of Federal funds. For purposes of section 70917
of BABA, FHWA considers 23 U.S.C. 313 to be a domestic content
procurement preference in existence at the time of the enactment of BIL
meeting the requirements of section 70914 with respect to iron, steel
and manufactured products for all financial assistance that is
administered under title 23, U.S.C.\8\ However, as noted above in
Section II.A, in 1983, FHWA issued a public interest waiver of general
applicability of FHWA's Buy America requirement for manufactured
products, known as the Manufactured Products General Waiver. Thus, were
FHWA to discontinue this waiver, FHWA would need to establish standards
for the application of Buy America to manufactured products that meet
or exceed the requirements of section 70914. Accordingly, FHWA is
publishing this NPRM to propose such standards.
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\8\ Financial assistance made available for Federal Lands
Management Agencies under the Federal Lands Transportation Program
is subject to the Buy American Act provision (41 U.S.C. 8301-8303)
under the Federal Acquisition Regulations. Throughout this document,
FHWA refers to the projects subject to FHWA's Buy America
requirements as ``FHWA-funded projects.''
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[[Page 17793]]
C. Administration Priorities
In January 2021, President Biden issued E.O. 14005, titled
``Ensuring the Future is Made in All of America by All of America's
Workers'' (86 FR 7475, Jan. 28, 2021). The E.O. sets forth a policy
that Federal Agencies should, consistent with applicable law, maximize
the use of goods, products, and materials produced in, and services
offered in, the United States. The E.O. helps promote private sector
investment in the production of goods critical to our national security
and economic stability. It is a policy of this Administration,
exemplified by this E.O., to bolster domestic supply chains and, in
doing so, create jobs, strengthen our manufacturing sector, and create
economic opportunities for more of America's small businesses. Indeed,
President Biden emphasized the importance of using domestic products in
American roads, bridges, and highways in his 2023 State of the Union
Address.\9\
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\9\ As stated by President Biden: ``And on my watch, American
roads, bridges, and American highways are going to be made with
American products as well.'' See https://www.whitehouse.gov/state-of-the-union-2023/.
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D. Build America, Buy America Act
On November 15, 2021, the President signed into law BIL, which
includes BABA. The BABA requires that all iron, steel, manufactured
products, and construction materials made available for a Federal
financial assistance program for infrastructure be produced in the
United States. BABA section 70914. The BABA, however, provides that the
preferences under section 70914 apply only to the extent that a
domestic content procurement preference as described in section 70914
does not already apply to iron, steel, manufactured products, and
construction materials. BABA section 70917(a)-(b). As FHWA has existing
Buy America domestic content preferences for steel, iron, and
manufactured products at 23 U.S.C. 313, BABA's preferences for those
materials do not explicitly apply to FHWA. The FHWA does, however,
apply BABA's domestic preference requirement for construction
materials.\10\
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\10\ Along with applying BABA's domestic preference requirement
for construction materials, section 70916(c) of BABA requires FHWA
to consult with the Director of the Hollings Manufacturing Extension
Partnership regarding whether there is a domestic entity that could
provide the iron, steel, manufactured product, or construction
material that is the subject of the proposed waiver before FHWA
grants a waiver under either its Buy America requirements for iron,
steel, and manufactured products and under BABA's domestic
preference requirement for construction materials.
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Under BABA, all manufactured products must be ``produced in the
United States.'' BABA section 70914. With respect to manufactured
products, BABA defines ``produced in the United States'' to mean that
(1) the manufactured product was manufactured in the United States and
(2) the cost of the components of the manufactured product that are
mined, produced, or manufactured in the United States is greater than
55 percent of the total cost of all components of the manufactured
product, unless another standard for determining the minimum amount of
domestic content of the manufactured product has been established under
applicable law or regulation. BABA section 70912(6)(B).
In addition, BABA expresses a general policy preference against
general applicability waivers, such as the Manufactured Products
General Waiver. For example, section 70913(c) of BABA requires Federal
Agencies to identify ``deficient programs'' for financial assistance,
which includes programs that are ``subject to a waiver of general
applicability not limited to the use of specific products for use in a
specific project.'' BABA section 70913(c)(2). Section 70914(d) of BABA
also requires Federal Agencies to review existing general applicability
waivers of Buy America requirements by publishing in the Federal
Register a document that: (i) describes the justification for the
general applicability waiver; and (ii) requests public comments for a
period of not less than 30 days on the continued need for the general
applicability waiver. Following the initial notice and review and
consideration of comments received, BABA requires Federal agencies to
publish in the Federal Register a determination on whether to continue
or discontinue the general applicability waiver. BABA section
70914(d)(2)(B). On March 17, 2023, at 88 FR 16517, FHWA published the
required notice to initiate its review of the Manufactured Products
General Waiver in the Federal Register (``2023 RFC''). The FHWA
discusses the comments received for the 2023 RFC in section III.
E. OMB's Guidance on BABA
The BABA further required OMB to issue guidance to assist in
applying BABA's requirements. BABA section 70915. On April 18, 2022,
OMB issued memorandum M-22-11, ``Initial Implementation Guidance on
Application of Buy America Preference in Federal Financial Assistance
Programs for Infrastructure,'' \11\ which was rescinded and replaced by
memorandum M-24-02, ``Implementation Guidance on Application of Buy
America Preference in Federal Financial Assistance Programs for
Infrastructure'' on October 25, 2023 (``Implementation Guidance'').\12\
Section VI of the Implementation Guidance warns against overly broad
waivers, stating that they ``undermine market signals designed to boost
domestic supply chains, particularly for key articles, materials, and
supplies in critical supply chains,'' and that ``[w]aivers that are
overly broad will tend to undermine domestic preference policies.''
Section VI also states that public interest waivers of domestic content
procurement preferences ``must be used judiciously and construed to
ensure the maximum utilization of goods, products, and materials
produced in the United States.'' The Implementation Guidance goes on to
state that whether a waiver is in the public interest will depend upon
numerous factors, such as the nature and amount of resources available
to the recipient; the value of the items, goods, or materials in
question; the potential domestic job impacts; and other policy
considerations, including sustainability, equity, accessibility,
performance standards, and the domestic content (if any) of and
conditions under which the non-qualifying good was produced. In terms
of general applicability waivers, section VI of the Implementation
Guidance states that Agencies ``should align such waivers with
complementary policies, such as work to boost supply chain resiliency
and domestic employment'' and that such waivers ``should include
appropriate expiration dates designed to ensure that, once available,
Buy America qualifying products receive appropriate consideration.''
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\11\ https://www.whitehouse.gov/wp-content/uploads/2022/04/M-22-11.pdf.
\12\ https://www.whitehouse.gov/wp-content/uploads/2023/10/M-24-02-Buy-America-Implementation-Guidance-Update.pdf.
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On August 23, 2023, at 88 FR 57750, OMB revised its guidance in
title 2 of the CFR to add a new part 184 that provides additional
guidance on implementing BABA. Part 184 includes definitions for key
terms, including iron or steel products, predominantly of iron or steel
or a combination of both, manufactured products, component, and
manufacturer. 2 CFR 184.3. In line with section 70912(6)(B) of BABA, 2
CFR 184.3 states that a manufactured product is ``produced in the
United
[[Page 17794]]
States'' if the product was manufactured in the United States; and the
cost of the components of the manufactured product that are mined,
produced, or manufactured in the United States is greater than 55
percent of the total cost of all components of the manufactured
product, unless another standard that meets or exceeds this standard
has been established under applicable law or regulation for determining
the minimum amount of domestic content of the manufactured product.
Part 184 also provides guidance for determining the cost of components
of manufactured products. Pursuant to 2 CFR 184.5, in determining
whether the cost of components for manufactured products is greater
than 55 percent of the total cost of all components, there are two
standards depending on the origin of the component. For components
purchased by the manufacturer, the cost of the component is the
acquisition cost, including transportation costs to the place of
incorporation into the manufactured product (whether or not such costs
are paid to a domestic firm), and any applicable duty (whether or not a
duty-free entry certificate is issued). 2 CFR 184.5(a). For components
manufactured by the manufacturer, the cost of the component is all
costs associated with the manufacture of the component, including
transportation costs described in 2 CFR 184.5(a), plus allocable
overhead costs, but excluding profit and any costs associated with the
manufacture of the manufactured product. 2 CFR 184.5(b).
Part 184 also states that an article, material, or supply should
only be classified as either an iron or steel product, manufactured
product, construction material, or section 70917(c) material,\13\ that
the classification must be made based on the status of the material at
the time it is brought to the work site for incorporation into an
infrastructure project, and that the material must meet the Buy America
standards for only the single category in which it is classified. 2 CFR
184.4(e)-(f).
---------------------------------------------------------------------------
\13\ Part 184 defines a section 70917(c) material as cement and
cementitious materials; aggregates such as stone, sand, or gravel;
or aggregate binding agents or additives. See 2 CFR 184.3. These
materials are named section 70917(c) materials in part 184 because
they are referred to in section 70917(c) of BABA.
---------------------------------------------------------------------------
Again, part 184 does not, by its own terms, apply to FHWA's Buy
America requirements for steel, iron, and manufactured products; it
only applies to FHWA's domestic content procurement preference for
construction materials.\14\ 2 CFR 184.2(a). Part 184 does, however,
apply to all Federal financial assistance programs for infrastructure
that are administered by Federal Agencies that did not have a domestic
content procurement preference for steel, iron, and manufactured
products meeting or exceeding BABA's requirements.
---------------------------------------------------------------------------
\14\ Since 23 U.S.C. 313 did not specifically apply to
``construction materials,'' FHWA did not have a domestic content
procurement preference in effect for these products for purposes of
section 70917 of BABA. Therefore, the provisions of BABA as
interpreted by OMB apply to construction materials.
---------------------------------------------------------------------------
III. March 17, 2023, Request for Comments
A. Overview of Comments Received
Pursuant to section 70914(d) of BABA, FHWA published the March 17,
2023, Request for Comments (RFC), seeking comments on whether to
continue or discontinue the Manufactured Products General Waiver. 88 FR
16517. The FHWA received 9,496 comments; however, a vast majority of
these comments received were ``form'' comments that were functionally
identical to each other, with only occasional minor changes to the
comments themselves under the names of different commenters. The
majority of these form comments expressed support for discontinuing the
Manufactured Products General Waiver, although there were also form
comments that supported continuing the waiver. While FHWA believes that
form comments might broadly indicate the level of support or opposition
to the waiver, no form comment provided substantive analysis regarding
the benefits or costs of continuing or discontinuing the Manufactured
Products General Waiver.
Excluding the form comments, FHWA received 134 unique, substantive
comments from State departments of transportation, manufacturers, State
government agencies, labor organizations, construction contractors,
industry associations, members of Congress, and individuals. The FHWA
briefly discusses the main topics brought up by commenters who
supported and opposed the Manufactured Products General Waiver below.
B. Comments in Favor of Continuing the Manufactured Products General
Waiver
Commenters who were in favor of continuing the Manufactured
Products General Waiver generally presented similar points. Such
commenters stated that removing the waiver (1) would likely increase
project costs due to the increased cost of domestically produced
products or due to the reduced size of the market for Buy America-
compliant products; (2) would likely lead to project delays or
cancellations due to the difficulty or inability to acquire Buy
America-compliant products, partly due to a limited supply of such
products; (3) may prevent the use of specific products because some
products or their components not currently produced domestically and
onshoring will take time, if it occurs at all, given the size of the
market for Buy America-compliant products and components; and (4) would
result in significant challenges if contracting agencies, contractors,
and manufacturers were required to track the origin of a product's
components, which commenters claimed would be worsened if these
entities also had to track the cost of a product's components. Many
commenters argued that these issues were particularly pronounced and
any benefits of rescinding the Manufactured Products General Waiver
would be limited given their assertions that the cost and amount of
manufactured products used in highway construction projects are
insignificant relative to the rest of the materials used in highway
construction projects.
Commenters acknowledged that, were FHWA to rescind the Manufactured
Products General Waiver and apply Buy America requirements for
manufactured products, a waiver could be obtained for manufactured
products that are not available from domestic sources; however,
commenters argued that going through the waiver process would
inevitably take time and therefore slow construction down, add
administrative burden, and may result in duplicative waivers
continually being requested for the same product that is included in
multiple projects.
C. Comments in Favor of Discontinuing the Waiver
Comments in favor of discontinuing the waiver and applying Buy
America requirements on manufactured products generally espoused the
belief that doing so would restore America's manufacturing base, create
and protect American jobs, and stimulate domestic economic growth.
Commenters also noted that recent supply chain disruptions indicate the
benefit of producing products in the United States and minimizing
dependence on foreign sources, which these commenters argued also
supports America's national security. Commenters who favored
discontinuing the Manufactured Products General Waiver, in general,
stated their belief that when taxpayer dollars are spent on federally
financed
[[Page 17795]]
infrastructure projects, those dollars should go to domestically
produced products.
Commenters also argued that rescinding the Manufactured Products
General Waiver would provide an incentive for companies to invest in
U.S. manufacturing, which they argued the current Manufactured Products
General Waiver disincentivizes. Commenters noted that switching from
foreign-produced products to domestically produced products would
reward companies that have moved production onshore, hired American
workers, and conducted their operations in compliance with strong U.S.
environmental and worker safety regulations. As one commenter stated,
each time FHWA employs the Manufactured Products General Waiver, it
fails to account for whether a Buy America requirement for manufactured
products was feasible, let alone probable. Another commenter stated
that strong domestic content standards send demand signals for
companies to invest in domestic production and workers. In a similar
vein, commenters argued that the continued existence of the waiver
eliminates any incentive for future domestic investment for
manufactured products used on FHWA-funded projects. Commenters also
pointed out that companies that wish to make manufactured products for
FHWA-funded projects domestically do not receive any protection under
the Manufactured Products General Waiver and must instead compete with
foreign imports. Commenters further noted that the Manufactured
Products General Waiver encourages the use of cheaper foreign-produced
manufactured products on FHWA-funded projects and denies opportunities
for U.S. manufacturing workers.
Despite these issues, some manufacturers and contracting agencies
also indicated that they intend to increase domestic manufacturing
capacity in response to the increased Federal transportation
investments brought about by BIL, which indicates that there may be
expansion capabilities for manufacturers who wish to produce Buy
America-compliant manufactured products. Other manufacturers commented
that they believed they were able to produce a Buy America-compliant
product and therefore desired the rescission of the current waiver to
take advantage of the market for Buy America-compliant products. These
manufacturers stated that because of the Manufactured Products General
Waiver, they must compete with foreign manufacturers who may seek to
undermine their pricing, have their products subsidized by foreign
governments, or dump their products into the U.S. market.
In addition, commenters stated their belief that the Manufactured
Products General Waiver was an inappropriate use of FHWA's waiver
authority when it was issued in 1983, arguing that the 1983 STAA
clearly directed and intended that FHWA require the use of U.S.-
produced manufactured products in FHWA-funded projects.
Commenters also stated that the Manufactured Products General
Waiver is inconsistent with the intent of Congress, as seen through the
enactment of BIL. These commenters pointed to the fact that, where it
applies, section 70914 of BIL requires the head of each Federal Agency
to ensure that none of the funds available for a Federal financial
assistance program for infrastructure may be obligated unless all of
the manufactured products used in the project are produced in the
United States; section 70913(c) of BIL defines programs for which a
domestic content procurement preference requirement is subject to a
waiver of general applicability not limited to the use of specific
products for use in a specific project, like the Manufactured Products
General Waiver, as ``deficient programs;'' and that section 70914(d) of
BIL requires Federal Agencies to review existing waivers of general
applicability and determine whether to continue or discontinue them.
IV. Proposed Discontinuation of the Manufactured Products General
Waiver
The FHWA has carefully considered comments received on the 2023
RFC, the purpose of its Buy America requirements, the rationale
provided by FHWA in issuing the Manufactured Products General Waiver in
1983, the priorities of the Administration, and the goal of Congress in
enacting the domestic content procurement preferences in BABA, in
determining whether the Manufactured Products General Waiver remains in
the public interest. After considering this information, FHWA has
decided to propose to discontinue the manufactured products waiver.
First, both the intent of Congress, as expressed in secs. 70933 and
70935 of BABA, and the President's policy for the Federal Government,
as expressed in section 1 of E.O. 14005, is that Federal Agencies
should use terms and conditions in Federal financial assistance awards
to maximize the use of goods, products, and materials produced in the
United States. Continuing the long-standing Manufactured Products
General Waiver is not consistent with these policy goals.
Second, FHWA believes it is important to recognize the purpose of
domestic content procurement preferences when considering whether a
waiver is applicable and in the public interest. The Congressional
findings in section 70911 of BABA are instructive regarding the
purposes of domestic content procurement preferences. In general, the
findings provide that taxpayers expect that publicly funded
infrastructure will be produced in the United States by American
workers, applying America's high environmental, worker, and workplace
safety standards; that taxpayer dollars should not reward companies
that have moved their operations and jobs to foreign countries; that
publicly funded infrastructure projects should seek to prevent shifts
in manufacturing to foreign countries, who may use less energy
efficient and more polluting manufacturing methods, from the United
States; that such projects should create a demand for domestically
produced goods, helping to sustain and grow domestic manufacturing and
the jobs domestic manufacturing supports throughout product supply
chains; and that taxpayer funding should sustain a robust domestic
manufacturing sector, which is a vital component of the national
security of the United States. See BABA section 70911. Continuing the
long-standing Manufactured Products General Waiver continues to
undermine the expressed purposes that domestic content procurement
preferences, such as FHWA's Buy America requirement, are intended to
serve.
Third, OMB's Implementation Guidance conveys a policy that waivers,
including waivers of general applicability like the Manufactured
Products General Waiver, should not be overly broad in order to ensure
that any such waivers appropriately convey market signals on where the
domestic supply chain can be bolstered for American manufacturers to
take advantage of. The Implementation Guidance further provides that
such waivers should also be time-limited to ensure that, once
available, Buy America-compliant materials can receive appropriate
consideration for inclusion in federally funded projects. The
Manufactured Products General Waiver is inconsistent with these general
principles.
Taking into account these above references, FHWA believes the
Manufactured Products General Waiver is overly broad. The FHWA has
considered comments stating that manufactured products that can be
[[Page 17796]]
manufactured domestically are more likely to be ignored in favor of
cheaper foreign products for use on FHWA-funded projects. The FHWA
agrees with these commenters that the Manufactured Products General
Waiver disincentivizes manufacturers from domestically producing
products by covering all manufactured products without discretion,
rather than specifically targeting those that would warrant a waiver
under the waiver criteria in 23 U.S.C. 313(b). Further, FHWA believes
the broadness of the Manufactured Products General Waiver can be seen
in the fact that it applies to any newly created manufactured product
without an analysis of whether coverage of that product is in the
public interest.
The Manufactured Products General Waiver also fails to provide
domestic manufacturers who wish to produce products for FHWA-funded
projects with knowledge of the current gaps in the domestic
manufacturing sector. By covering all manufactured products, the
Manufactured Products General Waiver does not provide market signals
that distinguish between manufactured products that are made
domestically but not included in FHWA-funded projects because the
products are more expensive than foreign products and manufactured
products that are not produced domestically at all. This lack of
clarity hinders manufacturers who wish to enter the market from
understanding the competitive landscape, disincentivizing them from
attempting to provide domestic manufactured products for FHWA-funded
projects.
The FHWA believes it is important to compare its current
understanding of the purpose and need for waivers with the fundamental
underpinnings of the Manufactured Products General Waiver when it was
issued in 1983. At that time, FHWA stated that a waiver was necessary
because of the costs of applying a Buy America requirement to
manufactured products--primarily the burden in identifying and tracing
the origin of the components of manufactured products--while those
products comprised only a small percent of the highway construction
program. 48 FR at 53102. While FHWA recognized these costs, FHWA did
not seemingly perceive any benefits of a Buy America requirement for
manufactured products because it believed that manufacturers would not
produce Buy America-compliant products due to the limited demand
created by FHWA-funded projects; such nonexistent products would thus
not require Buy America protection. In other words, when issuing the
Manufactured Products General Waiver, FHWA presumed at the time that
domestic manufacturers would not produce Buy America-compliant
products. The purpose of the waiver was thus to allow for the
incorporation of products from foreign sources to fill what FHWA
perceived would always be gaps in domestic manufacturing. It assumed
that domestic manufacturing would not produce Buy America-compliant
products and thus believed this assumption compelled the need for a
broad waiver of general applicability.
The FHWA no longer agrees with this premise and is accordingly
proposing to discontinue the Manufactured Products General Waiver. The
FHWA notes that the Federal-aid highway program has grown considerably
with the enactment of new funding programs that provide new
eligibilities since the Manufactured Products General Waiver was
established in 1983. As shown by commenters, domestic manufacturers are
available to produce Buy America-compliant products used in Federal-aid
highway funding programs. Keeping the Manufactured Products Waiver in
place provides no incentive for new domestic manufacturers to enter the
market or for existing domestic manufacturers to begin producing Buy
America-compliant products. For nascent industries that produce
manufactured products used in FHWA-funded projects, the Manufactured
Products General Waiver also discourages companies from investing in
domestic manufacturing that may be able to compete globally once the
domestic manufacturers have built up expertise. Further, FHWA believes
that due to the development of new kinds of manufactured products as
well as the expansion of program eligibilities, such as the
establishment of the Surface Transportation Block Grant Program and
Congestion Mitigation and Air Quality Improvement Program, manufactured
products as a category are used more often now than when the
Manufactured Products General Waiver was issued and accordingly have a
larger economic effect now. When issuing the waiver in 1983, FHWA
stated that materials and products other than steel, cement, asphalt,
and natural materials comprised a small percentage of the highway
construction program. Commenters on the 2023 RFC, however, referenced
numerous other products that they believed would be affected by
rescission of the Manufactured Products General Waiver, such as ITS
hardware, traffic signals and controllers, and vehicle detection
equipment.
Unlike the Manufactured Products General Waiver, FHWA instead
believes, in line with OMB's Implementation Guidance, that waivers
should aim to proactively encourage domestic manufacturing by providing
clear market signals about which markets domestic manufacturers can
enter with the reasonable expectation that their products could
adequately compete for use on FHWA-funded projects. The FHWA
acknowledges that waivers may be necessary in some circumstances but
believes that waivers should seek to identify areas where domestic
manufacturing can fill gaps and actively encourage such activity.
Accordingly, FHWA believes that the Manufactured Products General
Waiver is overly broad, no longer in line with the purpose of domestic
content procurement preferences and waivers, and therefore no longer
serves the public interest. The FHWA is thus proposing to discontinue
the Manufactured Products General Waiver. In doing so, FHWA seeks to
encourage manufacturers to supply Buy America-compliant products to
FHWA-funded projects and to encourage other manufacturers to shift
their production to the United States to take advantage of this market.
The FHWA believes that rescinding the Manufactured Products General
Waiver will also provide many benefits to the United States, such as
protecting and increasing domestic manufacturing and manufacturing
jobs, providing an opportunity for manufacturing innovations to occur
domestically, and creating a more resilient domestic supply chain and
protecting national security. In addition, FHWA expects increases in
domestic manufacturing to benefit related domestic industries, such as
component manufacturers and material and product transporters.
At the same time, FHWA understands that discontinuing the
Manufactured Products General Waiver and applying Buy America
requirements on manufactured products may result in cost increases,
project delays, and product unavailability if not done carefully. The
FHWA acknowledges that there may be some products that are not
currently produced in the United States and, for various reasons, might
not be able to be produced in the United States in the near future. For
such products, FHWA intends to consider whether it should propose any
targeted waivers, with these waivers providing a timeline to encourage
manufacturers to ramp up domestic production. To that end, FHWA is
concurrently publishing a Request for Information (RFI), seeking
specific and detailed information on
[[Page 17797]]
what products are not and cannot be produced in the United States in
the near future. Based on information received, FHWA intends to propose
time-limited and targeted waivers covering such products, if it
determines it would be appropriate to do so. The FHWA believes that
issuing targeted waivers for certain manufactured products presents a
better model than the current Manufactured Products General Waiver,
which does not consider the availability of individually manufactured
products and has no set ending in order to incentivize the onshoring of
manufacturing.
With the FHWA RFI, FHWA seeks to mitigate the concerns posed by
commenters that rescinding the waiver will cause cost increases and
project delays by ensuring the continued availability of necessary
manufactured products. The FHWA would intend for such waivers to allow
for the use of foreign manufactured products as domestic production
ramps-up. Such waivers would be time-limited and could include an
explicit schedule for phasing out a waiver over time, creating a glide-
path toward full Buy America compliance for products, where possible.
The FHWA's goal is that once these waivers expire, the domestic
production of any covered product would be sufficient to ensure that
Buy America-compliant products would be available for use in FHWA-
funded projects. Such waivers could also take into account situations
where economic realities, such as the size of the market, the cost of
onshoring production, and geographic constraints (such as products made
of materials that are not mined in the United States) may hinder
domestic manufacturing growth even in the longer term, though such
waivers would still be subject to periodic review.
By issuing waivers for products where necessary, FHWA intends to
ensure that manufactured products needed for highway construction
projects are available while also providing an advantage to domestic
manufacturers who can provide manufactured products to FHWA-funded
projects where a waiver is not needed. In addition, such targeted
waivers afford manufacturers insight into market demand that can
trigger capital investments in domestic manufacturing to fill current
gaps in the Nation's supply chain, thereby decreasing the need for
these waivers over the long-term. The FHWA will consider such waivers
where they are deemed necessary to ensuring the availability of
products at a reasonable price; however, where domestic production is
currently feasible, FHWA believes in allowing Buy America requirements
to operate as a useful incentive for domestic manufacturers to
contribute American-made manufactured products to highway construction
projects.
In addition, DOT has issued a ``Waiver of Buy America Requirements
for De Minimis Costs and Small Grants'' (``De Minimis and Small Grants
Waiver''). 88 FR 55817 (Aug. 16, 2023). The De Minimis and Small Grants
Waiver currently has no operative effect on manufactured products
included in FHWA-funded projects, as such products are covered by the
Manufactured Products General Waiver. Were the Manufactured Products
General Waiver to be rescinded, however, the De Minimis and Small
Grants Waiver would waive the application of FHWA's Buy America
requirements for manufactured products under a single financial
assistance award for which (1) the total value of non-compliant
products is no more than the lesser of $1,000,000 or 5 percent of total
applicable costs for the project; or (2) the total amount of Federal
financial assistance applied to the project, through awards or
subawards, is below $500,000. 88 FR at 55820. For smaller projects and
projects using limited amounts of manufactured products, where there is
less of a benefit to discontinuing the Manufactured Products General
Waiver, FHWA believes that the De Minimis and Small Grants waiver
should prevent the rescission of the waiver from increasing project
costs or causing project delays.
For all of the above reasons, FHWA is proposing to rescind the
Manufactured Products General Waiver. The FHWA believes that the
Manufactured Products General Waiver is no longer in the public
interest. The FHWA seeks comment on whether this is the appropriate
course of action. For proponents of rescission, as detailed more below,
FHWA seeks comment on when the effective date of the rescission and the
implementation of Buy America requirements for manufactured products
should be. For opponents of rescission, FHWA similarly seeks comment on
when in the future, if ever, the waiver should be rescinded and what
factors should FHWA consider before doing so.
V. FHWA Proposed Buy America Manufactured Product Standards
As set out in 23 U.S.C. 313, FHWA must ensure that all manufactured
products used in FHWA-funded projects are produced in the United
States. The statutory text does not define when a product is ``produced
in the United States.'' As FHWA is proposing to rescind the
Manufactured Products General Waiver, FHWA believes it is required by
BABA to adopt general standards that meet or exceed those under BABA,
which FHWA proposes to do through this rulemaking.
Therefore, while commenters to the 2023 RFC proposed various
standards they suggested FHWA should adopt for its application of Buy
America requirement for manufactured products, FHWA is proposing to
adopt the definition of when a manufactured product is ``produced in
the United States'' as found in section 70912(6)(B) of BABA. This would
require a manufactured product to be manufactured in the United States
and the cost of the components of the manufactured product that are
mined, produced, or manufactured in the United States to be greater
than 55 percent of the total cost of all components of the manufactured
product. While FHWA could legally adopt standards exceeding that found
in BABA, such as by setting a higher domestic content threshold than 55
percent, FHWA recognizes the burden that any application of Buy America
requirements may place on contracting agencies, contractors, and
manufacturers. To minimize that burden to the greatest extent
practicable while also maintaining the benefits of Buy America
requirements, FHWA is proposing to align its standard for when a
manufactured product is ``produced in the United States'' for the
purpose of 23 U.S.C. 313 to the one found in section 70912(6)(B) of
BABA.
This standard would also provide consistency between FHWA's
standard for manufactured products and the standard used by other
Federal Agencies that apply BABA. Beyond the requirements of section
70917 of BABA, FHWA believes there is a benefit of consistent
application and interpretation between FHWA's Buy America requirements
and BABA's domestic content procurement preferences. Consistency
minimizes the burden on contracting agencies, contractors, and
manufacturers, who can rely on existing systems and processes that they
use to comply with BABA when working on FHWA-funded projects. It also
allows manufactured products that provide BABA-compliant manufactured
products for projects funded by other Federal Agencies to provide those
same products on FHWA-funded projects. Consistent definitions further
allow for better understanding of applicable requirements, as
contracting agencies, contractors, and manufacturers do not have to
navigate between multiple, disparate regimes.
[[Page 17798]]
The FHWA notes that were the Manufactured Products General Waiver
to be rescinded, the requirements of 23 U.S.C. 313(h) would apply to
manufactured products. This would mean that the proposed Buy America
requirements for manufactured products would apply to all contracts
eligible for FHWA financial assistance for a project carried out within
the scope of the applicable finding, determination, or decision under
NEPA, regardless of the funding source for such contracts, if at least
one contract for the project is funded with amounts made available to
carry out Title 23, U.S.C. In other words, any Buy America requirements
for manufactured products could apply to manufactured products
purchased under contracts using only non-Federal funds if those
contracts are within the scope of a determination under NEPA that
involves an obligation of Title 23, U.S.C. funds.
The FHWA notes that it does not intend for these proposed standards
to supplant current FHWA waivers that cover specific manufactured
products. The FHWA further notes that its proposed standards are
substantively similar to those in FHWA's Electric Vehicle (EV) Charger
Waiver,\15\ which covers EV chargers, a type of manufactured product,
and waives Buy America requirements for chargers under certain
circumstances.\16\ In particular, FHWA notes that under proposed Sec.
635.410(c)(2)(ii), FHWA intends for a predominantly iron or steel
enclosure of an EV charger that is installed in the highway right of
way or other real property to be subject to FHWA's existing Buy America
requirements for iron or steel. The FHWA believes this aligns with
FHWA's EV Charger Waiver, which states that ``[a]ll predominantly steel
and iron housing components. . .must meet FHWA's Buy America
requirements for steel and iron'' and that ``[t]he cost of any such
housing shall be included as a cost of an EV charger's components when
calculating whether the cost of components manufactured in the United
States exceed 55 percent of the cost of all components.'' See 88 FR
10619, 10634 (Feb. 21, 2023).
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\15\ Waiver of Buy America Requirements for EV Chargers, 88 FR
10619, February 21, 2023.
\16\ More guidance on the EV Charger Waiver can be found at
https://www.fhwa.dot.gov/construction/contracts/buyam_qaev/.
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While FHWA is proposing to discontinue the Manufactured Products
General Waiver and impose Buy America requirements on manufactured
products, FHWA does not desire to place contracting agencies,
contractors, and manufacturers in a position where they are required to
comply with Buy America requirements for manufactured products without
having the systems in place to do so. For example, when part 184 was
issued by OMB in August 2023, a 60-day period was provided before the
revised standards for construction materials become effective. A longer
transition or adjustment period was provided by DOT following the
initiation of the new BABA requirements in May 2022. At that time, DOT
issued an adjustment period waiver to allow time for stakeholders to
transition to new rules and processes required by BABA related to
construction materials. See ``Temporary Waiver of Buy America
Requirements for Construction Materials,'' at 87 FR 31931. The FHWA
seeks comment on whether a similar transition period is needed for its
proposed standards for manufactured products to allow contracting
agencies, contractors, and manufacturers time to create appropriate
systems and processes, as well as train staff on compliance with the
proposed standards. The FHWA specifically seeks comment on the minimum
time required for these purposes and, accordingly, the effective date
for the proposed Buy America requirements for manufactured products.
The FHWA also recognizes the complications that may arise if new
requirements are imposed on ongoing projects, as well as projects that
are in the planning, design, or later implementation phases. The FHWA
intends any new requirements to only apply to Federal awards obligated
or authorized after the effective date of a final rule, but FHWA
requests comments on this point as well. For instance, FHWA requests
comment on whether there should be a buffer period for certain projects
that are in development that have not had Federal awards obligated or
authorized but have relied on the Manufactured Products General Waiver
such that those projects could continue to rely on the Manufactured
Products General Waiver, and under what conditions, if any, that buffer
period would apply.\17\
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\17\ See DOT's Waiver of Buy America Requirements for
Construction Materials for Certain Contracts and Solicitations,
issued on January 30, 2023, for a recent example of how the
Department has handled similar situations for construction materials
subject to the BABA requirements. https://www.transportation.gov/mission/office-secretary/office-policy/transportation-policy/waiver-buy-america-requirements-for-construction-materials.
---------------------------------------------------------------------------
The FHWA also recognizes that there are projects for highway
construction that are subject to alternate project delivery methods,
such as design-build, where contracts are awarded and work is
authorized and obligated in phases. For example, where a project has
not completed the environmental review process, Federal funds may be
obligated for preliminary engineering and environmental document
preparation but not physical construction. In these situations, FHWA
believes that it may be appropriate to apply these proposed standards,
if adopted, to physical construction since Federal funds have not been
obligated or authorized for this work nor have there been any
contractual commitments with respect to this work. The FHWA also
requests comments on the appropriate buffer period, if any, for these
types of projects.\18\
---------------------------------------------------------------------------
\18\ Ibid.
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The FHWA also understands that tracking the origin and cost of
components may be difficult, particularly for smaller manufacturers,
contractors, and contracting agencies. To ease this burden, FHWA is not
prescribing any specific method of compliance. The FHWA's intent and
expectation is that recipients ensure that 55 percent of components, by
cost, of a manufactured product are mined, produced, or manufactured in
the United States. The FHWA requests comments on any specific
provisions that FHWA should consider in easing the administrative
burden in demonstrating compliance with this proposed requirement.
VI. Section Analysis
Sec. 635.410(b), (c), and (d)--Reference to States
The FHWA does not intend to substantively change its current Buy
America regulations as they relate to FHWA's Buy America requirement
for iron and steel. The FHWA does, however, intend to make several,
minor changes regarding these requirements to reflect the current scope
of its Buy America requirements.
In Sec. 635.410(b)(2), the introductory paragraph to Sec.
635.410(b)(3), and Sec. 635.410(d), FHWA is proposing to replace the
mention of ``State'' with ``recipient.'' Along with the replacement of
current Sec. 635.410(c), described below, this would replace all
mentions of ``State'' in the current regulation with ``recipient.'' The
FHWA's Buy America requirements apply to all recipients of title 23,
U.S.C. funds, which includes States but also may include other
recipients like metropolitan planning organizations, local governments,
and
[[Page 17799]]
regional transportation authorities. As the Buy America requirements
are the same between States and non-State entities, FHWA believes non-
State entities should have the same abilities provided in regulation as
States currently do.
Sec. 635.410(b)--Reference to Steel or Iron Materials
Currently, 23 CFR 635.410(b) interchangeably refers to ``steel or
iron materials'' and ``steel and iron materials.'' For consistency,
FHWA is proposing to replace mentions of both terms with a single
phrase: ``iron or steel products,'' which would be defined at proposed
Sec. 635.410(c)(1)(ii). The FHWA does not intend this change to affect
its Buy America requirements for iron or steel materials. As noted in
the discussion below with respect to proposed Sec. 635.410(c)(1)(ii)
and (iv), and (c)(2), this change would make clear when a manufactured
product comprised of steel or iron would be considered an iron or steel
product versus a manufactured product. Consistent with current FHWA
requirements, predominantly iron or steel products would be subject to
FHWA's existing Buy America requirements for iron and steel at Sec.
635.410(b). Manufactured products that are not predominantly iron or
steel would be subject to FHWA's proposed Buy America requirements for
manufactured products at Sec. 635.410(c).
Sec. 635.410(c)--Waiver Provisions
The FHWA is proposing to replace current Sec. 635.410(c) with new
language detailing FHWA's Buy America requirements for manufactured
products, as described in detail in section V and below. The FHWA is
thus proposing to remove the current regulatory text in 23 CFR
635.410(c), which discusses the process for requesting a Buy America
waiver and the procedures FHWA will take to respond to that request.
These provisions have remained substantively unchanged from 1983.\19\
Since then, however, Congress has enacted several provisions
structuring FHWA's process for issuing Buy America waivers.\20\ These
statutorily required processes are not covered by the current version
of 23 CFR 635.410(c), and FHWA does not find it necessary to modify 23
CFR 635.410(c) to reiterate what is already stated in statute and FHWA
guidance.\21\
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\19\ The FHWA has made minor amendments to 23 CFR
635.410(c)(1)(ii) when Congress has modified the statutory coverage
of its Buy America requirements. Originally, 23 CFR 635.410(c)(1)
referenced a waiver of Buy America requirements being possible when
steel and cement materials were not produced in the United States in
sufficient and reasonably available quantity and of a satisfactory
quality. See 48 FR at 53104. When Congress subsequently removed
coverage for cement, FHWA modified that provision accordingly to
remove reference to cement. See 49 FR at 18821. And when Congress
added coverage for iron, FHWA modified the provision one last time
to include mention of iron. 58 FR at 38975. None of these changes,
the last of which occurred in 1993, substantially modified the
process and procedures described in 23 CFR 635.410(c), however.
\20\ The Consolidated Appropriations Act, 2010 (Pub. L. 111-117)
required FHWA to make an informal public notice and comment period
at least 15 days prior to issuing any Buy America waiver. The
SAFETEA-LU Technical Corrections Bill (Pub. L. 110-244) states that
if FHWA determines to issue a waiver, it must publish in the Federal
Register a detailed written justification as to the reasons for the
waiver and provide an additional comment period not to exceed 60
days, with that additional comment period not delaying the
effectiveness of the waiver. Section 11513 of BIL affirmed that not
less than 15 days before issuing a waiver, FHWA must provide notice
of the proposed waiver, an opportunity to comment on the proposed
waiver, and the reasons for the proposed waiver.
\21\ The FHWA maintains guidance describing the information
needed to submit a waiver request and the method to do so. See
Questions #22-27 at https://www.fhwa.dot.gov/construction/contracts/buyam_qageneral.cfm, and Question #19 at https://www.fhwa.dot.gov/construction/contracts/buyam_qa_baba.cfm.
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Sec. 635.410(c)--Introductory Text
As stated above in section V, FHWA is proposing to require that all
manufactured products used and permanently incorporated in FHWA-funded
construction \22\ projects be produced in the United States. To promote
consistency with FHWA's existing Buy America requirements for iron and
steel, FHWA proposes to adopt language similar to the current
regulatory language in Sec. 635.410(b)(1).
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\22\ 23 U.S.C. 101(a)(4) defines ``construction'' to include, in
part, any project eligible for assistance under title 23, U.S.C.
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In addition, FHWA is proposing to make clear that its Buy America
requirement for manufactured products only applies to products that are
permanently incorporated into FHWA-funded projects. The FHWA believes
this aligns with FHWA's longstanding practice for iron and steel items
and for the treatment of manufactured products covered by BABA. See
section IV of the Implementation Guidance.
Sec. 635.410(c)(1)(i)--Definition of Component
The FHWA is proposing to adopt the definition of ``component'' used
in part 184. This would define what a component is for the purpose of
FHWA's proposed Buy America requirements for manufactured products and
for FHWA's proposed definition of an iron or steel product. To provide
contracting agencies, contractors, and manufacturers with consistency,
FHWA believes it is useful to have similar definitions between FHWA's
Buy America requirements and BABA's domestic content procurement
preference where practicable.
Sec. 635.410(c)(1)(ii) and (vi)--Iron or Steel Products
Pursuant to FHWA's current policy, predominantly iron or steel
manufactured products must conform with FHWA's Buy America requirements
for iron or steel.\23\ The FHWA, however, does not currently define
what threshold a product has to meet in order to be classified as a
predominantly iron or steel product. In this proposed rulemaking, to
provide clarity and consistency on this issue, FHWA is proposing to
adopt the definitions of ``iron or steel product'' and ``predominantly
iron or steel or a combination of both'' in part 184.
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\23\ See Q&A #12 a https://www.fhwa.dot.gov/construction/contracts/buyam_qageneral.cfm.
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With the proposed application of Buy America to both iron or steel
products and manufactured products, FHWA believes that it is necessary
to provide standards to determine whether a product should be
classified as a manufactured product or an iron or steel product, as
that determination is significant in understanding which standards
apply to the product. While under FHWA's existing Buy America
requirements for iron and steel, all manufacturing processes of the
iron and steel must occur in the United States, FHWA's proposed
standards for manufactured products allow for the inclusion of non-
domestic components.
The FHWA proposes to use the definitions of ``iron or steel
products'' and ``predominantly of iron or steel or a combination of
both'' to classify a product for purposes of Buy America compliance. In
adopting the definitions of ``iron or steel products'' and
``predominantly of iron or steel or a combination of both'' used in
part 184, FHWA hopes to utilize a single consistent definition to
categorize products on a national level, both for all projects included
in FHWA-funded projects and all projects subject to BABA. See the
explanation below for proposed Sec. 635.410(c)(2) for more information
concerning the classification of materials.
Sec. 635.410(c)(1)(iii)--Definition of Excluded Materials
The FHWA proposes a definition of the term ``excluded material''
that cross-references the definition of the term ``Section 70917(c)
material'' found in
[[Page 17800]]
part 184 at 2 CFR 184.3. Part 184 defines section 70917(c) materials as
cement and cementitious materials; aggregates such as stone, sand, or
gravel; and aggregate binding agents or additives. More information on
the use of this category of materials in this proposed regulation can
be found below in the discussion of proposed Sec. Sec.
635.410(c)(1)(iv) and (c)(2).
Sec. 635.410(c)(1)(iv)--Manufactured Products and Section 70917(c)
Materials
To ensure consistency with BABA, FHWA proposes to use substantively
the same definition of ``manufactured product'' as used by OMB in part
184, with slight changes with respect to references to ``construction
materials'' and ``section 70917(c) materials'' in that definition which
are described below. See 2 CFR 184.3.
The FHWA thus proposes to define a ``manufactured product'' using
the same language found in paragraph (1) of the definition of the term
in part 184. For consistency, FHWA intends to apply this provision in
the same way as applied by OMB in part 184. For example, products
brought to the work site in an unprocessed or minimally processed
state, such as topsoil, compost, and seed, would not be considered
manufactured products. See 88 FR at 57769. Similarly, non-manufactured
or raw materials mixed off of the work site with other non-manufactured
or raw materials of similar types would not necessarily result in the
mixed material brought to the work site being classified as a
manufactured product if it remains in an unprocessed or minimally
processed state, such as minimally-processed fill dirt. See id.
The FHWA notes that its proposal omits references to construction
materials that are found in part 184. The FHWA does not believe it
necessary to refer to construction materials in this proposed
rulemaking because 23 U.S.C. 313 does not cover construction materials.
Since section 70915(b) of BABA directs OMB to issue the applicable
standards with respect to determining when a construction material is
produced in the United States for the purposes of BABA, FHWA and its
recipients will follow the applicable OMB standards and guidance for
construction materials.
The FHWA is also proposing to make clear that excluded materials,
defined in proposed Sec. 635.410(c)(1)(iii), are not, on their own,
manufactured products. The FHWA would not consider excluded materials
to be manufactured products and apply the proposed Buy America
requirements for manufactured products if the excluded materials have
not been combined with different excluded materials, or other
materials, to create a manufactured product. See 88 FR 57772. This is
also consistent with paragraph (2) of the definition of ``manufactured
product'' in part 184.
In terms of these excluded materials, FHWA received many comments
in the 2023 RFC expressing confusion over the legal effect of section
70917(c) of BABA. By stating that excluded materials are not
manufactured products, FHWA seeks to make clear that these materials--
standing alone, as delivered to the job site--are not manufactured
products. Likewise, FHWA recognizes and follows the OMB guidance
specifying that these materials, standing alone, as delivered to the
job site are not construction materials either, as provided in section
70917(c) of BABA. See 88 FR 57771.
In alignment with part 184, FHWA intends this rulemaking to mean
that excluded materials, as defined in proposed Sec.
635.410(c)(1)(iii), when combined together with other materials,
including other excluded materials, could result in the creation of a
manufactured product. See id. at 57772. If the individual excluded
material is combined with other excluded materials and non-minor
additions of other materials before it is brought to the work site,
then the new product should be classified as a manufactured product and
the excluded materials should be treated as components of the
manufactured products. Therefore, like all other components of
manufactured products, when excluded materials are components of a
manufactured product, they would generally be included in the
determination of whether a manufactured product is Buy America-
compliant under FHWA's proposed standards.
For example, in alignment with part 184, the combination of
excluded materials and other materials into precast concrete would not
render the precast concrete exempt from domestic content procurement
preferences. See id. at 57771. For precast concrete, FHWA believes such
an item would be a manufactured product or an iron or steel item
depending on its amount of iron or steel, by cost. In either case,
precast concrete used in FHWA-funded projects would be subject to the
applicable Buy America requirement.\24\ To the extent that cement and
cementitious material are components of that precast concrete, their
origin and cost would have to be considered to determine whether the
precast concrete would be Buy America-compliant.\25\ Similarly, in some
cases, aggregate binding agents and additives may be treated as
components of manufactured products.
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\24\ If considered an iron or steel item, the precast concrete
would be subject to FHWA's existing Buy America requirements for
iron and steel. If considered a manufactured product, as described
below, FHWA is proposing that the precast concrete be subject to the
proposed Buy America requirements for manufactured products and that
the iron and steel be subject to FHWA's existing Buy America
requirements for iron and steel.
\25\ The FHWA acknowledges that Congress eliminated a Buy
America requirement regarding cement originally included in the 1983
STAA in 1984. See Public Law 98-229. The FHWA therefore believes it
would be questionable to apply a domestic content procurement
preference to cement. As noted above, FHWA does not intend to apply
any domestic content procurement preference to cement standing
alone, either as a manufactured product or as a construction
material under BABA. The FHWA does not believe the removal of cement
from the 1983 STAA, however, means that cement must be exempted from
Buy America requirements even if included in a manufactured product.
The FHWA believes the language of the 1983 STAA can be interpreted
to refer to cement as a category of product. Its elimination
therefore removes the ability of FHWA to apply a Buy America
requirement to cement as a category of product. It says nothing
about FHWA's ability to consider it as a component of a manufactured
product.
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While FHWA is proposing that products with excluded materials as
their components would generally be considered manufactured products,
in alignment with part 184, FHWA also proposes that such excluded
materials combined as an unsettled mixture without final form when
reaching the work site should not be considered a manufactured product,
such as in the case of wet concrete or hot mix asphalt. See id. The OMB
noted in part 184 that while these products might fit the same
definition of ``manufactured products'' FHWA is proposing to use, in
the sense that the mixture would have ``different properties'' than
would the individual materials, it is more consistent with the intent
of BABA to treat only such materials that have set or dried into a
particular shape or form prior to reaching the work site as
manufactured products. Id. The FHWA agrees with OMB and further intends
for these proposed regulations to have the same reach as part 184.
In particular, consistent with part 184, FHWA proposes to make
clear that concrete and asphalt mixtures delivered to a job site
without final form for incorporation into a project shall not be
considered a manufactured product. As provided in part 184: ``OMB
further clarifies in this preamble that wet concrete should not be
considered a manufactured product if not dried or set prior to reaching
the work site. The setting or drying of a combination of section
70917(c) materials into a
[[Page 17801]]
finished product prior to reaching the work site is generally the
circumstance in which a combination of only section 70917(c) materials
would be considered a manufactured product.'' See id. at 57772.
Sec. 635.410(c)(1)(v)--Definition of ``Manufacturer''
For the purposes of defining the term ``manufacturer'' as it is
used in Sec. 635.410(c)(3), FHWA is proposing to use the definition
found in part 184 at 2 CFR 184.3. The FHWA believes this definition is
simple and provides clarity on how to distinguish between the
manufacturer of the finished manufactured product and the manufacturer
of the components that go into that product.
Sec. 635.410(c)(1)(vii)--Definition of ``Produced in the United
States''
For the reasons stated in section V, above, FHWA proposes to adopt
the definition for ``produced in the United States'' for manufactured
products found in section 70912(6)(B) of BABA, as implemented by OMB in
part 184 at 2 CFR 184.3.
Sec. 635.410(c)(2)--Classification
Single Classification of Materials
In Sec. 635.410(c)(2), FHWA is proposing to make clear, consistent
with part 184, that an article, material, or supply should only be
classified as either an iron or steel product, manufactured product, or
another category specified by law or found in 2 CFR part 184. With two
exceptions, discussed in more detail below, this means that an article,
material, or supply cannot fall into multiple categories, i.e., be
classified as both an iron or steel product and a manufactured product.
While this proposed regulation would only apply requirements to iron or
steel materials and manufactured products, as those are the only
materials covered under 23 U.S.C. 313, FHWA is proposing this provision
to differentiate iron or steel materials, manufactured products, and
other materials referred to in law or in part 184, such as excluded
materials, as defined in proposed Sec. 635.410(c)(1)(iii) and known as
section 70917(c) materials in part 184, and construction materials,
which may be subject to their own domestic content procurement
preference. In alignment with part 184, FHWA does not intend to subject
a material to multiple Buy America requirements. Nor does FHWA intend
to subject a material to a Buy America requirement and the requirement
of another domestic content procurement preference, such as
requirements for construction materials found in part 184. The FHWA
similarly does not intend materials to be subject to a Buy America
requirement and the same domestic content procurement preference under
BABA. For example, manufactured products would be subject only to
FHWA's proposed standards, not both FHWA's proposed standards and the
standards under BABA and part 184. In general, FHWA agrees with part
184 that applying multiple requirements to a single product is
unnecessarily burdensome.
For instance, except as provided below, FHWA does not generally
intend for a manufactured product with limited iron or steel content to
be subject to both requirements for iron or steel products and
manufactured products. Conversely, FHWA does not intend for a
predominantly iron or steel manufactured product, when classified as an
iron or steel product, to be subject to the proposed standards for
manufactured products. Under FHWA's proposed Sec. 635.410(c)(2), any
products meeting the definition of a manufactured product would need to
comply with the proposed standards for manufactured products while
products meeting the definition of an iron or steel product would
continue to comply with FHWA's existing standards for iron or steel
products found in 23 CFR 635.410(b).
Nor does FHWA intend for materials properly classified as
construction materials under part 184 to be subject to FHWA's Buy
America requirements. The FHWA is not proposing to have this regulation
cover the requirements applicable to construction materials. Instead,
FHWA intends for properly classified construction materials to be
solely subject to the requirements in BABA and part 184. Iron or steel
products and manufactured products that may contain construction
materials, however, would still be subject to the applicable FHWA Buy
America requirement. In such cases, FHWA does not intend for such
components of the iron or steel product or manufactured product to be
subject to BABA's construction material requirements.
Finally, FHWA intends this provision to make clear, as mentioned
above in the discussion of proposed Sec. 635.410(c)(1)(iv), that
excluded materials, standing alone, would not be subject to FHWA's Buy
America requirements for manufactured products. Excluded materials,
known as section 70917(c) materials in part 184, are a category of
products specified in 2 CFR part 184. The proposed language would
indicate that a material could only be classified as either an excluded
material or manufactured product; an excluded material could therefore
not be a manufactured product by itself.
However, for two particular kinds of manufactured products, FHWA is
proposing additional requirements along with FHWA's proposed standards
for manufactured products in order to continue FHWA's longstanding
policy of requiring predominantly iron or steel components of
manufactured products to be Buy America-compliant with respect to those
predominantly iron or steel components. In particular, FHWA believes
this policy should be continued for (1) the iron or steel components of
precast concrete; and (2) iron or steel enclosures of intelligent
transportation systems and other electronic hardware systems installed
in the highway right-of-way or other real property.\26\ The FHWA
believes that these products are regularly used in highway construction
projects and manufacturers have formed longstanding supply chains to
incorporate Buy America-compliant iron or steel components into them.
Where these products are considered manufactured products, FHWA
proposes that the product must meet the standard for a manufactured
product. In addition, unlike all other manufactured products, FHWA is
proposing to require the specified iron or steel components of these
two products to be compliant with FHWA's existing Buy America
requirements for iron and steel. However, to minimize any burden and
give credit for using an American-made iron or steel product, FHWA
proposes to include the cost of these iron or steel components in the
determination of whether 55 percent of the product's components, by
cost, are produced in the United States.
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\26\ The FHWA notes that these requirements would only apply if
the precast concrete or electronic hardware systems were classified
as manufactured products. If they were classified as iron or steel
products, such products would need to comply with FHWA's existing
Buy America requirements for iron or steel.
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Besides the two exceptions noted above for precast concrete and
iron or steel enclosures of intelligent transportation systems and
other electronic hardware systems installed in the highway right-of-way
or other real property, FHWA intends Sec. 635.410(c) to possess the
same meaning as 2 CFR 184.4(e). The FHWA also believes its proposed
language makes clear that a material incorporated into an
infrastructure project must meet the Buy America requirement only for
the single category in which it is classified, as generally stated in 2
CFR 184.4(f). Materials would be classified as either (1) iron or steel
materials and subject to FHWA's existing Buy America
[[Page 17802]]
requirements for iron or steel found in 23 CFR 635.410(b); (2)
manufactured products and subjects to the proposed Buy America
requirements for manufactured products; or (3) manufactured products
that are also either precast concrete or iron or steel enclosures of
intelligent transportation systems and other electronic hardware
systems installed in the highway right-of-way or other real property
and subject to the proposed Buy America requirements for manufactured
products and FHWA's existing Buy America requirements for specified
iron or steel components of these two products.
Categorization at the Work Site
The FHWA proposes Sec. 635.410(c)(2) to specify that the
classification of an article, material, or supply as being either an
iron or steel product or a manufactured product must be based on its
status at the time it is brought to the work site for incorporation
into an infrastructure project. The FHWA believes it is important to
determine when the classification of materials occurs, as some
manufactured products might include steel and iron. Depending on when a
product is classified for the purpose of applying FHWA's Buy America
requirements, the iron or steel component of a manufactured product
could be classified as a separate material, and thus be subject to
FHWA's Buy America requirements for iron and steel.
To provide consistency, FHWA is proposing this standard to align
with the standard used by OMB in part 184 at 2 CFR 184.4(e). The FHWA
does not intend this language to mean that FHWA will conduct a
compliance check to see if a product is Buy America-compliant when it
is brought to the work site; FHWA only intends this language to
describe when a product will be categorized as either an iron or steel
product or a manufactured product for the purpose of determining which
Buy America requirement applies.
Sec. 635.410(c)(3)--Cost of a Component
The FHWA is proposing to adopt the standards, unchanged, used in
part 184 at 2 CFR 184.5 to determine the cost of a given component. The
FHWA believes that this standard properly includes activities that
directly connect to the goals of FHWA's Buy America provision to
increase domestic manufacturing. The FHWA also notes that 23 U.S.C.
313(c) specifically states that for the purposes of 23 U.S.C. 313, in
calculating components' costs, labor costs included in final assembly
must not be included in the calculation.
Sec. 635.410(c)(4)--Severability
The FHWA is proposing to add a new Sec. 635.410(c)(4) that
contains a severability clause applicable to the proposed Buy America
requirements for manufactured products made by this proposed rule in
Sec. 635.410(c). The FHWA believes that the proposed amendments to
Sec. 635.410(c) are capable of operating independently of one another.
If one or more aspects of the proposed Buy America requirements for
manufactured products are determined to be invalid, the remaining
provisions should remain unaffected and in force.
VII. Rulemaking Analysis and Notices
Executive Order 12866 (Regulatory Planning and Review), Executive Order
13563 (Improving Regulation and Regulatory Review), and DOT Regulatory
Policies and Procedures
The OMB has determined that the proposed rule would be a
significant regulatory action within the meaning of E.O. 12866, as
amended by E.O. 14094.
The preliminary regulatory impact analysis (PRIA) supports this
proposed regulation and analyzes the costs and benefits associated with
establishing Buy America requirements for manufactured products.
The expected benefits of the proposed rule relate to protecting and
expanding domestic manufacturing, increasing supply chain resiliency,
and increasing consistency in applying domestic content procurement
preferences for manufactured products between FHWA and other Federal
Agencies that are subject to the requirements of BABA. None of these
benefits have been quantified.
The costs of the proposed rule relate to increased material costs
for manufactured products used in highway construction projects,
project delay, and the administrative costs to FHWA and recipients of
FHWA financial assistance. At this time, FHWA is only able to quantify
costs for the increased materials costs and the administrative costs to
the FHWA. The FHWA's estimates of those increased material costs for
manufactured products permanently incorporated into FHWA-funded
projects range from a high of roughly $737 million per year to a low of
$45 million. The wide range stems from the difficulty in estimating (1)
the fraction of inputs to highway construction that are manufactured
products; (2) the fraction of manufactured products that are currently
domestically supplied but which fail to meet the proposed rule's
requirement that 55 percent of the product's components, by cost, are
mined, produced, or manufactured in the United States; and (3) the
likely price premiums for purchasing manufactured products that would
be compliant with the proposed rule compared to manufactured products
currently used in FHWA-funded projects that would not be. The FHWA
estimates an additional $167,000 per year in increased FHWA
administration costs to cover the salary and employer-provided benefits
of an additional Federal employee to administer the Buy America
program. The other administrative costs to recipients of FHWA financial
assistance and the costs associated with project delivery delay have
not been quantified.
The full regulatory impact analysis is available in the docket. The
FHWA is seeking comment on assumptions that were developed as part of
the PRIA, as well as information on other benefits or costs that would
result from implementation of the rule.
This rule will not adversely affect in a material way the economy,
any sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State, local, territorial, or
Tribal governments or communities. These changes do not create a
serious inconsistency with any other Agency's action or materially
alter the budgetary impact of any entitlements, grants, user fees, or
loan programs.
Regulatory Flexibility Act
In compliance with the Regulatory Flexibility Act (Pub. L. 96-354,
5 U.S.C. 601-612), FHWA has evaluated the effects of this proposed rule
on small entities and has determined that it is not anticipated to have
a significant economic impact on a substantial number of small
entities. This proposed rule would impose Buy America requirements for
manufactured products on recipients of FHWA financial assistance
including States, local governments, and other grant recipients. These
recipients are primarily States, who are not included in the definition
of small entity set forth in 5 U.S.C. 601. The FHWA believes the
projected impact upon small entities that utilize FHWA funding would be
negligible. To the extent the revisions require expenditures by State,
local governments, and other grant recipients on Federal-aid projects,
they are reimbursable. Small entities that may be impacted indirectly
by a rulemaking are not subject to analysis under the Regulatory
Flexibility Act, see Mid-Tex Electric Cooperative, Inc. v. Federal
Energy Regulatory Commission, 773 F.2d 327 (D.C. Cir 1985). Therefore,
[[Page 17803]]
FHWA certifies that the proposed action would not have a significant
economic impact on a substantial number of small entities.
Unfunded Mandates Reform Act of 1995
This proposed rule would not impose unfunded mandates as defined by
the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 109 Stat. 48).
Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires
Federal Agencies to prepare a written statement, which includes
estimates of anticipated impacts, before proposing ``any rule that
includes any Federal mandate that may result in the expenditure by
State, local, and Tribal governments, in the aggregate, or by the
private sector, of $100,000,000 or more (adjusted annually for
inflation) in any one year.'' The current threshold after adjustment
for inflation is $177 million, using the most current (2022) Implicit
Price Deflator for the Gross Domestic Product. The definition of
``Federal mandate'' in the Unfunded Mandates Reform Act excludes
financial assistance of the type in which State, local, or Tribal
governments have authority to adjust their participation in the program
in accordance with changes made in the program by the Federal
Government. The Federal-aid highway program permits this type of
flexibility. Further, in compliance with the Unfunded Mandates Reform
Act of 1995, FHWA will evaluate any regulatory action that might be
proposed in subsequent stages of the proceeding to assess the effects
on State, local, and Tribal governments, and the private sector.
Executive Order 13132 (Federalism)
The E.O. 13132 requires Agencies to ensure meaningful and timely
input by State and local officials in the development of regulatory
policies that may have a substantial, direct effect on the States, on
the relationship between the national government and the States, or on
the distribution of power and responsibilities among the various levels
of government. The FHWA has analyzed this proposed rule in accordance
with the principles and criteria contained in E.O. 13132. The FHWA has
determined that this proposed rule would not have sufficient federalism
implications to warrant the preparation of a federalism assessment. The
FHWA has also determined that this proposed rule would not preempt any
State law or State regulation or affect the States' ability to
discharge traditional State governmental functions.
Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et
seq.), Federal Agencies must obtain approval from OMB for each
collection of information they conduct, sponsor, or require through
regulations. The FHWA has determined that the proposed rule does not
contain collection of information requirements for the purposes of the
PRA.
National Environmental Policy Act
The FHWA has analyzed this proposed rule pursuant to the National
Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321 et seq.) and
has determined that it is categorically excluded under 23 CFR
771.117(c)(20), which applies to the promulgation of rules,
regulations, and directives. Categorically excluded actions meet the
criteria for categorical exclusions under the Council on Environmental
Quality regulations and under 23 CFR 771.117(a) and normally do not
require any further NEPA approvals by FHWA. This proposed rule would
establish Buy America requirements for manufactured products. The FHWA
does not anticipate any adverse environmental impacts from this
proposed rule, and no unusual circumstances are present under 23 CFR
771.117(b).
Executive Order 13175 (Tribal Consultation)
The FHWA has analyzed this proposed rule in accordance with the
principles and criteria contained in E.O. 13175, ``Consultation and
Coordination with Indian Tribal Governments.'' The FHWA does not
believe that the proposed rule would have substantial direct effects on
one or more Indian Tribes; would not impose substantial direct
compliance costs on Indian Tribal governments; and would not preempt
Tribal laws. Therefore, a Tribal summary impact statement is not
required.
Executive Order 12898 (Environmental Justice)
The E.O. 12898 requires that each Federal Agency make achieving
environmental justice part of its mission by identifying and
addressing, as appropriate, disproportionately high and adverse human
health or environmental effects of its programs, policies, and
activities on minorities and low-income populations. The FHWA has
determined that this proposed rule does not raise any environmental
justice issues.
Regulation Identification Number
A RIN is assigned to each regulatory action listed in the Unified
Agenda of Federal Regulations. The Regulatory Information Service
Center publishes the Unified Agenda in spring and fall of each year.
The RIN contained in the heading of this document can be used to cross-
reference this action with the Unified Agenda.
Rulemaking Summary, 5 U.S.C. 553(b)(4)
As required by 5 U.S.C. 553(b)(4), a summary of this rule can be
found in the Abstract section of the Department's Unified Agenda entry
for this rulemaking at [https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202310&RIN=2125-AG13].
List of Subjects in 23 CFR Part 635
Grant programs--transportation, Highways and roads, Reporting and
recordkeeping requirements.
Shailen P. Bhatt,
Administrator,Federal Highway Administration.
For the reasons stated in the preamble, FHWA proposes to amend part
635, as follows:
PART 635--CONSTRUCTION AND MAINTENANCE
0
1. The authority citation for part 635 continues to read as follows:
Authority: Sections 1525 and 1303 of Pub. L. 112-141, Sec. 1503
of Pub. L. 109-59, 119 Stat. 1144; 23 U.S.C. 101 (note), 109, 112,
113, 114, 116, 119, 128, and 315; 31 U.S.C. 6505; 42 U.S.C. 3334,
4601 et seq.; Sec. 1041(a), Pub. L. 102-240, 105 Stat. 1914; 23 CFR
1.32; 49 CFR 1.85(a)(1).
Subpart D--General Material Requirements
0
2. Amend Sec. 635.410 by:
0
a. Removing the word ``State'' and adding in its place the word
``recipient'' in paragraphs (b)(2) and (3);
0
b. removing the words ``steel and iron materials'' and ``steel or iron
materials'' and adding, in their place, the words ``iron or steel
products'' in paragraphs (b)(1)(i) and (ii), (b)(2), (b)(3)
introductory text, (b)(3)(i) and (ii), and (b)(4);
0
c. revising paragraph (c); and
0
d. Removing the word ``State'' and adding in its place the word
``recipient'' in paragraph (d).
The revision reads as follows:
Sec. 635.410 Buy America requirements.
* * * * *
(c) No Federal-aid highway construction project is to be authorized
[[Page 17804]]
for advertisement or otherwise authorized to proceed unless the
manufactured products used and permanently incorporated in such project
are produced in the United States. To meet this requirement, the
manufactured product must meet the following:
(1) The following definitions apply to this section:
(i) Component means an article, material, or supply, whether
manufactured or unmanufactured, incorporated directly into a
manufactured product or, where applicable, an iron or steel product.
(ii) Excluded materials means section 70917(c) materials as defined
in 2 CFR 184.3.
(iii) Iron or steel products means articles, materials, or supplies
that consist wholly or predominantly of iron or steel or a combination
of both.
(iv) Manufactured products means articles, materials, or supplies
that have been processed into a specific form and shape, or combined
with other articles, materials, or supplies to create a product with
different properties than the individual articles, materials, or
supplies. If an item is classified as an iron or steel product, an
excluded material, or other product category as specified by law or in
2 CFR part 184, then it is not a manufactured product. However, an
article, material, or supply classified as a manufactured product may
include components that are iron or steel products, excluded materials,
or other product categories as specified by law or in 2 CFR part 184.
Mixtures of concrete or asphalt delivered to a job site without final
form for incorporation into a project are not a manufactured product.
(v) Manufacturer, in the case of manufactured products, means the
entity that performs the final manufacturing process that produces a
manufactured product.
(vi) Predominantly of iron or steel or a combination of both means
that the cost of the iron and steel content exceeds 50 percent of the
total cost of all its components. The cost of iron and steel is the
cost of the iron or steel mill products (such as bar, billet, slab,
wire, plate, or sheet), castings, or forgings utilized in the
manufacture of the product and a good faith estimate of the cost of
iron or steel components.
(vii) Produced in the United States, in the case of manufactured
products, means:
(A) The product was manufactured in the United States; and
(B) The cost of the components of the manufactured product that are
mined, produced, or manufactured in the United States is greater than
55 percent of the total cost of all components of the manufactured
product.
(2) An article, material, or supply shall only be classified as an
iron or steel product, a manufactured product, or other products as
specified by law or in 2 CFR part 184. An iron or steel product must
meet the requirements of paragraph (b) of this section. Except as
otherwise provided in this paragraph (c), an article, material, or
supply shall not be considered to fall into multiple categories. In
some cases, an article, material, or supply may not fall under any of
the above-listed categories. The classification of an article,
material, or supply as falling into one of the categories listed in
this paragraph (c) must be made based on its status at the time it is
brought to the work site for incorporation into an infrastructure
project. In general, the work site is the location of the
infrastructure project at which the iron or steel product or
manufactured product will be incorporated.
(i) With respect to precast concrete products that are classified
as manufactured products, components of precast concrete products that
are manufactured predominantly of iron or steel or a combination of
both shall meet the requirements of paragraph (b) of this section. The
cost of such components shall be included in the applicable calculation
for purposes of determining whether the precast concrete product is
produced in the United States.
(ii) With respect to intelligent transportation systems and other
electronic hardware systems that are installed in the highway right of
way or other real property and classified as manufactured products, the
cabinets or other enclosures of such systems that are manufactured
predominantly of iron or steel or a combination of both shall meet the
requirements of paragraph (b) of this section. The cost of cabinets or
other enclosures shall be included in the applicable calculation for
purposes of determining whether systems referred to in the preceding
sentence are produced in the United States.
(3) In determining whether the cost of components for manufactured
products is greater than 55 percent of the total cost of all
components, recipients shall determine the cost as follows:
(i) For components purchased by the manufacturer, the acquisition
cost, including transportation costs to the place of incorporation into
the manufactured product (whether or not such costs are paid to a
domestic firm), and any applicable duty (whether or not a duty-free
entry certificate is issued); or
(ii) For components manufactured by the manufacturer, all costs
associated with the manufacture of the component, including
transportation costs as described in paragraph (a) of this section,
plus allocable overhead costs, but excluding profit. Cost of components
does not include any costs associated with the manufacture of the
manufactured product.
(4) The provisions of this paragraph (c) are separate and severable
from one another and from the other provisions of this section. If any
provision is stayed or determined to be invalid, the remaining
provisions shall continue in effect.
* * * * *
[FR Doc. 2024-05182 Filed 3-11-24; 8:45 am]
BILLING CODE 4910-22-P