The Biden administration wants to eliminate a Buy America waiver that has allowed the purchase of foreign manufactured goods for use in highway projects since the 1980s. In his State-of-the-Union address on March 7, 2024, President Biden declared “’Buy America’ has been the law of the land since the 1930s.” Faulting prior administrations for failing to buy American, he vowed that “on my watch,” federally funded projects will be made with American products, singling out highways. To demonstrate the administration’s adherence to this policy, the Department of Transportation’s Federal Highway Administration (FHWA)--on the same day-- initiated a rulemaking procedure to discontinue its general waiver of Buy America requirements for manufactured products used in federal-aid highway projects. This post examines the FHWA’s proposed withdrawal of its 40-year-old waiver.
Beginning in the late 1970s, Congress enacted Buy America requirements for highway projects undertaken with federal funds. In 1983, the FHWA determined that the quantity of manufactured products used in highway construction projects was not sufficient to provide incentives for domestic manufacturing, thus there would be little benefit in subjecting them to domestic purchasing requirements. It determined it would be in the public interest to waive Buy America requirements for such products. Under its Manufactured Products General Waiver, manufactured products permanently incorporated into FHWA-funded projects do not need to be produced domestically (except for predominantly iron or steel manufactured products and predominantly iron or steel components of manufactured products).
The FHWA’s proposal to discontinue the manufactured products waiver was based on several factors. First was the president’s Buy America policy, embodied in his 2021 Made in America order, to maximize the use of goods, products, and materials produced in the United States. Second was the Build America, Buy America Act’s (BABA Act) inclusion of a policy preference against general applicability waivers like the FHWA's waiver. In addition, the FHWA conducted a review of its general waiver to comply with the BABA Act’s directive that federal agencies review their use of such waivers. FHWA also considered its original rationale for issuing the general waiver in comparison to the current domestic manufacturing situation. Based on these considerations, the FHWA proposes to end its waiver. If the waiver is terminated, recipients of FHWA funding would be required to apply Buy America requirements to manufactured products.
The removal of the FHWA’s general applicability waiver will not likely affect US obligations under its trade agreements even though it may deprive its partners’ suppliers of opportunities afforded by the FHWA waiver. Under the WTO Government Procurement Agreement and free trade agreements, the United States has taken an exception for domestic purchasing requirements that apply to federally funded highway projects. That means that US trading partners can participate in such projects only if they meet the Buy America requirements. However, that exception has not applied to manufactured goods used in highway projects that are covered under the FHWA’s genera waiver. If that waiver is withdrawn, recipients of FHWA highway-aid funds will not be able to purchase foreign manufactured goods unless another type of waiver applies. Waivers are generally available when US-produced products are not available, the cost of such products is unreasonable, or a waiver is considered to be in the public interest.
If the manufactured products waiver is eliminated, FHWA is proposing to modify its current Buy America regulations to provide standards for determining when a manufactured product would be deemed to be “produced in the United States” and therefore Buy America-compliant. In the interest of uniformity and consistency, FHWA is proposing standards that mirror those established by the Office of Management and Budget in its final guidance implementing the BABA Act.
Public comments on the proposed termination must be submitted by May 13, 2024.
Jean Heilman Grier
March 13, 2024
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