The White House’s final guidance on implementing the Build America, Buy America Act (BABA Act), issued on August 14, added no provisions to its proposed guidance for the application of the Act's 'Buy America' preference to projects covered by trade agreements. While the Office of Management and Budget (OMB) acknowledged concerns raised by foreign governments with the absence of such provisions, it asserted that its 2022 initial guidance would suffice. That guidance states that a public interest waiver is needed to purchase foreign goods covered by an international agreement. This post looks at the implications of OMB’s treatment of compliance with agreements.
The BABA Act, which was included in the Infrastructure Investment and Jobs Act of 2021, mandates the use of US-produced iron, steel, manufactured products, and construction materials in any infrastructure project undertaken by non-federal entities with federal funds. To implement this far-reaching preference, OMB issued initial guidance in April 2022. It followed, in February 2023, with proposed guidance on the implementation of the BABA Act.
Following consideration of public comments on the proposed guidance, OMB on August 14 released its final guidance. It incorporates a new part 184 (Buy America Preferences for Infrastructure Projects) into the Code of Federal Regulations (CFR) on how to implement the BABA requirements and standards. The final guidance includes definitions for key terms, including iron or steel products, manufactured products, construction materials, and materials such as aggregates and cement. It also provides domestic manufacturing process standards for each construction material covered by the preference. The guidance will become effective on October 23, 2023.
In issuing the final guidance, OMB acknowledged that several commenters had expressed concerns that the proposed guidance did not explicitly state that the Buy America preference “shall be applied in a manner consistent with United States obligations under international agreements,” in accordance with the BABA Act. OMB further noted that commenters had asked how the implementation of the BABA preference would interact with US trade obligations, such as the WTO Government Procurement Agreement (GPA).
The European Union and others sought an explicit clarification that BABA requirements do not apply to government procurement covered by US trade agreements and that foreign products covered by such agreements could be incorporated into an infrastructure project without the need for a waiver. The United Kingdom and others raised concerns that the proposed guidance could lead to confusion and barriers to trade. Some commenters noted that the waiver process is too onerous.
Stating that “the BABA provisions apply in a manner consistent with United States obligations under international agreements,” OMB concluded there was no reason to address this issue in the final guidance. Rather, it relies on its April 2022 initial guidance, which is still in effect (at least partially). Some elements of the initial guidance have been revised in the final guidance, and OMB indicated it may revise it further in the future.
OMB’s refusal to clarity the interaction of trade agreement obligations and the BABA preference may undermine compliance with US trade agreement or, at a minimum, make compliance with agreements very difficult. First, how will suppliers, non-federal fund recipients, and federal agencies know they need to consult the initial guidance to determine how to treat goods covered by trade agreements without an explicit provision in the final guidance? Second, how will they know what projects are covered by trade agreements and thus may be eligible for a public interest waiver? The scope of this problem and the Obama administration's remedy with respect to a similar issue were detailed in an earlier post.
Finally, there is the waiver process itself, which provides no certainty that a public interest waiver will be issued for goods covered by an agreement. Such waivers must follow the same process as for waivers for nonavailability and unreasonableness of costs. It requires a recipient of federal funds to request a waiver from the federal awarding agency, in accordance with that agency’s instructions. If an agency is persuaded to issue such a waiver, it must prepare a detailed written explanation for the proposed waiver, post the proposed waiver and explanation on a designated website, and allow at least 15 calendar days for public comments. Finally, if it decides to proceed with the proposed waiver, it must submit its waiver determination to the Made in America Office in OMB for final review.
Fulfilling US trade obligations in the implementation of the BABA preference will require more than a mere assertion of compliance.
Jean Heilman Grier
August 21, 2023
UPDATED (August 23, 2023: Added the effective date and citation in the Federal Register for OMB's final guidance.