Waive Buy America for Alaskan Ferry Terminal?

The U.S.-Canada dispute over the application of Buy America requirements to the Alaska ferry terminal project could be resolved with a public interest waiver.

Buy America requirements are once again under fire from Canada, as they have been increasingly over the past several years. Canada’s most recent complaint relates to the application of a federal Buy America requirement that prohibits the use of Canadian iron and steel in the rebuilding of an Alaskan ferry terminal on Canadian land at the port of Prince Rupert. But, this time, Canada has done more than complain. It has invoked a rarely used sanctions law (the Foreign Extraterritorial Measures Act) to bar any company working on the project from complying with the requirement to use American iron and steel. This dispute needs to be resolved with pragmatism, as have other recent Buy America cases involving Canada.

This latest dispute arises from a long-standing federal requirement that only U.S. iron and steel products can be used in a federally funded highway construction project. This domestic content restriction applies to the renovation of the Alaskan ferry terminal because it will be primarily funded by the Federal Highway Administration (FHWA).

The FHWA has the authority to waive the Buy America requirement if its application would be inconsistent with the public interest. While the FHWA does not often issue public interest waivers, there are no set standards for the waivers. However, the FHWA will not issue a waiver unless it is requested by the state or local agency involved in the project. In the current case, the State of Alaska has apparently not sought a waiver. Such a waiver could resolve the Alaskan terminal dispute just as a waiver provided a practical result in a new border crossing between Canada and the United States.

In 2012, the FHWA issued a waiver of its Buy America policy for the New International Trade Crossing (NITC) over the Detroit River, linking Detroit, Michigan to Windsor, Ontario. Even though the NITC is being solely funded by Canadian public and private sources and Canadian partners are assuming all the financial risk for the project, the U.S. asserted that its domestic content requirement applied to the whole project. The justification for that broad application was the State of Michigan’s intent to use Canada’s financial contribution to the NITC as the State’s matching share on other Federal-aid highway projects. Application of the U.S. requirement would have meant that Canadian iron and steel could NOT have been used in the project. Such an absurd result was averted when the FWHA, based on a request from Michigan’s Governor, issued a public interest waiver, citing the “unique financing structure”. As a consequence, both American and Canadian steel and iron products are eligible for use in the construction of the NITC.

Last year, the FHWA found a way to resolve another dispute with Canada over its Buy America policy in the repair of a bridge in a small Colorado town. The FHWA initially concluded that Morrison, Colorado would have to dismantle a bridge that had been repaired using a FHWA grant because Canadian steel was incorporated into the project. However, in October 2014, FHWA reversed its position and concluded that the foreign steel did not need to be removed, as long as no federal grant money was used for the Canadian beams in the bridge.

In 2010, the U.S. and Canada were able to work out an agreement that addressed Canada’s wide-spread criticism of the Buy America provision in the American Recovery and Reinvestment Act of 2009 (ARRA), which shut out Canadian suppliers. ARRA required the use of U.S.-made iron, steel and manufactured goods in a wide array of public projects that it funded. Under the 2010 agreement, Canada gained access to a number of ARRA-funded projects, which was not provided to any other trading partner.  In exchange, Canada agreed to open up the procurement of its provinces and territories for the first time and to bind that coverage under the WTO Government Procurement Agreement (GPA).

The current Alaskan ferry terminal dispute needs to be resolved in a practical manner as in other recent cases. But, it also may be time for the U.S. and Canada to explore a broader resolution of their recurring Buy America disputes. The 2010 agreement could provide the path with its call for future discussions on expansion of procurement commitments.

Jean Heilman Grier

January 26, 2015

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