Type: Law Bulletins
Date: 01/21/2016

When Only American Steel Will Do

Companies that do highway projects suffered a setback when the Federal Highway Administration (FHWA) withdrew its December 2012 memorandum on Jan. 6, 2016. The 2012 memorandum clarified the FHWA’s previous position on the applicability of the Buy America Act to highway projects in light of the American Recovery and Reinvestment Act (ARRA).

Specifically, the FHWA had taken the position that for a manufactured product to be considered subject to Buy America it had to be manufactured predominantly of steel or iron. Predominantly was interpreted to mean that the product had to consist of at least 90% steel or iron content when delivered to the job site (or any site where precast concrete products were manufactured) for installation. According to the FHWA, miscellaneous steel or iron components, subcomponents and hardware necessary to encase, assemble and construct components that were not predominantly steel or iron were not subject to Buy America coverage.

All of this changed on Dec. 22, 2015, when the U.S. District Court for the District of Columbia decided United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union et al. v. FHWA, (C.A. No 2-13-1301), in which the judge vacated the 90% threshold exemption for manufactured steel or iron components, subcomponents and hardware as well as the waiver for miscellaneous steel or iron components, subcomponents and hardware. The court found that the FHWA’s exemption and waiver (from the memo) were substantive rules, requiring public notice and comment before they could be finalized, and that the 90% content position was arbitrary and capricious. Although the judge advised that he was not criticizing the exemption’s substance (for the waiver of components, subcomponents and hardware) because it seemed “quite sensible,” he believed the FHWA failed to follow proper procedures, which an agency must do even when adopting a sensible rule.

On Jan. 6, 2016, the FHWA rescinded its 2012 memo. As of that date, all federal, state and local public agencies using FHWA funds must comply with the existing Buy America requirements. Contracts already awarded will not be automatically impacted by this ruling. For details, see the FHWA’s Construction Program Guide for Buy America

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