Buy America Nationwide Waiver Notification for Commercially Available Off-the-Shelf (COTS) Products With Steel or Iron Components and for Steel Tie Wire Permanently Incorporated in Precast Concrete Products

AGENCY:

Federal Highway Administration (FHWA), DOT.

ACTION:

Notice.

SUMMARY:

The FHWA is proposing two nationwide waivers from the Buy America requirements for COTS products with steel or iron components and steel tie wire permanently incorporated into precast concrete products.

Specialty steel or iron items, or any steel or iron item that is built to contract specification for a Federal-aid project, would remain subject to FHWA's Buy America requirements. The FHWA is requesting comments on these two proposed nationwide waivers, including the impact this proposal would have on State and local agencies administering Federal-aid projects; contractors; materials suppliers; railroads and utilities performing work related to a Federal-aid highway construction contract; and manufacturers.

DATES:

Comments must be received on or before December 2, 2016.

ADDRESSES:

Mail or hand deliver comments to Docket Management Facility: U.S. Department of Transportation, 1200 New Jersey Avenue SE., Room W12-140, Washington, DC 20590. You may also submit comments electronically at www.regulations.gov. All comments should include the docket number that appears in the heading of this document. All comments received will be available for examination and copying at the above address from 9 a.m. to 5 p.m., e.t., Monday through Friday, except Federal holidays. Those desiring notification of receipt of comments must include a self-addressed, stamped postcard or you may print the acknowledgment page that appears after submitting comments electronically. Anyone is able to search the electronic form of all comments in any one of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, or labor union). The DOT posts these comments, without edits, including any personal information the commenter provides, to www.regulations.gov,, as described in the system of records notice (DOT/ALL-14 FDMS), which can be reviewed at www.dot.gov/privacy.

FOR FURTHER INFORMATION CONTACT:

Mr. Gerald Yakowenko, FHWA Office of Program Administration, (202) 366-1562, Gerald.Yakowenko@dot.gov, or Mr. William Winne, FHWA Office of the Chief Counsel, (202) 366-1397, William.Winne@dot.gov, Federal Highway Administration, Department of Transportation, 1200 New Jersey Avenue SE., Washington, DC 20590. Office hours are from 8:00 a.m. to 4:30 p.m., e.t., Monday through Friday, except Federal holidays.

SUPPLEMENTARY INFORMATION:

Electronic Access

An electronic copy of this notice may be downloaded from the specific docket page at www.regulations.gov.

Background

The FHWA's Buy America regulation at 23 CFR 635.410 requires a domestic manufacturing process for steel or iron materials that are permanently incorporated into a Federal-aid construction project. The FHWA interprets domestic manufacturing process to include steel manufacturing processes such as melting, rolling, cutting, welding, fabrication, and the process of applying a coating. The regulation is based on the statutory mandate in 23 U.S.C. 313(a).

The statute requires the application of the FHWA Buy America requirements to any project receiving Federal assistance under Title 23; however, the statute provides exceptions if the Secretary finds: (1) The application of the requirement would be inconsistent with the public interest; (2) where materials and products are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; or (3) the inclusion of domestic material will increase the cost of the overall project contract by more than 25 percent. See 23 U.S.C. 313(b).

A request for a waiver may be made for specific projects, for certain materials or products in specific geographic areas, or waivers regarding nationwide public interest or availability issues. See 23 U.S.C. 313(c). Not less than 15 days before waiving any Buy America requirement for Federal-aid highways projects, FHWA is required to notify the public on its intent to issue such a waiver. The FHWA's implementing regulations also allow the Agency to publish its decisions on nationwide waivers in the Federal Register for public comment. 23 CFR 635.410(c)(6). Based on the Secretary's authority to grant waivers from Buy America, FHWA has issued three nationwide waivers: for manufactured products other than steel and iron manufactured products (1983), for certain ferry boat equipment (1994), and for pig iron and processed, pelletized, and reduced iron ores (1995).

The FHWA Buy America regulations also contain a regulatory exception for minimal use of foreign iron and steel. See 23 CFR 635.410(b)(4). This exception allows for a small use of foreign iron and steel materials if “the cost of such materials used does not exceed one-tenth of one percent (0.1 percent) of the total contract cost or $2,500, whichever is greater.” The FHWA expects that the contracting agency will maintain a running list of foreign steel or iron material as a project proceeds to be able to confirm compliance with this provision. The intent of this provision was to “eliminate an administrative burden placed on the States for truly minor items.” 48 FR 1946, 1947 (Jan. 17, 1983); 48 FR 53099, 53103 (Nov. 25, 1983).

Manufactured Products Waiver of 1983

In its final rule issued on November 25, 1983, FHWA also discussed a nationwide waiver for manufactured products other than steel and cement manufactured products. 48 FR 53099, 53102 (Nov. 25, 1983). In the final rule, FHWA stated that materials and products other than steel, cement, asphalt, and natural materials comprised a small percent of the highway construction program, and it was very difficult to identify the various materials and trace their origin. Id. The FHWA found that it was “in the public interest to waive the application of Buy America to manufactured products other than steel and cement manufactured products.”

As a result of the heightened awareness on projects funded under the American Recovery and Reinvestment Act of 2009 (Recovery Act) (Pub. L. 111-5), project inspectors and auditors spent significant resources examining compliance with FHWA's Buy America requirements for all steel or iron products in highway projects and noted compliance issues with Buy America certifications. In working to address these findings, FHWA realized that there was confusion regarding the application of Buy America requirements to COTS products with steel or iron components, such as sinks, toilets, faucets, traffic controller cabinets, and circuit breaker panels. Some FHWA Divisions were requiring Buy America compliance for steel and iron components and subcomponents of manufactured products. Other Divisions were treating these steel or iron components of manufactured products as excluded from Buy America requirements through the manufactured products waiver. On December 21, 2012, FHWA issued a memorandum intended to clarify the scope and meaning of the manufactured products waiver and indicated that the waiver was intended to encompass miscellaneous steel or iron components and subcomponents that are commonly available as off-the-shelf products.

December 2015 District Court Decision

On October 12, 2014, the United Steelworkers Union and a group of eight manufacturing corporations filed a lawsuit challenging FHWA's December 21, 2012, Buy America memorandum, claiming that it was a substantive rule that required notice and comment pursuant to the Administrative Procedure Act, 5 U.S.C. 553.

On December 22, 2015, the U.S. District Court for the District of Columbia rendered its decision in the United Steelworkers Union case. The Court found against FHWA and vacated the December 21, 2012, memorandum. The Court also found that the COTS exception was a separate waiver from the manufactured products waiver in the November 25, 1983, rule. Id. at 26. The court concluded, as a result, that FHWA had to provide notice and an opportunity for comment in accordance with SAFETEA-LU Technical Correction Act of 2008 and the Consolidated and Further Continuing Appropriations Act, 2012 before the Agency could implement that exception.

The decision returned matters to pre-2012 memorandum conditions, when there was ambiguity and uncertainty on whether the FHWA Buy America requirements applied to COTS products with steel or iron components. As before December 21, 2012, FHWA Divisions and State DOTs are currently left to interpret the applicability of Buy America in this gray area, creating potential inconsistency in the application of Buy America. In response, FHWA evaluated options to achieve greater nationwide uniformity in the application of its Buy America requirements in a manner consistent with the Court's ruling. The FHWA has also received a number of requests to take action in this regard.

Covered Materials

In keeping with the statutory text and the purpose of the Buy America requirements, the following covered materials, among others, have been and continue to be subject to Buy America requirements:

(1) Structural steel (any structural steel shapes used as load-bearing members);

(2) reinforcing steel used in cast-in-place, precast, pre-stressed or post-tensioned concrete products (including reinforcing steel couplers, connectors, wire mesh, steel fibers, pre-stressing or post-tensioning strand, wire rope or cable);

(3) steel or iron materials used in pavements, bridges, tunnels, or other structures: High strength bolts/nuts (any threaded fastening element with a nominal diameter greater than 3/4 inch inclusive and any matching components to it such as nuts and washers), anchor bolts, anchor rods, dowel bars, bridge bearings, and cable wire/strand;

(4) motor/machinery brakes and other equipment for moveable structures;

(5) guardrail, guardrail posts, offset blocks, guardrail related hardware, transitions, end sections, end treatments, terminals, cable barriers;

(6) steel fencing or steel fabric material, fence posts, fence rails;

(7) steel or iron pipe, casing, conduit, ducting, fire hydrants, manhole covers, rims, risers, drop inlet grates;

(8) mast arms, poles, cross arms, standards, trusses, or supporting structural members for signs, luminaires, or traffic control systems;

(9) incidental steel or iron items that are not explicitly defined in the contract documents but are permanently incorporated. This includes items that are impractical to remove due to design, construction, staging, or other functional requirements. If a steel or iron item is necessary for construction and it is impossible or impractical to remove, then Buy America requirements apply. This category includes, but is not limited to: Corrugated steel stay-in-place forms, sheet piling, steel casing for micropile construction, tie wire, filler metal/green rod for welding operations, etc.;

(10) steel or iron materials that are specified and manufactured for a specific Federal-aid project (for example, a lifting cable that is designed and manufactured for a specific project, or ductile iron pipe fittings built to contractor specifications); and

(11) rails for railroad or transit infrastructure funded under Title 23.

Pursuant to 23 U.S.C. 313(b), however, FHWA finds that the application of the Buy America requirements in certain limited circumstances is inconsistent with the public interest. Accordingly, FHWA is proposing two new nationwide waivers.

Proposed Nationwide Waivers

The FHWA continues to carry out and require compliance with the Buy America requirements, but it is also cognizant of the practical and administrative issues associated with its implementation. Contracting agencies must document and trace the origin of all steel components for products not waived under the 1983 regulations that are permanently incorporated in a Federal-aid project. If they are not able to document the domestic manufacturing processes for steel components (melted and manufactured in the United States), they must assume the steel is non-domestic and track each component to ensure compliance with the minimal use provisions of 23 CFR 635.410(b)(4) or request a waiver for each product under 23 CFR 635.410(c)(1).

From a practical viewpoint, manufacturers of electrical and mechanical products rely on multiple suppliers, both domestic and foreign, to source steel components for their products. Some steel components may be comprised of subcomponents that originate from different global suppliers with separate manufacturing processes. For many electrical and mechanical products, the Federal-aid highway program represents only a small fraction of the market for that product. For a contracting agency to comply with the Buy America requirements, it would need manufacturers to source and track components separately from its suppliers and provide certifications for all steel components. Only upon issuance of such certifications by manufacturers would contracting agencies be able to properly certify compliance with Buy America requirements. Thus, manufacturers would need to implement new sourcing, inventory, and tracking processes for contracting agencies to fully comply with the Buy America requirements.

Several State DOTs recently informed FHWA that manufacturer's certifications documenting compliance with the Buy America requirements are not available, and as a result, the State DOT must assume that all of the steel components are non-domestic and request a waiver. Oregon DOT's January 15, 2016, waiver request for the steel components of more than 50 manufactured products illustrates the challenges and administrative burdens faced by contracting agencies.

The FHWA recognizes that verifying compliance with the Buy America requirements may be burdensome for some materials. For others, it is virtually impossible to trace the processes from the melting of the steel through the manufacturing and coating of the steel or iron materials. The FHWA believes that requiring contracting agencies to document the origin of every amount of steel or iron subcomponent of commercially available off-the-shelf products places an unreasonable burden on recipients and increases their administrative costs without significantly furthering the objectives and policies of Buy America. Therefore, FHWA seeks comments about the administrative costs of documenting the origin of steel or iron used in subcomponents of COTS products.

Proposed Nationwide Waiver for Commercially Available Off-the-Shelf Products With Steel or Iron Components

The first proposed nationwide waiver is for COTS incorporating steel or iron components. The term COTS means any manufactured product incorporating steel or iron components (excluding the covered materials discussed above, vehicles, or tie wire permanently incorporated in precast concrete) that:

(1) Is available and sold to the public in the retail and wholesale market;

(2) is offered to a contracting agency, under a contract or subcontract at any tier, without modification, and in the same form in which it is sold in the retail or wholesale market; and

(3) is broadly used in the construction industry.

The COTS products are limited to manufactured products with steel or iron components, such as sinks, faucets, toilets, door hinges, electrical products, and ITS hardware that are not made specifically for highway projects but are incidental to such projects. By contrast, products produced of steel or iron that are permanent features of a highway project that are specifically manufactured or modified for construction of such projects are excluded from COTS items and must comply with FHWA's Buy America requirements.

The FHWA believes that tracking the country of origin of steel or iron components of COTS places an unreasonable administrative burden on Federal-aid recipients, distributors, and contractors, including small businesses. These entities would likely have to establish costly material inventory tracking systems to ensure that all steel or iron components meet the Buy America requirements. The FHWA believes that manufacturers, distributors, contractors, and Federal-aid recipients would incur significant and unreasonable costs to document and track information regarding manufacturing operations. The FHWA also believes that steel or iron components of COTS constitute a relatively small percentage of the overall steel and iron materials used on Federal-aid projects, and the administrative costs associated with ensuring compliance would be disproportional to the value of the material. The FHWA believes that it may be in the public's interest that related administrative costs are better allocated to other oversight actions that reduce costs or accelerate project delivery. Accordingly, and pursuant to the exception provided under 23 U.S.C. 313(b) when application of the Buy America requirements is inconsistent with the public interest, FHWA proposes to issue this nationwide waiver for COTS with steel or iron components.

Proposed Temporary Nationwide Waiver for Steel Tie Wire Permanently Incorporated in Precast Concrete Products

The second proposed nationwide waiver is for steel tie wire that is permanently incorporated into precast concrete products. Steel tie wire may be shown or referenced in standard plans, specifications, special provisions, or are standard industry practice. Even when tie wire is permanently incorporated in a precast concrete product, it is considered incidental to the design and construction of the product. Steel tie wire facilitates or allows the final product to be constructed but does not provide a structural function in the final product.

Manufacturers in the precast concrete industry rely extensively on rebar tying guns to tie reinforcing steel. The benefits of using rebar tying guns include the reduction of repetitive stress workplace injuries, such as carpal tunnel syndrome, and an increase in production. These rebar tying guns use tie wire supplied on spools. Although tie wire is domestically produced, patent requirements for the tying guns that are widely used by the precast concrete industry limit the use of tie wire to non-domestic sources. The patented design of these guns requires the use of specific tie wire spools, which are not compatible with the tie wire that is currently produced in the United States. Although there may be companies interested and able to supply Buy America-compliant tie wire, the supply of this product may be limited to specific applications due to its lack of compatibility with the rebar tying guns. The FHWA does not want to discourage innovation or create artificial barriers to continued process improvements in the construction industry. However, the Agency recognizes that more time may be needed to accommodate the demand for Buy America-compliant tie wire (supplied on spools for the proprietary tie wire guns commonly used in the industry) because it may not be domestically produced in sufficient and reasonably available quantities at this time.

The FHWA recognizes the impacts to the precast concrete industry related to the Court's decision to vacate FHWA's December 21, 2012, memorandum, and believes that it is appropriate to issue a 1-year temporary waiver of the Buy America requirements to allow suppliers in the precast industry to provide Buy America compliant tie wire. Accordingly, and pursuant to the exception provided under 23 U.S.C. 313(b) when materials and products are not produced in the United States in sufficient and reasonably available quantities, FHWA proposes to temporarily waive Buy America requirements for tie wire permanently incorporated into precast concrete products for a 1-year period from the date of issuance of the waiver. At the end of the 1-year period, FHWA will assess whether to continue the waiver or apply Buy America requirements to tie wire permanently incorporated into precast concrete products. The FHWA also seeks comments about the domestic availability of tie wire and lifting devices.

Other Steel and Iron Products Permanently Incorporated in Precast Concrete Products

The FHWA is considering whether to issue a nationwide waiver for specialized lifting devices incorporated in precast concrete products. Over the years, suppliers in the precast industry have developed many types of specialized steel lifting devices that are designed and used to lift and move different precast concrete products used in highway and infrastructure projects. Many in the precast concrete industry may have come to rely on non-domestic lifting devices. The Court's decision to vacate FHWA's December 21, 2012, memorandum may result in an increase in demand for Buy America compliant lifting devices. It is uncertain whether the current supply of Buy America compliant lifting devices would be sufficient to meet such an increase in demand. The Agency recognizes that more time may be needed to accommodate an increase in demand for Buy America compliant lifting devices. The FHWA seeks comments and additional information about the supply and availability of Buy America compliant lifting devices that are permanently incorporated into precast concrete products.

Invitation for Public Comment

The FHWA requests public comment and input on this proposal for two nationwide waivers for manufactured items. Specifically, FHWA invites public comment on the following issues:

Proposed Nationwide Waiver for Commercially Available Off-the-Shelf Products With Steel or Iron Components

1. Does the COTS definition provide a reasonable description of commercially available off-the-shelf steel or iron items?

2. Are there COTS products that should be on the covered steel or iron materials list? If so, why?

3. Should there be a per-item cost cap for COTS items? If so, what should the cap be?

4. What is the burden, time, and cost associated with enforcing or complying with Buy America requirements for COTS items?

5. Are certifications and/or other documents available to allow owner agencies to trace and verify domestic melting and manufacturing processes for steel or iron products?

6. Does your agency or company track costs associated with the administrative or compliance efforts associated with the Buy America requirements?

Proposed Temporary Nationwide Waiver for Steel Tie Wire Permanently Incorporated in Precast Concrete Products

7. Is the temporary waiver for tie wire permanently incorporated into precast concrete necessary and appropriate, and if yes, is 1 year the appropriate length?

Additional Question Regarding Other Steel and Iron Products Permanently Incorporated in Precast Concrete Products

8. Is domestically produced supply sufficient to meet demand for Buy America compliant lifting devices permanently incorporated into precast concrete?

9. Does your agency or company have concerns regarding the administrative burden, time, and cost associated with enforcing or complying with Buy America requirements on steel or iron products permanently incorporated into precast concrete products?

10. Does your agency or company have concerns regarding the availability of materials and products that comply with Buy America requirements on steel or iron products permanently incorporated into precast concrete products?

11. Does your State DOT have data that document the relative use of steel or iron products incorporated into precast products in comparison with all steel/iron materials used in your highway program?

(Authority: 23 U.S.C. 313; 23 CFR 635.410)