Buy America and highway projects

Most of the significant highway projects in the United States are funded by the Federal Highway Administration (FHWA). This funding brings with it Buy America restrictions that require all steel and iron materials used to be U.S.-made.

The FHWA, part of the Department of Transportation (DOT), is responsible for regulating and maintaining U.S. highway infrastructure. Canadian companies will generally interact with the FHWA in either a direct sale to the FHWA or as a subcontractor on an FHWA-funded project.

Direct procurement by the FHWA

The FHWA does execute procurements for highway projects on federal lands, research and development projects, and for normal supplies and services needed for its own use. Buy American requirements apply to these purchases. In these procurements, FHWA generally follows rules set forth in the Federal Acquisition Regulations (FAR) and implementing instructions contained in the Department of Transportation Acquisition Regulations (TAR).

Procurement by the FHWA (when the FHWA purchases something for its own use) is covered by the revised WTO Agreement on Government Procurement (GPA). Under the revised GPA, on purchases of goods or services Canadian firms will be treated as U.S. firms when the prime contract is worth more than $182,000 for goods and general services, and $7,008,000 for construction services. Be aware though that other programs, such as small business set asides, still may impede the participation of Canadian firms for procurements below US$250,000.

When the contract is less than the above dollar thresholds or where the FHWA is purchasing a good or service not covered by the revised GPA, the Buy American Act (41 U.S.C. Chapter 83) applies.

Federally funded highway projects

The vast majority of significant highway projects in the U.S. are procured by state or local governments with funding provided by the FHWA. Marketing efforts should be directed to local sources. To identify opportunities visit the FedBizOpps website.

Highway projects executed by state or local governments receiving FHWA funding must comply with specific Buy America requirements contained in Title 23, Part 635 of the U.S. Code of Federal Regulations (23 CFR Subpart 635.410). The Code requires that no Federal aid construction project be authorized unless:

• they do not incorporate steel or iron materials; or
• if steel or iron materials are to be used, all manufacturing processes, including application of a coating for these materials, must occur in the United States.

Individual states must comply with this requirement unless:

• they have standard contract provisions that require the use of domestic materials and products, including steel and iron materials, to the same or greater extent; or
• they elect to use procedures allowing alternate bids for foreign steel and iron materials with provisos that:
  • All bidders must also submit a bid based on the use of domestic iron or steel; and
  • The contract will be awarded to the bidder who submits the lowest total bid based on domestic iron and steel materials unless such total bid exceeds the lowest total bid based on furnishing foreign iron or steel materials by more than 25 percent.

These requirements do not apply if the cost of the iron and steel materials does not exceed 0.1% of the total contract cost, or US$2,500, whichever is greater.

More about Buy America restrictions

For your convenience, we have summarized below the related Buy America restrictions listed at 23 CFR Subpart 635.410, which are most relevant:

• Applies to iron and steel products and their coatings. Raw materials were originally included; however, lack of adequate domestic supply resulted in a nationwide waiver (published in the Federal Register in March 1995) for iron ore, pig iron, reduced/processed/pelletized iron ore, and raw alloys;
• All manufacturing processes must take place domestically. Manufacturing begins with the initial melting and mixing, and continues through the bending and coating stages. If a domestic product is taken out of the U.S. for any process, it becomes foreign source material;
• The restrictions apply to permanently incorporated steel or iron materials;
• Minimal use of foreign source materials valued at the greater of US$2,500 or 0.1% of the total contract cost is permitted. Cost is based on the value of the steel and iron products "as they are delivered to the project site";
• Under an alternate bid procedure that the states are permitted to use, foreign source materials may be proposed for use along with domestic materials and the foreign materials offered may be accepted by the state if the total project bid using foreign materials is 25% less than the lowest total bid using domestic materials;
• In 1994, a nationwide waiver for specific ferryboat parts came into effect;
• State restrictions may include additional products but must allow any U.S. domestic source.

Canadian suppliers may find it difficult to provide iron and steel products for use in highway projects. Canadian products could be used if:

• the value of the foreign materials is minimal, i.e.: the greater of US$2,500 or 0.1% of the prime contract; or
• the use of the U.S. product would be inconsistent with the public interest; or
• steel and iron materials/products are not produced in the U.S. in sufficient and reasonably available quantities of a satisfactory quality.

In the latter two cases, a waiver must be obtained by the prime contractors via the grantee from the regional federal highway administrator.

For more information:

• Visit the Department of Transportation (DOT) Buy America webpage.
• Visit the Federal Highway Administration website for opportunities, regulations, and "Doing Business with the FHWA".
• Arrange a meeting with the FHWA to discuss how your company can meet FHWA's Buy America requirements.
• For additional assistance, please contact your nearest Canadian Trade Commissioner – In Canada or Abroad.