What is Build America, Buy America (BABA)?

On May 14, 2022, Build America, Buy America will go into effect. This new law governs domestic preferences for iron and steel, manufactured products and construction materials for infrastructure projects that use federal dollars for funding. It follows similar rules and standards created by the American Iron and Steel (AIS) Act, but has some key differences.

While the law does go into effect on this date, the U.S. EPA is soliciting information from manufacturers, supplies and distributors who will be affected by this with listening sessions. The agency will do the same for engineers, consulting engineers and contractors. 

With this in mind, below are details shared in the listening session for manufacturers, suppliers and distributors.

What is Build America, Buy America (BABA)?

BABA is Public Law 117-58 included in the Infrastructure Investment & Jobs Act (IIJA) – also referred to as the Bipartisan Infrastructure Law (BIL) – under Title IX, Subtitle A, Part I - Buy America Sourcing Requirements. 

This law requires that “none of the funds made available for a Federal financial assistance program for infrastructure…may be obligated for a project unless all of the iron, steel, manufactured products, and construction materials used in the project are produced in the United States.” According to the law a “project” is defined as, “any activity related to the construction, alteration, maintenance, or repair of infrastructure in the U.S.”

EPA indicated in its listening session April 25 that BABA expands the requirements of AIS domestic preference requirements. Officials noted that in most situations, standards established by AIS will be used in BABA, but that with the expanded requirements, more purchased items for infrastructure projects will now be covered by domestic preference laws, even if those projects historically had not been covered.

To summarize, all iron, steel, 55% of manufactured products and all construction materials must be domestically produced for a project to receive and use federal funding. Oversight of this law will be handled by the Made in America Office (MIAO)

Made in America Office (MIAO)

The Made in America Office (MIAO) was codified by BIL as well as a centralized waiver process which was required by Executive Order 14,005. MIAO was created to improve domestic supply chains to increase reliance on domestically source materials. By centralizing the waiver process, MIAO will “gather government-wide data to support decision-making to make U.S. supply chains more resilient,” while also improving transparency of waivers to ensure domestic producers have clear signals of materials required for production.

What Funding & Grant Programs Does BABA Cover?

BABA will cover all federal funding, not just those funds allocated through BIL. To be clear, this means all State Revolving Funds (SRF) and Water Infrastructure Finance and Innovation Act (WIFIA) funds trigger BABA requirements, regardless of their funding being created by BIL.

In addition, it also adds new requirements to several existing EPA infrastructure programs including:

• Tribes, Territories, and District of Columbia
• Section 319 Nonpoint Source Implementation Grand Program
• National Estuary Program
• Water Infrastructure Improvements for the Nation (WIIN) Grant Program
• Sewer Ovewrflow and Stormwater Reuse Municipal Grans (OSG)
• Alaska Native Village (ANV) Grant Program
• United States - Mexico Border Infrastructure Program
• America’s Water Infrastructure Act (AWIA) Resiliency Grant Program
• Congressionally Directed Spending/Community Project funding.

What Items Are Covered by BABA?

Items covered by BABA will be directed into one of three categories: iron and steel, manufactured products, construction materials. No item can exist in more than one category, which has made for many questions from manufacturers, suppliers and distributors. The U.S. EPA is still soliciting feedback on how these categories should be defined and the items that should be or should not be included in each of them.

BABA is applied to all items “consumed in, incorporated into or affixed to an infrastructure project (aka permanently incorporated).” EPA officials said BABA does not apply to items brought to and removed from the construction site – such as rental pumps or generators, or temporary scaffolding – prior to the completion of the infrastructure projects. It also will not apply to “equipment or furnishings that are used at or within the finished infrastructure project,” such as desks, movable chairs, portable computer equipment or other items of that nature.

Iron & Steel

Iron and steel for the purpose of BABA is defined as “items that are predominantly iron or steel, unless another standard applies under law or regulation.” This definition applies to all manufacturing processes, meaning the initial melting stage through the application of coatings must occur in the U.S.

During the question and answer portion of the listening session, EPA officials said a good rule of thumb is to ask “Is the furnace in the U.S.?” While this will suffice in most cases, officials encouraged manufacturers, suppliers and distributors to contact them directly for specific answers related to their particular products.

Manufactured Products

All products subject to BABA must be manufactured in the U.S., meaning the “cost of components 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.” Similar to the iron and steel provision, this portion of the law may change if another law or standard determines a new minimum amount for domestic content.

With this particular area, products such as pumps, motors, blowers, drives, actuators and more will be subject to this 55% rule. EPA also said they are seeking input from manufacturers on more complex products such as valves, hydrants and other items for how to best account for them, but indicated they would most likely land in this particular category for BABA applications.

Construction Materials

During the webinar on April 25, EPA shared lists for what would be included and excluded from the construction materials category, which can be seen in the table below. EPA was quick to note that there is a Notice of Listening Sessions and Request for Information from the Office of Management & Budget (OMB) regarding this category and encouraged industry professionals to participate in those sessions.

What Waivers are There for BABA?

The U.S. EPA has authority to waive BABA based on three waivers: public interest waiver, nonavailability waiver and an unreasonable cost waiver.

Public Interest Waiver

The public interest waiver is used when “applying the domestic content procurement preference would be inconsistent with the public interest.”

Nonavailabiliy Waiver

The nonavailability waiver is used when the “types of iron, steel, manufactured products or construction materials are not produced in the United States in sufficient and reasonably available quantities or of satisfactory quality.”

Unreasonable Cost Waiver

The unreasonable cost waiver is used when “inclusion of iron, steel, manufactured products, or construction materials produced in the United States will increase the cost of th overall project by more than 25%.”

What Principles Govern BABA Waivers?

EPA uses three principles to guide its decision-making when determining whether it will or will not issue a waiver for BABA. Each waiver, it says will be time-limited, targeted and conditional. 

The time-limited principle means EPA will determine a period of time during which the waiver may be applied. This will be short and clearly defined to ensure producers have quick access to the market.

Each waiver will also be targeted because EPA believes that “waivers that are overly broad will tend to undermine domestic preference policies.” As such, broad waiver considerations will receive greater scrutiny than those with a narrow focus and scope.

Lastly, all waivers are conditional, which provides EPA the opportunity to provide waivers that will also support BABA policies through specific conditions.

Project Specific Waivers vs. General Applicability (National) Waivers

The principles for waivers inform how the waiver types are used. For project specific waivers, MIAO will request review after a 15-day public comment period. Meanwhile, MIAO will request a review after a 30-day public comment period for General Applicability waivers. These General Applicability Waivers will also be reviewed every five years.

Share Feedback With EPA

The May 14, 2022 effective date is approaching quickly and U.S. EPA is looking for more feedback. During the listening session April 25, it shared questions for manufacturers, suppliers and distributors (listed below), and requested all feedback be emailed to [email protected] or [email protected].

1. What items are currently not made in the U.S.?
2. What items are made in the U.S. but have current significant supply chain delays?
3. What product inputs are made in the U.S., but have limited supply/priority for water sector projects?
4. Any suggestions for documenting compliance for complex, multi-component items (e.g. certification letters)?
5. What other concerns do you have about BABA?
   

About the Author: Bob Crossen is Senior Managing Editor for WWD. Crossen can be reached at [email protected].