Municipal Castings Association

THE AMERICAN RECOVERY AND REINVESTMENT ACT BUY AMERICA REQUIREMENT

The Buy America provision of the American Recovery and Reinvestment Act (ARRA or the Stimulus) mandates that:

No foreign iron, steel, or manufactured goods are permitted for use in a project for the construction, alteration, maintenance, or repair of any public building or public work if the funding for the project is made available by the ARRA.

"Public buildings or public works" covered by the requirement include – but are not limited to: "sewers," "mains," and "pumping stations."

With respect to determining whether iron and steel is "produced in the United States," implementing regulations and guidance specify that "production in the United States of the iron or steel used as construction material requires that all manufacturing processes must take place in the United States, except metallurgical processes involving refinement of steel additives." This provision appears to reflect similar Buy America provisions in the U.S. transportation laws.

It is longstanding precedent of the Federal Highway Administration (FHWA) Buy America provision – upon which the Stimulus Act’s Buy America provision is based – that with respect to iron and steel, "produced in the United States" means that "all manufacturing processes must take place domestically." FHWA has stated that with respect to iron and steel, "[m]anufacturing begins with the initial melting and mixing, and continues through the coating stage. Any process which modifies the chemical content, the physical size or shape, or the final finish is considered a manufacturing process. These processes include rolling, extruding, machining, bending, grinding, drilling and coating. "Coating" includes epoxy coating, galvanizing, painting, or any other coating that protects or enhances the value of the material."

In addition, the FHWA has confirmed that grants made by it for federal aid highway projects using ARRA funds will be subject to the existing FHWA Buy America requirements.

There are three principal exceptions under U.S. domestic law to the Buy America requirement. They are:

Where applying the Buy America requirement would be inconsistent with the public interest;
Where the iron, steel, and the relevant manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; and
Where inclusion of iron, steel, and manufactured goods produced in the United States would increase the cost of the overall project by more than 25 percent.

The Stimulus contains an exception allowing a project to use foreign products only if the use of products produced in the United States will increase the cost of the "overall project" by more than 25%. This does not mean that the exception applies if the cost of the product will be 25% greater than foreign products; rather, the cost of U.S. made product must increase the cost of the entire project by more that 25%.

Although the ARRA’s Buy America section is to be applied under U.S. domestic law in a manner that is consistent with U.S. international legal obligations, The North American Free Trade Agreement (NAFTA) only compels the United States to extend equal procurement opportunity to goods and services for direct federal procurement from Canada and Mexico that have values at or above specified threshold levels. States, municipal, and other non-federal projects, which comprise the bulk of the Stimulus funding, are not covered by the NAFTA. This policy is reiterated by the FHWA in its own guidance. "Article 1001 of NAFTA expressly exempts grants, loans, cooperative agreements, and other forms of Federal financial assistance from its coverage. Unless further negotiations among the U.S., Canada and Mexico modifies {sic} NAFTA, or additional statutory requirements are implemented, the NAFTA does not affect Buy America requirements."

The Buy America mandate in the ARRA is far-reaching, and whether an exception under that statute applies in a given instance will require careful and detailed legal analysis. For example, the United States is under no obligation to give non-discriminatory national treatment to the goods and services of countries such as Brazil, China, India, and Russia, which are not parties to the World Trade Organization’s Agreement on Government Procurement or to any other international agreement on government procurement with the United States.