Buy America — It’s Back

Readers will remember the Buy America constraints of the American Recovery and Reinvestment Act of 2009 (ARRA) which, for the first time, imposed a domestic preference provision that required all iron, steel, and manufactured goods used in any project funded wholly or partially by the ARRA be produced in the United States. The list of projects covered by that year-long legislation included those funded by the Environmental Protection Agency (EPA) Clean Water State Revolving Fund and the Drinking Water State Revolving Loan Fund (CWSRF and DWSRF, respectively). Today, these projects are well underway towards completion. But two new legislative efforts have since been passed that continues the domestic iron and steel requirements for American water infrastructure projects.
 

1. The Consolidated Appropriations Act of 2014 (CAA) that funds the EPA for the 2014 fiscal year contains a new Buy America provision — this time referred to as the “American iron and steel” requirement, or the AIS. Essentially, the legislation dictates that CWSRF and DWSRF recipients use iron and steel products that are produced in the United States for the “construction, alteration, maintenance or repair” of a public water system or treatment works if [that] project is funded through “an assistance agreement executed beginning January 17, 2014” through the end of the fiscal year, September 30, 2014. It also specifically lists the types of iron and steel products covered by the requirement.
    

2. The Water Resources Reform and Development Act of 2014 (WRRDA) authorizes the US Army Corps of Engineers and EPA marine navigation, flood management, and conservation projects for a four-year period — 2014 through 2018.
    
   • A. The WRRDA introduces a new funding mechanism, the “Water Infrastructure Finance and Innovation Act of 2014” (WIFIA), a loan guarantee assistance for those projects funded by public and/or private investments. Projects here include flood damage reduction, restoration of aquatic ecosystems, improvements to inland and intracoastal waterway navigation systems, wastewater treatment works, desalination plants, and the acquisition of property for the construction of projects. Iron and steel products used by recipients of WIFIA monies must be produced in the United States. The requirement is the same as that found in the CAA.
      
   • B. For all practical purposes, the WRRDA also made permanent the requirement to use iron and steel produced in the United States required by the EPA yearly funding measure described in (1) above — but only for CWSRF projects.

Question and Answers

Q: How do the EPA fiscal year 2014 appropriation bill and the WRRDA differ from the ARRA “Buy America” provisions? The ARRA required that all iron, steel, and manufactured goods that are incorporated into a public building or public work be produced in the US. The EPA Appropriations Act and the WRRDA require that iron and steel used in projects be produced in the US. Unlike the ARRA, the EPA and the WRRDA specifically list the type of products “made primarily of iron or steel” as linked or unlined pipes and fittings, manhole covers, and other municipal castings, hydrants, tanks, flanges, pipe clamps and restraints, valves, structural steel, reinforced precast concrete, and construction material.

Q: What does “primarily made of iron and steel” mean? Products must be made of greater than 50% iron or steel, measured by cost and which in turn is based on material costs.

Q: Is this latest Buy America legal under US trade obligations? The Obama Administration argues that it meets US trade obligations as the monies in both the EPA and WRRDA legislation is “passed through” to sub-federal entities which mostly are not covered by the WTO Agreement on Government Procurement.

Q: Does the NAFTA offer any protection for Canadian companies? No, for the same reasons as noted above and because sub-federal procurement (provinces, states, municipalities) are not covered for government procurement purposes.

Q: Did Canada and the US not agree on a bilateral procurement agreement in 2010? Yes, but that agreement applied only to ARRA-funded projects and only included a “consultation” provision for any future Buy America legislation.

Q: How do the EPA fiscal year 2014 appropriation bill and WRRDA mirror the language in the ARRA of 2009? The ARRA and the EPA appropriations bill and the WRRDA permit the EPA to issue waivers where the EPA finds that applying these requirements would be inconsistent with the public interest; iron and steel products are not produced in the US in sufficient and reasonably available quantities and of a satisfactory quality or the inclusion of the iron and steel products produced in the US will increase the cost of the overall project by more than 25%.

Q: Who can apply for these waivers? Only those assistance recipients receiving monies from the EPA appropriation bill or the WRRDA can apply for waivers from the EPA.

Q: How can my company learn more about these two measures as well as information about the implementation of both bills? Arent Fox LLP is working with the EPA and others in Washington towards pragmatic implementation of these new rules on behalf of our clients. Contact Birgit Matthiesen, Director of Canada-US Cross Border Business Affairs at Arent Fox, at birgit.matthiesen@arentfox.com, or the Arent Fox professional who handles your matters.