Buy America, Transportation Infrastructure, and American Manufacturing

Buy America, Transportation Infrastructure, and American Manufacturing

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April 7, 2017
Buy America, Transportation Infrastructure,
and American Manufacturing
Congress over the years has passed several domestic
and local governments is not covered by these agreements,
content laws that aim to protect American manufacturing
even if federal funds are involved, unless the states or
and manufacturing jobs. One is known as the Buy America
localities voluntarily agree to comply. Thus, where the
Act, or more simply, Buy America. Statements by the
federal government provides grants or loans to state and
Trump Administration about reinvigorating domestic
local authorities for transportation projects, it may attach
manufacturing and reinvesting in infrastructure have
Buy America sourcing restrictions to these funds without
stimulated renewed interest in Buy America.
violating international obligations. The exclusion of
What Is Buy America?
subnational procurement from trade agreements has caused
considerable tension with major U.S. trading partners.
Buy America refers to several statutes and regulations that
apply to federal funds used to support projects carried out
Table 1. Buy America Requirements
by state and local government, mainly involving highways,
for Transportation Projects
public transportation, aviation, and intercity passenger rail,
Agency
Domestic Content
including Amtrak. Buy America also applies to certain
federally funded water infrastructure projects. Buy America
Federal Transit
100% U.S.-made requirement for
in transportation dates to the Surface Transportation
Administration (FTA): 49 iron, steel, and manufactured goods.
Assistance Act of 1978 (STAA; P.L. 95-599), and is
U.S.C. §5323(j); 49 C.F.R. Buy America does not apply to
different from requirements under the Buy American Act of
Part 661
rolling stock if more than 60% of
1933, which applies to direct purchases by the federal
components, by value, are produced
government.
domestically and final assembly is in
the United States. Threshold rises
Unless a nationwide or project-specific waiver is granted,
to 65% for FY2018 and FY2019 and
Buy America generally requires the use of U.S.-made iron
70% for FY2020 onward.
and steel and the domestic production and assembly of
certain other manufactured goods. One of the main
Federal Highway
100% U.S.-made requirement for
manufacturing industries this affects is rolling stock, which
Administration (FHWA):
iron, steel, and manufactured goods
includes intercity passenger rail trains, public transportation
23 U.S.C. §313; 23 C.F.R. made predominantly of steel and
rail cars and buses, and associated equipment.
§635.410
iron.
Buy America requirements differ in law and regulation
Federal Railroad
100% U.S.-made requirement for
according to the specific federal funding program and
Administration (FRA):
iron, steel, and manufactured goods.
administering agency (Table 1). For example, for a public
49 U.S.C. Chapters 244,
transportation bus or rail car purchase using federal funds to
246; §24405
be Buy America compliant, the law requires domestic
Amtrak (National
All manufactured and
manufacture of 60% of its components, by value, and final
Railroad Passenger
unmanufactured goods must be
assembly in the United States. For Amtrak rolling stock the
Corporation): 49 U.S.C.
substantially domestic; manufactured
threshold, set in regulation, is 50%.
§24305
products must have undergone final
The Fixing America’s Surface Transportation (FAST) Act
assembly in the United States and
(P.L. 114-94) increased the threshold for public
have 50% or more domestic
transportation rolling stock to 65% for FY2018 and FY2019
components by value.
and to 70% for FY2020 onward. For federally funded
Federal Aviation
All steel and manufactured goods
airport facility or equipment projects, the threshold for the
Administration (FAA):
must be produced in the United
value of domestic components and subcomponents is 60%.
49 U.S.C. §50101
States. Preference does not apply if
If a state or local government does not use federal funds on
more than 60%, by value, of all
a project, the project is not subject to Buy America. Some
components and subcomponents of
states may have laws imposing similar requirements on
the facility or equipment are
state-funded purchases.
produced domestically and final
Issues
assembly is in the United States.
Source: CRS, adapted from U.S. Department of Transportation,
Trade Agreements
“Buy America Provisions Side-by-Side.”
The United States is a signatory to international agreements
that restrict discrimination against trading partners in
government procurement. However, procurement by state
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Buy America, Transportation Infrastructure, and American Manufacturing
Effects on Manufacturing and Jobs
by state and local government project sponsors. These costs
include the effort required by contractors to document the
Assessing the economic effects of Buy America on the steel
national origin of iron, steel, and manufactured products
industry and manufacturing of rolling stock is difficult due
and agency administration of the certification process.
to the lack of relevant data. It is unclear how much iron and
steel are used in transportation projects that have federal
Waiver requests, another cost, may be prepared by the state
funding; hence, data are not available to calculate how
or local government project sponsor alone or in cooperation
much steel is produced and sold domestically as a direct
with the contractor. Delays can arise from domestic supply
result of Buy America. Nevertheless, the available data
problems and the waiver application process.
suggest that steel for the Buy America market represents a
small portion of total domestic demand for steel.
Policy Options
Even though a key rationale for Buy America is its positive
Tightening Buy America Restrictions
effects on manufacturing jobs, the overall effect on iron and
Congress could modify Buy America by making it more
steel manufacturing jobs is likely to be negligible. Domestic
restrictive. For example, bills have been proposed requiring
preference laws, a top policy priority for the steel industry,
domestic steel used in transportation projects to be made
have done little to stem the drop in direct employment in
from iron ore and taconite mined or processed in the United
steel manufacturing, which has declined from almost
States. Other bills have sought to increase to 100% the
260,000 jobs in 1990 to about 140,000 in 2016, due largely
share of public transit rolling stock components and
to higher productivity (Figure 1). CRS estimates that a 1%
subcomponents that must be produced in the United States.
increase in U.S. steel production would lead to an increase
of 700 to 900 jobs.
Loosening Buy America Restrictions
There have been no recent legislative proposals to reduce
Figure 1. Steel Manufacturing Employment
the types of purchases to which Buy America requirements
apply. In 2015, Congress did raise the threshold for
purchases in public transportation subject to Buy America
requirements from $100,000 to $150,000. Proposals to
change the threshold of Amtrak purchases subject to Buy
America to $5 million or more, as opposed to the existing
threshold of $1 million, have not been enacted.
Standardizing Buy America Restrictions
The current Buy America law and regulations establish
significantly different requirements for the several
Department of Transportation (DOT) subagencies and
Amtrak. Standardizing Buy America requirements and
possibly having a single office within DOT to enforce them

might address this concern.
Source: Bureau of Labor Statistics, Current Employment Statistics.
Broadening Buy America Coverage
Buy America has likely promoted some additional
At present, Buy America requirements do not extend to oil,
production of rail cars and buses in the United States, but
natural gas, and hazardous liquid pipelines, as these are
these industries are relatively small, and demand is related
generally built and owned by private corporations.
strongly to the combined level of federal, state, and local
Congress is considering a bill that would extend Buy
government funding. Railroad rolling stock manufacturing
America requirements to gas and hazardous liquid pipelines
directly employed more than 30,000 workers in 2015,
regulated by DOT’s Pipeline and Hazardous Materials
making up 0.2% of total factory employment. Much of this
Safety Administration. The bill would require, as a new
workforce is not affected by Buy America requirements
safety standard, that the construction or replacement of
since some of this equipment is not publicly funded, such as
regulated pipelines use only steel produced in the United
freight locomotive and freight rail cars.
States. Domestic preference laws could also be extended to
Because Buy America requires affected agencies to procure
other sectors, including clean energy manufacturing, if
U.S.-made steel and manufactured goods even when they
there is some federal involvement.
cost more than competing imports, it may reduce the
quantity of goods that can be purchased for a given
CRS Products
expenditure. This limits any positive effects on
CRS Report R43354, Domestic Content Restrictions: The Buy
manufacturing employment and may adversely affect
American Act and Complementary Provisions of Federal Law, by
employment in related industries, such as construction and
Kate M. Manuel et al.
engineering.
Effects on Transportation Infrastructure

Buy America could increase the cost and completion time
Michaela D. Platzer, Specialist in Industrial Organization
of at least some transportation projects, and may result in
fewer projects being undertaken. Evidence of these effects,
and Business
however, is largely anecdotal. Other direct costs associated
William J. Mallett, Specialist in Transportation Policy
with Buy America are mainly related to administering and
IF10628
enforcing its requirements, costs that are mostly absorbed
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Buy America, Transportation Infrastructure, and American Manufacturing

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
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Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
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