DOT Issues Waiver for US Materials Mandate

WEDNESDAY, JUNE 1, 2022


Last week, the U.S. Department of Transportation issued a notice of a temporary public interest waiver regarding construction materials through the recent Buy America standards. The requirement for infrastructure projects to be constructed with certain materials made in the United States went into effect last month, but will now be waived until Nov. 10, unless extended­.

The notice of the 180-day waiver was recently published in The Federal Register.

Steel, Iron Buy America Requirement

In an order issued mid-April, the Biden Administration announced that projects funded by the bipartisan infrastructure law will be required to use only iron and steel produced in the U.S. The Buy America Act, included in the Infrastructure Investment and Jobs Act, aims to support the country’s industrial base, protect national security and support jobs.

The requirement went into effect on May 14.

The 17-page guidance released on April 18 notes that “none of the funds” provided under the law may be used for infrastructure, unless:

  • All iron and steel used in the project are produced in the U.S.—this means all manufacturing processes, from the initial melting stage through the application of coatings, occurred in the U.S.;
  • All manufactured products used in the project are produced in the U.S.—this means the manufactured product was manufactured in the U.S.; and the cost of the components of the manufactured product that are mined, produced or manufactured in the U.S. is greater than 55% of the total cost of all components of the manufactured product, unless another standard for determining the minimum amount of domestic content of the manufactured product has been established under applicable law or regulation; and
  • All construction materials are manufactured in the U.S.—this means that all manufacturing processes for the construction material occurred in the U.S.

The rule also indicates to waive the process in the event there are not enough domestic producers or material costs are too high. However, the goal is to issue fewer waivers over time as U.S. manufacturing capacity increases.

If the purchase would be “inconsistent with the public interest,” the materials are not being produced in enough quantities or of necessary quality or the inclusion of these U.S.-based materials will increase the cost of the overall project by more than 25%, a request to waive the application can be submitted in writing to the agency.

Latest DOT Waiver

Implementation guidance issued earlier this year stated that materials are to be classified in one of three categories: iron or steel, a manufactured product or a construction material. Construction materials affected by the waiver include an material that is or consists primarily of non-ferrous metals, plastic and polymer-based products, glass, lumber or drywall.

“In order to deliver projects and meaningful results while ensuring robust adoption of Buy America standards, the department is establishing a temporary public interest waiver for construction materials for a period of 180 days, expiring on Nov. 10,” wrote the Department in its release. “DOT is establishing this transitional waiver to prepare for compliance with the new Made in America standards for construction materials.”

DOT reports that it received 83 comments in response to its previous notice, including from state transportation agencies, public transit agencies, airport operators, construction firms, manufacturers and suppliers, labor organizations, individuals and associations. A “vast majority” of these commentors supported the proposal to issue a temporary waiver.

“The department recognizes both the importance of ensuring Buy America-compliant construction materials and the need to implement the requirement in a way that is not overly burdensome,” the agency said.

Brian Turmail, Vice President of Public Affairs and Strategic Initiatives at Associated General Contractors of America, said the Buy America provision has the potential to significantly impede any range of transportation infrastructure projects from moving forward.

“More recently, we’ve seen a lot of challenges more regional in nature with some of the materials even being supplied domestically,” Turmail said.

“The supply chain is so fragile right now that it’s easy to envision a scenario that something a year ago that was easily sourced domestically is no longer sourced domestically or is impossible to achieve within the project timeline. It’s going to discourage agencies from asking for a waiver. The White House set itself up to really be reluctant to give out waivers given how high-profile and public each of these waiver requests is being set up to be.”

According to the notice, the temporary waiver will provide the DOT time to:

  • Seek information and feedback from State, local, industry, and other partners and stakeholders on challenges with and solutions for implementing the requirement;
  • Allow a reasonable adjustment period for recipients of DOT financial assistance, including states, local communities, Tribal nations, transit agencies, railroads, airports and ports and their industrial vendors to develop and transition to new compliance and certification processes for construction materials; and
  • Gather data on the sourcing of the full range of construction materials used in federally funded transportation projects and strategies for increasing domestic capacity to produce those materials.

Additionally, the DOT requests that implementing partners will also take action to prepare for compliance with the new requirements, including establishing certification processes; working to ensure that manufacturers, contractors and subcontractors are prepared to meet the Buy America Standards; and providing data to the DOT on the domestic availability of construction materials.

“By the end of the waiver period, DOT expects State, industry, and other partners to establish an effective compliance process appropriate for construction materials, consistent with the BIL and relevant implementation guidance and standards,” writes the department.

Cost Concerns, Tariffs

At the beginning of 2022, the AGC found that increased prices of construction materials were outpacing the rate at which contractors are raising their bid prices. In a survey issued by the association in January, 86% of contractors rated material costs at their top concern for 2022, more than any other concern. Availability of materials and supply chain disruptions were the second most frequent concern, listed by 77% of the more than 1,000 respondents.

In that report, when comparing year-over-year increases, that month ABC reported that steel mill product prices had increased 141.6% since October 2020, while iron and steel prices were up 101.5%. According to the most recent report from earlier this month, year-over-year steel mill product prices rose 42.9% and the price momentum of iron and steel was going upward 1.4%.

As a result of the continued uptick in prices and inflation, the AGC has urged President Joe Biden to remove the tariffs on several building materials. Currently, tariffs run as high as 25% on steel, 18% on Canadian lumber and 10% on aluminum.

In February, The White House announced a new deal between the U.S. and Japan to roll back tariffs on Japanese steel. The deal reportedly removed the 25% levy previously imposed by former President Trump from about 1.25 million metric tons of Japanese steel imports annually.

Should Japan go over that amount, however, the tariff would be reinstated on any additional steel imports. According to the U.S. Commerce Department, Japan is one of the top 10 sources of steel to the nation, but only accounts for roughly 4% of all steel imports.

And, at the end of November 2021, the U.S. Department of Commerce increased tariffs on antidumping and countervailing duties on Canadian softwood lumber imports. Implemented by the Biden Administration, the increase nearly doubles the import rate from 8.99% during the Trump Administration to 17.99%.

“Given the impact inflation is already having on the economy, it makes no sense for the administration to continue to needlessly inflate the cost of key construction materials,” said Stephen E. Sandherr, AGC Chief Executive Officer. “Removing these tariffs will take some of the price pressure off of employers grappling to control costs.”

Last month, the Texas Department of Transportation announced that road infrastructure projects are being impacted by construction material shortages and cost increases, causing delays and driving up project expenses.

“Due to recent circumstances affected by world events, there has been significant volatility in the market for various construction materials,” wrote TxDOT Director, Construction Division, Duane Milligan in a memorandum.

“We have seen the availability of some materials become very limited or the material lead time has increased significantly. We have also seen significant increases (over 100% in some cases) in some material prices.”

“Contractors all over the country have been running into extreme price increases and delays on getting materials delivered, and shortages of workers to perform the work when they do have the materials,” said Ken Simonson, chief economist with the Associated General Contractors of America, told the Austin Monitor.

Simonson added that while more steel-making capacity is coming online over the next year or so, a shortage of construction workers could also complicate both projects.

“It’s an ongoing challenge for contractors to get enough workers,” Simonson said. “The country has really neglected its career and technical education programs that are the pipeline for bringing people into fields like construction.”

   

Tagged categories: Building materials; Construction; Government; Government contracts; Infrastructure; Infrastructure; NA; North America; President Biden; Program/Project Management; Upcoming projects

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