LEGALLY SPEAKING Buy America(n) A recent court decision and rule change serve as a reminder of the importance of certification of steel materials on federal and federally-funded state projects. O n January 6, 2016, the Federal Highway Administration (FHWA) revised its policies on Buy America requirements for federal-aid state construction projects. This policy change followed a December 22, 2015 decision by the U.S. District Court for the District of Columbia in which the court invalidated FHWA rules exempting miscel- laneous steel or iron components, subcom- ponents and hardware, and steel and iron manufactured products of 90 percent or less steel, from the Buy America requirements. Background on Buy America(n) Laws and Requirements U.S. law has long required the federal government to use American-made materials on federal projects. In 1933, Congress enacted the Buy American Act, requiring the use of “manufactured articles, materials and supplies that have been manufactured in the Uni ted States, substantially all from articles, materials or supplies mined, produced or manufactured in the United States” on projects procured directly by the federal government. Requirements for using American-made materials on state projects subsidized by federal funds, however, occurred much later. In 1983, the U.S. Department of Transporta- tion issued regulations pursuant to the Surface Transportation Assistance Act of 1978 and Surface Transportation Act of 1982 (the “1982 Act”), requiring the use of domestic steel and iron materials and products on federal-aid transportation projects. These regulations are often referred to as “Buy America” requirements (not to be confused with the Buy American Act). While the requirements initiated with FHWA- related projects, subsequent statutes expressly applied Buy America requirements to Federal Aviation Administration, Federal Rail Administration, Federal Transit Administration and AMTRAK projects. Furthermore, the Buy America requirements apply to local roads and rural minor collectors, transportation enhancement projects, and non-highway construction projects when funded by Federal Highway Trust Fund money. It is important to understand that Buy America requirements – as with the Buy American Act – apply to materials permanently incor- porated into the work. They do not apply to temporary materials, even if such materials are left in place for the contractor’s convenience. For example, if a drilled shaft contractor leaves temporary casing in place because it becomes bound, or a grouting contractor elects to leave grouting pipe in place, this casing need not be manufactured in the United States. For a manufactured steel or iron product to be considered domestic, all manufactur- ing processes must take place domestically. FHWA defines manufacturing as follows: “Manufacturing is any process that modifies the chemical content; physical shape or size; or final finish of a product. Manufac- turing 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.” Certification To comply with Buy America requirements, a contractor must certify that iron and steel products are domestic before incorporating the materials into the work. FHWA, AASHTO and the DOT Office of Inspector General have endorsed a step certification process as a way of establishing accounta- bility and improving enforcement against intentional violators. As described by FHWA, step certification is a process “under which each handler (supplier, fabricator, manufacturer, processor, etc.) of the iron and steel products certifies that their step in the process was domestically performed.” Step certification creates a “chain of custody” record of all steps in the manufacturing process. As for the language of the Brian Wood Attorney Of Counsel Smith, Currie and Hancock certification, FHWA recom- mends the following: “All manufacturing processes for these steel and iron materials, including the application of coatings (unless granted a waiver pursuant to 23 CFR 635.410), have occurred in the United States.” Step certification can be difficult for certain types of steel products. For example, substantial amounts of the small-to- medium diameter steel pipe used in foundation construction (for casing, grout pipe, pipe piles, etc.) is secondary, or “mill seconds,” rejected as not meeting the strict specifications of the oil industry. As such, much of this pipe is sold in bulk, oftentimes without mill reports. Pipe suppliers may mix inventory of pipe by diameter and length, without regard to sourcing, and mill reports can no longer be matched with the corresponding pipe. Where these suppliers purchase steel pipe from domestic and foreign sources, the supplier may be unable to identify the source of the material, much less where the steps in manufacturing occurred. Accor- dingly, such vendors are often unwilling to provide the necessary certification(s). Even if they provide a certification, the language of the certification may not address or cover all steps in the manufacturing process. Foundation contractors performing work on public projects, particularly federal and federal-aid state projects, should avoid using steel materials from these vendors. While the contractor may seek to obtain indemnification from the steel supplier regarding its certification of the materials, the indemnification may provide little protection for the contractor if the government determines that the contractor knew or should have known that the material is not domestically sourced. DEEP FOUNDATIONS • SEPT/OCT 2016 • 111
