On June 20, New York Governor Andrew Cuomo and state legislative leaders announced that they had reached agreement on legislation that will require the use of American-made structural iron and steel in the state’s most significant infrastructure projects. As a result, the New York legislature enacted the New York Buy American Act to apply to all state surface road and bridge projects, beginning in April 2018. The new measure has only a two-year life and is much narrower than an earlier proposal of the Governor. This post examines the scope of the legislation and its effect on New York’s international trade obligations.
The new domestic preference applies to state entities that undertake road and bridge projects: the Department of Transportation, Thruway Authority, Bridge Authority, Metropolitan Transportation Authority, Office of General Services, the State University of New York (SUNY) Construction Fund and Dormitory Authority of the State of New York. These entities must include a provision in all bridge and road contracts over $1 million in value “that the structural iron and structural steel used or supplied in the performance of the contract or any subcontract thereto and permanently incorporated into such surface road or bridge, shall be produced or made in whole or substantial part in the United States, its territories or possessions”.
Under the legislation, the entire manufacturing process of the iron or steel products must take place in the U.S. “from the initial melting stage through the application of coatings, except metallurgical processes involving the refinement of steel additives”. The new measure provides that a contractor shall not be required to certify that the iron or steel used in a project subject to the Buy American requirement is made in whole or in substantial part in the U.S.
The new NY law includes exceptions that are typically found in federal Buy American requirements: where application of the domestic content requirement would not be in the public interest or would increase the cost of the contract by an unreasonable amount or the iron or steel is not manufactured in the U.S. in sufficient and reasonably available quantities or of satisfactory quality. Other exceptions to the application of the measure include where it would result in the loss or reduction of federal funding or limit or jeopardize the ability to obtain federal funding.
The measure allows New York to comply with its obligations under the WTO Government Procurement Agreement and free trade agreements, by excluding application of the Buy American requirement where a reciprocal trade agreement or treaty requires nondiscriminatory governmental procurement practices or policies with respect to a foreign government. It further provides that the provision is not “intended to contravene any existing treaties, laws, trade agreements, or regulations of the United States or subsequent trade agreements entered into between any foreign countries and the state or the United States”.
New York covers its state agencies, state university system and public authorities under the trade agreements that apply to its state procurement. However, it excludes procurement of “construction-grade steel (including requirements on subcontracts)” from its trade obligations.
Looking forward, the newly enacted measure calls for establishment of a workgroup to consider the feasibility of expanding the Buy American requirement to other products such as concrete, cement and aluminum, as well as to evaluate “reciprocal trade access for any foreign state that may be significantly impacted by the implementation” of the law to New York’s detriment. The workgroup must also report on the impact of the measure on capital plans of state agencies, including any changes in costs of projects and cost savings due to materials used in accordance with the legislative directive. Its interim report is due on January 1, 2019 and its final report on January 1, 2020, a few months before the April 2020 expiration of the law.
The enacted legislation is much narrower than a measure that the Governor proposed at the beginning of 2017 for inclusion in the state budget. That measure would have required all state agencies to give preferences to domestic products in purchases above $100,000. It was not included in the state budget that was adopted.
Jean Heilman Grier
July 18, 2017