Buy America Requirements for Federally Funded Airports (2013)

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3 BUY AMERICA REQUIREMENTS FOR FEDERALLY FUNDED AIRPORTS By Timothy R. Wyatt, Conner Gwyn Schenck PLLC I. INTRODUCTION Federal airport development grant programs in- clude statutory preferences for domestic goods, commonly known as Buy America, Buy American, or Buy National provisions. These provisions have evolved from the 1933 Buy American Act (BAA),1 which applied to direct procurements of goods by federal government agencies. Buy America provi- sions in transportation grant programs, on the other hand, apply to procurements made by recipi- ents of federal grants, including state and local governments and airport authorities.2 Figure 1 summarizes these different Buy Amer- ica provisions that apply to federal transportation agencies and grant programs. The transportation grant provisions generally include stricter domestic preference requirements than the original BAA. As discussed in this digest, the BAA was weakened in practice by liberal applications and interpretations of its statutory exceptions. As a result, in the transportation grant provisions, Congress included specific guidance (including numeric thresholds) regarding when one of the exceptions may apply to permit the use or purchase of foreign goods. The Buy America provision in the Airport Im- provement Program (AIP),3 enacted in 1990, ap- pears to have been designed as a particularly strict domestic preference requirement. The AIP Buy America provision permits the appropriation of Federal Aviation Administration (FAA) funds “for a project only if steel and manufactured goods used in the project are produced in the United States.”4 According to the current language of the AIP provi- sion, the Secretary of Transportation may waive the domestic preference to permit the use of foreign steel or manufactured goods in the following cases: • Public Interest. Where the use of domestic steel or manufactured goods would be “inconsistent with the public interest.”5 1 Pub. L. No. 72-428, Tit. III; Mar. 3, 1933, 47 Stat. 1520, codified at 41 U.S.C. §§ 8301–8305 (2011). 2 See infra Pt. III. 3 49 U.S.C. § 50101 (2011). This provision is refer- enced herein as the “AIP Buy America Provision.” How- ever, it also applies to other lines of business within the FAA. See infra Pt. III. C.i. 4 49 U.S.C. § 50101(a) (2011). 5 49 U.S.C. § 50101(b)(1) (2011). • Unavailability. Where domestic steel and manufactured goods “are not produced in a suffi- cient and reasonably available amount or are not of a satisfactory quality.”6 • Unreasonable Cost. Where the use of domestic steel and manufactured goods “will increase the cost of the overall project by more than 25 per- cent.”7 • Substantial Domestic Manufacture. Where the project involves procurement of a facility or equip- ment, and final assembly of the facility or equip- ment occurs in the United States, and “the cost of components and subcomponents produced in the United States is more than 60 percent of the cost of all components of the facility or equipment.”8 However, there is no requirement in the AIP Buy America provision (as there is in other trans- portation grant provisions) for the FAA to publish the Buy America waivers that it grants. As a re- sult, until recent years, the AIP Buy America pro- vision has been the subject of very little scrutiny, guidance, or enforcement. Congressional oversight was expanded with passage of the American Rein- vestment and Recovery Act (ARRA) economic stimulus program in 2009,9 which required the FAA to publish Buy America waivers for projects that received ARRA funds.10 Consequently, the FAA has published some waivers of the Buy Amer- ica requirements, and has also published expanded guidance to help AIP grant recipients comply with the requirements.11 On February 24, 2010, the Fi- nancial Assistance Division of the FAA Office of Airport Planning and Programming (APP-500) is- sued Program Guidance Letter (PGL) 10-02 di- rected toward compliance with both the AIP and ARRA Buy America provisions.12 Although it is brief, PGL 10-02 is the most authoritative Buy 6 49 U.S.C. § 50101(b)(2) (2011). 7 49 U.S.C. § 50101(b)(4) (2011). 8 49 U.S.C. § 50101(b)(3) (2011). 9 American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, 123 Stat. 115 (2009). 10 Id. § 1605(c). 11 See infra Pt. III.F. 12 FED. AVIATION ADMIN., PROGRAM GUIDANCE LETTER NO. 10-02, GUIDANCE FOR BUY AMERICAN ON AIRPORT IMPROVEMENT PROGRAM (AIP) OR AMERICAN RECOVERY AND REINVESTMENT ACT (ARRA) PROJECTS (Feb. 24, 2010), http://www.faa.gov/airports/aip/guidance_letters/ media/PGL_10_02.pdf.

4 America guidance available to AIP grant recipients and attempts to address the most common compli- ance questions. The APP-500 Office has also estab- lished a Buy America Web site that contains the most up-to-date Buy America guidance,13 including a list of products that have received Buy America waivers, or those that the APP-500 Office has found to comply with the Buy America requirements. Although guidance and enforcement of the AIP Buy America provision is still evolving, there is now sufficient information publicly available to provide compliance guidance for most situations encountered by AIP grant recipients. This digest synthesizes all available information, including statutory and regulatory language, legislative his- tory, administrative and judicial opinions, and agency guidance, to help airport sponsors and their contractors understand and comply with the Buy America requirements. The digest traces the AIP Buy America provision from the BAA and the other transportation grant Buy America provisions from which it evolved. Particular attention is paid to the legislative history of the AIP Buy America provi- sion and the limited guidance that the FAA has made available. The digest identifies areas where the FAA has directly adopted compliance tests used by other federal agencies in enforcing the BAA or other transportation grant Buy America provisions. The digest also identifies ways in which the AIP Buy America provision differs from its predeces- sors, where the FAA and its grant recipients should not rely on guidance provided by other agencies (involving similar but different statutes). Finally, the digest identifies areas where the FAA’s inter- pretation of airport Buy America requirements may deviate from the congressional intent or from the interpretation of nearly identical statutory lan- guage by other federal agencies. Although some confusion remains, this digest is intended to pro- vide answers for the most common compliance is- sues encountered by airport grant recipients and to serve as a resource in the development of further guidance. 13 Fed. Aviation Admin., AIP Buy American Prefer- ences, http://www.faa.gov/airports/aip/buy_american/ (last updated Mar. 13, 2012).

5 F ig u re 1 . C om pa ri so n o f B u y A m er ic a P ro vi si on s A pp li ca bl e to F ed er al T ra n sp or ta ti on A ge n ci es a n d G ra n t P ro gr am s. B A A S T A A A IP A R R A (4 1 U .S .C . § § 83 01 –8 30 5) (4 9 U .S .C . § 5 01 01 ) A pp li es t o: F ed er al A ge n ci es F A A F H W A F T A F A A F ed er al A ge n - ci es , F A A (4 8 C .F .R . § 25 .0 00 ) (A M S T 3. 6. 4) (2 3 C .F .R . § 6 35 .4 10 ) (2 3 C .F .R . § 6 61 ) (P G L 1 0- 02 ) (4 8 C .F .R . § 25 .6 00 ) U n m an u fa ct u re d G oo ds D om es ti c (s u bj ec t to E xc ep ti on s) E xe m pt E xe m pt ( ex ce pt as p ar t of f ac il it y or eq u ip m en t) E xe m pt E qu ip m en t D om es ti c (s u bj ec t to E xc ep ti on s) W ai ve d D om es ti c (s u bj ec t to E xc ep ti on s) D om es ti c E xe m pt ( ex - ce pt M fg r’ d C on - st ru ct io n M at e- ri al s) S u bs ta n ti al D om es ti c M an u fa ct u re E xc ep - ti on V eh ic le s V eh ic le s: A ss em - bl ed in U .S . o f 60 % D om es ti c C om po - n en ts a n d S u bc om - po n en ts V eh ic le s: E x- em pt O th er E qu ip m en t A ll e qu ip m en t: A ss em bl ed in U .S . o f 50 % D om es ti c C om po n en ts E qu ip m en t: A ll m an u fa ct u ri n g pr oc - es se s in t h e U .S . u si n g 10 0% D om es - ti c C om po n en ts A ll e qu ip m en t: A ss em bl ed in U .S . of 6 0% D om es ti c C om po n en ts a n d S u bc om po n en ts M an u fa c- tu re d C on st ru c- ti on M at er ia ls : F in al a ss em bl y in U .S . N o W ai ve r R eq u ir ed N o W ai ve r R eq u ir ed C on st ru ct io n M at er ia ls D om es ti c (s u bj ec t to E xc ep ti on s) S te el S te el : D om es ti c (s u bj ec t to E xc ep ti on s) S te el : D om es ti c (N o E xc ep ti on s) S te el & I ro n : D om es ti c

F ig u re 1 c on ti n u ed 6 B A A S T A A A IP A R R A (4 1 U .S .C . § § 83 01 –8 30 5) (4 9 U .S .C . § 5 01 01 ) Ir on Ir on : D om es ti c (s u bj ec t to E xc ep ti on s) Ir on : E xe m pt (e xc ep t pa rt o f fa ci l- it y or e qu ip m en t) C em en t C em en t: E xe m pt C em en t: W ai ve d C em en t & A s- ph al t: E xc lu de d as U n m an u fa c- tu re d G oo ds A sp h al t A sp h al t: W ai ve d A sp h al t: E va lu at e as M fg r’ d C on st r. M at er ia l A sp h al t: W ai ve d M an u fa ct u re d C on st ru ct io n M at er ia ls M fg r’ d C on st r. M at er ia ls : W ai ve d M fg r’ d C on st r. M at er ia ls : D om es - ti c (s u bj ec t to E xc ep - ti on s) M fg r’ d C on st r. M at er ia ls : D om es - ti c (e va lu at e as s u b- co m po n en t of f ac il - it y) M fg r’ d C on st r. M at er ia ls : F in al as se m bl y in U .S . Im pr ac ti ca bi li ty E xc ep ti on D et er m . b y A ge n cy H ea d D et er m in ed by C O F ac il it ie s E va lu at e In di vi du al C on st ru ct io n M at er ia ls E va lu at e In di vi du al C on st ru ct io n M at er ia ls D om es ti c (A ss em - bl ed in U .S . o f 60 % D om es ti c C om po - n en ts a n d S u bc om - po n en ts ) E va lu at e In di - vi du al C on st ru c- ti on M at er ia ls O th er E xc ep ti on s U n av ai la bi li ty In su ff ic ie n t qu an ti ty A N D U n sa ti sf ac - to ry q u al it y N o do m es ti c re sp on se t o op en p ro cu re - m en t In su ff ic ie n t qu an ti ty A N D U n sa ti sf ac - to ry q u al it y In su ff ic ie n t qu an ti ty O R U n sa t- is fa ct or y qu al it y In su ff ic ie n t qu an ti ty A N D U n sa ti sf ac to ry qu al it y

7 B A A S T A A A IP A R R A (4 1 U .S .C . § § 83 01 –8 30 5) (4 9 U .S .C . § 5 01 01 ) G oo ds o n F A R L is t pl u s M ar ke t R es ea rc h G oo ds o n F A R L is t (N o M ar ke t R es ea rc h ) G oo ds o n F A R L is t (N o M ar ke t R es ea rc h ) G oo ds o n F A R L is t pl u s M ar ke t R es ea rc h N o w ai ve r re qu ir ed U n re as on ab le C os t 6% s u rc h ar ge t o fo re ig n li n e it em s In cr ea se t ot al p ro je ct c os t by 2 5% if f or ei gn co n te n t In cr ea se t ot al p ro je ct c os t by 2 5% (1 2% if lo w d om es ti c bi dd er is s m al l b u si - n es s) N o w ai ve r re qu ir ed W ai ve r re qu ir ed P u bl ic I n te re st D et er m in ed b y A ge n cy H ea d D et er m in ed b y A ge n cy H ea d D et er m in ed b y A ge n cy H ea d F re e T ra de T re at a s D om es ti c go od s fr om W T O , F T A s, N A F T A pa rt n er s; W ai ve d by U .S . T ra de R ep . T re at a s D o- m es ti c go od s fr om N A F T A pa rt n er s; N o In ap pl ic ab le In ap pl ic ab le In ap pl ic ab le C on si st en t w it h U .S . t ra de o bl i- ga ti on s w ai ve r re qu ir ed P u bl ic at io n R ep or t to C on gr es s al l pu rc h as es m an u fa ct u re d ou ts id e U .S . P u bl ic in sp ec ti on o f al l w ai ve rs P u bl ic in sp ec ti on o f al l w ai ve rs P u bl is h P u bl ic I n - te re st w ai ve r in F ed er al R eg is te r E xe m pt P u bl is h a ll w ai v- er s in F ed er al R eg is te r P u bl ic in sp ec ti on o f al l w ai ve rs f or C on st ru ct io n M at er ia ls P u bl ic in sp ec ti on o f al l w ai ve rs