Disclaimer: I am not an attorney, and this article is a good faith, best effort at communicating the most relevant aspects of BABA requirements, for the lighting industry. The link at the end of this article goes to a more complete article published by the law firm, Steptoe.
The lighting industry has been familiar with Buy America as well as Buy American requirements for many years. These often have been required for transportation projects and military projects that receive federal funding. Build America, Buy America (BABA) was enacted in November 2021 as part of the Infrastructure Investment and Jobs Act (IIJA infrastructure law) to strengthen Made in America requirements and ensure that all federally funded infrastructure projects (not just those funded by the IIJA) use American-made iron, steel, construction materials, and manufactured products. This article will only focus on the manufactured product requirements.
OMB FINAL GUIDANCE
The Office of Management and Budget (OMB) issued initial BABA guidance in April 2022, and final guidance in August 2023. Here are some of the most significant impacts of the final August 2023 guidance for manufactured products:
- The final guidance provides a new definition of “manufactured products,” which provides that they are articles, materials, or supplies that have been: “[p]rocessed into a specific form and shape” or “[c]ombined with other articles, materials, or supplies to create a product with different properties than the individual articles, materials, or supplies.” The final guidance also clarifies that an item is not a manufactured product if it meets the definition of an iron or steel product, a construction material, or a “section 70917(c) material” (i.e., aggregate, its additives or binding agents, or cement or similar material).
- The final guidance provides a new definition of “components,” which provides that they are an article, material, or supply, whether manufactured or unmanufactured, incorporated directly into a manufactured product, or an iron or steel product.
- The final guidance creates a new part 184 in Title 2 of the Code of Federal Regulations to provide a common system for federal agencies to distinguish between the product categories included in BABA, and includes key definitions such as the ones discussed above; guidance for determining components and the cost of components of manufactured products; guidance for classifying manufactured products and construction materials; and procedures for requesting and issuing Buy America waivers.
- The final guidance became effective 60 days post-publication on October 23, 2023.
- BABA requirements only apply to items that are “consumed in, incorporated into, or affixed to” an infrastructure project. They do not apply to tools, equipment, and supplies that are brought to a construction site and removed at or before the completion of the project (e.g., temporary lighting), and equipment or furnishings that are used at or within the finished project (e.g., floor lamps or table lamps).
To be “produced in the United States,” a manufactured product must be manufactured in the United States, and “the cost of the components of the manufactured product that are mined, produced, or manufactured in the United States [must be] greater than 55 percent of the total cost of all components of the manufactured product.” This definition has an exception for other domestic preference requirements applicable to a project that have an equivalent or higher cost of components threshold.
To determine whether the cost of components is greater than 55 percent of the total cost of all components, for components purchased by the manufacturer, the cost is the acquisition cost (including transportation costs and any applicable duty), and for components manufactured by the manufacturer, the cost includes all costs associated with manufacturing (including transportation and overhead costs, but excluding profit).
Therefore, there are four steps to determine whether the cost of the US components is greater than 55 percent of the total cost of all components, including (1) determining the components of the item that are manufactured in the United States; (2) determining the cost of the components manufactured in the United States; (3) determining the cost of all components; and (4) dividing step 2 by step 3.
The final guidance includes guidance on proposing and issuing BABA waivers and reiterates the availability of three kinds of waivers.
- A public interest waiver, is available when an agency concludes that applying the Buy America Preference would be inconsistent with the public interest.
- A nonvavailability waiver is available when an agency concludes that specific types of iron, steel, manufactured products, or construction materials are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality.
- An unreasonable cost waiver is available when an agency concludes that applying the requirements to iron, steel, or manufactured products, or construction materials, will increase the cost of the overall infrastructure project by more than 25 percent.
OMB specifically considered and rejected an exemption or waiver for commercial off the shelf (COTS) products. However, OMB noted that COTS items may fall within various public interest waivers that agencies have issued such as de minimis or minor component waivers.
Tomorrow, I’ll cover a Buy America waiver the Federal Highway Administration (FWHA) issued for EV chargers.
WHAT’S TO COME
OMB still intends to issue a revised Memorandum updating the initial guidance April 2022 M-22-11 Memorandum, which continues to apply except to the extent that it is inconsistent with the final guidance. Further, expect to see agencies, such as the Federal Highway Administration and Federal Transit Administration, grapple with potential conflicts and gaps between the final guidance and existing domestic content regimes. Agencies may update existing policies to reflect the new BABA standards in the final OMB guidance, or rely on some combination of existing requirements and BABA. Agencies may also go above and beyond minimum BABA compliance and broadly apply the requirements to for-profit recipients that receive federal financial assistance awards directly.
The OMB final guidance applies government-wide, but federal agencies may also issue further supplemental requirements. Notably, the final guidance does not replace those existing Buy America preferences that already complied with BABA by meeting or exceeding its requirements and defers to agencies to update their own existing regulations as needed
Read the complete Steptoe law firm article here.