LEGAL ALERT: COURT VACATES FHWA 90-PERCENT THRESHOLD AND MISCELLANEOUS PRODUCTS EXEMPTIONS ASPECTS OF FHWA SECRETARY's 2012 "BUY AMERICA" EXCEPTIONS MEMORANDUM 

By recent order, the United States District Court for the District of Columbia vacated the Federal Highway Administration (FHWA) 2012 Memorandum regarding exceptions to the “Buy America” preferences for use of domestic steel and iron on federally funded highway programs. Among other things, the Memorandum exempted manufactured items that were at least 90 percent steel or iron, and other miscellaneous steel and iron products, from the Buy America requirements.

The Buy America preference requirement is grounded in several evolutions of the Federal Surface Transportation Assistance Act. One aspect of the related acts was the preference for domestic unmanufactured and manufactured products purchased with monies funded in conjunction with those acts. Those preferences included domestic steel and iron products, both manufactured and unmanufactured.

However, the acts allowed the Secretary of the U.S. Department of Transportation to exempt the Buy America preference when the Secretary deemed Buy America compliance would be inconsistent with the public interest. The 2012 Memorandum resulted from the Secretary’s most recent exercise of that exemption authority, and was intended to clarify earlier exception determinations by the Secretary.

Using his exemption authority, in the 2012 Memorandum, the Secretary exempted from Buy America policy application two categories of products: 1) manufactured products made up of less than 90 percent steel or iron; and 2) miscellaneous or “off-the-shelf” steel or iron products. The case before the District Court involved challenge to those policy exemptions.

In short, the court agreed with the challenging plaintiffs and held the 2012 Memorandum violated the Administrative Procedures Act (APA) because: a) the 90 percent threshold had not been subjected to required notice and comment rulemaking processes, and was itself arbitrary and capricious; and b) the miscellaneous products exceptions likewise were not subjected to required notice and comment rulemaking processes under the APA and also for Buy America waivers.

Thus far, the FWHA has not issued any additional clarification regarding Buy America implementation, nor has it initiated any related rulemaking processes. The overall impacts remain to be seen, but pending any overturning of the decision on appeal, or such rulemaking processes, all steel and iron for new federally funded highway projects must be reviewed for compliance with the Buy America requirements, and potential exemptions.

FWHA personnel have suggested that vacating the 2012 Memorandum is likely to significantly impact utility components. However, there will be other impacts as well.