In a Presidential Memorandum issued January 24, 2017, President Trump directed the Secretary of Commerce to develop a plan within 180 days to require that pipelines in the United States use materials and equipment produced in the United States “to the maximum extent possible and to the extent permitted by law.” The plan will extend to newly constructed pipelines as well as to those that are “retrofitted, repaired and expanded . . . inside the borders of the United States.”
With respect to iron or steel products, the Memorandum makes it clear that all stages of the manufacturing process must occur in the United States. The Memorandum states:
“Produced in the United States” shall mean:
(i) With regard to iron or steel products, that all manufacturing processes for such iron or steel products, from the initial melting stage through the application of coatings, occurred in the United States.
(ii) Steel or iron material or products manufactured abroad from semi-finished steel or iron from the United States are not “produced in the United States” for purposes of this memorandum.
(iii) Steel or iron material or products manufactured in the United States from semi-finished steel or iron of foreign origin are not “produced in the United States” for purposes of this memorandum.
The notions that iron and steel products must be manufactured in the United States and that all of the manufacturing processes must occur in the United States is not new. Substantially similar requirements are used in the “Buy America” provision of the Surface Transportation Assistance Act of 1982. See 49 U.S.C. § 5323(j). The Federal Transit Administration and the Federal Highway Administration have used this approach for state and local highway and transit projects funded wholly or partially with federal funds. See, e.g., 49 C.F.R. § 661.5.
In addition, the Consolidated Appropriations Act of 2014 included a requirement that recipients of assistance under the Clean Water State Revolving Loan Fund and Drinking Water State Revolving Loan Fund use iron and steel products produced in the United States in public water system and water treatment works projects. See Pub. Law No. 113-76 § 436 (Jan. 17, 2014). The requirement for the use of American Iron and Steel (“AIS”) under this statute is implemented through a March 2014 Memorandum issued by the Environmental Protection Agency. The EPA Memorandum defines “production in the United States” to mean that all manufacturing processes—melting, refining, forming, rolling, drawing, finishing, fabricating and coating—must take place in the United States. Further, a domestic iron or steel product taken outside the United States any part of the manufacturing process becomes a foreign-sourced material.
The AIS requirement, as implemented by the EPA, is likely to be instructive in the formulation of the Department of Commerce’s Buy American pipeline plan. The EPA defines the term “iron and steel products” to include lined and unlined pipes and fittings, castings, tanks, flanges, pipe clamps and restraints, valves, structural steel, reinforced precast concrete, and construction materials, that are primarily made of iron or steel. All of these materials are used in the construction of pipelines.
Waivers are available under EPA’s AIS guidance and DOT’s Buy America requirements. Waivers generally are available where: (1) imposing the requirements would be inconsistent with the public interest; (2) the iron and steel products are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; or (3) including the iron and steel products produced in the United States will increase the cost by more than a specified percentage, such as 25 percent.
We cannot predict the level of detail that will be included in the Department of Commerce’s plan. We also cannot predict how bilateral or multilateral treaties and other such agreements already in place or that the Trump Administration may make could affect products of a particular country. The American Recovery and Reinvestment Act of 2009, which provided nearly $800 billion to stimulate the US economy, included a Buy American provision requiring that all iron, steel, and manufactured goods used in projects it funded be produced in the United States. Pub. Law No. 111-5 § 1605 (Feb. 17, 2009). The ARRA Buy American provision, however, specified that it should be “applied in a manner consistent with United States obligations under international agreements.” This provision permitted products of some foreign countries to be used in some cases. This language does not appear in the President’s Memorandum.
Nevertheless, we expect the regulations and guidance implementing the Commerce Department’s pipeline plan to include many of the elements of the EPA AIS program and the DOT “Buy America” programs. Companies in the pipeline industry should consider the likely direction of these regulations and plan accordingly.